10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period from to

Commission File Number: 001-37695

YUMANITY THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	20-8436652
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
40 Guest Street, Suite 4410 Boston, MA	02135
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 617-409-5300

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, par value $0.001 per share	YMTX	The Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 July 28, 2022, the registrant had 10,856,467 shares of common stock, $0.001 par value per share, outstanding.

Summary of the Material Risks Associated with Our Business

We are subject to various risks associated with our businesses and industries. These risks include the following:

•if we do not successfully consummate the proposed merger (the "Merger") with Kineta, Inc. ("Kineta"), our board of directors may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities;

•failure to complete the proposed Merger may result in us paying a termination fee to Kineta and could significantly harm the market price of our common stock and negatively affect our future business and operations;

•our stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with or following the Merger;

•during the pendency of the Merger, we may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect our business;

•certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement;

•while the proposed asset sale (the "Asset Sale") with Janssen Pharmaceutica, NV ("Janssen") is pending, it creates unknown impacts on our future which could materially and adversely affect our business, financial condition and results of operations;

•the failure to consummate the Asset Sale may materially and adversely affect our business, financial condition and results of operations;

•our historical operating results indicate substantial doubt exists related to our ability to continue as a going concern;

•we have incurred significant operating losses since our inception and anticipate we will incur continued losses for the foreseeable future;

•if the Asset Sale is not completed, we will need additional funding to advance YTX-7739 through clinical development, which funding may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other operations;

•we have concentrated our research and development efforts on the treatment of neurodegenerative diseases, a field that has seen limited success in drug development. Further, our product candidates are based on new approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval;

•we depend on our collaboration with Merck and may in the future depend on other collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates;

•our product candidates may cause serious adverse events or other undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any;

•the ongoing pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases has and may continue to impact our research, development and potential future commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations;

•the regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed; and

•we may not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

The summary risk factors described above should be read together with the text of the full risk factors below, in the section entitled “Risk Factors” in Part II, Item 1A. and the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the U.S. Securities and Exchange Commission (“SEC”). The risks summarized above or described in full below are not the only risks that we face. Additional

i

risks and uncertainties not precisely known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

ii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these words or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

•the success of our efforts, and those of our advisors, in executing on our strategic alternatives while preserving our cash balance to the extent practicable, including the Merger and the Asset Sale;

•the expected benefits of and potential value created by the Merger and the Asset Sale for our stockholders, including with respect to the amount of the proposed dividend distributed to our stockholders in connection with the proposed Asset Sale;

•the likelihood of the satisfaction of the conditions to the completion of the Merger and the Asset Sale, including stockholder approval, and whether and when the Merger and Asset Sale will be consummated;

•the risk of unanticipated costs, liabilities or delays relating to the Merger and the Asset Sale;

•the possibility of any change, effect, development, matter, state of facts, series of events or circumstances that could give rise to the termination of the agreement with Kineta related to the Merger or the agreement with Janssen related to the Asset Sale, including a termination of such agreements under circumstances that could require us to pay a termination fee to Kineta or Janssen;

•our ability to manage and correctly estimate our operating expenses and our expenses associated with the Merger and the Asset Sale;

•our ability to continue as a going concern;

•our ability to operate as a stand-alone company if the Merger is not consummated;

•our business strategy for and the potential therapeutic benefits of our current and prospective product candidates and the results of preclinical studies;

•our financial and cash position;

•the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements;

•the timing, progress and results of preclinical studies and clinical trials for our programs and product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;

•the potential attributes and benefits of our product candidates;

•our ability to establish or maintain collaborations or strategic relationships or obtain additional funding;

•the potential for our business development efforts to maximize the potential value of our portfolio;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

•our financial performance;

•our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

•our expectations related to the use of our cash reserves;

•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•the impact of laws and regulations, including without limitation recently enacted tax reform legislation;

•the effect of COVID-19 on the foregoing; and other risks and uncertainties, including those listed under the caption “Risk Factors” in Part I, Item 1A

iii

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a competitive and rapidly changing environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments we may make or enter into.

You should read this Quarterly Report and the documents that we file with the Securities and Exchange Commission with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
Signatures		88

v

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

YUMANITY THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

	June 30,			December 31,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	11,846		$	35,102
Marketable securities		—			1,399
Accounts receivable		—			5,000
Restricted cash, current		828			—
Prepaid expenses and other current assets		1,854			1,207
Total current assets		14,528			42,708
Property and equipment, net		60			387
Operating lease right-of-use assets		831			18,543
Deposits		—			366
Restricted cash		50			928
Total assets	$	15,469		$	62,932
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,599		$	1,839
Accrued expenses and other current liabilities		2,422			4,846
Current portion of long-term debt		—			5,805
Operating lease liabilities		559			5,064
Current portion of finance lease obligation		—			48
Short-term borrowings		578			—
Deferred revenue		2,381			5,061
Total current liabilities		7,539			22,663
Long-term debt, net of discount and current portion		—			7,357
Operating lease liabilities, net of current portion		—			9,415
Total liabilities		7,539			39,435
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		—			—
Common stock, $0.001 par value; 125,000,000 shares authorized; 10,842,945 shares and 10,644,714 shares issued and outstanding as of June 30, 2022    and December 31, 2021, respectively		11			11
Additional paid-in capital		213,458			210,799
Accumulated deficit		(205,539	)		(187,313	)
Total stockholders’ equity		7,930			23,497
Total liabilities and stockholders’ equity	$	15,469		$	62,932

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

1

YUMANITY THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Collaboration revenue	$	1,657		$	2,114		$	2,679		$	5,646
Operating expenses:
Research and development		1,141			7,327			6,037			14,106
General and administrative		5,557			4,712			10,382			10,764
Impairment loss		—			—			3,901			—
Total operating expenses		6,698			12,039			20,320			24,870
Loss from operations		(5,041	)		(9,925	)		(17,641	)		(19,224	)
Other income (expense):
Interest expense		(7	)		(463	)		(217	)		(951	)
Interest income and other income (expense), net		203			(66	)		(168	)		(95	)
(Loss) gain on debt extinguishment		—			—			(200	)		1,134
Total other income (expense), net		196			(529	)		(585	)		88
Net loss	$	(4,845	)	$	(10,454	)	$	(18,226	)	$	(19,136	)
Net loss applicable to common shareholders		(4,845	)		(10,454	)		(18,226	)		(19,136	)
Net loss per share, basic and diluted	$	(0.45	)	$	(1.03	)	$	(1.69	)	$	(1.88	)
Weighted average common shares outstanding, basic and diluted		10,847,734			10,195,608			10,800,473			10,194,474

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

2

YUMANITY THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net loss	$	(4,845	)	$	(10,454	)	$	(18,226	)	$	(19,136	)
Other comprehensive income:
Unrealized gains on marketable securities, net of tax of $0		—			—			—			—
Comprehensive loss	$	(4,845	)	$	(10,454	)	$	(18,226	)	$	(19,136	)

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

3

YUMANITY THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

	Common Stock					Additional Paid-in		Accumulated Other Comprehensive		Accumulated			Total Stockholders’ Equity
	Shares			Amount		Capital		Gain (Loss)		Deficit			(Deficit)
Balances at December 31, 2021		10,644,714		$	11	$	210,799	$	—	$	(187,313	)	$	23,497
Stock/equity-based    compensation expense		—			—		1,204		—		—			1,204
Issuance of common stock from at the market offering		216,332			—		383		—		—			383
Vesting of restricted stock units		17,624			—		—		—		—			—
Forfeiture of restricted stock awards		(31,930	)		—									—
Net loss		—			—		—		—		(13,381	)		(13,381	)
Balances at March 31, 2022		10,846,740		$	11	$	212,386	$	—	$	(200,694	)	$	11,703
Stock/equity-based    compensation expense		—			—		1,072		—		—			1,072
Forfeiture of restricted stock awards		(3,795	)		—		—		—		—			—
Net loss		—			—		—		—		(4,845	)		(4,845	)
Balances at June 30, 2022		10,842,945		$	11	$	213,458	$	—	$	(205,539	)	$	7,930

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Gain (Loss)		Deficit			(Deficit)
Balances at December 31, 2020		10,193,831	$	10	$	204,007	$	—	$	(147,810	)	$	56,207
Stock/equity-based    compensation expense		—		—		1,407		—		—			1,407
Net loss		—		—		—		—		(8,682	)		(8,682	)
Balances at March 31, 2021		10,193,831	$	10	$	205,414	$	—	$	(156,492	)	$	48,932
Issuance of common stock from at the market offering		82,132		—		1,313		—		—			1,313
Exercises of common stock options		6,083		—		57		—		—			57
Stock/equity-based    compensation expense		—		—		1,259		—		—			1,259
Net loss		—		—		—		—		(10,454	)		(10,454	)
Balances at June 30, 2021		10,282,046	$	10	$	208,043	$	—	$	(166,946	)	$	41,107

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

4

YUMANITY THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(18,226	)	$	(19,136	)
Adjustments to reconcile net loss to net cash used in operating activities:
Net amortization of premiums (accretion of discounts) on marketable securities		(1	)		(7	)
Depreciation and amortization expense		97			375
Non-cash lease expense		1,967			2,518
Stock/equity-based compensation expense		2,276			2,666
Other non-cash expense		—			55
Non-cash interest expense		36			284
Loss (gain) on debt extinguishment		200			(1,134	)
Impairment of right-of-use asset		3,901			—
Loss on sale of property and equipment		20			63
Changes in operating assets and liabilities:
Accounts receivable		5,000			—
Prepaid expenses and other current assets		(668	)		(164	)
Deposits		366			—
Operating lease liabilities		(2,076	)		(2,157	)
Accounts payable		(240	)		(5,573	)
Accrued expenses and other current liabilities		(3,090	)		(4,047	)
Deferred revenue		(2,680	)		(5,646	)
Net cash used in operating activities		(13,118	)		(31,903	)
Cash flows from investing activities:
Purchases of marketable securities		—			(9,869	)
Proceeds from sales and maturities of marketable securities		1,400			6,075
Purchases of property and equipment		(53	)		(90	)
Proceeds from sale of property and equipment		263			—
Net cash provided by (used in) investing activities		1,610			(3,884	)
Cash flows from financing activities:
Proceeds from at the market offering		383			1,313
Proceeds from exercise of stock options		—			57
Proceeds from issuance of short-term borrowings		1,742			—
Payments of principal portion of long-term debt		(929	)		—
Payments of final payoff of long term debt		(11,803	)		—
Payments of debt issuance costs related to long-term debt		—			(103	)
Payments of short-term borrowings		(1,164	)		—
Payments of finance lease obligations		(27	)		(108	)
Net cash provided by (used in) financing activities		(11,798	)		1,159
Net decrease in cash, cash equivalents and restricted cash		(23,306	)		(34,628	)
Cash, cash equivalents and restricted cash at beginning of period		36,030			82,885
Cash, cash equivalents and restricted cash at end of period	$	12,724		$	48,257
Supplemental cash flow information:
Cash paid for interest	$	400		$	660

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

5

YUMANITY THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

Yumanity Therapeutics, Inc. (together with its wholly owned subsidiaries, the “Company” or “Yumanity”) is a clinical stage biopharmaceutical company engaged in the research and development of treatments for neurodegenerative diseases caused by protein misfolding.

The Company is subject to risks similar to those of other clinical stage companies in the biopharmaceutical industry, including dependence on key individuals, the need to develop commercially viable products, competition from other companies, many of whom are larger and better capitalized, the impact of the ongoing COVID-19 pandemic and the need to obtain adequate additional financing to fund the development of its product candidates. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any product candidates developed will obtain required regulatory approval or that any approved products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from the sale of its products.

Exploration of Strategic Alternatives and Restructuring

In February 2022, the Company announced that it is exploring strategic alternatives to enhance shareholder value and engaged H.C. Wainwright as its financial advisor to assist in this process. In February 2022, the Company also began implementation of a strategic restructuring with the objective of preserving capital. As part of the restructuring, it has eliminated approximately 60% of its workforce and has taken other actions, including reducing its office and laboratory space, to reduce expenditures (see Note 5).

After a comprehensive review of strategic alternatives, on June 5, 2022, Yumanity entered into a Merger Agreement (the "Merger Agreement") with Kineta, Inc. ("Kineta"). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, at the effective time of the Merger, Yacht Merger Sub, Inc., a wholly-owned subsidiary of Yumanity, will merge with and into Kineta (the "Merger"), with Kineta continuing as a wholly-owned subsidiary of Yumanity and the surviving corporation of the Merger.

On June 5, 2022, the Company also entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Janssen Pharmaceutica NV ("Janssen"). Pursuant to the Asset Purchase Agreement and subject to the satisfaction or waiver of the conditions set forth in the Asset Purchase Agreement, at the closing of the transaction contemplated by the Asset Purchase Agreement, the Company will sell to Janssen all of the Company’s rights, title and interest in YTX-7739 as well as its unpartnered preclinical and discovery-stage product candidates including intellectual property rights, biological materials, regulatory documentation, books and records, inventory, contracts, permits, actions and rights of recovery and other properties, assets and rights related thereto (the "Purchased Assets"), and Janssen will assume certain of the Company’s liabilities, for a purchase price of $26 million in cash (the "Asset Sale").

The two transactions are expected to close in the second half of 2022, subject to customary closing conditions, including approval of both transactions by the stockholders of Yumanity.

The Company expects to devote significant time and resources to the completion of the Merger and the Asset Sale. If the Merger is not completed, the Company will reconsider its strategic alternatives and may pursue one of the following courses of action, which the Company currently believes are the most likely alternatives if the Merger with Kineta is not completed:

• Pursue another strategic transaction similar to the Merger. The Company may resume its process of evaluating other candidate companies interested in pursuing a strategic transaction and, if a candidate is identified, focus its attention on negotiating and completing such strategic transaction with such candidate.

• Continue to operate its business. If the Asset Sale also does not close, the Company could elect to continue to operate its business and pursue licensing or partnering transactions or utilize its intellectual property to pursue the treatment of neurodegenerative diseases. To continue to operate its business, the Company would require a significant amount of time and financial resources, and the Company would be subject to all the risks and uncertainties involved in the development of product candidates. There is no assurance that the Company could raise sufficient capital to support these efforts, that its development efforts would be successful or that it could successfully obtain the regulatory approvals required to market any product candidate it pursued.

6

• Dissolve and liquidate its assets. If the Company is unable, or does not believe that it is able, to find a suitable candidate for another strategic transaction, the Company may dissolve and liquidate its assets. In that event, the Company would be required to pay all of its debts and contractual obligations and to set aside certain reserves for commitments and contingent liabilities. If the Company dissolves and liquidates its assets, there can be no assurance as to the amount or timing of available cash that will remain for distribution to the Company’s stockholders after paying the Company’s debts and other obligations and setting aside funds for commitments and contingent liabilities.

The Company's future operations are highly dependent on the success of the Merger with Kineta.

Clinical and Regulatory Update

In January 2022, the Food & Drug Administration (the "FDA") placed a partial clinical hold on the Company's future multidose clinical trials of YTX-7739 in the United States. The FDA has not halted all clinical programming and is permitting the Company's proposed single dose formulation clinical trial to proceed. The Company has paused its previously planned studies of YTX-7739 while the partial clinical hold is pending.

Merger with Proteostasis Therapeutics, Inc.

On December 22, 2020, Proteostasis Therapeutics, Inc. (“Proteostasis” or “PTI”) completed its previously announced merger transaction with Yumanity, Inc. (formerly Yumanity Therapeutics, Inc.) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of August 22, 2020, as amended on November 6, 2020 (the “Proteostasis Merger Agreement”), by and among Pangolin Merger Sub, Inc., a wholly-owned subsidiary of Proteostasis (“Pangolin Merger Sub”), Yumanity Holdings, LLC (“Holdings”) and Yumanity, Inc., pursuant to which Pangolin Merger Sub merged with and into Yumanity, Inc., with Yumanity, Inc. surviving as a wholly owned subsidiary of Proteostasis (the “Proteostasis Merger”). Immediately following the Proteostasis Merger, Proteostasis changed its name to “Yumanity Therapeutics, Inc.”

Basis of presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise noted, all references to common stock share and per share amounts have also been adjusted to reflect the exchange ratio as described in the Proteostasis Merger Agreement.

Going concern

The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the original issuance date of the condensed consolidated financial statements.

Since its inception, the Company has funded its operations primarily with equity and debt including proceeds from the Proteostasis Merger. The Company has incurred recurring losses and negative cash flows from operations since inception, including net losses of $4.8 million and $18.2 million for the three and six months ended June 30, 2022. In addition, as of June 30, 2022, the Company had an accumulated deficit of $205.5 million. The Company expects to continue to generate operating losses for the foreseeable future, although at reduced expected levels as a result of restructuring actions taken in the six months ended June 30, 2022.

As further discussed above in “Exploration of Strategic Alternatives and Restructuring,” on June 5, 2022, the Company entered into the Merger Agreement with Kineta and the Asset Purchase Agreement with Janssen. There is no assurance that the Company will be successful in executing either or both transactions or obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. If the Company is unable to obtain additional funding, consummate the aforementioned transactions or execute other strategic alternatives, the Company will be forced to further delay, reduce or eliminate its research and development programs or initiate steps to cease operations.

As of the issuance date of the condensed consolidated financial statements for the six months ended June 30, 2022, the Company expects that, absent either strategic transaction, its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements early into the first quarter of 2023, which is less than twelve months from

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the issuance date of these condensed consolidated financial statements. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might result from the outcome of this uncertainty.

Impact of the COVID-19 pandemic

The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the spread of the outbreak. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, and facilities and production have been suspended. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The COVID-19 pandemic is ongoing and may affect the Company’s ability to initiate and complete preclinical studies, delay its future clinical trials, disrupt regulatory activities, or have other adverse effects on its business and operations. The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact the Company’s ability to raise additional funds to support its operations. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on the Company’s business and operations.

Clinical trial sites in many countries, including those in which the Company operates, have incurred delays due to COVID-19. Certain of the sites in the YTX-7739 Phase 1b clinical trial incurred delays due to COVID-19 that resulted in a delay in the results from that study. There continues to be a risk of additional delays to the Company’s clinical programs if and when they are re-commenced.

To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the pandemic and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in these condensed consolidated financial statements. The extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects.

At-the-Market Offering Program

In April 2021, the Company entered into a sales agreement (the "Prior Sales Agreement") with Jefferies LLC (“Jefferies”) with respect to an at-the-market (“ATM”) offering program under which it could have issued and sold, from time-to-time at its sole discretion, shares of its common stock, in an aggregate offering amount of up to $60.0 million. In December 2021, the Company terminated the Prior Sales Agreement and entered into a new sales agreement with Jefferies with respect to an ATM offering under which it may issue and sell, from time-to-time and at its sole discretion, shares of its common stock, in an aggregate offering amount of up to $60.0 million (the “New Sales Agreement”). Jefferies acts as the Company's sales agent and will use commercially reasonable efforts to sell shares of common stock from time-to-time, based upon instruction by the Company.

The Company will pay Jefferies up to 3% of the gross proceeds from any common stock sold through the New Sales Agreement. The Company sold 216,332 shares of common stock under the New Sales Agreement during the six months ended June 30, 2022 for aggregate net proceeds to the Company of approximately $0.4 million, after deducting sales commissions. As of June 30, 2022, $59.6 million of common stock remained available for future issuance under the New Sales Agreement, although these amounts may be limited as the Company will be subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds the Company can raise through primary public offerings of securities in any twelve-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of its common stock held by non-affiliates of the Company. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its common stock using its Form S-3 until such time as its public float exceeds $75 million.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements, as of June 30, 2022 and for the three and six months ended June 30, 2022, are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company

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believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 24, 2022. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2022 and condensed consolidated results of operations and cash flows for the three and six months ended June 30, 2022 and 2021 have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

The Accumulated Deficit balance as of March 31, 2021 as presented in the Condensed Consolidated Statement of Stockholders' Equity included in the prior financial statements as of and for the period ended March 31, 2022 was incorrectly stated due to a typographical error and has been corrected in the Condensed Consolidated Statement of Stockholders' Equity for the current period. The correct accumulated deficit number used in the Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2021 is $(156,492) instead of $(8,682). This error did not impact the unaudited condensed consolidated balance sheets, statements of cash flow, or notes to the financial statements as of, and for the three months ended March 31, 2021. The materiality of the error was assessed in accordance with the SEC’s Staff Accounting Bulletin 99 and the Company concluded that the previously issued condensed consolidated financial statements were not materially misstated. In accordance with the SEC’s Staff Accounting Bulletin 108, this immaterial error has been corrected and the revision will be presented prospectively here and in future filings.

Summary of Significant Accounting Policies

The Company’s significant accounting policies, which are disclosed in the audited financial statements for the year ended December 31, 2021 and the notes thereto, are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 24, 2022. There were no changes to significant accounting policies during the three and six months ended June 30, 2022.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses prior to the Merger and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts, and experience. Actual results may differ from those estimates or assumptions.

Restricted cash

Amounts included in restricted cash represent amounts pledged as collateral for Company credit cards and as part of the terms of its office and laboratory space lease. These amounts are classified as restricted cash in the Company’s condensed consolidated balance sheet. In December 2020, in connection with the Proteostasis Merger, the Company acquired Proteostasis’ restricted cash pledged as collateral for its office and laboratory space lease and amended its loan and security agreement to establish an escrow account in the amount of its Paycheck Protection Program loan. After forgiveness of the PPP Loan, in April 2021 the escrowed cash was released and reclassified into cash and cash equivalents. The cash pledged as collateral is classified as restricted cash in the Company’s condensed consolidated balance sheet as of June 30, 2022. Regarding the cash pledged as collateral related to the lease, because the restriction on that pledged cash is expected to lapse soon after July 31, 2022, due to the modification of the related lease (see Note 10), that amount has been presented as a current asset in the condensed consolidated balance sheet at June 30, 2022. As of June 30, 2022 and 2021, the cash and restricted cash of $12.7 million and $48.3 million, respectively, has been presented in the condensed consolidated statements of cash flows included cash and cash equivalents of $11.8 million and $47.4 million, respectively, and restricted cash of $0.9 million and $0.9 million, respectively.

Fair value measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair

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value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long-term debt under its loan and security agreement approximates its fair value due to its variable interest rate.

3. Fair Value Measurements and Marketable Securities

The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at June 30, 2022:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	11,506	$	—	$	—	$	11,506
Marketable securities:
Commercial paper		—		—		—		—
	$	11,506	$	—	$	—	$	11,506
	Fair Value Measurements at December 31, 2021:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	34,136	$	—	$	—	$	34,136
Marketable securities:
Commercial paper		—		1,399		—		1,399
	$	34,136	$	1,399	$	—	$	35,535

Marketable securities were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. The Company’s marketable securities matured during the three months ended June 30, 2022.

4. Collaboration Agreement

In June 2020, the Company entered into an exclusive license and research collaboration agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”) to support the research, development and commercialization of products for the treatment of amyotrophic lateral sclerosis (ALS) and frontotemporal lobar dementia (FTLD). Pursuant to the Collaboration Agreement, the Company granted Merck an exclusive, worldwide license with the right to grant and authorize sublicenses, under certain intellectual property rights related to two certain undisclosed targets in connection with the Company’s ALS and FTLD programs to make, have made, use, import, offer to sell and sell compounds and products covered by such intellectual property rights. In the event that the exploitation of such compound or product would infringe during the term of the Merck Collaboration Agreement a claim of an issued patent controlled by Yumanity, Yumanity also granted Merck a non-exclusive, sublicensable, royalty-free license under such issued patent to exploit such compound and product.

Under the terms of the Collaboration Agreement, the Company and Merck are each responsible to perform certain research activities in accordance with a mutually agreed upon research plan. Upon the completion of certain stages of the research plan, Merck will elect to either advance and make certain contractual option payments or terminate the applicable research program. If Merck elects not to advance a research program, such program terminates and the rights granted to Merck in the program revert to the

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Company. Following completion of the research program, Merck is responsible for the development and commercialization of the compounds developed pursuant to the research program and any product containing such compounds.

Under the terms of the Collaboration Agreement, the Company received an upfront payment totaling $15.0 million in July 2020 and is eligible to receive up to $280.0 million upon achievement of specified research and development milestones, and up to $250.0 million upon achievement of specified sales-based milestones as well as a tiered, mid-single digit royalty on net sales of licensed products, subject to customary reductions.

Unless terminated earlier, the Collaboration Agreement will continue in full force and effect until one or more products has received marketing authorization and, thereafter, until expiration of all royalty obligations under the Collaboration Agreement. The Company or Merck may terminate the Collaboration Agreement upon an uncured material breach by the other party or insolvency of the other party. Merck may also terminate the Merck Collaboration Agreement for any reason upon certain notice to the Company.

Merck also participated in the Company’s Class C preferred units financing in June 2020 with terms consistent with those of other investors that purchased Class C preferred units in June 2020. The Class C preferred units were issued at a price of $4.0008 per unit, which was determined to be fair value based on the same price paid by other investors that purchased Class C preferred units in the financing. The equity investment was considered to be distinct from the Collaboration Agreement.

The Company assessed the promised goods and services to determine if they are distinct. Based on this assessment, the Company determined that Merck cannot benefit from the promised goods and services separately from the others as they are highly interrelated and therefore not distinct. Accordingly, the promised goods and services represent one combined performance obligation and the entire transaction price was allocated to that single combined performance obligation. The performance obligation is being satisfied over the research term as the Company performs the research and development activities through the first substantive option period, and participates in a Joint Steering Committee to oversee research and development activities. Accordingly, the upfront payment of $15.0 million was recorded as deferred revenue and was recognized as revenue as the performance obligation was satisfied. The Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. For the three and six months ended June 30, 2022, the Company recorded less than $0.1 million of collaboration revenue related to the Collaboration Agreement associated with providing the Initial Phase research and development services.

At contract inception, the potential milestone payments that the Company is eligible to receive were excluded from the transaction price as they were fully constrained. At the end of each reporting period, the Company reevaluates the transaction price and as uncertain events are resolved or other changes in circumstances occur, and if necessary, the Company will adjust its estimate of the transaction price. Any additions to the transaction price would be reflected in the period as a cumulative revenue catch-up. At the inception of the arrangement, the Company evaluated the options held by Merck to either advance or terminate the applicable research program to determine if they provided Merck with any material rights. The Company concluded that the options were not issued at a significant and incremental discount, and therefore do not provide Merck with a material right. As such, these options were excluded as performance obligations and will be accounted for if and when they occur.

In November 2021, the Company delivered one of two data packages associated with the Initial Phase of the research and development services. On December 17, 2021, Merck notified the Company that Merck has accepted the first data package for one program from their research collaboration with the Company relating to ALS and FTLD, and that Merck has elected to continue the research collaboration. Achievement of this milestone triggered a $5.0 million milestone payment due from Merck. Upon Merck electing to advance the research program into the second phase (the "Second Phase"), the Company assessed whether the promised goods and services for the Second Phase are distinct. Based on the facts and circumstances, including but not limited to key differences between the Initial Phase research plan and the Second Phase research plans, including experiments performed and personnel utilized, the Company determined that the Second Phase represents a separate contract with its own performance obligation. The Second Phase performance obligation is being satisfied over the Second Phase research term as the Company performs the research and development activities through the second substantive option period and participates in a Joint Steering Committee to oversee research and development activities. Accordingly, the option payment of $5.0 million was recorded to deferred revenue at December 31, 2021 and during the six months ended June 30, 2022 the Company recognized $2.6 million of collaboration revenue related to the Collaboration Agreement as the Second Phase performance obligation is satisfied. The Company recognizes the Second Phase revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Deferred revenue totals $2.4 million at June 30, 2022 related to the Collaboration Agreement, and it is expected to be recognized in the next twelve months.

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The Company assessed the Collaboration Agreement to determine whether a significant financing component exists and concluded that a significant financing component does not exist.

5. Accrued Expenses and Other Current Liabilities

Accrued expenses consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Accrued employee compensation and benefits	$	350	$	1,763
Accrued external research and development expenses		962		1,633
Accrued professional fees		740		901
Other		370		549
	$	2,422	$	4,846

In January 2022, the Company approved a restructuring plan following a review of its operations, cost structure and growth opportunities (the “Restructuring”). The Company recorded a charge of $0.4 million and $1.4 million during the three and six months ended June 30, 2022, respectively, as a result of the Restructuring, which consisted of one-time termination benefits for employee severance, benefits and related costs, and certain retention payments, which are expected to result in cash expenditures and will be paid out by December 31, 2022.

The following table summarizes the changes in the Company’s accrued restructuring balance, which are included in Accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet:

(In thousands)	2022
Beginning balance at December 31, 2021	$	—
Restructuring costs, personnel related		985
Cash paid for restructuring costs		(330	)
Ending balance at March 31, 2022		655
Restructuring costs, personnel related		412
Cash paid for restructuring costs		(765	)
Forfeitures		(31	)
Ending balance at June 30, 2022	$	271

6. Short-term borrowings

As of June 30, 2022, the Company had short-term borrowings of $0.6 million consisting of a Commercial Insurance Premium Finance and Security Agreement (the “Finance and Security Agreement”) entered into in January 2022. The Finance and Security Agreement has a nine-month repayment period with an annual interest rate of 2.93% and a maturity of September 22, 2022. Collateral under the Finance and Security Agreement includes the right, title, and interest in the underlying business insurance policies.

7. Debt

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Principal amount of long-term debt	$	—	$	12,733
Less: Current portion of long-term debt		—		(5,805	)
Long-term debt, net of current portion		—		6,928
Debt discount, net of accretion		—		(217	)
Accrued end-of-term payment		—		646
Long-term debt, net of discount and current portion	$	—	$	7,357

The Company entered into a loan and security agreement with Hercules Capital, Inc. (the “Lender”) in December 2019 (the “Term Loan”), pursuant to which it had $12.7 million in outstanding principal borrowings as of December 31, 2021. On February 25, 2022, the Company repaid to the Lender a payoff amount of $12.8 million and terminated the Term Loan, provided that the Company continues to be bound by certain indemnification obligations under Section 6.3 of the Term Loan. The payoff amount resulted in an

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extinguishment loss of $0.2 million and included payment of approximately $0.9 million consisting of end of term costs of 5.25% of the $15.0 million amount drawn under the Term Loan and $0.1 million as outlined below, as well as an interest/non-use fee of less than $0.1 million.

In April 2020, the Term Loan was amended to permit indebtedness consisting of a loan under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided that such loan shall be unsecured, shall not contain any terms or conditions that are adverse to the Lender’s rights under the loan and that the Company will not prepay such loan. In June 2020, the Term Loan was amended and an additional end of term cost of $0.3 million became due upon repayment of the loan. Also in April 2020, prior to entering into the Proteostasis Merger Agreement with PTI in August 2020, the Company issued a Promissory Note to Silicon Valley Bank, pursuant to which it received loan proceeds of $1.1 million (the “Loan”) provided under the PPP established under the CARES Act and guaranteed by the U.S. Small Business Administration. On April 3, 2021, the Company was notified by Silicon Valley Bank that the Loan forgiveness application was accepted by the Small Business Association as of March 30, 2021. Accordingly, the Company has recognized $1.1 million in income for debt extinguishment.

On December 22, 2020, the Company entered into an Unconditional Secured Guaranty and Pledge Agreement (the “Guaranty”) with the Lender as a condition to the Lender’s consent to the Proteostasis Merger under the Term Loan between Yumanity, Inc. as borrower and the Lender. Immediately prior to the Proteostasis Merger, Yumanity, Inc. entered into a Fourth Amendment and Consent to Loan and Security Agreement dated as of December 22, 2020 with the Lender (the “Loan Amendment”). The Guaranty provides for the Company’s guaranty of Yumanity Inc.’s obligations under the Loan Agreement and provides the Lender a security interest in all of Company’s assets other than intellectual property as collateral. The Loan Amendment provides for the Lender’s consent to the Proteostasis Merger and to the creation and funding of a Silicon Valley Bank Paycheck Protection Program escrow account to hold funds in connection with Yumanity’s outstanding Paycheck Protection Program loan amounts for which Yumanity has submitted a forgiveness application. The Loan Amendment also amends the definition of “Change in Control” to include the situations in which the Company no longer controls Yumanity, Inc. The remaining terms and conditions of the Loan Agreement generally continue in the form existing prior to the Loan Amendment.

On March 29, 2021, the Term Loan was amended again to allow for the creation of a new foreign subsidiary, as well as changing certain covenants related to the financial operations of said subsidiary. The subsidiary was formed on April 23, 2021.

On April 13, 2021, the Term Loan was amended to reduce the end of term cost of $0.3 million to $0.1 million upon repayment of the loan.

8. Stock/Equity-Based Compensation

Restricted Stock Units (RSUs)

On January 14, 2021, the Company’s compensation committee of the board approved payment to be made to Company employees through a grant of RSUs based on the February 1, 2021 closing share price of the Company’s common stock with a fair value of $2.2 million. The requisite service period for the awards ranges from one to four years (the vesting period). The Company recognized employee stock-based compensation expense for the RSU grant on a straight-line basis over the vesting period of the awards. During the six months ended June 30, 2022, there were no RSUs granted and 48,172 were outstanding, and the Company recognized $0.1 million of stock-based compensation expense during the three and six months ended June 30, 2022.

The following table summarizes the Company’s RSU activity for the six months ended June 30, 2022:

	RSUs			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021		86,225		$	17.89
Issued	-			$	—
Vested		(17,624	)	$	17.89
Forfeited		(20,429	)	$	17.89
Unvested balance at June 30, 2022		48,172		$	17.89

Restricted Stock Awards (RSAs)

On November 22, 2021, the Company’s compensation committee of the board approved payment to be made to Company employees through a grant of RSAs based on the December 1, 2021 closing share price of the Company’s common stock with a fair value of $1.2 million. The requisite service period for the awards is one year (the vesting period). The Company recognized employee stock-based compensation expense for the RSA grant on a straight-line basis over the vesting period of the awards. During the six

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months ended June 30, 2022, there were no RSAs granted and 80,160 outstanding, and the Company recognized $0.3 and $0.7 million stock-based compensation expense during the three and six months ended June 30, 2022.

The following table summarizes the Company's RSA activity for the three and six months ended June 30, 2022:

	RSAs			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021		305,663		$	3.83
Issued	-			$	—
Vested		(189,778	)	$	3.83
Forfeited		(35,725	)	$	3.83
Unvested balance at June 30, 2022		80,160		$	3.83

Summary of plans

Upon completion of the Proteostasis Merger, the Company assumed PTI’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) and PTI’s 2016 Employee Stock Purchase Plan (the “2016 ESPP”).

2016 Stock Option and Incentive Plan

On February 3, 2016, PTI’s stockholders approved the 2016 Plan, which became effective on February 9, 2016. The 2016 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards and other stock-based awards. The number of shares initially reserved for issuance under the 2016 Plan was 79,092 shares. The number of shares of common stock that may be issued under the 2016 Plan will automatically increase each January 1, beginning January 1, 2017, by the lesser of 3% of the shares of the Company’s common stock outstanding on the immediately preceding December 31, or an amount determined by the Company’s board of directors or the compensation committee of the board of directors. The shares of common stock underlying any awards that are forfeited, canceled, repurchased, or are otherwise terminated by the Company under the 2016 Plan and the 2008 Equity Incentive Plan, as amended (the “2008 Plan”) will be added back to the shares of common stock available for issuance under the 2016 Plan. On January 1, 2022, an additional 319,341 shares were reserved for issuance under the 2016 Plan in accordance with the provisions of the 2016 Plan described above. Options granted under the 2016 Plan with service-based vesting conditions generally vest over four years and expire after ten years. As of June 30, 2022 the total number of shares of the Company’s common stock reserved for issuance under the 2016 Plan was 760,498, of which 457,504 shares are available for future issuance under the 2016 Plan.

2016 Employee Stock Purchase Plan

On February 3, 2016, PTI’s stockholders approved the 2016 ESPP, which became effective in connection with the completion of the PTI’s initial public offering. A total of 6,938 shares of common stock were initially reserved for issuance under the 2016 ESPP. In addition, the number of shares of common stock that may be issued under the 2016 ESPP will automatically increase each January 1, beginning January 1, 2017, by the lesser of (i) 6,938 shares of common stock, (ii) 1% of the Company’s shares of common stock outstanding on the immediately preceding December 31, or (iii) an amount determined by the Company’s board of directors or the compensation committee of the board of directors. As of June 30, 2022, the total number of shares reserved under the 2016 ESPP was 48,564 shares. The number of shares reserved for issuance under the 2016 ESPP was increased by 6,938 shares effective as of January 1, 2022 in accordance with the provisions of the 2016 ESPP described above.

Yumanity Therapeutics, Inc. Amended and Restated 2018 Stock Option and Grant Plan

On December 4, 2018, the Company’s board of directors adopted the 2018 Unit Option and Grant Plan (the “2018 Plan”), which was approved by the Company’s members on December 5, 2018. The 2018 Plan provided for the Company to grant unit options, restricted unit awards and unrestricted unit awards to employees, directors and consultants of the Company. As part of the Yumanity Reorganization (as defined below) and the Proteostasis Merger, the 2018 Plan was amended and restated as the “Yumanity Therapeutics, Inc. Amended and Restated 2018 Stock Option and Grant Plan”. Each stock option outstanding under the 2018 Plan at the effective time of the Proteostasis Merger was automatically converted into a stock option exercisable for the same number of shares of Yumanity common stock, and then assumed by the Company, based on the exchange ratio described in the Proteostasis Merger Agreement and the exercise price per share of such outstanding stock option, as adjusted for the exchange ratio. The 2018 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated.

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Options granted under the 2018 Plan with service-based vesting conditions generally vest over four years and expire after ten years. The total number of common shares that may be issued under the 2018 Plan is 1,527,210 as of June 30, 2022. Shares that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of shares or otherwise terminated (other than by exercise) and shares that are withheld upon the exercise of an option or settlement of an award to cover exercise price or tax withholding shall be added back to shares available under the 2018 Plan. As of June 30, 2022, 219,859 shares remain available for issuance under the 2018 Plan.

Under each plan, the exercise price per option granted is not less than the fair market value of common stock as of the date of grant.

2021 Inducement Plan

On June 2, 2021, the Board of Directors approved the adoption of the Company’s 2021 Inducement Plan (the “2021 Plan”),

which is used exclusively for the grant of equity awards to individuals who were not previously employees of the Company (or following a bona fide period of non-employment), as an inducement material to such individual’s entering into employment with the Company, pursuant to Rule 416 under the Securities Act of 1933. During six months ended June 30, 2022, the Company issued 17,000 options from the 2021 Plan to purchase common stock. As of June 30, 2022, the total number of shares of the Company’s common stock that may be issued under the 2021 Plan is 400,000 shares of which 246,600 shares are available for future issuance under the 2021 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2021 Plan.

On April 13, 2021, Board of Directors approved the issuance of stock options to purchase 104,000 shares of its common stock. The stock options were issued outside of the Company’s 2021 Plan as an inducement material to the individual’s acceptance of an offer of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). As of June 30, 2022, all 104,000 stock options have been forfeited.

Option valuation

The fair value of option grants is estimated using the Black-Scholes option-pricing model. Prior to the Proteostasis Merger, the Company was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimates its expected stock/unit volatility based on the historical volatility of a publicly traded set of peer companies. The expected term of the Company’s options has been determined utilizing a midpoint convention estimate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield was based on the fact that the Company has never paid cash dividends.

Option activity

The following table summarizes the Company’s option activity during six months ended June 30, 2022:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		1,779,174		$	18.99		7.67		—
Granted		17,000		$	2.89				—
Exercised		—			—				—
Forfeited		(573,490	)	$	31.47				—
Outstanding as of June 30, 2022		1,222,684		$	11.99		7.82		—
Vested and expected to vest as of June 30, 2022		1,222,684		$	11.99		7.82		—

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Stock/equity-based compensation

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The Company recorded stock/equity-based compensation expense related to common stock options and restricted stock units and restricted stock awards in the following expense categories in its condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development expenses	$	89	$	355	$	190	$	746
General and administrative expenses		983		904		2,086		1,920
	$	1,072	$	1,259	$	2,276	$	2,666

As of June 30, 2022, total unrecognized compensation cost related to unvested options and restricted common stock was $6.4 million, which is expected to be recognized over a weighted average period of 1.75 years.

9. Net Loss Per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(4,845	)	$	(10,454	)	$	(18,226	)	$	(19,136	)
Denominator:
Weighted average common shares    outstanding, basic and diluted		10,847,734			10,195,608			10,800,473			10,194,474
Net loss per share, basic and diluted	$	(0.45	)	$	(1.03	)	$	(1.69	)	$	(1.88	)

The following common stock equivalents presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:

	As of June 30,
	2022		2021
Options to purchase common stock		1,222,684		1,756,947
Warrants to purchase common stock or shares    convertible into common stock		99,986		99,986
Unvested RSUs		48,172		112,544
		1,370,842		1,969,477

10. Leases

In February 2020, the Company entered into a license agreement with a third party for the use of office and laboratory space in Boston, Massachusetts, commencing in May 2020 (the “Premises”). The Company determined that this license agreement qualified as a lease under ASC 842, Leases (“ASC 842”). The initial term of the license agreement is three years with the option to extend for a total of three one-year periods at fair-market rent at the time of each extension. In addition to use of office and laboratory space, the license fee includes various laboratory, office, and operational support services to be provided by the licensor. The initial monthly license fee escalates 3% annually and totals approximately $12.0 million for the three-year term. Additionally, the licensee agreement for the Premises required the Company to pay for a non-exclusive, irrevocable license to use forty-two unreserved parking spaces adjacent to the Premises at the prevailing monthly parking rate. On May 1, 2020, the lease commencement date was met and the Company recorded an operating lease asset of $10.6 million and a corresponding lease liability of $10.2 million.

On December 22, 2020, as part of the Proteostasis Merger, the Company acquired a lease for approximately 30,000 square feet of office and laboratory space (the “Merger Premises”) in Boston, Massachusetts. The lease commenced in January 2018 with rent payments commencing in April 2018. The initial term of the lease was ten years with the option to extend for an additional seven years at fair-market rent at the time of the extension. In addition to use of office and laboratory space, the Company is responsible for paying its allocable portion of building and laboratory operating expenses separately from rent, based on actual costs incurred. Remaining fixed lease payments at the time of the Proteostasis Merger were approximately $14.2 million. On December 22, 2020, the Company recorded an operating lease asset and corresponding lease liability of $10.2 million associated with this lease. The operating

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lease asset was increased by the value attributable to the below-market lease of $3.1 million and an allocated portion of the excess purchase price for the Proteostasis Merger of $1.9 million.

On January 7, 2021 the Company entered into a sublease agreement (the “Sublease”) with Moma Therapeutics, Inc. (the “Subtenant”), whereby the Company subleased the entire Merger Premises to the Subtenant. The initial term of the Sublease commences on the date the Company receives consent to the Sublease from the landlord and shall continue until 18 months from the commencement date. The Sublease provides for the first monthly installment of rent to be paid by the Subtenant on the date of the Sublease.

The Sublease provides for an initial annual base rent of $1,939,340, which increases annually up to a maximum annual base rent of $1,997,520. The Subtenant also is responsible for paying to the Company operating costs, annual tax costs and all utility costs attributable to the Premises during the term of the Sublease. Expense arising from the Merger Premises of $0.5 million and $1.0 million for the three and six months ended June 30, 2022 and lease income from the Sublease of $0.5 million and $1.0 million for the three and six months ended June 30, 2022 are classified in operating expense on a net basis.

On February 28, 2022, the Company entered into two agreements that effectively amended the Premises license agreement for laboratory space in Boston, Massachusetts. The first agreement terminated the existing license, due to expire in May of 2023, effective March 31, 2022. The second agreement, effective April 1, 2022, created a new license for approximately 20 percent of the space covered by the original license with an expiration date of December 31, 2022. The Company agreed to surrender to Licensor the full amount of both the security deposit and the last month’s license fee held by licensor pursuant to the agreement, totaling approximately $0.8 million, in consideration of the agreement to terminate the original license. The related lease liability was reduced by $3.2 million with a corresponding reduction of the ROU asset as a result of this modification. The new license agreement decreases the monthly license fee amount from $0.4 million to $0.1 million.

During the three months ended March 31, 2022, the Company determined a triggering event occurred related to a portion of its Merger Premises. As a result, the Company performed an impairment test. Based on a comparison of undiscounted cash flows to the right of use (“ROU”) asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease, contract terms and sublease income potential. This resulted in an impairment charge of $3.9 million, which reflects the excess of the ROU asset carrying value over its fair value.

On May 16, 2022, the Company entered into an agreement that accelerated the termination date of the Merger Premises lease agreement to July 31, 2022, which results in no payment obligations after that date. No other terms of the lease agreement were changed, and no additional costs were incurred related to the change. As a result of the modification, the related lease liability was reduced by $8.6 million with a corresponding reduction of the ROU asset as a result of this modification. The remaining lease liability relating solely to the Merger Premises of $0.2 million at June 30, 2022 has been classified as a current liability.

The Company also leased property and equipment under agreements that are accounted for as finance leases. As of March 31, 2022 the Company entered into an agreement for an early termination of the finance leases, which primarily consisted of laboratory equipment. The remaining finance lease liabilities settled was less than $0.1 million.

The components of lease cost were as follows (in thousands):

	Six Months Ended June 30,
	2022		2021
Operating lease cost	$	2,496	$	3,053
Short-term lease cost		—		—
Variable lease cost		357		272
Finance lease cost:
Amortization of lease assets		8		77
Interest on lease liabilities		1		5
Total finance lease cost	$	9	$	82

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Supplemental disclosure of cash flow information related to leases was as follows (in thousands):

	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement    of operating lease liabilities (operating cash flows)	$	2,177	$	2,970
Cash paid for amounts included in the measurement    of finance lease liabilities (operating cash flows)	$	1	$	5
Cash paid for amounts included in the measurement    of finance lease liabilities (financing cash flows)	$	27	$	108
Operating lease liabilities arising from obtaining    right-of-use assets	$	—	$	—
Finance lease liabilities arising from obtaining right-    of-use assets	$	—	$	—
Reduction in operating lease liabilities as a result of lease modifications	$	11,844	$	—
Reduction in operating right-of-use assets as a result of lease modifications	$	11,852	$	—

The weighted-average remaining lease term and discount rate were as follows:

	As of June 30,
	2022			2021
Weighted-average remaining lease term (in years) used for:
Operating leases		0.39			4.75
Finance leases		—			1.11
Weighted-average discount rate used for:
Operating leases		5.85	%		9.08	%
Finance leases		—			5.88	%

Because the interest rates implicit in the license agreement and lease agreement assumed from PTI were not readily determinable, the Company’s incremental borrowing rate was used to calculate the present value of each. The present value of the Company’s finance leases was calculated using the rate implicit in the lease. There were no finance leases as of June 30, 2022.

As of June 30, 2022, future annual lease payments under the Company’s real estate operating leases and equipment finance leases were as follows (in thousands):

Year	Operating Leases			Lease Payments to be Received from Sublease			Net Operating Lease Payments
2022	$	566		$	(166	)	$	400
2023		—			—		$	-
2024		—			—		$	-
2025		—			—		$	-
2026		—			—		$	-
Thereafter		—			—		$	-
Total future lease payments		566			(166	)		400
Less: Imputed interest		(7	)		—			(7	)
Total lease liabilities	$	559		$	(166	)	$	393

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The following table presents lease assets and liabilities and their classification on the condensed consolidated balance sheet (in thousands):

Leases	Condensed Consolidated Balance Sheet Classification	Amount
Assets:
Operating lease assets	Operating lease right-of- use assets	$	831
Total leased assets		$	831
Liabilities:
Current:
Operating lease liabilities	Operating lease liabilities	$	559
Non-current:
Operating lease liabilities	Operating lease liabilities, net of current portion		—
Total lease liabilities		$	559

11. Commitments and Contingencies

License agreement

The Company has a tangible property and patent license agreement with Whitehead Institute for Biomedical Research (“Whitehead”) entered into in 2016 and subsequently amended in 2016 and 2018, under which the Company obtained a certain exclusive and non-exclusive, royalty-bearing, sublicensable, worldwide license to make, sell and distribute products under certain patents owned by Whitehead for certain know-how related to specific neurodegenerative diseases. In consideration for the rights granted by the agreement, the Company paid a one-time license fee of less than $0.1 million and issued 300,000 common units valued at $0.8 million. The Company is required to pay annual maintenance fees of up to $0.1 million through the termination of the agreement. The Company is also required to pay up to an aggregate of approximately $1.9 million upon the achievement of certain developmental and regulatory milestones for the first two licensed products under its first indication. The Company is also required to pay additional milestone amounts for subsequent licensed products under its first or subsequent indications, but at a lower rate. The Company did not meet any milestones for the six months ended June 30, 2022 and the year ended December 31, 2021. The Company must also pay a royalty in the low single digits on future sales by the Company and a mid single to low double digit percentage of certain income received from sublicensees and certain partners. The license agreement remains in effect until the expiration of the last-to-expire patent licensed under the agreement. Whitehead may terminate the agreement upon the Company’s uncured material breach of the agreement, including failure to make required payments under the agreement or to achieve certain milestones, or if the Company becomes insolvent or bankrupt. The Company may terminate the license agreement at any time upon providing certain written notice to Whitehead.

Contingent Value Rights Agreement

In connection with the Proteostasis Merger, the Company entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with Shareholder Representative Services LLC as representative of the PTI stockholders. The CVR Agreement entitled each holder of Company Common Stock as of immediately prior to the effective time of the Proteostasis Merger to receive certain net proceeds, if any, derived from the grant, sale or transfer of rights of the CF Assets ( the “CF Assets”) to any one of three specified counterparties completed during the nine-month period after the effective time of the Proteostasis Merger (with any potential payment obligations continuing until the 10-year anniversary of the closing of the Proteostasis Merger Agreement). The CVR agreement became effective at the closing of the Proteostasis Merger. Due to the fact that no CF Asset sale was completed by the nine-month anniversary of the effective time of the Proteostasis Merger, the CVRs expired. No liability has been recorded at June 30, 2022 or previous periods associated with the CVRs.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 24, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company focused on the discovery and development of innovative, disease-modifying therapies for neurodegenerative diseases. Neurodegenerative diseases cause a progressive loss of structure and function in the brain, leaving patients with devastating damage to their nervous system and widespread functional impairment. Although treatments may help relieve some of the physical or mental symptoms associated with neurodegenerative diseases, few of the currently available therapies slow or stop the continued loss of neurons, resulting in a critical unmet need. We are specifically focused on developing novel therapies to treat devastating conditions, either with large or orphan disease markets, including Parkinson’s disease, dementia with Lewy bodies, multiple system atrophy, amyotrophic lateral sclerosis, or ALS (also known as Lou Gehrig’s disease), and frontotemporal lobar degeneration, or FTLD.

Exploration of Strategic Alternatives and Restructuring

In February 2022, we announced that we are exploring strategic alternatives to enhance shareholder value and engaged H.C. Wainwright as our financial advisor to assist in this process. In February 2022, we also began implementation of a strategic restructuring with the objective of preserving capital. In the first quarter of 2022, our board of directors approved a restructuring plan following a review of our operations, cost structure and growth opportunities. The restructuring included a reduction in headcount of approximately 60% across the Company. We recorded a charge of $1.4 million in the six months ended June 30, 2022 as a result of the restructuring, which consisted of one-time termination benefits for employee severance, benefits and related costs, all of which are expected to result in cash expenditures and substantially all of which will be paid out by the end of 2022.

After a comprehensive review of strategic alternatives, on June 5, 2022, we entered into the Merger Agreement with Kineta, Inc. ("Kineta"). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, at the effective time of the Merger, Yacht Merger Sub, Inc., a wholly-owned subsidiary of ours, will merge with and into Kineta (the "Merger"), with Kineta continuing as a wholly-owned subsidiary of ours and the surviving corporation of the Merger.

On June 5, 2022, we also entered into an Asset Purchase Agreement with Janssen Pharmaceutica NV ("Janssen"). Pursuant to the Asset Purchase Agreement and subject to the satisfaction or waiver of the conditions set forth in the Asset Purchase Agreement, at the closing of the transactions contemplated by the Asset Purchase Agreement, we will sell to Janssen all of our rights, title and interest in YTX-7739 as well as our unpartnered preclinical and discovery-stage product candidates including intellectual property rights, biological materials, regulatory documentation, books and records, inventory, contracts, permits, actions and rights of recovery and other properties, assets and rights related thereto (the "Purchased Assets"), and Janssen will assume certain of our liabilities, for a purchase price of $26 million in cash (the "Asset Sale").

Our future operations are highly dependent on the success of the Merger with Kineta.

Clinical and Regulatory Update

Our lead program, YTX-7739, is in development for the potential treatment and disease modification of Parkinson’s disease. YTX-7739 targets an enzyme known as stearoyl-CoA desaturase, or SCD. Inhibition of SCD in multiple cellular systems, including patient-derived neurons, as well as in a novel mouse model of Parkinson’s disease, has been demonstrated to overcome the toxicity of misfolded alpha-synuclein or α-synuclein, a protein strongly associated with Parkinson’s disease.

In January 2022, the FDA placed a partial clinical hold on future multidose clinical trials of YTX-7739 in the United States until the FDA’s concerns have been addressed. The FDA has not halted all clinical programming and is permitting a proposed single dose formulation clinical trial to proceed. We have paused our previously planned studies of YTX-7739 while the partial clinical hold is in effect.

On November 10, 2021, we announced the top-line results of a European Phase 1b clinical trial of YTX-7739 in patients with mild-to-moderate Parkinson’s disease. The Phase 1b clinical trial was a randomized, placebo-controlled, double-blind multi dose study

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to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of YTX-7739. Data were reported from 20 patients with mild-to-moderate Parkinson’s disease. Patients received once-daily oral doses of YTX-7739 (20 mg or placebo) for 28 days. YTX-7739 was shown to inhibit its primary target, SCD, an enzyme whose inhibition has been closely linked to neuronal survival and improved motor function in a Parkinson’s disease model.

After 28 days of treatment, the 20 mg dose given once-daily reduced the fatty acid desaturation index (FA-DI), a biomarker of SCD inhibition, by approximately 20%-40%, the range expected to be clinically relevant based on preclinical studies. Target engagement in the cerebrospinal fluid suggested that YTX-7739 effectively crossed the blood-brain barrier. Additionally, the pharmacokinetic/pharmacodynamic profile of YTX-7739 was consistent with previous studies and we believe informs dose selection for future studies.

YTX-7739 was generally well tolerated with all treatment emergent adverse events being mild to moderate in severity. There were no serious adverse events. Moderate adverse events (AEs) in the active treatment group consisted of two patients with increased Parkinson’s symptoms, two patients with lower back pain, one patient with headache, one patient with myalgia, one patient with insomnia, one patient with ligament strain, and one patient with vaccination complication. One patient on placebo had moderate worsening of tremors and Parkinsonism, which led to discontinuation. AEs occurring at a higher percentage in two or more patients administered YTX-7739 compared to placebo were procedural pain, myalgia, dry eye, hyperbilirubinemia, hypesthesia, lower back pain, and constipation. AEs occurring at a higher percentage with placebo included orthostatic hypotension, headache, tremor, fatigue and dizziness.

As expected, after only 28 days of dosing, there were no statistically significant differences in clinical assessments (Unified Parkinson's Disease Rating Scale Part III (UPDRS III), Montreal Cognitive Assessment (MoCA)) or most exploratory biomarkers. Quantitative electroencephalogram (qEEG) assessments of the effect of YTX-7739 on brain activity were completed in a subset of eight patients and demonstrated a statistically significant change compared to baseline, suggestive of a potential improvement in synaptic function.

Research and Discovery

At the center of our scientific foundation is our drug discovery engine, which is based on technology licensed from the Whitehead Institute, an affiliate of the Massachusetts Institute of Technology. This core technology, combined with investments and advancements by us, was designed to enable rapid screening to identify drugs with the potential to modify disease by overcoming toxicity in disease-causing gene networks. Toxicity in many neurodegenerative diseases results from an aberrant accumulation of misfolded proteins in the brain. We leverage our proprietary discovery engine to identify and screen novel drug targets and drug molecules for their ability to protect nerve cells from toxicity arising from misfolded proteins. To date, we have identified over 20 targets, most of which have not previously been linked to neurodegenerative diseases.

Financial Update

We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $18.2 million and $19.1 million, respectively, for the six months ended June 30, 2022 and 2021. As of June 30, 2022, we had an accumulated deficit of $205.5 million. We expect to continue to incur significant expenses and increasing operating losses.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing, manufacturing and distribution activities. We also expect to incur additional costs associated with operating as a public company. We expect to continue to incur significant operating losses for the foreseeable future, although at reduced expected levels as a result of restructuring actions taken in the six months ended June 30, 2022.

As a result, we would need substantial additional funding to support our continuing operations. In February 2022, we announced that we are exploring strategic alternatives to enhance shareholder value and engaged H.C. Wainwright as our financial advisor to assist in this process. On June 5, 2022, we entered into the Merger Agreement with Kineta and the Asset Purchase Agreement with Janssen. If the proposed Merger or Asset Sale do not close, we may be unable to raise additional funds or enter into other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we will be forced to significantly delay, reduce or eliminate development and commercialization of one or more of our product candidates or delay or abandon our pursuit of potential in-licenses or acquisitions or initiate steps to cease operations.

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Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. Typically, it takes many years to develop one new product from the time it is discovered to when it is available for treating patients, and development may cease for a number of reasons. Because of the numerous risks and uncertainties associated with product development, including any impact from the ongoing COVID-19 pandemic, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of June 30, 2022, we had cash, cash equivalents and marketable securities of $11.8 million. As of the issuance date of the condensed consolidated financials for the periods ended June 30, 2022, we expect that, absent completing either strategic transaction, our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses early into the first quarter of 2023 and therefore substantial doubt exists about our ability to continue as a going concern. Our future viability is dependent on our ability to raise additional capital to finance our operations or execute other strategic alternatives.

COVID-19

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization and to date, the COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and difficult to predict. While we continue to conduct our research and development activities, the COVID-19 pandemic may cause disruptions that affect our ability to initiate and complete preclinical studies and clinical trials or to procure items that are essential for our research and development activities. The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds to support our operations. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on our business and operations. Clinical trial sites in many countries, including those in which we operate, have incurred delays due to COVID-19. The YTX-7739 Phase 1b clinical trial site incurred delays due to COVID-19, resulting in a delay in the expected timing of early results from that study. There continues to be a risk of additional delays to our clinical programs.

We plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our business operations. In an effort to provide a safe work environment for our employees, we have, among other things, implemented measures to enable remote work whenever possible. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic.

Merger with Proteostasis

On August 22, 2020, Proteostasis Therapeutics, Inc., a Delaware corporation (“Proteostasis”), Pangolin Merger Sub, Inc. (“Pangolin Merger Sub”), Yumanity, Inc. (formerly Yumanity Therapeutics, Inc.), and Yumanity Holdings, LLC (“Holdings”), entered into the Proteostasis Merger Agreement, as amended on November 6, 2020, pursuant to which Pangolin Merger Sub merged with and into Yumanity, Inc. (the "Proteostasis Merger"). Immediately prior to the closing of the transaction, Holdings merged with and into Yumanity, Inc. with Yumanity, Inc. surviving the Proteostasis Merger (the “Yumanity Reorganization”) and, upon the closing of the Proteostasis Merger, Yumanity, Inc. became a wholly owned subsidiary of Proteostasis. The Proteostasis Merger was completed on December 22, 2020 pursuant to the terms of the Proteostasis Merger Agreement. In connection with the completion of the Proteostasis Merger, Proteostasis changed its name to Yumanity Therapeutics, Inc., and the trading symbol changed from “PTI” to “YMTX.” We refer to the historical operations of Holdings and Yumanity, Inc. as Yumanity and following the Proteostasis Merger, the business conducted by Yumanity became our primary business.

Pursuant to the terms of the Proteostasis Merger Agreement, upon closing of the Proteostasis Merger, all of Yumanity, Inc.’s outstanding common stock was exchanged for common stock of Proteostasis and all outstanding options and warrants to purchase common stock of Yumanity, Inc. were exchanged for options and warrants to purchase common stock of Proteostasis.

The transaction was accounted for as a reverse merger and as an asset acquisition in accordance with Generally Accepted Accounting Principles in the United States, or GAAP. Under this method of accounting, Yumanity was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Proteostasis Merger: (i) Yumanity’s equity holders owned a substantial majority of the voting rights in the combined organization, (ii) Yumanity designated a majority of the members (seven of nine) of the initial board of directors of the combined organization and (iii) Yumanity’s senior management held all key positions in the senior management of the combined organization. Accordingly, for accounting purposes, the transaction was treated as the equivalent of Yumanity issuing stock to acquire the net assets of Proteostasis. As a result, as of the closing date of the Proteostasis Merger, the net assets of Proteostasis were recorded at their acquisition-date fair

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values in the financial statements of the Company and the reported operating results prior to the Proteostasis Merger are those of Yumanity.

At-the-Market Offering Program

In April 2021, we entered into a sales agreement (the "Prior Sales Agreement") with Jefferies LLC (“Jefferies”) with respect to an at-the-market (“ATM”) offering program under which we could have issued and sold, from time-to-time at our sole discretion, shares of our common stock, in an aggregate offering amount of up to $60.0 million. In December 2021, we terminated the Prior Sales Agreement and entered into a new sales agreement with Jefferies with respect to an ATM offering under which we may issue and sell, from time-to-time and at our sole discretion, shares of our common stock, in an aggregate offering amount of up to $60.0 million (the “New Sales Agreement”). Jefferies acts as our sales agent and will use commercially reasonable efforts to sell shares of common stock from time-to-time, based upon instruction from us.

We will pay Jefferies up to 3% of the gross proceeds from any common stock sold through the New Sales Agreement. We sold 216,332 shares of common stock under the New Sales Agreement during the six months ended June 30, 2022 for gross proceeds of $0.4 million and for aggregate net proceeds to us of approximately $0.4 million, after deducting sales commissions. As of June 30, 2022, $59.6 million of common stock remained available for future issuance under the New Sales Agreement, although these amounts may be limited as we will be subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates of the company. Therefore, we will be limited in the amount of proceeds it is able to raise by selling shares of our common stock using its Form S-3 until such time as our public float exceeds $75 million.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for product candidates are successful and result in regulatory approval or licenses with third parties, we may generate revenue in the future from product sales, milestone payments under our existing collaboration agreement or payments from other license agreements that we may enter into with third parties.

In June 2020, we entered into a research collaboration and license agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”), focused on accelerating the development of new treatments for neurodegenerative diseases. Under the terms of the Collaboration Agreement, Merck will gain exclusive rights to two novel pipeline programs for the treatment of ALS and FTLD. We and Merck will collaborate to advance the two preclinical programs during the research term, after which Merck has the right to continue clinical development and commercialization. Under the Collaboration Agreement, we received an upfront payment totaling $15.0 million and are eligible to receive future milestone payments of up to $530.0 million associated with the successful research, development and sales of marketed products for pipeline programs, of which $5.0 million was paid to us in February 2022 as discussed below, as well as royalties on net sales. We will perform certain research and development activities over the research term pursuant to the Collaboration Agreement and will participate on a Joint Steering Committee to oversee research and development activities.

On December 17, 2021, Merck notified us that the first data package that we submitted for one program has met the requirements to progress to the next stage of the research collaboration. Achievement of this milestone triggered a $5.0 million milestone payment from Merck, which was received in February 2022. We cannot provide assurance as to the timing of future milestones or royalty payments or that we will receive any of the future payments at all.

We will record revenue over the research term as we satisfy our performance obligations under the Collaboration Agreement. Accordingly, the $15.0 million upfront payment has been recognized and the $5.0 million milestone payment is being recognized as revenue using the cost-to-cost method, which we believe best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. We recorded $2.7 million and $5.6 million of collaboration revenue during the six months ended June 30, 2022 and 2021, respectively, and deferred revenue totals $2.4 million at June 30, 2022 related to the Collaboration Agreement.

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Operating Expenses

Research and Development

Research and development expenses consist primarily of costs incurred in connection with the discovery, preclinical and clinical development and manufacture of our product candidates, and include:

•salaries, benefits, stock/equity-based compensation, consultants and other related costs for individuals involved in research and development activities;

•external research and development expenses incurred under agreements with contract research organizations (“CROs”), investigative sites and other scientific development services;

•costs incurred under agreements with contract development and manufacturing organizations (“CDMOs”) for developing and manufacturing material for preclinical studies and clinical trials;

•licensing agreements and associated milestones;

•costs related to compliance with regulatory requirements;

•lab supplies and other lab related expenses; and

•facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, insurance and other operating costs.

We expense research and development costs as incurred and recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Nonrefundable advance payments for goods and services to be received in the future for use in research and development activities are deferred and capitalized in prepaid expenses and other current assets. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, milestone payments and annual maintenance fees under license agreements are expensed in the period in which they are incurred.

Our external direct research and development expenses are tracked by product candidate and consist primarily of costs that include fees and other expenses paid to outside consultants, CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by product candidate also include fees incurred under third-party license agreements. We do not allocate employee costs and costs associated with our platform technology, early stage discovery efforts, laboratory supplies and facilities, including depreciation or other indirect costs, to specific product candidates because these costs are deployed across multiple programs and our platform and, as such, are not separately classified.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We cannot accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of product candidates including future trial design and various regulatory requirements, many of which cannot yet be determined with accuracy based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans.

The successful development and commercialization of YTX-7739 and any other product candidates we may develop in the future 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 preclinical and clinical development of any of our product candidates. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

•the partial clinical hold that has been placed on our investigational new drug (“IND”) application for YTX-7739 by the FDA;

•the timing and progress of preclinical and clinical development activities;

•the number and scope of preclinical and clinical programs we decide to pursue;

•the ability to maintain current research and development programs and to establish new ones;

•establishing an appropriate safety profile with IND-enabling or foreign equivalent studies;

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•successful patient enrollment in, and the initiation and completion of, clinical trials;

•the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

•the receipt of regulatory approvals from applicable regulatory authorities;

•the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

•our ability to establish new licensing or collaboration arrangements;

•the performance of our future collaborators, if any;

•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

•development and timely delivery of commercial-grade drug formulations that can be used in our planned clinical trials and for commercial launch;

•obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

•launching commercial sales of product candidates, if approved, whether alone or in collaboration with others; and

•maintaining a continued acceptable safety profile of the product candidates following approval.

Any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time to complete clinical development of that product candidate. As a result, we expect research and development costs to continue to decrease for the foreseeable future since we have paused the development of YTX-7739 and any other product candidates we may develop in the future. We may never obtain regulatory approval for any of our product candidates. Drug commercialization will take several years and millions of dollars in development costs.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits, and stock/equity-based compensation expenses for personnel in executive, finance, accounting, human resources and other administrative functions. Other significant general and administrative expenses include legal fees relating to patent, intellectual property and corporate matters, and fees paid for accounting, audit, consulting and other professional services, as well as facilities, and other allocated expenses, which include direct and allocated expenses for rent, insurance and other operating costs.

We anticipate that our general and administrative expenses will increase in the near future in connection with the proposed Merger with Kineta and proposed Asset Sale with Janssen. These increases will likely include legal fees and fees to outside consultants, among other expenses.

Other Income (Expense)

Interest Expense

Interest expense consists of interest charged on outstanding borrowings associated with our loan and security agreements, as well as amortization of debt issuance costs and accretion of a final payment payable upon the maturity or the repayment in full of all obligations under such loans. Interest expense also consists of interest related to finance leases and short-term borrowings.

Interest Income and Other Income (Expense), Net

Interest income consists of interest earned on our invested cash balances. Other income (expense), net includes a gain on the extinguishment of debt upon forgiveness of the PPP loan (see Paycheck Protection Loan section of the Description of Indebtedness below).

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Income Taxes

Prior to the Yumanity Reorganization, Holdings was treated as a partnership for federal income tax purposes and, therefore, its owners, and not Holdings, were subject to U.S. federal or state income taxation. Holdings’ directly held subsidiary was treated as a corporation for U.S. federal income tax purposes and subject to taxation in the United States. After the Yumanity Reorganization, the Company and its subsidiary are both taxpaying entities. In each reporting period, our tax provision included the effects of consolidating our subsidiary’s results of operations. Since our inception, we have not recorded any income tax benefits for the net losses we incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. Utilization of U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 ("Section 382"), and corresponding provisions of state law, due to ownership changes that be occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

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

	Three Months Ended June 30,
	2022			2021			Change
	(in thousands)
Collaboration revenue	$	1,657		$	2,114		$	(457	)
Operating expenses:
Research and development		1,141			7,327			(6,186	)
General and administrative		5,557			4,712			845
Impairment loss		—			—			—
Total operating expenses		6,698			12,039			(5,341	)
Loss from operations		(5,041	)		(9,925	)		4,884
Other income (expense):
Interest expense		(7	)		(463	)		456
Interest income and other income (expense), net		203			(66	)		269
Total other income (expense), net		196			(529	)		725
Net loss	$	(4,845	)	$	(10,454	)	$	5,609

Collaboration Revenue

Collaboration revenue recognized during the three months ended June 30, 2022 of $1.7 million was related to our Collaboration Agreement with Merck. The milestone payment of $5.0 million received in February 2022 was initially recorded as deferred revenue and is being recognized as revenue under the cost-to-cost method as research and development is being performed.

Research and Development Expenses

	Three Months Ended June 30,
	2022		2021		Change
	(in thousands)
Direct research and development expenses by program:
YTX-7739	$	231	$	2,397		(2,166	)
YTX-9184		38		642		(604	)
Platform, research and discovery, and unallocated expenses:
Platform and other early stage research external costs		19		731		(712	)
Personnel related (including equity-based compensation)		387		2,126		(1,739	)
Facility related and other		466		1,431		(965	)
Total research and development expenses	$	1,141	$	7,327	$	(6,186	)

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Research and development expenses were $1.1 million for the three months ended June 30, 2022, a decrease of $6.2 million from $7.3 million for the three months ended June 30, 2021. Direct expenses of our YTX-7739 program decreased by $2.2 million during the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Overall costs of the YTX-7739 clinical programs declined sharply as a result of our pause in early 2022 of previously planned clinical studies while the partial clinical hold is pending with the FDA. Direct expenses of our YTX-9184 program decreased by $0.6 million from $0.6 million for the three months ended June 30, 2021 to less than $0.1 million for the three months ended June 30, 2022. The change was primarily due to the decision in late 2021 not to pursue near-term clinical studies of YTX-9184. Platform and other early-stage research external costs decreased by $0.7 million from $0.7 million in the three months ended June 30, 2021 to less than $0.1 million in the three months ended June 30, 2022. This change was primarily due to decreased laboratory activities in the three months ended June 30, 2022 after we announced a restructuring that eliminated approximately 60% of our workforce. That restructuring also impacted personnel related costs which decreased by $1.7 million to $0.4 million in the three months ended June 30, 2022. Facility related and other costs decreased $1.0 million, mostly due to the amendment in February 2022 of our headquarters lease which reduced lease expense by approximately 80%. The decrease was also partially due to the change in the proportion of research and development personnel that made up total personnel, resulting in a decreased allocation of facility related costs.

General and Administrative Expenses

	Three Months Ended June 30,
	2022		2021		Change
	(in thousands)
Personnel related (including equity-based compensation)	$	1,962	$	2,138		(176	)
Professional and consultant fees		2,584		1,403		1,181
Facility related and other		1,011		1,171		(160	)
Total general and administrative expenses	$	5,557	$	4,712	$	845

General and administrative expenses were $5.6 million for the three months ended June 30, 2022, an increase of $0.8 million from $4.7 million for the three months ended June 30, 2021. The decrease of $0.2 million in personnel related costs was primarily due to the restructuring announced in February 2022. Personnel-related costs for each of the three months ended June 30, 2022 and 2021 included stock/equity-based compensation of $1.0 million and $0.9 million, respectively. Professional and consultant fees increased by $1.2 million primarily due to higher legal and investment banking fees incurred to put in place the Merger Agreement with Kineta and the Asset Purchase Agreement with Janssen. Facility and other related costs decreased by $0.2 million primarily due to the change in the proportion of general and administrative personnel that made up total personnel, resulting in an increased allocation of facility related costs.

Other Income (Expense)

Other income (expense) changed by $0.7 million to net other income of $0.2 million for the three months ended June 30, 2022 from net other expense of $0.5 million for the three months ended June 30, 2021, primarily due to reduction of interest expense by $0.5 million due to the extinguishment of the Term Loan in February 2022.

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Comparison of the Six Months Ended June 30, 2022 and 2021

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

	Six Months Ended June 30,
	2022			2021			Change
	(in thousands)
Collaboration revenue	$	2,679		$	5,646		$	(2,967	)
Operating expenses:
Research and development		6,037			14,106			(8,069	)
General and administrative		10,382			10,764			(382	)
Impairment loss		3,901			—			3,901
Total operating expenses		20,320			24,870			(4,550	)
Loss from operations		(17,641	)		(19,224	)		1,583
Other income (expense):
Interest expense		(217	)		(951	)		734
Interest income and other income (expense), net		(168	)		(95	)		(73	)
Loss on debt extinguishment		(200	)		1,134			(1,334	)
Total other income (expense), net		(585	)		88			(673	)
Net loss	$	(18,226	)	$	(19,136	)	$	910

Collaboration Revenue

Collaboration revenue recognized during the six months ended June 30, 2022 of $2.7 million was related to our Collaboration Agreement with Merck. The milestone payment of $5.0 million received in February 2022 was initially recorded as deferred revenue and is being recognized as revenue under the cost-to-cost method as research and development is being performed.

Research and Development Expenses

	Six Months Ended June 30,
	2022		2021		Change
	(in thousands)
Direct research and development expenses by program:
YTX-7739	$	1,965	$	4,118	$	(2,153	)
YTX-9184		113		1,145		(1,032	)
Platform, research and discovery, and unallocated expenses:
Platform and other early stage research external costs		341		1,801		(1,460	)
Personnel related (including equity-based compensation)		2,049		4,154		(2,105	)
Facility related and other		1,569		2,888		(1,319	)
Total research and development expenses	$	6,037	$	14,106	$	(8,069	)

Research and development expenses were $6.0 million for the six months ended June 30, 2022, a decrease of $8.1 million from $14.1 million for the six months ended June 30, 2021. Direct expenses of our YTX-7739 program decreased by $2.2 million to $2.0 million in the six months ended June 30, 2022 from $4.1 million in the six months ended June 30, 2021. Overall costs of the YTX-7739 clinical programs declined as a result of our pause in early 2022 of previously planned clinical studies while the partial clinical hold is pending with the FDA. Direct expenses of our YTX-9184 program decreased by $1.0 million from $1.1 million for the six months ended June 30, 2021 to $0.1 million for the six months ended June 30, 2022. The change was primarily due to the decision in late 2021 not to pursue near-term clinical studies of YTX-9184. Platform and other early-stage research external costs decreased by $1.5 million from $1.8 million in the six months ended June 30, 2021 to $0.3 million in the six months ended June 30, 2022. This change was primarily due to decreased laboratory activities in the six months ended June 30, 2022 after we announced a restructuring in February 2022 that eliminated approximately 60% of our workforce. That restructuring also impacted personnel related costs which decreased by $2.1 million to $2.0 million in the six months ended June 30, 2022. Facility related and other costs decreased $1.3 million, mostly due to the amendment in February 2022 of our headquarters lease which reduced lease expense by approximately 80%. The decrease was also partially due to the change in the proportion of research and development personnel that made up total personnel, resulting in a decreased allocation of facility related costs.

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General and Administrative Expenses

	Six Months Ended June 30,
	2022		2021		Change
	(in thousands)
Personnel related (including equity-based compensation)	$	4,661	$	4,407		254
Professional and consultant fees		3,399		3,488		(89	)
Facility related and other		2,322		2,869		(547	)
Total general and administrative expenses	$	10,382	$	10,764	$	(382	)

General and administrative expenses were $10.4 million for the six months ended June 30, 2022, a decrease of $0.4 million from $10.8 million for the six months ended June 30, 2021. The increase of $0.3 million in personnel related costs was primarily due to a restructuring charge of $0.9 million during the six months ended June 30, 2022. Personnel-related costs for each of the six months ended June 30, 2022 and 2021 included stock/equity-based compensation of $2.1 million and $1.9 million, respectively. Professional and consultant fees decreased by less than $0.1 million, as the higher audit expenses and legal fees in the six months ended June 30, 2021 as we transitioned to operating as a public company after the Merger were similar to the higher legal and investment banking fees incurred to put in place the Merger Agreement with Kineta and the Asset Purchase Agreement with Janssen. Facility and other related costs decreased by $0.6 million, primarily due to the amendment in February 2022 of our headquarters lease which reduced lease expense by approximately 80%.

Other Income (Expense)

Other income (expense) changed by $0.7 million to net other expense of $0.6 million for the six months ended June 30, 2022 from net other income of less than $0.1 million for the six months ended June 30, 2021, primarily due to the $1.1 million gain on extinguishment of a PPP loan recorded in the period ended March 31, 2021 compared with a $0.2 million loss on extinguishment of our long-term debt during the period ended June 30, 2022.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily with proceeds from sales of preferred units and an upfront payment from our collaboration agreement with Merck received in July 2020. In December 2020, we completed the Proteostasis Merger and acquired its $35.9 million of cash, cash equivalents and restricted cash. Immediately following the Proteostasis Merger, we also completed a private placement of an aggregate of 1,460,861 shares of our common stock and received net proceeds of approximately $31.6 million. We have also funded operations using borrowings under loan and security agreements.

As of the issuance date of the condensed consolidated financial statements for the quarter ended June 30, 2022, we expect that, absent either strategic transaction, our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses early into the first quarter of 2023. We expect to continue to generate operating losses for the foreseeable future, although at reduced expected levels as a result of restructuring actions taken in the six months ended June 30, 2022. These conditions give rise to substantial doubt over our ability to continue as a going concern.

Cash Flows

The following table summarizes our sources and uses of cash for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022			2021
	(in thousands)
Cash used in operating activities	$	(13,118	)	$	(31,903	)
Cash provided by (used in) investing activities		1,610			(3,884	)
Cash provided by (used in) financing activities		(11,798	)		1,159
Net decrease in cash, cash equivalents, and restricted cash	$	(23,306	)	$	(34,628	)

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Net Cash Used in Operating Activities

During the six months ended June 30, 2022, operating activities used $13.1 million of cash, resulting from our net loss of $18.2 million, primarily due to net cash changes in our working capital of $3.4 million offset by the add back of non-cash charges of $8.5 million, which included $2.0 million of non-cash lease expense, $3.9 million of loss on extinguishment of a lease, and $2.3 million of stock/equity-based compensation expense. Net cash provided by changes in our operating assets and liabilities for the six months ended June 30, 2022 consisted of a $2.1 million decrease in operating lease liabilities (see Note 10 to the financial statements) and a $2.7 million decrease in deferred revenue due to the recognition of revenue related to the Collaboration Agreement (see Note 4 to the financial statements). Additionally, there was a $3.3 million decrease in accounts payable and accrued expenses and other current liabilities, primarily due to payment of $1.5 million of 2021 performance bonuses.

During the six months ended June 30, 2021, operating activities used $31.9 million of cash, resulting from our net loss of $19.1 million, primarily due to net cash changes in our operating assets and liabilities of $17.6 million offset by the add back of non-cash charges of $4.8 million, which included $2.5 million of non-cash lease expense and $2.7 million of stock/equity-based compensation expense. Net cash provided by changes in our operating assets and liabilities for the six months ended June 30, 2021 consisted of a $5.6 million decrease in deferred revenue due to the recognition of revenue related to the Collaboration Agreement (see Note 4 to the financial statements). Additionally, there was a $9.6 million decrease in accounts payable and accrued expenses and other current liabilities, primarily due to $5.7 million that was paid to settle severance and other obligations resulting from the merger, as well as payment of $1.7 million of 2020 performance bonuses offset by 2021 bonus expense accrued, and $1.7 million of banking commissions paid related to the Private Placement that closed in the fourth quarter of 2020. There was also a decrease of $2.2 million in operating lease liabilities resulting from lease payments.

Changes in accounts payable, accrued expenses and prepaid expenses in all periods were generally due to changes in our business and the timing of vendor invoicing and payments.

Net Cash (Used in)/Provided by Investing Activities

During the six months ended June 30, 2022, net cash provided by investing activities was $1.6 million, primarily related to the maturity of $1.4 million of marketable debt securities.

During the six months ended June 30, 2021, net cash used in investing activities was $3.9 million, primarily related to $3.8 million for net purchases of marketable debt securities and by $0.1 million of purchases of property and equipment.

Net Cash Provided by Financing Activities

Net cash used in financing activities for the six months ended June 30, 2022 was $11.8 million, consisting primarily of $12.7 million of payments of debt principal, offset by $1.7 million of net proceeds from short-term borrowings that financed payments of our directors' and officer's insurance premiums as well as by $0.4 million in proceeds from the ATM program.

Net cash provided by financing activities for the six months ended June 30, 2021 was $1.2 million, consisting primarily of $1.3 in proceeds from the ATM program, offset by payments of debt issuance costs of $0.1 million and payments of finance lease obligations of $0.1 million.

Description of Indebtedness

Loan and Security Agreement

We entered into a loan and security agreement with Hercules Capital, Inc. (the “Lender”) in December 2019 (the “Term Loan”), pursuant to which we had $12.7 million in outstanding principal borrowings as of December 31, 2021. On February 25, 2022, we repaid to the Lender a payoff amount of $12.8 million and terminated the Term Loan, provided that we continue to be bound by certain indemnification obligations under Section 6.3 of the Term Loan. The payoff amount included payment of approximately $0.9 million consisting of the end of term cost, as well as an interest/non-use fee of less than $0.1 million.

In April 2020, the Term Loan was amended to permit indebtedness consisting of a loan under the PPP of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), provided that such loan shall be unsecured, shall not contain any terms or conditions that are adverse to the lender’s rights under the loan and that we will not prepay such loan. In June 2020, the Term Loan was amended and an end of term cost of $0.3 million became due upon repayment of the loan.

On December 22, 2020, we entered into an Unconditional Secured Guaranty and Pledge Agreement (the “Guaranty”) with the Lender as a condition to the Lender’s consent to the Proteostasis Merger under the Term Loan between us as borrower and the Lender. Immediately prior to the Proteostasis Merger, we entered into a Fourth Amendment and Consent to Loan and Security Agreement

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dated as of December 22, 2020 with the Lender (the “Loan Amendment”). The Guaranty provides for our guaranty of our obligations under the Loan Agreement and provides the Lender a security interest in all of our assets other than intellectual property as collateral. The Loan Amendment provides for the Lender’s consent to the Proteostasis Merger and to the creation and funding of a Silicon Valley Bank Paycheck Protection Program escrow account to hold funds in connection with our outstanding Paycheck Protection Program loan amounts for which we have submitted a forgiveness application. The Loan Amendment also amends the definition of “Change in Control” to include the situations in which we no longer control Yumanity, Inc., our wholly-owned subsidiary. The remaining terms and conditions of the Loan Agreement generally continue in the form existing prior to the Loan Amendment.

On March 29, 2021, the Term Loan was amended again to allow for the creation of a new foreign subsidiary, as well as changing certain covenants related to the financial operations of said subsidiary. The subsidiary was formed on April 23, 2021.

On April 13, 2021, the Term Loan was amended to reduce the end of term cost from $0.3 million to $0.1 million and to extend the availability of Tranche 2 from March 31, 2021 to June 30, 2021.

Borrowings under the Term Loan were collateralized by substantially all of our personal property, other than our intellectual property. There were no financial covenants associated with the Term Loan; however, we are subject to certain affirmative and negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions; encumbering our intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and engaging in certain other business transactions. The obligations under the Term Loan are subject to acceleration upon the occurrence of specified events of default, including a material adverse change to our business, operations or financial or other condition. Upon the occurrence of an event of default and until such event of default is no longer continuing, the annual interest rate will be 5.0% above the otherwise applicable rate.

Paycheck Protection Program Loan

In April 2020, prior to entering into the Proteostasis Merger Agreement in August 2020, we issued a Promissory Note to Silicon Valley Bank, pursuant to which we received loan proceeds of $1.1 million (the “PPP Loan”), provided under the PPP established under the CARES Act and guaranteed by the U.S. Small Business Administration. The PPP Loan was unsecured, was scheduled to mature on April 24, 2022, and had a fixed interest rate of 1.0% per annum. Equal monthly payments of principal and interest were to begin commencing in August 2021 until the maturity date. Interest would have accrued on the unpaid principal balance from the inception date of the loan. Forgiveness of the PPP Loan was only available for principal that is used for the limited purposes that expressly qualify for forgiveness under U.S. Small Business Administration requirements. On April 3, 2021, we were notified by Silicon Valley Bank that our forgiveness application was accepted by the Small Business Association as of March 30, 2021. Accordingly, we have recognized $1.1 million in income for debt extinguishment as of June 30, 2021.

Funding requirements

We expect to continue to incur significant expenses in connection with our ongoing activities, particularly as we explore our strategic alternatives and operate as a public company.

Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

•professional services and other fees associated with exploring our strategic alternatives;

•the initiation, progress, timing, costs and results of clinical trials for our product candidates;

•the outcome, timing and cost of the regulatory approval process for our product candidates by the FDA;

•the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

•the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;

•the costs of operating as a public company; and

•the extent to which we in-license or acquire other products, product candidates or technologies.

On June 5, 2022, we announced the Merger Agreement with Kineta and Asset Purchase Agreement with Janssen. We believe that, absent either strategic transaction, our cash and cash equivalents will be sufficient to fund our operations early into the first quarter of 2023. If neither strategic transaction closes, and we cannot obtain necessary funding from other sources, we will need to eliminate research and development programs and take other measures, including initiating steps to cease operations. If we cannot raise adequate financing, our business, financial condition and results of operations could be materially adversely affected.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2022, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, as of June 30, 2022, we are not presently subject to any pending or threatened litigation that we believe, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our other filings with the Securities and Exchange Commission (“SEC”), before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties were to occur, which may cause you to lose all or part of the money you paid to buy our common stock. Additional risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Risks Related to the Proposed Merger with Kineta

We cannot be sure if or when the Merger will be completed.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger by our stockholders and Kineta’s shareholders. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If we are unable to satisfy the closing conditions in Kineta’s favor or if other mutual closing conditions are not satisfied, Kineta will not be obligated to complete the Merger. Under certain circumstances, we would be required to pay Kineta a termination fee of $500,000 and reimburse certain third-party expenses incurred by Kineta up to a maximum of $250,000.

If the Merger is not completed, our board of directors, in discharging its fiduciary obligations to our stockholders, will evaluate other strategic alternatives or financing options that may be available, which alternatives may not be as favorable to our stockholders as the Merger. Any future sale or merger, financing or other transaction may be subject to further stockholder approval. We may also be unable to find, evaluate or complete other strategic alternatives, which may have a materially adverse effect our business.

Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Merger will be completed may affect our ability to retain and motivate existing employees. A substantial amount of our management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from our day-to-day operations. Uncertainty as to our future could adversely affect our business and our relationship with collaborators, suppliers, vendors, regulators and other business partners. For example, vendors, collaborators and other counterparties may defer decisions concerning working with us, or seek to change existing business relationships with us. Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

Until the Merger is completed, the Merger Agreement restricts Kineta and us from taking specified actions without the consent of the other party, and, in regards to us, requires us to operate in the ordinary course of business consistent with past practice. These restrictions may prevent Kineta and us from making appropriate changes to our respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger.

The Exchange Ratio set forth in the Merger Agreement is not adjustable based on the market price of our common stock, so the Merger consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set an exchange ratio for the Kineta capital stock based on (A) the fully diluted capitalization of the parties as of closing, taking into account Kineta’s outstanding stock options, warrants and restricted stock units and our outstanding stock options, warrants, restricted stock units and restricted stock awards and (B) a valuation of us equal to $34,000,000, subject to adjustment as described in the Merger Agreement, and a valuation of Kineta equal to $194,000,000, and subject to adjustment for the reverse stock split to be implemented prior to the consummation of the Merger.

Any changes in the market price of our common stock before the completion of the Merger will not affect the number of shares of our common stock issuable to Kineta’s securityholders pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of our common stock increases from the market price of our common stock on the date of the Merger Agreement, then Kineta’s securityholders could receive Merger consideration with substantially greater value than the value of such Merger consideration on the date of the Merger Agreement. Similarly, if before the completion of the Merger the market price of our common stock declines from the market price on the date of the Merger Agreement, then Kineta’s securityholders could receive Merger consideration with substantially lower value than the value of such Merger consideration on the date of the Merger

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Agreement. Because the Exchange Ratio does not adjust as a result of changes in the market price of our common stock, for each one percentage point change in the market price of our common stock, there is a corresponding one percentage point rise or decline, respectively, in the value of the total Merger consideration payable to Kineta’s securityholders pursuant to the Merger Agreement.

Failure to complete the Merger may result in our paying a termination fee to Kineta and could significantly harm the market price of our common stock and negatively affect our future business and operations.

If the Merger is not completed and the Merger Agreement is terminated under certain circumstances, we may be required to pay Kineta a termination fee of $500,000 and reimburse certain third-party expenses incurred by Kineta up to a maximum of $250,000. Even if a termination fee is not payable in connection with a termination of the Merger Agreement, we will have incurred significant fees and expenses, which must be paid whether or not the Merger is completed. Further, if the Merger is not completed, it could significantly harm the market price of our common stock.

In addition, if the Merger Agreement is terminated and we or Kineta determines to seek another business combination, there can be no assurance that we will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable to us than the terms set forth in the Merger Agreement.

The closing of the Merger is subject to approval by our stockholders and the Kineta shareholders. Failure to obtain these approvals would prevent the closing of the Merger.

The closing of the Merger is subject to certain approvals by our stockholders and the Kineta shareholders. Failure to obtain the required stockholder approvals may result in a material delay in, or the abandonment of, the Merger. Any delay in completing the Merger may materially adversely affect the timing and benefits that are expected to be achieved from the Merger.

The Merger may be completed even though certain events occur prior to the closing that materially and adversely affect us or Kineta.

The Merger Agreement provides that either we or Kineta can refuse to complete the Merger if there is a material adverse change affecting the other party between June 5, 2022, the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on us or Kineta, including, but not limited to:

•conditions generally affecting the industries in which we and Kineta participate or the United States or global economy or capital markets as a whole, to the extent that such conditions do not have a materially disproportionate impact on us or Kineta, respectively;

•any natural disaster, public health event or any acts of terrorism, sabotage, military action or war (whether or not declared) or any escalation or worsening thereof, to the extent they do not disproportionately affect us or Kineta, respectively;

•any failure to meet internal projections or forecasts or third party revenue or earnings predictions for any period ending on or after the date of the Merger Agreement;

•any change in GAAP or any change in applicable laws, rules, or regulations or the interpretation thereof after the date of the Merger Agreement;

•any effect resulting from the execution, delivery, announcement or performance of the obligations under the Merger Agreement or the announcement, pendency or anticipated consummation of the Merger or any related transactions; and

•the taking of any action by either us or Kineta required to comply with the terms of the Merger Agreement or at the written request of the other party.

If adverse changes occur and we and Kineta still complete the Merger, the market price of the combined organization’s common stock may suffer. This in turn may reduce the value of the Merger to our stockholders.

Some of our and Kineta officers and directors have interests in the Merger that are different from our and Kineta’s respective stockholders and that may influence them to support or approve the Merger without regard to the interests of our and Kineta’s respective stockholders.

Certain officers and directors of ours and Kineta participate in arrangements that provide them with interests in the Merger that are different from the interests of our and Kineta’s respective stockholders, including, among others, the continued service as an officer or director of the combined organization, severance benefits, the acceleration of stock option vesting, continued indemnification and the

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potential ability to sell an increased number of shares of common stock of the combined organization in accordance with Rule 144 under the Securities Act.

For example, we are party to post-employment arrangements with our executive officers pursuant to their employment agreements that may result in the receipt by such executive officers of cash severance payments and other benefits with a total value of approximately $[●] million (collectively and not individually), but not including the value of any accelerated vesting of our equity awards held by those officers. Additionally, certain of our officers are eligible to receive transaction success bonuses in connection with the closing of the transactions and our officers and directors are parties to the support agreements with Kineta.

The Yumanity board of directors was aware of these interests and considered them, among other matters, in the decision to approve the Merger Agreement.

The market price of our common stock following the Merger may decline as a result of the Merger.

The market price of our common stock may decline as a result of the Merger for a number of reasons, including if:

•investors react negatively to the prospects of the combined organization’s product candidates, business and financial condition following the Merger;

•the effect of the Merger on the combined organization’s business and prospects is not consistent with the expectations of financial or industry analysts; or

•the combined organization does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts.

Our stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with or following the Merger.

If the combined organization is unable to realize the strategic and financial benefits currently anticipated from the Merger, our stockholders will have experienced substantial dilution of their ownership interests in our company without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined organization is able to realize only part of the expected strategic and financial benefits currently anticipated from the Merger.

During the pendency of the Merger, we may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect our business.

Covenants in the Merger Agreement impede the ability of us to enter into material transactions that are not in the ordinary course of business pending completion of the Merger, other than the Asset Sale. As a result, if the Merger is not completed, we may be at a disadvantage to our competitors during such period. In addition, while the Merger Agreement is in effect, we are generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties. Any such transactions that are impeded or prohibited pursuant to these covenants could be favorable to our stockholders if consummated.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit us from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when our board of directors determines in good faith that an unsolicited alternative takeover proposal constitutes or would reasonably be expected to result in a superior takeover proposal and that failure to cooperate with the proponent of the proposal would reasonably be expected to be inconsistent with our board’s fiduciary duties.

Because the lack of a public market for Kineta’s capital stock makes it difficult to evaluate the value of Kineta’s capital stock, the shareholders of Kineta may receive shares of our common stock in the Merger that have a value that is less than, or greater than, the fair market value of Kineta’s capital stock.

The outstanding capital stock of Kineta is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Kineta. Because the percentage of our common stock to be issued to Kineta’s shareholders was determined based on negotiations between the parties, it is possible that the value of our common stock to be

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received by Kineta’s shareholders will be less than the fair market value of Kineta, or we may pay more than the aggregate fair market value for Kineta.

If the conditions to the Merger are not met, the Merger will not occur.

Even if the Merger is approved by our and Kineta’s stockholders, specified conditions must be satisfied or waived to complete the Merger. We cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger will not occur or will be delayed, and we may lose some or all of the intended benefits of the Merger. Additionally, if the Merger does not occur, we may not have sufficient cash to conduct an orderly wind-down and dissolution of our company. We may seek an immediate dissolution, subject to a vote of our stockholders, in the event the Merger is not completed.

Litigation relating to the Merger could require us to incur significant costs and suffer management distraction, and could delay or enjoin the Merger.

We could be subject to demands or litigation related to the Merger, whether or not the Merger is consummated. Such actions may create uncertainty relating to the Merger, or delay or enjoin the Merger, and responding to such demands could divert management time and resources. In addition, such demands or litigation could lead to a dissolution or bankruptcy of either us or Kineta or both parties if the costs associated with such demands or litigation are significant enough.

If the Merger is not completed, we may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to its stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that the Merger will be completed. If the Merger is not completed, we may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations. In addition, if we were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation of the company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to its stockholders. As a result of this requirement, a portion of our remaining cash assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of our liquidation, dissolution or winding up.

Our ability to use net operating loss (“NOL”) carryforwards and certain tax credit carryforwards may be subject to limitation in connection with the Merger and other ownership changes.

As of December 31, 2021, we had federal and state NOL carryforwards of $486.6 million and $497.2 million, respectively. Of the federal NOL carryforwards, $228.1 million begin to expire in 2026, and $258.5 million can be carried forward indefinitely. As of December 31, 2021, we had $0.1 million of foreign net operating loss carryforwards that do not expire. Under Section 382, changes in our ownership may limit the amount of NOL carryforwards and research and development tax credit carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in our ownership of more than 50% within a three-year period. Any such limitation may significantly reduce our ability to utilize our NOL carryforwards and research and development tax credit carryforwards before they expire. The completion of the Merger, together with private placements and other transactions that have occurred since our inception, may trigger such an ownership change pursuant to Section 382. Any such limitation, whether as the result of the Merger, prior private placements, sales of common stock by our existing stockholders, or additional sales of our common stock by the combined organization after the Merger, could have a material adverse effect on our results of operations in future years.

Risks Related to the Proposed Asset Sale

While the Asset Sale is pending, it creates unknown impacts on our future which could materially and adversely affect our business, financial condition and results of operations.

While the Asset Sale is pending, it creates unknown impacts on our future. Therefore, our current or potential business partners may decide to delay, defer or cancel entering into new business arrangements with us pending consummation of the Asset Sale. The occurrence of these events individually or in combination could materially and adversely affect our business, financial condition and results of operations.

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The failure to consummate the Asset Sale may materially and adversely affect our business, financial condition and results of operations.

The Asset Sale is subject to various closing conditions including, among others, the approval of the Asset Sale by our stockholders. We cannot control these conditions and cannot assure you that they will be satisfied. If the Asset Sale is not consummated, we may be subject to a number of risks, including the following:

•we may not be able to identify an alternate transaction, or if an alternate transaction is identified, such alternate transaction may not result in equivalent terms as compared to what is proposed in the Asset Sale;

•the trading price of our common stock may decline to the extent that the current market price reflects a market assumption that the Asset Sale will be consummated;

•the failure to complete the Asset Sale may create doubt as to our ability to effectively implement our current business strategies;

•our costs related to the Asset Sale, such as legal, accounting and financial advisory fees, must be paid even if the Asset Sale is not completed; and

•our relationships with our customers, suppliers and employees may be damaged and our business may be harmed.

The occurrence of any of these events individually or in combination could materially and adversely affect our business, financial condition and results of operations, which could cause the market value of our common stock to decline.

The closing of the Merger is not conditioned on the consummation of the Asset Sale.

The closing of the Merger is not conditioned on the closing of the Asset Sale. If we fail to consummate the Asset Sale, the Merger may still proceed, provided that the closing conditions contained in the Merger Agreement are satisfied or waived. The occurrence of these events would result in the combined organization continuing to own the Purchased Assets following the closing of the Merger, which could cause the combined organization to incur unanticipated costs and expenses in connection with continued ownership of the Purchased Assets, or pursuit of an alternative disposition of the Purchased Assets.

Risks Related to Our Business, Financial Position, and Need for Additional Capital

Our historical operating results indicate substantial doubt exists related to our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern.

We have incurred net losses and used significant cash in operating activities since inception, and we expect to continue to generate operating losses for the foreseeable future, although at reduced expected levels as a result of restructuring actions taken in the six months ended June 30, 2022. As of June 30, 2022, we have an accumulated deficit of $205.5 million and cash, cash equivalents and marketable securities of $11.8 million. These factors raise substantial doubt about our ability to continue as a going concern and to satisfy our estimated liquidity needs for 12 months from the issuance of the condensed consolidated financial statements.

If we continue to experience operating losses, and we are not able to generate additional liquidity through a capital raise or other cash infusion, we might need to secure additional sources of funds, which may or may not be available to us. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of our product candidates or other research and development initiatives or initial steps to cease operations.

If the Merger is not completed, we may be unsuccessful in completing an alternative strategic transaction on terms that are as favorable as the terms of the proposed transaction with Kineta, or at all, and we may be unable to reestablish a viable operating business.

We have generated limited revenue to date from our collaboration agreement with Merck, and have not generated revenue from any product sales. Our assets currently consist primarily of cash, cash equivalents and marketable securities, our intellectual property portfolio, license and collaboration agreements, our remaining assets, our listing on The Nasdaq Capital Stock Market, the Merger Agreement with Kineta and the proposed Asset Sale with Janssen. While we have entered into the Merger Agreement with Kineta, the consummation of the Merger with Kineta may be delayed or may not occur at all. If the Merger is not completed, our board of directors may elect to pursue an alternative strategic transaction similar to the proposed Merger with Kineta. Attempting to complete an alternative transaction will be costly and time consuming. If the Merger with Kineta is not completed and our board of directors determines to

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pursue an alternative transaction, the terms of any such alternative transaction may not be as favorable to us and our stockholders as the terms of the Merger with Kineta. Additionally, we would be subject to all the risks and uncertainties involved in securing such transaction, and we can make no assurances that such an alternative transaction would occur at all. Further, if the Merger with Kineta is not completed and the Asset Sale with Janssen is completed, we will not have a viable operating business. Even if the Asset Sale is not completed, we would require a significant amount of time and financial resources to pursue the development of our product candidates. There is no assurance that we could raise sufficient capital to support these efforts, that our development efforts would be successful or that we could successfully obtain the regulatory approvals required to market any product candidate we pursued.

If we do not successfully consummate the Merger with Kineta, our board of directors may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

If the Merger is not completed, our board of directors may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation. In addition, if our board of directors were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation of the company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. Our commitments and contingent liabilities may include (i) obligations under our employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of the company; (ii) potential litigation against us, and other various claims and legal actions arising in the ordinary course of business; and (iii) non-cancelable contractual obligations. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of the company. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the company, even if the Asset Sale is still consummated.

We are substantially dependent on our remaining employees to facilitate the consummation of the Merger and the Asset Sale

As of June 30, 2022, we had only twelve full-time employees. Our ability to successfully complete the Merger and the Asset Sale depends in large part on our ability to retain certain remaining personnel. Despite our efforts to retain these employees, one or more may terminate their employment with us on short notice. The loss of the services of certain employees could potentially harm our ability to consummate the Merger or the Asset Sale, to run our day-to-day business operations, as well as to fulfill our reporting obligations as a public company.

We have incurred significant operating losses since our inception and anticipate we will incur continued losses for the foreseeable future.

We have funded our operations to date through proceeds from collaborations and sales of preferred units and our common stock. From our inception through June 30, 2022, we have received gross proceeds of $158.9 million from such transactions. As of June 30, 2022, our cash, cash equivalents and marketable securities were $11.8 million. We have incurred net losses in each year since our inception, and we have an accumulated deficit of $205.5 million as of June 30, 2022.

In February 2022, we announced that our board of directors approved a strategic restructuring with the objective of preserving capital. As part of the restructuring, we eliminated approximately 60% of our workforce among other actions to reduce cash burn while we explore strategic alternatives. There can be no assurance of success in reducing our cash burn.

Substantially all of our operating losses have resulted from costs incurred in connection with general and administrative costs associated with our operations, and our research and development programs, including for our preclinical and clinical product candidates and our discovery engine platform. As of the issuance date of the condensed consolidated financial statements for the quarter ended June 30, 2022, we expect that, absent either strategic transaction our existing cash, cash equivalents and marketable securities will fund our operating expenses early into the first quarter of 2023. We expect to continue to generate operating losses for the foreseeable future, although at reduced expected levels as a result of restructuring actions taken in the six months ended June 30, 2022. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

As a public company, we expect to continue to incur significant and increasing operating losses for the foreseeable future.

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We are a clinical-stage biopharmaceutical company with a very limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We are a clinical-stage biopharmaceutical company with a limited operating history, focused on developing therapeutics for neurodegenerative diseases. We were initially formed as a limited liability company in 2014 and converted into a corporation in 2015, we have no products approved for commercial sale, and we have not generated any revenue from product sales to date. We began human clinical trials for YTX-7739 at the end of 2019 and have not initiated clinical trials for any of our other current product candidates. Our operations to date have been limited primarily to organizing and staffing, raising capital, and conducting research and development activities for our product candidates.

To date, we have not initiated or completed a pivotal clinical trial, obtained marketing approval for any product candidates, manufactured a commercial scale product, or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Our short operating history as a company makes any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties. If we do not address these risks and difficulties successfully, our business will suffer.

SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our shelf registration statement on Form S-3.

SEC regulations limit the amount that companies with a public float of less than $75 million may raise during any 12-month period pursuant to a shelf registration statement on Form S-3, referred to as the baby shelf rules. Since the filing of our Annual Report on Form 10-K for the year ended December 31, 2021 with the SEC on March 24, 2022, we have been subject to such rules. Under these regulations, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3, including the registration statement under which our Open Market Sale AgreementSM with Jefferies LLC, is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates of the Company. Therefore, we will be limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3 until such time as our public float exceeds $75 million. Furthermore, if we are required to file a new registration statement on another form, we may incur additional costs and be subject to delays due to review by the SEC staff.

Drug development is a highly uncertain undertaking and involves a substantial degree of risk. We have never generated any revenue from product sales, and we may never generate revenue or be profitable.

Our ability to become profitable depends upon the ability of our product candidates to generate revenue. To date, we have not generated any revenue from our product candidates and we do not know when, or if, we will do so. If the Asset Sale is completed, we will sell substantially all of our assets to Janssen. In the event the Asset Sale is not completed, we do not anticipate generating any revenue from product sales until after we have successfully completed clinical development and received regulatory approval for the commercial sale of a product candidate, if ever. Our ability to generate revenue depends on a number of factors, including, but not limited to:

•considerable time and expense to respond to the partial clinical hold that has been placed on our investigational new drug ("IND") application for YTX-7739 by the U.S. Food and Drug Administration (the “FDA”) and no assurance can be given that the FDA will remove the partial clinical hold in which case our business and prospects will likely suffer material adverse consequences;

•successfully completing preclinical and clinical development of our product candidates;

•successfully submitting IND applications or comparable applications, for our product candidates;

•identifying, assessing, and/or developing new product candidates from our discovery engine platform;

•developing a sustainable and scalable manufacturing process for our product candidates, as well as establishing and maintaining commercially viable supply relationships with third parties that can provide adequate products and services to support clinical activities and commercial demand for our product candidates;

•the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future product candidates, if any;

•negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

•obtaining regulatory approvals for product candidates for which we successfully complete clinical development;

•launching and successfully commercializing product candidates for which we obtain regulatory approval, either by establishing a sales, marketing, and distribution infrastructure or collaborating with a partner;

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•negotiating and maintaining an adequate price for our products, both in the United States and in foreign countries where our products are commercialized, if approved;

•obtaining market acceptance of our product candidates as viable treatment options;

•building out new facilities or expanding existing facilities to support our ongoing development activities;

•addressing any competing technological and market developments;

•maintaining, protecting, expanding, and enforcing our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and

•hiring and retaining qualified personnel.

Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the FDA, or foreign regulatory agencies, to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our current or future collaborators’ clinical trials or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, absent our entering into a collaboration or partnership agreement, we anticipate incurring significant costs associated with commercializing any approved product candidate and ongoing compliance efforts.

Even if we are able to generate revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations. Revenue from the sale of any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own the commercial rights for that territory. The precise number of people with Parkinson’s disease and amyotrophic lateral sclerosis (“ALS”) is unknown. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates. If the number of addressable patients is not as significant as we anticipate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice, or treatment guidelines, we may not generate significant revenue from sales of our product candidates, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates, or continue our operations and cause a decline in the value of our common stock, all or any of which may adversely affect our viability.

Due to the significant resources required for the development of our programs, and depending on our ability to access capital, we will need to prioritize development of certain product candidates if the Asset Sale is not completed. Moreover, we may fail to expend our limited resources on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have historically prioritized our lead product candidate, YTX-7739, which is in Phase 1 of clinical development for the treatment of Parkinson's disease. We seek to maintain a process of prioritization and resource allocation to maintain an optimal balance between aggressively advancing product candidates, such as YTX-7739, and ensuring replenishment of our portfolio.

Due to the significant resources required for the development of our product candidates, we have had to focus on specific diseases and disease pathways and decide which product candidates to pursue and advance and the amount of resources to allocate to each. For example, if the Asset Sale is not completed and if the partial clinical hold that has been placed on our IND for YTX-7739 is lifted by the FDA, we plan to evaluate YTX-7739 in additional preclinical studies instead of advancing our other product candidate, YTX-9184, as we believe this approach will provide an opportunity to assess results in patients sooner, given the studies and clinical trials done to date of YTX-7739. Our decisions concerning the allocation of research, development, collaboration, management, and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities. If we make incorrect determinations regarding the viability or market potential of any of our product candidates, including our decision to focus on YTX-7739, or misread trends in the biopharmaceutical industry, in particular for neurodegenerative diseases, our business, financial condition, and results of operations could be materially adversely affected. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.

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If the Asset Sale is not completed, we will need additional funding to advance YTX-7739 through clinical development, which funding may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other operations.

As of June 30, 2022, our cash, cash equivalents and marketable securities were $11.8 million. If the Asset Sale is not completed, we will require additional funding to advance clinical trials of YTX-7739 and other planned early development of other programs generated by our discovery engine platform. Our ability to secure this additional funding may be adversely impacted by negative or ambiguous results in future clinical trials for YTX-7739. Developing small-molecule products is expensive. If the Asset Sale is not completed, we expect our discovery, research, and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance our product candidates in clinical trials. We may also need additional funds sooner if we choose to pursue additional indications and/or geographies for our product candidates or otherwise expand more rapidly than we presently anticipate.

In addition, we have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.

Our operating plan may also change as a result of many factors currently unknown, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and, if approved, to commercialize our product candidates. Raising funds in the current economic environment may present additional challenges. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and, if approved, commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to it, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects.

Based on our public float, as of the date of the filing of this Quarterly Report on Form 10-Q, we are only permitted to utilize a “shelf” registration statement, including the registration statement under which our Open Market Sale AgreementSM with Jefferies LLC, is operated, subject to Instruction I.B.6 to Form S-3, which is referred to as the “baby shelf” rule. For so long as our public float is less than $75 million, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months pursuant to the baby shelf rules. Although alternative public and private transaction structures may be available, these may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay, or discontinue one or more of our research or development programs or the commercialization of any approved product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, and results of operations.

Risks Related to Our Product Development and Commercialization

If the Asset Sale is not completed, it may take considerable time and expense to respond to the partial clinical hold that has been placed on our IND by the FDA and no assurance can be given that the FDA will remove the partial clinical hold in which case our business and prospects will likely suffer material adverse consequences.

In January 2022, the FDA placed a partial clinical hold on multidose clinical trials of YTX-7739. The partial clinical hold suspends initiation of multiple dose clinical trials in the U.S. until the FDA’s concerns have been addressed. The FDA has not halted all clinical programming and is permitting our planned single dose formulation clinical trial to proceed, although we have paused our previously planned studies of YTX-7739 while the partial clinical hold is pending. If the Asset Sale is not completed, it may take a considerable period of time, the length of which is not certain at this time, and expense for us to fully address FDA’s concerns. Even if we are able to fully respond to the FDA’s questions, the FDA may subsequently make additional requests that we would need to fulfill prior to the

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lifting of the partial clinical hold. It is possible that we will be unable to fully address the FDA’s questions and as a result the partial clinical hold may never be lifted and we may never be able to begin multidose clinical trials of YTX-7739 in the U.S.

Research and development of biopharmaceutical products is inherently risky.

We are at an early stage of development of the product candidates currently in our pipeline. To date, we have devoted substantially all of our efforts and financial resources to identify, secure intellectual property for, and develop our discovery engine platform and our product candidates, including conducting multiple preclinical studies, and providing general and administrative support for these operations. Our business depends heavily on the successful clinical development, regulatory approval, and commercialization of our lead product candidate, YTX-7739, which is in clinical development. None of our product candidates have advanced into late-stage development or a pivotal clinical study and it may be years before any such study is initiated, if at all. If the Asset Sale is not completed, YTX-7739 will require substantial additional clinical development, testing, and regulatory approval before we are permitted to commence commercialization. Further, we cannot be certain that any of our product candidates will be successful in clinical trials or obtain regulatory approval.

If the Asset Sale is not completed, our future success will be dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:

•failure to lift the partial clinical hold that has been placed on our IND for YTX-7739 by the FDA;

•our product candidates may not successfully complete preclinical studies or clinical trials;

•a product candidate may, upon further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

•our competitors may develop therapeutics that render our product candidates obsolete or less attractive;

•our competitors may develop platform technologies that render our platform technology obsolete or less attractive;

•the product candidates that we develop and our discovery engine platform may not be sufficiently covered by intellectual property for which we hold exclusive rights;

•the market for a product candidate may change so that the continued development of that product candidate is no longer reasonable or commercially attractive;

•a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;

•we may not be able to establish manufacturing capabilities or arrangements with third-party manufacturers for clinical and, if approved, commercial study;

•even if a product candidate obtains regulatory approval, we may be unable to establish sales and marketing capabilities, or successfully market such approved product candidate, to gain market acceptance; and

•a product candidate may not be accepted as safe or effective by patients, the medical community or third-party payors, if applicable.

If any of these events occur, we may be forced to abandon our development efforts for a product candidate or candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. For instance, if we observe harmful side effects or other characteristics that indicate one product candidate is unlikely to be effective or otherwise does not meet applicable regulatory criteria, these findings may implicate the discovery engine platform as a whole.

If the Asset Sale is not completed, we may not be successful in our efforts to further develop our discovery engine platform technology and current product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Each of our product candidates are in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we could generate any revenue from product sales, if at all.

Preclinical and clinical product candidates and clinical trials are subject to extensive and rigorous review and regulation by numerous government authorities in the United States and abroad. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must, among other requirements, demonstrate through preclinical studies and clinical trials that the product candidate is safe and effective for use in each target indication. Drug development is a long, expensive, and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. This process can take many years and may include post-marketing studies and

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surveillance, which will require the expenditure of substantial resources. Of the large number of drugs in development in the United States, only a small percentage will successfully complete the FDA regulatory approval process and will be commercialized. Accordingly, even if the Asset Sale is not completed and we are able to obtain the requisite financing to continue to fund our development and preclinical studies and clinical trials, we cannot assure you that any of our product candidates will be successfully developed or commercialized.

If the Asset Sale is not completed and if any of our product candidates successfully complete clinical trials, we generally plan to seek regulatory approval to market our product candidates in the United States, the European Union (“EU”), and in additional foreign countries where we believe there is a viable commercial opportunity and significant patient need. We have never commenced, compiled, or submitted an application seeking regulatory approval to market any product candidate. We may never receive regulatory approval to market any product candidates even if such product candidates successfully complete clinical trials, which would adversely affect our viability. To obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of our product candidates. We may also rely on collaborators or partners to conduct the required activities to support an application for regulatory approval, and to seek approval, for one or more of our product candidates. We cannot be sure that any collaborators or partners will conduct these activities or do so within the timeframe we desire. Even if we (or any collaborators or partners) are successful in obtaining approval in one jurisdiction, we cannot ensure that we (or any collaborators or partners) will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our revenue and results of operations could be negatively affected.

Even if we receive regulatory approval to market any of our product candidates, we cannot assure you that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives.

Investment in biopharmaceutical product development involves significant risk that any product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide any assurance that we will be able to successfully advance any of our product candidates through the development process or, if approved, successfully commercialize any of our product candidates.

If the Asset Sale is not completed, we may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products. If we fail to successfully identify and develop additional product candidates, our commercial opportunity may be limited.

One of our strategies has been to identify and pursue clinical development of additional product candidates. Our portfolio currently consists of four programs, one of which is in clinical development and the rest of which are in research, discovery and preclinical stages of development. If the Asset Sale is not completed, identifying, developing, obtaining regulatory approval, and commercializing additional product candidates for the treatment of neurodegenerative diseases will require substantial additional funding and is prone to the risks of failure inherent in drug development. We cannot provide you any assurance that we will be able to successfully identify or acquire additional product candidates, advance any of these additional product candidates through the development process, successfully commercialize any such additional product candidates, if approved, or assemble sufficient resources to identify, acquire, develop or, if approved, commercialize additional product candidates. If we are unable to successfully identify, acquire, develop, and commercialize additional product candidates, our commercial opportunity may be limited.

We may not be able to conduct, or contract others to conduct, animal testing in the future, which could harm our research and development activities.

Certain laws and regulations relating to drug development require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted or delayed.

We have concentrated our research and development efforts on the treatment of neurodegenerative diseases, a field that has seen limited success in drug development. Further, our product candidates are based on new approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

We have focused our research and development efforts on addressing neurodegenerative diseases, including Parkinson’s disease and ALS. Efforts by biopharmaceutical companies in the field of neurodegenerative diseases have seen limited successes in drug development. There are few effective therapeutic options available for patients with Parkinson’s disease or ALS. Our future success is

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highly dependent on the successful development of our discovery engine platform technology and our product candidates for treating neurodegenerative diseases. Developing and, if approved, commercializing our product candidates for treatment of neurodegenerative diseases subject us to a number of challenges, including engineering product candidates and obtaining regulatory approval from the FDA and other regulatory authorities who have only a limited set of precedents to rely on.

Our approach is centered on the key insight that human protein misfolding, a phenomenon at the root of virtually all neurodegenerative diseases, can be modeled effectively in yeast cells. Discoveries from the yeast system are then translated to diseased human cell lines created by adult stem cells using induced pluripotent stem cell technology (“iPSC”). This strategy may not prove to be successful. We cannot be sure that our approach will yield satisfactory therapeutic products that are safe and effective, scalable, or profitable.

Moreover, public perception of drug safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to prescribe our products.

We may encounter difficulties in enrolling subjects in our clinical trials, thereby delaying or preventing development of our product candidates.

There is no precise method of establishing the actual number of people with neurodegenerative diseases in any geography over any time period. It is estimated that more than 60 million people worldwide suffer from neurodegenerative diseases. If the actual number of people with neurodegenerative diseases is lower than we believe, we may experience difficulty in enrolling subjects in our clinical trials, thereby delaying development of our product candidates. Furthermore, if the Asset Sale is not completed, we may experience difficulties in subject enrollment in our clinical trials for a variety of other reasons, including:

•failure to lift the partial clinical hold that has been placed on our IND for YTX-7739 by the FDA;

•the subject eligibility criteria defined in the protocol, including biomarker-driven identification and/or certain highly-specific criteria related to stage of disease progression, which may limit the patient populations eligible for our clinical trials to a greater extent than competing clinical trials for the same indication that do not have biomarker-driven patient eligibility criteria;

•eligibility requirements mandated by regulatory agencies which may limit the number of eligible patients in a given disorder;

•the size of the study population required for analysis of the study’s primary endpoints;

•the proximity of subjects to a study site;

•the design of the study;

•our use of academic sites, which may be less accustomed to running clinical trials and managing enrollment;

•public perception of drug safety issues;

•our ability to recruit clinical study investigators with the appropriate competencies and experience;

•competing clinical trials for similar therapies or targeting patient populations meeting our patient eligibility criteria;

•clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates;

•our ability to obtain and maintain patient consents;

•the risk that subjects enrolled in clinical trials will not complete such studies, for any reason; and

•the impact of the ongoing COVID-19 pandemic on patient enrollment and retention and clinical trial site initiation.

Our clinical trials may fail to demonstrate adequate safety and efficacy of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must, among other requirements, demonstrate through lengthy, complex, and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. Each product candidate must demonstrate an adequate risk versus benefit profile in our intended patient population and for our intended use.

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Clinical testing is expensive and can take many years to complete, and our outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early-stage clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. The results of clinical trials in one set of subjects or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in study procedures set forth in protocols, differences in the size and type of the patient populations, changes in and lack of adherence to the dosing regimen or the expected delivery formulation of YTX-7739 or any of our other product candidates and other clinical study protocols, and the rate of dropout among clinical study participants. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in later-stage clinical trials due to lack of efficacy or safety issues, notwithstanding promising results in early-stage studies. This is particularly true in neurodegenerative diseases, where failure rates historically have been higher than in other disease areas. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.

We have limited experience in designing clinical trials and may be unable to design and execute a clinical study to support marketing approval. We cannot be certain that any future clinical trials will be successful. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those, and other indications, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more studies could be required before we submit our product candidates for approval. To the extent that the results of the studies are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional studies in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval may limit the scope and use of our product candidates, which may also limit their commercial potential.

We may not be able to file IND applications or related amendments or similar applications and amendments outside the United States to commence additional clinical trials on the timelines expected, and even if we are able to, regulatory authorities may not permit us to proceed.

We may not be able to file future IND applications or similar applications outside the Unites States for our product candidates on the timelines we expect. For example, we may experience manufacturing delays or other delays with preclinical studies. Moreover, we cannot be sure that submission of an IND or similar applications outside the United States will result in the FDA or respective regulatory authority allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in IND or similar applications, we cannot guarantee that such regulatory authorities will not change their requirements in the future. These considerations also apply to new clinical trials we may submit as amendments to existing IND or similar applications or to a new application. Any failure to file IND or similar applications on the timelines we expect or to obtain regulatory authorizations for our trials may prevent us from completing our clinical trials or commercializing our products on a timely basis, if at all.

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

From time to time, we may publicly disclose preliminary or topline data from our clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as part of its analyses of data, and we may not have received or had the opportunity to fully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

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In addition, the information we choose to publicly disclose regarding a particular clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, topline, or preliminary data that we report differs from actual or final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Our product candidates may cause serious adverse events or other undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Serious adverse events or other undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials, and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities.

Further, clinical trials by their nature utilize a sample of the potential patient population for a limited duration of exposure. Rare and severe side effects of a product candidate may only be uncovered with a significantly larger number of patients exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates (or any other similar products) after such approval, a number of potentially significant negative consequences could result, including:

•regulatory authorities may suspend, withdraw, or limit their approval of such product candidates;

•regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;

•we may be required to change the way such products are distributed or administered;

•we may be required to conduct additional post-marketing studies and surveillance;

•we may be required to implement a risk evaluation and mitigation strategy (“REMS”), or create a medication guide outlining the risks of such side effects for distribution to patients;

•we may be subject to regulatory investigations and government enforcement actions;

•subjects in a clinical study may experience severe or unexpected drug-related side effects;

•we may decide, or regulatory authorities may require it, to conduct additional clinical trials or abandon product development programs;

•we may decide to remove such products from the marketplace;

•we could be sued and held liable for injury caused to individuals exposed to or taking our products;

•the product may become less competitive; and

•our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidates, could substantially increase the costs of commercializing our product candidates, and could significantly impact our ability to successfully commercialize our product candidates and generate revenues.

Failures or delays in the commencement or completion of, or ambiguous or negative results from, our clinical trials of our product candidates could result in increased costs to us and could delay, prevent, or limit our ability to generate revenue and continue our business.

We do not know whether any of our clinical trials will begin or be completed on schedule, if at all, as the commencement and completion of clinical trials can be delayed or prevented for a number of reasons, including, among others:

•the FDA or other regulatory bodies may not authorize us or our investigators to commence our planned clinical trials or any other clinical trials we may initiate, or may suspend our clinical trials, for example, through imposition of a clinical hold;

•delays in filing or receiving clearance of additional IND applications that may be required;

•lack of adequate funding to continue our clinical trials and preclinical studies;

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•negative results from our preclinical studies and clinical trials;

•delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites;

•inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical trials, for example delays in the manufacturing of sufficient supply of finished drug product;

•difficulties obtaining ethics committee or Institutional Review Board (“IRB”) approval to conduct a clinical study at a prospective site or sites;

•challenges in recruiting and enrolling subjects to participate in clinical trials, the proximity of subjects to study sites, eligibility criteria for the clinical study, the nature of the clinical study protocol, the availability of approved effective treatments for the relevant disease, and competition from other clinical study programs for similar indications;

•severe or unexpected drug-related side effects experienced by subjects in a clinical study;

•we may decide, or regulatory authorities may require it, to conduct additional clinical trials or abandon product development programs;

•delays in validating, or inability to validate, any endpoints utilized in a clinical study, if necessary;

•the FDA may disagree with our clinical study design and our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials;

•reports from preclinical or clinical testing of other alpha-synuclein-dependent therapies that raise safety or efficacy concerns; and

•difficulties retaining subjects who have enrolled in a clinical study but may be prone to withdraw due to rigors of the clinical trial, lack of efficacy, side effects, personal issues, or loss of interest.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical study may be suspended or terminated by us, the FDA, other regulatory authorities, the IRBs or ethics committees at the sites in which such clinical studies are being conducted, or a data and safety monitoring board (“DSMB”) overseeing the clinical study at issue may recommend the suspension of the clinical study due to a number of factors, including, among others:

•failure to conduct the clinical study in accordance with regulatory requirements or our clinical protocols;

•inspection of the clinical study operations or study sites by the FDA or other regulatory authorities that reveals deficiencies or violations that require us to undertake corrective action, including in response to the imposition of a clinical hold;

•unforeseen safety issues, including any that could be identified in our preclinical studies or clinical trials, adverse side effects or lack of effectiveness;

•changes in government regulations or administrative actions;

•problems with clinical supply materials; and

•lack of adequate funding to continue clinical trials.

We may in the future seek orphan drug designation or exclusivity for certain of our product candidates. If our competitors are able to obtain orphan drug exclusivity for products that constitute the same drug and treat the same indications as our product candidates, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.

We may in the future seek orphan drug designation or exclusivity for certain of our product candidates. Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs and biologics intended to treat relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is defined as a disease or condition having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the EU, the European Commission after recommendation from the EMA’s Committee for Orphan Medicinal Products, grants orphan designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the EU and for which no satisfactory method of diagnosis, prevention, or

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treatment has been authorized for marketing in the EU (or, if a method exists, the product would be of significant benefit to those affected by the condition). Additionally, orphan drug designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the product in the EU would generate sufficient return to justify the necessary investment in developing the product.

If we request orphan drug designation for our product candidates, there can be no assurances that the FDA or the European Commission will grant any of our product candidates such designation. Additionally, orphan drug designation does not guarantee that any regulatory authority will accelerate regulatory review of, or ultimately approve, the product candidate, nor does it limit the ability of any regulatory authority to grant orphan drug designation to product candidates of other companies that treat the same indications.

Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the European Commission from approving another marketing application for a product that constitutes the same (or, in the EU, similar) drug treating the same indication for that marketing exclusivity period, except in limited circumstances. If another sponsor receives such approval before we do (regardless of our orphan drug designation), we will be precluded from receiving marketing approval for our product for the applicable exclusivity period. The applicable period is seven years in the United States and 10 years in the EU. The exclusivity period in the EU may be reduced to six years if, at the end of the fifth year, it is established that a product no longer meets the criteria for orphan designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan exclusivity may be revoked if any regulatory authority determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition. In the United States, even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

We have conducted and, if the Asset Sale is not completed, may in the future, conduct clinical trials for our product candidates outside the United States, and the FDA and similar foreign regulatory authorities may not accept data from such trials.

We have conducted, and, if the Asset Sale is not completed, may in the future, conduct clinical trials outside the United States, including in Europe or other foreign jurisdictions. The acceptance of trial data from clinical trials conducted outside the United States by the FDA may be subject to certain conditions. The FDA will generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed and well-conducted in accordance with GCP requirements, including requirements for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the FDA is able to validate the data from the trial through an onsite inspection, if necessary. In cases where data from clinical trials conducted outside the United States are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the United States population and United States medical practice; (ii) the trials were performed by clinical investigators of recognized competence; and (iii) the data must be considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any similar foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA or any similar foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval for commercialization in the applicable jurisdiction.

Changes in regulatory requirements, FDA guidance, or unanticipated events during our preclinical studies and clinical trials of our product candidates may occur, which may result in changes to preclinical or clinical study protocols or additional preclinical or clinical study requirements, which could result in increased costs to us and could delay our development timeline.

Changes in regulatory requirements, FDA guidance, or unanticipated events during our preclinical studies and clinical trials may force us to amend preclinical studies and clinical trial protocols or the FDA may impose additional preclinical studies and clinical trial requirements. Amendments or changes to our clinical study protocols would require resubmission to the FDA and IRBs or ethics committees for review and approval, which may adversely impact the cost, timing, or successful completion of clinical trials. Similarly, amendments to our preclinical studies may adversely impact the cost, timing, or successful completion of those preclinical studies. If we experience delays completing, or if we terminate, any of our preclinical studies or clinical trials, or if we are required to

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conduct additional preclinical studies or clinical trials, the commercial prospects for our product candidates may be harmed and our ability to generate product revenue will be delayed.

If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates we may develop, we may not be successful in commercializing those product candidates if and when they are approved.

We do not currently have an infrastructure for the sales, marketing, and distribution of pharmaceutical products. In order to market our product candidates, if approved by the FDA or any other regulatory body, we must build our sales, marketing, managerial, and other non-technical capabilities, or make arrangements with third parties to perform these services. There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and other commercialization capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our commercialization personnel.

If we enter into arrangements with third parties to perform sales, marketing, commercial support, and distribution services, our product revenue or the profitability of product revenue may be lower than if we were to market and sell any products we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates if approved.

If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, or if we are unable to do so on commercially reasonable terms, our business, results of operations, financial condition, and prospects will be materially adversely affected.

Even if we receive marketing approval for our product candidates, our product candidates may not achieve broad market acceptance by physicians, patients, healthcare payors, or others in the medical community, which would limit the revenue that we generate from their sales.

The commercial success of our product candidates, if approved by the FDA or other applicable regulatory authorities, will depend upon the awareness and acceptance of our product candidates among the medical community, including physicians, patients, and healthcare payors. If any of our product candidates are approved but do not achieve an adequate level of acceptance by physicians, patients, healthcare payors, and others in the medical community, we may not generate sufficient revenue to become or remain profitable. Market acceptance of our product candidates, if approved, will depend on a number of factors, including, among others:

•the safety, efficacy, and other potential advantages of our approved product candidates compared to other available therapies;

•limitations or warnings contained in the labeling approved for our product candidates by the FDA or other applicable regulatory authorities;

•any restrictions on the use of our products together with other medications;

•the prevalence and severity of any adverse effects associated with our products;

•inability of certain types of patients to take our products;

•the clinical indications for which our product candidates are approved;

•availability of alternative treatments already approved or expected to be commercially launched in the near future;

•the potential and perceived advantages of our approved product candidates over current treatment options or alternative treatments, including future alternative treatments;

•the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

•the strength of marketing and distribution support and timing of market introduction of competitive products;

•publicity concerning our products or competing products and treatments;

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•pricing and cost effectiveness;

•the effectiveness of our sales and marketing strategies;

•our ability to increase awareness of our products through sales and marketing efforts;

•our ability to obtain sufficient third-party payor coverage or reimbursement; or

•the willingness of patients to pay out-of-pocket in the absence of third-party payor coverage.

If our product candidates are approved but do not achieve an adequate level of acceptance by patients, physicians, and payors, we may not generate sufficient revenue from our approved product candidates to become or remain profitable. Before granting reimbursement approval, healthcare payors may require us to demonstrate that our product candidates, in addition to treating these target indications, also provide incremental health benefits to patients. Our efforts to educate the medical community and third-party payors about the benefits of our product candidates may require significant resources and may never be successful.

We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before we do or develop therapies that are safer, more advanced, or more effective, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition.

The development and commercialization of new drug products is highly competitive. Moreover, the neurodegenerative field is characterized by strong and increasing competition, with a strong emphasis on intellectual property. We may face competition with respect to any product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

There are a number of large pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of the neurodegenerative disease indications for which we have research programs, including Parkinson’s disease and ALS. Companies that we are aware of are developing therapeutics in the neurodegenerative disease area include large companies with significant financial resources, such as AbbVie, AstraZeneca, Biogen, Bristol-Myers Squibb, Lilly, GlaxoSmithKline, Johnson & Johnson, Novartis, Roche, Sanofi, and Takeda. In addition to competition from other companies targeting neurodegenerative indications, any products we may develop may also face competition from other types of therapies, such as gene-editing therapies.

Many of our current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of neurodegenerative disease indications, which could give such products significant regulatory and market timing advantages over any of our product candidates. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our product candidates and may obtain orphan product exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.

In addition, we could face litigation or other proceedings with respect to the scope, ownership, validity and/or enforceability of our patents relating to our competitors’ products and our competitors may allege that our products infringe, misappropriate, or otherwise violate their intellectual property. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize. See “Risks Related to Our Intellectual Property Rights.”

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The ongoing pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases has and may continue to impact our research, development and potential future commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities. To date, the COVID-19 pandemic has caused significant disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases and new variants of the virus are identified, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Certain states and cities, including where we or the third parties with whom we engage operate, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.

The extent to which COVID-19 may impact our preclinical studies or clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the identification of new variants of the virus, the severity of COVID-19, or the effectiveness of actions to contain and treat COVID-19. The continued spread of COVID-19 globally has and may continue to adversely impact our preclinical studies or clinical trial operations, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. COVID-19 may also affect employees of third-party CROs located in affected geographies that we rely upon to carry out our clinical trials. Any negative impact COVID-19 has to patient enrollment or treatment or the execution of our current product candidates and any future product candidates could cause costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to commercialize our current product candidate and any future product candidates, increase our operating expenses, and have a material adverse effect on our financial results.

Further, the COVID-19 outbreak caused delays in our Phase 1 single ascending dose trial of YTX-7739, and the sites of the YTX-7739 Phase 1b clinical trial incurred delays due to COVID-19, resulting in a delay in the expected timing of early results from that trial. COVID-19 may cause delays in our other clinical trials, including delays in enrollment, due to diversion or prioritization of trial site resources away from the conduct of clinical trials and toward the COVID-19 pandemic. Key clinical trial activities, such as site monitoring, may be interrupted due to restrictions in travel, and some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers and suppliers, which could result in delays or disruptions in the supply of our current product candidates and any future product candidates. In addition, we may take temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions. If we or any of the third parties with whom we engage, however, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business and our results of operation and financial condition.

Risks Related to Our Regulatory Approval and Other Legal Compliance Matters

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors, including the type, complexity, and novelty of the product candidates involved. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. We have not submitted for, or obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

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Applications for our product candidates could be delayed in receiving or fail to receive regulatory approval for many reasons, including but not limited to the following:

•the FDA or comparable foreign regulatory authorities may disagree with the design, implementation, or results of our clinical trials;

•the FDA or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective for the proposed indication, or have undesirable or unintended side effects, toxicities, or other characteristics that preclude us from obtaining marketing approval or prevent or limit commercial use;

•the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval;

•the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

•the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission, or to obtain regulatory approval in the United States or elsewhere;

•we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for our proposed indication is acceptable;

•the FDA or comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.

Even if we obtain regulatory approval for our product candidates, our products will remain subject to extensive regulatory scrutiny.

Even if we receive marketing approval for our product candidates, regulatory authorities may still impose significant restrictions on our product candidates, indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies. If any of our product candidates are approved, they will be subject to ongoing regulatory requirements, including for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-marketing information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive requirements imposed by the FDA and comparable foreign regulatory authorities, including, for example, ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practice (“cGMP”) regulations and applicable product tracking and tracing requirements. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any new drug application (“NDA”) or comparable marketing approval. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

The FDA has significant post-marketing authority, including, for example, the authority to require labeling changes based on new safety information and to require post-marketing studies or clinical trials to evaluate serious safety risks related to the use of a drug. The FDA also has the authority to require, as part of an NDA or post-approval, the submission of a REMS. Any REMS required by the FDA may lead to increased costs to assure compliance with new post-approval regulatory requirements and potential requirements or restrictions on the sale of approved products, all of which could lead to lower sales volume and revenue.

Any regulatory approvals that we receive for our product candidates will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a REMS), or contain requirements for potentially costly post-marketing testing. We will be required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities. Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assure compliance. The FDA and other agencies, including the U.S. Department of Justice, closely regulate and monitor the post-approval marketing and promotion of

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products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in accordance with the provisions of the approved labeling. We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have approval. The holder of an approved NDA or comparable marketing approval must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing studies or clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

•issue warning or untitled letters that would result in adverse publicity;

•impose civil or criminal penalties;

•suspend or withdraw regulatory approvals;

•suspend or impose a clinical hold on any of our ongoing clinical trials;

•refuse to approve pending applications or supplements to approved applications submitted by us;

•impose restrictions on our operations;

•require the conduct of additional post-market clinical trials to assess the safety of the product;

•seize or detain products; or

•request that we initiate a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products, if approved. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of the company and our operating results will be adversely affected.

We are subject to healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings.

Although we do not currently have any products on the market, if we obtain FDA approval for any of our product candidates and begins commercializing our products, we may be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal government and the states and foreign governments in which we conduct our business. Healthcare providers, physicians, third-party payors, and others play a primary role in the recommendation and prescription of our product candidates, if approved. Our future arrangements with third-party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our product candidates, for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

•the federal Anti-Kickback Statute (“AKS”) prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order, or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. A person or entity does not need to have actual knowledge of the federal AKS or specific intent to violate it to have committed a violation. The AKS has been interpreted to apply to arrangements between biopharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other;

•the federal False Claims Act imposes criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government,

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claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government. Manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. When an entity is determined to have violated the False Claims Act, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false or fraudulent statements relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which also impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information on health plans, healthcare clearing houses, and certain healthcare providers and their business associates, defined as independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

•the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact, or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services;

•federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs;

•federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

•the federal transparency requirements, sometimes referred to as the “Sunshine Act,” under the Patient Protection and Affordable Care Act (the “ACA”) require manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the Centers for Medicare and Medicaid Services (“CMS”) information related to payments and other transfers of value to physicians ( as defined by the law), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and teaching hospitals, as well as physician ownership and investment interests, and requires applicable manufacturers and group purchasing organizations to report annually the ownership and investment interests held by such physicians and their immediate family members and payments or other “transfers of value” to such physician owners. Such information is subsequently made publicly available in a searchable format on a CMS website, and, effective January 1, 2022, these reporting obligations extend to include transfers of value made to certain non-physician assistants and nurse practitioners; and

•analogous state laws and regulations, such as state anti-kickback and false claims laws and transparency laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state and require the registration of pharmaceutical sales.

In the event we decide to conduct clinical trials or to enroll subjects in our planned or future clinical trials, we may be subject to additional privacy requirements. The collection, use, storage, disclosure, transfer, or other processing of personal data regarding individuals in the European Economic Area ("EEA"), including personal health data, for example, is subject to the EU GDPR. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing

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information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. The GDPR may increase our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. Compliance with the GDPR is a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our European activities. Further to the United Kingdom’s exit from the EU, the UK GDPR and the UK Data Protection Act 2018 set out the United Kingdom’s data protection regime, which is independent from but aligned to the EU's data protection regime. Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher. Although the United Kingdom is regarded as a third country under the EU’s GDPR, the European Commission has now issued a decision recognizing the United Kingdom as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EEA to the United Kingdom remain unrestricted. Like the EU GDPR, the UK GDPR restricts personal data transfers outside the United Kingdom to countries not regarded by the United Kingdom as providing adequate protection. The United Kingdom government has confirmed that personal data transfers from the United Kingdom to the EEA remain free flowing.

Additionally, other countries outside of Europe have enacted or are considering enacting similar privacy and data protection laws, which could increase the cost and complexity of delivering our services and operating our business. For example, Brazil enacted the General Data Protection Law, New Zealand enacted the New Zealand Privacy Act, China released a second draft of the Personal Information Protection Law, and Canada introduced the Digital Charter Implementation Act.

California recently enacted the California Consumer Privacy Act, or CCPA, which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered businesses to provide certain disclosures to consumers about their data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information, as well as the right to request, modify, and delete personal information. The CCPA went into effect on January 1, 2020, and the California State Attorney General submitted final regulations for review on June 2, 2020, which were finalized and are now effective. The California State Attorney General has commenced enforcement actions against violators as of July 1, 2020. Further, a new California privacy law, the California Privacy Rights Act, or CPRA, was passed by California voters on November 3, 2020. The CPRA will create additional obligations with respect to processing and storing personal information that are scheduled to take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022). Other U.S. states also are considering omnibus privacy legislation and industry organizations regularly adopt and advocate for new standards in these areas. For example, Virginia recently enacted the Consumer Data Protection Act that will become effective on January 1, 2023, and is similar to the CCPA and CPRA, and Colorado recently enacted the Colorado Privacy Act, which will become effective on July 1, 2023, and which is similar to the CCPA and Virginia law. While the CCPA and CPRA provide exceptions for certain activities involving data collected in the context of clinical trials, health data governed by California’s Confidentiality of Medical Information Act, and PHI governed by HIPAA, and other state laws may contain similar exceptions, we cannot yet determine the impact the CCPA, CPRA, or other such existing or future laws, regulations and standards may have on our business.

Pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as: providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates.

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities to be conducted by our sales team, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, and exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government funded healthcare programs.

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If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Even if resolved in our favor, litigation or other legal proceedings relating to healthcare laws and regulations may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, manufacturing, sales, marketing or distribution activities. Uncertainties resulting from the initiation and continuation of litigation or other proceedings relating to applicable healthcare laws and regulations could have an adverse effect on our ability to compete in the marketplace.

If any of our product candidates obtain regulatory approval, additional competitors could enter the market with generic or other versions of such drugs, which may result in a material decline in sales of affected products.

Under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), a pharmaceutical manufacturer may file an abbreviated new drug application (“ANDA”) seeking approval of a generic copy of an approved, small-molecule innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act that references the FDA’s prior approval of the small-molecule innovator product. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. The Hatch-Waxman Act also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or in some circumstances, FDA filing and reviewing) of an ANDA or 505(b)(2) NDA. For example, a drug that is granted regulatory approval may be eligible for five years of marketing exclusivity in the United States following regulatory approval if that drug is classified as a new chemical entity (“NCE”). A drug can be classified as a NCE if the FDA has not previously approved any other drug containing the same active moiety.

In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the “Orange Book.” If there are patents listed in the Orange Book, a generic or 505(b)(2) applicant that seeks to market our product before expiration of the patents must include in the ANDA or 505(b)(2) NDA a “Paragraph IV certification,” challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Appropriate notice of the certification must be given to the innovator, too, and if within 45 days of receiving such notice the innovator sues to protect our patents, approval of the ANDA or 505(b)(2) is stayed for 30 months, or as lengthened or shortened by the court.

Accordingly, if any of our product candidates are approved, competitors could file ANDAs for generic versions of our small-molecule drug products or 505(b)(2) NDAs that reference our small-molecule drug products, respectively. If there are patents listed for our small-molecule drug products in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA or 505(b)(2) NDA applicant does or does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if any of our owned or in-licensed patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, the affected product could immediately face generic competition and our sales would likely decline rapidly and materially. See “Risks Related to Our Intellectual Property Rights.”

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability.

The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. For example, if the Asset Sale is not completed and we receive marketing approval for YTX-7739 as a treatment for Parkinson’s disease, physicians may nevertheless prescribe YTX-7739 to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our product candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

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Even if approved, reimbursement policies could limit our ability to sell our product candidates.

In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Sales of our drugs will depend, in part, on the extent to which our drugs will be covered by third-party payors, such as government health programs, commercial insurance, and managed healthcare organizations. Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval.

Market acceptance and sales of our product candidates will depend on reimbursement policies and may be affected by healthcare reform measures. Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial payors are critical to new product acceptance. Third-party payors decide which drugs they will pay for and establish reimbursement levels. In the United States, the principal decisions about reimbursement for new medicines are typically made by CMS. CMS decides whether and to what extent our products will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a therapeutic is:

•a covered benefit under our health plan;

•safe, effective and medically necessary;

•appropriate for the specific patient;

•cost-effective; and

•neither experimental nor investigational.

Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels for those medications. Cost containment is a primary concern in the U.S. healthcare industry and elsewhere. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that reimbursement will be available for our product candidates and, if reimbursement is available, the level of such reimbursement. Reimbursement may impact the demand for, or the price of, our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates. Limited coverage and less than adequate reimbursement may reduce the demand for, or the price of, any product for which we obtain regulatory approval.

In some foreign countries, particularly in Canada and European countries, the pricing of prescription pharmaceuticals is subject to strict governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, we may be required to conduct a clinical study that compares the cost-effectiveness of our product candidates with other available therapies. If reimbursement for our product candidates is unavailable in any country in which we seek reimbursement, if it is limited in scope or amount, if it is conditioned upon our completion of additional clinical trials, or if pricing is set at unsatisfactory levels, our operating results could be materially adversely affected.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, President Obama signed into law the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms.

Among the provisions of the ACA of importance to our product candidates are the following:

•an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biological products, apportioned among these entities according to their market share in certain government healthcare programs;

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•a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected;

•an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

•expansion of healthcare fraud and abuse laws, including the False Claims Act and the AKS, which include, among other things, new government investigative powers and enhanced penalties for non-compliance;

•a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% in 2019 pursuant to subsequent legislation) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

•extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

•expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals, thereby potentially increasing manufacturers’ Medicaid rebate liability;

•expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

•the requirements under the federal open payments program and its implementing regulations;

•a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and

•a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Since its enactment, there have been judicial, Congressional and executive challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example:

•On August 2, 2011, the U.S. Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension that lasted from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. Following the temporary suspension, a 1% payment reduction occurred from April 1, 2022 through June 30, 2022, and the 2% payment reduction resumed on July 1, 2022.

•On January 2, 2013, the U.S. American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers.

•On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

•On May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

•On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020.

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•On December 20, 2019, former President Trump signed into law the Further Consolidated Appropriations Act (H.R. 1865), which repealed the Cadillac tax, the health insurance provider tax, and the medical device excise tax. It is impossible to determine whether similar taxes could be instated in the future.

Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, President Biden signed an Executive Order on July 9, 2021 affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option. Among other things, the Executive Order also directs the U.S. Department of Health and Human Services, or HHS, to provide a report on actions to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry; and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. FDA released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. On September 25, 2020, CMS stated drugs imported by states under this rule will not be eligible for federal rebates under Section 1927 of the Social Security Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs. If implemented, importation of drugs from Canada may materially and adversely affect the price we receive for any of our product candidates. Further, on November 20, 2020, CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates would have been calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. However, on December 29, 2021 CMS rescinded the Most Favored Nations rule. Additionally, on November 30, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and recent legislation imposed a moratorium on implementation of the rule until January 1, 2026. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent labeling and post-marketing testing and other requirements.

It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations, and other healthcare payors to contain or reduce costs of healthcare may adversely affect the demand for any product candidates for which we may obtain regulatory approval, our ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for a product, our ability to generate revenue and achieve or maintain profitability, and the level of taxes that we are required to pay.

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Our future growth may depend, in part, on our ability to commercialize our product candidates in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability may depend, in part, on our ability to commercialize our product candidates in foreign markets for which we may rely on collaboration with third parties. If we commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

•our customers’ ability to obtain reimbursement for our product candidates in foreign markets;

•our inability to directly control commercial activities because we are relying on third parties;

•the burden of complying with complex and changing foreign regulatory, tax, accounting, and legal requirements;

•different medical practices and customs in foreign countries affecting acceptance in the marketplace;

•import or export licensing requirements;

•longer accounts receivable collection times;

•longer lead times for shipping;

•language barriers for technical training;

•reduced protection of intellectual property rights in some foreign countries;

•the existence of additional potentially relevant third-party intellectual property rights;

•foreign currency exchange rate fluctuations; and

•the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions, and changes in tariffs.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

In order to market any product outside of the United States, however, we must establish and comply with the numerous and varying safety, efficacy, and other regulatory requirements of other countries. Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or other comparable foreign regulatory authority grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. The marketing approval processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United States, as well as other risks. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for we and could delay or prevent the introduction of our products in certain countries. Failure to obtain marketing approval in other countries or any delay or other setback in obtaining such approval would impair our ability to market our product candidates in such foreign markets. Any such impairment would reduce the size of our potential market, which could have a material adverse impact on our business, results of operations, and prospects.

Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct, or other illegal activity by our employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless, and negligent conduct that fails to: comply with the laws of the FDA and other comparable foreign regulatory authorities; provide true, complete and accurate information to the FDA and other comparable foreign regulatory authorities; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or

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report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, sales, marketing, and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales and commission, certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and local environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other worldwide anti-bribery laws.

Our business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. Recently the SEC and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of our employees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition.

Risks Related to Our Reliance on Third Parties

We depend on our collaboration with Merck and may in the future depend on other collaborations with third parties for the research, development and commercialization of certain other product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

We have entered into a collaboration agreement with Merck and, if the Asset Sale is not completed, may seek other third-party collaborators for the research, development, and commercialization of certain of the product candidates we may develop. Our likely collaborators for any other collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, biotechnology companies and academic institutions. Under our collaboration with Merck, we have, and if we enter into any such arrangements with any other third parties, we will likely have, shared or limited control over the amount and timing of resources that our collaborators dedicate to the development or potential commercialization of any product candidates we may seek to develop with them. Our ability to generate revenue from these arrangements with commercial entities will depend on our

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collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.

Collaborations involving our research programs, or any product candidates we may develop, pose the following risks to we:

•collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations;

•collaborators may not properly obtain, maintain, enforce, or defend intellectual property or proprietary rights relating to our product candidates or research programs or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property related proceedings, including proceedings challenging the scope, ownership, validity and enforceability of our intellectual property;

•collaborators may own or co-own intellectual property covering our product candidates or research programs that results from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or research programs;

•we may need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us;

•disputes may arise between the collaborators and us that result in the delay or termination of the research, development, or commercialization of our product candidates or research programs or that result in costly litigation or arbitration that diverts management attention and resources;

•collaborators may decide to not pursue development and commercialization of any product candidates we develop or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;

•collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;

•collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or research programs if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

•collaborators with marketing and distribution rights to one or more product candidates may not commit sufficient resources to the marketing and distribution of such product candidates;

•we may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo a change of control;

•collaborators may undergo a change of control and the new owners may decide to take the collaboration in a direction which is not in our best interest;

•collaborators may become bankrupt, which may significantly delay our research or development programs, or may cause us to lose access to valuable technology, know-how or intellectual property of the collaborator relating to our products, product candidates or research programs;

•key personnel at our collaborators may leave, which could negatively impact our ability to productively work with our collaborators;

•collaborations may require us to incur short and long-term expenditures, issue securities that dilute our stockholders, or disrupt our management and business;

•collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates or our discovery engine platform; and

•collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our development or commercialization program under such collaboration could be delayed, diminished, or terminated.

We may face significant competition in seeking appropriate collaborations. Recent business combinations among biotechnology and pharmaceutical companies have resulted in a reduced number of potential collaborators. In addition, the negotiation process is

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time-consuming and complex, and we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay our development program or one or more of our other development programs, delay our potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to it on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue.

Under our collaboration with Merck, and if we enter into other collaborations to develop and potentially commercialize any product candidates, we may not be able to realize the benefit of such transactions if us or our collaborator elects not to exercise the rights granted under the agreement or if us or our collaborator are unable to successfully integrate a product candidate into existing operations and company culture. In addition, if our agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates utilizing the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of our in the business and financial communities could be adversely affected. Many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” section also apply to the activities of our collaborators and any negative impact on our collaborators may adversely affect us.

Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. If the Asset Sale is not completed, for some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates, such as those that may result from our collaboration with Merck.

Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical studies, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. The terms of any collaborations or other arrangements that we may establish may not be favorable to it.

In addition, our collaboration with Merck and any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Termination of our collaboration with Merck or any such termination or expiration of future collaborations would adversely affect us financially and could harm our business reputation.

We rely, and expect to continue to rely, on third parties to conduct any preclinical studies and clinical trials for our product candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We do not have the ability to independently conduct preclinical studies and clinical trials. We rely on medical institutions, clinical investigators, contract laboratories, and other third parties, such as CROs, to conduct preclinical studies and clinical trials on our product candidates. We enter into agreements with third-party CROs to provide monitors for and to manage data for our clinical trials. We will rely heavily on these parties for execution of clinical trials for our product candidates and control only certain aspects of their activities. As a result, we will have less direct control over the conduct, timing, and completion of these clinical trials and the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

•have staffing difficulties;

•fail to comply with contractual obligations;

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•experience regulatory compliance issues;

•undergo changes in priorities or become financially distressed; or

•form relationships with other entities, some of which may be our competitors.

These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost increases that are beyond our control. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory, and scientific requirements and standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with regulations and guidelines, including Good Clinical Practices (“GCPs”) for conducting, monitoring, recording, and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the study patients are adequately informed of the potential risks of participating in clinical trials. These regulations are enforced by the FDA, the Competent Authorities of the Member States of the EEA and comparable foreign regulatory authorities for any product candidates in clinical development. The FDA enforces GCP regulations through periodic inspections of clinical study sponsors, principal investigators and study sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with product candidates produced under cGMP regulations and will require a large number of test patients. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject it to enforcement action up to and including civil and criminal penalties.

Although we design our clinical trials for our product candidates, CROs conduct all of the clinical trials. As a result, many important aspects of the clinical trials are outside of our direct control. In addition, the CROs may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements, but we remain responsible and are subject to enforcement action that may include civil penalties and criminal prosecution for any violations of FDA laws and regulations during the conduct of our clinical trials. If the CROs do not perform clinical trials in a satisfactory manner, breach their obligations to us, or fail to comply with regulatory requirements, the development and commercialization of our product candidates may be delayed or our development program materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs devote to our program or our clinical products. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials and this could significantly delay commercialization and require significantly greater expenditures.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. For example, our sponsored research agreement with Northwestern may be terminated by either party upon 60 days’ written notice to the other party. If our collaboration is delayed or terminated or our ability to continue to use the current research space is terminated as a result of conflicts of interest, we may not be able to continue our planned research projects and related clinical trials on the expected timeline and may need to spend significant time and efforts to secure alternative lab facilities and equipment. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such CROs are associated with may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, we believe that our financial results and the commercial prospects for our product candidates in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

The manufacture of our product candidates, particularly those that utilize our discovery engine platform, is complex and we may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for preclinical studies and clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

The processes involved in manufacturing our drug product candidates, particularly those that utilize our discovery engine platform, are complex, expensive, highly-regulated, and subject to multiple risks. Further, as product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials.

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In addition, the manufacturing process for any products that we may develop is subject to FDA and other comparable foreign regulatory authority approval processes and continuous oversight, and we will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements, including, for example, complying with cGMPs, on an ongoing basis. If we or our third-party manufacturers are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our contract manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical study costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations, and growth prospects.

We rely completely on third-party suppliers to manufacture our clinical drug supplies for our product candidates, and we intend to rely on third parties to produce preclinical, clinical, and commercial supplies of any future product candidates.

We do not currently have, nor do we plan to acquire, the infrastructure or capability to internally manufacture our clinical drug supply of our product candidates, or any future product candidates, for use in the conduct of our preclinical studies and clinical trials, and we lack the internal resources and the capability to manufacture any product candidates on a clinical or commercial scale. The facilities used by our contract manufacturers to manufacture the active pharmaceutical ingredient and final drug product must complete a pre-approval inspection by the FDA and other comparable foreign regulatory agencies to assess compliance with applicable requirements, including cGMPs, after we submit an NDA or relevant foreign regulatory submission to the applicable regulatory agency.

We do not control the manufacturing process of, and are completely dependent on, our contract manufacturers to comply with cGMPs for manufacture of both active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or applicable foreign regulatory agencies, they will not be able to pass a pre-approval inspection and we would be unable to obtain regulatory approval for our product candidates. We may be required to change contract manufacturers and verify that the new contract manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidates according to the specifications previously submitted to the FDA or another regulatory authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget. In addition, we have no direct control over our contract manufacturers’ ability to maintain adequate quality control, quality assurance, and qualified personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result, failure to satisfy the regulatory requirements for the production of those materials and products may affect the regulatory clearance of our contract manufacturers’ facilities generally. If the FDA or an applicable foreign regulatory agency determines now or in the future that these facilities for the manufacture of our product candidates are noncompliant, we may need to find alternative manufacturing facilities, which would adversely impact our ability to develop, obtain regulatory approval for or market our product candidates. Our reliance on contract manufacturers also exposes us to the possibility that they, or third parties with access to their facilities, will have access to and may appropriate our trade secrets or other proprietary information.

We do not have long-term supply agreements in place with our contractors, and each batch of our product candidates is individually contracted under a quality and supply agreement. If we engage new contractors, such contractors must complete an inspection by the FDA and other applicable foreign regulatory agencies. We plan to continue to rely upon contract manufacturers and, potentially, collaboration partners to manufacture commercial quantities of our product candidates, if approved. Our current scale of manufacturing is adequate to support all of our needs for preclinical studies and clinical study supplies.

Risks Related to Our Intellectual Property Rights

If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents that are sufficient to protect our product candidates, others could compete against us more directly by developing and commercializing products similar or identical to ours, which would have a material adverse impact on our business, results of operations, financial condition, and prospects.

Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection in the United States and other countries for commercially important technology, inventions, and know-how related to our business, defend and enforce our patents, should they issue, preserve the confidentiality of our trade secrets, and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking patents intended to cover our products and compositions, their methods of use, and any

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other inventions that are important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

We do not currently have any issued patents covering our clinical-stage product candidate YTX-7739 as a composition of matter. We cannot provide any assurances that any of our pending patent applications will mature into issued patents in any particular jurisdiction and, if they do, that such patents will include claims with a scope sufficient to protect our product candidates or otherwise provide any competitive advantage. The patent application and approval process is expensive, complex, and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. If we are unable to obtain or maintain patent protection with respect to any of our proprietary products and technology we develop, our business, financial condition, results of operations, and prospects could be materially harmed.

If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, which in recent years have been the subject of much litigation, and, therefore, the issuance, scope, validity, enforceability, and commercial value of any patent claims that we may obtain cannot be predicted with certainty. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

Patent applications are generally maintained in confidence until publication. In the United States, for example, patent applications are typically maintained in secrecy for up to 18 months after their filing. Similarly, publication of discoveries in scientific or patent literature often lags behind actual discoveries. Consequently, we cannot be certain that we were the first to file patent applications on our product candidates. There is also no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which could be used by a third party to challenge the validity of our patents, should they issue, or prevent a patent from issuing from a pending patent application. Any of the foregoing could harm our competitive position, business, financial condition, results of operations, and prospects.

Moreover, our patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented in the United States and abroad. U.S. patents and patent applications may also be subject to interference, derivation, ex parte reexamination, post-grant review, or inter partes review proceedings, supplemental examination and challenges in district court. Patents may also be subjected to opposition, post-grant review, or comparable proceedings lodged in various foreign, both national and regional, patent offices or courts. An adverse determination in any such proceeding could result in either loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. In addition, such proceedings may be costly. Thus, any patents, should they issue, that we may own or exclusively license may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market, or otherwise commercialize our product candidates.

Furthermore, though a patent, if it were to issue, is presumed valid and enforceable, our issuance is not conclusive as to our validity or our enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Even if a patent issues and is held to be valid and enforceable, competitors may be able to design around or circumvent our patents, such as using pre-existing or newly developed technology or products in a non-infringing manner. Other parties may develop and obtain patent protection for more effective technologies, designs, or methods. If these developments were to occur, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

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If the Asset Sale is not completed, we will incur significant ongoing expenses in maintaining our patent portfolio. Should we lack the funds to maintain our patent portfolio or to enforce our rights against infringers, we could be adversely impacted.

We may in the future co-own patent rights relating to future product candidates and our discovery engine platform with third parties. Some of our in-licensed patent rights are, and may in the future be, co-owned with third parties. In addition, our licensors may co-own the patent rights it in-licenses with other third parties with whom we do not have a direct relationship. Our exclusive rights to certain of these patent rights are dependent, in part, on inter-institutional or other operating agreements between the joint owners of such patent rights, who are not parties to our license agreements. If our licensors do not have exclusive control of the grant of licenses under any such third-party co-owners’ interest in such patent rights or we are otherwise unable to secure such exclusive rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patent rights in order to enforce such patent rights against third parties, and such cooperation may not be provided to it. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example, we do not know whether:

•any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our product candidates or any other products or product candidates;

•any of our pending patent applications will issue as patents at all;

•we will be able to successfully commercialize our product candidates, if approved, before our relevant patents expire;

•we will be the first to make the inventions covered by each of our patents and pending patent applications;

•we will be the first to file patent applications for these inventions;

•others will not develop similar or alternative technologies that do not infringe our patents;

•others will not use pre-existing technology to effectively compete against it;

•any of our patents, if issued, will be found to ultimately be valid and enforceable;

•any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

•we will develop additional proprietary technologies or product candidates that are separately patentable; or

•that our commercial activities or products will not infringe upon the patents or proprietary rights of others.

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

We have entered into license agreements with third parties and may need to obtain additional licenses from others to advance our research or allow commercialization of product candidates we may develop or our discovery engine platform technology. It is possible that we may be unable to obtain additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates or continue to utilize our existing discovery engine platform, which could harm our business, financial condition, results of operations, and prospects significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current technology, including our discovery engine platform technology, manufacturing methods, product candidates, or future methods or products resulting in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.

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In addition, each of our license agreements imposes, and we expect our future agreements, if any, will impose various development, diligence, commercialization, and other obligations on it. Certain of our license agreements also require us to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products, in order to maintain the licenses. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties would have the freedom to seek regulatory approval of, and to market, products identical to ours, and we may be required to cease our development and commercialization of certain of our product candidates or of our current discovery engine platform technology. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:

•the scope of rights granted under the license agreement and other interpretation-related issues;

•the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

•the sublicensing of patent and other rights under our collaborative development relationships;

•our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

•the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

•the priority of invention of patented technology.

In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.

We may also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Additionally, we rely on unpatented know-how, continuing technological innovation to develop, strengthen, and maintain the proprietary and competitive position of our product candidates, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. However, trade secrets are difficult to protect. For example, we may be required to share our trade secrets with third-party licensees, collaborators, consultants, contractors, or other advisors and we have limited control over the protection of trade secrets used by such third parties. Although we use reasonable efforts to protect our trade secrets, including by entering into confidentiality agreements, our employees, consultants, contractors, outside scientific collaborators, and other advisors may unintentionally or willfully disclose our trade secrets and proprietary information to competitors and we may not have adequate remedies for any such disclosure. Enforcing a claim that a third party illegally obtained and used, disclosed, or misappropriated any of our trade secrets is difficult, expensive, and time-consuming, and the outcome is unpredictable. Furthermore, we may not obtain these agreements in all circumstances, and the employees and consultants who are parties to these agreements may breach or violate the terms of these agreements, thus we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. In addition, trade secret laws in the United States vary, and some U.S. courts as well as courts outside the United States are sometimes less willing or unwilling to protect trade secrets. Moreover, it is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Further, our trade secrets could otherwise become known or be independently discovered by our competitors or other third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees, and current employees. If our trade secrets or confidential or proprietary information is divulged to or acquired by third parties, including our competitors, our competitive position in the marketplace, business, financial condition, results of operations, and prospects may be materially adversely affected.

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We may be sued for infringing the intellectual property rights of others, which may be costly and time-consuming and may prevent or delay our product development efforts and stop it from commercializing or increase the costs of commercializing our product candidates, if approved.

Our success will depend in part on our ability to operate without infringing, misappropriating, or otherwise violating the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products, and methods do not or will not infringe the patents or other intellectual property rights of third parties. We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technologies we use in our business.

The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that our product candidates or the use of our technologies infringe or otherwise violate patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. As we continue to develop and, if approved, commercialize our current product candidates and future product candidates, competitors may claim that our technology infringes their intellectual property rights as part of business strategies designed to impede our successful commercialization. There may be third-party patents or patent applications with claims to compositions, materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. In particular, we are aware of an issued patent in each of the United States and Japan that expires in 2030 that covers one of our preclinical assets. We do not know if we will have reasonable defenses against a claim of infringement or if we will be able to obtain a license to such patent on commercially reasonable terms, if at all. As a result, if the Asset Sale is not completed, we may not be able to commercialize such asset, if approved, prior to such patent’s expiration.

We are also aware of U.S. and foreign patents and applications owned by a third party claiming certain compositions of matter and methods of use which we expect to expire in 2031. While we believe that we have reasonable defenses against a claim of infringement, including non-infringement and invalidity, there can be no assurance that we will prevail in any such action by the holder of these patents. In the event such patents were enforced against us and deemed to cover one or more of our products, and our defenses were unsuccessful, we would then need to obtain a license to these patents, which license may not be available on commercially reasonable terms, or at all. As a result, if the Asset Sale is not completed, we may not be free to manufacture or market our products, including YTX-7739, if approved, prior to expiration of such patents.

Additionally, because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because patent claims can be revised before issuance, third parties may have currently pending patent applications which may later result in issued patents that our product candidates may infringe, or which such third parties claim are infringed by our technologies. If a patent holder believes one or more of our product candidates infringe its patent rights, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect.

The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our product candidates and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were to obtain a license, it could be granted on non-exclusive terms, thereby providing our competitors and other third parties access to the same technologies licensed to it. In addition, if any such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing our product candidates. Any claim relating to intellectual property infringement that is successfully asserted against we may require us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced to take a license.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on it. There could also be public announcements of the results of the hearing, motions, or other interim proceedings or developments and if securities analysts or investors perceive those results to be negative, it could cause the price of shares of our common stock to decline. If we are unable to avoid infringing the patent rights of

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others, we may be required to seek a license, defend an infringement action, or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of the following:

•cease developing, selling or otherwise commercializing our product candidates;

•pay substantial damages for past use of the asserted intellectual property;

•obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

•in the case of trademark claims, redesign, or rename, some or all of our product candidates to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if possible, could be costly and time-consuming.

Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition, and prospects.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We enter into confidentiality and intellectual property assignment agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors. These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. The assignment of intellectual property rights under these agreements may not be automatic upon the creation of the intellectual property or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against it, to determine the ownership of what we regard as our intellectual property. For example, even if we have a consulting agreement in place with an academic advisor pursuant to which such academic advisor is required to assign any inventions developed in connection with providing services to it, such academic advisor may not have the right to assign such inventions to us, as it may conflict with his or her obligations to assign all such intellectual property to his or her employing institution.

Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on our owned and in-licensed patents and patent applications are or will be due to be paid to the U.S. Patent and Trademark Office (“USPTO”) in several stages and various government patent agencies outside of the United States over the lifetime of such patents and patent applications and any patent rights we may own or license in the future. We have systems in place to remind us to pay these fees, and we employ outside firms to remind us or our licensors to pay annuity fees due to foreign patent agencies on our foreign patents and pending foreign patent applications. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions over the lifetime of our owned patents and applications. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors or other third parties might be able to enter the market earlier than would otherwise have been the case and this circumstance could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may be involved in lawsuits or other proceedings to protect or enforce our intellectual property, which could be expensive, time-consuming, and unsuccessful.

Even if our patent applications are issued, competitors and other third parties may infringe, misappropriate, or otherwise violate our patents and other intellectual property rights. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming and divert the attention of our management and key personnel from our business operations.

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Furthermore, many of our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. Our ability to enforce our patent rights also depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product.

In an infringement proceeding, a court may disagree with our allegations and refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question, or may decide that a patent of ours is invalid, unenforceable or not infringed. An adverse result in any litigation, defense or post-grant proceedings could result in one or more of our patents being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. If any of our patents, if and when issued, covering our product candidates are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to us from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our involvement in litigation or interference proceedings may fail and, even if successful, may result in substantial costs, and distract our management and other employees. We may not be able to prevent infringement, misappropriation of, or other violations of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Issued patents covering our discovery engine platform and our product candidates could be found invalid or unenforceable if challenged.

If we initiated legal proceedings against a third party to enforce a patent, if and when issued, covering our discovery engine platform or one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. The outcome of any such proceeding is generally unpredictable.

In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for unenforceability assertions of a patent include allegations that someone connected with prosecution of the patent application that matured into the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution of the patent application. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post grant review and equivalent proceedings in foreign jurisdictions, e.g., opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection would have a material adverse impact on our business.

We may not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing and prosecuting patent applications, and defending patents on our discovery engine platform and product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the

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United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. In addition, the statutory deadlines for pursuing patent protection in individual foreign jurisdictions are based on the priority date of each of our patent applications and we may not timely file foreign patent applications. For the patent families related to YTX-7739, as well as for many of the patent families that we own, the relevant statutory deadlines have not yet expired. Thus, for each of the patent families that we believe provides coverage for our lead product candidate, if the Asset Sale is not completed, we will need to decide whether and where to pursue protection outside the United States.

Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biotechnology or pharmaceuticals. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of or marketing of competing products in violation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against it. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If we do not obtain additional protection under the Hatch-Waxman Act and similar foreign legislation by extending the patent terms and obtaining data exclusivity for our product candidates, our business may be materially harmed.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from our earliest U.S. non-provisional filing date in our chain of priority. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.

Depending upon the timing, duration, and specifics of FDA marketing approval of our product candidates, one or more of the U.S. patents we own may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain a patent term extension or the term of any such extension is less than we request, the duration of patent protection we obtain for our product candidates may not provide us with any meaningful commercial or competitive advantage, our competitors may obtain approval of competing products earlier than they would otherwise be able to do so, and our ability to generate revenues could be materially adversely affected.

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Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation under the Leahy-Smith America Invents Act (the "America Invents Act"). The America Invents Act includes a number of significant changes to U.S. patent law. After March 2013, under the America Invents Act, the United States transitioned to a first-inventor-to-file system in which, assuming that other requirements for patentability are met, the first-inventor-to-file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The America Invents Act also includes provisions that affect the way patent applications will be prosecuted and that may also affect patent litigation. It is not yet clear what, if any, impact the America Invents Act will have on the operation of our business. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any patents that may issue from our patent applications, all of which could have a material adverse effect on our business and financial condition.

In addition, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. The full impact of these decisions is not yet known. For example, on March 20, 2012, in Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., the Court held that several claims drawn to measuring drug metabolite levels from patient samples and correlating them to drug doses were not patentable subject matter. The decision appears to impact diagnostics patents that merely apply a law of nature via a series of routine steps and it has created uncertainty around the ability to obtain patent protection for certain inventions. Additionally, on June 13, 2013, in Association for Molecular Pathology v. Myriad Genetics, Inc., the Court held that claims to isolated genomic DNA are not patentable, but claims to complementary DNA molecules are patent eligible because they are not a natural product. The effect of the decision on patents for other isolated natural products is uncertain. However, on March 4, 2014, the USPTO issued a memorandum to patent examiners providing guidance for examining claims that recite laws of nature, natural phenomena or natural products under the Myriad and Prometheus decisions. This guidance did not limit the application of Myriad to DNA but rather applied the decision to other natural products.

In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on these and other decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce any patents that may issue in the future.

We may be subject to damages resulting from claims that us or our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers.

Our employees have been previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We also engage advisors and consultants who are concurrently employed at universities or who perform services for other entities.

Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for it, and although we are not aware of any claims currently pending against it, we may be subject to claims that us or our employees, advisors, or consultants have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third party. We have and may in the future also be subject to claims that an employee, advisor, or consultant performed work for us that conflicts with that person’s obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for it. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our product candidates, which would materially adversely affect our commercial development efforts.

We may not be successful in obtaining, through acquisitions, in-licenses or otherwise, necessary rights to our discovery engine platform, product candidates or other technologies.

We currently have rights to intellectual property, through licenses from third parties, to identify and develop our discovery engine platform technology and product candidates. Many pharmaceutical companies, biotechnology companies, and academic institutions are competing with it in the field of neurodegeneration and discovery engine platform and may have patents and have filed and are likely filing patent applications potentially relevant to our business. In order to avoid infringing these third-party patents, we may find it necessary or prudent to obtain licenses to such patents from such third-party intellectual property holders. In addition, with respect

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to any patents we co-own with third parties, we may require licenses to such co-owners’ interest to such patents. However, we may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes, or other intellectual property rights from third parties that we identify as necessary for our current or future product candidates and our discovery engine platform technology. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over it due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to it. We also may be unable to license or acquire third party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

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Numerous factors may limit any potential competitive advantage provided by our intellectual property rights.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:

•others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own;

•we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or own now or in the future;

•we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;

•it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents;

•issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

•our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

•we may not develop additional proprietary technologies that are patentable;

•the patents of others may harm our business; and

•we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could significantly harm our business and results of operations.

Risks Related to Our Business Operations, Employee Matters and Managing Growth

Our corporate restructuring and the associated headcount reduction announced in February 2022 may not result in anticipated savings, could result in total costs and expenses and attrition that are greater than expected and could disrupt our business.

On February 17, 2022, we announced an approximate 60% reduction in headcount as part of a corporate restructuring. We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our restructuring efforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings from the restructuring, our operating results and financial condition would be adversely affected. We also cannot guarantee that we will not have to undertake additional headcount reductions or restructuring activities in the future. Furthermore, our restructuring activities may be disruptive to our operations. For example, our headcount reductions could yield unanticipated consequences, such as attrition beyond planned staff reductions, or increase difficulties in our day-to-day operations. Our headcount reductions could also harm our ability to attract and retain qualified management, scientific, clinical, manufacturing and other personnel who are critical to our business. Any failure to attract or retain qualified personnel could prevent us from successfully developing and commercializing our product candidates in the future.

Our future success depends on our ability to retain our management team and to retain and motivate qualified personnel.

Our ability to compete in the highly competitive biotechnology and biopharmaceuticals industries depends upon our ability to retain highly qualified managerial, scientific, and medical personnel. In order to induce valuable employees to continue their employment with us, we have provided stock options and restricted stock that vest over time. The value to employees of stock options that vest over time is significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies.

We are highly dependent on our management, scientific and medical personnel, including our Chief Executive Officer, Richard Peters, M.D., Ph.D. Despite our efforts to retain valuable employees, members of our management, scientific, and development teams may

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terminate their employment with us on short notice. The loss of the services of any of our executive officers, including Dr. Peters, other key employees and other scientific and medical advisors, and an inability to find suitable replacements could result in delays in product development and harm our business. Pursuant to their employment arrangements, each of our executive officers, and other employees may voluntarily terminate their employment at any time, with or without notice. Our success also depends on our ability to continue to attract, retain, and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel. While we committed to pay one-time employee retention payments to certain employees at the time we effected our February 2022 corporate restructuring, the combination of having effected such a restructuring and our announced plans to explore strategic alternatives may make it increasingly difficult for us to retain our executive officers, other key employees and other scientific and medical advisors.

We may not be able to attract or retain qualified management and scientific personnel in the future due to the intense competition for a limited number of qualified personnel among biopharmaceutical, biotechnology, pharmaceutical, and other businesses. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we may be able to offer. We also experience competition for the hiring of scientific personnel from universities and research institutions. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can develop and commercialize product candidates will be limited.

We may need to grow the size of our organization and we may experience difficulties identifying and hiring the right employees and in managing this growth.

Although we announced in February 2022 an approximate 60% reduction in our headcount, it is possible that, in the future, we may experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of research and development, product development and manufacturing, regulatory affairs and, if any product candidates are submitted for or receive marketing approval, sales, marketing and distribution. Future growth would impose significant added responsibilities on members of management, including:

•identifying, recruiting, integrating, maintaining and motivating additional employees;

•managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

•improving our operational, financial and management controls, reporting systems and procedures.

Our future financial performance and our ability to commercialize our product candidates may depend, in part, on our ability to effectively manage any future growth and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors, contractors and consultants to provide certain services, including substantially all aspects of regulatory approval, clinical management and manufacturing. There can be no assurance that the services of independent organizations, advisors, contractors and consultants will continue to be available to us on a timely basis when needed or that we will be able to find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by independent organizations, advisors, contractors or consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing independent organizations, advisors, contractors or consultants or find other competent resources on economically reasonable terms, or at all.

If we are not able to effectively expand our organization by hiring new employees and expanding the roster of independent organizations, advisors and consultants on whom we rely on an outsourced basis, we may not be able successfully to implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

The use of our product candidates in clinical trials and the sale of our product candidates, if approved, exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, or others selling or otherwise coming into contact with our product candidates. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability, and a breach of warranties. Claims could also be asserted

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under state consumer protection acts. If we become subject to product liability claims and cannot successfully defend itself against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

•withdrawal of subjects from our clinical trials;

•substantial monetary awards to patients or other claimants;

•decreased demand for our product candidates or any future product candidates following marketing approval, if obtained;

•damage to our reputation and exposure to adverse publicity;

•increased FDA warnings on product labels;

•litigation costs;

•distraction of management’s attention from our primary business;

•loss of revenue; and

•the inability to successfully commercialize our product candidates or any future product candidates, if approved.

We maintain product liability insurance coverage for our clinical trials with a €5 million annual aggregate coverage limit. Nevertheless, our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. If and when we obtain marketing approval for our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may not be able to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business, and prospects could be materially adversely affected.

Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or other disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, the ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

We will continue to incur increased costs as a result of operating as a public company, and our management team will be required to devote substantial time to new compliance initiatives.

As a public company, we will continue to incur significant legal, accounting, and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and rules subsequently implemented by the SEC and The Nasdaq Stock Market have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

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Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), we will be required to furnish a report by our management on our internal control over financial reporting, which may include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. While we remain a “smaller reporting company” with less than $100 million in annual revenues, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we need to continue to dedicate internal resources, potentially engage outside consultants, and maintain a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could result in sanctions or other penalties that would harm our business.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of The Nasdaq Capital Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. We must perform system and process design evaluation and testing of the effectiveness of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by Section 404. This requires that we incur substantial additional professional fees and internal costs related to our accounting and finance functions and that we expend significant management efforts. Prior to the merger with Proteostasis, we had never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 in a timely manner, or if we are unable to maintain proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. If that were to happen, our investors could lose confidence in our reported financial information, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

Changes in tax law could adversely affect our business and financial condition.

The rules dealing with U.S. federal, state, and local and non-U.S. taxation are constantly under review by persons involved in the legislative process, the Internal Revenue Service, the U.S. Treasury Department and other taxing authorities. Changes to tax laws or tax rulings, or changes in interpretations of existing laws (which changes may have retroactive application), could adversely affect us or holders of our common stock. These changes could subject us to additional income-based taxes and non-income taxes (such as payroll, sales, use, value-added, digital tax, net worth, property, and goods and services taxes), which in turn could materially affect our financial position and results of operations. Additionally, new, changed, modified, or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs, as well as the costs of our products. In recent years, many such changes have been made, and changes are likely to continue to occur in the future. Any changes in the U.S. and non-U.S. taxation of our business activities may increase our effective tax rate and harm our business, financial condition, and results of operations.

Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.

As of December 31, 2021, we had federal and state net operating loss (“NOL”) carryforwards of $486.6 million and $497.2 million, respectively. Of the federal NOL carryforwards, $228.1 million begin to expire in 2026, and $258.5 million can be carried forward indefinitely. As of December 31, 2021, we had $0.1 million of foreign net operating loss carryforwards that do not expire. Under Section 382, changes in our ownership may limit the amount of our net operating loss carryforwards and research and development tax credit carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such limitation may significantly reduce our ability to utilize our NOL carryforwards and research and development tax credit

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carryforwards before they expire. Our existing NOLs may be subject to limitations arising from previous ownership changes, which could have a material adverse effect on our results of operations in future years. We have not yet completed a Section 382 analysis, and therefore, there can be no assurances that the NOL is already not limited. In addition, the Merger, if consummated, is expected to constitute an ownership change under Section 382. Our NOLs may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs.

In addition, the reduction of the corporate tax rate under the Tax Cuts and Jobs Act of 2017 ("TCJA") may cause a reduction in the economic benefit of our NOL carryforwards and other deferred tax assets available to it. For example, while the TCJA allows for federal NOLs incurred in tax years beginning after December 31, 2017 to be carried forward indefinitely, the TCJA also imposes an 80% limitation on the use of NOLs that are generated in tax years beginning after December 31, 2017. Net operating losses generated prior to December 31, 2017, however, will still have a 20-year carryforward period, but are not subject to the 80% limitation.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) modifies, among other things, the rules governing NOLs. NOLs arising in tax years 2019, 2020, and 2021 are subject to a five year carryback and indefinite carryforward, while NOLs arising in tax years beginning after December 31, 2020 also are subject to indefinite carryforward but cannot be carried back. The CARES Act also suspends the 80% limitation mentioned above for NOLs generated in taxable years ending after December 31, 2017 that are used in taxable years ending on or prior to December 31, 2020. In future years, if and when a net deferred tax asset is recognized related to our NOLs, the changes in the carryforward/carryback periods as well as the new limitation on use of NOLs may significantly impact our valuation allowance assessments for NOLs generated after December 31, 2017.

Furthermore, the ability of the combined organization to utilize our NOLs following the Merger is conditioned upon the combined organization maintaining profitability in the future and generating U.S. federal taxable income. Since we do not know whether or when the combined organization will generate the U.S. federal taxable income necessary to utilize our remaining NOLs, these NOL carryforwards generated prior to December 31, 2017 could expire unused. Notwithstanding the foregoing discussion of NOLs, we have recorded a full valuation allowance related to our NOLs due to the uncertainty of the ultimate realization of the future benefits of such NOLs..

We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

We may acquire additional businesses or products, form strategic alliances, or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing, and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot provide assurance that, following any such acquisition, we will achieve the synergies expected in order to justify the transaction.

Risks Related to Our Common Stock

The market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above the price at which you purchased our shares.

The market price for our common stock historically has been highly volatile and could continue to be subject to wide fluctuations in response to various factors. The daily closing market price for our common stock has varied between a high price of $12.04 on September 16, 2021 and a low price of $0.97 on March 11, 2022 in the twelve-month period ending on July 28, 2022. The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the price at which you purchased your shares. The market price for our common stock may be influenced by many factors, including:

•failure to lift the partial clinical hold on our IND for YTX-7739 by the FDA, if the Asset Sale is not completed;

•adverse results or delays in preclinical studies or clinical trials;

•an inability to obtain additional funding;

•failure by us to successfully develop and commercialize our product candidates;

•failure by us to maintain our existing strategic collaborations or enter into new collaborations;

•failure by us or our licensors and strategic partners to prosecute, maintain or enforce our intellectual property rights;

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•changes in laws or regulations applicable to future products;

•an inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;

•adverse regulatory decisions;

•the introduction of new products, services or technologies by our competitors;

•failure by us to meet or exceed financial projections we may provide to the public;

•failure by us to meet or exceed the financial projections of the investment community;

•the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;

•announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic partners or our competitors;

•disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

•additions or departures of key scientific or management personnel;

•significant lawsuits, including patent or stockholder litigation;

•changes in the market valuations of similar companies;

•sales of our common stock by us or our stockholders in the future; and

•the trading volume of our common stock.

In addition, companies trading in the stock market in general, and The Nasdaq Capital Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Our quarterly operating results may fluctuate substantially, which may cause the price of our common stock to fluctuate substantially.

We expect our quarterly operating results to be subject to fluctuations. Our net income or loss and other operating results may be affected by numerous factors, including:

•our ability to complete the Merger, the Asset Sale, or any strategic transaction;

•derivative instruments recorded at fair value;

•asset impairments, severance costs, lease termination costs, transaction and other costs triggered by a wind down of our operations and ;

•any lawsuits in which we may become involved.

If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business or cease coverage of us, our share price and trading volume could decline.

The trading market for our common stock will likely depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. Although we have obtained research coverage from certain analysts, there can be no assurance that analysts will continue to cover us or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. Recently, one securities analyst ceased coverage of us, and, if one or more of the remaining analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets and demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

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As of June 30, 2022, our executive officers, directors, five percent or greater stockholders and their affiliates beneficially own approximately 37.3% of our outstanding voting stock. These stockholders have the ability to influence us through their ownership positions. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.

We expect our stock price to continue to be volatile, and securities class action litigation has often been instituted against companies following periods of volatility of their stock price or after the announcement of a change in control transaction. Any such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, which could harm our business. This litigation, if instituted against us, could also impair our ability to successfully complete a potential strategic transaction on terms that are favorable to our stockholders, or at all.

An active trading market for our common stock may not be sustained.

Although our common stock is listed on The Nasdaq Capital Market, an active trading market for our shares may never be sustained. If an active market for our common stock is not sustained, it may be difficult for you to sell shares you purchased without depressing the market price for the shares, or at all.

An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling additional shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

We have never paid and, other than in connection with the Asset Sale, do not intend to pay cash dividends in the foreseeable future. As a result, capital appreciation, if any, will be your sole source of gain.

We have never paid cash dividends on any of our capital stock. In connection with the closing of the Asset Sale, we plan to distribute any remaining available cash proceeds from the Asset Sale to our stockholders via a one-time dividend, net of any amounts retained for outstanding obligations and net cash requirements associated with the closing of the Merger. Other than the potential distribution in connection with the closing of the Asset Sale, we do not currently anticipate declaring or paying cash dividends on our capital stock in the foreseeable future. We intend to retain future earnings, if any, to fund the development and growth of our business. In addition, we may enter into future debt agreements that restrict our ability to pay dividends. As a result, other than the potential distribution in connection with the closing of the Asset Sale, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Provisions in our fifth amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change in control of us or changes in our management and, therefore, depress the market price of our common stock.

Our fifth amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of us or changes in our management that the stockholders of ours may deem advantageous. These provisions among other things:

•establish a classified board of directors so that not all members of the board are elected at one time;

• permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships;

• provide that directors may only be removed for cause and only by the affirmative vote of the holders of 75% or more of the outstanding shares of our capital stock then entitled to vote;

• require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;

• prohibit our stockholders to call special meetings of stockholders;

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• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

• provide that the board of directors is expressly authorized to amend or repeal our bylaws;

• restrict the forum for certain litigation against us to Delaware; and

• establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law ("Section 203") may discourage, delay or prevent a change in control of us. Section 203 imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15% or more of our common stock.

Our bylaws contain exclusive forum provisions, which may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable and may discourage lawsuits with respect to such claims.

Our third amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf; (2) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (3) any action or proceeding asserting a claim against us or any of our current or former directors, officers, or employees arising out of or pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws (each as may be amended from time to time); (4) any action or proceeding to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws (including any right, obligation, or remedy thereunder); (5) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and (6) any action or proceeding asserting a claim against us or any director, officer or other employee, governed by the internal affairs doctrine (the “Delaware Forum Provision”). The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act, the Exchange Act or for which the federal courts have exclusive jurisdiction.

Our third amended and restated bylaws further provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, our third amended and restated bylaws provide that any person or entity holding, owning or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and the Federal Forum Provision.

The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing the claims identified above, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the Delaware Forum Provision and the Federal Forum Provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the Delaware Forum Provision and the Federal Forum Provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair our stockholders’ ability to sell or purchase our common stock when they wish to do so. Delisting of our common stock could depress our stock price, substantially limit liquidity of our common stock and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Further, delisting of the common stock would likely result in the common stock becoming a “penny stock” under the Exchange Act. In the event of non-compliance with the continued listing requirements or the delisting of our common stock, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

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Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require it to relinquish proprietary rights.

To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. Any future debt financing may involve covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. In addition, if we seek funds through arrangements with collaborative partners, these arrangements may require it to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to it.

We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common shares less attractive to investors.

We are a “smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in our Annual Report on Form 10-K, and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.

Investors may find our common stock less attractive to the extent we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

General Risk Factors

Unfavorable global economic conditions could adversely affect our business, financial condition, or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. In the past several years, global credit and financial markets have experienced volatility, instability and disruptions, including as a result of the ongoing COVID-19 pandemic. From time to time, this volatility, instability and disruption has caused, and may cause in the future, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. For example, since early 2020, the COVID-19 pandemic has caused disruption in the financial markets both globally and in the United States. While certain negative effects of the ongoing COVID-19 pandemic have lessened as vaccines are distributed and administered and prevention and treatment methods improve, there have been and may continue to be resurgences of cases, including as a result of the emergence of variants that may be more contagious or more resistant to the vaccine and treatment options available, placing renewed and prolonged strain on both health care facilities and our workforce. Given the inter-connectivity of the global economy, pandemic disease and health events have the potential to continue to negatively impact economic activities in many countries, including the United States. The ongoing spread of the coronavirus, including variants thereof and resurgences in geographies experiencing some relief, could have a negative material impact on our business, prospects, financial condition and results of operations of the Company.

In addition, any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions could result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Geopolitical developments, such as the Russian invasion of Ukraine or deterioration in the bilateral relationship between the United States and China, may impact government spending, international trade and market stability, and cause weaker macro-economic conditions. The impact of these developments, including any resulting sanctions, export controls or other restrictive actions that may be imposed against governmental or other entities in, for example, Russia, have in the past contributed and may in the future contribute to disruption, instability and volatility in the global markets, which in turn could adversely impact our operations and weaken our financial results. Certain political developments may also lead to uncertainty to regulations and rules that may materially affect our business.

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We, or the third parties upon whom we depend, may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition, and prospects. If a natural disaster, power outage, or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers and suppliers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

Our internal computer systems, or those of our third-party CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product candidates’ development programs.

Despite the implementation of security measures, our internal computer systems and those of our third-party CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. While we have not experienced any such system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical study data for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed.

We may be unable to adequately protect our information systems from cyberattacks, which could result in the disclosure of confidential or proprietary information, including personal data, damage our reputation, and subject us to significant financial and legal exposure.

We rely on information technology systems that we or our third-party providers operate to process, transmit and store electronic information in our day-to-day operations. In connection with our product discovery efforts, we may collect and use a variety of personal data, such as names, mailing addresses, email addresses, phone numbers and clinical trial information. A successful cyberattack could result in the theft or destruction of intellectual property, data or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations. Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, wire fraud and other forms of cyber fraud, the deployment of harmful malware, denial-of-service, social engineering fraud or other means to threaten data security, confidentiality, integrity and availability. A successful cyberattack could cause serious negative consequences for us, including, without limitation, the disruption of operations, the misappropriation of confidential business information, including financial information, trade secrets, financial loss and the disclosure of corporate strategic plans. Although we devote resources to protect our information systems, we realize that cyberattacks are a threat, and there can be no assurance that our efforts will prevent information security breaches that would result in business, legal, financial or reputational harm to us, or would have a material adverse effect on our results of operations and financial condition. Any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result in significant liability under state (e.g., state breach notification laws), federal (e.g., HIPAA, as amended by HITECH), and international law (e.g., the EU General Data Protection Regulation, or GDPR) and may cause a material adverse impact to our reputation, affect our ability to use collected data, conduct new studies and potentially disrupt our business.

We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. We also rely on our employees and consultants to safeguard their security credentials and follow our policies and procedures regarding use and access of computers and other devices that may contain our sensitive information. If we or our third-party providers fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to our information technology systems, we or our third-party providers could have difficulty preventing, detecting and controlling such cyber-attacks and any such attacks could result in losses described above, as well as disputes with physicians, patients and our partners, regulatory sanctions or penalties, increases in operating expenses, expenses or lost revenues or other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition, prospects and cash flows. Any failure by such third parties to prevent or mitigate security breaches or improper access to or disclosure of such information could have similarly adverse consequences for us. If we are unable to prevent or mitigate the impact of such security or data privacy breaches, we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

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.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

Exhibit Number	Description
2.1++	Asset Purchase Agreement, dated as of June 5, 2022, by and between Yumanity Therapeutics, Inc. and Janssen Pharmaceutica NV (included as Annex E to the proxy statement/prospectus/information statement forming a part of this Registration Statement).
2.2++	Agreement and Plan of Merger, dated as of June 5, 2022, by and among Yumanity Therapeutics, Inc., Yacht Merger Sub, Inc. and Kineta, Inc. (included as Annex A to the proxy statement/prospectus/information statement forming a part of this Registration Statement).
2.3	Form of Support Agreement, dated as of June 5, 2022, by and between Yumanity Therapeutics, Inc., Kineta, Inc. and certain directors and officers of Yumanity Therapeutics, Inc. (filed as Exhibit 2.3 to the Registrant’s Current Report on Form 8-K (File No. 001-37695) as filed with the SEC on June 6, 2022 and incorporated herein by reference).
2.4	Form of Support Agreement, by and between Yumanity Therapeutics, Inc., Kineta, Inc. and certain directors and officers and shareholders of Kineta, Inc. (filed as Exhibit 2.4 to the Registrant’s Current Report on Form 8-K (File No. 001-37695) as filed with the SEC on June 6, 2022 and incorporated herein by reference).
2.5	Form of Lock-Up Agreement, by and among Yumanity Therapeutics, Inc., Kineta, Inc., and certain stockholders of Kineta, Inc. and Yumanity Therapeutics, Inc. (filed as Exhibit 2.5 to the Registrant’s Current Report on Form 8-K (File No. 001-37695) as filed with the SEC on June 6, 2022 and incorporated herein by reference).
10.1	Lease Termination Agreement by and between Yumanity Therapeutics, Inc. and Ice Box, LLC dated as of May 16, 2022 (filed as Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (File No.: 001-37695) filed on May 18, 2022).
10.2++	Form of Securities Purchase Agreement, dated as of June 5, 2022, by and between the Registrant and each of the institutional investors named therein (filed as Exhibit 2.6 to the Registrant’s Current Report on Form 8-K (File No. 001-37695) as filed with the SEC on June 6, 2022 and incorporated herein by reference)
10.3++	Form of Registration Rights Agreement, dated as of June 5, 2022, by and between the Registrant and each of the institutional investors named therein (filed as Exhibit 2.7 to the Registrant’s Current Report on Form 8-K (File No. 001-37695) as filed with the SEC on June 6, 2022 and incorporated herein by reference).
31.1+	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-32.1
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 #	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

+ Filed herewith.

* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

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++ Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

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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.

	Yumanity Therapeutics, Inc.
Date: August 4, 2022	By:	/s/ Richard Peters
		Richard Peters
		President, Chief Executive Officer and Principal Executive Officer
Date: August 4, 2022	By:	/s/ Michael Wyzga
		Michael Wyzga
		Chief Financial Officer and Principal Financial Officer

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EX-31.1

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a)/15d-14(a)

of the Securities Exchange Act of 1934

I, Richard Peters, M.D, Ph.D., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Yumanity Therapeutics, 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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.

Date: August 4, 2022	By:	/s/ Richard Peters
		Richard Peters, M.D., Ph. D
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a)/15d-14(a)

of the Securities Exchange Act of 1934

I, Michael Wyzga, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Yumanity Therapeutics, 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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.

Date: August 4, 2022	By:	/s/ Michael Wyzga
		Michael Wyzga
		Chief Financial Officer (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 Quarterly Report on Form 10-Q of Yumanity Therapeutics, Inc. (the “Company”) for the period ending June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to the best of his knowledge:

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

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

Date: August 4, 2022	/s/ Richard Peters
	Richard Peters
	President and Chief Executive Officer (Principal Executive Officer)
Date: August 4, 2022	/s/ Michael Wyzga
	Michael Wyzga
	Chief Financial Officer (Principal Financial Officer)

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2022	Jul. 28, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity File Number	001-37695
Entity Registrant Name	YUMANITY THERAPEUTICS, INC.
Entity Central Index Key	0001445283
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	YMTX
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-8436652
Document Quarterly Report	true
Document Transition Report	false
Entity Address, Address Line One	40 Guest Street
Entity Address, Address Line Two	Suite 4410
Entity Address, City or Town	Boston
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02135
City Area Code	617
Local Phone Number	409-5300
Entity Common Stock, Shares Outstanding		10,856,467

XML

Condensed Consolidated Balance sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 11,846	$ 35,102
Marketable securities	0	1,399
Accounts receivable	0	5,000
Restricted cash, current	828	0
Prepaid expenses and other current assets	1,854	1,207
Total current assets	14,528	42,708
Property and equipment, net	60	387
Operating lease right-of-use assets	831	18,543
Deposits	0	366
Restricted cash	50	928
Total assets	15,469	62,932
Current liabilities:
Accounts payable	1,599	1,839
Accrued expenses and other current liabilities	2,422	4,846
Current portion of long-term debt	0	5,805
Operating lease liabilities	559	5,064
Current portion of finance lease obligation	0	48
Short-term borrowings	578	0
Deferred revenue	2,381	5,061
Total current liabilities	7,539	22,663
Long-term debt, net of discount and current portion	0	7,357
Operating lease liabilities, net of current portion	0	9,415
Total liabilities	7,539	39,435
Commitments and contingencies (Note 11)
Stockholders' equity/(deficit):
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	0	0
Common stock, $0.001 par value; 125,000,000 shares authorized; 10,842,945 shares and 10,644,714 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	11	11
Additional paid-in capital	213,458	210,799
Accumulated deficit	(205,539)	(187,313)
Total stockholders' equity	7,930	23,497
Total liabilities and stockholders' equity	$ 15,469	$ 62,932

XML

Condensed Consolidated Balance sheets (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	125,000,000	125,000,000
Common stock, shares issued	10,842,945	10,644,714
Common stock, shares outstanding	10,842,945	10,644,714

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Collaboration revenue	$ 1,657	$ 2,114	$ 2,679	$ 5,646
Operating expenses:
Research and development	1,141	7,327	6,037	14,106
General and administrative	5,557	4,712	10,382	10,764
Impairment loss	0	0	3,901	0
Total operating expenses	6,698	12,039	20,320	24,870
Loss from operations	(5,041)	(9,925)	(17,641)	(19,224)
Other income (expense):
Interest Expense	(7)	(463)	(217)	(951)
Interest income and other income (expense), net	203	(66)	(168)	(95)
(Loss) gain on debt extinguishment	0	0	(200)	1,134
Total other income (expense), net	196	(529)	(585)	88
Net loss	(4,845)	(10,454)	(18,226)	(19,136)
Net loss applicable to common shareholders	$ (4,845)	$ (10,454)	$ (18,226)	$ (19,136)
Net loss per share, basic	$ (0.45)	$ (1.03)	$ (1.69)	$ (1.88)
Net loss per share, diluted	$ (0.45)	$ (1.03)	$ (1.69)	$ (1.88)
Weighted average common shares outstanding, basic	10,847,734	10,195,608	10,800,473	10,194,474
Weighted average common shares outstanding, diluted	10,847,734	10,195,608	10,800,473	10,194,474

XML

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net loss	$ (4,845)	$ (10,454)	$ (18,226)	$ (19,136)
Other comprehensive income:
Unrealized gains on marketable securities, net of tax of $0	0	0	0	0
Comprehensive loss	$ (4,845)	$ (10,454)	$ (18,226)	$ (19,136)

XML

Condensed Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Unrealized gain on marketable securities, net of tax	$ 0	$ 0	$ 0	$ 0

XML

Condensed Consolidated Statements of Preferred Units and Stockholders' Equity (Deficit) - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Gain (Loss) [Member]	Accumulated Deficit [Member]
Beginning balance at Dec. 31, 2020	$ 56,207	$ 10	$ 204,007	$ 0	$ (147,810)
Beginning balance, shares at Dec. 31, 2020		10,193,831
Stock/equity-based compensation expense	1,407		1,407
Net loss	(8,682)				(8,682)
Ending balance at Mar. 31, 2021	48,932	$ 10	205,414	0	(156,492)
Ending balance, shares at Mar. 31, 2021		10,193,831
Beginning balance at Dec. 31, 2020	56,207	$ 10	204,007	0	(147,810)
Beginning balance, shares at Dec. 31, 2020		10,193,831
Net loss	(19,136)
Ending balance at Jun. 30, 2021	41,107	$ 10	208,043	0	(166,946)
Ending balance, shares at Jun. 30, 2021		10,282,046
Beginning balance at Mar. 31, 2021	48,932	$ 10	205,414	0	(156,492)
Beginning balance, shares at Mar. 31, 2021		10,193,831
Exercises of common stock options	57		57
Exercises of common stock options, shares		6,083
Stock/equity-based compensation expense	1,259		1,259
Issuance of common stock, net of issuance costs, shares		82,132
Issuance of common stock, net of issuance costs	1,313		1,313
Net loss	(10,454)				(10,454)
Ending balance at Jun. 30, 2021	41,107	$ 10	208,043	0	(166,946)
Ending balance, shares at Jun. 30, 2021		10,282,046
Beginning balance at Dec. 31, 2021	23,497	$ 11	210,799	0	(187,313)
Beginning balance, shares at Dec. 31, 2021		10,644,714
Vesting of restricted stock unit, shares		17,624
Stock/equity-based compensation expense	1,204		1,204
Forfeiture of restricted stock awards, Shares		(31,930)
Issuance of common stock, net of issuance costs, shares		216,332
Issuance of common stock, net of issuance costs	383		383
Net loss	(13,381)				(13,381)
Ending balance at Mar. 31, 2022	11,703	$ 11	212,386	0	(200,694)
Ending balance, shares at Mar. 31, 2022		10,846,740
Beginning balance at Dec. 31, 2021	$ 23,497	$ 11	210,799	0	(187,313)
Beginning balance, shares at Dec. 31, 2021		10,644,714
Exercises of common stock options, shares	0
Net loss	$ (18,226)
Ending balance at Jun. 30, 2022	7,930	$ 11	213,458	0	(205,539)
Ending balance, shares at Jun. 30, 2022		10,842,945
Beginning balance at Mar. 31, 2022	11,703	$ 11	212,386	0	(200,694)
Beginning balance, shares at Mar. 31, 2022		10,846,740
Stock/equity-based compensation expense	1,072		1,072
Forfeiture of restricted stock awards, Shares		(3,795)
Net loss	(4,845)				(4,845)
Ending balance at Jun. 30, 2022	$ 7,930	$ 11	$ 213,458	$ 0	$ (205,539)
Ending balance, shares at Jun. 30, 2022		10,842,945

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net loss				$ (18,226)	$ (19,136)
Adjustments to reconcile net loss to net cash used in operating activities:
Net amortization of premiums (accretion of discounts) on marketable securities				(1)	(7)
Depreciation and amortization expense				97	375
Non-cash lease expense				1,967	2,518
Stock/equity-based compensation expense				2,276	2,666
Other non-cash expense				0	55
Non-cash interest expense				36	284
Loss (gain) on debt extinguishment	$ 0		$ 0	200	(1,134)
Impairment of right-of-use asset		$ 3,900		3,901	0
Loss on sale of property and equipment				20	63
Changes in operating assets and liabilities:
Accounts receivable				(5,000)
Prepaid expenses and other current assets				(668)	(164)
Deposits				366
Operating lease liabilities				(2,076)	(2,157)
Accounts payable				(240)	(5,573)
Accrued expenses and other current liabilities				(3,090)	(4,047)
Deferred revenue				(2,680)	(5,646)
Net cash used in operating activities				(13,118)	(31,903)
Cash flows from investing activities:
Purchases of marketable securities				0	(9,869)
Proceeds from sales and maturities of marketable securities				1,400	6,075
Purchases of property and equipment				(53)	(90)
Proceeds from sale of property and equipment				263
Net cash provided by (used in) investing activities				1,610	(3,884)
Cash flows from financing activities:
Proceeds from at the market offering				383	1,313
Proceeds from exercise of stock options				0	57
Proceeds from issuance of short-term borrowings				1,742
Payments of principal portion of long-term debt				(929)
Payments of final payoff of long term debt				(11,803)
Payments of debt issuance costs related to long-term debt				0	(103)
Payments of short-term borrowings				(1,164)
Payments of finance lease obligations				(27)	(108)
Net cash provided by (used in) financing activities				(11,798)	1,159
Net decrease in cash, cash equivalents and restricted cash				(23,306)	(34,628)
Cash, cash equivalents and restricted cash at beginning of period		$ 36,030		36,030	82,885
Cash, cash equivalents and restricted cash at end of period	$ 12,724		$ 48,257	12,724	48,257	$ 82,885
Supplemental cash flow information:
Cash paid for interest				$ 400	$ 660

XML

Nature of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

Yumanity Therapeutics, Inc. (together with its wholly owned subsidiaries, the “Company” or “Yumanity”) is a clinical stage biopharmaceutical company engaged in the research and development of treatments for neurodegenerative diseases caused by protein misfolding.

The Company is subject to risks similar to those of other clinical stage companies in the biopharmaceutical industry, including dependence on key individuals, the need to develop commercially viable products, competition from other companies, many of whom are larger and better capitalized, the impact of the ongoing COVID-19 pandemic and the need to obtain adequate additional financing to fund the development of its product candidates. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any product candidates developed will obtain required regulatory approval or that any approved products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from the sale of its products.

Exploration of Strategic Alternatives and Restructuring

In February 2022, the Company announced that it is exploring strategic alternatives to enhance shareholder value and engaged H.C. Wainwright as its financial advisor to assist in this process. In February 2022, the Company also began implementation of a strategic restructuring with the objective of preserving capital. As part of the restructuring, it has eliminated approximately 60% of its workforce and has taken other actions, including reducing its office and laboratory space, to reduce expenditures (see Note 5).

After a comprehensive review of strategic alternatives, on June 5, 2022, Yumanity entered into a Merger Agreement (the "Merger Agreement") with Kineta, Inc. ("Kineta"). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, at the effective time of the Merger, Yacht Merger Sub, Inc., a wholly-owned subsidiary of Yumanity, will merge with and into Kineta (the "Merger"), with Kineta continuing as a wholly-owned subsidiary of Yumanity and the surviving corporation of the Merger.

On June 5, 2022, the Company also entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Janssen Pharmaceutica NV ("Janssen"). Pursuant to the Asset Purchase Agreement and subject to the satisfaction or waiver of the conditions set forth in the Asset Purchase Agreement, at the closing of the transaction contemplated by the Asset Purchase Agreement, the Company will sell to Janssen all of the Company’s rights, title and interest in YTX-7739 as well as its unpartnered preclinical and discovery-stage product candidates including intellectual property rights, biological materials, regulatory documentation, books and records, inventory, contracts, permits, actions and rights of recovery and other properties, assets and rights related thereto (the "Purchased Assets"), and Janssen will assume certain of the Company’s liabilities, for a purchase price of $26 million in cash (the "Asset Sale").

The two transactions are expected to close in the second half of 2022, subject to customary closing conditions, including approval of both transactions by the stockholders of Yumanity.

The Company expects to devote significant time and resources to the completion of the Merger and the Asset Sale. If the Merger is not completed, the Company will reconsider its strategic alternatives and may pursue one of the following courses of action, which the Company currently believes are the most likely alternatives if the Merger with Kineta is not completed:

• Pursue another strategic transaction similar to the Merger. The Company may resume its process of evaluating other candidate companies interested in pursuing a strategic transaction and, if a candidate is identified, focus its attention on negotiating and completing such strategic transaction with such candidate.

• Continue to operate its business. If the Asset Sale also does not close, the Company could elect to continue to operate its business and pursue licensing or partnering transactions or utilize its intellectual property to pursue the treatment of neurodegenerative diseases. To continue to operate its business, the Company would require a significant amount of time and financial resources, and the Company would be subject to all the risks and uncertainties involved in the development of product candidates. There is no assurance that the Company could raise sufficient capital to support these efforts, that its development efforts would be successful or that it could successfully obtain the regulatory approvals required to market any product candidate it pursued.

• Dissolve and liquidate its assets. If the Company is unable, or does not believe that it is able, to find a suitable candidate for another strategic transaction, the Company may dissolve and liquidate its assets. In that event, the Company would be required to pay all of its debts and contractual obligations and to set aside certain reserves for commitments and contingent liabilities. If the Company dissolves and liquidates its assets, there can be no assurance as to the amount or timing of available cash that will remain for distribution to the Company’s stockholders after paying the Company’s debts and other obligations and setting aside funds for commitments and contingent liabilities.

The Company's future operations are highly dependent on the success of the Merger with Kineta.

Clinical and Regulatory Update

In January 2022, the Food & Drug Administration (the "FDA") placed a partial clinical hold on the Company's future multidose clinical trials of YTX-7739 in the United States. The FDA has not halted all clinical programming and is permitting the Company's proposed single dose formulation clinical trial to proceed. The Company has paused its previously planned studies of YTX-7739 while the partial clinical hold is pending.

Merger with Proteostasis Therapeutics, Inc.

On December 22, 2020, Proteostasis Therapeutics, Inc. (“Proteostasis” or “PTI”) completed its previously announced merger transaction with Yumanity, Inc. (formerly Yumanity Therapeutics, Inc.) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of August 22, 2020, as amended on November 6, 2020 (the “Proteostasis Merger Agreement”), by and among Pangolin Merger Sub, Inc., a wholly-owned subsidiary of Proteostasis (“Pangolin Merger Sub”), Yumanity Holdings, LLC (“Holdings”) and Yumanity, Inc., pursuant to which Pangolin Merger Sub merged with and into Yumanity, Inc., with Yumanity, Inc. surviving as a wholly owned subsidiary of Proteostasis (the “Proteostasis Merger”). Immediately following the Proteostasis Merger, Proteostasis changed its name to “Yumanity Therapeutics, Inc.”

Basis of presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise noted, all references to common stock share and per share amounts have also been adjusted to reflect the exchange ratio as described in the Proteostasis Merger Agreement.

Going concern

The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the original issuance date of the condensed consolidated financial statements.

Since its inception, the Company has funded its operations primarily with equity and debt including proceeds from the Proteostasis Merger. The Company has incurred recurring losses and negative cash flows from operations since inception, including net losses of $4.8 million and $18.2 million for the three and six months ended June 30, 2022. In addition, as of June 30, 2022, the Company had an accumulated deficit of $205.5 million. The Company expects to continue to generate operating losses for the foreseeable future, although at reduced expected levels as a result of restructuring actions taken in the six months ended June 30, 2022.

As further discussed above in “Exploration of Strategic Alternatives and Restructuring,” on June 5, 2022, the Company entered into the Merger Agreement with Kineta and the Asset Purchase Agreement with Janssen. There is no assurance that the Company will be successful in executing either or both transactions or obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. If the Company is unable to obtain additional funding, consummate the aforementioned transactions or execute other strategic alternatives, the Company will be forced to further delay, reduce or eliminate its research and development programs or initiate steps to cease operations.

As of the issuance date of the condensed consolidated financial statements for the six months ended June 30, 2022, the Company expects that, absent either strategic transaction, its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements early into the first quarter of 2023, which is less than twelve months from

the issuance date of these condensed consolidated financial statements. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might result from the outcome of this uncertainty.

Impact of the COVID-19 pandemic

The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the spread of the outbreak. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, and facilities and production have been suspended. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The COVID-19 pandemic is ongoing and may affect the Company’s ability to initiate and complete preclinical studies, delay its future clinical trials, disrupt regulatory activities, or have other adverse effects on its business and operations. The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact the Company’s ability to raise additional funds to support its operations. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on the Company’s business and operations.

Clinical trial sites in many countries, including those in which the Company operates, have incurred delays due to COVID-19. Certain of the sites in the YTX-7739 Phase 1b clinical trial incurred delays due to COVID-19 that resulted in a delay in the results from that study. There continues to be a risk of additional delays to the Company’s clinical programs if and when they are re-commenced.

To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the pandemic and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in these condensed consolidated financial statements. The extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects.

At-the-Market Offering Program

In April 2021, the Company entered into a sales agreement (the "Prior Sales Agreement") with Jefferies LLC (“Jefferies”) with respect to an at-the-market (“ATM”) offering program under which it could have issued and sold, from time-to-time at its sole discretion, shares of its common stock, in an aggregate offering amount of up to $60.0 million. In December 2021, the Company terminated the Prior Sales Agreement and entered into a new sales agreement with Jefferies with respect to an ATM offering under which it may issue and sell, from time-to-time and at its sole discretion, shares of its common stock, in an aggregate offering amount of up to $60.0 million (the “New Sales Agreement”). Jefferies acts as the Company's sales agent and will use commercially reasonable efforts to sell shares of common stock from time-to-time, based upon instruction by the Company.

The Company will pay Jefferies up to 3% of the gross proceeds from any common stock sold through the New Sales Agreement. The Company sold 216,332 shares of common stock under the New Sales Agreement during the six months ended June 30, 2022 for aggregate net proceeds to the Company of approximately $0.4 million, after deducting sales commissions. As of June 30, 2022, $59.6 million of common stock remained available for future issuance under the New Sales Agreement, although these amounts may be limited as the Company will be subject to the general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds the Company can raise through primary public offerings of securities in any twelve-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of its common stock held by non-affiliates of the Company. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its common stock using its Form S-3 until such time as its public float exceeds $75 million.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements, as of June 30, 2022 and for the three and six months ended June 30, 2022, are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company

believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 24, 2022. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2022 and condensed consolidated results of operations and cash flows for the three and six months ended June 30, 2022 and 2021 have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

The Accumulated Deficit balance as of March 31, 2021 as presented in the Condensed Consolidated Statement of Stockholders' Equity included in the prior financial statements as of and for the period ended March 31, 2022 was incorrectly stated due to a typographical error and has been corrected in the Condensed Consolidated Statement of Stockholders' Equity for the current period. The correct accumulated deficit number used in the Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2021 is $(156,492) instead of $(8,682). This error did not impact the unaudited condensed consolidated balance sheets, statements of cash flow, or notes to the financial statements as of, and for the three months ended March 31, 2021. The materiality of the error was assessed in accordance with the SEC’s Staff Accounting Bulletin 99 and the Company concluded that the previously issued condensed consolidated financial statements were not materially misstated. In accordance with the SEC’s Staff Accounting Bulletin 108, this immaterial error has been corrected and the revision will be presented prospectively here and in future filings.

Summary of Significant Accounting Policies

The Company’s significant accounting policies, which are disclosed in the audited financial statements for the year ended December 31, 2021 and the notes thereto, are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 24, 2022. There were no changes to significant accounting policies during the three and six months ended June 30, 2022.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses prior to the Merger and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts, and experience. Actual results may differ from those estimates or assumptions.

Restricted cash

Amounts included in restricted cash represent amounts pledged as collateral for Company credit cards and as part of the terms of its office and laboratory space lease. These amounts are classified as restricted cash in the Company’s condensed consolidated balance sheet. In December 2020, in connection with the Proteostasis Merger, the Company acquired Proteostasis’ restricted cash pledged as collateral for its office and laboratory space lease and amended its loan and security agreement to establish an escrow account in the amount of its Paycheck Protection Program loan. After forgiveness of the PPP Loan, in April 2021 the escrowed cash was released and reclassified into cash and cash equivalents. The cash pledged as collateral is classified as restricted cash in the Company’s condensed consolidated balance sheet as of June 30, 2022. Regarding the cash pledged as collateral related to the lease, because the restriction on that pledged cash is expected to lapse soon after July 31, 2022, due to the modification of the related lease (see Note 10), that amount has been presented as a current asset in the condensed consolidated balance sheet at June 30, 2022. As of June 30, 2022 and 2021, the cash and restricted cash of $12.7 million and $48.3 million, respectively, has been presented in the condensed consolidated statements of cash flows included cash and cash equivalents of $11.8 million and $47.4 million, respectively, and restricted cash of $0.9 million and $0.9 million, respectively.

Fair value measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair

value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long-term debt under its loan and security agreement approximates its fair value due to its variable interest rate.

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Fair Value Measurements and Marketable Securities

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements and Marketable Securities

3. Fair Value Measurements and Marketable Securities

The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at June 30, 2022:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	11,506	$	—	$	—	$	11,506
Marketable securities:
Commercial paper		—		—		—		—
	$	11,506	$	—	$	—	$	11,506
	Fair Value Measurements at December 31, 2021:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	34,136	$	—	$	—	$	34,136
Marketable securities:
Commercial paper		—		1,399		—		1,399
	$	34,136	$	1,399	$	—	$	35,535

Marketable securities were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. The Company’s marketable securities matured during the three months ended June 30, 2022.

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Collaboration Agreement

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Collaboration Agreement

4. Collaboration Agreement

In June 2020, the Company entered into an exclusive license and research collaboration agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”) to support the research, development and commercialization of products for the treatment of amyotrophic lateral sclerosis (ALS) and frontotemporal lobar dementia (FTLD). Pursuant to the Collaboration Agreement, the Company granted Merck an exclusive, worldwide license with the right to grant and authorize sublicenses, under certain intellectual property rights related to two certain undisclosed targets in connection with the Company’s ALS and FTLD programs to make, have made, use, import, offer to sell and sell compounds and products covered by such intellectual property rights. In the event that the exploitation of such compound or product would infringe during the term of the Merck Collaboration Agreement a claim of an issued patent controlled by Yumanity, Yumanity also granted Merck a non-exclusive, sublicensable, royalty-free license under such issued patent to exploit such compound and product.

Under the terms of the Collaboration Agreement, the Company and Merck are each responsible to perform certain research activities in accordance with a mutually agreed upon research plan. Upon the completion of certain stages of the research plan, Merck will elect to either advance and make certain contractual option payments or terminate the applicable research program. If Merck elects not to advance a research program, such program terminates and the rights granted to Merck in the program revert to the

Company. Following completion of the research program, Merck is responsible for the development and commercialization of the compounds developed pursuant to the research program and any product containing such compounds.

Under the terms of the Collaboration Agreement, the Company received an upfront payment totaling $15.0 million in July 2020 and is eligible to receive up to $280.0 million upon achievement of specified research and development milestones, and up to $250.0 million upon achievement of specified sales-based milestones as well as a tiered, mid-single digit royalty on net sales of licensed products, subject to customary reductions.

Unless terminated earlier, the Collaboration Agreement will continue in full force and effect until one or more products has received marketing authorization and, thereafter, until expiration of all royalty obligations under the Collaboration Agreement. The Company or Merck may terminate the Collaboration Agreement upon an uncured material breach by the other party or insolvency of the other party. Merck may also terminate the Merck Collaboration Agreement for any reason upon certain notice to the Company.

Merck also participated in the Company’s Class C preferred units financing in June 2020 with terms consistent with those of other investors that purchased Class C preferred units in June 2020. The Class C preferred units were issued at a price of $4.0008 per unit, which was determined to be fair value based on the same price paid by other investors that purchased Class C preferred units in the financing. The equity investment was considered to be distinct from the Collaboration Agreement.

The Company assessed the promised goods and services to determine if they are distinct. Based on this assessment, the Company determined that Merck cannot benefit from the promised goods and services separately from the others as they are highly interrelated and therefore not distinct. Accordingly, the promised goods and services represent one combined performance obligation and the entire transaction price was allocated to that single combined performance obligation. The performance obligation is being satisfied over the research term as the Company performs the research and development activities through the first substantive option period, and participates in a Joint Steering Committee to oversee research and development activities. Accordingly, the upfront payment of $15.0 million was recorded as deferred revenue and was recognized as revenue as the performance obligation was satisfied. The Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. For the three and six months ended June 30, 2022, the Company recorded less than $0.1 million of collaboration revenue related to the Collaboration Agreement associated with providing the Initial Phase research and development services.

At contract inception, the potential milestone payments that the Company is eligible to receive were excluded from the transaction price as they were fully constrained. At the end of each reporting period, the Company reevaluates the transaction price and as uncertain events are resolved or other changes in circumstances occur, and if necessary, the Company will adjust its estimate of the transaction price. Any additions to the transaction price would be reflected in the period as a cumulative revenue catch-up. At the inception of the arrangement, the Company evaluated the options held by Merck to either advance or terminate the applicable research program to determine if they provided Merck with any material rights. The Company concluded that the options were not issued at a significant and incremental discount, and therefore do not provide Merck with a material right. As such, these options were excluded as performance obligations and will be accounted for if and when they occur.

In November 2021, the Company delivered one of two data packages associated with the Initial Phase of the research and development services. On December 17, 2021, Merck notified the Company that Merck has accepted the first data package for one program from their research collaboration with the Company relating to ALS and FTLD, and that Merck has elected to continue the research collaboration. Achievement of this milestone triggered a $5.0 million milestone payment due from Merck. Upon Merck electing to advance the research program into the second phase (the "Second Phase"), the Company assessed whether the promised goods and services for the Second Phase are distinct. Based on the facts and circumstances, including but not limited to key differences between the Initial Phase research plan and the Second Phase research plans, including experiments performed and personnel utilized, the Company determined that the Second Phase represents a separate contract with its own performance obligation. The Second Phase performance obligation is being satisfied over the Second Phase research term as the Company performs the research and development activities through the second substantive option period and participates in a Joint Steering Committee to oversee research and development activities. Accordingly, the option payment of $5.0 million was recorded to deferred revenue at December 31, 2021 and during the six months ended June 30, 2022 the Company recognized $2.6 million of collaboration revenue related to the Collaboration Agreement as the Second Phase performance obligation is satisfied. The Company recognizes the Second Phase revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Deferred revenue totals $2.4 million at June 30, 2022 related to the Collaboration Agreement, and it is expected to be recognized in the next twelve months.

The Company assessed the Collaboration Agreement to determine whether a significant financing component exists and concluded that a significant financing component does not exist.

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Accrued Expenses

6 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

5. Accrued Expenses and Other Current Liabilities

Accrued expenses consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Accrued employee compensation and benefits	$	350	$	1,763
Accrued external research and development expenses		962		1,633
Accrued professional fees		740		901
Other		370		549
	$	2,422	$	4,846

In January 2022, the Company approved a restructuring plan following a review of its operations, cost structure and growth opportunities (the “Restructuring”). The Company recorded a charge of $0.4 million and $1.4 million during the three and six months ended June 30, 2022, respectively, as a result of the Restructuring, which consisted of one-time termination benefits for employee severance, benefits and related costs, and certain retention payments, which are expected to result in cash expenditures and will be paid out by December 31, 2022.

The following table summarizes the changes in the Company’s accrued restructuring balance, which are included in Accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet:

(In thousands)	2022
Beginning balance at December 31, 2021	$	—
Restructuring costs, personnel related		985
Cash paid for restructuring costs		(330	)
Ending balance at March 31, 2022		655
Restructuring costs, personnel related		412
Cash paid for restructuring costs		(765	)
Forfeitures		(31	)
Ending balance at June 30, 2022	$	271

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Short-term borrowings

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Short-term borrowings

6. Short-term borrowings

As of June 30, 2022, the Company had short-term borrowings of $0.6 million consisting of a Commercial Insurance Premium Finance and Security Agreement (the “Finance and Security Agreement”) entered into in January 2022. The Finance and Security Agreement has a nine-month repayment period with an annual interest rate of 2.93% and a maturity of September 22, 2022. Collateral under the Finance and Security Agreement includes the right, title, and interest in the underlying business insurance policies.

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Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

7. Debt

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Principal amount of long-term debt	$	—	$	12,733
Less: Current portion of long-term debt		—		(5,805	)
Long-term debt, net of current portion		—		6,928
Debt discount, net of accretion		—		(217	)
Accrued end-of-term payment		—		646
Long-term debt, net of discount and current portion	$	—	$	7,357

The Company entered into a loan and security agreement with Hercules Capital, Inc. (the “Lender”) in December 2019 (the “Term Loan”), pursuant to which it had $12.7 million in outstanding principal borrowings as of December 31, 2021. On February 25, 2022, the Company repaid to the Lender a payoff amount of $12.8 million and terminated the Term Loan, provided that the Company continues to be bound by certain indemnification obligations under Section 6.3 of the Term Loan. The payoff amount resulted in an

extinguishment loss of $0.2 million and included payment of approximately $0.9 million consisting of end of term costs of 5.25% of the $15.0 million amount drawn under the Term Loan and $0.1 million as outlined below, as well as an interest/non-use fee of less than $0.1 million.

In April 2020, the Term Loan was amended to permit indebtedness consisting of a loan under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided that such loan shall be unsecured, shall not contain any terms or conditions that are adverse to the Lender’s rights under the loan and that the Company will not prepay such loan. In June 2020, the Term Loan was amended and an additional end of term cost of $0.3 million became due upon repayment of the loan. Also in April 2020, prior to entering into the Proteostasis Merger Agreement with PTI in August 2020, the Company issued a Promissory Note to Silicon Valley Bank, pursuant to which it received loan proceeds of $1.1 million (the “Loan”) provided under the PPP established under the CARES Act and guaranteed by the U.S. Small Business Administration. On April 3, 2021, the Company was notified by Silicon Valley Bank that the Loan forgiveness application was accepted by the Small Business Association as of March 30, 2021. Accordingly, the Company has recognized $1.1 million in income for debt extinguishment.

On December 22, 2020, the Company entered into an Unconditional Secured Guaranty and Pledge Agreement (the “Guaranty”) with the Lender as a condition to the Lender’s consent to the Proteostasis Merger under the Term Loan between Yumanity, Inc. as borrower and the Lender. Immediately prior to the Proteostasis Merger, Yumanity, Inc. entered into a Fourth Amendment and Consent to Loan and Security Agreement dated as of December 22, 2020 with the Lender (the “Loan Amendment”). The Guaranty provides for the Company’s guaranty of Yumanity Inc.’s obligations under the Loan Agreement and provides the Lender a security interest in all of Company’s assets other than intellectual property as collateral. The Loan Amendment provides for the Lender’s consent to the Proteostasis Merger and to the creation and funding of a Silicon Valley Bank Paycheck Protection Program escrow account to hold funds in connection with Yumanity’s outstanding Paycheck Protection Program loan amounts for which Yumanity has submitted a forgiveness application. The Loan Amendment also amends the definition of “Change in Control” to include the situations in which the Company no longer controls Yumanity, Inc. The remaining terms and conditions of the Loan Agreement generally continue in the form existing prior to the Loan Amendment.

On March 29, 2021, the Term Loan was amended again to allow for the creation of a new foreign subsidiary, as well as changing certain covenants related to the financial operations of said subsidiary. The subsidiary was formed on April 23, 2021.

On April 13, 2021, the Term Loan was amended to reduce the end of term cost of $0.3 million to $0.1 million upon repayment of the loan.

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Stock/Equity-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock/Equity-Based Compensation

8. Stock/Equity-Based Compensation

Restricted Stock Units (RSUs)

On January 14, 2021, the Company’s compensation committee of the board approved payment to be made to Company employees through a grant of RSUs based on the February 1, 2021 closing share price of the Company’s common stock with a fair value of $2.2 million. The requisite service period for the awards ranges from one to four years (the vesting period). The Company recognized employee stock-based compensation expense for the RSU grant on a straight-line basis over the vesting period of the awards. During the six months ended June 30, 2022, there were no RSUs granted and 48,172 were outstanding, and the Company recognized $0.1 million of stock-based compensation expense during the three and six months ended June 30, 2022.

The following table summarizes the Company’s RSU activity for the six months ended June 30, 2022:

	RSUs			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021		86,225		$	17.89
Issued	-			$	—
Vested		(17,624	)	$	17.89
Forfeited		(20,429	)	$	17.89
Unvested balance at June 30, 2022		48,172		$	17.89

Restricted Stock Awards (RSAs)

On November 22, 2021, the Company’s compensation committee of the board approved payment to be made to Company employees through a grant of RSAs based on the December 1, 2021 closing share price of the Company’s common stock with a fair value of $1.2 million. The requisite service period for the awards is one year (the vesting period). The Company recognized employee stock-based compensation expense for the RSA grant on a straight-line basis over the vesting period of the awards. During the six

months ended June 30, 2022, there were no RSAs granted and 80,160 outstanding, and the Company recognized $0.3 and $0.7 million stock-based compensation expense during the three and six months ended June 30, 2022.

The following table summarizes the Company's RSA activity for the three and six months ended June 30, 2022:

	RSAs			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021		305,663		$	3.83
Issued	-			$	—
Vested		(189,778	)	$	3.83
Forfeited		(35,725	)	$	3.83
Unvested balance at June 30, 2022		80,160		$	3.83

Summary of plans

Upon completion of the Proteostasis Merger, the Company assumed PTI’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) and PTI’s 2016 Employee Stock Purchase Plan (the “2016 ESPP”).

2016 Stock Option and Incentive Plan

On February 3, 2016, PTI’s stockholders approved the 2016 Plan, which became effective on February 9, 2016. The 2016 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards and other stock-based awards. The number of shares initially reserved for issuance under the 2016 Plan was 79,092 shares. The number of shares of common stock that may be issued under the 2016 Plan will automatically increase each January 1, beginning January 1, 2017, by the lesser of 3% of the shares of the Company’s common stock outstanding on the immediately preceding December 31, or an amount determined by the Company’s board of directors or the compensation committee of the board of directors. The shares of common stock underlying any awards that are forfeited, canceled, repurchased, or are otherwise terminated by the Company under the 2016 Plan and the 2008 Equity Incentive Plan, as amended (the “2008 Plan”) will be added back to the shares of common stock available for issuance under the 2016 Plan. On January 1, 2022, an additional 319,341 shares were reserved for issuance under the 2016 Plan in accordance with the provisions of the 2016 Plan described above. Options granted under the 2016 Plan with service-based vesting conditions generally vest over four years and expire after ten years. As of June 30, 2022 the total number of shares of the Company’s common stock reserved for issuance under the 2016 Plan was 760,498, of which 457,504 shares are available for future issuance under the 2016 Plan.

2016 Employee Stock Purchase Plan

On February 3, 2016, PTI’s stockholders approved the 2016 ESPP, which became effective in connection with the completion of the PTI’s initial public offering. A total of 6,938 shares of common stock were initially reserved for issuance under the 2016 ESPP. In addition, the number of shares of common stock that may be issued under the 2016 ESPP will automatically increase each January 1, beginning January 1, 2017, by the lesser of (i) 6,938 shares of common stock, (ii) 1% of the Company’s shares of common stock outstanding on the immediately preceding December 31, or (iii) an amount determined by the Company’s board of directors or the compensation committee of the board of directors. As of June 30, 2022, the total number of shares reserved under the 2016 ESPP was 48,564 shares. The number of shares reserved for issuance under the 2016 ESPP was increased by 6,938 shares effective as of January 1, 2022 in accordance with the provisions of the 2016 ESPP described above.

Yumanity Therapeutics, Inc. Amended and Restated 2018 Stock Option and Grant Plan

On December 4, 2018, the Company’s board of directors adopted the 2018 Unit Option and Grant Plan (the “2018 Plan”), which was approved by the Company’s members on December 5, 2018. The 2018 Plan provided for the Company to grant unit options, restricted unit awards and unrestricted unit awards to employees, directors and consultants of the Company. As part of the Yumanity Reorganization (as defined below) and the Proteostasis Merger, the 2018 Plan was amended and restated as the “Yumanity Therapeutics, Inc. Amended and Restated 2018 Stock Option and Grant Plan”. Each stock option outstanding under the 2018 Plan at the effective time of the Proteostasis Merger was automatically converted into a stock option exercisable for the same number of shares of Yumanity common stock, and then assumed by the Company, based on the exchange ratio described in the Proteostasis Merger Agreement and the exercise price per share of such outstanding stock option, as adjusted for the exchange ratio. The 2018 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated.

Options granted under the 2018 Plan with service-based vesting conditions generally vest over four years and expire after ten years. The total number of common shares that may be issued under the 2018 Plan is 1,527,210 as of June 30, 2022. Shares that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of shares or otherwise terminated (other than by exercise) and shares that are withheld upon the exercise of an option or settlement of an award to cover exercise price or tax withholding shall be added back to shares available under the 2018 Plan. As of June 30, 2022, 219,859 shares remain available for issuance under the 2018 Plan.

Under each plan, the exercise price per option granted is not less than the fair market value of common stock as of the date of grant.

2021 Inducement Plan

On June 2, 2021, the Board of Directors approved the adoption of the Company’s 2021 Inducement Plan (the “2021 Plan”),

which is used exclusively for the grant of equity awards to individuals who were not previously employees of the Company (or following a bona fide period of non-employment), as an inducement material to such individual’s entering into employment with the Company, pursuant to Rule 416 under the Securities Act of 1933. During six months ended June 30, 2022, the Company issued 17,000 options from the 2021 Plan to purchase common stock. As of June 30, 2022, the total number of shares of the Company’s common stock that may be issued under the 2021 Plan is 400,000 shares of which 246,600 shares are available for future issuance under the 2021 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2021 Plan.

On April 13, 2021, Board of Directors approved the issuance of stock options to purchase 104,000 shares of its common stock. The stock options were issued outside of the Company’s 2021 Plan as an inducement material to the individual’s acceptance of an offer of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). As of June 30, 2022, all 104,000 stock options have been forfeited.

Option valuation

The fair value of option grants is estimated using the Black-Scholes option-pricing model. Prior to the Proteostasis Merger, the Company was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimates its expected stock/unit volatility based on the historical volatility of a publicly traded set of peer companies. The expected term of the Company’s options has been determined utilizing a midpoint convention estimate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield was based on the fact that the Company has never paid cash dividends.

Option activity

The following table summarizes the Company’s option activity during six months ended June 30, 2022:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		1,779,174		$	18.99		7.67		—
Granted		17,000		$	2.89				—
Exercised		—			—				—
Forfeited		(573,490	)	$	31.47				—
Outstanding as of June 30, 2022		1,222,684		$	11.99		7.82		—
Vested and expected to vest as of June 30, 2022		1,222,684		$	11.99		7.82		—

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Stock/equity-based compensation

The Company recorded stock/equity-based compensation expense related to common stock options and restricted stock units and restricted stock awards in the following expense categories in its condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development expenses	$	89	$	355	$	190	$	746
General and administrative expenses		983		904		2,086		1,920
	$	1,072	$	1,259	$	2,276	$	2,666

As of June 30, 2022, total unrecognized compensation cost related to unvested options and restricted common stock was $6.4 million, which is expected to be recognized over a weighted average period of 1.75 years.

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Net Loss per Share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Net Loss per Share

9. Net Loss Per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(4,845	)	$	(10,454	)	$	(18,226	)	$	(19,136	)
Denominator:
Weighted average common shares    outstanding, basic and diluted		10,847,734			10,195,608			10,800,473			10,194,474
Net loss per share, basic and diluted	$	(0.45	)	$	(1.03	)	$	(1.69	)	$	(1.88	)

The following common stock equivalents presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:

	As of June 30,
	2022		2021
Options to purchase common stock		1,222,684		1,756,947
Warrants to purchase common stock or shares    convertible into common stock		99,986		99,986
Unvested RSUs		48,172		112,544
		1,370,842		1,969,477

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Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

10. Leases

In February 2020, the Company entered into a license agreement with a third party for the use of office and laboratory space in Boston, Massachusetts, commencing in May 2020 (the “Premises”). The Company determined that this license agreement qualified as a lease under ASC 842, Leases (“ASC 842”). The initial term of the license agreement is three years with the option to extend for a total of three one-year periods at fair-market rent at the time of each extension. In addition to use of office and laboratory space, the license fee includes various laboratory, office, and operational support services to be provided by the licensor. The initial monthly license fee escalates 3% annually and totals approximately $12.0 million for the three-year term. Additionally, the licensee agreement for the Premises required the Company to pay for a non-exclusive, irrevocable license to use forty-two unreserved parking spaces adjacent to the Premises at the prevailing monthly parking rate. On May 1, 2020, the lease commencement date was met and the Company recorded an operating lease asset of $10.6 million and a corresponding lease liability of $10.2 million.

On December 22, 2020, as part of the Proteostasis Merger, the Company acquired a lease for approximately 30,000 square feet of office and laboratory space (the “Merger Premises”) in Boston, Massachusetts. The lease commenced in January 2018 with rent payments commencing in April 2018. The initial term of the lease was ten years with the option to extend for an additional seven years at fair-market rent at the time of the extension. In addition to use of office and laboratory space, the Company is responsible for paying its allocable portion of building and laboratory operating expenses separately from rent, based on actual costs incurred. Remaining fixed lease payments at the time of the Proteostasis Merger were approximately $14.2 million. On December 22, 2020, the Company recorded an operating lease asset and corresponding lease liability of $10.2 million associated with this lease. The operating

lease asset was increased by the value attributable to the below-market lease of $3.1 million and an allocated portion of the excess purchase price for the Proteostasis Merger of $1.9 million.

On January 7, 2021 the Company entered into a sublease agreement (the “Sublease”) with Moma Therapeutics, Inc. (the “Subtenant”), whereby the Company subleased the entire Merger Premises to the Subtenant. The initial term of the Sublease commences on the date the Company receives consent to the Sublease from the landlord and shall continue until 18 months from the commencement date. The Sublease provides for the first monthly installment of rent to be paid by the Subtenant on the date of the Sublease.

The Sublease provides for an initial annual base rent of $1,939,340, which increases annually up to a maximum annual base rent of $1,997,520. The Subtenant also is responsible for paying to the Company operating costs, annual tax costs and all utility costs attributable to the Premises during the term of the Sublease. Expense arising from the Merger Premises of $0.5 million and $1.0 million for the three and six months ended June 30, 2022 and lease income from the Sublease of $0.5 million and $1.0 million for the three and six months ended June 30, 2022 are classified in operating expense on a net basis.

On February 28, 2022, the Company entered into two agreements that effectively amended the Premises license agreement for laboratory space in Boston, Massachusetts. The first agreement terminated the existing license, due to expire in May of 2023, effective March 31, 2022. The second agreement, effective April 1, 2022, created a new license for approximately 20 percent of the space covered by the original license with an expiration date of December 31, 2022. The Company agreed to surrender to Licensor the full amount of both the security deposit and the last month’s license fee held by licensor pursuant to the agreement, totaling approximately $0.8 million, in consideration of the agreement to terminate the original license. The related lease liability was reduced by $3.2 million with a corresponding reduction of the ROU asset as a result of this modification. The new license agreement decreases the monthly license fee amount from $0.4 million to $0.1 million.

During the three months ended March 31, 2022, the Company determined a triggering event occurred related to a portion of its Merger Premises. As a result, the Company performed an impairment test. Based on a comparison of undiscounted cash flows to the right of use (“ROU”) asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease, contract terms and sublease income potential. This resulted in an impairment charge of $3.9 million, which reflects the excess of the ROU asset carrying value over its fair value.

On May 16, 2022, the Company entered into an agreement that accelerated the termination date of the Merger Premises lease agreement to July 31, 2022, which results in no payment obligations after that date. No other terms of the lease agreement were changed, and no additional costs were incurred related to the change. As a result of the modification, the related lease liability was reduced by $8.6 million with a corresponding reduction of the ROU asset as a result of this modification. The remaining lease liability relating solely to the Merger Premises of $0.2 million at June 30, 2022 has been classified as a current liability.

The Company also leased property and equipment under agreements that are accounted for as finance leases. As of March 31, 2022 the Company entered into an agreement for an early termination of the finance leases, which primarily consisted of laboratory equipment. The remaining finance lease liabilities settled was less than $0.1 million.

The components of lease cost were as follows (in thousands):

	Six Months Ended June 30,
	2022		2021
Operating lease cost	$	2,496	$	3,053
Short-term lease cost		—		—
Variable lease cost		357		272
Finance lease cost:
Amortization of lease assets		8		77
Interest on lease liabilities		1		5
Total finance lease cost	$	9	$	82

Supplemental disclosure of cash flow information related to leases was as follows (in thousands):

	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement    of operating lease liabilities (operating cash flows)	$	2,177	$	2,970
Cash paid for amounts included in the measurement    of finance lease liabilities (operating cash flows)	$	1	$	5
Cash paid for amounts included in the measurement    of finance lease liabilities (financing cash flows)	$	27	$	108
Operating lease liabilities arising from obtaining    right-of-use assets	$	—	$	—
Finance lease liabilities arising from obtaining right-    of-use assets	$	—	$	—
Reduction in operating lease liabilities as a result of lease modifications	$	11,844	$	—
Reduction in operating right-of-use assets as a result of lease modifications	$	11,852	$	—

The weighted-average remaining lease term and discount rate were as follows:

	As of June 30,
	2022			2021
Weighted-average remaining lease term (in years) used for:
Operating leases		0.39			4.75
Finance leases		—			1.11
Weighted-average discount rate used for:
Operating leases		5.85	%		9.08	%
Finance leases		—			5.88	%

Because the interest rates implicit in the license agreement and lease agreement assumed from PTI were not readily determinable, the Company’s incremental borrowing rate was used to calculate the present value of each. The present value of the Company’s finance leases was calculated using the rate implicit in the lease. There were no finance leases as of June 30, 2022.

As of June 30, 2022, future annual lease payments under the Company’s real estate operating leases and equipment finance leases were as follows (in thousands):

Year	Operating Leases			Lease Payments to be Received from Sublease			Net Operating Lease Payments
2022	$	566		$	(166	)	$	400
2023		—			—		$	-
2024		—			—		$	-
2025		—			—		$	-
2026		—			—		$	-
Thereafter		—			—		$	-
Total future lease payments		566			(166	)		400
Less: Imputed interest		(7	)		—			(7	)
Total lease liabilities	$	559		$	(166	)	$	393

The following table presents lease assets and liabilities and their classification on the condensed consolidated balance sheet (in thousands):

Leases	Condensed Consolidated Balance Sheet Classification	Amount
Assets:
Operating lease assets	Operating lease right-of- use assets	$	831
Total leased assets		$	831
Liabilities:
Current:
Operating lease liabilities	Operating lease liabilities	$	559
Non-current:
Operating lease liabilities	Operating lease liabilities, net of current portion		—
Total lease liabilities		$	559

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

License agreement

The Company has a tangible property and patent license agreement with Whitehead Institute for Biomedical Research (“Whitehead”) entered into in 2016 and subsequently amended in 2016 and 2018, under which the Company obtained a certain exclusive and non-exclusive, royalty-bearing, sublicensable, worldwide license to make, sell and distribute products under certain patents owned by Whitehead for certain know-how related to specific neurodegenerative diseases. In consideration for the rights granted by the agreement, the Company paid a one-time license fee of less than $0.1 million and issued 300,000 common units valued at $0.8 million. The Company is required to pay annual maintenance fees of up to $0.1 million through the termination of the agreement. The Company is also required to pay up to an aggregate of approximately $1.9 million upon the achievement of certain developmental and regulatory milestones for the first two licensed products under its first indication. The Company is also required to pay additional milestone amounts for subsequent licensed products under its first or subsequent indications, but at a lower rate. The Company did not meet any milestones for the six months ended June 30, 2022 and the year ended December 31, 2021. The Company must also pay a royalty in the low single digits on future sales by the Company and a mid single to low double digit percentage of certain income received from sublicensees and certain partners. The license agreement remains in effect until the expiration of the last-to-expire patent licensed under the agreement. Whitehead may terminate the agreement upon the Company’s uncured material breach of the agreement, including failure to make required payments under the agreement or to achieve certain milestones, or if the Company becomes insolvent or bankrupt. The Company may terminate the license agreement at any time upon providing certain written notice to Whitehead.

Contingent Value Rights Agreement

In connection with the Proteostasis Merger, the Company entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with Shareholder Representative Services LLC as representative of the PTI stockholders. The CVR Agreement entitled each holder of Company Common Stock as of immediately prior to the effective time of the Proteostasis Merger to receive certain net proceeds, if any, derived from the grant, sale or transfer of rights of the CF Assets ( the “CF Assets”) to any one of three specified counterparties completed during the nine-month period after the effective time of the Proteostasis Merger (with any potential payment obligations continuing until the 10-year anniversary of the closing of the Proteostasis Merger Agreement). The CVR agreement became effective at the closing of the Proteostasis Merger. Due to the fact that no CF Asset sale was completed by the nine-month anniversary of the effective time of the Proteostasis Merger, the CVRs expired. No liability has been recorded at June 30, 2022 or previous periods associated with the CVRs.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements, as of June 30, 2022 and for the three and six months ended June 30, 2022, are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company

believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 24, 2022. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2022 and condensed consolidated results of operations and cash flows for the three and six months ended June 30, 2022 and 2021 have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

The Accumulated Deficit balance as of March 31, 2021 as presented in the Condensed Consolidated Statement of Stockholders' Equity included in the prior financial statements as of and for the period ended March 31, 2022 was incorrectly stated due to a typographical error and has been corrected in the Condensed Consolidated Statement of Stockholders' Equity for the current period. The correct accumulated deficit number used in the Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2021 is $(156,492) instead of $(8,682). This error did not impact the unaudited condensed consolidated balance sheets, statements of cash flow, or notes to the financial statements as of, and for the three months ended March 31, 2021. The materiality of the error was assessed in accordance with the SEC’s Staff Accounting Bulletin 99 and the Company concluded that the previously issued condensed consolidated financial statements were not materially misstated. In accordance with the SEC’s Staff Accounting Bulletin 108, this immaterial error has been corrected and the revision will be presented prospectively here and in future filings.

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

The Company’s significant accounting policies, which are disclosed in the audited financial statements for the year ended December 31, 2021 and the notes thereto, are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 24, 2022. There were no changes to significant accounting policies during the three and six months ended June 30, 2022.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses prior to the Merger and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts, and experience. Actual results may differ from those estimates or assumptions.

Restricted Cash

Restricted cash

Amounts included in restricted cash represent amounts pledged as collateral for Company credit cards and as part of the terms of its office and laboratory space lease. These amounts are classified as restricted cash in the Company’s condensed consolidated balance sheet. In December 2020, in connection with the Proteostasis Merger, the Company acquired Proteostasis’ restricted cash pledged as collateral for its office and laboratory space lease and amended its loan and security agreement to establish an escrow account in the amount of its Paycheck Protection Program loan. After forgiveness of the PPP Loan, in April 2021 the escrowed cash was released and reclassified into cash and cash equivalents. The cash pledged as collateral is classified as restricted cash in the Company’s condensed consolidated balance sheet as of June 30, 2022. Regarding the cash pledged as collateral related to the lease, because the restriction on that pledged cash is expected to lapse soon after July 31, 2022, due to the modification of the related lease (see Note 10), that amount has been presented as a current asset in the condensed consolidated balance sheet at June 30, 2022. As of June 30, 2022 and 2021, the cash and restricted cash of $12.7 million and $48.3 million, respectively, has been presented in the condensed consolidated statements of cash flows included cash and cash equivalents of $11.8 million and $47.4 million, respectively, and restricted cash of $0.9 million and $0.9 million, respectively.

Fair value measurements

Fair value measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair

value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long-term debt under its loan and security agreement approximates its fair value due to its variable interest rate.

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Fair Value Measurements and Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Measurement Inputs and Valuation Techniques [Line Items]

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at June 30, 2022:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	11,506	$	—	$	—	$	11,506
Marketable securities:
Commercial paper		—		—		—		—
	$	11,506	$	—	$	—	$	11,506
	Fair Value Measurements at December 31, 2021:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	34,136	$	—	$	—	$	34,136
Marketable securities:
Commercial paper		—		1,399		—		1,399
	$	34,136	$	1,399	$	—	$	35,535

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Accrued employee compensation and benefits	$	350	$	1,763
Accrued external research and development expenses		962		1,633
Accrued professional fees		740		901
Other		370		549
	$	2,422	$	4,846

Summary of restructuring balance accrued expenses and other current liabilities

The following table summarizes the changes in the Company’s accrued restructuring balance, which are included in Accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet:

(In thousands)	2022
Beginning balance at December 31, 2021	$	—
Restructuring costs, personnel related		985
Cash paid for restructuring costs		(330	)
Ending balance at March 31, 2022		655
Restructuring costs, personnel related		412
Cash paid for restructuring costs		(765	)
Forfeitures		(31	)
Ending balance at June 30, 2022	$	271

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Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Summary of Long-term Debt

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2022		2021
Principal amount of long-term debt	$	—	$	12,733
Less: Current portion of long-term debt		—		(5,805	)
Long-term debt, net of current portion		—		6,928
Debt discount, net of accretion		—		(217	)
Accrued end-of-term payment		—		646
Long-term debt, net of discount and current portion	$	—	$	7,357

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Stock/Equity-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of Restricted Stock Unit Activity and Related Information

The following table summarizes the Company’s RSU activity for the six months ended June 30, 2022:

	RSUs			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021		86,225		$	17.89
Issued	-			$	—
Vested		(17,624	)	$	17.89
Forfeited		(20,429	)	$	17.89
Unvested balance at June 30, 2022		48,172		$	17.89

Summary of Restricted Stock Awards Activity

The following table summarizes the Company's RSA activity for the three and six months ended June 30, 2022:

	RSAs			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021		305,663		$	3.83
Issued	-			$	—
Vested		(189,778	)	$	3.83
Forfeited		(35,725	)	$	3.83
Unvested balance at June 30, 2022		80,160		$	3.83

Summary of Stock Option Activity

The following table summarizes the Company’s option activity during six months ended June 30, 2022:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		1,779,174		$	18.99		7.67		—
Granted		17,000		$	2.89				—
Exercised		—			—				—
Forfeited		(573,490	)	$	31.47				—
Outstanding as of June 30, 2022		1,222,684		$	11.99		7.82		—
Vested and expected to vest as of June 30, 2022		1,222,684		$	11.99		7.82		—

Summary of Stock-based Compensation Expense, Including Shares Issued to Consultants for Services

The Company recorded stock/equity-based compensation expense related to common stock options and restricted stock units and restricted stock awards in the following expense categories in its condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development expenses	$	89	$	355	$	190	$	746
General and administrative expenses		983		904		2,086		1,920
	$	1,072	$	1,259	$	2,276	$	2,666

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Net Loss per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(4,845	)	$	(10,454	)	$	(18,226	)	$	(19,136	)
Denominator:
Weighted average common shares    outstanding, basic and diluted		10,847,734			10,195,608			10,800,473			10,194,474
Net loss per share, basic and diluted	$	(0.45	)	$	(1.03	)	$	(1.69	)	$	(1.88	)

Schedule of Antidilutive Securities Excluded from Computation of Diluted Weighted-average Shares Outstanding

The following common stock equivalents presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:

	As of June 30,
	2022		2021
Options to purchase common stock		1,222,684		1,756,947
Warrants to purchase common stock or shares    convertible into common stock		99,986		99,986
Unvested RSUs		48,172		112,544
		1,370,842		1,969,477

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Leases (Tables)

6 Months Ended

Jun. 30, 2022

Lessee Disclosure [Abstract]

Elements of Lease Expense

The components of lease cost were as follows (in thousands):

	Six Months Ended June 30,
	2022		2021
Operating lease cost	$	2,496	$	3,053
Short-term lease cost		—		—
Variable lease cost		357		272
Finance lease cost:
Amortization of lease assets		8		77
Interest on lease liabilities		1		5
Total finance lease cost	$	9	$	82

Summary of supplemental disclosure of cash flow information related to leases

Supplemental disclosure of cash flow information related to leases was as follows (in thousands):

	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement    of operating lease liabilities (operating cash flows)	$	2,177	$	2,970
Cash paid for amounts included in the measurement    of finance lease liabilities (operating cash flows)	$	1	$	5
Cash paid for amounts included in the measurement    of finance lease liabilities (financing cash flows)	$	27	$	108
Operating lease liabilities arising from obtaining    right-of-use assets	$	—	$	—
Finance lease liabilities arising from obtaining right-    of-use assets	$	—	$	—
Reduction in operating lease liabilities as a result of lease modifications	$	11,844	$	—
Reduction in operating right-of-use assets as a result of lease modifications	$	11,852	$	—

Schedule of weighted-average remaining lease term and discount rate

The weighted-average remaining lease term and discount rate were as follows:

	As of June 30,
	2022			2021
Weighted-average remaining lease term (in years) used for:
Operating leases		0.39			4.75
Finance leases		—			1.11
Weighted-average discount rate used for:
Operating leases		5.85	%		9.08	%
Finance leases		—			5.88	%

Summary of future annual operating lease payments

As of June 30, 2022, future annual lease payments under the Company’s real estate operating leases and equipment finance leases were as follows (in thousands):

Year	Operating Leases			Lease Payments to be Received from Sublease			Net Operating Lease Payments
2022	$	566		$	(166	)	$	400
2023		—			—		$	-
2024		—			—		$	-
2025		—			—		$	-
2026		—			—		$	-
Thereafter		—			—		$	-
Total future lease payments		566			(166	)		400
Less: Imputed interest		(7	)		—			(7	)
Total lease liabilities	$	559		$	(166	)	$	393

Summary of table presents lease assets and liabilities and their classification on the condensed consolidated balance sheet

The following table presents lease assets and liabilities and their classification on the condensed consolidated balance sheet (in thousands):

Leases	Condensed Consolidated Balance Sheet Classification	Amount
Assets:
Operating lease assets	Operating lease right-of- use assets	$	831
Total leased assets		$	831
Liabilities:
Current:
Operating lease liabilities	Operating lease liabilities	$	559
Non-current:
Operating lease liabilities	Operating lease liabilities, net of current portion		—
Total lease liabilities		$	559

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Nature of Business and Basis of Presentation - Additional Information (Detail) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended				6 Months Ended
	Jun. 05, 2022	Apr. 30, 2021	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021	Feb. 28, 2022	Dec. 31, 2021
Nature of Business [Line Items]
Accumulated deficit			$ (205,539)			$ (156,492)	$ (205,539)			$ (187,313)
Net loss			(4,845)	$ (13,381)	$ (10,454)	$ (8,682)	(18,226)	$ (19,136)
Workforce reduced									60.00%
Public Float, Increased			75,000				75,000
Janssen Pharmaceutica NV
Nature of Business [Line Items]
Asset purchase agreement price	$ 26,000
At The Market Offering [Member] | New Sales Agreement With Jefferies Llc [Member]
Nature of Business [Line Items]
Common Stock, Value, Subscriptions			$ 59,600				$ 59,600			$ 60,000
Percentage of commission on gross proceeds of common stock sold		3.00%
At The Market Offering [Member] | Prior Sales Agreement With Jefferies Llc [Member]
Nature of Business [Line Items]
Common Stock, Value, Subscriptions		$ 60,000
Sale of Stock, Number of Shares Issued							216,332
Sale Of Stock Consideration Received On Transaction, net							$ 400

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Accounting Policies [Abstract]
Restricted Cash and Cash Equivalents	$ 12,700		$ 48,300		$ 12,700	$ 48,300
Accumulated deficit	(205,539)			$ (156,492)	(205,539)		$ (187,313)
Net loss	(4,845)	$ (13,381)	(10,454)	$ (8,682)	(18,226)	(19,136)
Cash and cash equivalents	11,846		47,400		11,846	47,400	$ 35,102
Restricted Cash	$ 900		$ 900		$ 900	$ 900

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Fair Value Measurements and Marketable Securities - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Assets:
Total assets	$ 11,506	$ 35,535
Commercial Paper [Member]
Assets:
Marketable securities	0	1,399
Money Market Funds [Member]
Assets:
Cash equivalents	11,506	34,136
Level 1 [Member]
Assets:
Total assets	11,506	34,136
Level 1 [Member] | Commercial Paper [Member]
Assets:
Marketable securities	0	0
Level 1 [Member] | Money Market Funds [Member]
Assets:
Cash equivalents	11,506	34,136
Level 2 [Member]
Assets:
Total assets	0	1,399
Level 2 [Member] | Commercial Paper [Member]
Assets:
Marketable securities	0	1,399
Level 2 [Member] | Money Market Funds [Member]
Assets:
Cash equivalents	0	0
Level 3 [Member]
Assets:
Total assets	0	0
Level 3 [Member] | Commercial Paper [Member]
Assets:
Marketable securities	0	0
Level 3 [Member] | Money Market Funds [Member]
Assets:
Cash equivalents	$ 0	$ 0

XML

Collaboration Agreement - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 31, 2020	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Dec. 17, 2021	Jun. 30, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from collaborative arrangement		$ 1,657	$ 2,114	$ 2,679	$ 5,646
License And Research Collaboration Agreement | Merck
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Upfront payments received	$ 15,000
Collaborative arrangement, milestone payments receivable							$ 5,000
Deferred revenue additions	15,000			2,600		$ 5,000
Deferred revenue		2,400		2,400
License And Research Collaboration Agreement | Merck | Maximum [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from collaborative arrangement		$ 100		$ 100
License And Research Collaboration Agreement | Merck | Class C Preferred Units
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Stock price per share								$ 4.0008
License And Research Collaboration Agreement | Merck | Research and Development | Maximum [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Collaborative arrangement, milestone payments receivable	280,000
License And Research Collaboration Agreement | Merck | Sales Based | Maximum [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Collaborative arrangement, milestone payments receivable	$ 250,000

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Accrued Expenses - Schedule of Accrued Expenses (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Accrued employee compensation and benefits	$ 350	$ 1,763
Accrued external research and development expenses	962	1,633
Accrued professional fees	740	901
Other	370	549
Total accrued expenses	$ 2,422	$ 4,846

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Accrued Expenses (Additional Information) (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Payables and Accruals [Abstract]
Restructuring cost	$ 0.4	$ 1.4

XML

Accrued Expenses - Summary of restructuring balance accrued expenses and other current liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2022	Mar. 31, 2022
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Beginning balance	$ 655	$ 0
Restructuring costs, personnel related	412	985
Cash paid for restructuring costs	(765)	(330)
Forfeitures	(31)
Ending balance	$ 271	$ 655

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Short-term borrowing (Additional Information) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Short-term borrowings	$ 578	$ 0
Finance and Security Agreement
Short-term Debt [Line Items]
Frequency of periodic payment	nine-month
Annual interest rate	2.93%
Debt maturity date	Sep. 22, 2022

XML

Debt - Summary of Long-term Debt (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Long-Term Debt, Unclassified [Abstract]
Principal amount of long-term debt	$ 0	$ 12,733
Less: Current portion of long-term debt	0	(5,805)
Long-term debt, net of current portion	0	6,928
Debt discount, net of accretion	0	(217)
Accrued end-of-term payment	0	646
Long-term debt, net of discount and current portion	$ 0	$ 7,357

XML

Debt - Additional Information (Detail) - USD ($) $ in Thousands				1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 25, 2022	Apr. 13, 2021	Apr. 03, 2021	Apr. 30, 2020	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Dec. 31, 2019
Debt Instrument [Line Items]
Long-term non current					$ 0		$ 0		$ 12,733
Gain (Loss) on extinguishment of debt					0	$ 0	(200)	$ 1,134
Silicon Valley Bank [Member]
Debt Instrument [Line Items]
Gain (Loss) on extinguishment of debt			$ 1,100
Minimum [Member]
Debt Instrument [Line Items]
Repayment period		$ 100
Maximum [Member]
Debt Instrument [Line Items]
Repayment period		$ 300
New Loan
Debt Instrument [Line Items]
Long-term non current										$ 12,700
Accrued end-of-term payment	$ 900				$ 300		$ 300
Gain (Loss) on extinguishment of debt	200
Repayment period	$ 12,800
End term cost of amount drawn under term loan in percent	5.25%
Amount drawn under term loan	$ 15,000
Additional amount drawn under term loan	100
New Loan | Maximum [Member]
Debt Instrument [Line Items]
Interest/non-use fee	$ 100
Paycheck Protection Program Loan
Debt Instrument [Line Items]
Proceeds from Paycheck Protection Program loan				$ 1,100

XML

Stock/Equity-Based Compensation - Additional Information (Detail) - USD ($) $ in Thousands				3 Months Ended		6 Months Ended		12 Months Ended
	Feb. 01, 2021	Jan. 12, 2021	Feb. 03, 2016	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Jan. 01, 2022	Apr. 13, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Forfeited shares						573,490
Amount of cost not yet recognized for nonvested award under share-based payment arrangement.				$ 6,400		$ 6,400
Stock-based compensation				1,072	$ 1,259	$ 2,276	$ 2,666
Weighted average remaining contractual term						7 years 9 months 25 days		7 years 8 months 1 day
Number of options outstanding, including both vested and non-vested options						1 year 9 months
Restricted Incentive Units RSU [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation				$ 100		$ 100
Fair value of share options granted	$ 2,200
Units granted						0
Number of incentive units				48,172		48,172
Restricted Incentive Units Rsa [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation				$ 300		$ 700
Fair value of share options granted		$ 1,200
Units granted						0
Number of incentive units				80,160		80,160
Board Of Directors Chairman [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock to be purchased										104,000
Forfeited shares						104,000
2018 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized				1,527,210		1,527,210
Common stock available for future issuance				219,859		219,859
2018 Plan | Service Based [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment award, expiration period						10 years
Share-based payment award, vest period						4 years
2016 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for issuance			79,092	760,498		760,498
Common stock available for future issuance				457,504		457,504
Common stock reserved for issuance, percentage of number of shares of common stock outstanding			3.00%
2016 Plan [Member] | Service Based [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment award, expiration period						10 years
Share-based payment award, vest period						4 years
2016 Plan [Member] | Additional [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for future issuance									319,341
2016 ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for issuance			6,938	48,564		48,564
Common stock reserved for issuance, percentage of number of shares of common stock outstanding			1.00%
2016 ESPP [Member] | Additional [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for issuance									6,938
2021 Stock Option And Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized				400,000		400,000
Common stock available for issuance				246,600		246,600
Stock option issued						17,000

XML

Stock/Equity-Based Compensation - Summary of Restricted Stock Unit Activity and Related Information (Detail)	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Restricted Incentive Units RSU [Member]
Number of Shares
Unvested balance at December 31, 2021 | shares	86,225
Issued | shares	0
Vested | shares	(17,624)
Forfeited | shares	(20,429)
Unvested balance at June 30, 2022 | shares	48,172
Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021 | $ / shares	$ 17.89
Issued | $ / shares	0
Vested | $ / shares	17.89
Forfeited | $ / shares	17.89
Unvested balance at June 30, 2022 | $ / shares	$ 17.89
Restricted Incentive Units RSA [Member]
Number of Shares
Unvested balance at December 31, 2021 | shares	305,663
Issued | shares	0
Vested | shares	(189,778)
Forfeited | shares	(35,725)
Unvested balance at June 30, 2022 | shares	80,160
Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021 | $ / shares	$ 3.83
Issued | $ / shares	0
Vested | $ / shares	3.83
Forfeited | $ / shares	3.83
Unvested balance at June 30, 2022 | $ / shares	$ 3.83

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Stock/Equity-Based Compensation - Summary of Stock Option Activity (Detail) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Number of Shares/Units
Outstanding at December 31, 2021	1,779,174
Granted	17,000
Exercised	0
Forfeited	(573,490)
Outstanding as of June 30, 2022	1,222,684	1,779,174
Vested and expected to vest as of June 30, 2022	1,222,684
Weighted Average Exercise Price
Outstanding as of December 31, 2021	$ 18.99
Granted	2.89
Exercised	0
Forfeited	31.47
Outstanding as of June 30, 2022	11.99	$ 18.99
Vested and expected to vest as of June 30, 2022	$ 11.99
Weighted Average Remaining Contractual Term, Outstanding	7 years 9 months 25 days	7 years 8 months 1 day
Vested and expected to vest as of June 30, 2022	7 years 9 months 25 days
Aggregate Intrinsic Value, Outstanding as of December 30, 2021	$ 0
Aggregate Intrinsic Value,Granted	0
Aggregate Intrinsic Value,Exercised	$ 0
Aggregate Intrinsic Value,Forfeited	$ 0
Weighted Average Remaining Contractual Term,Forfeited	$ 0	$ 0
Aggregate Intrinsic Value, Vested and expected to vest at June 30, 2022	$ 0

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Stock/Equity-Based Compensation - Summary of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Stock-based compensation expense	$ 1,072	$ 1,259	$ 2,276	$ 2,666
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Stock-based compensation expense	89	355	190	746
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total Stock-based compensation expense	$ 983	$ 904	$ 2,086	$ 1,920

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Net Loss per Share - Schedule of Basic and Diluted Net Loss per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Numerator:
Net loss	$ (4,845)	$ (13,381)	$ (10,454)	$ (8,682)	$ (18,226)	$ (19,136)
Denominator:
Weighted average common shares outstanding, basic	10,847,734		10,195,608		10,800,473	10,194,474
Weighted average common shares outstanding, diluted	10,847,734		10,195,608		10,800,473	10,194,474
Net loss per share, basic	$ (0.45)		$ (1.03)		$ (1.69)	$ (1.88)
Net loss per share, diluted	$ (0.45)		$ (1.03)		$ (1.69)	$ (1.88)

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Net Loss per Share - Schedule of Antidilutive Securities Excluded from Computation of Diluted Weighted-average Shares Outstanding (Detail) - shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding	1,370,842	1,969,477
Options to Purchase Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding	1,222,684	1,756,947
Warrants to purchase common stock or shares convertible into common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding	99,986	99,986
Unvested Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities outstanding	48,172	112,544

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Leases - Additional Information (Detail)							3 Months Ended		6 Months Ended
	May 16, 2022 USD ($)	Feb. 28, 2022 USD ($)	Jan. 07, 2021	Dec. 22, 2020 USD ($) ft²	May 01, 2020 USD ($)	Feb. 29, 2020 USD ($)	Jun. 30, 2022 USD ($)	Mar. 31, 2022 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Operating Lease, Right-of-Use Asset
Operating Lease, Right-of-Use Asset		$ 3,200,000					$ 831,000		$ 831,000		$ 18,543,000
Increase (decrease) in operating lease liability	$ 8,600,000								11,844,000
License term						3 years
Remaining finance lease liabilities	$ 200,000						166,000		166,000
Operating Lease, Impairment Loss								$ 3,900,000	3,901,000	$ 0
Security deposit and the last month's license fee		800,000
Moma Therapeutics Inc [Member]
Operating Lease, Right-of-Use Asset
Lessee, operating sub lease, term of contract			18 months
Operating sub lease, cost							500,000		1,000,000.0
Sublease Income							$ 500,000		$ 1,000,000.0
Old Premises Cambridge [Member]
Operating Lease, Right-of-Use Asset
Lease expiration date									May 01, 2020
New Premises Boston [Member]
Operating Lease, Right-of-Use Asset
Operating Lease, Right-of-Use Asset					$ 10,600,000
Increase (decrease) in operating lease liability					$ (10,200,000)
Percentage of escalation of License fee						3.00%
Total Amount of License fee						$ 12,000,000.0
Merger Laboratory Boston [Member]
Operating Lease, Right-of-Use Asset
Operating lease, initial term							10 years		10 years
Operating lease, option to extend additional term							7 years		7 years
Operating Lease, Right-of-Use Asset				$ 10,200,000
Increase (decrease) in operating lease liability				$ (10,200,000)
Number of Square Feet | ft²				30,000
Operating lease, payments				$ 14,200,000
Merger Laboratory Boston [Member] | Portion of Excess Merger Purchase Price [Member]
Operating Lease, Right-of-Use Asset
Operating Lease, Right-of-Use Asset				1,900,000
Merger Laboratory Boston [Member] | Value Attributable to Below Market Lease [Member]
Operating Lease, Right-of-Use Asset
Operating Lease, Right-of-Use Asset				$ 3,100,000
Maximum [Member]
Operating Lease, Right-of-Use Asset
Total Amount of License fee		400,000
Remaining finance lease liabilities								$ 100,000
Maximum [Member] | Moma Therapeutics Inc [Member]
Operating Lease, Right-of-Use Asset
Operating leases, rent expense, sublease rentals									$ 1,997,520
Minimum [Member]
Operating Lease, Right-of-Use Asset
Total Amount of License fee		$ 100,000
Minimum [Member] | Moma Therapeutics Inc [Member]
Operating Lease, Right-of-Use Asset
Operating leases, rent expense, sublease rentals									$ 1,939,340

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Leases - Summary of lease cost (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Lease cost
Operating lease cost	$ 2,496	$ 3,053
Short-term Lease Cost	0	0
Variable lease cost	357	272
Finance lease cost, amortization of lease assets	8	77
Finance lease cost, interest on lease liabilities	1	5
Total finance lease cost	$ 9	$ 82

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Leases - Summary of supplemental disclosure of cash flow information related to leases (Detail) - USD ($) $ in Thousands		6 Months Ended
	May 16, 2022	Jun. 30, 2022	Jun. 30, 2021
Schedule of Supplemental disclosure of cash flow information related to leases [Abstract]
Cash paid for amounts included in the measurement of operating lease liabilities (operating cash flows)		$ 2,177	$ 2,970
Cash paid for amounts included in the measurement of finance lease liabilities (operating cash flows)		1	5
Cash paid for amounts included in the measurement of finance lease liabilities (financing cash flows)		27	108
Operating lease liabilities arising from obtaining right-of-use assets		0
Finance lease liabilities arising from obtaining right-of-use assets		0
Reduction in operating lease liabilities as a result of lease modifications	$ 8,600	11,844
Reduction in operating right-of-use assets as a result of lease modifications		$ 11,852

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Leases - Schedule of weighted-average remaining lease term and discount rate (Detail)	Jun. 30, 2022	Jun. 30, 2021
Schedule of weighted average remaining lease term and discount rate [Abstract]
Weighted-average remaining lease term (in years) used for Operating leases	4 months 20 days	4 years 9 months
Weighted-average remaining lease term (in years) used for Finance leases		1 year 1 month 9 days
Weighted-average discount rate for Operating leases	5.85%	9.08%
Weighted-average discount rate used for Finance leases		5.88%

XML

Leases - Summary of future annual Operating lease payments (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	May 16, 2022
Operating Leases
2022	$ 566
2023	0
2024	0
2025	0
2026	0
Thereafter	0
Total future lease payments	566
Less: Imputed interest	(7)
Total lease liabilities	559
Finance Leases
2022	166
Total future lease payments	166
Total lease liabilities	166	$ 200
Net Operating Lease Payments
2022	400
2023	0
2024	0
2025	0
2026	0
Thereafter	0
Total future lease payments	400
Less: Imputed interest	(7)
Total lease liabilities	$ 393

XML

Leases - Summary of table presents lease assets and liabilities and their classification on the condensed consolidated balance sheet (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Feb. 28, 2022	Dec. 31, 2021
Assets:
Operating lease assets	$ 831	$ 3,200	$ 18,543
Total leased assets	831
Current:
Operating lease liabilities	559		5,064
Non-current:
Operating lease liabilities	0		$ 9,415
Total lease liabilities	$ 559

XML

Commitments and Contingencies - Additional Information (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) shares
Long-term Purchase Commitment [Line Items]
Period of agreement	9 months
Contingent Value Rights Agreement [Member] | Shareholder Representative Series LLC [Member]
Long-term Purchase Commitment [Line Items]
Business combination contingent consideration agreement	$ 0
Whitehead Institute for Biomedical Research [Member]
Long-term Purchase Commitment [Line Items]
Common unit issued | shares	300,000
Common Unit, Issuance Value	$ 800
Whitehead Institute for Biomedical Research [Member] | Maximum [Member]
Long-term Purchase Commitment [Line Items]
Payment of license fees	100
Annual cost maintenance	100
Whitehead Institute for Biomedical Research [Member] | Maximum [Member] | Developmental and Regulatory [Member] | First Two Licensed Products [Member]
Long-term Purchase Commitment [Line Items]
Contractual Obligation	$ 1,900