SEC Filing • Oncorus, Inc

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10-Q

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, 2021

☐ 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: 001-39575

ONCORUS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		47-3779757
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

50 Hampshire Street, Suite 401 Cambridge, Massachusetts		02139
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (857) 320-6400

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.0001 par value per share

ONCR

The Nasdaq Stock Market LLC

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 28, 2021, the registrant had 25,749,205 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
	SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS	1
	SUMMARY RISK FACTORS	3

PART I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:



the impact of the COVID-19 pandemic on our business and operations, results of operations and financial performance, including impacts on initiation, patient enrollment, development and operation of our preclinical studies and clinical trials and manufacturing efforts;



the initiation, timing, progress and expected results of our preclinical studies, clinical trials and our research and development programs, including our ongoing Phase 1 clinical trial and the timing of initiation for future clinical trials for our lead product candidate, ONCR-177;



our success in identifying and developing future potential candidates from our oncolytic HSV-1 platform, or oHSV Platform, and our synthetic viral RNA immunotherapy platform, or Synthetic vRNA Immunotherapy Platform;



our ability to advance product candidates into, and successfully complete, clinical trials;



the timing or likelihood of our ability to receive the required regulatory approvals and clearances to successfully market and sell our products in the United States and certain other countries;



the commercialization of our product candidates, if approved;



our expectations regarding the potential market size and the rate and degree of market acceptance for any product candidates that we develop;



the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;



the effects of competition with respect to ONCR-177 or any of our other current or future product candidates, as well as innovations by current and future competitors in our industry;



our ability to fund our working capital requirements;



our intellectual property position, including the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering our product candidates;



our financial performance and our ability to effectively manage our anticipated growth;



our ability to obtain additional funding for our operations; and



other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors in this report or under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 10, 2021.

These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions and are not guarantees of future performance or development. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under “Risk Factors” and elsewhere in this Quarterly Report and under similar captions in our periodic reports filed with the SEC from time to time. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to new information, actual results or changes in our expectations, except as required by law.

SUMMARY RISK FACTORS

A summary of risks that could materially and adversely affect our business, financial condition, operating results and prospects include the following:



We have a limited operating history. We have incurred significant losses since our inception and anticipate that we will incur significant and increasing losses for the foreseeable future and we may never achieve or maintain profitability.



We will require substantial additional financing to advance the development of our product candidates, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our product development programs, potential commercialization efforts or other operations.



We have never generated any revenue from product sales and may never become profitable.



Our product candidates are in early stages of development, are not approved for commercial sale and might never receive regulatory approval or become commercially viable.



We currently have only one product candidate, ONCR-177, in clinical development. A failure of this product candidate in clinical development would adversely affect our business and may require us to discontinue development of other product candidates based on the same therapeutic approach.



Public health crises such as pandemics, including the coronavirus disease, or COVID-19, or similar outbreaks could materially and adversely affect our business, including the conduct of preclinical studies and clinical trials and our manufacturing efforts.



Preclinical and clinical development involve a lengthy and expensive process with an uncertain outcome, and delays can occur for a variety of reasons outside of our control.



If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.



Serious adverse events, undesirable side effects or other unexpected properties of our current or future product candidates may be identified during development or after approval, which could halt their development or lead to the discontinuation of our clinical development programs, refusal by regulatory authorities to approve our product candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations on the use of our product candidates thereby limiting the commercial potential of such product candidate.



We anticipate that many of our product candidates will be used in combination with third-party drugs, some of which may still be in development, and we have limited or no control over the supply, regulatory status or regulatory approval of such drugs.



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



We rely, and expect to continue to rely, on third parties to conduct, supervise, and monitor our preclinical studies and clinical trials. If those third parties do not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with regulatory requirements, we may be unable to obtain regulatory approval for our product candidates or any other product candidates that we may develop in the future.



If the manufacturers upon which we rely fail to produce any product candidates in the volumes that we require on a timely basis, or fail to comply with stringent regulations applicable to biopharmaceutical manufacturers, we may face delays in the development and commercialization of, or be unable to meet demand for, any product candidates, which may have an adverse effect on our business.



If we are unable to successfully commercialize any product candidate for which we receive regulatory approval, or experience significant delays in doing so, our business will be materially harmed.



We face significant competition from other biopharmaceutical and biotechnology companies, academic institutions, government agencies, and other research organizations, which may result in others discovering, developing or commercializing products more quickly or marketing them more successfully than us. If their product candidates are shown to be safer or more effective than ours, our commercial opportunity may be reduced or eliminated.



Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, hospitals, cancer treatment centers, third-party payors and others in the medical community necessary for commercial success. The revenues that we generate from their sales may be limited, and we may never become profitable.



Negative developments in the field of immuno-oncology could damage public perception of our oHSV and Synthetic vRNA Immunotherapy Platforms and our product candidates, including ONCR-177, and negatively affect our business.



If we are unable to obtain, maintain and protect our intellectual property rights for our technology and product candidates, or if our intellectual property rights are inadequate, our competitive position could be harmed.



We are highly dependent on our key personnel, including our Chief Executive Officer, Chief Scientific Officer and Senior Vice President, Clinical Development. If we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ONCORUS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except for par value data)

(unaudited)


	JUNE 30, 2021			DECEMBER 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	159,920		$	130,305
Prepaid expenses and other current assets		2,769			3,086
Total current assets		162,689			133,391
Property and equipment, net		9,412			4,173
Right-of-use asset		40,018			41,372
Restricted cash		2,877			2,877
Other assets		614			450
Total assets	$	215,610		$	182,263
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,959		$	1,245
Accrued expenses		7,701			3,738
Lease liability - current portion		1,084			993
Other current liabilities		—			8
Total current liabilities		10,744			5,984
Lease liability - net of current portion		42,234			41,615
Total liabilities		52,978			47,599
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; authorized — 10,000 shares at June 30, 2021 and December 31, 2020; issued and outstanding — no shares at June 30, 2021 and December 31, 2020		—			—
Common stock, $0.0001 par value; authorized — 100,000 shares at June 30, 2021 and December 31, 2020; issued and outstanding — 25,741 and 22,599 shares at June 30, 2021 and December 31, 2020, respectively		3			2
Additional paid-in capital		320,645			264,487
Accumulated deficit		(158,016	)		(129,825	)
Total stockholders’ equity		162,632			134,664
Total liabilities and stockholders’ equity	$	215,610		$	182,263

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

ONCORUS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2021			2020			2021			2020
Operating expenses:
Research and development	$	10,660		$	6,741		$	19,107		$	12,633
General and administrative		4,889			2,007			9,111			4,059
Total operating expenses		15,549			8,748			28,218			16,692
Loss from operations		(15,549	)		(8,748	)		(28,218	)		(16,692	)
Other income (expense):
Change in fair value of Series B tranche rights		—			(625	)		—			(625	)
Other expense		—			(9	)		—			(20	)
Interest income		21			8			27			136
Total other income (expense), net		21			(626	)		27			(509	)
Net loss and comprehensive loss	$	(15,528	)	$	(9,374	)	$	(28,191	)	$	(17,201	)
Accretion of discount and dividends on redeemable convertible preferred stock		—			(2,725	)		—			(5,450	)
Net loss attributable to common stockholders	$	(15,528	)	$	(12,099	)	$	(28,191	)	$	(22,651	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.60	)	$	(12.09	)	$	(1.13	)	$	(22.67	)
Weighted-average number of common shares outstanding—basic and diluted		25,684			1,001			24,851			999

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

ONCORUS, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(unaudited)


	SERIES A-1 REDEEMABLE CONVERTIBLE PREFERRED STOCK				SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK				COMMON STOCK
	SHARES		AMOUNT		SHARES		AMOUNT		SHARES		AMOUNT		ADDITIONAL PAID-IN CAPITAL			ACCUMULATED DEFICIT			TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
Balance at December 31, 2019		76,499,992	$	63,494		62,535,183	$	53,138		988,700	$	—	$	—		$	(74,297	)	$	(74,297	)
Series A-1 and Series B preferred stock dividends and accretion		—		1,570		—		1,155		—		—		(308	)		(2,417	)		(2,725	)
Stock-based compensation expense		—		—		—		—		—		—		303			—			303
Vesting of restricted common stock		—		—		—		—		8,855		—		—			—			—
Exercise of options to purchase common stock		—		—		—		—		1,572		—		5			—			5
Net loss		—		—		—		—		—		—		—			(7,827	)		(7,827	)
Balance at March 31, 2020		76,499,992		65,064		62,535,183		54,293		999,127		—		—			(84,541	)		(84,541	)
Series A-1 and Series B preferred stock dividends and accretion		—		1,570		—		1,155		—		—		(316	)		(2,409	)		(2,725	)
Stock-based compensation expense		—		—		—		—		—		—		316			—			316
Vesting of restricted common stock		—		—		—		—		5,161		—		—			—			—
Exercise of options to purchase common stock		—		—		—		—		—		—		—			—			—
Net loss		—		—		—		—		—		—		—			(9,374	)		(9,374	)
Balance at June 30, 2020		76,499,992	$	66,634		62,535,183	$	55,448		1,004,288	$	—	$	—		$	(96,324	)	$	(96,324	)

Balance at December 31, 2020		—		—		—		—		22,599,048		2		264,487			(129,825	)		134,664
Proceeds from issuance of common stock, net of issuance costs of $4,017		—		—		—		—		3,000,000		—		52,983			—			52,983
Stock-based compensation expense		—		—		—		—		—		—		1,172			—			1,172
Vesting of restricted common stock		—		—		—		—		5,171		—		—			—			—
Exercise of options to purchase common stock		—		—		—		—		22,470		—		98			—			98
Net loss		—		—		—		—		—		—		—			(12,663	)		(12,663	)
Balance at March 31, 2021		—		—		—		—		25,626,689		3		318,740			(142,488	)		176,255
Stock-based compensation expense		—		—		—		—		—		—		1,656			—			1,656
Vesting of restricted common stock		—		—		—		—		5,170		—		—			—			—
Exercise of options to purchase common stock		—		—		—		—		109,213		—		249			—			249
Net loss		—		—		—		—		—		—		—			(15,528	)		(15,528	)
Balance at June 30, 2021		—	$	—		—	$	—		25,741,072	$	3	$	320,645		$	(158,016	)	$	162,632

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

ONCORUS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	SIX MONTHS ENDED JUNE 30,
	2021			2020
Operating activities:
Net loss	$	(28,191	)	$	(17,201	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		817			628
Stock-based compensation		2,828			619
Change in fair value of Series B tranche rights		—			625
Changes in:
Prepaid expenses and other assets		151			(933	)
Operating lease right-of-use asset		1,354			229
Accounts payable		676			953
Accrued expenses and other current liabilities		116			41
Operating lease liability		711			(584	)
Net cash used in operating activities		(21,538	)		(15,623	)
Investing activities
Purchase of property and equipment		(2,177	)		(747	)
Net cash used in investing activities		(2,177	)		(747	)
Financing activities
Proceeds from exercise of options to purchase common stock		347			5
Proceeds from issuance of common stock, net of issuance costs		52,983			—
Net cash provided by financing activities		53,330			5
Increase (decrease) in cash and cash equivalents		29,615			(16,365	)
Cash, cash equivalents and restricted cash at beginning of period		133,182			45,286
Cash, cash equivalents and restricted cash at end of period	$	162,797		$	28,921
Supplemental disclosure of non-cash investing and financing activities
Purchase of property and equipment in accrued expenses and accounts payable	$	3,878		$	179
Accretion of discount and dividends on preferred stock	$	—		$	5,450

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

ONCORUS, INC.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(in thousands, except share and per share amounts, unless otherwise noted)

1. Nature of the Business and Liquidity

Oncorus, Inc. (the “Company”) is a clinical stage biopharmaceutical company focused on developing next-generation viral immunotherapies to transform outcomes for cancer patients. Using its two platforms, the Company is developing a pipeline of intratumorally and intravenously administered product candidates designed to selectively attack and kill tumor cells.

The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring and developing the Company’s technology, establishing the Company’s intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies, commencing a clinical trial and manufacturing scale-up activities. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.

On September 25, 2020, the Company effected a 1-for-12.0874 reverse stock split of its issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of Series A-1 redeemable convertible preferred stock (“Series A-1”), and the Series B redeemable convertible preferred stock (“Series B”). Accordingly, all share and per share amounts for all periods presented in the accompanying unaudited interim condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split, including reclassification of par, additional paid-in capital and accumulated deficit amounts as a result of the split adjustment.

On October 6, 2020, the Company completed an initial public offering (“IPO”), in which the Company issued and sold 5,800,000 shares of its common stock at a public offering price of $15.00 per share. On October 14, 2020, the Company sold an additional 757,991 shares of common stock at $15.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock. The total gross proceeds from the IPO were $98.4 million and the Company raised approximately $88.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 14,951,554 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding.

In February 2021, the Company completed a follow-on public offering of its common stock in which it sold 3,000,000 shares at an offering price of $19.00 per share, resulting in gross proceeds of $57.0 million and net proceeds of $53.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, possible failure of preclinical studies or clinical trials, the need to obtain marketing approval for its product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the need to successfully commercialize and gain market acceptance of any of the Company’s products that are approved and the ability to secure additional capital 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 and infrastructure, and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The Company expects to continue to incur losses from operations for the foreseeable future and additional capital will be required to fund future operations. The Company expects that its cash and cash equivalents as of June 30, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months from the date these financial statements were issued.

2. Summary of Significant Accounting Policies

Basis of Presentation

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

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals and estimates that impact the financial statements) which are considered necessary to present fairly the Company’s financial position as of June 30, 2021, its results of operations for the three and six months ended June 30, 2021 and 2020, its changes in redeemable preferred convertible preferred stock and stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020 and its cash flows for the six months ended June 30, 2021 and 2020.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2021. The condensed consolidated balance sheet data as of December 31, 2020 presented for comparative purposes was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by GAAP. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2020, included in the Annual Report on Form 10-K and, since that date, there have been no changes to the Company’s significant accounting policies.

COVID-19 Pandemic

With the ongoing COVID-19 global pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business, including its preclinical studies and its ongoing clinical trial. The Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been re-organized to reduce risks of COVID-19 transmission. Given the global impact and the other risks and uncertainties associated with the pandemic, the Company’s business, financial condition and results of operations could be materially adversely affected. The Company continues to closely monitor the COVID-19 pandemic and evolve its business continuity plans, clinical development plans and response strategy to mitigate any potential impact. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Oncorus Securities Corporation. All intercompany transactions have been eliminated in consolidation. The Company has one operating segment.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, the estimated fair value of the Company’s common stock and share-based awards utilized for stock-based compensation purposes, accrued expenses, and amounts of expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company has all of its cash at one financial institution, that management believes to be of high credit quality, in amounts that exceed federally insured limits. Cash equivalents consist of money market funds that invest primarily in U.S. government-backed securities and treasuries.

The Company is dependent upon a third-party contract manufacturer and third-party contract research organizations for the performance of portions of its testing for pre-clinical and clinical studies. The Company believes that its relationships with these organizations are satisfactory, and that alternative suppliers of these services are available in the event of the loss of one or more of these suppliers.

Restricted Cash

The Company maintains a balance in a segregated bank account in connection with a letter of credit for the benefit of the landlord in connection with an operating lease. As of June 30, 2021, restricted cash consisted of $2.9 million held for the benefit of the landlord. This amount has been classified as part of non-current assets on the Company's unaudited interim condensed consolidated balance sheets.

The Company includes its restricted cash balance in the cash, cash equivalents and restricted cash reconciliation of operating, investing, and financing activities in the unaudited interim condensed consolidated statements of cash flows. The following table provides a reconciliation of cash, cash equivalents and restricted cash in the unaudited interim condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited interim condensed consolidated statements of cash flows (in thousands):


	June 30,
	2021		2020
	(in thousands)
Cash and cash equivalents	$	159,920	$	28,921
Restricted cash		2,877		—
Total cash, cash equivalents and restricted cash shown in the unaudited interim consolidated statements of cash flows	$	162,797	$	28,921

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly, such as quoted market prices, interest rates, and yield curves.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent a valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s cash and cash equivalents, classified within Level 1, are valued using net asset value per share for the money market funds.

The tranche rights granted to the Series B stockholders were classified within Level 3 of the fair value hierarchy because they were valued using significant inputs not observable in the market. The valuation of the tranche rights used assumptions the Company believed would be made by a market participant. The Company assessed these estimates on an ongoing basis as additional data impacting the assumptions was obtained. Refer to Note 6 for additional information regarding the valuation of the tranche rights.

The Company believes that the carrying amounts of prepaid expenses, other current assets, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of those instruments.

Operating Leases

During the quarter ended December 31, 2020, the Company early adopted ASC Topic 842, “Leases” (“ASC 842”) using the revised modified retrospective approach as of January 1, 2020. The unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2020 have been retroactively adjusted to reflect the adoption of ASC 842, including retroactive adjustments to the unaudited interim condensed consolidated statement of cash flows and certain additional footnote disclosures as included herein. The adoption of ASC 842 had no material impact to the Company’s unaudited condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2020.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on specific facts and circumstances, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable. The lease liability is measured at the present value of future lease payments, discounted using the discount rate as of the lease commencement date. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. The Company recognizes a corresponding lease right of use (“ROU”) asset, initially measured as the amount of lease liability, adjusted for any initial lease costs or lease payments made before or at the commencement of the lease, and reduced by any lease incentives.

The Company’s leases consist of only operating leases. Operating leases are recognized on the balance sheet as ROU lease assets, lease liabilities current and lease liabilities non-current. Fixed rents are included in the calculation of the lease balances while certain variable costs paid for certain operating and pass-through costs are excluded. Lease expense is recognized over the expected term on a straight-line basis.

Recently Issued Accounting Pronouncements

There have been no recently issued accounting pronouncements other than those described in the Company’s audited financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the 2020 Annual Report on Form 10-K filed with the SEC on March 10, 2021.

3. Fair Value Measurements

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):


	FAIR VALUE MEASUREMENTS AS OF JUNE 30, 2021
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Assets:
Money market funds (included in cash and cash equivalents)	$	158,066	$	—	$	—	$	158,066
	$	158,066	$	—	$	—	$	158,066


	FAIR VALUE MEASUREMENTS AS OF DECEMBER 31, 2020
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Assets:
Money market funds (included in cash and cash equivalents)	$	126,056	$	—	$	—	$	126,056
	$	126,056	$	—	$	—	$	126,056

4. Leases