Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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, 2023

☐ 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: 001-38459

SURFACE ONCOLOGY, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware			46-5543980
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
50 Hampshire Street, 8th Floor Cambridge, MA			02139
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (617) 714-4096

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


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, $0.0001	SURF	The Nasdaq Global 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 Act). Yes ☐ No ☒

As of July 31, 2023, the registrant had 60,824,474 shares of common stock $0.0001 par value per share, outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

•the completion of the proposed merger with Coherus BioSciences Inc.;

•the timing, progress and results of preclinical studies and clinical trials for our current product candidates and other product candidates we may develop, 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 timing, scope or likelihood of regulatory filings and approvals, including timing of Investigational New Drug application and Biological Licensing Application filings for, and final U.S. Food and Drug Administration approval of, our current product candidates and any other future product candidates;

•the success of the implementation of our corporate restructuring and strategic decision to pause the internal clinical development of SRF617 and focus resources on the advancement of SRF388 and SRF114;

•the timing, scope or likelihood of foreign regulatory filings and approvals;

•our ability to use our understanding of the tumor microenvironment to identify product candidates and to match immunotherapies to select patient subsets;

•our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical studies;

•our ability to develop combination therapies, whether on our own or in collaboration with Novartis Institutes for Biomedical Research, Inc. (“Novartis”) or other third parties;

•our manufacturing, commercialization and marketing capabilities and strategy;

•the pricing and reimbursement of our current product candidates and other product candidates we may develop, if approved;

•the rate and degree of market acceptance and clinical utility of our current product candidates and other product candidates we may develop;

•the potential benefits of and our ability to maintain our collaborations with Novartis and GSK, and establish or maintain future collaborations or strategic relationships or obtain additional funding;

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

•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our current product candidates and other product candidates we may develop, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

•our competitive position, and developments and projections relating to our competitors and our industry;

•our expectations related to the use of our existing cash, cash equivalents and marketable securities;

•our ability to raise capital to fund operations;

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

•our ability to regain compliance with the closing bid price requirement for listing on the Nasdaq Stock Market LLC; and

•the impact of laws and regulations.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

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		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
Signatures		49

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SURFACE ONCOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share data)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	14,842	$	50,910
Marketable securities	41,416		73,913
Prepaid expenses and other current assets	4,330		4,317
Total current assets	60,588		129,140
Property and equipment, net	2,499		4,866
Operating lease right-of-use asset	2,919		24,307
Restricted cash	—		1,595
Other assets	—		2
Total assets	$	66,006	$	159,910
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	609	$	256
Accrued expenses and other current liabilities	6,731		10,214
Operating lease liability	9,488		5,790
Total current liabilities	16,828		16,260
Operating lease liability, non-current	—		24,662
Convertible note payable, non-current	—		25,585
Total liabilities	16,828		66,507
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized at June 30, 2023 and December 31, 2022; no shares issued and outstanding at June 30, 2023 and December 31, 2022	—		—
Common stock, $0.0001 par value; 150,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; 60,730,274 and 60,578,956 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	6		6
Additional paid-in capital	301,655		298,741
Accumulated other comprehensive loss	(221)		(1,015)
Accumulated deficit	(252,262)		(204,329)
Total stockholders’ equity	49,178		93,403
Total liabilities and stockholders’ equity	$	66,006	$	159,910

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

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SURFACE ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(in thousands, except share and per share data)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
License-related revenue	$	—	$	—	$	—	$	30,000
Operating expenses:
Research and development	13,831		18,198		27,608		34,822
General and administrative	8,576		6,426		14,460		12,967
Restructuring charges	3,234		—		3,234		—
Total operating expenses	25,641		24,624		45,302		47,789
Loss from operations	(25,641)		(24,624)		(45,302)		(17,789)
Interest expense	(3,108)		(733)		(4,040)		(1,415)
Other income (expense), net	557		144		1,409		190
Net loss	(28,192)		(25,213)		(47,933)		(19,014)
Net loss per share — basic and diluted	$	(0.46)	$	(0.46)	$	(0.79)	$	(0.37)
Weighted average common shares outstanding — basic and diluted	60,717,899		54,654,822		60,673,195		51,647,148
Comprehensive loss:
Net loss	$	(28,192)	$	(25,213)	$	(47,933)	$	(19,014)
Other comprehensive loss:
Unrealized gain (loss) on marketable securities, net of tax of $0	348		(259)		794		(949)
Comprehensive loss	$	(27,844)	$	(25,472)	$	(47,139)	$	(19,963)

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

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SURFACE ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share amounts)


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Balances at December 31, 2022	60,578,956	$	6	$	298,741	$	(1,015)	$	(204,329)	$	93,403
Issuance of common stock under stock purchase plan	137,917	—		77		—		—		77
Stock-based compensation expense	—	—		1,646		—		—		1,646
Unrealized gain on marketable securities	—	—		—		446		—		446
Net loss	—	—		—		—		(19,741)		(19,741)
Balances at March 31, 2023	60,716,873	$	6	$	300,464	$	(569)	$	(224,070)	$	75,831
Issuance of common stock upon exercise of stock options	13,401	—		5		—		—		5
Stock-based compensation expense	—	—		1,186		—		—		1,186
Unrealized gain on marketable securities	—	—		—		348		—		348
Net loss	—	—		—		—		(28,192)		(28,192)
Balances at June 30, 2023	60,730,274	6		301,655		(221)		(252,262)		49,178


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balances at December 31, 2021	46,958,776	$	5	$	259,859	$	(221)	$	(140,743)	$	118,900
Issuance of common stock upon exercise of stock options	208	—		—		—		—		—
Issuance of common stock under stock purchase plan	51,329	—		157		—		—		157
Issuance of common stock upon public offering, net of issuance costs	7,337,251	1		20,555		—		—		20,556
Stock-based compensation expense	—	—		1,865		—		—		1,865
Unrealized loss on marketable securities	—	—		—		(690)		—		(690)
Net income	—	—		—		—		6,199		6,199
Balances at March 31, 2022	54,347,564	$	6	$	282,436	$	(911)	$	(134,544)	$	146,987
Issuance of common stock upon exercise of stock options	9,135	—		11		—		—		11
Issuance of common stock under stock purchase plan	2,234	—		7		—		—		7
Issuance of common stock upon public offering, net of issuance costs	1,025,935	—		2,110		—		—		2,110
Stock-based compensation expense	—	—		2,073		—		—		2,073
Unrealized loss on marketable securities	—	—		—		(259)		—		(259)
Net loss	—	—		—		—		(25,213)		(25,213)
Balances at June 30, 2022	55,384,868	6		286,637		(1,170)		(159,757)		125,716

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

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SURFACE ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six months ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(47,933)	$	(19,014)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	2,307		691
Stock-based compensation expense	2,832		3,938
Non-cash interest expense related to note payable	2,665		296
Net amortization of premiums and discounts on marketable securities	(211)		276
Gain on disposal of property and equipment	(29)		—
Non-cash operating lease cost	1,911		1,172
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(13)		(1,660)
Other assets	2		157
Accounts payable	353		(1,128)
Accrued expenses and other current liabilities	(3,397)		(2,395)
Operating lease liability	(1,487)		(1,304)
Net cash used in operating activities	(43,000)		(18,971)
Cash flows from investing activities:
Purchases of property and equipment	—		(146)
Proceeds from sales of property and equipment	3		—
Purchases of marketable securities	(35,568)		(15,690)
Proceeds from sales or maturities of marketable securities	69,070		30,745
Net cash provided by investing activities	33,505		14,909
Cash flows from financing activities:
Payments made on convertible note payable	(28,250)		—
Proceeds from issuance of common stock upon public offering, net	—		22,666
Proceeds from employee stock purchases	77		164
Proceeds from exercise of stock options	5		11
Net cash provided by (used in) financing activities	(28,168)		22,841
Net increase (decrease) in cash and cash equivalents and restricted cash	(37,663)		18,779
Cash and cash equivalents and restricted cash at beginning of period	52,505		57,640
Cash and cash equivalents and restricted cash at end of period	$	14,842	$	76,419
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,666	$	1,097
Supplemental disclosure of non-cash investing and financing activities:
Re-measurement of right-of-use asset and related lease liability	$	(19,477)	$	755
Purchases of property and equipment included in accounts payable and accrued expenses	$	—	$	92

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

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

1. Nature of the Business

Surface Oncology, Inc. (the “Company” or “Surface”) is a clinical-stage immuno-oncology company focused on using its specialized knowledge of the biological pathways critical to the immunosuppressive tumor microenvironment (“TME”) for the development of next-generation cancer therapies. Surface was incorporated in April 2014 under the laws of the State of Delaware.

The Company is subject to risks common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the ability to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

On August 5, 2021, the Company entered into an amendment to its existing Capital on Demand™ Sales Agreement (the “Amended Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”), to allow the issuance and sale of up to $80,000 in gross proceeds, from time to time during the term of the Amended Sales Agreement, through an “at-the-market” equity offering program under which JonesTrading will act as the Company’s sales agent (the “2021 ATM Facility”). The 2021 ATM Facility provides that JonesTrading will continue to be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the 2021 ATM Facility. The Company has no obligation to sell any shares under the Amended Sales Agreement and may, at any time, suspend solicitation and offers under the 2021 ATM Facility. In the three and six months ended June 30, 2023, the Company did not sell shares of common stock, at-the-market under the Amended Sales Agreement. In the three and six months ended June 30, 2022, the Company sold 1,025,935 and 8,363,186 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $2,110 and $22,666. Since August 5, 2021, the Company has sold 14,611,756 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $41,421.

Proposed Transaction with Coherus BioSciences, Inc.

On June 15, 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Coherus BioSciences, Inc., a Delaware corporation (“Parent” or “Coherus”), Crimson Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub I”) and Crimson Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”).

Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Merger Sub I will merge with and into the Company (the “First Merger”), with the Company surviving such First Merger as a wholly owned subsidiary of Parent, and, as part of the same overall transaction, promptly after the First Merger, the surviving entity of the First Merger will merge with and into Merger Sub II (the “Second Merger” and together with the First Merger, the “Mergers”), with Merger Sub II surviving the Second Merger (the “Surviving Entity”).

Under the Merger Agreement, at the effective time of the First Merger (the “Effective Time”), each share of common stock, $0.0001 par value per share, of the Company (the “Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than treasury shares, any shares of Company Common Stock held directly by Parent or Merger Subs immediately prior to the Effective Time and shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by any holder who properly demands appraisal for such shares in accordance with Section 262 of the Delaware General Corporation Law) will be converted automatically into and shall thereafter represent the right to receive consideration per share consisting of:

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

•a number of shares of common stock, par value $0.0001 per share, of Parent (the “Parent Common Stock”) equal to the exchange ratio (the “Exchange Ratio”) determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Company’s net cash as of the closing of the Mergers (the “Closing”), as calculated in accordance with the Merger Agreement, by (2) $5.2831 (the “Parent Stock Price”), by (y) the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement (the “Upfront Consideration”), plus any cash payable in lieu of a fractional share of Parent Common Stock; and

•one contingent value right (a “CVR”) representing the right to receive the CVR Payment Amount (as defined in the Merger Agreement), as provided for in the CVR Agreement (as defined in the Merger Agreement) (collectively, with the Upfront Consideration, the “Merger Consideration”).

At the Effective Time, each option (a “Company Stock Option”) to purchase Company Common Stock granted under Company’s equity incentive plans that is outstanding immediately prior to the Effective Time shall be converted, assumed or cancelled as follows:

•each Company Stock Option with an exercise price per share that is less than the value of the Upfront Consideration (an “In-the-Money Option”) shall be cancelled and converted into the right to receive:

a.a number of shares of Parent Common Stock, subject to certain exceptions for fractional shares and applicable withholdings, equal to the quotient of (x) the product of (1) the total number of shares of vested and unvested Company Common Stock underlying the In-the-Money Option multiplied by (2) the excess of the value of the Upfront Consideration over the exercise price of such In-the-Money Option, divided by (y) the Parent Stock Price; and

b.a number of CVRs equal to the vested and unvested shares of Company Common Stock underlying the In-the-Money Option;

•each Company Stock Option held by a Company employee who continues employment with Parent and its affiliates after the Effective Time (a “Covered Employee”) and with an exercise price that is equal to or greater than the value of the Upfront Consideration (each, an “Underwater Option”) shall be assumed by Parent and converted into an option to acquire shares of Parent Common Stock (an “Assumed Option”), and with the same vesting schedule and other terms and conditions applicable to such Assumed Option immediately prior to the Effective Time, except that (i) each Assumed Option shall become exercisable for a number of shares of Parent Common Stock equal to the product (rounded down to the next whole number of shares) of (x) the number of shares of Company Common Stock that would have been issuable upon full exercise of such Assumed Option immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, and (ii) the per share exercise price for such Assumed Option shall equal the quotient (rounded up to the next whole cent) obtained by dividing the exercise price per share of the Company Common Stock as of immediately prior to the Effective Time by the Exchange Ratio; and

•each Underwater Option held by a Company employee who is not a Covered Employee shall be cancelled, and the holder of such Underwater Option shall receive no Merger Consideration with respect to such Underwater Option.

At the Effective Time, each Company restricted stock unit award (a “Company RSU Award”), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive the Merger Consideration in respect of each share of Company Common Stock subject to such Company RSU Award, subject to certain exceptions for fractional shares and applicable withholdings.

Each CVR entitles the holder thereof to receive contingent payments, without interest, and subject to deduction for any required tax withholding, if applicable, equal to (i) the dollar amount of the Net CVR Payments (as defined below) received during the 10-year period following the Closing (the “CVR Term”) divided by (ii) the total number of outstanding CVRs (the “CVR Payment Amount”).

For each fiscal quarter during the CVR Term (each, a “CVR Payment Period”), the “Net CVR Payments” shall equal the sum of the following, less any permitted deductions (as set forth in the CVR Agreement).

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

•70% of all milestone- and royalty-based payments actually received by Parent, the Surviving Entity or their affiliates from GlaxoSmithKline Intellectual Property (No. 4) Limited under the License Agreement, dated December 16, 2020, between Company and GlaxoSmithKline Intellectual Property (No. 4) Limited;

•70% of all milestone- and royalty-based payments actually received by Parent, the Surviving Entity or their affiliates from Novartis Institute for Biomedical Research, Inc. under the collaboration agreement, dated January 9, 2016, between Company and Novartis Institute for Biomedical Research, Inc.;

•25% of any upfront payment actually received by Parent, the Surviving Entity or their affiliates under an agreement entered into by the Parent, the Surviving Entity or their affiliates after the Closing granting a third party development, manufacture or commercialization rights for the Company’s SRF114 proprietary drug product candidate in any market outside of the United States, less development costs and expenses incurred by Parent, the Surviving Entity or their affiliates after the Closing for the development of SRF114; and

•50% of any upfront payment actually received by Parent, the Surviving Entity or their affiliates under an agreement entered into by Parent, the Surviving Entity or their affiliates after the Closing granting a third party development, manufacture or commercialization rights for the Company’s SRF388 proprietary drug product candidate in any market outside of the United States, less development costs and expenses incurred by Parent, the Surviving Entity or their affiliates after the Closing for the development of SRF388.

The obligations of the Company and Parent to consummate the Mergers and the other transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of certain conditions, including: (i) the Company’s net cash being no less than $19,600 as of the date of determination; (ii) the adoption of the Merger Agreement by holders of at least a majority of the Company Common Stock outstanding; (iii) Parent’s Registration Statement on Form S-4 to be filed in connection with the Mergers having become effective and not subject to any stop order, and the shares of Parent Common Stock issuable in the Mergers having been approved for listing on the Nasdaq; (iv) execution of the CVR Agreement by Parent and the Rights Agent; and (v) other customary conditions for a transaction of this type, such as the absence of any legal restraint prohibiting the consummation of the Mergers and the absence of any material adverse effect for the Company or Parent. The parties have also made certain representations, warranties and covenants in the Merger Agreement, including covenants to conduct their respective businesses in the ordinary course in all material respects between the signing of the Merger Agreement and the Closing, prohibiting the parties from engaging in certain kinds of activities during such period without the consent of the other party and the use of commercially reasonable efforts to cause the conditions of the Mergers to be satisfied.

In connection with the announcement of the Mergers, and on June 15, 2023, the Company was required under the terms of that certain Loan and Security Agreement (the “Loan Agreement”), dated November 22, 2019, as amended on October 1, 2021 and September 21, 2022, by and among K2 HealthVentures, LLC and Ankura Trust Company, LLC (collectively, the “Secured Parties”) and the Company, to pay in full all outstanding loan obligations due to the Secured Parties which is further described in Note 8. In addition, on June 15, 2023, the Company entered into a Lease Termination Agreement (the “Termination Agreement”) with BMR-Hampshire LLC (the “Landlord”) pursuant to which the parties agreed to terminate that certain Lease (the “Lease”) relating to the Company’s corporate headquarters at 50 Hampshire Street in Cambridge, MA (the “Premises”). As consideration for the Company entering into the Termination Agreement, the Company agreed to pay $10,000 to the Landlord which is further described in Note 11.

Concurrent with the signing of the Merger Agreement, the Company announced a reduction in force as part of its cost savings efforts that resulted in the termination of approximately 50% of the Company’s remaining workforce (the “June Reduction in Force”). In connection with the June Reduction in Force, the affected employees will be provided severance benefits, including cash severance payments, acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, and COBRA continuation or reimbursement, pursuant to each affected employee’s employment agreement with the Company or any applicable severance policy. Each affected employee’s eligibility for these severance benefits is contingent upon such employee’s entering into an effective separation agreement, which includes a general release of claims against the Company (the “Release Requirement”).

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The Company’s financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has primarily funded its operations with proceeds from private and public sales of its securities, proceeds from a collaboration agreement with Novartis, proceeds from a license agreement with GlaxoSmithKline Intellectual Property (No. 4) Limited (“GSK”) and issuance of a debt facility with K2 Health Ventures LLC (“K2HV”). The Company has a history of incurring losses and negative cash flows from operations. As of June 30, 2023, the Company had an accumulated deficit of $252,262.

As of August 2, 2023, the issuance date of this Quarterly Report on Form 10-Q, the Company expects that its operating losses and negative cash flows from operations will continue for the foreseeable future. In addition, the Company’s repayment in full of the Loan Agreement and entering into the Lease Termination Agreement negatively impacted the Company’s liquidity. In accordance with the requirements of ASC 205-40, management has concluded these factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiary, Surface Securities Corporation, a Massachusetts corporation, after elimination of all intercompany accounts and transactions.

The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2023, as amended by the Form 10-K/A filed with the SEC on May 1, 2023.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, 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 consolidated financial statements include, but are not limited to, revenue recognition and the accrual of research and development expenses. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates.

Unaudited Interim Financial Information

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023 and the results of its operations and its cash flows for the three and six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The condensed balance sheet at December 31, 2022, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year period.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This standard became effective for the Company on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company's financial position or results of operations.

Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

3. Marketable Securities

As of June 30, 2023, the fair value of available-for-sale marketable debt securities by type of security was as follows:


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable debt securities:
U.S. Treasury notes	$	13,433	$	—	(43)		$	13,390
U.S. government agency bonds	11,167		—		(75)		11,092
Corporate bonds	$	17,037	$	—	$	(103)	$	16,934
	$	41,637	$	—	$	(221)	$	41,416

The amortized cost and fair value of the Company’s available-for-sale debt securities by contractual maturity are summarized as follows:


	June 30, 2023
	Amortized Cost		Fair Value
Maturing in one year or less	$	39,271	$	39,065
Maturing after one year	2,366		2,351
	$	41,637	$	41,416

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

As of December 31, 2022, the fair value of available-for-sale marketable debt securities by type of security was as follows:


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable debt securities:
U.S. Treasury notes	$	50,080	$	1	(714)		$	49,367
U.S. government agency bonds	10,957		—		(184)		10,773
Corporate bonds	$	13,891	$	—	$	(118)	$	13,773
	$	74,928	$	1	$	(1,016)	$	73,913

The amortized cost and fair value of the Company’s available-for-sale debt securities by contractual maturity are summarized as follows:


	December 31, 2022
	Amortized Cost		Fair Value
Maturing in one year or less	$	73,446	$	72,453
Maturing after one year	1,482		1,460
	$	74,928	$	73,913

The cost of securities sold is determined based on the specific identification method for purposes of recording realized gains and losses. During the six months ended June 30, 2023 the Company recorded $110 of realized losses on sales of marketable securities. During the six month ended June 30, 2022, there were no realized losses on sales of marketable securities. The Company has the intent and ability to hold such marketable securities until recovery and has determined that there has been no material change to their credit risk. As a result, the Company determined it did not hold any investments with a credit loss at June 30, 2023.

There were 15 securities held by the Company in an unrealized loss position for less than twelve months as of June 30, 2023. The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of June 30, 2023 was $27,552. There were 20 securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2022. The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2022 was $34,079. There were 7 securities held in an unrealized loss position for more than twelve months as of June 30, 2023. The aggregate fair value of securities held by the Company in an unrealized loss position for more than twelve months as of June 30, 2023 was $13,863. There were 18 securities held in an unrealized loss position for more than twelve months as of December 31, 2022. The aggregate fair value of securities held by the Company in an unrealized loss position for more than twelve months as of December 31, 2022 was $36,857. As of June 30, 2023 and December 31, 2022, the Company assessed the unrealized losses on its available for sale investments in debt securities and determined it does not intend to sell the securities and it is not likely that it will be required to sell the securities prior to recovery. The Company also determined no portion of the unrealized losses relate to a credit loss.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

4. Fair Value of Financial Assets

The following tables present information about the Company’s financial assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:


	Fair Value Measurements as of June 30, 2023 using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	6,736	$	—	$	—	$	6,736
Marketable securities:
U.S. Treasury notes	—		13,390		—		13,390
U.S. government agency bonds	—		11,092		—		11,092
Corporate bonds	—		16,934		—		16,934
	$	6,736	$	41,416	$	—	$	48,152


	Fair Value Measurements as of December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	31,189	$	—	$	—	$	31,189
Marketable securities:
U.S. Treasury notes	—		49,367		—		49,367
U.S. Government agency bonds	—		10,773		—		10,773
Corporate bonds	—		13,773		—		13,773
	$	31,189	$	73,913	$	—	$	105,102

As of June 30, 2023 and December 31, 2022, the Company’s cash equivalents were invested in money market funds and were valued based on Level 1 inputs. The Company’s investments in U.S. Treasury notes, U.S. government agency bonds and corporate bonds were valued based on Level 2 inputs. Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. treasury notes, U.S. government agency bonds and corporate bonds were valued by obtaining third-party pricing sources, which use quoted prices in active markets for similar securities or other inputs that are observable or can be corroborated by observable market data. These represent a Level 2 measurement within the fair value hierarchy. During the six months ended June 30, 2023 and 2022, there were no transfers between Level 1, Level 2 and Level 3.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

5. Collaboration and License Agreements

Novartis Agreement

In January 2016, the Company entered into a collaboration agreement with Novartis, which was subsequently amended in May 2016, July 2017, September 2017, and October 2018 (as amended, the “Novartis Agreement”). Pursuant to the Novartis Agreement, the Company granted Novartis a worldwide exclusive license to research, develop, manufacture and commercialize antibodies that target cluster of differentiation 73 (“CD73”). In addition, the Company initially granted Novartis the right to purchase exclusive option rights (each an “Option”) for up to four specified targets (each an “Option Target”) including certain development, manufacturing, and commercialization rights, pursuant to which, Novartis initially had the right to exercise up to three purchased Options. Accordingly, Novartis had the ability to exclusively license the development, manufacturing and commercial rights for up to four targets (inclusive of CD73). As of June 30, 2023, the Company had received an aggregate of $150,000 from Novartis in upfront payments, milestone payments, and option purchase payments. As of January 2020, there were no Options remaining for purchase and exercise, and accordingly the Company’s performance obligations under the Novartis Agreement ended. Under the Novartis Agreement, the Company is currently entitled to potential development milestones of $325,000 and sales milestones of $200,000, as well as tiered royalties on annual net sales by Novartis ranging from high single-digit to mid-teens percentages upon the successful commercialization of NZV930 (formerly SRF373). Due to the uncertainty of pharmaceutical development and the historical failure rates generally associated with drug development, the Company may not receive any milestone payments or any royalty payments under the Novartis Agreement.

The Company did not recognize any revenue relating to the Novartis Agreement during the three and six months ended June 30, 2023 and 2022 as it does not have any remaining performance obligations under the agreement.

Termination

Unless terminated earlier, the Novartis Agreement will continue in effect until neither the Company nor Novartis is researching, developing, manufacturing or commercializing NZV930. Novartis may terminate the Novartis Agreement for any or no reason upon prior notice to the Company within a specified time period. Either party may terminate the Novartis Agreement in full if an undisputed material breach is not cured within a certain period of time or upon notice of insolvency of the other party. To the extent Novartis terminates for convenience, or the Company terminates for Novartis’ uncured material breach, Novartis will grant the Company, on mutually agreeable financial terms, an exclusive, worldwide, irrevocable, perpetual and royalty-bearing license with respect to intellectual property controlled by Novartis that is reasonably necessary to research, develop, manufacture or commercialize NZV930.

GSK Agreement

In December 2020, the Company entered into a license agreement with GSK, which was subsequently amended in August 2021 (as amended, the “GSK Agreement”). Pursuant to the GSK Agreement, the Company granted GSK a worldwide exclusive, sublicensable license to develop, manufacture and commercialize antibodies that target the antibody GSK4381562 (formerly SRF813), targeting CD112R, also known as PVRIG (the “Licensed Antibodies”). GSK is responsible for the development, manufacturing and commercialization of the Licensed Antibodies and a joint development committee was formed to facilitate information sharing between the Company and GSK. GSK is responsible for all costs and expenses of such development, manufacturing and commercialization and is obligated to provide the Company with updates on its development, manufacturing and commercialization activities through the joint development committee. Under the terms of the GSK Agreement, GSK made a one-time upfront payment of $85,000 and was required to make additional payments to the Company for supply services and transition services initially estimated to be $4,314 and $950, respectively. In November 2021, GSK notified the Company it received clearance from the U.S. Food and Drug Administration (‘FDA”) for GSK4381562 to proceed into a first-in-human clinical trial, and as a result, the Company’s performance obligations under the GSK Agreement ended. In March 2022, the Company earned a $30,000 milestone payment from GSK upon the dosing of the first patient in the Phase 1 trial of GSK4381562. The Company is eligible to receive up to $60,000 in additional clinical milestones and $155,000 in regulatory milestones. In addition, the Company may receive up to $485,000 in sales milestone payments. The Company is also eligible to receive royalties on global net sales of any approved products based on the licensed antibodies, ranging in percentages from high single digits to mid-teens. Due to the uncertainty of pharmaceutical development and the historical failure rates generally associated with drug development, the Company may not receive any milestone payments or any royalty payments under the GSK Agreement.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

In March 2022, GSK notified the Company it had dosed the first patient in its Phase 1 study of GSK4381562 in patients with solid tumors. As a result of this Phase 1 study initiation, the first clinical milestone under the GSK Agreement was achieved. The Company concluded the variable consideration associated with this milestone was no longer constrained and recognized $30,000 in license-related revenue for the six months ended June 30, 2022, as it had no further performance obligations associated with the milestone. The Company did not recognize license-related revenue under the GSK Agreement during the three months ended June 30, 2022. The Company did not recognize license-related revenue under the GSK Agreement during the three and six months ended June 30, 2023.

Termination

Unless terminated earlier, the GSK Agreement expires on a licensed product-by-licensed product and country-by-country basis on the later of ten years from the date of first commercial sale or when there is no longer a valid patent claim or regulatory exclusivity covering such licensed product in such country. Either party may terminate the GSK Agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party. GSK may terminate the GSK Agreement for its convenience. The Company may terminate the GSK Agreement if GSK institutes certain actions related to the licensed patents or if GSK ceases development activities, other than for certain specified technical or safety reasons. In the event of termination, the Company would regain worldwide rights to the terminated program.

License-Related Revenue

For the three and six months ended June 30, 2023 and 2022, the Company recognized the following totals of license-related revenue:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
License-related revenue	$	—	$	—	$	—	$	30,000

6. Stockholders’ Equity

Common Stock

As of June 30, 2023 and December 31, 2022, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 150,000,000 shares of $0.0001 par value common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of any outstanding preferred stock. No dividends have been declared or paid by the Company through June 30, 2023.

As of June 30, 2023 and December 31, 2022, the Company had reserved 24,307,486 and 23,936,163 shares, respectively, of common stock for the exercise of outstanding stock options, shares to be issued under the 2021 ATM Facility, shares to be issued upon the vesting of restricted stock units and the number of shares remaining available for future grant under the Company’s 2018 Plan, Inducement Plan and ESPP (each defined in Note 7 below).

In August 2021, the Company entered into the Amended Sales Agreement with JonesTrading to allow the issuance and sale of up to $80,000 in shares of the Company’s common stock, from time to time. During the three and six months ended June 30, 2023, the Company did not sell shares of common stock, at-the-market under the Amended Sales Agreement. During the three and six months ended June 30, 2022, the Company sold 1,025,935 and 8,363,186 shares of common stock, at-the-market under the Amended Sales Agreement for net proceeds of $2,110 and $22,666. Since August 5, 2021, the Company has sold 14,611,756 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $41,421.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

7. Stock-Based Awards

2014 Stock Incentive Plan

The Company’s 2014 Stock Incentive Plan (the “2014 Plan”) provided for the Company to grant incentive stock options or nonqualified stock options, restricted stock awards, unrestricted stock awards or restricted stock units to employees, directors and consultants of the Company. The 2014 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 were determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of the stock options could not be less than 100% of the fair market value of a share of the Company’s common stock on the date of grant and the term of the stock options could not be greater than ten years.

As of December 31, 2018, all remaining shares available under the 2014 Plan were transferred to the Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”).

2018 Stock Option and Incentive Plan

In April 2018, the Company’s 2018 Plan was approved by its stockholders and became effective. The 2018 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, non-employee directors and other key persons (including consultants). The number of shares initially reserved for issuance under the 2018 Plan was 1,545,454, plus the shares of common stock remaining available for issuance under the 2014 Plan, the reserved shares shall be cumulatively increased each January 1 by 4% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation committee of the board of directors. The shares of common stock underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2018 Plan and the 2014 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan.

As of June 30, 2023, 1,457,618 shares were available for future issuance under the 2018 Plan.

Stock options granted under the 2014 Plan and 2018 Plan to employees generally vest over three years and expire after ten years.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)
Outstanding as of December 31, 2022	8,233,330	$	5.74	6.68	$	159
Granted	3,068,900	0.69
Exercised	(13,401)	0.35
Forfeited	(1,189,831)	2.65
Outstanding as of June 30, 2023	10,098,998	$	4.58	6.95	$	604
Options exercisable at June 30, 2023	6,305,828	$	5.78	5.66	$	188
Vested and expected to vest at June 30, 2023	10,098,998	$	4.58	6.95	$	604

Concurrent with the June Reduction in Force, 1,062,115 stock options were forfeited upon employee termination. The affected employees were provided severance benefits, including acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, pursuant to each affected employee’s employment agreement with the Company. Pursuant to the terms of the Merger Agreement, at the Effective Time, each In-the-Money Option, will be converted into the right to receive a number of shares of Parent Common Stock equal to the Exchange Ratio and a number of CVRs equal to the vested and unvested shares of Company Common Stock underlying the In-the-Money Option. Each Underwater Option held by a Company employee who is not a Covered Employee will be cancelled. This modification to the terms of their awards was accounted for as a Type IV modification as it was improbable-to-improbable that the forfeited awards would vest, which would result in a new modification date fair value. If the Closing occurs within six months of such termination, compensation expense will be recorded upon the Closing equal to the modification date fair value of the award.

The weighted average grant-date fair value per share of stock options granted during the six months ended June 30, 2023 and year ended December 31, 2022 was $0.50 and $2.28, respectively.

As of June 30, 2023 and December 31, 2022, there were outstanding stock options held by non-employees for the purchase of 247,169 and 260,570 shares of common stock, respectively, with service-based vesting conditions.

2018 Employee Stock Purchase Plan

In April 2018, the Company’s 2018 Employee Stock Purchase Plan (the “ESPP”) was approved by its stockholders and became effective. A total of 256,818 shares of common stock were initially reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued under the ESPP automatically increased on January 1, 2019, and shall increase each January 1 thereafter through January 1, 2028, by the lesser of (i) 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 and (ii) such lesser number of shares as determined by the administrator of the Company’s ESPP. As of June 30, 2023, a total of 1,873,627 shares of common stock were reserved for issuance under this plan.

For the six months ended June 30, 2023, the Company issued 137,917 shares of common stock under the ESPP. The Company did not issue shares of common stock under the ESPP during the three months ended June 30, 2023. For the three and six months ended June 30, 2022, the Company issued 2,234 and 53,563 shares of common stock under the ESPP, respectively.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

2021 Inducement Plan

In December 2021, the Company adopted the Company’s 2021 Inducement Plan (the “Inducement Plan”) pursuant to which the Company reserved 600,000 shares of common stock to be used exclusively for grants of equity-based awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Marketplace Rules of the Nasdaq Stock Market, Inc. The Inducement Plan provides for the grant of equity-based awards in the form of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, unrestricted stock awards, and dividend equivalent rights. The Inducement Plan was adopted by the Company without stockholder approval pursuant to Rule 5635(c)(4) of the Marketplace Rules of the Nasdaq Stock Market, Inc.

The following table summarizes the Company’s stock option under the Inducement Plan activity since December 31, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)
Outstanding as of December 31, 2022	210,400	$	2.61	9.36	$	—
Granted	—	—
Exercised	—	—
Forfeited	(9,113)	3.12
Outstanding as of June 30, 2023	201,287	$	2.59	8.87	$	—
Options exercisable at June 30, 2023	41,457	$	3.26	8.72	$	—
Vested and expected to vest at June 30, 2023	201,287	$	2.59	8.87	$	—

The Company did not grant stock options under the Inducement Plan during the three and six months ended June 30, 2023. The weighted average grant-date fair value per share of stock options granted during the six months ended June 30, 2022 was $1.99. As of June 30, 2023, 398,713 shares were available for future issuance under the Inducement Plan.

Restricted Stock Units

The Company has granted restricted stock units (“RSUs”) with service-based vesting conditions. RSUs represent the right to receive shares of common stock upon meeting specified vesting requirements. Unvested shares of restricted common stock units may not be sold or transferred by the holder. These restrictions lapse according to the service-based vesting conditions of each award. In 2022, the Company granted 732,000 RSUs to employees. 40% of each employee grant vested in August 2022 and the remaining 60% will vest in August 2023, as long as the applicable individual remains an employee of the Company at such time.

The table below summarizes the Company’s RSU activity since December 31, 2022:


	Number of Shares	Weighted Average Grant-Date Fair Value
Unvested restricted stock units as of December 31, 2022	385,980	$	3.64
Granted	—	—
Vested	—	—
Forfeited	(107,100)	3.64
Unvested restricted stock units as of June 30, 2023	278,880	$	3.64

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Concurrent with the June Reduction in Force, 103,920 RSUs were forfeited upon employee termination. The affected employees were provided severance benefits, including acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, pursuant to each affected employee’s employment agreement with the Company. Pursuant to the terms of the Merger Agreement, at the Effective Time, each Company RSU Award, whether vested or unvested, that is outstanding immediately prior to the Effective Time will automatically be converted into the right to receive the Merger Consideration in respect of each share of Company Common Stock subject to such Company RSU Award, subject to certain exceptions for fractional shares and applicable withholdings. This modification to the terms of their awards was accounted for as a Type IV modification as it was improbable-to-improbable that the forfeited awards would vest, which would result in a new modification date fair value. If the Closing occurs within six months of such termination, compensation expense will be recorded upon the Closing equal to the Merger Consideration.

The Company recorded an immaterial amount of expense related to RSUs during the three months ended June 30, 2023. The expense related to RSUs granted to employees was $341 during the six months ended June 30, 2023, and $610 and $819 for the three and six months ended June 30, 2022, respectively.

Stock-Based Compensation

The Company recorded stock-based compensation expense related to stock options, ESPP and restricted stock unit awards in the following expense categories of its condensed consolidated statements of operations and comprehensive loss:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Research and development expenses	$	371	$	777	$	1,017	$	1,360
General and administrative expenses	815		1,296		1,815		2,578
	$	1,186	$	2,073	$	2,832	$	3,938

As of June 30, 2023, the Company had an aggregate of $6,620 of unrecognized stock-based compensation cost, which is expected to be recognized over a weighted average period of 1.56 years.

8. Debt

On November 22, 2019, the Company entered into a loan and security agreement (the “Loan Agreement”) with K2HV (the “Lender”), as amended on October 1, 2021 and September 21, 2022.

In connection with the announcement of the Mergers, on June 15, 2023, the Company paid in full all outstanding loan obligations due to the Secured Parties. Pursuant to the payoff letter, dated June 15, 2023, between the Company and the Secured Parties, the Loan Agreement terminated on June 16, 2023, when the Company paid in full all outstanding loan obligations of $25,000 due to the Secured Parties, along with $3,250 in fees and expenses pertaining to the termination of the Loan Agreement. At such time, all liens securing the Company’s obligations under the Loan Agreement were released.

The Company recorded interest expense related to the loan facility of $3,108 and $4,040, and $733 and $1,415 for the three and six months ended June 30, 2023 and 2022, respectively. The Company recorded $2,456 of interest expense in the three months ended June 30, 2023 related to the termination of the Loan Agreement, of which $1,250 related to the pre-payment penalty and $1,206 related to the unamortized debt discount and final fees at the time of the termination.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

9. Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Basic and diluted net loss per share:
Numerator:
Net loss	$	(28,192)	$	(25,213)	$	(47,933)	$	(19,014)
Denominator:
Weighted average commons shares outstanding — basic and diluted	60,717,899		54,654,822		60,673,195		51,647,148
Net loss per share — basic and diluted	$	(0.46)	$	(0.46)	$	(0.79)	$	(0.37)

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2023, as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated above because including them would have had an anti-dilutive effect:


	June 30,
	2023	2022
Stock options to purchase common stock	10,300,285	8,968,131
Shares to be issued under the 2018 ESPP	1,873,627	1,500,500
RSUs issued and expected to vest	278,880	711,000
Shares available from conversion of note payable	—	832,677
	12,452,792	12,012,308

10. Income Taxes

The Company did not provide for any income taxes for the three and six months ended June 30, 2023 or 2022.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of June 30, 2023 and December 31, 2022. Management reevaluates the positive and negative evidence at each reporting period.

As of June 30, 2023 and December 31, 2022, the Company had no accrued interest or tax penalties recorded. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years are still open under statute from 2019 to present. All years may be examined to the extent the tax credit or net operating loss carryforwards are used in future periods. There are currently no federal or state audits.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

11. Leases

Termination of BMR-Hampshire Lease

In connection with the announcement of the Mergers, on June 15, 2023, the Company entered into the Termination Agreement with the Landlord pursuant to which the parties agreed to terminate, as of September 15, 2023, as such date may be extended by the Company or accelerated by the Landlord subject to the terms of the Termination Agreement (such date, the “Termination Date”), the Lease, by and between the Landlord and the Company, relating to the Premises. The original scheduled termination date of the Lease was March 31, 2030.

As consideration for the Company entering into the Termination Agreement, the Company agreed to pay $10,000 to the Landlord, with approximately $1,595 due upon execution of the Termination Agreement, and $8,405 being due on or before the Termination Date, subject to the terms and conditions of the Termination Agreement. The Company will have no further rent obligations to the Landlord pursuant to the Lease after the Termination Date.

As a result of the lease termination, the Company reduced the remaining lease payments by approximately $30,700.The Termination Agreement was accounted for as a lease modification in the three months ended June 30, 2023 and reduced the right-of-use asset and lease liability by approximately $19,500. The lease continues to qualify as an operating lease.

Sublease Agreement with EQRx, Inc.

In May 2022, the Company entered into the second amendment to the Sublease Agreement (as amended, the “Sublease Amendment”). The Sublease Amendment extended the term of the sublease for a period of 18 months, with an option to extend the sublease for a further six months upon the expiration of the Sublease Amendment. The Sublease Amendment has been accounted for as a single-modified contract. The Company determined the Sublease Amendment would continue to be accounted for as an operating lease. Consistent with the Company’s policy election for lessor operating leases, each lease component and its associated non-lease components is accounted for as a single lease component.

Concurrent with the Termination Agreement, the Sublease Agreement, as amended, terminates on the Termination Date.

In the three and six months ended June 30, 2023 and 2022, the Company recognized sublease income of $647 and $1,290, and $648 and $1,304, respectively.

As of June 30, 2023, future undiscounted cash inflows under the sublease are as follows:


Year Ending December 31,
2023	$	636
	$	636

12. Commitments and Contingencies

Legal Proceedings

The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings.

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SURFACE ONCOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

13. Related Party Transactions

Novartis Institutes for BioMedical Research, Inc.

Novartis is a related party because it is a greater than 5% stockholder of the Company. In January 2016, the Company entered into the Novartis Agreement and sold 2,000,000 shares of its Series A-1 Preferred Stock to Novartis for gross proceeds of $13,500. In addition, concurrent with the Company’s initial public offering of common stock, the Company issued Novartis 766,666 shares of its common stock at $15.00 per share, for proceeds of $11,500 in a private placement.

During the three and six months ended June 30, 2023 and 2022, the Company made no cash payments to Novartis related to the Novartis Agreement. As of June 30, 2023 and 2022, no amounts were due from Novartis. The Company did not recognize any collaboration revenue - related party under the Novartis Agreement in the three and six months ended June 30, 2023 or 2022.

14. Restructuring

On June 15, 2023, the Company’s Board of Directors approved the Merger Agreement. Concurrent with the signing of the Merger Agreement, the Company announced the June Reduction in Force. In connection with the June Reduction in Force, the affected employees were provided severance benefits, including cash severance payments, acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, and COBRA continuation or reimbursement, pursuant to each affected employee’s employment agreement. During the three and six months ended June 30, 2023, the Company recorded $3,234 of restructuring charges consisting of $2,301 of employee severance and related costs and $933 of facility costs related to accelerated depreciation on laboratory equipment and computer equipment that is no longer required and will be disposed of.

The accrued restructuring liability of $2,301 is payable within the next two months and has been included as accrued restructuring costs in current liabilities in the consolidated balance sheet. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Merger Agreement.

The Company also completed an evaluation of the impact of the Termination Agreement on the carrying value of its other long-lived assets. This process includes evaluating the estimated remaining lives, significant changes in the use, and potential impairment charges related to its long-lived assets. Based on its evaluation, the Company determined it will accelerate depreciation on its leasehold improvements to coincide with the remaining lease term as a result of the Termination Agreement.

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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 unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2022 included in our Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission, or the SEC.

Overview

We are a clinical-stage immuno-oncology company focused on using our specialized knowledge of the biological pathways critical to the immunosuppressive tumor microenvironment, or the TME, for the development of next-generation cancer therapies. While first-generation immuno-oncology therapies, such as checkpoint inhibitors, represented a remarkable therapeutic advancement, we believe most patients do not achieve durable clinical benefit primarily because these therapies focus on only one element of the complex and interconnected immunosuppressive TME. We believe there is a significant opportunity to more broadly engage both the innate and adaptive arms of the immune system in a multi-faceted, coordinated and patient-specific approach, to meaningfully improve cure rates for patients with a variety of cancers.

We aim to identify key components within the TME to gain a deep understanding of its biology, leverage this understanding to define the optimal therapeutic targets and the patients most likely to benefit, and develop novel antibody therapeutics with differentiated biologic activity. By utilizing our expertise in immunology, oncology, assay development, antibody selection and characterization, and translational research, we are developing and advancing a broad pipeline of TME-focused programs that we believe are the next generation of immuno-oncology therapies. Our programs demonstrate our multi-faceted approach by targeting several critical components of the immunosuppressive TME.

Our lead program, SRF388, is an antibody targeting interleukin 27, or IL-27, an immunosuppressive cytokine, or protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell carcinoma. IL-27 is a cytokine secreted by macrophages and antigen presenting cells that plays an important physiologic role in suppressing the immune system, as evidenced by its ability to resolve tissue inflammation. In addition, one of the subunits of IL-27, EBI3, is highly expressed during pregnancy and its expression is correlated with maternal-fetal tolerance. Due to its immunosuppressive nature, there is a rationale for inhibiting IL-27 to treat cancer, as this approach will influence the activity of multiple types of immune cells that are necessary to recognize and attack a tumor. SRF388 received orphan drug designation and fast track designation from the United States Food and Drug Administration, or FDA, for the treatment of hepatocellular carcinoma, or HCC, in November 2020. We initiated Phase 2 clinical trials evaluating SRF388 in patients with HCC and non-small-cell lung cancer, or NSCLC, in April 2022. In June 2022, at the 2022 American Society of Clinical Oncology, or ASCO, Annual Meeting, we presented initial Phase 1/1b data demonstrating clinical activity in multiple solid tumor types. We observed confirmed partial responses in two patients who received SRF388 monotherapy, one in NSCLC and one in clear cell renal cell carcinoma, or RCC. In addition, we observed a partial response in a patient who was treated with SRF388 in combination with pembrolizumab for HCC. In November, we announced that a second patient with NSCLC experienced a confirmed partial response to SRF388 monotherapy treatment, and another patient with highly pretreated NSCLC experienced durable disease stabilization which, at the time, had continued for more than 56 weeks. We are no longer enrolling RCC patients in our Phase 1 SRF388 monotherapy and combination trial in order to focus efforts on NSCLC and HCC based on encouraging data seen in those indications. In June 2023, we announced data from the Phase 2 clinical study evaluating SRF388 as a monotherapy in NSCLC. We observed two confirmed partial responses in PD-L1 negative or low patients with squamous NSCLC, as well as one confirmed report of durable disease stabilization in a patient with adenocarcinoma. We expect to provide follow-up data by the end of the year.

Our second clinical-stage program, SRF114, is a highly specific afucosylated immunoglobulin isotype G1, or IgG1, antibody targeting CCR8, a chemokine receptor highly expressed on regulatory T cells, or Treg cells, in the TME. SRF114 is designed to cause depletion of intra-tumoral Treg cells, important regulators of immune suppression and tolerance, through antibody-dependent cellular cytotoxicity, or ADCC, and/or antibody-dependent cellular phagocytosis, or ADCP, leading to anti-tumor activity in preclinical models. In January 2023, we initiated a Phase 1/2 clinical trial investigating SRF114 in patients with advanced solid tumors. Part A, the monotherapy dose-escalation portion of the study, will evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics, and preliminary efficacy of SRF114 in patients with advanced solid tumors. Once Part A is completed, Part B will evaluate SRF114 in up to 40 patients with head and neck squamous cell carcinoma, or HNSCC, as a monotherapy. We expect to provide initial clinical data in 2024.

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Our third clinical-stage program, SRF617 is an antibody designed to inhibit cluster of differentiation-39, or CD39. CD39 is a critical enzyme involved in the production of extracellular adenosine, a key metabolite with strong immunosuppressive properties within the TME. SRF617 aims to reduce the production of immunosuppressive adenosine, and we believe SRF617 has the potential to stimulate anti-tumor immunity because of its ability to maintain levels of extracellular adenosine triphosphate, or ATP. In November 2022, we announced the strategic decision to pause further development of the SRF617 program due to business considerations.

We expect that the unique insights generated in any one of our product programs will accelerate the development of the other programs in a synergistic fashion due to the interconnections between these TME pathways.

In addition to our internal programs, we have two programs, NZV930 and GSK4381562, which are exclusively licensed to Novartis Institutes for Biomedical Research, Inc., or Novartis, and GlaxoSmithKline, or GSK, respectively.

In January 2016, we granted Novartis a worldwide exclusive license to research, develop, manufacture, and commercialize NZV930. NZV930 is an antibody designed to inhibit cluster of differentiation 73, or CD73, which is a critical enzyme involved in the production of extracellular adenosine, a key metabolite with strong immunosuppressive properties within the TME. NZV930 aims to reduce the production of immunosuppressive adenosine within the TME.

In December 2020, we granted GSK an exclusive license to the worldwide development and commercialization rights for GSK4381562. GSK4381562 is an antibody targeting CD112R, also known as PVRIG, an inhibitory protein expressed on natural killer, or NK, and T cells. GSK4381562 blocks the interaction of CD112R with CD112, its binding partner that is expressed on tumor cells. GSK4381562 can promote the activation of both NK and T cells, with potential to elicit a strong anti-tumor response and promote immunological memory.

Effective November 1, 2022, our Board of Directors approved a strategic decision to pause the internal clinical development of SRF617, a novel antibody targeting CD39, and focus resources on the advancement of our SRF388 and SRF114 programs, which we believe hold the greatest near-term potential to provide benefit to patients. We also implemented a corporate restructuring which reduced our workforce by approximately 20%. The majority of the personnel and program restructuring were completed during the fourth quarter of 2022. We recorded a charge in the fourth quarter of 2022 of $4.0 million, consisting of severance, benefits, outplacement services and costs associated with terminating contracts.

Proposed Transaction with Coherus BioSciences, Inc.

On June 15, 2023, we entered into an Agreement and Plan of Merger, or the Merger Agreement, by and among Coherus BioSciences, Inc., a Delaware corporation, or Parent, Crimson Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of Parent, or Merger Sub I, and Crimson Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent, or Merger Sub II, and together with Merger Sub I, or the Merger Subs.

Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Merger Sub I will merge with and into the Company, or the First Merger, with the Company surviving such First Merger as a wholly owned subsidiary of Parent, and, as part of the same overall transaction, promptly after the First Merger, the surviving entity of the First Merger will merge with and into Merger Sub II, or the Second Merger and together with the First Merger, or the Mergers, with Merger Sub II surviving the Second Merger, or the Surviving Entity.

Under the Merger Agreement, at the effective time of the First Merger, or the Effective Time, each of our shares of common stock, $0.0001 par value per share, or the Company Common Stock issued and outstanding immediately prior to the Effective Time (other than treasury shares, any shares of Company Common Stock held directly by Parent or Merger Subs immediately prior to the Effective Time and shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by any holder who properly demands appraisal for such shares in accordance with Section 262 of the Delaware General Corporation Law) will be converted automatically into and shall thereafter represent the right to receive consideration per share consisting of:

•a number of shares of common stock, par value $0.0001 per share, of Parent, or the Parent Common Stock equal to the exchange ratio, or the Exchange Ratio determined by dividing (x) the quotient obtained by dividing (1) $40.0 million plus our net cash as of the closing of the Mergers, or the Closing, as calculated in accordance with the Merger Agreement, by (2) $5.2831, or the Parent Stock Price, by (y) the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement, or the Upfront Consideration, plus any cash payable in lieu of a fractional share of Parent Common Stock; and

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•one contingent value right, or a CVR, representing the right to receive the CVR Payment Amount (as defined in the Merger Agreement), as provided for in the CVR Agreement (as defined in the Merger Agreement) collectively, with the Upfront Consideration, or the Merger Consideration.

In connection with the announcement of the Mergers, on June 15, 2023, we were required under the terms of that certain Loan and Security Agreement, or the Loan Agreement, dated November 22, 2019, as amended on October 1, 2021 and September 21, 2022, by and among K2 HealthVentures, LLC and Ankura Trust Company, LLC, or collectively, the Secured Parties and the Company, to pay in full all outstanding loan obligations due to the Secured Parties. In addition, on June 15, 2023, we entered into a Lease Termination Agreement, or the Termination Agreement, with BMR-Hampshire LLC, or the Landlord, pursuant to which the parties agreed to terminate that certain Lease, or the Lease, relating to our corporate headquarters at 50 Hampshire Street in Cambridge, MA, or the Premises. As consideration for us entering into the Termination Agreement, we agreed to pay $10.0 million to the Landlord. As a result of the Termination Agreement, we reduced the remaining lease payments by approximately $30.7 million. We accounted for the Termination Agreement as a lease modification in the three months ended June 30, 2023 and reduced the right-of-use asset and lease liability by approximately $19.5 million.

Concurrent with the signing of the Merger Agreement, we announced a reduction in force as part of our cost savings efforts that is expected to result in the termination of approximately 50% of our remaining workforce, or the June Reduction in Force. In connection with the June Reduction in Force, the affected employees will be provided severance benefits, including cash severance payments, acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, and COBRA continuation or reimbursement, pursuant to each affected employee’s employment agreement with us or any applicable severance policy. Each affected employee’s eligibility for these severance benefits is contingent upon such employee’s entering into an effective separation agreement, which includes a general release of claims against us.

We were incorporated and commenced principal operations in 2014. We have devoted substantially all of our resources to developing our programs, including SRF388, SRF114, SRF617, NZV930 and GSK4381562, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations with proceeds from public and private sales of our securities, payments received under our collaboration agreement with Novartis and license agreement with GSK and a debt financing. As of June 30, 2023, we had cash, cash equivalents and marketable securities of $56.3 million. Since our inception, we have incurred significant losses. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of the product candidates we develop. Our net loss was $28.2 and $47.9 million for the three and six months ended June 30, 2023. Our net loss was $25.2 and $19.0 million for the three and six months ended June 30, 2022. As of June 30, 2023, we had an accumulated deficit of $252.3 million. We expect to continue to incur significant expenses and operating losses, particularly as we:

•pursue the clinical development of product candidates;

•leverage our programs to advance product candidates into preclinical and clinical development;

•seek regulatory approvals for any product candidates that successfully complete clinical trials;

•hire additional clinical, quality control, and scientific personnel;

•expand our operational, financial, and management systems and increase personnel, including personnel to support our clinical development, manufacturing, and commercialization efforts, and our operations as a public company;

•maintain, expand and protect our intellectual property portfolio;

•establish a sales, marketing, medical affairs, and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly with a commercial partner; and

•acquire or in-license other product candidates and technologies.

As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. 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 may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates.

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Because of the numerous risks and uncertainties associated with product development, 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 revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We believe that our existing cash, cash equivalents and marketable securities, as of June 30, 2023 will enable us to fund our operating expenses and capital expenditure requirements through 2023, excluding any future milestone payments from Novartis or GSK. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to do so in the near future. All of our revenue to date has been derived from our collaboration agreement with Novartis and our license agreement with GSK. If our development efforts for our programs are successful and result in regulatory approval or additional license or collaboration agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from additional collaboration or license agreements that we may enter into with third parties. We expect that our revenue for the next several years will be derived primarily from our collaboration agreement with Novartis and our license agreement with GSK, as well as any additional collaborations or licenses that we may enter into in the future.

Collaboration Agreement with Novartis

In January 2016, we entered into a collaboration agreement with Novartis, which was subsequently amended in May 2016, July 2017, September 2017 and October 2018, or as amended, the Novartis Agreement, to develop next-generation cancer therapies. Under the Novartis Agreement, as amended, we were responsible for performing research on antibodies that bind to CD73 and four other specified targets. We were responsible for all costs and expenses incurred by, or on behalf of, us in connection with the research.

Upon entering into the Novartis Agreement, we received an upfront payment of $70.0 million from Novartis and granted Novartis a worldwide exclusive license to research, develop, manufacture and commercialize antibodies that target CD73. In addition, we initially granted Novartis the right to purchase exclusive option rights, each an Option, to up to four specified targets, including certain research, development, manufacturing and commercialization rights. Pursuant to the Novartis Agreement, Novartis initially had the right to exercise up to three purchased Options. In January 2020, Novartis did not purchase and exercise its single remaining Option under the Novartis Agreement and, as a result, the option purchase period expired. Accordingly, there are no Options remaining eligible for purchase and exercise by Novartis, and our performance obligations under the Novartis Agreement have ended. We are currently entitled to potential development milestones of $325.0 million; and potential sales milestones of $200.0 million, as well as tiered royalties on annual net sales of NZV930 by Novartis ranging from high single-digit to mid-teens percentages. Such amounts of potential milestone payments assume the successful clinical development and achievement of all sales milestones for NZV930.

Under ASC 606 we accounted for (i) the license conveyed with respect to CD73 and (ii) our obligations to perform research on CD73 and other specified targets as a single performance obligation under the Novartis Agreement. We recognize 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. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion.

Through June 30, 2023, we had received an aggregate of $150.0 million from Novartis in upfront payments, milestone payments, and option purchase payments. As of January 2020, we no longer had any performance obligations under the Novartis Agreement. We did not recognize any collaboration revenue - related party in the three and six months ended June 30, 2023 or 2022.

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License Agreement with GSK

In December 2020, we entered into a license agreement with GSK, which was subsequently amended in August 2021 or, as amended, the GSK Agreement, under which we granted GSK a worldwide exclusive, sublicensable license to develop, manufacture and commercialize antibodies that target the antibody GSK4381562, targeting CD112R, also known as PVRIG, or the Licensed Antibodies. GSK is responsible for the development, manufacturing and commercialization of the Licensed Antibodies and a joint development committee was formed to facilitate information sharing between us and GSK. Under the terms of the GSK Agreement, GSK is obligated to use commercially reasonable efforts to develop and commercialize the Licensed Antibodies. Pursuant to the August 2021 amendment to the GSK Agreement, we provided additional transition and supply services related to the development and manufacturing of the Licensed Antibodies.

Under the terms of the GSK Agreement, GSK made a one-time upfront payment of $85.0 million and was required to make additional payments to us for supply services and transition services initially estimated to be $4.3 million and $1.0 million, respectively. In March 2022, GSK initiated a Phase 1 clinical trial of GSK4381562 in patients with solid tumors, triggering a $30.0 million milestone payment. We are eligible to receive up to $60.0 million in additional clinical milestones and $155.0 million in regulatory milestones. In addition, we may receive up to $485.0 million in sales milestone payments. We are also eligible to receive royalties on global net sales of any approved products based on the licensed antibodies, ranging in percentages from high single digits to mid-teens. Such amounts of potential milestone payments assume the successful clinical development and achievement of all sales milestones for GSK4381652.

Under ASC 606 we account for (i) the delivery of the worldwide, exclusive, sublicensable license to develop, manufacture and commercialize the Licensed Antibodies; (ii) supply of Licensed Antibodies until an investigational new drug, or IND, application is accepted by a regulatory authority; and (iii) transition services until an IND application is accepted by a regulatory authority as separate and distinct performance obligations. We determined the transaction price under ASC 606 at the inception of the GSK Agreement to be $90.3 million, consisting of the upfront payment of $85.0 million plus $4.5 million for supply of the Licensed Antibodies and $0.8 million for the transition services. We recognized revenue for the license performance obligation at a point in time, which is upon transfer of the license to GSK. As control of the license was transferred on the effective date of December 16, 2020 and GSK could begin to use and benefit from the license, we recognized $85.0 million of license-related revenue during the year ended December 31, 2020 under the GSK Agreement. We recognized the portion of the transaction price allocated to supply services and transition services over time. We transfer control of these services over time and GSK receives and consumes the benefit over time as we perform the services.

In November 2021, GSK received clearance from the FDA for GSK4381562 to proceed into a first-in-human clinical trial and as a result our performance obligations under the GSK Agreement ended. No amount of the transaction price allocated to the performance obligations was unsatisfied as of November 2021.

In March 2022, GSK notified us it had dosed the first patient in their Phase 1 study of GSK4381562 in patients with solid tumors. As a result of this Phase 1 study initiation, the first clinical milestone under the GSK Agreement was achieved. We concluded the variable consideration associated with this milestone was no longer constrained and recognized $30.0 million in license-related revenue for the six months ended June 30, 2022, as we had no further performance obligations associated with the milestone. We did not recognize license-related revenue under the GSK Agreement in the three months ended June 30, 2022. We did not recognize license-related revenue under the GSK Agreement in the three and six months ended June 30, 2023.

Through June 30, 2023, we have received $85.0 million from GSK in upfront payments, $30.0 million in clinical milestones and $5.3 million in reimbursement for the transition and supply services performed.

Operating Expenses

Research and Development Expenses

Research and development expenses are expensed as incurred and consist of costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:

•salaries, benefits and other related costs, including stock-based compensation, for personnel engaged in research and development functions;

•expenses incurred in connection with the preclinical development of our programs and clinical trials of our product candidates, including under agreements with third parties, such as consultants, contractors, and contract research organizations, or CROs;

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•the cost of manufacturing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants, contractors, and contract manufacturing organizations, or CMOs;

•laboratory supplies;

•facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities, insurance and supplies; and

•third-party license fees.

We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to personnel, early research and consumable costs, which are deployed across multiple projects under development. These costs are included in unallocated research and development expenses in the table below. A portion of our research and development costs are external costs, which we do track on a program-by-program basis.

The following table summarizes our research and development expenses by program:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

	(in thousands)				(in thousands)
SRF388	4,232		5,202		8,435		10,086
SRF114	1,320		1,595		2,651		2,930
SRF617	1,679		4,258		3,261		8,016
GSK4381562	—		—		—		4
Other early-stage programs	182		61		360		146
Unallocated research and discovery expenses	6,418		7,082		12,901		13,640
Total research and development expenses	$	13,831	$	18,198	$	27,608	$	34,822

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 anticipate that our research and development expenses will decrease in the future as a result of the strategic decision to pause the SRF617 program as well as the reduction in headcount relating to the merger agreement announced in June 2023. This will be partially offset by increased clinical development costs as we advance our SRF388 Phase 2 clinical trials and SRF114 Phase 1/2 clinical trial.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of any of our product candidates that we develop from our programs. We are also unable to predict when, if ever, net cash inflows will commence from sales of product candidates we develop. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

•successful completion of clinical trials and preclinical studies;

•sufficiency of our financial and other resources to complete the necessary clinical trials and preclinical studies;

•acceptance of INDs for our planned clinical trials or future clinical trials;

•successful enrollment and completion of clinical trials;

•successful data from our clinical program that supports an acceptable risk-benefit profile of our product candidates in the intended populations;

•receipt of regulatory and marketing approvals from applicable regulatory authorities;

•receipt and maintenance of marketing approvals from applicable regulatory authorities;

•establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates are approved;

•entry into collaborations to further the development of our product candidates;

•obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates;

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•successfully launching commercial sales of our product candidates, if and when approved;

•acceptance of our product candidates’ benefits and uses, if and when approved, by patients, the medical community and third-party payors;

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

•effectively competing with other therapies; and

•obtaining and maintaining healthcare coverage and adequate reimbursement from third-party payors.

A change in the outcome of any of these variables with respect to the development of any of our programs or any product candidate we develop would significantly change the costs, timing, and viability associated with the development of such program or product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees paid for accounting, auditing, consulting and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.

We anticipate that our general and administrative expenses will decrease in the future as a result of a reduction in headcount relating to the merger agreement announced in June 2023. This will be partially offset by increases in accounting, audit, legal, regulatory, compliance as well as investor and public relations expenses associated with operating as a public company.

Impairment and Restructuring Expenses

Impairment and restructuring expenses consist of the write down of certain personal property assets classified as held for sale as well as certain restructuring charges recognized during the periods.

Interest and Other Income (Expense), Net

Interest and other income consist primarily of interest earned on our cash, cash equivalents, and marketable securities as well as interest paid on our loan and security agreement, or the Loan Agreement, with K2HV.

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Results of Operations

Comparison of Three Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022, along with the changes in those items:


	Three months ended June 30,
	2023		2022		2023 v 2022
	(in thousands)
License related revenue	$	—	$	—	$	—
Operating expenses:
Research and development	13,831		18,198		(4,367)
General and administrative	8,576		6,426		2,150
Restructuring charges	3,234		—		3,234
Total operating expenses	25,641		24,624		1,017
Loss from operations	(25,641)		(24,624)		(1,017)
Interest and other expense, net	(2,551)		(589)		(1,962)
Net loss	$	(28,192)	$	(25,213)	$	(2,979)

License-Related Revenue

We did not recognize license-related revenue during the three months ended June 30, 2023 or June 30, 2022.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended June 30, 2023 and 2022, along with the changes in those items:


	Three months ended June 30,
	2023		2022		2023 v 2022
	(in thousands)
Direct research and development expenses by program:
SRF388	$	4,232	$	5,202	$	(970)
SRF114	1,320		1,595		(275)
SRF617	1,679		4,258		(2,579)
GSK4381562	—		—		—
Other early-stage programs	182		61		121
Research and discovery and unallocated expenses:
Personnel related (including stock-based compensation)	2,838		4,825		(1,987)
Facility related and other	3,580		2,257		1,323
Total research and development expenses	$	13,831	$	18,198	$	(4,367)

Research and development expenses were $13.8 million for the three months ended June 30, 2023, compared to $18.2 million for the three months ended June 30, 2022. The decrease of $4.4 million was primarily due to decreases of $1.0 million in external costs for our SRF388 program, $0.3 million in external costs for our SRF114 program, $2.6 million in external costs for our SRF617 program, and $0.7 million for research and discovery and unallocated costs, which were offset by an increase of $0.1 million in external costs for other early stage programs.

The decrease in research and development expenses for our SRF388 program was primarily due to a reduction in manufacturing costs.

The decrease in research and development expenses for our SRF114 program was primarily due to a reduction in manufacturing costs.

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The decrease in research and development expenses for our SRF617 program was primarily due to the strategic decision to pause the program as a part of our corporate restructuring in November 2022.

The decrease in research and discovery and unallocated expenses was primarily due to a decrease in stock-based compensation relating to the June Reduction in Force.

The increase in other early-stage programs was primarily due to preclinical costs for the development of new targets.

General and Administrative Expenses

General and administrative expenses were $8.6 million for the three months ended June 30, 2023, compared to $6.4 million for the three months ended June 30, 2022. The increase primarily relates to an increase in legal expenses and other professional fees associated with the Merger Agreement, partially offset by a decrease in personnel related costs from decreased headcount.

Impairment and Restructuring Expenses

During the three months ended June 30, 2023, we recognized an impairment charge of $0.9 million for expenses related to laboratory equipment and other long-lived assets that have been classified as held for sale and were written down to their fair value less cost to sell. In addition, we recognized $2.3 million for severance and related costs during the three months ended June 30, 2023 as a result of a reduction in workforce that was announced concurrent with the Merger Agreement in June 2023.

Interest and Other Income (Expense), Net

Interest and other income (expense), net was approximately $(2.6) million and $(0.6) million during the three months ended June 30, 2023 and 2022, respectively, due primarily to interest expense related to the Loan Agreement, as amended, partially offset by interest income on invested balances of our cash, cash equivalents and marketable securities. We recorded $2.5 million to interest expense in the three months ended June 30, 2023 related to the termination of the Loan Agreement, of which $1.3 million related to the pre-payment penalty and $1.2 million related to the unamortized debt discount and final fees at the time of the termination.

Comparison of Six Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022, along with the changes in those items:


	Six months ended June 30,
	2023		2022		2023 v 2022
	(in thousands)
License-related revenue	$	—	$	30,000	$	(30,000)
Operating expenses:
Research and development	27,608		34,822		(7,214)
General and administrative	14,460		12,967		1,493
Restructuring charges	3,234		—		3,234
Total operating expenses	45,302		47,789		(2,487)
Loss from operations	(45,302)		(17,789)		(27,513)
Interest and other expense, net	(2,631)		(1,225)		(1,406)
Net loss	$	(47,933)	$	(19,014)	$	(28,919)

License-Related Revenue

We did not recognize license-related revenue during the six months ended June 30, 2023. During the six months ended June 30, 2022, we recognized $30.0 million related to the achievement of the first clinical milestone under the GSK Agreement as a result of the first patient dosed in GSK’s Phase 1 study of GSK4381562 in patients with solid tumors in March 2022.

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Research and Development Expenses

The following table summarizes our research and development expenses for the six months ended June 30, 2023 and 2022, along with the changes in those items:


	Six months ended June 30,
	2023		2022		2023 v 2022
	(in thousands)
Direct research and development expenses by program:
SRF388	$	8,435	$	10,086	$	(1,651)
SRF114	2,651		2,930		(279)
SRF617	3,261		8,016		(4,755)
GSK4381562	—		4		(4)
Other early-stage programs	360		146		214
Research and discovery and unallocated expenses:
Personnel related (including stock-based compensation)	7,230		9,093		(1,863)
Facility related and other	5,671		4,547		1,124
Total research and development expenses	$	27,608	$	34,822	$	(7,214)

Research and development expenses were $27.6 million for the six months ended June 30, 2023, compared to $34.8 million for the six months ended June 30, 2022. The decrease of $7.2 million was primarily due to decreases of $1.7 million in external costs for our SRF388 program, $0.3 million in external costs for our SRF114 program, $4.8 million in external costs for our SRF617 program, and $(0.7) million for research and discovery and unallocated costs, which were partially offset by an increase of $0.2 million in external costs for other early-stage programs.

The decrease in research and development expenses for our SRF388 program was primarily due to a reduction in manufacturing costs.

The decrease in research and development expenses for our SRF114 program was primarily due to a reduction in manufacturing costs.

The decrease in research and development expenses for our SRF617 program was primarily due to the strategic decision to pause the program as a part of our corporate restructuring in November 2022.

The increase in other early-stage programs was primarily due to preclinical costs for the development of new targets.

The decrease in research and discovery and unallocated expenses was primarily due to a decrease in stock-based compensation relating to the June Reduction in Force.

General and Administrative Expenses

General and administrative expenses were $14.5 million for the six months ended June 30, 2023, compared to $13.0 million for the six months ended June 30, 2022. The increase of $1.5 million was primarily due to an increase in legal expenses and other professional fees associated with the Merger Agreement, partially offset by a decrease in personnel related costs from decreased headcount.

Impairment and Restructuring Expenses

During the six months ended June 30, 2023, we recognized an impairment charge of $0.9 million for expenses related to laboratory equipment and other long-lived assets that have been classified as held for sale and were written down to their fair value less cost to sell. In addition, we recognized $2.3 million for severance and related costs during the six months ended June 30, 2023 as a result of a reduction in workforce that was announced concurrent with the Merger Agreement in June 2023.

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Interest and Other Income (Expense), Net

Interest and other income (expense), net was approximately $(2.6) million and $(1.2) million during the six months ended June 30, 2023 and 2022, respectively, due primarily to interest expense related to the Loan Amendment partially offset by interest income on invested balances of our cash, cash equivalents and marketable securities. We recorded $2,456 to interest expense in the six months ended June 30, 2023 related to the termination of the Loan Agreement, of which $1,250 related to the pre-payment penalty and $1,206 related to the unamortized debt discount and final fees at the time of the termination.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have generated limited revenue to date from the Novartis Agreement and the GSK Agreement. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have financed our operations with proceeds from public and private sales of our securities, payments received under the Novartis Agreement, the GSK Agreement and a debt financing. Through June 30, 2023, we had received gross proceeds of $247.3 million from public and private sales of our securities, $25.0 million from the Loan Agreement with K2HV, $120.3 million from the GSK Agreement and $150.0 million from the Novartis Agreement.

In November 2019, we entered into the Loan Agreement with K2HV, which was subsequently amended in October 2021 and September 2022, pursuant to which K2HV agreed to make available to us term loans in an aggregate principal amount of up to $50.0 million, in three tranches. In connection with the announcement of the Merger Agreement, the Company paid in full all outstanding loan obligations due to the Secured Parties. In June 2023, the Company paid the outstanding principal balance of $25.0 million as well as $3.3 million in fees and expenses pertaining to the termination of the Loan Agreement. At such time, all liens securing the Company’s obligations under the Loan Agreement were released.

In August 2021, we entered into an amendment to our existing Capital on Demand™ Sales Agreement (the “Amended Sales Agreement”) with JonesTrading Institutional Services LLC, or JonesTrading, to allow the issuance and sale of up to $80.0 million in shares of our common stock, from time to time. As of June 30, 2023, we have sold 14,611,756 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $41.4 million.

Effective November 1, 2022, our Board of Directors approved a corporate restructuring to pause the internal clinical development of SRF617 and focus resources on the advancement of our SRF388 and SRF114 programs. We recorded a charge of $4.0 million in the fourth quarter of 2022, consisting of severance, benefits, outplacement services and costs associated with terminating contracts.

In June 2023, concurrent with the signing of the Merger Agreement, our Board of Directors approved a reduction in force as part of our cost savings efforts. We recorded a charge of $2.3 million in June 2023, consisting of severance and benefits costs.

On June 15, 2023, in connection with the announcement of the Merger Agreement, we entered into the Termination Agreement with the Landlord. As consideration for entering into the Termination Agreement, we agreed to pay $10.0 million to the Landlord, with approximately $1.6 million due upon execution of the Termination Agreement, and $8.4 million being due on or before the Termination Date, subject to the terms and conditions of the Termination Agreement. We will have no further rent obligations to the Landlord pursuant to the Lease after the Termination Date.

As of June 30, 2023, we had cash, cash equivalents and marketable securities of $56.3 million.

Effects of Inflation

We do not believe that inflation has had a material impact on our business or operating results during the periods presented. However, inflation, has had, and may continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to conduct clinical trials and other operational costs. Inflationary costs could adversely affect our business, financial condition and results of operations. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, any potential additional funding.

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Going Concern

Since our inception, we have incurred significant operating losses and negative cash flows from our operations. We have not yet commercialized any products and we do not expect to generate revenue from sales of any products for several years, if at all. As of June 30, 2023, Surface had cash, cash equivalents and marketable securities of $56.3 million. We expect that our research and development and general and administrative expenses will continue to be significant as we focus on advancing our SRF388 and SRF114 clinical development programs. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through 2023, excluding any future milestone payments from Novartis or GSK, but not for more than one year after the date that the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued.

These conditions and events raise substantial doubt about our ability to continue as a going concern for the one-year period following the issuance of our consolidated financial statements for the six months ended June 30, 2023. To finance our operations, we will need to raise additional capital, which cannot be assured. Unless and until we reach profitability in the future, we will require additional capital to fund our operations, which could be raised through a combination of equity or debt financings and collaboration and license arrangements, including the Novartis Agreement and GSK Agreement. If we are unable to obtain funding, we could be forced to delay, reduce, or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations.

Future Funding Requirements

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

•completing clinical development of existing product candidates and programs, identifying new product candidates, and completing pre-clinical and clinical development of such product candidates;

•seeking and obtaining marketing approvals for any of product candidates that we develop;

•launching and commercializing product candidates for which we obtain marketing approval by establishing a sales force, marketing, medical affairs and distribution infrastructure or, alternatively, collaborating with a commercialization partner;

•achieving adequate coverage and reimbursement by hospitals, government and third-party payors for product candidates that we develop;

•establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and the market demand for product candidates that we develop, if approved;

•obtaining market acceptance of product candidates that we develop as viable treatment options;

•addressing any competing technological and market developments;

•negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations in such collaborations;

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

•defending against third-party interference or infringement claims, if any; and

•attracting, hiring and retaining qualified personnel.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

In addition to the variables described above, if and when any product candidate we develop successfully completes development, we will incur substantial additional costs associated with regulatory filings, marketing approval, post-marketing requirements, maintaining our intellectual property rights, and regulatory protection, in addition to other costs. We cannot reasonably estimate these costs at this time.

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Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration and license arrangements, including the Novartis Agreement and GSK Agreement. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate development or future commercialization efforts.

Cash Flows

The following table summarizes information regarding our cash flows for each of the periods presented:


	Six months ended June 30,
	2023		2022
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(43,000)	$	(18,971)
Investing activities	33,505		14,909
Financing activities	(28,168)		22,841
Net increase (decrease) in cash and cash equivalents and restricted cash	$	(37,663)	$	18,779

Operating Activities

During the six months ended June 30, 2023, net cash used in operating activities was $43.0 million, primarily due to our net loss of $47.9 million and changes in our operating assets and liabilities of $4.5 million, partially offset by non-cash charges of $9.5 million. Net cash used in our operating assets and liabilities for the six months ended June 30, 2023 consisted primarily of a $3.4 million decrease in accrued expenses and other current liabilities, a decrease of $1.5 million in our operating lease liability, and $0.4 million increase in accounts payable. The decrease in accrued expenses and other current liabilities is primarily due to a reduction in manufacturing fees and preclinical related fees. The decrease in our operating lease liability is a result of the lease termination signed in June 2023, and the increase in accounts payable is a result of the timing of payments.

During the six months ended June 30, 2022, net cash used in operating activities was $19.0 million, primarily due to our net loss of $19.0 million and changes in our operating assets and liabilities of $6.3 million, partially offset by non-cash charges of $6.4 million. Net cash used in changes in our operating assets and liabilities for the six months ended June 30, 2022 consisted primarily of an increase of $1.7 million in prepaid expenses and other current assets, a $2.4 million decrease in accrued expenses and other current liabilities, a decrease of $1.3 million in our operating lease liability, and $1.1 million decrease in accounts payable. The decrease in accrued expenses and other current liabilities is primarily due to the decrease in accrued bonus and accrued professional fees. The increase in prepaid expenses and other current assets is a result of increased clinical expenses and higher insurance premiums. The decrease in our operating lease liability is a result of rental payments made on our operating leases, and the decrease in accounts payable is a result of the timing of payments.

Investing Activities

During the six months ended June 30, 2023, net cash provided by investing activities was $33.5 million, consisting of proceeds from sales or maturities of marketable securities of $69.1 million, which was partially offset by purchases of marketable securities of $35.6 million.

During the six months ended June 30, 2022, net cash provided by investing activities was $14.9 million, consisting of proceeds from sales or maturities of marketable securities of $30.7 million, which was partially offset by purchases of marketable securities of $15.7 million and purchases of property and equipment of $0.1 million.

Financing Activities

During the six months ended June 30, 2023, net cash used in financing activities was $28.2 million, consisting of $28.3million paid to K2HV in June 2023 to terminate the Loan Agreement, which was partially offset by proceeds of $0.1 million received from the issuance of shares under our 2018 Employee Stock Purchase Plan.

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During the six months ended June 30, 2022, net cash provided by financing activities was $22.8 million, consisting of proceeds of $22.7 million received from issuance of our shares of common stock at-the-market under the Amended Sales Agreement and proceeds of $0.2 million received from the issuance of shares under our 2018 Employee Stock Purchase Plan.

Contractual Obligations

We have entered into agreements in the normal course of business with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are generally cancellable by us upon prior written notice to the vendor.

During the six months ended June 30, 2023, there were no material changes, to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K filed with the SEC on March 9, 2023, as amended by the Form 10-K/A filed with the SEC on May 1, 2023.

Critical Accounting Policies and Significant Judgments and Estimates

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

Our critical accounting policies and the methodologies and assumptions we apply under them have not materially changed since our Annual Report on Form 10-K filed with the SEC on March 9, 2023, as amended by the Form 10-K/A filed with the SEC on May 1, 2023.

Recently Issued 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 appearing in this Quarterly Report on Form 10-Q.

Smaller Reporting Company and Emerging Growth Company Status

We are a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during our most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time, we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not smaller reporting companies.

We are also an “emerging growth company.” As such, the Jumpstart Our Business Startups Act of 2012 allows us to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our cash, cash equivalents and marketable securities as of June 30, 2023 consisted of cash and investments in money market funds, U.S. Treasury notes, U.S. government agency bonds and corporate bonds. Interest income is sensitive to changes in the general level of interest rates, which have risen in the past few months and may continue to rise; however, due to the nature of these investments, we do not believe that we have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates.

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Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures 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, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023.

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) has occurred during the six months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In October 2020, we filed an opposition in the European Patent Office, or EPO, opposing the grant of European Patent No. EP 3258951B1 to Compugen, Ltd., or the Compugen Patent. We are one of two parties opposing the grant of the Compugen Patent, which relates generally to PVRIG (an alternate name for CD112R) antibodies for use in treating cancer. In connection with the license agreement with GSK, GSK has assumed responsibility for this opposition. The oral proceedings were held in July of 2023. The Opposition Division of the EPO maintained an amended version of the patent, which is subject to appeal. Accordingly, final resolution of the opposition may be several years in the future.

In June 2021, we filed an opposition in the EPO, opposing the grant of European Patent No. EP 3153526B1 to INSERM (Institut National de la Santé et de la Recherche Médicale). In view of the strategic decision to pause the SRF617 program, we have withdrawn our opposition.

On July 31, 2023, a purported stockholder of the Company filed a complaint in connection with the Company’s proposed transaction with Coherus BioSciences, Inc. in the United States District Court for the Southern District of New York, captioned Guentter v. Surface Oncology, Inc., et al, Case No. 1:23-cv-06687 (referred to as the “Guentter Complaint”), naming as defendants the Company and each member of the Surface Board as of the date of the Merger Agreement.

The Guentter Complaint alleges, among other things, that the registration statement filed by the Company with the SEC on July 7, 2023, as amended on July 24, 2023 (the “Registration Statement”) is materially incomplete and misleading by allegedly failing to disclose in violation of Section 14(a) and Section 20(a) of the Exchange Act, as well as Rule 14a-9 promulgated thereunder, allegedly material information concerning (i) the sales process and alleged conflicts of interest for management; (ii) purported financial projections for Surface and Parent; and (iii) certain data and inputs underlying the financial valuation analyses supporting the fairness opinion rendered by Wedbush Securities Inc. The relief sought in the Guentter Complaint includes equitable relief, including among other things, to enjoin the consummation of the merger unless and until certain additional and allegedly material information is disclosed to the Company’s stockholders, to rescind the Merger Agreement, to the extent already implemented, or to recover rescissory damages, and to award plaintiff the cost and disbursements of the Guentter Complaint, including reasonable attorneys’ and expert fees and expenses.

We cannot predict the outcome of the Guentter Complaint, nor can we predict the amount of time and expense that will be required to resolve the Guentter Complaint. We believe that the Guentter Complaint is without merit and we and the individual defendants intend to vigorously defend against the Guentter Complaint and any subsequently filed similar actions.

If additional similar complaints are filed, absent new or significantly different allegations, we will not necessarily disclose such additional filings.

From time to time, we may become involved in other litigation or legal proceedings relating to claims arising from the ordinary course of business.

Item 1A. Risk Factors

Risks Relating to the Mergers

Because the Exchange Ratio depends on Surface Net Cash at the Closing and will not be adjusted in the event of any change in the price of either Coherus BioSciences, Inc. (“Coherus”) common stock or Surface common stock, and because of the uncertainty of the value of, and the ultimate realization on, the CVRs, the value of the Merger Consideration that Surface stockholders will receive in the Mergers is uncertain.

Upon completion of the First Merger, each share of Surface common stock that is issued and outstanding immediately prior to the Effective Time will be converted automatically into the right to receive, without interest, (a) a number of shares of Coherus common stock equal to the Exchange Ratio determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Surface Net Cash, determined and calculated in accordance with the Merger Agreement, by (2) $5.2831 (the VWAP for the five trading days through and including June 15, 2023), by (y) the total number of shares of Surface common stock issued and outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement, and if applicable, cash in lieu of fractional shares (without interest and less any applicable withholding taxes), and (b) one CVR representing the right to receive the CVR Payment Amount, all as described in the Merger Agreement.

Pursuant to the Merger Agreement, the amount of Surface Net Cash used to calculate the Exchange Ratio is subject to certain adjustments and reductions, including, without limitation, with respect to short- and long-term liabilities, unpaid fees and expenses related to the Mergers, the cash cost of unpaid change of control payments, severance, termination or similar payments that become due in connection with the Mergers, the cash cost of unpaid time off, bonuses, deferred compensation and similar liabilities owed to Surface’s current and former officers, employees, independent contractors, consultants and directors, certain payroll and withholding taxes, unpaid retention amounts due under insurance policies, and notice and termination payments under specified contracts. The amount of Surface Net Cash will be increased by the expected cost of the D&O insurance policy, prepaid chemistry, manufacturing and controls, or CMC, prepaid clinical and other receivables and certain other payment amounts as agreed between Surface and Coherus in the Merger Agreement.

Coherus and Surface will calculate Surface Net Cash as of the Anticipated Closing Date (as defined in the Merger Agreement), or the other applicable dates of determination set forth in the Merger Agreement. In the event that the amount of Surface Net Cash is less than anticipated, the Exchange Ratio will be reduced and Surface’s stockholders will receive fewer shares of Coherus common stock. Further, the Merger Agreement includes a closing condition that requires Surface to deliver a minimum net cash of $19,600,000 at Closing. If the amount of Surface Net Cash falls below this threshold, Coherus would not be obligated to, but may in its sole discretion elect to, complete the Mergers, which would further reduce the number of shares of Coherus common stock issued in connection with the Mergers.

The market prices of Coherus common stock and Surface common stock have fluctuated prior to and after the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Surface special meeting, and through the date the First Merger is consummated. Given that the price per share of Coherus common stock used in the calculation of the Exchange Ratio was fixed upon the execution of the Merger Agreement, the Exchange Ratio will not be adjusted for changes in the market price of either Coherus common stock or Surface common stock prior to the completion of the Mergers.

Moreover, the CVRs are non-transferable and there is uncertainty regarding the value of the CVRs and whether any payment will ultimately be realized on the CVRs.

Because the value of the Merger Consideration will depend on the market price of Coherus common stock at the time the First Merger is completed and the ultimate realization of the CVRs, Surface stockholders will not know or be able to determine at the time of the Surface special meeting the market value of the Merger Consideration they will receive upon completion of the Mergers.

Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Coherus’ or Surface’s respective businesses, operations and prospects, the uncertainty as to the extent of the duration, scope and impact of the COVID-19 pandemic, market assessments of the likelihood that the Mergers will be completed, interest rates, general market, industry and economic conditions and other factors generally affecting the respective prices of Coherus common stock and Surface common stock, federal, state and local legislation, governmental regulation and legal developments in the industry segments in which Coherus and Surface operate, and the timing of the Mergers. Many of these factors are beyond the control of Coherus and Surface, and neither Coherus nor Surface is permitted to terminate the Merger Agreement solely due to a decline in the market price of the common stock of the other party. You are urged to obtain current market quotations for Coherus common stock and Surface common stock in determining whether to vote in favor of the Surface merger proposal.

The market price of Coherus common stock will continue to fluctuate after the Mergers.

Upon completion of the Mergers, Surface stockholders will become holders of Coherus common stock. The market price of the common stock of the combined company will continue to fluctuate, potentially significantly, following completion of the Mergers, including for the reasons described above. As a result, former Surface stockholders could lose some or all of the value of their investment in Coherus common stock. In addition, any significant price or volume fluctuations in the stock market generally could have a material adverse effect on the market for, or liquidity of, the Coherus common stock received in the Mergers, regardless of the combined company’s actual operating performance.

The Mergers may not be completed and the Merger Agreement may be terminated in accordance with its terms.

The Mergers are subject to a number of conditions that must be satisfied, including the approval by Surface stockholders of the Surface merger proposal, or waived (to the extent permitted), in each case prior to the completion of the First Merger, as described in the Merger Agreement. These conditions to the completion of the Mergers, some of which are beyond the control of Coherus and Surface, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Mergers may be delayed or not completed.

Additionally, either Coherus or Surface may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Mergers are not completed by the Termination Date. In addition, if the Merger Agreement is terminated under specified circumstances, including if the Surface board of directors authorizes entry into a definitive agreement relating to a superior proposal, Surface will be required to pay a termination fee to Coherus equal to $2.0 million, less the amount of previously paid Coherus transaction expenses up to $500,000, if any. See the Merger Agreement for a more complete discussion of the circumstances under which the Merger Agreement could be terminated and when a termination fee may be payable by Surface.

The Mergers may be completed even if certain events occur prior to the Closing that materially and adversely affect Coherus and Surface.

In general, either party can refuse to complete the Mergers if there is a material adverse change affecting the other party between the signing date of the Merger Agreement and the Closing. However, certain types of changes do not permit either party to refuse to complete the Mergers, even if such change could have a material adverse effect on Coherus or Surface, including, subject to certain exceptions, among others:

•changes in general economic or business conditions or in the financial, debt, banking, capital, credit or securities markets, or in interest or exchange rates;

•changes or conditions generally affecting the industries in which either company and its subsidiaries operate;

•changes in the price or trading volume of Coherus’ or Surface’s stock;

•political, geopolitical, social or regulatory conditions;

•any natural disasters or calamities, weather conditions including hurricanes, floods, tornados, tsunamis, earthquakes and wildfires, epidemics, pandemics or public health emergencies or other force majeure events, or any escalation or worsening of such conditions;

•changes in law or GAAP;

•any failure by either company to meet any internal or published projections, forecasts, estimates or predictions in respect of the revenues, earnings or other financial or operating metrics for any period;

•any action taken (or omitted to be taken) by either company, or which the companies cause to be taken by any of their subsidiaries, in each case which is expressly required by the Merger Agreement or at the express written request of Coherus;

•the announcement or pendency of the Merger Agreement and the Mergers, including the initiation of litigation by any person with respect to the Merger Agreement, and including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, partners or employees of the parties and their subsidiaries due to the announcement or consummation of the Mergers; or

•changes in regulatory, preclinical or clinical, competitive, pricing, reimbursement or manufacturing events, or any effects relating to or affecting any products or product candidates of the companies or any product or product candidate competitive with or related to any products or products candidates of the companies, including any results, outcomes, data, adverse events, side effects (including toxicity) or safety observations related to or arising from any preclinical or clinical studies, trials or tests with respect to any products or product candidates of the companies or any product or product candidate competitive with or related to any products or product candidates of the companies, or announcements of any of the foregoing (provided, that in the case of Surface, if any of the foregoing effects result in or are related to the FDA revoking the investigational new drug application for any product or product candidate of a party, then such changes, effects, and revocation shall be taken into account when determining whether there has been a material adverse effect with respect to such party).

If one or more material adverse changes occur and Coherus and Surface still complete the Mergers, the stock price of the combined company following the Closing may suffer. This in turn may reduce the value of the shares of Coherus common stock to the stockholders of the combined company.

The termination of the Merger Agreement could negatively impact Coherus or Surface and the trading prices of Coherus common stock or Surface common stock.

If the Mergers are not completed for any reason, including because Surface stockholders fail to approve the Surface merger proposal, the ongoing businesses of Coherus and Surface may be adversely affected and, without realizing any of the expected benefits of having completed the Mergers, Coherus and Surface would be subject to a number of risks, including the following:

•each company may experience negative reactions from the financial markets, including negative impacts on its stock price;

•each company may experience negative reactions from its customers, suppliers, distributors and employees;

•each company will be required to pay its respective costs relating to the Mergers, such as financial advisory, legal, financing and accounting costs and associated fees and expenses, whether or not the Mergers are completed;

•the possibility that Surface will be unable to fund another potential strategic partner and, as a result, elects to liquidate and dissolve its business;

•the Merger Agreement places certain restrictions on the conduct of each company’s business prior to completion of the Mergers and such restrictions, the waiver of which is subject to the consent of the other company (not to be unreasonably withheld, conditioned or delayed), which may have prevented Coherus and Surface from taking actions during the pendency of the Mergers that would have been beneficial; and

•matters relating to the Mergers (including integration planning) will require substantial commitments of time and resources by Coherus and Surface management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to Coherus or Surface, as applicable, as an independent company.

In addition, if the Mergers are not completed, Coherus or Surface could be subject to litigation related to any failure to complete the Mergers or to perform their respective obligations under the Merger Agreement. If the Mergers are not completed, Coherus and Surface cannot assure their stockholders that these risks will not materialize and will not materially affect the business, financial results and stock prices of Coherus or Surface.

The market price for shares of Coherus common stock may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of shares of Coherus common stock or Surface common stock.

Upon consummation of the Mergers, holders of Surface common stock will become holders of Coherus common stock. Coherus’ business differs from that of Surface in certain respects, and, accordingly, the financial position and results of operations of Coherus after the Mergers, as well as the market price of shares of Coherus common stock, may be affected by factors that are different from those currently or historically affecting the financial position and results of operations of Surface. The results of operations of the combined company may also be affected by factors different from those that currently affect or have historically affected either Coherus or Surface. In addition, the stock market has experienced significant price and volume fluctuations in recent times, which, if they continue to occur, could have a material adverse effect on the market for, or liquidity of, Coherus common stock, regardless of Coherus’ actual operating performance.

The shares of common stock of the combined company to be received by Surface stockholders as a result of the Mergers will have rights different from the shares of Surface common stock.

Upon completion of the Mergers, Surface stockholders will no longer be stockholders of Surface, but will instead become stockholders of Coherus. As Coherus and Surface are both Delaware corporations, the rights of Coherus and Surface stockholders are not materially different. However, there are certain differences in the rights of Coherus stockholders under the Coherus charter and Coherus bylaws, and of Surface stockholders under the Surface charter and Surface bylaws.

After the Mergers, Surface stockholders will have a significantly lower ownership and voting interest in Coherus than they currently have in Surface and will exercise less influence over management and policies of the combined company.

After completion of the Mergers, the current securityholders of Surface will own a smaller percentage of the combined company than their ownership of Surface prior to the Mergers. Based on the number of shares of Coherus and Surface common stock outstanding on July 21, 2023, and assuming that the Surface Net Cash at Closing is approximately $20 million to $25 million, upon completion of the Mergers (without consideration of the shares of Coherus common stock underlying the CVRs), former Surface stockholders are expected to own approximately 11% to 12%, of the outstanding shares of Coherus common stock (without consideration of any potential shares of Coherus common stock underlying the CVRs) and Coherus stockholders immediately prior to the Mergers are expected to own approximately 88% to 89%, of the outstanding shares of Coherus common stock. Consequently, former Surface stockholders will have less influence over the management and policies of the combined company than they currently have over the management and policies of Surface.

Until the completion of the Mergers or the termination of the Merger Agreement in accordance with its terms, Coherus and Surface are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Coherus, Surface and/or their respective stockholders.

From and after the date of the Merger Agreement and prior to completion of the Mergers, the Merger Agreement restricts Coherus and Surface from taking specified actions without the consent of the other party and requires that the business of each company and its respective subsidiaries be conducted in the ordinary course in all material respects. These restrictions may prevent Coherus or Surface, as applicable, from taking actions during the pendency of the Mergers that would have been beneficial. Adverse effects arising from these restrictions during the pendency of the Mergers could be exacerbated by any delays in consummation of the Mergers or termination of the Merger Agreement.

Obtaining required approvals and satisfying Closing conditions may prevent or delay completion of the Mergers.

The Mergers are subject to a number of Closing conditions as specified in the Merger Agreement. These Closing conditions include, among others:

•approval by Surface stockholders of the Surface merger proposal;

•the absence of restraining orders, injunctions or other judgments, orders or decrees issued by any court of competent jurisdiction or other legal restraint or prohibition remaining in effect, and no law having been enacted, entered, promulgated or enforced by any governmental entity that, in any case, prohibits or makes illegal the consummation of the Mergers or the other transactions contemplated by the Merger Agreement;

•the effectiveness of the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, under the Securities Act and the absence of any stop order suspending the effectiveness of the Form S-4 that has not been withdrawn; and

•the execution by Coherus and the Rights Agent of the CVR Agreement, which shall be in full force and effect.

The obligation of each of Coherus and Surface to consummate the Mergers is also conditioned on, among other things, the truth and accuracy of the representations and warranties made by the other party on the date of the Merger Agreement and on the Closing Date (subject to certain materiality and material adverse effect qualifiers), the performance by the other party in all material respects of its obligations under the Merger Agreement, and there having been no effect that, individually or in the aggregate, may result in, together with all other effects, has constituted or resulted in, or would reasonably be expected to constitute or result in, a material adverse effect. No assurance can be given that the required Surface stockholder approval will be obtained or that the required conditions to Closing will be satisfied, and, if all required consents and approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Mergers could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that Coherus and Surface expect to achieve if the Mergers are successfully completed within the parties’ expected time frame.

The Mergers, and uncertainty regarding the Mergers, may cause customers, suppliers, distributors or strategic partners to delay or defer decisions concerning Coherus or Surface and adversely affect each company’s ability to effectively manage its respective business.

The Mergers will happen only if the stated Closing conditions are met, including the approval of the Surface merger proposal, among other conditions. Many of the conditions are beyond the control of Coherus and Surface, and both parties also have certain rights to terminate the Merger Agreement. Accordingly, there may be uncertainty regarding the completion of the Mergers. This uncertainty may cause customers, suppliers, distributors, vendors, strategic partners or others that deal with Coherus or Surface to delay or defer entering into contracts with Coherus or Surface or making other decisions concerning Coherus or Surface or seek to change or cancel existing business relationships with Coherus or Surface, which could negatively affect their respective businesses. Any delay or deferral of those decisions or changes in existing agreements could have an adverse impact on the respective businesses of Coherus and Surface, regardless of whether the Mergers are ultimately completed.

In addition, the Merger Agreement restricts Coherus, Surface and each company’s respective subsidiaries from taking certain actions during the pendency of the Mergers without the consent of the other party. These restrictions may prevent Coherus and Surface from pursuing attractive business opportunities or strategic transactions that may arise prior to the completion of the Mergers. See “The Merger Agreement—Conduct of Business Prior to the Completion of the Mergers” for a description of the restrictive covenants to which each of Coherus and Surface is subject.

The Merger Agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with Surface.

The Merger Agreement contains “no solicitation” provisions that restrict the ability of Surface to, among other things:

•initiate, solicit, endorse, assist, induce, facilitate or encourage (including by providing information) any inquiries, proposals or offers with respect to, or the making, submission, announcement or completion of, any inquiry, proposal or offer that constitutes, or would be reasonably expected to lead to, an acquisition proposal;

•enter into, continue or otherwise engage or participate in any negotiations or discussions with any person other than Coherus, the Merger Subs and their respective affiliates and representatives concerning any acquisition proposal or any inquiry, proposal or offer that would reasonably be expected to lead to any acquisition proposal;

•furnish, provide or cause to be furnished or provided any non-public information or data relating to Surface or any of its subsidiaries in connection with, or for the purpose of soliciting, initiating, encouraging or facilitating, or in response to, any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to, an acquisition proposal;

•execute or enter into any letter of intent or any other contract contemplating an acquisition proposal (other than a confidentiality agreement to the extent permitted under the Merger Agreement); or

•resolve or agree or propose to do any of the foregoing.

Furthermore, there are only limited exceptions to the requirement under the Merger Agreement that the Surface board of directors not withdraw, change, qualify, withhold, amend or modify in any way adverse to Coherus the Surface recommendation. Although the Surface board of directors is permitted to effect a change of recommendation, after complying with certain procedures set forth in the Merger Agreement, in response to a superior proposal or to an intervening event (if the Surface board of directors determines in good faith, after consultation with its outside legal counsel and financial advisor, that, in light of such superior proposal or intervening event, a failure to effect a change of recommendation would reasonably be expected to be inconsistent with the Surface board of directors’ fiduciary duties to its stockholders under applicable law), such change of recommendation would entitle Coherus to terminate the Merger Agreement and collect a termination fee from Surface.

These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that implied by the Exchange Ratio, or might result in a potential competing acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

Failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the Mergers.

The success of the Mergers will depend, in part, on the combined company’s ability to retain the talents and dedication of the professionals currently employed by Coherus and Surface. It is possible that these employees may decide not to remain with Coherus or Surface, as applicable, while the Mergers are pending, or with the combined company. If key employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Coherus and Surface to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, Coherus and Surface may not be able to locate suitable replacements for any key employees that leave either company or offer employment to potential replacements on reasonable terms. In addition, there could be disruptions to or distractions for the workforce and management, including disruptions associated with integrating employees into the combined company. No assurance can be given that the combined company will be able to attract or retain key employees of Coherus and Surface to the same extent that those companies have been able to attract or retain their own employees in the past.

Surface directors and executive officers have interests and arrangements that may be different from, or in addition to, those of Surface stockholders generally.

When considering the recommendations of the Surface board of directors on how to vote on the proposals described in this proxy statement/prospectus, Surface stockholders should be aware that Surface directors and executive officers have interests in the Mergers that are different from, or in addition to, those of Surface stockholders generally. These interests include the treatment in the Mergers of outstanding equity, equity-based and incentive awards, severance arrangements, change of control benefits, other compensation and benefit arrangements, and the right to continued indemnification of former Surface directors and officers by the combined company.

Surface stockholders should be aware of these interests when they consider the recommendation of the Surface board of directors that they vote to approve the Surface merger proposal. The Surface board of directors was aware of and considered these interests when it determined that the Mergers were fair to and in the best interests of Surface and its stockholders, approved and declared advisable the Merger Agreement, and recommended that Surface stockholders adopt the Merger Agreement.

The opinion rendered to Surface from its financial advisor will not reflect changes in circumstances between the date of such opinion and the completion of the Mergers.

Wedbush Securities Inc., or Wedbush, delivered its oral opinion to the Surface board of directors on June 15, 2023, which opinion was subsequently confirmed in a written opinion dated as of June 15, 2023, that as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of review undertaken as set forth in the written opinion, the Exchange Ratio and CVRs pursuant to the Merger Agreement was fair, from a financial point of view, to the holders of Surface common stock.

Surface has not obtained and will not obtain an updated opinion from Wedbush regarding the fairness, from a financial point of view, of the Merger Consideration, Exchange Ratio or CVRs, including as of the date of the Form S-4 or of the Surface special meeting, or prior to the completion of the Mergers. The opinion of Wedbush was necessarily based on general financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to Wedbush only as of the date of the opinion of Wedbush, and such opinion does not address the fairness of the Merger Consideration, Exchange Ratio or CVRs, from a financial point of view, at the time the Mergers are completed. Changes in the operations and prospects of Coherus or Surface, general financial, economic, monetary, market and other conditions, circumstances and factors that may be beyond the control of Coherus and Surface, and on which the opinion of Wedbush was based, may alter the value of Coherus or Surface or the prices of shares of Coherus or Surface common stock by the time the Mergers are completed and therefore, material differences could result between the estimated fair values of what Coherus acquires in the Mergers, compared to the purchase consideration actually paid. The opinion of Wedbush does not speak as of any date other than the date of such opinion. The recommendation of the Surface board of directors that Surface stockholders vote “FOR” the Surface merger proposal and “FOR” the Surface adjournment proposal are each made as of the Form S-4.

Whether or not the Mergers are completed, the announcement and pendency of the Mergers could cause disruptions in the businesses of Coherus and Surface, which could have an adverse effect on each company’s respective businesses and financial results.

Whether or not the Mergers are completed, the announcement and pendency of the Mergers could cause disruptions in the businesses of Coherus and Surface, including by diverting the attention of Coherus and Surface management toward the completion of the Mergers. In addition, Coherus and Surface have each diverted significant management resources in an effort to complete the Mergers and are each subject to restrictions contained in the Merger Agreement on the conduct of their respective businesses. If the Mergers are not completed, Coherus and Surface will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.

Coherus or Surface may waive one or more of the closing conditions without re-soliciting Surface stockholder approval.

To the extent permitted by law, Coherus or Surface may determine to waive, in whole or part, one or more of the conditions to their respective obligations to consummate the Mergers. Surface currently expects to evaluate the materiality of any waiver and its effect on Surface stockholders in light of the facts and circumstances at the time to determine whether any amendment of this proxy statement/prospectus or any re-solicitation of proxies is required in light of such waiver. Any determination as to whether to waive any condition to the Mergers, and as to whether to re-solicit Surface stockholder approval and/or amend this proxy statement/prospectus as a result of such waiver, will be made by Surface at the time of such waiver based on the facts and circumstances as they exist at that time.

The Mergers will involve substantial costs.

Coherus and Surface have incurred and expect to incur non-recurring costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the Mergers. As of July 24, 2023, Coherus and Surface estimated that their aggregate costs associated with the Mergers and related transactions would be approximately $5.4 million and $5.4 million, respectively. These costs include filing and registration fees with the SEC, printing and mailing costs associated with the Form S-4, and legal, accounting, investment banking, consulting, public relations and proxy solicitation fees. These costs do not include severance and retention payments that may be made to certain Surface employees and costs that will be incurred in connection with the integration of Coherus’ and Surface’s businesses. Some of these costs are payable by Coherus or Surface regardless of whether the Mergers are completed.

The combined company will also incur restructuring and integration costs in connection with the Mergers. The costs related to restructuring will be expensed as a cost of the ongoing results of operations of either Coherus or the combined company. There are processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Mergers and the integration of Surface’s business. Although Coherus expects that the elimination of duplicative costs, strategic benefits and additional income, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and restructuring costs related to the Mergers over time, any net benefit may not be achieved in the near term or at all. Many of these costs will be borne by Coherus even if the Mergers are not completed. While Coherus has assumed that certain expenses would be incurred in connection with the Mergers and the other transactions contemplated by the Merger Agreement, there are many factors beyond Coherus’ control that could affect the total amount or the timing of the integration and implementation expenses.

Due to the Mergers, the ability of Coherus to use Surface’s net operating losses to offset future taxable income may be restricted and these net operating losses could expire or otherwise be unavailable.

As of December 31, 2022, Surface had federal and state net operating loss carryforwards, or NOLs, of $93.8 million and $155.9 million, respectively. In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-ownership change NOLs to offset future taxable income. As of December 31, 2022, Surface had not completed a Section 382 limitation study. In the absence of a Section 382 limitation study, there is uncertainty as to whether Surface’s existing NOLs are subject to limitations, and, if the Mergers are completed, Surface’s existing NOLs may be subject to additional limitations. In addition, if Coherus undergoes any subsequent ownership change, its ability to utilize NOLs would be limited.

If the Mergers do not qualify as a reorganization under the Code, the holders of Surface common stock may be taxed on the full amount of the Merger Consideration.

The Mergers are intended to be considered together as a single integrated transaction for U.S. federal income tax purposes that qualifies for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the Mergers so qualify, U.S. holders will recognize no gain or loss with respect to the exchange of Surface common stock for Coherus common stock, although the U.S. federal income tax treatment of the CVRs and payments, if any, made under the CVRs is subject to substantial uncertainty. However, there are significant factual and legal uncertainties as to whether the Mergers qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Moreover, it is not, a condition to Coherus’ or Surface’s obligation to complete the transactions that the Mergers so qualify. None of the parties to the Merger Agreement have sought or intend to seek any ruling from the IRS regarding the qualification of the Mergers as a reorganization within the meaning of Section 368(a) of the Code. If the Mergers do not qualify for the U.S. federal income tax treatment described herein, the U.S. holders generally would recognize gain or loss for U.S. federal income tax purposes on each share of Surface common stock surrendered in the Mergers.

If Surface does not successfully consummate the Mergers or another strategic transaction, the Surface board of directors may decide to pursue a dissolution and liquidation of Surface. In such an event, the amount of cash available for distribution to Surface’s 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, as to which Surface can give you no assurance.

There can be no assurance that the Mergers will be completed. If the Mergers are not completed, the Surface board of directors may decide to pursue a dissolution and liquidation of Surface. In such an event, the amount of cash available for distribution to Surface’s stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Surface funds its operations while pursuing the Mergers. In addition, if the Surface board of directors were to approve and recommend, and Surface’s stockholders were to approve, a dissolution and liquidation of the company, Surface would be required under Delaware corporate law to pay Surface’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Surface’s commitments and contingent liabilities may include obligations under Surface’s 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, litigation against Surface, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities. As a result of this requirement, a portion of Surface’s assets would need to be reserved pending the resolution of such obligations.

In addition, Surface may be subject to litigation or other claims related to a dissolution and liquidation of Surface. If a dissolution and liquidation were to be pursued, the Surface board of directors, in consultation with Surface’s advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Surface common stock could lose all or a significant portion of their investment in the event of liquidation, dissolution or winding up of the company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to Surface’s stockholders.

Surface’s management has expressed substantial doubt about its ability to continue as a going concern.

Surface’s management has expressed substantial doubt about its ability to continue as a going concern, and Surface’s auditors’ report to its December 31, 2022 financial statements includes an explanatory paragraph that expressed substantial doubt about Surface’s ability to continue as a going concern. Surface’s current cash level raises substantial doubt about its ability to continue as a going concern. Additionally, Surface’s management has independently determined that there is substantial doubt about Surface’s ability to continue as a going concern because its cash flows generated from operations may not be sufficient to meet its current operating costs. In addition, Surface’s future financial statements may include similar qualifications about its ability to continue as a going concern. Surface’s financial statements were prepared assuming that it will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. If Surface is unable to meet its current operating costs, Surface would need to seek additional financing or modify or cease its operational plans. If Surface seeks additional financing to fund its business activities in the future and there remains substantial doubt about its ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to Surface on commercially reasonable terms or at all.

Surface is substantially dependent on Surface’s remaining employees to facilitate the consummation of the Mergers.

Surface’s ability to consummate a strategic transaction depends upon its ability to retain its employees required to consummate such a transaction, the loss of whose services may adversely impact the ability to consummate such transaction. In June 2023, Surface undertook an organizational restructuring that significantly reduced its workforce in order to conserve its capital resources. As of July 1, 2023, Surface had only 35 full-time employees. Surface’s ability to successfully complete the Mergers depends in large part on Surface’s ability to retain certain remaining personnel. Despite Surface’s efforts to retain these employees, one or more may terminate their employment with Surface on short notice. Surface’s cash conservation activities may yield other unintended consequences, such as attrition beyond its planned reduction in workforce and reduced employee morale, which may cause remaining employees to seek alternative employment. The loss of the services of certain employees could potentially harm Surface’s ability to consummate the Mergers and to run Surface’s day-to-day business operations, as well as to fulfill Surface’s reporting obligations as a public company.

In July 2023, we filed an 8-K supplementing the risk factors previously disclosed in Part I, Item 1A (“Risk Factors”) of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2022 to add the following new risk factor:

Our management and auditors have expressed substantial doubt about our ability to continue as a going concern.

Our auditors’ report to our December 31, 2022 financial statements includes an explanatory paragraph that expressed substantial doubt about our ability to continue as a going concern. Our current cash level raises substantial doubt about our ability to continue as a going concern without immediate short-term financing or the consummation of the transactions contemplated by the Merger Agreement. Additionally, our management has independently determined that there is substantial doubt about the Company’s ability to continue as a going concern because our cash flows generated from operations may not be sufficient to meet our current operating costs. In addition, our future financial statements may include similar qualifications about our ability to continue as a going concern. The Company’s financial statements were prepared assuming that it will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. If the Company is unable to meet its current operating costs, the Company would need to seek additional financing or modify or cease its operational plans. If the Company seeks additional financing to fund its business activities in the future and there remains substantial doubt about its ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to the Company on commercially reasonable terms or at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.


Exhibit Number						Description
2.1 †						Agreement and Plan of Merger, dated June 15, 2023, among Coherus BioSciences, Inc., Crimson Merger Sub I. Inc., Crimson Merger Sub II, LLC and Surface Oncology, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 16, 2023 (File No. 001-38459) and incorporated herein by reference).
10.1						Lease Termination Agreement, dated as of June 15, 2023, by and between BMR-Hampshire LLC and Surface Oncology, Inc.
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 and Accounting 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 of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document


†			Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S K. The undersigned registrant hereby undertakes to provide a copy of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.
*			The certification furnished in Exhibit 32.1 and Exhibit 32.2 hereto is 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, except to the extent that the Registrant specifically incorporates it by reference. Such certification 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.

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.


	Surface Oncology, Inc.
Date: August 2, 2023	By:	/s/ Robert W. Ross, M.D.
		Robert W. Ross, M.D.
		Chief Executive Officer (Principal Executive Officer)
Date: August 2, 2023	By:	/s/ Jessica Fees
		Jessica Fees
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

LEASE TERMINATION AGREEMENT

THIS LEASE TERMINATION AGREEMENT (this “Agreement”) is entered into as of this ____ day of June, 2023 (“Execution Date”), by and between BMR-HAMPSHIRE LLC, a Delaware limited liability company (“Landlord”), and SURFACE ONCOLOGY, INC., a Delaware corporation (“Tenant”).

RECITALS

A.WHEREAS, Landlord and Tenant entered into that certain Lease dated as of May 13, 2016, as amended by that certain First Amendment to Lease dated as of February 28, 2017, as further amended by that certain Second Amendment to Lease dated as of May 22, 2018, as further amended by that certain Third Amendment to Lease dated as of April 30, 2020, as affected by that certain Consent to Sublease dated as of December 16, 2019 and that certain First Amendment to Consent to Sublease dated as of May 11, 2022 (collectively, the “EQRx Sublease Consent”) (as the same may have been amended, amended and restated, supplemented or otherwise modified from time to time, the “Lease”), whereby Tenant leases from Landlord certain premises on the seventh floor (the “Seventh Floor Premises”) and on the Eighth Floor (the “Eighth Floor Premises,” together with the Seventh Floor Premises, the “Premises”) at 50 Hampshire Street in Cambridge, Massachusetts (the “Building”);

B.WHEREAS, Tenant subleases the Seventh Floor Premises to EQRx, Inc. (“EQRx”) pursuant to that certain Sublease dated as of December 16, 2019, as amended by that certain First Amendment to Sublease dated as of July 9, 2020, as further amended by that certain Second Amendment to Sublease dated as of May 11, 2022, as affected by the EQRx Sublease Consent (collectively, the “EQRx Sublease”); and

C.WHEREAS, Landlord and Tenant desire to terminate the Lease on September 15, 2023 (as such date may be extended by Tenant or accelerated by Landlord pursuant to Section 6, below, the “Termination Date”), subject to and in accordance with the following conditions and provisions.

AGREEMENT

NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree as follows:

1.Surrender Condition. Tenant shall surrender the Eighth Floor Premises on or before the Termination Date in broom clean condition and in the condition otherwise required under the Lease. Landlord acknowledges that Tenant shall have no obligation to remove any improvements or personal property, or leave the space in other than its “as is” condition, with respect to the Seventh Floor Premises on or before the Termination Date because EQRx shall remain in the Seventh Floor Premises in accordance with the Sublease Attornment and Recognition described in Section 7 below. With respect to the Eighth Floor Premises, (a) at least thirty (30) days prior to the Termination Date, Tenant shall deliver to Landlord the Exit Survey (as defined in the Lease) and (b) at least ten (10) days prior to the Termination Date, Tenant shall (i) provide Landlord with written evidence of all appropriate governmental releases obtained by Tenant in accordance with Applicable Laws (as defined in the Lease), (ii) place Laboratory Equipment Decontamination Forms on all decommissioned equipment to assure safe occupancy by future users and (iii) conduct a site inspection with Landlord. Tenant shall cause the remediation of any recognized environmental conditions set forth in the Exit Survey and compliance with any recommendations set forth in the Exit Survey, and Tenant shall remain responsible

for such obligations after Tenant’s surrender of the Premises. Tenant’s obligations under this Section 1 shall survive the termination of the Lease or this Agreement.

1.Execution Fee and Termination Fee. In consideration for the execution and delivery of this Agreement, the sufficiency of which is hereby acknowledged, Tenant shall pay to Landlord as a fee and not a penalty, the sum of $1,595,139.76 (the “Execution Fee”). In consideration for the termination of the Lease prior to the scheduled expiration date in accordance with this Agreement, the sufficiency of which are hereby acknowledged, Tenant shall pay to Landlord as a fee and not a penalty a termination fee equal to $8,404,860.24 (the “Closing Fee”), which is due and payable on or before the Termination Date by wire transfer in immediately available funds. The Execution Fee together with the Closing Fee equals $10,000,000 and shall be referred to herein as the “Termination Fee.” Notwithstanding the provisions of Article 11 of the Lease or anything in the Lease to the contrary, Landlord and Tenant agree that Landlord shall promptly hereafter draw down all of the L/C Security and credit it against the Execution Fee and such amount shall be non-refundable, notwithstanding anything in this Agreement to the contrary.

2.Sale of Tenant Personal Property. As an inducement to Landlord to enter into this Agreement, Tenant agrees to use commercially reasonable efforts, including the engagement of a professional liquidator, to sell or transfer all of Tenant’s furniture, trade fixtures, non-building system equipment and other personal property, in all cases which constitute property of Tenant under the Lease, and located in the Eighth Floor Premises prior to the Termination Date (the “Tenant Personal Property”). For the avoidance of doubt, per Section 17.7 of the Lease, Tenant Personal Property expressly excludes attached equipment, decorations, fixtures and trade fixtures; movable laboratory casework and related appliances; and other additions and improvements attached to or built into the Premises made by either Landlord or Tenant (including all floor and wall coverings, paneling, sinks and related plumbing fixtures; laboratory benches; exterior venting fume hoods; walk-in freezers and refrigerators; ductwork; conduits; electrical panels and circuits; attached machinery and equipment; and built-in furniture and cabinets, in each case, together with all additions and accessories thereto), all of which shall remain property of Landlord and remain in the Premises upon the termination of this Lease. Tenant shall provide to Landlord a list of the Tenant Personal Property that Tenant intends to sell prior to the sale thereof so that Landlord can verify that all such personal property is Tenant Personal Property under the Lease. In addition, Tenant shall obtain any necessary releases of recorded financing statements from Tenant lenders and financing parties to the sale of Tenant Personal Property contemplated herein, including without limitation, from Ankura Company, LLC and K2 Ventures LLC with respect to that certain Consent to Removal of Personal Property dated as of January 14, 2020, or otherwise provide Landlord with reasonable evidence of the discharge of such debt. Tenant shall pay to Landlord all net sale proceeds received by Tenant in connection with the sale of the Tenant Personal Property on or before the Termination Date (the “Personal Property Proceeds”), which obligation shall survive the termination of the Lease or this Agreement with respect to any proceeds received by Tenant after the Termination Date. Tenant makes no promise or guarantee of receiving any Personal Property Proceeds and Landlord acknowledges and agrees that the Tenant may not receive any Personal Property Proceeds from its efforts to sell of transfer the Tenant Personal Property. Tenant shall reimburse, indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold harmless Landlord Indemnitees (as defined

in the Lease) for, from and against any and all Claims (as defined in Lease) arising out of or relating to the sale of the Tenant Personal Property and other actions contemplated by this Section 3.

3.Merger and CFO Affidavit. The Merger (as defined below) shall occur no later than the Termination Date and Tenant shall provide Landlord with an affidavit of Tenant’s Chief Financial Officer in the form attached hereto as Exhibit A dated as of the Termination Date. Prior to filing any Form 8-K with the Securities and Exchange Commission of the United States of America and issuing any press release with respect to this Agreement or the Merger, Tenant shall use reasonable efforts to provide Landlord with a copy of the same for its review.

4.EQRx L/C. Landlord acknowledges that the letter of credit issued for the benefit of EQRx as a Security Deposit under EQRx Sublease has expired. Prior to July 31, 2023, Tenant shall cause EQRx to deliver a valid, unexpired Security Deposit (as defined in the EQRx Sublease) in the amount of $843,813.17 (the “EQRx L/C”) to Tenant. The EQRx L/C shall either list Landlord as beneficiary or list Tenant as beneficiary and shall be delivered to Landlord (if Landlord is listed as beneficiary) or be transferred to Landlord (if Tenant is listed as beneficiary) on the Termination Date in connection with the Sublease Attornment and Recognition (defined in Section 7 of this Agreement). In the event that EQRx is unable to obtain the EQRx L/C prior to July 31, 2023, Tenant shall use all commercially reasonable efforts to cause EQRx to obtain the EQRx L/C prior to the Termination Date and Landlord will use reasonable efforts during such period, if necessary, to negotiate a satisfactory short-term cash security arrangement, pending re-issuance of the EQRx L/C, with EQRx that is acceptable to Landlord in its sole but good faith discretion.

5.Lease Termination. Provided that Tenant has fully satisfied all of its obligations set forth in Section 1, Section 2, Section 3, Section 4 and Section 5 of this Agreement (“Termination Conditions”), and Tenant has paid all Rent due to Landlord under the Lease through the Termination Date, then the Lease shall terminate effective as of 11:59 p.m. Eastern time on the Termination Date (“Lease Termination”). Tenant shall have the right to extend the Termination Date to accommodate the later closing of the Merger one or more times by at least five business days’ prior written notice to Landlord, which extension shall be, in any event, to a date (the “Outside Termination Date”) that is no later than December 31, 2023. Any notice of an extension pursuant to the immediately preceding sentence shall be given promptly after the event giving rise to the extension occurs. Landlord reserves the right to waive any of the Termination Conditions in its sole discretion. In addition, Landlord may accelerate the occurrence of the Termination Date by the giving of at least 10 business days’ prior written notice to Tenant designating a new Termination Date, which new Termination Date shall be on or after July 31, 2023 but in any event prior to the Outside Termination Date; provided, however, that in connection with any such acceleration, Landlord shall waive the conditions set forth in Section 4 above that the Merger shall have occurred prior to the Termination Date and as set forth in Section 5 above requiring the EQRx L/C to have been delivered to Tenant prior to July 31, 2023.

The parties acknowledge and agree that Landlord shall have no obligation to provide any Landlord’s Statement with respect to the calendar year in which the Termination Date occurs. Each party hereby waives any right to a final reconciliation on account of such Landlord’s Statement pursuant to Section 9.3(x) of the Lease, and Tenant hereby waives any further right to contest the amount of Tenant’s Adjusted Share of Operating Expenses or Laboratory Support

Expenses or conduct any audit or review pursuant to Section 9.4 of the Lease. As of the Lease Termination, the Lease shall be fully and finally surrendered and terminated and shall no longer be of any force or effect, except for those provisions that, by their express terms, survive the expiration or earlier termination of the Lease.

1.In the event that (A) any of the Termination Conditions have not been satisfied or waived by Landlord on or before the Termination Date (in which case this Agreement shall automatically terminate on the Termination Date), or (B) this Agreement is otherwise terminated by Landlord in accordance with its terms, then, in either case, except for those provisions that, by their express terms, survive the expiration or earlier termination of this Agreement, the Lease shall continue in full force and effect, and Landlord shall refund to Tenant any Closing Fee actually received by Landlord (but in any event not those amounts of the Closing Fee, if any, that were credited towards the Eighth Floor Premises Rent Payments, as defined below, which shall be applied by Landlord towards the Rent for the applicable period of the Term).

2.Eighth Floor Premises Rent Payments. Rent paid by Tenant under the Lease with respect to the Eighth Floor Premises only for the period from August 1, 2023 through the Termination Date (“Eighth Floor Premises Rent Payments”) shall be credited on a dollar-for-dollar basis against the Closing Fee.

3.Sublease Attornment and Recognition. Effective as of the Termination Date, Landlord shall recognize the EQRx Sublease as a direct lease between Landlord and EQRx, and EQRx shall attorn to Landlord, all in accordance with the terms and conditions set forth in the EQRx Sublease Consent (the “Sublease Attornment and Recognition”). The parties acknowledge and agree that the Lease Termination constitutes a termination of the Master Lease (as defined in the EQRx Sublease Consent) for purposes of Section 11 of the EQRx Sublease Consent. Tenant agrees to reasonably cooperate with Landlord in connection with Landlord taking on the obligations of “Sublessor” under the EQRx Sublease, as contemplated herein, including, without limitation, responding to requests for information related to the administration of the EQRx Sublease, which obligation shall survive the termination of the Lease.

4.Representations and Warranties. Tenant hereby represents and warrants that the following statements are true as of the Effective Date and will be true on the Termination Date:

a. Tenant owns and holds the entire interest of Tenant under the Lease;

b. There exist no subleases created by, through or under Tenant affecting the Premises or any part thereof other than the EQRx Sublease, and EQRx and Tenant are not in default of any of their respective obligations under the EQRx Sublease except as expressly noted above with respect to the EQRx L/C, and no event has occurred that, with the passage of time or the giving of notice (or both) would constitute a default by either EQRx or Tenant thereunder;

c. Tenant has not assigned or encumbered its interest in the Lease or any part thereof except as provided in the EQRx Sublease;

d. Tenant has no knowledge of any fact or circumstance which would give rise to any claim, demand, action or cause of action arising out of or in connection with Tenant’s occupancy of the Premises. No contracts for the furnishing of any labor or materials with respect to improvements or alterations in or about the Premises have been executed by Tenant or are outstanding that have not been performed and satisfied; and

e. Tenant is under agreement pursuant to a merger agreement (“Merger Agreement”) to consummate a stock for stock merger to effectuate the sale of Tenant’s business (“Merger”). A summary of the material financial terms of such transaction has been provided to Landlord, which summary is true and correct in all material respects. Tenant shall promptly notify Landlord

if the Merger Agreement terminates prior to the occurrence of the Merger for any reason. Upon receipt of a notice as described in the immediately preceding sentence, Landlord shall have the right, but not the obligation, to terminate this Agreement by written notice to Tenant.

Tenant shall reimburse, indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold harmless Landlord Indemnitees (as defined in the Lease) for, from and against any and all Claims (as defined in Lease) arising out of or resulting from any breach by Tenant of the representations and warranties made herein, or from any lien, charge, encumbrance or Claim against the Premises from persons claiming by, through or under Tenant, which indemnification obligation shall survive the Lease Termination.

1.Access. Effective as of the Execution Date, Landlord shall have access to the Premises for purposes of showing the Premises to prospective tenants and others upon twenty-four hours’ prior notice to Tenant (which may be by email to the address set forth herein) and EQRx (which may be by email to the address set forth in the EQRx Sublease Consent), and otherwise in accordance with the access provisions of Section 14.4 of the Lease.

2.Reservation of Rights. Regardless of whether the Lease terminates or not pursuant to this Agreement, Landlord does not waive, and hereby reserves, any rights and/or remedies that Landlord may have under the Lease or at law or in equity arising from any default of Tenant under the Lease.

3.Release of Rights. As of Lease Termination, Tenant fully and unconditionally releases, cancels, annuls, rescinds, discharges, disclaims, waives and releases any and all rights and benefits Tenant may have under the Lease arising from and after Lease Termination. Landlord and Tenant hereby certify to each other that, as of the date hereof, to their respective actual knowledge, without inquiry, neither party is in default of the Lease.

4.Quitclaim. To the extent, if any, that the Lease gives Tenant any right, title or interest in or to the Premises, Tenant does hereby remise, release and quitclaim to Landlord such right, title or interest in or to the Premises as of the Lease Termination and shall execute and deliver to Landlord any documentation reasonably requested by Landlord to effect or document such remise, release and quitclaim.

5.Attorneys’ Fees. Except as otherwise expressly set forth in this Agreement, each party shall pay its own costs and expenses incurred in connection with this Agreement and such party’s performance under this Agreement, provided, that if either party commences an action, proceeding, demand, claim, action, cause of action or suit against the other party arising out of or in connection with this Agreement, then the substantially prevailing party shall be reimbursed by the other party for all reasonable costs and expenses, including reasonable attorneys’ fees and expenses, incurred by the substantially prevailing party in such action, proceeding, demand, claim, action, cause of action or suit, and in any appeal in connection therewith (regardless of whether the applicable action, proceeding, demand, claim, action, cause of action, suit or appeal is voluntarily withdrawn or dismissed).

6.Integration. The terms of this Agreement are intended by the parties as a final, complete and exclusive expression of their agreement with respect to the terms that are included in this Agreement, and may not be contradicted or supplemented by evidence of any other prior or contemporaneous agreement.

7.Successors and Assigns. Each of the covenants, conditions and agreements contained in this Agreement shall inure to the benefit of and shall apply to and be binding upon the parties hereto and their respective heirs, legatees, devisees, executors, administrators and permitted successors, assigns and sublessees. Nothing in this section shall in any way alter the provisions of the Lease restricting assignment and subletting.

8.Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts, without regard to the Commonwealth of Massachusetts’ conflict of law principles.

9.Authority. Tenant warrants and represents that the execution and consummation of this Agreement have been duly authorized by all appropriate company action, and the individual or individuals signing this Agreement have the power, authority and legal capacity to sign this Agreement on behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations and entities on whose behalf such individual or individuals have signed.

10.Counterparts. This Agreement may be executed in one or more counterparts, each of which, when taken together, shall constitute one and the same document.

11.Amendment. No provision of this Agreement may be modified, amended or supplemented except by an agreement in writing signed by Landlord and Tenant.

12.Waiver of Jury Trial. To the extent permitted by applicable laws, the parties waive trial by jury in any action, proceeding or counterclaim brought by the other party hereto related to matters arising out of or in any way connected with this Agreement, Tenant’s use or occupancy of the Premises or any claim of injury or damage related to this Agreement or the Premises.

13.Facsimile and PDF Signatures. A facsimile or portable document format (PDF) signature on this Agreement shall be equivalent to, and have the same force and effect as, an original signature.

14.Voluntary Agreement. The parties have read this Agreement and the mutual releases contained in it, and have freely and voluntarily entered into this Agreement.

15.Defined Terms. Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed Massachusetts instrument as of the day hereinabove first written.

LANDLORD:

BMR-HAMPSHIRE LLC,

a Delaware limited liability company

By:

Name:

Its:

TENANT:

SURFACE ONCOLOGY, INC.,

a Delaware corporation

By:

Name:

Its:

EXHIBIT A

OFFICER’S AFFIDAVIT

__________ __, 2023

The undersigned ______________________, in his or her capacity as Chief Financial Officer, of Surface Oncology, Inc. a Delaware limited liability company (“Tenant”), hereby certifies as follows:

1.That Tenant has entered into a lease termination agreement dated as of June __, 2023 (the “Lease Termination Agreement”), with BMR-Hampshire LLC, a Delaware limited liability company (“Landlord”), with respect to premises located at 50 Hampshire Street in Cambridge, Massachusetts.

1.That there are no judgments or decrees or attachments or orders of any court or officer for the payment of money against the Tenant to which it is a party, unsatisfied or not cancelled of record in any of municipal, state or federal courts, or elsewhere, or any suit or proceeding pending anywhere affecting Tenant, and that any judgments found of record against any person or entity under the name or names of the Tenant are not against the Tenant but against another person or entity of similar name; that no proceedings in bankruptcy have ever been instituted by or against the Tenant, nor has the Tenant made any general assignment or assignments for the benefit of creditors; and that the Tenant has assets greater in value than its liabilities and is otherwise solvent.

1.That the execution, delivery and performance of the Lease Termination Agreement did not and will not result in a violation or breach of or constitute a default under any court order, writ, judgment or decree issued by any competent judicial, quasi-judicial, or other governmental body, agency or authority, and further will not result in a violation or breach of or constitute a default under any mortgage, contract, agreement, or other instrument by which the Tenant may be bound or by which any of its assets may be bound.

1.That the financial statements and other documentation submitted to Landlord by or on behalf of Tenant in connection with the Lease Termination Agreement evidencing Tenant’s solvency were then true, accurate and complete in all material respects, and that there has been no material adverse change in the financial affairs of Tenant subsequent to the submission of such financial statements and other documentation to Landlord.

This Affidavit is made effective for all purposes and in all respects as of the date first appearing above (the “Effective Date”) to induce Landlord to enter into the Lease Termination Agreement, knowing full well that Landlord relies upon the truth of the statements in this Affidavit in the entering into the Lease Termination Agreement.

IN WITNESS WHEREOF the undersigned are executing this Affidavit to be effective for all purposes and in all respects as the Effective Date.

By:_______________________________

______________, Chief Financial Officer

COMMONWEALTH OF MASSACHUSETTS

______________, ss.

On this ____ day of __________, __________, before me, the undersigned notary public, personally appeared _______________, proved to me through satisfactory evidence of identification, which were __________________, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he or she signed it voluntarily for its stated purpose in his or her capacity as Chief Financial Officer of Surface Oncology, Inc.

______________________________

(official signature and seal of notary)

Name: ________________________

My commission expires: ___________]

Exhibit 31.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)

and 15d-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Robert W. Ross, M.D., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Surface Oncology, 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)) 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 changes 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.


Dated: August 2, 2023			/s/ Robert W. Ross, M.D.
			Robert W. Ross, M.D. Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)

and 15d-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Jessica Fees, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Surface Oncology, Inc.;

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 2, 2023			/s/ Jessica Fees
			Jessica Fees Chief Financial Officer (Principal Financial and Accounting Officer)

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 Surface Oncology, Inc. (the “Company”) for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert W. Ross, M.D., Chief Executive Officer of the Company, hereby certifies, pursuant to Section 1350 of Chapter 63 of Title 18, United States Code, that to his knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, 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 2, 2023			/s/ Robert W. Ross, M.D.
			Robert W. Ross, M.D. Chief Executive Officer (Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

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 Surface Oncology, Inc. (the “Company”) for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jessica Fees, Chief Financial Officer of the Company, hereby certifies, pursuant to Section 1350 of Chapter 63 of Title 18, United States Code, that to his knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, 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 2, 2023			/s/ Jessica Fees
			Jessica Fees Chief Financial Officer (Principal Financial and Accounting Officer)

Cover - shares	6 Months Ended
Cover - shares	Jun. 30, 2023	Jul. 31, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	001-38459
Entity Registrant Name	SURFACE ONCOLOGY, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-5543980
Entity Address, Address Line One	50 Hampshire Street
Entity Address, Address Line Two	8th Floor
Entity Address, City or Town	Cambridge
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02139
City Area Code	617
Local Phone Number	714-4096
Title of 12(b) Security	Common stock, $0.0001
Trading Symbol	SURF
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		60,824,474
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001718108
Current Fiscal Year End Date	--12-31

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 14,842	$ 50,910
Marketable securities	41,416	73,913
Prepaid expenses and other current assets	4,330	4,317
Total current assets	60,588	129,140
Property and equipment, net	2,499	4,866
Operating lease right-of-use asset	2,919	24,307
Restricted cash	0	1,595
Other assets	0	2
Total assets	66,006	159,910
Current liabilities:
Accounts payable	609	256
Accrued expenses and other current liabilities	6,731	10,214
Operating lease liability	9,488	5,790
Total current liabilities	16,828	16,260
Operating lease liability, non-current	0	24,662
Convertible note payable, non-current	0	25,585
Total liabilities	16,828	66,507
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized at June 30, 2023 and December 31, 2022; no shares issued and outstanding at June 30, 2023 and December 31, 2022	0	0
Common stock, $0.0001 par value; 150,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; 60,730,274 and 60,578,956 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	6	6
Additional paid-in capital	301,655	298,741
Accumulated other comprehensive loss	(221)	(1,015)
Accumulated deficit	(252,262)	(204,329)
Total stockholders’ equity	49,178	93,403
Total liabilities and stockholders’ equity	$ 66,006	$ 159,910

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	150,000,000	150,000,000
Common stock, issued (in shares)	60,730,274	60,578,956
Common stock, outstanding (in shares)	60,730,274	60,578,956

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
License-related revenue	$ 0	$ 0	$ 0	$ 30,000
Operating expenses:
Research and development	13,831	18,198	27,608	34,822
General and administrative	8,576	6,426	14,460	12,967
Restructuring charges	3,234	0	3,234	0
Total operating expenses	25,641	24,624	45,302	47,789
Loss from operations	(25,641)	(24,624)	(45,302)	(17,789)
Interest expense	(3,108)	(733)	(4,040)	(1,415)
Other income (expense), net	557	144	1,409	190
Net loss	$ (28,192)	$ (25,213)	$ (47,933)	$ (19,014)
Net loss per share — basic (in dollars per share)	$ (0.46)	$ (0.46)	$ (0.79)	$ (0.37)
Net loss per share — diluted (in dollars per share)	$ (0.46)	$ (0.46)	$ (0.79)	$ (0.37)
Weighted average common shares outstanding— basic (in shares)	60,717,899	54,654,822	60,673,195	51,647,148
Weighted average common shares outstanding— diluted (in shares)	60,717,899	54,654,822	60,673,195	51,647,148
Comprehensive loss:
Net loss	$ (28,192)	$ (25,213)	$ (47,933)	$ (19,014)
Other comprehensive loss:
Unrealized gain (loss) on marketable securities, net of tax of $0	348	(259)	794	(949)
Comprehensive loss	$ (27,844)	$ (25,472)	$ (47,139)	$ (19,963)

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Marketable securities tax	$ 0	$ 0	$ 0	$ 0

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2021		46,958,776
Beginning balance at Dec. 31, 2021	$ 118,900	$ 5	$ 259,859	$ (221)	$ (140,743)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options (in shares)		208
Issuance of common stock upon exercise of stock options	0		0
Issuance of common stock under stock purchase plan (in shares)		51,329
Issuance of common stock under stock purchase plan	157		157
Issuance of common stock upon public offering, net of issuance costs (in shares)		7,337,251
Issuance of common stock upon public offering, net of issuance costs	20,556	$ 1	20,555
Stock-based compensation expense	1,865		1,865
Unrealized gain (loss) on marketable securities	(690)			(690)
Net income (loss)	6,199				6,199
Ending balance (in shares) at Mar. 31, 2022		54,347,564
Ending balance at Mar. 31, 2022	146,987	$ 6	282,436	(911)	(134,544)
Beginning balance (in shares) at Dec. 31, 2021		46,958,776
Beginning balance at Dec. 31, 2021	118,900	$ 5	259,859	(221)	(140,743)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized gain (loss) on marketable securities	(949)
Net income (loss)	(19,014)
Ending balance (in shares) at Jun. 30, 2022		55,384,868
Ending balance at Jun. 30, 2022	125,716	$ 6	286,637	(1,170)	(159,757)
Beginning balance (in shares) at Mar. 31, 2022		54,347,564
Beginning balance at Mar. 31, 2022	146,987	$ 6	282,436	(911)	(134,544)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options (in shares)		9,135
Issuance of common stock upon exercise of stock options	11		11
Issuance of common stock under stock purchase plan (in shares)		2,234
Issuance of common stock under stock purchase plan	7		7
Issuance of common stock upon public offering, net of issuance costs (in shares)		1,025,935
Issuance of common stock upon public offering, net of issuance costs	2,110	$ 0	2,110
Stock-based compensation expense	2,073		2,073
Unrealized gain (loss) on marketable securities	(259)			(259)
Net income (loss)	(25,213)				(25,213)
Ending balance (in shares) at Jun. 30, 2022		55,384,868
Ending balance at Jun. 30, 2022	$ 125,716	$ 6	286,637	(1,170)	(159,757)
Beginning balance (in shares) at Dec. 31, 2022	60,578,956	60,578,956
Beginning balance at Dec. 31, 2022	$ 93,403	$ 6	298,741	(1,015)	(204,329)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock under stock purchase plan (in shares)		137,917
Issuance of common stock under stock purchase plan	77		77
Stock-based compensation expense	1,646		1,646
Unrealized gain (loss) on marketable securities	446			446
Net income (loss)	(19,741)				(19,741)
Ending balance (in shares) at Mar. 31, 2023		60,716,873
Ending balance at Mar. 31, 2023	$ 75,831	$ 6	300,464	(569)	(224,070)
Beginning balance (in shares) at Dec. 31, 2022	60,578,956	60,578,956
Beginning balance at Dec. 31, 2022	$ 93,403	$ 6	298,741	(1,015)	(204,329)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized gain (loss) on marketable securities	794
Net income (loss)	$ (47,933)
Ending balance (in shares) at Jun. 30, 2023	60,730,274	60,730,274
Ending balance at Jun. 30, 2023	$ 49,178	$ 6	301,655	(221)	(252,262)
Beginning balance (in shares) at Mar. 31, 2023		60,716,873
Beginning balance at Mar. 31, 2023	75,831	$ 6	300,464	(569)	(224,070)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock under stock purchase plan (in shares)		13,401
Issuance of common stock under stock purchase plan	5		5
Stock-based compensation expense	1,186		1,186
Unrealized gain (loss) on marketable securities	348			348
Net income (loss)	$ (28,192)				(28,192)
Ending balance (in shares) at Jun. 30, 2023	60,730,274	60,730,274
Ending balance at Jun. 30, 2023	$ 49,178	$ 6	$ 301,655	$ (221)	$ (252,262)

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (47,933)	$ (19,014)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	2,307	691
Stock-based compensation expense	2,832	3,938
Non-cash interest expense related to note payable	2,665	296
Net amortization of premiums and discounts on marketable securities	(211)	276
Gain on disposal of property and equipment	(29)	0
Non-cash operating lease cost	1,911	1,172
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(13)	(1,660)
Other assets	2	157
Accounts payable	353	(1,128)
Accrued expenses and other current liabilities	(3,397)	(2,395)
Operating lease liability	(1,487)	(1,304)
Net cash used in operating activities	(43,000)	(18,971)
Cash flows from investing activities:
Purchases of property and equipment	0	(146)
Proceeds from sales of property and equipment	3	0
Purchases of marketable securities	(35,568)	(15,690)
Proceeds from sales or maturities of marketable securities	69,070	30,745
Net cash provided by investing activities	33,505	14,909
Cash flows from financing activities:
Payments made on convertible note payable	(28,250)	0
Proceeds from issuance of common stock upon public offering, net	0	22,666
Proceeds from employee stock purchases	77	164
Proceeds from exercise of stock options	5	11
Net cash provided by (used in) financing activities	(28,168)	22,841
Net increase (decrease) in cash and cash equivalents and restricted cash	(37,663)	18,779
Cash and cash equivalents and restricted cash at beginning of period	52,505	57,640
Cash and cash equivalents and restricted cash at end of period	14,842	76,419
Supplemental disclosure of cash flow information:
Cash paid for interest	1,666	1,097
Supplemental disclosure of non-cash investing and financing activities:
Re-measurement of right-of-use asset and related lease liability	(19,477)	755
Purchases of property and equipment included in accounts payable and accrued expenses	$ 0	$ 92

Nature of the Business	6 Months Ended
Nature of the Business	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Nature of the Business	Nature of the Business Surface Oncology, Inc. (the “Company” or “Surface”) is a clinical-stage immuno-oncology company focused on using its specialized knowledge of the biological pathways critical to the immunosuppressive tumor microenvironment (“TME”) for the development of next-generation cancer therapies. Surface was incorporated in April 2014 under the laws of the State of Delaware. The Company is subject to risks common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the ability to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. On August 5, 2021, the Company entered into an amendment to its existing Capital on Demand™ Sales Agreement (the “Amended Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”), to allow the issuance and sale of up to $80,000 in gross proceeds, from time to time during the term of the Amended Sales Agreement, through an “at-the-market” equity offering program under which JonesTrading will act as the Company’s sales agent (the “2021 ATM Facility”). The 2021 ATM Facility provides that JonesTrading will continue to be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the 2021 ATM Facility. The Company has no obligation to sell any shares under the Amended Sales Agreement and may, at any time, suspend solicitation and offers under the 2021 ATM Facility. In the three and six months ended June 30, 2023, the Company did not sell shares of common stock, at-the-market under the Amended Sales Agreement. In the three and six months ended June 30, 2022, the Company sold 1,025,935 and 8,363,186 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $2,110 and $22,666. Since August 5, 2021, the Company has sold 14,611,756 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $41,421. Proposed Transaction with Coherus BioSciences, Inc. On June 15, 2023, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Coherus BioSciences, Inc., a Delaware corporation (“Parent” or “Coherus”), Crimson Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub I”) and Crimson Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”). Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Merger Sub I will merge with and into the Company (the “First Merger”), with the Company surviving such First Merger as a wholly owned subsidiary of Parent, and, as part of the same overall transaction, promptly after the First Merger, the surviving entity of the First Merger will merge with and into Merger Sub II (the “Second Merger” and together with the First Merger, the “Mergers”), with Merger Sub II surviving the Second Merger (the “Surviving Entity”). Under the Merger Agreement, at the effective time of the First Merger (the “Effective Time”), each share of common stock, $0.0001 par value per share, of the Company (the “Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than treasury shares, any shares of Company Common Stock held directly by Parent or Merger Subs immediately prior to the Effective Time and shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by any holder who properly demands appraisal for such shares in accordance with Section 262 of the Delaware General Corporation Law) will be converted automatically into and shall thereafter represent the right to receive consideration per share consisting of: •a number of shares of common stock, par value $0.0001 per share, of Parent (the “Parent Common Stock”) equal to the exchange ratio (the “Exchange Ratio”) determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Company’s net cash as of the closing of the Mergers (the “Closing”), as calculated in accordance with the Merger Agreement, by (2) $5.2831 (the “Parent Stock Price”), by (y) the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement (the “Upfront Consideration”), plus any cash payable in lieu of a fractional share of Parent Common Stock; and •one contingent value right (a “CVR”) representing the right to receive the CVR Payment Amount (as defined in the Merger Agreement), as provided for in the CVR Agreement (as defined in the Merger Agreement) (collectively, with the Upfront Consideration, the “Merger Consideration”). At the Effective Time, each option (a “Company Stock Option”) to purchase Company Common Stock granted under Company’s equity incentive plans that is outstanding immediately prior to the Effective Time shall be converted, assumed or cancelled as follows: •each Company Stock Option with an exercise price per share that is less than the value of the Upfront Consideration (an “In-the-Money Option”) shall be cancelled and converted into the right to receive: a.a number of shares of Parent Common Stock, subject to certain exceptions for fractional shares and applicable withholdings, equal to the quotient of (x) the product of (1) the total number of shares of vested and unvested Company Common Stock underlying the In-the-Money Option multiplied by (2) the excess of the value of the Upfront Consideration over the exercise price of such In-the-Money Option, divided by (y) the Parent Stock Price; and b.a number of CVRs equal to the vested and unvested shares of Company Common Stock underlying the In-the-Money Option; •each Company Stock Option held by a Company employee who continues employment with Parent and its affiliates after the Effective Time (a “Covered Employee”) and with an exercise price that is equal to or greater than the value of the Upfront Consideration (each, an “Underwater Option”) shall be assumed by Parent and converted into an option to acquire shares of Parent Common Stock (an “Assumed Option”), and with the same vesting schedule and other terms and conditions applicable to such Assumed Option immediately prior to the Effective Time, except that (i) each Assumed Option shall become exercisable for a number of shares of Parent Common Stock equal to the product (rounded down to the next whole number of shares) of (x) the number of shares of Company Common Stock that would have been issuable upon full exercise of such Assumed Option immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, and (ii) the per share exercise price for such Assumed Option shall equal the quotient (rounded up to the next whole cent) obtained by dividing the exercise price per share of the Company Common Stock as of immediately prior to the Effective Time by the Exchange Ratio; and •each Underwater Option held by a Company employee who is not a Covered Employee shall be cancelled, and the holder of such Underwater Option shall receive no Merger Consideration with respect to such Underwater Option. At the Effective Time, each Company restricted stock unit award (a “Company RSU Award”), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive the Merger Consideration in respect of each share of Company Common Stock subject to such Company RSU Award, subject to certain exceptions for fractional shares and applicable withholdings. Each CVR entitles the holder thereof to receive contingent payments, without interest, and subject to deduction for any required tax withholding, if applicable, equal to (i) the dollar amount of the Net CVR Payments (as defined below) received during the 10-year period following the Closing (the “CVR Term”) divided by (ii) the total number of outstanding CVRs (the “CVR Payment Amount”). For each fiscal quarter during the CVR Term (each, a “CVR Payment Period”), the “Net CVR Payments” shall equal the sum of the following, less any permitted deductions (as set forth in the CVR Agreement). •70% of all milestone- and royalty-based payments actually received by Parent, the Surviving Entity or their affiliates from GlaxoSmithKline Intellectual Property (No. 4) Limited under the License Agreement, dated December 16, 2020, between Company and GlaxoSmithKline Intellectual Property (No. 4) Limited; •70% of all milestone- and royalty-based payments actually received by Parent, the Surviving Entity or their affiliates from Novartis Institute for Biomedical Research, Inc. under the collaboration agreement, dated January 9, 2016, between Company and Novartis Institute for Biomedical Research, Inc.; •25% of any upfront payment actually received by Parent, the Surviving Entity or their affiliates under an agreement entered into by the Parent, the Surviving Entity or their affiliates after the Closing granting a third party development, manufacture or commercialization rights for the Company’s SRF114 proprietary drug product candidate in any market outside of the United States, less development costs and expenses incurred by Parent, the Surviving Entity or their affiliates after the Closing for the development of SRF114; and •50% of any upfront payment actually received by Parent, the Surviving Entity or their affiliates under an agreement entered into by Parent, the Surviving Entity or their affiliates after the Closing granting a third party development, manufacture or commercialization rights for the Company’s SRF388 proprietary drug product candidate in any market outside of the United States, less development costs and expenses incurred by Parent, the Surviving Entity or their affiliates after the Closing for the development of SRF388. The obligations of the Company and Parent to consummate the Mergers and the other transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of certain conditions, including: (i) the Company’s net cash being no less than $19,600 as of the date of determination; (ii) the adoption of the Merger Agreement by holders of at least a majority of the Company Common Stock outstanding; (iii) Parent’s Registration Statement on Form S-4 to be filed in connection with the Mergers having become effective and not subject to any stop order, and the shares of Parent Common Stock issuable in the Mergers having been approved for listing on the Nasdaq; (iv) execution of the CVR Agreement by Parent and the Rights Agent; and (v) other customary conditions for a transaction of this type, such as the absence of any legal restraint prohibiting the consummation of the Mergers and the absence of any material adverse effect for the Company or Parent. The parties have also made certain representations, warranties and covenants in the Merger Agreement, including covenants to conduct their respective businesses in the ordinary course in all material respects between the signing of the Merger Agreement and the Closing, prohibiting the parties from engaging in certain kinds of activities during such period without the consent of the other party and the use of commercially reasonable efforts to cause the conditions of the Mergers to be satisfied. In connection with the announcement of the Mergers, and on June 15, 2023, the Company was required under the terms of that certain Loan and Security Agreement (the “Loan Agreement”), dated November 22, 2019, as amended on October 1, 2021 and September 21, 2022, by and among K2 HealthVentures, LLC and Ankura Trust Company, LLC (collectively, the “Secured Parties”) and the Company, to pay in full all outstanding loan obligations due to the Secured Parties which is further described in Note 8. In addition, on June 15, 2023, the Company entered into a Lease Termination Agreement (the “Termination Agreement”) with BMR-Hampshire LLC (the “Landlord”) pursuant to which the parties agreed to terminate that certain Lease (the “Lease”) relating to the Company’s corporate headquarters at 50 Hampshire Street in Cambridge, MA (the “Premises”). As consideration for the Company entering into the Termination Agreement, the Company agreed to pay $10,000 to the Landlord which is further described in Note 11. Concurrent with the signing of the Merger Agreement, the Company announced a reduction in force as part of its cost savings efforts that resulted in the termination of approximately 50% of the Company’s remaining workforce (the “June Reduction in Force”). In connection with the June Reduction in Force, the affected employees will be provided severance benefits, including cash severance payments, acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, and COBRA continuation or reimbursement, pursuant to each affected employee’s employment agreement with the Company or any applicable severance policy. Each affected employee’s eligibility for these severance benefits is contingent upon such employee’s entering into an effective separation agreement, which includes a general release of claims against the Company (the “Release Requirement”). The Company’s financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has primarily funded its operations with proceeds from private and public sales of its securities, proceeds from a collaboration agreement with Novartis, proceeds from a license agreement with GlaxoSmithKline Intellectual Property (No. 4) Limited (“GSK”) and issuance of a debt facility with K2 Health Ventures LLC (“K2HV”). The Company has a history of incurring losses and negative cash flows from operations. As of June 30, 2023, the Company had an accumulated deficit of $252,262. As of August 2, 2023, the issuance date of this Quarterly Report on Form 10-Q, the Company expects that its operating losses and negative cash flows from operations will continue for the foreseeable future. In addition, the Company’s repayment in full of the Loan Agreement and entering into the Lease Termination Agreement negatively impacted the Company’s liquidity. In accordance with the requirements of ASC 205-40, management has concluded these factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued.

Summary of Significant Accounting Policies	6 Months Ended
Summary of Significant Accounting Policies	Jun. 30, 2023
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiary, Surface Securities Corporation, a Massachusetts corporation, after elimination of all intercompany accounts and transactions. The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2023, as amended by the Form 10-K/A filed with the SEC on May 1, 2023. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, 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 consolidated financial statements include, but are not limited to, revenue recognition and the accrual of research and development expenses. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates. Unaudited Interim Financial Information The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023 and the results of its operations and its cash flows for the three and six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The condensed balance sheet at December 31, 2022, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year period. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This standard became effective for the Company on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company's financial position or results of operations. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

Marketable Securities

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

As of June 30, 2023, the fair value of available-for-sale marketable debt securities by type of security was as follows:


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable debt securities:
U.S. Treasury notes	$	13,433	$	—	(43)		$	13,390
U.S. government agency bonds	11,167		—		(75)		11,092
Corporate bonds	$	17,037	$	—	$	(103)	$	16,934
	$	41,637	$	—	$	(221)	$	41,416

The amortized cost and fair value of the Company’s available-for-sale debt securities by contractual maturity are summarized as follows:


	June 30, 2023
	Amortized Cost		Fair Value
Maturing in one year or less	$	39,271	$	39,065
Maturing after one year	2,366		2,351
	$	41,637	$	41,416

As of December 31, 2022, the fair value of available-for-sale marketable debt securities by type of security was as follows:


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable debt securities:
U.S. Treasury notes	$	50,080	$	1	(714)		$	49,367
U.S. government agency bonds	10,957		—		(184)		10,773
Corporate bonds	$	13,891	$	—	$	(118)	$	13,773
	$	74,928	$	1	$	(1,016)	$	73,913

The amortized cost and fair value of the Company’s available-for-sale debt securities by contractual maturity are summarized as follows:


	December 31, 2022
	Amortized Cost		Fair Value
Maturing in one year or less	$	73,446	$	72,453
Maturing after one year	1,482		1,460
	$	74,928	$	73,913

Fair Value of Financial Assets

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets


	Fair Value Measurements as of June 30, 2023 using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	6,736	$	—	$	—	$	6,736
Marketable securities:
U.S. Treasury notes	—		13,390		—		13,390
U.S. government agency bonds	—		11,092		—		11,092
Corporate bonds	—		16,934		—		16,934
	$	6,736	$	41,416	$	—	$	48,152


	Fair Value Measurements as of December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	31,189	$	—	$	—	$	31,189
Marketable securities:
U.S. Treasury notes	—		49,367		—		49,367
U.S. Government agency bonds	—		10,773		—		10,773
Corporate bonds	—		13,773		—		13,773
	$	31,189	$	73,913	$	—	$	105,102

Collaboration and License Agreements

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Collaboration and License Agreements

Novartis Agreement

Termination

GSK Agreement

Termination

License-Related Revenue

For the three and six months ended June 30, 2023 and 2022, the Company recognized the following totals of license-related revenue:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
License-related revenue	$	—	$	—	$	—	$	30,000

Stockholders’ Equity	6 Months Ended
Stockholders’ Equity	Jun. 30, 2023
Equity [Abstract]
Stockholders’ Equity	Stockholders’ Equity Common Stock As of June 30, 2023 and December 31, 2022, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 150,000,000 shares of $0.0001 par value common stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of any outstanding preferred stock. No dividends have been declared or paid by the Company through June 30, 2023. As of June 30, 2023 and December 31, 2022, the Company had reserved 24,307,486 and 23,936,163 shares, respectively, of common stock for the exercise of outstanding stock options, shares to be issued under the 2021 ATM Facility, shares to be issued upon the vesting of restricted stock units and the number of shares remaining available for future grant under the Company’s 2018 Plan, Inducement Plan and ESPP (each defined in Note 7 below). In August 2021, the Company entered into the Amended Sales Agreement with JonesTrading to allow the issuance and sale of up to $80,000 in shares of the Company’s common stock, from time to time. During the three and six months ended June 30, 2023, the Company did not sell shares of common stock, at-the-market under the Amended Sales Agreement. During the three and six months ended June 30, 2022, the Company sold 1,025,935 and 8,363,186 shares of common stock, at-the-market under the Amended Sales Agreement for net proceeds of $2,110 and $22,666. Since August 5, 2021, the Company has sold 14,611,756 shares of common stock at-the-market under the Amended Sales Agreement for net proceeds of $41,421

Stock-Based Awards

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Awards

2014 Stock Incentive Plan

As of December 31, 2018, all remaining shares available under the 2014 Plan were transferred to the Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”).

2018 Stock Option and Incentive Plan

As of June 30, 2023, 1,457,618 shares were available for future issuance under the 2018 Plan.

Stock options granted under the 2014 Plan and 2018 Plan to employees generally vest over three years and expire after ten years.

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)
Outstanding as of December 31, 2022	8,233,330	$	5.74	6.68	$	159
Granted	3,068,900	0.69
Exercised	(13,401)	0.35
Forfeited	(1,189,831)	2.65
Outstanding as of June 30, 2023	10,098,998	$	4.58	6.95	$	604
Options exercisable at June 30, 2023	6,305,828	$	5.78	5.66	$	188
Vested and expected to vest at June 30, 2023	10,098,998	$	4.58	6.95	$	604

The weighted average grant-date fair value per share of stock options granted during the six months ended June 30, 2023 and year ended December 31, 2022 was $0.50 and $2.28, respectively.

2018 Employee Stock Purchase Plan

2021 Inducement Plan

The following table summarizes the Company’s stock option under the Inducement Plan activity since December 31, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)
Outstanding as of December 31, 2022	210,400	$	2.61	9.36	$	—
Granted	—	—
Exercised	—	—
Forfeited	(9,113)	3.12
Outstanding as of June 30, 2023	201,287	$	2.59	8.87	$	—
Options exercisable at June 30, 2023	41,457	$	3.26	8.72	$	—
Vested and expected to vest at June 30, 2023	201,287	$	2.59	8.87	$	—

Restricted Stock Units

The table below summarizes the Company’s RSU activity since December 31, 2022:


	Number of Shares	Weighted Average Grant-Date Fair Value
Unvested restricted stock units as of December 31, 2022	385,980	$	3.64
Granted	—	—
Vested	—	—
Forfeited	(107,100)	3.64
Unvested restricted stock units as of June 30, 2023	278,880	$	3.64

Stock-Based Compensation


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Research and development expenses	$	371	$	777	$	1,017	$	1,360
General and administrative expenses	815		1,296		1,815		2,578
	$	1,186	$	2,073	$	2,832	$	3,938

As of June 30, 2023, the Company had an aggregate of $6,620 of unrecognized stock-based compensation cost, which is expected to be recognized over a weighted average period of 1.56 years

Debt	6 Months Ended
Debt	Jun. 30, 2023
Debt Disclosure [Abstract]
Debt	Debt On November 22, 2019, the Company entered into a loan and security agreement (the “Loan Agreement”) with K2HV (the “Lender”), as amended on October 1, 2021 and September 21, 2022. In connection with the announcement of the Mergers, on June 15, 2023, the Company paid in full all outstanding loan obligations due to the Secured Parties. Pursuant to the payoff letter, dated June 15, 2023, between the Company and the Secured Parties, the Loan Agreement terminated on June 16, 2023, when the Company paid in full all outstanding loan obligations of $25,000 due to the Secured Parties, along with $3,250 in fees and expenses pertaining to the termination of the Loan Agreement. At such time, all liens securing the Company’s obligations under the Loan Agreement were released. The Company recorded interest expense related to the loan facility of $3,108 and $4,040, and $733 and $1,415 for the three and six months ended June 30, 2023 and 2022, respectively. The Company recorded $2,456 of interest expense in the three months ended June 30, 2023 related to the termination of the Loan Agreement, of which $1,250 related to the pre-payment penalty and $1,206 related to the unamortized debt discount and final fees at the time of the termination.

Net Loss per Share

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Basic and diluted net loss per share:
Numerator:
Net loss	$	(28,192)	$	(25,213)	$	(47,933)	$	(19,014)
Denominator:
Weighted average commons shares outstanding — basic and diluted	60,717,899		54,654,822		60,673,195		51,647,148
Net loss per share — basic and diluted	$	(0.46)	$	(0.46)	$	(0.79)	$	(0.37)


	June 30,
	2023	2022
Stock options to purchase common stock	10,300,285	8,968,131
Shares to be issued under the 2018 ESPP	1,873,627	1,500,500
RSUs issued and expected to vest	278,880	711,000
Shares available from conversion of note payable	—	832,677
	12,452,792	12,012,308

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The Company did not provide for any income taxes for the three and six months ended June 30, 2023 or 2022. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of June 30, 2023 and December 31, 2022. Management reevaluates the positive and negative evidence at each reporting period. As of June 30, 2023 and December 31, 2022, the Company had no accrued interest or tax penalties recorded. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years are still open under statute from 2019 to present. All years may be examined to the extent the tax credit or net operating loss carryforwards are used in future periods. There are currently no federal or state audits.

Leases

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Leases

Termination of BMR-Hampshire Lease

Sublease Agreement with EQRx, Inc.

Concurrent with the Termination Agreement, the Sublease Agreement, as amended, terminates on the Termination Date.

In the three and six months ended June 30, 2023 and 2022, the Company recognized sublease income of $647 and $1,290, and $648 and $1,304, respectively.

As of June 30, 2023, future undiscounted cash inflows under the sublease are as follows:


Year Ending December 31,
2023	$	636
	$	636

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Legal Proceedings The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings.

Related Party Transactions	6 Months Ended
Related Party Transactions	Jun. 30, 2023
Related Party Transactions [Abstract]
Related Party Transactions	Related Party Transactions Novartis Institutes for BioMedical Research, Inc. Novartis is a related party because it is a greater than 5% stockholder of the Company. In January 2016, the Company entered into the Novartis Agreement and sold 2,000,000 shares of its Series A-1 Preferred Stock to Novartis for gross proceeds of $13,500. In addition, concurrent with the Company’s initial public offering of common stock, the Company issued Novartis 766,666 shares of its common stock at $15.00 per share, for proceeds of $11,500 in a private placement. During the three and six months ended June 30, 2023 and 2022, the Company made no cash payments to Novartis related to the Novartis Agreement. As of June 30, 2023 and 2022, no amounts were due from Novartis. The Company did not recognize any collaboration revenue - related party under the Novartis Agreement in the three and six months ended June 30, 2023 or 2022.

Restructuring	6 Months Ended
Restructuring	Jun. 30, 2023
Restructuring and Related Activities [Abstract]
Restructuring	Restructuring On June 15, 2023, the Company’s Board of Directors approved the Merger Agreement. Concurrent with the signing of the Merger Agreement, the Company announced the June Reduction in Force. In connection with the June Reduction in Force, the affected employees were provided severance benefits, including cash severance payments, acceleration of outstanding equity awards to the extent the Closing occurs within six months of such termination, and COBRA continuation or reimbursement, pursuant to each affected employee’s employment agreement. During the three and six months ended June 30, 2023, the Company recorded $3,234 of restructuring charges consisting of $2,301 of employee severance and related costs and $933 of facility costs related to accelerated depreciation on laboratory equipment and computer equipment that is no longer required and will be disposed of. The accrued restructuring liability of $2,301 is payable within the next two months and has been included as accrued restructuring costs in current liabilities in the consolidated balance sheet. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Merger Agreement. The Company also completed an evaluation of the impact of the Termination Agreement on the carrying value of its other long-lived assets. This process includes evaluating the estimated remaining lives, significant changes in the use, and potential impairment charges related to its long-lived assets. Based on its evaluation, the Company determined it will accelerate depreciation on its leasehold improvements to coincide with the remaining lease term as a result of the Termination Agreement.

Summary of Significant Accounting Policies (Policies)	6 Months Ended
Summary of Significant Accounting Policies (Policies)	Jun. 30, 2023
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiary, Surface Securities Corporation, a Massachusetts corporation, after elimination of all intercompany accounts and transactions. The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 2 to the financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2023, as amended by the Form 10-K/A filed with the SEC on May 1, 2023.
Use of Estimates	Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, 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 consolidated financial statements include, but are not limited to, revenue recognition and the accrual of research and development expenses. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates.
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023 and the results of its operations and its cash flows for the three and six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The condensed balance sheet at December 31, 2022, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year period.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This standard became effective for the Company on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company's financial position or results of operations. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Summary of Fair Value of Available-for-sale Marketable Debt Securities by Type of Security

As of June 30, 2023, the fair value of available-for-sale marketable debt securities by type of security was as follows:


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable debt securities:
U.S. Treasury notes	$	13,433	$	—	(43)		$	13,390
U.S. government agency bonds	11,167		—		(75)		11,092
Corporate bonds	$	17,037	$	—	$	(103)	$	16,934
	$	41,637	$	—	$	(221)	$	41,416

As of December 31, 2022, the fair value of available-for-sale marketable debt securities by type of security was as follows:


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable debt securities:
U.S. Treasury notes	$	50,080	$	1	(714)		$	49,367
U.S. government agency bonds	10,957		—		(184)		10,773
Corporate bonds	$	13,891	$	—	$	(118)	$	13,773
	$	74,928	$	1	$	(1,016)	$	73,913

Summary of Available-for-sale Debt Securities by Contractual Maturity

The amortized cost and fair value of the Company’s available-for-sale debt securities by contractual maturity are summarized as follows:


	June 30, 2023
	Amortized Cost		Fair Value
Maturing in one year or less	$	39,271	$	39,065
Maturing after one year	2,366		2,351
	$	41,637	$	41,416

The amortized cost and fair value of the Company’s available-for-sale debt securities by contractual maturity are summarized as follows:


	December 31, 2022
	Amortized Cost		Fair Value
Maturing in one year or less	$	73,446	$	72,453
Maturing after one year	1,482		1,460
	$	74,928	$	73,913

Fair Value of Financial Assets (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured at Fair Value on Recurring Basis


	Fair Value Measurements as of June 30, 2023 using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	6,736	$	—	$	—	$	6,736
Marketable securities:
U.S. Treasury notes	—		13,390		—		13,390
U.S. government agency bonds	—		11,092		—		11,092
Corporate bonds	—		16,934		—		16,934
	$	6,736	$	41,416	$	—	$	48,152


	Fair Value Measurements as of December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	31,189	$	—	$	—	$	31,189
Marketable securities:
U.S. Treasury notes	—		49,367		—		49,367
U.S. Government agency bonds	—		10,773		—		10,773
Corporate bonds	—		13,773		—		13,773
	$	31,189	$	73,913	$	—	$	105,102

Collaboration and License Agreements (Tables)

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Collaboration Revenue

For the three and six months ended June 30, 2023 and 2022, the Company recognized the following totals of license-related revenue:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
License-related revenue	$	—	$	—	$	—	$	30,000

Stock-Based Awards (Tables)

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity

The following table summarizes the Company’s stock option activity since December 31, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)
Outstanding as of December 31, 2022	8,233,330	$	5.74	6.68	$	159
Granted	3,068,900	0.69
Exercised	(13,401)	0.35
Forfeited	(1,189,831)	2.65
Outstanding as of June 30, 2023	10,098,998	$	4.58	6.95	$	604
Options exercisable at June 30, 2023	6,305,828	$	5.78	5.66	$	188
Vested and expected to vest at June 30, 2023	10,098,998	$	4.58	6.95	$	604

The following table summarizes the Company’s stock option under the Inducement Plan activity since December 31, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)
Outstanding as of December 31, 2022	210,400	$	2.61	9.36	$	—
Granted	—	—
Exercised	—	—
Forfeited	(9,113)	3.12
Outstanding as of June 30, 2023	201,287	$	2.59	8.87	$	—
Options exercisable at June 30, 2023	41,457	$	3.26	8.72	$	—
Vested and expected to vest at June 30, 2023	201,287	$	2.59	8.87	$	—

Summary of Restricted Stock Unit Activity

The table below summarizes the Company’s RSU activity since December 31, 2022:


	Number of Shares	Weighted Average Grant-Date Fair Value
Unvested restricted stock units as of December 31, 2022	385,980	$	3.64
Granted	—	—
Vested	—	—
Forfeited	(107,100)	3.64
Unvested restricted stock units as of June 30, 2023	278,880	$	3.64

Summary of Stock-Based Compensation Expense Related to Stock Options and Restricted Stock Awards


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Research and development expenses	$	371	$	777	$	1,017	$	1,360
General and administrative expenses	815		1,296		1,815		2,578
	$	1,186	$	2,073	$	2,832	$	3,938

Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Net Loss Per Share Attributable to Common Stockholders

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Basic and diluted net loss per share:
Numerator:
Net loss	$	(28,192)	$	(25,213)	$	(47,933)	$	(19,014)
Denominator:
Weighted average commons shares outstanding — basic and diluted	60,717,899		54,654,822		60,673,195		51,647,148
Net loss per share — basic and diluted	$	(0.46)	$	(0.46)	$	(0.79)	$	(0.37)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated above because including them would have had an anti-dilutive effect:


	June 30,
	2023	2022
Stock options to purchase common stock	10,300,285	8,968,131
Shares to be issued under the 2018 ESPP	1,873,627	1,500,500
RSUs issued and expected to vest	278,880	711,000
Shares available from conversion of note payable	—	832,677
	12,452,792	12,012,308

Leases (Tables)

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Schedule of Future Undiscounted Cash Inflows Under Sublease

As of June 30, 2023, future undiscounted cash inflows under the sublease are as follows:


Year Ending December 31,
2023	$	636
	$	636

Nature of the Business - Additional Information (Details) - USD ($)				3 Months Ended			6 Months Ended		23 Months Ended
	Sep. 15, 2023	Jun. 15, 2023	Aug. 05, 2021	Sep. 15, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Dec. 31, 2022
Class of Stock [Line Items]
Common stock, par value (in dollars per share)		$ 0.0001			$ 0.0001		$ 0.0001		$ 0.0001	$ 0.0001
Exchange ratio, quotient numerator		$ 40,000,000
Share price (in dollars per share)		$ 5.2831
Period following the closing		10 years
Minimum cash amount		$ 19,600,000
Termination agreement lease amount		$ 1,595,000
Accumulated deficit					$ 252,262,000		$ 252,262,000		$ 252,262,000	$ 204,329,000
June Reduction In Force
Class of Stock [Line Items]
Restructuring workforce reduced percentage		50.00%
Forecast
Class of Stock [Line Items]
Termination agreement lease amount	$ 8,405,000			$ 10,000,000
SRF114
Class of Stock [Line Items]
Upfront payment percentage		25.00%
SRF388
Class of Stock [Line Items]
Upfront payment percentage		50.00%
GSK Agreement
Class of Stock [Line Items]
Milestone and royalty-based payment percentage		70.00%
Novartis Collaboration
Class of Stock [Line Items]
Milestone and royalty-based payment percentage		70.00%
2021 ATM Facility
Class of Stock [Line Items]
Number of shares issued (in shares)					0	1,025,935	0	8,363,186	14,611,756
Net proceeds from issuance of common stock						$ 2,110,000		$ 22,666,000	$ 41,421,000
2021 ATM Facility \| Maximum
Class of Stock [Line Items]
Gross proceeds from issuance of common stock			$ 80,000,000
Percentage of gross proceeds of shares sold for compensation (as a percent)			3.00%

Marketable Securities - Summary of Fair Value of Available-for-sale Marketable Debt Securities by Type of Security (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 41,637	$ 74,928
Gross Unrealized Gains	0	1
Gross Unrealized Losses	(221)	(1,016)
Fair Value	41,416	73,913
U.S. Treasury notes
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	13,433	50,080
Gross Unrealized Gains	0	1
Gross Unrealized Losses	(43)	(714)
Fair Value	13,390	49,367
U.S. government agency bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	11,167	10,957
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(75)	(184)
Fair Value	11,092	10,773
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	17,037	13,891
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(103)	(118)
Fair Value	$ 16,934	$ 13,773

Marketable Securities - Summary of Fair Value of Available-for-sale Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Amortized Cost
Maturing in one year or less	$ 39,271	$ 73,446
Maturing after one year	2,366	1,482
Amortized Cost	41,637	74,928
Fair Value
Maturing in one year or less	39,065	72,453
Maturing after one year	2,351	1,460
Fair Value	$ 41,416	$ 73,913

Marketable Securities - Additional Information (Details)	6 Months Ended		12 Months Ended
	Jun. 30, 2023 USD ($) security	Jun. 30, 2022 USD ($)	Dec. 31, 2022 USD ($) security
Investments, Debt and Equity Securities [Abstract]
Loss on realized sale	$ 110,000	$ 0
Number of positions, less then 12 months \| security	15		20
Aggregate fair value, securities, less than 12 months	$ 27,552,000		$ 34,079,000
Number of positions, 12 months or longer \| security	7		18
Aggregate fair value, securities, 12 months or longer	$ 13,863,000		$ 36,857,000
Investments in other-than-temporary decline in fair value	$ 0		$ 0

Fair Value of Financial Assets - Summary of Financial Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 41,416	$ 73,913
U.S. Treasury notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,390	49,367
U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	11,092	10,773
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	16,934	13,773
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured on recurring basis	48,152	105,102
Fair Value, Measurements, Recurring \| U.S. Treasury notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,390	49,367
Fair Value, Measurements, Recurring \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	11,092	10,773
Fair Value, Measurements, Recurring \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	16,934	13,773
Fair Value, Measurements, Recurring \| Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	6,736	31,189
Fair Value, Measurements, Recurring \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured on recurring basis	6,736	31,189
Fair Value, Measurements, Recurring \| Level 1 \| U.S. Treasury notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Fair Value, Measurements, Recurring \| Level 1 \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Fair Value, Measurements, Recurring \| Level 1 \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Fair Value, Measurements, Recurring \| Level 1 \| Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	6,736	31,189
Fair Value, Measurements, Recurring \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured on recurring basis	41,416	73,913
Fair Value, Measurements, Recurring \| Level 2 \| U.S. Treasury notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	13,390	49,367
Fair Value, Measurements, Recurring \| Level 2 \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	11,092	10,773
Fair Value, Measurements, Recurring \| Level 2 \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	16,934	13,773
Fair Value, Measurements, Recurring \| Level 2 \| Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Fair Value, Measurements, Recurring \| Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured on recurring basis	0	0
Fair Value, Measurements, Recurring \| Level 3 \| U.S. Treasury notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Fair Value, Measurements, Recurring \| Level 3 \| U.S. government agency bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Fair Value, Measurements, Recurring \| Level 3 \| Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Fair Value, Measurements, Recurring \| Level 3 \| Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 0	$ 0

Collaboration and License Agreements - Additional Information (Details)	1 Months Ended		3 Months Ended		6 Months Ended
	Mar. 31, 2022 USD ($)	Jan. 31, 2016 target	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Aug. 31, 2021 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License related revenue			$ 0	$ 0	$ 0	$ 30,000,000
Novartis Collaboration
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of option targets \| target		4
Number of option targets purchased \| target		3
Upfront, milestone, and option purchase payments, aggregate amount			150,000,000		150,000,000
Novartis Collaboration \| Novartis Institutes for Biomedical Research, Inc.
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue			0	0	0	0
Novartis Collaboration \| Novartis Institutes for Biomedical Research, Inc. \| Development Milestone
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Potential milestones payment					325,000,000
Novartis Collaboration \| Novartis Institutes for Biomedical Research, Inc. \| Sales Milestone
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Potential milestones payment					$ 200,000,000
GSK Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Termination period					10 years
GSK Agreement \| License
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License related revenue	$ 30,000,000		$ 0	$ 0	$ 0	$ 30,000,000
GSK Agreement \| License \| Transferred at Point in Time
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Upfront payment							$ 85,000,000
GSK Agreement \| License \| Transferred over Time
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Additional payments to be received							4,314,000
GSK Agreement \| Transition Services \| Transferred over Time
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Additional payments to be received							$ 950,000
GSK Agreement \| Clinical Milestone Payment
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Potential milestones payment					60,000,000
GSK Agreement \| Regulatory Milestone Payment
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Potential milestones payment					155,000,000
GSK Agreement \| Sales Milestone Payment
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Potential milestones payment					$ 485,000,000

Collaboration and License Agreements - Schedule of Collaboration Revenue (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License-related revenue		$ 0	$ 0	$ 0	$ 30,000,000
GSK Agreement \| License
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License-related revenue	$ 30,000,000	$ 0	$ 0	$ 0	$ 30,000,000

Stockholders' Equity - Additional Information (Details)		3 Months Ended		6 Months Ended		23 Months Ended
Stockholders' Equity - Additional Information (Details)	Aug. 05, 2021 USD ($)	Jun. 30, 2023 $ / shares shares	Jun. 30, 2022 USD ($) shares	Jun. 30, 2023 USD ($) vote $ / shares shares	Jun. 30, 2022 USD ($) shares	Jun. 30, 2023 USD ($) $ / shares shares	Jun. 15, 2023 $ / shares	Dec. 31, 2022 $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Common stock, authorized (in shares)		150,000,000		150,000,000		150,000,000		150,000,000
Common stock, par value (in dollars per share) \| $ / shares		$ 0.0001		$ 0.0001		$ 0.0001	$ 0.0001	$ 0.0001
Number of votes entitled by each share of common stock holder \| vote				1
Dividends, declared or paid \| $				$ 0
Capital common shares reserved for future issuance (in shares)		24,307,486		24,307,486		24,307,486		23,936,163
Common stock, issued (in shares)		60,730,274		60,730,274		60,730,274		60,578,956
2021 ATM Facility
Subsidiary, Sale of Stock [Line Items]
Common stock, issued (in shares)		0	1,025,935	0	8,363,186	14,611,756
Net proceeds from issuance of common stock \| $			$ 2,110,000		$ 22,666,000	$ 41,421,000
Maximum \| 2021 ATM Facility
Subsidiary, Sale of Stock [Line Items]
Gross proceeds from issuance of common stock \| $	$ 80,000,000

Stock-Based Awards - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 15, 2023	Apr. 30, 2018	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			$ 1,186	$ 2,073	$ 2,832	$ 3,938
June Reduction In Force
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options forfeited (in shares)	1,062,115
General and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			815	1,296	1,815	2,578
2018 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation cost			$ 6,620		$ 6,620
Unrecognized stock-based compensation cost, weighted-average period (in years)					1 year 6 months 21 days
Stock options to purchase common stock \| June Reduction In Force
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Modification closing period	6 months
Stock options to purchase common stock \| Non-Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock converted under option plan (in shares)			247,169		247,169		260,570
RSUs issued and expected to vest
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted stock units, Granted (in shares)					0		732,000
Restricted stock units forfeited (in shares)	103,920				107,100
RSUs issued and expected to vest \| June Reduction In Force
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Modification closing period	6 months
RSUs issued and expected to vest \| Vesting August 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period percentage							40.00%
RSUs issued and expected to vest \| Vesting August 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period percentage							60.00%
RSUs issued and expected to vest \| Granted to Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			$ 0	$ 610	$ 341	$ 819
2014 Plan \| Stock options to purchase common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of exercise price per share of stock options to fair market value of share of common stock (as a percent)					100.00%
Stock options granted expiry period (in years)					10 years
Weighted average grant-date fair value per share of stock options granted (in dollars per share)					$ 0.50		$ 2.28
2018 Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock to be issued (in shares)		1,545,454
Percentage of authorized number of shares of common stock outstanding (as a percent)		4.00%
Stock options forfeited (in shares)					1,189,831
Number of shares of common stock converted under option plan (in shares)			10,098,998		10,098,998		8,233,330
2018 Employee Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance (in shares)			1,457,618		1,457,618
2018 Employee Stock Option and Incentive Plan \| 2018 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock to be issued (in shares)		256,818	1,873,627		1,873,627
Percentage of authorized number of shares of common stock outstanding (as a percent)		1.00%
Number of shares of common stock issued (in shares)			0	2,234	137,917	53,563
2014 Plan and 2018 Plan \| Stock options to purchase common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted expiry period (in years)					10 years
Stock options granted vesting period (in years)					3 years
Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock to be issued (in shares)								600,000
Stock options forfeited (in shares)					9,113
Weighted average grant-date fair value per share of stock options granted (in dollars per share)						$ 1.99
Number of shares of common stock converted under option plan (in shares)			201,287		201,287		210,400
Inducement Plan \| Stock options to purchase common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance (in shares)			398,713		398,713

Stock-Based Awards - Summary of Stock Option Activity (Details) - 2018 Stock Option and Incentive Plan $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2023 USD ($) $ / shares shares	Dec. 31, 2022 USD ($) $ / shares shares
Number of Shares
Number of Shares, outstanding beginning balance (in shares) \| shares	8,233,330
Number of Shares, granted (in shares) \| shares	3,068,900
Number of Shares, exercised (in shares) \| shares	(13,401)
Number of Shares, forfeited (in shares) \| shares	(1,189,831)
Number of Shares, outstanding ending balance (in shares) \| shares	10,098,998	8,233,330
Number of Shares, options exercisable at ending balance (in shares) \| shares	6,305,828
Number of Shares, vested and expected to vest at ending balance (in shares) \| shares	10,098,998
Weighted Average Exercise Price
Weighted Average Exercise Price, Outstanding beginning balance (in dollars per share) \| $ / shares	$ 5.74
Weighted Average Exercise Price, Granted (in dollars per share) \| $ / shares	0.69
Weighted Average Exercise Price, Exercised (in dollars per share) \| $ / shares	0.35
Weighted Average Exercise Price, Forfeited (in dollars per share) \| $ / shares	2.65
Weighted Average Exercise Price, Outstanding ending balance (in dollars per share) \| $ / shares	4.58	$ 5.74
Weighted Average Exercise Price, Exercisable at ending balance (in dollars per share) \| $ / shares	5.78
Weighted Average Exercise Price, Vested and expected to vest at ending balance (in dollars per share) \| $ / shares	$ 4.58
Stock Option Activity, Additional Disclosures
Weighted Average Remaining Contractual Term (in years), Outstanding	6 years 11 months 12 days	6 years 8 months 4 days
Weighted Average Remaining Contractual Term (in years), Options exercisable	5 years 7 months 28 days
Weighted Average Remaining Contractual Term (in years), Vested and expected to vest	6 years 11 months 12 days
Aggregate Intrinsic Value (in dollars per share) \| $	$ 604	$ 159
Aggregate Intrinsic Value, Options exercisable at ending balance (in dollars per share) \| $	188
Aggregate Intrinsic Value, Vested and expected to vest at ending balance (In dollars per share) \| $	$ 604

Stock-Based Awards - Summary of Stock Option Activity - Inducement Plan (Details) - Inducement Plan - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Dec. 31, 2022
Number of Shares
Number of Shares, outstanding beginning balance (in shares)		210,400
Number of Shares, granted (in shares)	0	0
Number of Shares, exercised (in shares)		0
Number of Shares, forfeited (in shares)		(9,113)
Number of Shares, outstanding ending balance (in shares)	201,287	201,287	210,400
Number of Shares, options exercisable at ending balance (in shares)	41,457	41,457
Number of Shares, vested and expected to vest at ending balance (in shares)	201,287	201,287
Weighted Average Exercise Price
Weighted Average Exercise Price, Outstanding beginning balance (in dollars per share)		$ 2.61
Weighted Average Exercise Price, Granted (in dollars per share)		0
Weighted Average Exercise Price, Exercised (in dollars per share)		0
Weighted Average Exercise Price, Forfeited (in dollars per share)		3.12
Weighted Average Exercise Price, Outstanding ending balance (in dollars per share)	$ 2.59	2.59	$ 2.61
Weighted Average Exercise Price, Exercisable at ending balance (in dollars per share)	3.26	3.26
Weighted Average Exercise Price, Vested and expected to vest at ending balance (in dollars per share)	$ 2.59	$ 2.59
Stock Option Activity, Additional Disclosures
Weighted Average Remaining Contractual Term (in years), Outstanding		8 years 10 months 13 days	9 years 4 months 9 days
Weighted Average Remaining Contractual Term (in years), Options exercisable		8 years 8 months 19 days
Weighted Average Remaining Contractual Term (in years), Vested and expected to vest		8 years 10 months 13 days
Aggregate Intrinsic Value (in dollars per share)	$ 0	$ 0	$ 0
Aggregate Intrinsic Value, Options exercisable at ending balance (in dollars per share)	0	0
Aggregate Intrinsic Value, Vested and expected to vest at ending balance (In dollars per share)	$ 0	$ 0

Stock-Based Awards - Summary of Restricted Stock Unit Activity (Details) - RSUs issued and expected to vest - $ / shares		6 Months Ended	12 Months Ended
	Jun. 15, 2023	Jun. 30, 2023	Dec. 31, 2022
Number of Shares
Unvested restricted stock units, beginning balance (in shares)		385,980
Unvested restricted stock units, Granted (in shares)		0	732,000
Unvested restricted stock units, Vested (in shares)		0
Unvested restricted stock units, Forfeited (in shares)	103,920	107,100
Unvested restricted stock units, ending balance (in shares)		278,880	385,980
Weighted Average Grant-Date Fair Value
Weighted Average Grant-Date Fair Value, beginning balance (in dollars per share)		$ 3.64
Weighted Average Grant-Date Fair Value, Granted (in dollars per share)		0
Weighted Average Grant-Date Fair Value, Vested (in dollars per share)		0
Weighted Average Grant-Date Fair Value, Forfeited (in dollars per share)		3.64
Weighted Average Grant-Date Fair Value, ending balance (in dollars per share)		$ 3.64	$ 3.64

Stock-Based Awards - Summary of Stock-Based Compensation Expense Related to Stock Options and Restricted Stock Awards (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 1,186	$ 2,073	$ 2,832	$ 3,938
Research and development expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	371	777	1,017	1,360
General and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 815	$ 1,296	$ 1,815	$ 2,578

Debt - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jun. 15, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Termination of Loan Agreement
Debt Instrument [Line Items]
Interest expense		$ 2,456
Prepayment Penalty		1,250
Amortization of debt issuance costs		1,206
K2 Health Ventures LLC \| Term Loans \| Loan and Security Agreement
Debt Instrument [Line Items]
Extinguishment of debt	$ 25,000
Fees and expenses	$ 3,250
Interest expense		$ 3,108	$ 733	$ 4,040	$ 1,415

Net Loss per Share - Schedule of Basic and Diluted Net Loss Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Numerator:
Net Income (Loss) Attributable to Parent	$ (28,192)	$ (19,741)	$ (25,213)	$ 6,199	$ (47,933)	$ (19,014)
Denominator:
Weighted average commons shares outstanding—basic (shares)	60,717,899		54,654,822		60,673,195	51,647,148
Weighted average common shares outstanding— diluted (in shares)	60,717,899		54,654,822		60,673,195	51,647,148
Net loss per share — basic (in dollars per share)	$ (0.46)		$ (0.46)		$ (0.79)	$ (0.37)
Net loss per share — diluted (in dollars per share)	$ (0.46)		$ (0.46)		$ (0.79)	$ (0.37)

Net Loss per Share- Securities Excluded from Computation of Diluted Net Loss Per Share (Details) - shares	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares excluded from computation of diluted net income per share attributable to common stockholders (in shares)	12,452,792	12,012,308
Stock options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares excluded from computation of diluted net income per share attributable to common stockholders (in shares)	10,300,285	8,968,131
Shares to be issued under the 2018 ESPP
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares excluded from computation of diluted net income per share attributable to common stockholders (in shares)	1,873,627	1,500,500
RSUs issued and expected to vest
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares excluded from computation of diluted net income per share attributable to common stockholders (in shares)	278,880	711,000
Shares available from conversion of note payable
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares excluded from computation of diluted net income per share attributable to common stockholders (in shares)	0	832,677

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Income Tax Disclosure [Abstract]
Income tax provision or benefit	$ 0	$ 0	$ 0	$ 0
Interest and penalties accrued	$ 0		$ 0		$ 0

Leases - Narrative (Details) - USD ($) $ in Thousands			3 Months Ended
Leases - Narrative (Details) - USD ($) $ in Thousands	Sep. 15, 2023	Jun. 15, 2023	Sep. 15, 2023	Jun. 30, 2023	May 31, 2022
Lease Agreements [Line Items]
Termination agreement lease amount		$ 1,595
Reduction due to lease modification		$ 30,700
Right of use asset reduction				$ 19,500
Lease liability reduction				$ 19,500
Sublease term					18 months
Sublease extension term					6 months
Forecast
Lease Agreements [Line Items]
Termination agreement lease amount	$ 8,405		$ 10,000

Leases - Schedule of Future Undiscounted Cash Inflows Under Sublease (Details) - Sublease Agreement with EQRx - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Lease Agreements [Line Items]
Sublease income	$ 647	$ 648	$ 1,290	$ 1,304
2023	636		636
Total future sublease payments	$ 636		$ 636

Related Party Transactions - Additional Information (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2016	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 15, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Preferred stock shares issued to related party (in shares)		0		0			0
Share price (in dollars per share)						$ 5.2831
Related Party \| Novartis Collaboration
Related Party Transaction [Line Items]
Payment for reimbursement of manufacturing costs incurred		$ 0	$ 0	$ 0	$ 0
Amounts due from related party		0	0	0	0
Revenue		$ 0	$ 0	$ 0	$ 0
Related Party \| Novartis Collaboration \| Minimum
Related Party Transaction [Line Items]
Percentage of share holding (as a percent)	5.00%
Related Party \| Novartis Collaboration \| Series A One Redeemable Convertible Preferred Stock
Related Party Transaction [Line Items]
Preferred stock shares issued to related party (in shares)	2,000,000
Gross proceeds from issuance of preference stock	$ 13,500,000
Related Party \| Novartis Collaboration \| Private Placement
Related Party Transaction [Line Items]
Common stock, issued (in shares)	766,666
Share price (in dollars per share)	$ 15.00
Proceeds from issuance of private placement	$ 11,500,000

Restructuring (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Restructuring (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 3,234	$ 0	$ 3,234	$ 0
Accrued restructuring liability	2,301		2,301
Employee Severance
Restructuring Cost and Reserve [Line Items]
Restructuring charges	2,301		2,301
Facility Costs, Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 933		$ 933