SELLAS LIFE SCIENCES GROUP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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

Overview

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

Galinpepimut-S, or GPS

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

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

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

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

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

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

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

As the interim and final analyzes are event driven, they may occur at times other than those listed above.

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

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

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

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

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

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

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

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

in the February 2020we have begun an open-label, investigator-sponsored, phase 1 clinical trial of GPS in combination with nivolumab (Opdivo®), Bristol-Myers Squibb’s anti-PD-1 therapy, in patients with malignant pleural mesothelioma, or MPM, the one Relapsed or refractory disease after receiving standard multimodal frontline therapy for MSK. Completion of enrollment of a target total of 10 evaluable patients is expected during

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

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

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

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

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

GFH009

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

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

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

Following completion of the Phase 1 clinical trial and determination of the
recommended Phase 2 dose, we intend to commence a Phase 2 clinical trial of
GFH009 in combination with venetoclax and azacitidine in AML patients who failed
or did not respond to treatment with venetoclax and azacitidine. The primary
endpoint of the Phase 2 clinical trial, which we expect to initiate by the end
of the first quarter of 2023, will be complete remission (CR) rate and secondary
endpoints will include progression free survival, OS and proportion of patients
proceeding to transplant. We are also planning a Phase 2 clinical trial of
GFH009 in certain solid tumors which will likely commence in the first quarter
of 2023 and are exploring various options with respect to clinical development
for GFH009 in several pediatric indications which we expect to finalize by the
end of 2022.
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Effects of COVID-19

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

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Components of the earnings situation

royalties

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

Cost of License Revenue

The cost of royalty income consists of sub-license fees incurred under our license from MSK in connection with the 3DMed License Agreement.

research and development costs

Research and development costs consist of costs associated with the discovery and development of our product candidates. We record research and development costs as they are incurred. These expenses include:

• expenses incurred as part of arrangements with CROs, sites and consultants conducting our pre-clinical studies and clinical studies;

• manufacturing costs;

• quality control and quality assurance services;

•outsourced professional scientific development services;

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

•Payments under our license agreements under which we acquired certain intellectual property;

• expenses related to certain regulatory activities, including filing fees paid to regulators;

•Laboratory materials and supplies to support our research activities; and

• Associated expenses, incidental expenses and other facility-related costs.

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

•the number of clinical centers and participating countries involved in the studies;

• the length of time required to accommodate suitable patients;

•the number of patients who ultimately participate in the studies;

•the number of doses patients receive;

• the length of patient follow-up;

•the results of clinical studies;

•the costs associated with production;

•obtaining marketing approvals;

•the commercialization of current and future product candidates; and

•the impact of the COVID-19 pandemic.

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

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

Acquired In-Process Research and development

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

General and Administrative Expenses

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

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

Non-operating income (expense), net

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

Critical Accounting Policies and Estimates

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

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Operating results for the past three and nine months 09/30/2022 and 2021

The table below summarizes our operating results for the past three and nine months 09/30/2022 and 2021 (in thousands):

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



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

A further analysis of the changes and trends in our results of operations is discussed below.

royalties

There was no license income in the past three months 09/30/2022 and 2021.

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

Cost of Licensing Revenue

In the past three months, no costs for license income were incurred
09/30/2022 and 2021.

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

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

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

Acquired In-Process Research and development

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

General and administrative

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

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

Non-operating income (expense), net

Non-operating income (expense), net for the past three and nine months
09/30/2022 and 2021 was as follows (in thousands):

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

Non-operating net income of $0.1 million during the past three months 09/30/2022 was primarily due to interest income on our cash and cash equivalents.

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

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

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

The change in the fair value of the option liability and the change in the fair value of the contingent consideration are non-cash.

income tax expense

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

Liquidity, capital resources and financing needs

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

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

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

On March 31, 2022, we entered into the GFH009 Agreement with GenFleet pursuant
to which GenFleet granted to us a sublicensable, royalty-bearing license, to
certain of its intellectual property, to develop, manufacture, and commercialize
a small molecule CDK9 inhibitor, GFH009, for the treatment, diagnosis or
prevention of disease
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in humans and animals in all countries and territories of the world other than
mainland China, Hong Kong, Macau and Taiwan, or the GFH009 Territory. GFH009 is
currently in a Phase 1 clinical trial in the United States and China.

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

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

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

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

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


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cash flows

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

                                                                  Nine Months Ended September 30,
                                                                    2022                    2021
Net cash (used in) provided by:
Operating activities                                         $        (18,657)         $    (21,045)
Investing activities                                                   (4,500)                    -
Financing activities                                                   23,150                12,024

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

             $             

(7) $ (9,021)

Net Cash Used in the operative business

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

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

Net Cash Used in investment activities

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

No funds were used for investment activities in the past nine months
September 30, 2021.

Net Cash Provided by Financing Activities

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

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

Off-Balance Sheet Arrangements

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We have not entered into any off-balance sheet financing arrangements to date
09/30/2022.

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