SEC Filing | Candel Therapeutics, Inc

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2024


☐	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: 001-40629

CANDEL THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	52-2214851
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
117 Kendrick St, Suite 450 Needham, MA	02494
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 916-5445

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

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common Stock, par value $0.01 per share

    CADL

    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 Exchange Act). Yes ☐ No ☒

As of August 5, 2024, the registrant had 32,084,777 shares of common stock, $0.01 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Form 10-Q), including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q may include, but are not limited to, statements about:

•

the timing and the success of preclinical studies and clinical trials of CAN-2409 (international non-proprietary name: aglatimagene besadenovec) and CAN-3110 and any other product candidates;

•

the initiation of any clinical trials of CAN-2409 and CAN-3110 and any other product candidates;

•

our need to raise additional funding before we can expect to generate any revenues from product sales;

•

our ability to conduct successful clinical trials or obtain regulatory approval for CAN-2409 and CAN-3110 or any other product candidates that we may identify or develop;

•

the ability of our research to generate and advance additional product candidates;

•

the effects of public health crises, outbreaks of an infectious disease or ongoing geopolitical conflicts, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations;

•

our ability to establish an adequate safety or efficacy profile for CAN-2409, CAN-3110 or any other product candidates that we may pursue;

•

our ability to manufacture CAN-2409, CAN-3110 or any other product candidate in conformity with our specifications and the U.S. Food and Drug Administration’s (FDA) requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;

•

the implementation of our strategic plans for our business, any product candidates we may develop and any companion diagnostics;

•

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

•

the rate and degree of market acceptance and clinical utility for any product candidates we may develop;

•

estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

•

the period we estimate to be funded by our existing financial resources;

•

our ability to establish and maintain collaborations;

•

the potential benefits with the continued existence of our license agreement with Mass General Brigham (MGB);

•

our financial performance;

•

our ability to effectively manage our anticipated growth;

•

developments relating to our competitors and our industry, including the impact of government regulation;

•

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

•

other risks and uncertainties, including those discussed in Part II, Item 1A - Risk Factors in this Form 10-Q.

In some cases, forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “could,” “expects,” “intends,” “plans,” “aims,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.

The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.

This Form 10-Q may include statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.

SUMMARY OF THE MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those described more fully in Part II, Item 1A - Risk Factors in this Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

•

We are a biopharmaceutical company with a limited operating history and we have not generated any revenue from product sales. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years and may never achieve or maintain profitability.

•

Substantial doubt exists about our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient additional funding to finance our operations. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate some of our research, clinical trials, product development, or future commercialization efforts.

•

We have incurred indebtedness, and we may incur additional indebtedness, which could adversely affect our financial condition.

•

Our business is dependent on the success of CAN-2409, CAN-3110 and any other product candidates that we advance into the clinic. All of our product candidates will require additional development before we may be able to seek regulatory approval for and launch a product commercially.

•

Our preclinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates, which would prevent or delay development, regulatory approval, and commercialization.

•

Our product candidates are based on a novel approach to the treatment of cancer, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval, if at all.

•

Even if we receive marketing approval for our current or future product candidates, our current or future product candidates may not achieve broad market acceptance, which would limit the revenue that we generate from their sales.

•

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize CAN-2409, CAN-3110 and future product candidates as expected, and our ability to generate revenue may be materially impaired.

•

The FDA’s agreement to a Special Protocol Assessment with respect to the study design of our phase 3 clinical trial of CAN-2409 in newly diagnosed localized prostate cancer in intermediate and high-risk patients does not guarantee any particular outcome from regulatory review, including ultimate approval, and may not lead to a successful review or approval process.

•

Some of our product candidates are being and may continue to be studied in third-party research and clinical trials sponsored by organizations or agencies other than us, or in investigator-sponsored clinical trials, which means we will have minimal or no control over the conduct of such trials and which may adversely affect our ability to obtain marketing approval or certain regulatory exclusivities.

•

Changes in product candidate manufacturing or formulation may result in additional costs or delay.

•

Any future public health crisis, outbreaks of an infectious disease or ongoing geopolitical conflicts may have adverse effects on our business and operations.

•

If the government or third-party payors fail to provide adequate coverage, reimbursement and payment rates for our product candidates, or if health maintenance organizations or long-term care facilities choose to use therapies that are less expensive or considered a better value, our revenue and prospects for profitability will be limited.

•

If the manufacturers upon which we may rely fail to produce our 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, our product candidates and may lose potential revenues.

•

The transition of our manufacturing operations to a third-party contract manufacturer may result in further delays or expenses, and we may not experience the anticipated operating efficiencies.

•

Our rights to develop and commercialize certain of our product candidates are subject and may in the future be subject, in part, to the terms and conditions of licenses granted to us by third parties. If we fail to comply with our obligations under our current or future intellectual property license agreements or otherwise experience disruptions

to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.

NOTE REGARDING COMPANY REFERENCES

Unless the context otherwise requires, the terms “Candel Therapeutics,” “the Company,” “we,” “us,” and “our” in this Form 10-Q refer to Candel Therapeutics, Inc. and its consolidated subsidiary.

NOTE REGARDING TRADEMARKS

We own or have rights to various trademarks, service marks and trade names that are used in connection with the operation of our business, including our company name, Candel Therapeutics, our logo, and the names of our CAN-2409™ and CAN-3110™ product candidates. This Form 10-Q may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this Form 10-Q is not intended to and does not imply a relationship with, or endorsement or sponsorship by, us. Solely for convenience, the trademarks, service marks and trade names referred to in this Form 10-Q may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
Signatures		87

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Candel Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)


	JUNE 30, 2024 (Unaudited)			DECEMBER 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	21,454		$	35,413
Prepaid expenses and other current assets		1,281			1,384
Total current assets		22,735			36,797
Fixed assets, net		2,719			3,206
Lease right of use assets		684			816
Restricted cash		266			266
Other assets		81			116
Total assets	$	26,485		$	41,201
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	433		$	422
Accrued expenses		3,215			4,356
Current portion of term loan payable to a bank		9,809			8,893
Current portion of lease liability		539			513
Total current liabilities		13,996			14,184
Term loan payable to a bank		6,705			11,632
Other long-term debt		810			751
Lease liability, net of current portion		698			973
Warrant liability		14,248			916
Total liabilities		36,457			28,456
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized at June 30, 2024 and December 31, 2023; no shares issued or outstanding at June 30, 2024 and December 31, 2023, respectively.		—			—
Common stock, $0.01 par value; 150,000,000 shares authorized at June 30, 2024 and December 31, 2023; 31,186,817 and 29,213,627 shares issued at June 30, 2024 and December 31, 2023, respectively; 31,064,209 and 29,091,019 shares outstanding at June 30, 2024 and December 31, 2023, respectively.		303			290
Treasury stock (at cost)		(448	)		(448	)
Additional paid-in capital		157,659			149,931
Accumulated deficit		(167,486	)		(137,028	)
Total stockholders’ equity (deficit)		(9,972	)		12,745
Total liabilities and stockholders’ equity (deficit)	$	26,485		$	41,201

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

Candel Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2024			2023			2024			2023
Operating expenses:
Research and development	$	4,979		$	5,934		$	9,081		$	11,403
General and administrative		3,592			3,645			7,392			7,809
Total operating expenses		8,571			9,579			16,473			19,212
Loss from operations		(8,571	)		(9,579	)		(16,473	)		(19,212	)
Other income (expense):
Grant income		—			12			—			24
Interest income		240			453			560			1,164
Interest expense		(567	)		(644	)		(1,213	)		(1,253	)
Change in fair value of warrant liability		(13,339	)		144			(13,332	)		868
Total other income (expense), net		(13,666	)		(35	)		(13,985	)		803
Net loss and comprehensive loss	$	(22,237	)	$	(9,614	)	$	(30,458	)	$	(18,409	)
Net loss per share, basic and diluted	$	(0.74	)	$	(0.33	)	$	(1.03	)	$	(0.64	)
Weighted-average common shares outstanding, basic and diluted		29,878,210			28,919,810			29,537,874			28,919,810

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

Candel ThErapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)


	COMMON STOCK				TREASURY STOCK						ADDITIONAL PAID-IN		ACCUMULATED			STOCKHOLDERS’
	SHARES		AMOUNT		SHARES			AMOUNT			CAPITAL		DEFICIT			DEFICIT
Balance, December 31, 2023		29,213,627	$	290		(122,608	)	$	(448	)	$	149,931	$	(137,028	)	$	12,745
Options exercised		684,873		7		—			—			1,209		—			1,216
Stock-based compensation		—		—		—			—			2,138		—			2,138
Restricted stock unit vesting		703,427		—		—			—			—		—			—
Change in fair value of NC Ohio Trust Warrants		—		—		—			—			746		—			746
Sale of common stock, net of issuance costs		584,890		6								3,635		—			3,641
Net loss		—		—		—			—			—		(30,458	)		(30,458	)
Balance, June 30, 2024		31,186,817	$	303		(122,608	)	$	(448	)	$	157,659	$	(167,486	)	$	(9,972	)


	COMMON STOCK				TREASURY STOCK						ADDITIONAL PAID-IN		ACCUMULATED			STOCKHOLDERS’
	SHARES		AMOUNT		SHARES			AMOUNT			CAPITAL		DEFICIT			DEFICIT
Balance, March 31, 2024		29,470,076	$	292		(122,608	)	$	(448	)	$	151,384	$	(145,249	)	$	5,979
Options exercised		537,909		6		—			—			984		—			990
Stock-based compensation		—		—		—			—			1,108		—			1,108
Restricted stock unit vesting		703,427		—		—			—			0		—			—
Change in fair value of NC Ohio Trust Warrants		—		—		—			—			733		—			733
Sale of common stock, net of issuance costs		475,405		5		—			—			3,450		—			3,455
Net loss		—		—		—			—			—		(22,237	)		(22,237	)
Balance, June 30, 2024		31,186,817	$	303		(122,608	)	$	(448	)	$	157,659	$	(167,486	)	$	(9,972	)


	COMMON STOCK				TREASURY STOCK						ADDITIONAL PAID-IN			ACCUMULATED			STOCKHOLDERS’
	SHARES		AMOUNT		SHARES			AMOUNT			CAPITAL			DEFICIT			EQUITY
Balance, December 31, 2022		29,042,418	$	290		(122,608	)	$	(448	)	$	146,961		$	(99,089	)	$	47,714
Stock-based compensation		—		—		—			—			1,544			—			1,544
Change in fair value of NC Ohio Trust Warrants		—		—		—			—			(78	)		—			(78	)
Net loss		—		—		—			—			—			(18,409	)		(18,409	)
Balance, June 30, 2023		29,042,418	$	290		(122,608	)	$	(448	)	$	148,427		$	(117,498	)	$	30,771


	COMMON STOCK				TREASURY STOCK						ADDITIONAL PAID-IN			ACCUMULATED			STOCKHOLDERS’
	SHARES		AMOUNT		SHARES			AMOUNT			CAPITAL			DEFICIT			EQUITY
Balance, March 31, 2023		29,042,418	$	290		(122,608	)	$	(448	)	$	147,694		$	(107,884	)	$	39,652
Stock-based compensation		—		—		—			—			746			—			746
Change in fair value of NC Ohio Trust Warrants		—		—		—			—			(13	)		—			(13	)
Net loss		—		—		—			—			—			(9,614	)		(9,614	)
Balance, June 30, 2023		29,042,418	$	290		(122,608	)	$	(448	)	$	148,427		$	(117,498	)	$	30,771

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

Candel Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	SIX MONTHS ENDED JUNE 30,
	2024			2023
Cash Flows from Operating Activities:
Net loss	$	(30,458	)	$	(18,409	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		500			466
Loss on the sale of fixed assets		—			74
Non-cash stock compensation expense		2,884			1,466
Non-cash lease expense		132			116
Non-cash interest expense		59			51
Change in fair value of warrant liability		13,332			(868	)
Accretion of debt discount		156			154
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		103			419
Other assets		35			(159	)
Accounts payable		11			87
Accrued expenses		(1,141	)		(1,162	)
Deferred income		—			(24	)
Lease liability		(249	)		(225	)
Net cash used in operating activities		(14,636	)		(18,014	)
Cash Flows from Investing Activities:
Purchase of fixed assets		(13	)		(307	)
Proceeds from the sale of fixed assets		—			157
Net cash used in investing activities		(13	)		(150	)
Cash Flows from Financing Activities:
Proceeds from option exercises		1,216			—
Proceeds from sale of common stock, net of issuance costs		3,641			—
Principal payments on term loan		(4,167	)		—
Net cash provided by financing activities		690			—
Net decrease in cash		(13,959	)		(18,164	)
Cash, cash equivalents and restricted cash at beginning of period		35,679			70,324
Cash, cash equivalents and restricted cash at end of period	$	21,720		$	52,160
Supplemental cash flow information:
Cash paid for taxes	$	—		$	168
Cash paid for interest	$	1,041		$	1,037
Supplemental disclosures of non-cash information:
Capital expenditures in accounts payable and accrued expenses	$	—		$	16

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

Candel Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Candel Therapeutics, Inc., formerly known as Advantagene, Inc. (the Company), is a clinical stage biopharmaceutical company that was incorporated in Delaware in June 2003. On November 30, 2020, the Company changed its name to Candel Therapeutics, Inc. The Company is focused on developing off-the-shelf viral immunotherapies that elicit an individualized, systemic anti-tumor immune response to help patients fight cancer. The Company’s engineered viruses are designed to induce immunogenic cell death through direct viral-mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment at the site of injection. This is intended to lead to in-situ vaccination against the injected tumor and uninjected distant metastases. The Company has established two off-the-shelf viral immunotherapy platforms and its two product candidates, CAN-2409 and CAN-3110, are in clinical trials for a number of tumor types. Additionally, the Company and the University of Pennsylvania (UPenn) are collaborating to study the impact of novel viral immunotherapies based on Candel's propriety enLIGHTEN™ Discovery Platform, a systematic, iterative herpes simplex virus based platform leveraging human biology and advanced analytics, to strengthen the effects of UPenn's investigational CAR-T cell therapies in solid tumors.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including 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 product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

Since inception, the Company has funded its operations primarily with proceeds from the sale of its convertible notes and capital stock and from debt borrowings. The Company has incurred recurring losses since its inception, including a net loss of $30.5 million and $18.4 million for the six months ended June 30, 2024 and 2023, respectively. In addition, as of June 30, 2024, the Company had an accumulated deficit of $167.5 million. The Company expects to continue to generate operating losses and negative cash flows from operations for the foreseeable future.

On August 5, 2022, the Company filed a shelf registration statement on Form S-3 (as amended to date, the Shelf) with the U.S. Securities and Exchange Commission (SEC), which covers the offering, issuance, and sale by us of up to an aggregate of $200.0 million of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. We simultaneously entered into a sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale by us of up to $75.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf (the ATM Program). The Shelf was declared effective by the SEC on August 12, 2022. As of June 30, 2024, the Company has sold and issued 584,890 shares of common stock under the ATM Program, with total net proceeds of $3.6 million. Subsequent to June 30, 2024 and through August 5, 2024, the Company has sold and issued 683,851 additional shares of common stock under the ATM Program, with total net proceeds of $4.1 million.

The Company’s cash and cash equivalents were $21.5 million as of June 30, 2024. In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), 205-40, Presentation of Financial Statements - Going Concern, management is required to assess the Company’s ability to continue as a going concern for the one-year look forward period following the date that the condensed consolidated financial statements are issued. The Company expects to continue to generate operating losses and negative cash flows from operations. Based on these conditions, the Company has determined that substantial doubt exists regarding its ability to continue as a going concern for the one-year period following the date these condensed consolidated financial statements are issued. To sustain its future operations beyond such one-year period, the Company will require additional funding. The Company expects to finance its cash needs through a combination of public or private equity or debt financings, government grants, and other sources, which may include collaborations, strategic alliances and licensing arrangements with third parties. There is no assurance that the Company will be successful in obtaining sufficient funding on acceptable terms, if at all, and the Company could be forced to delay, reduce, or eliminate some or all of its research, clinical trials, product development or future commercialization efforts, which could materially adversely affect its business prospects or its ability to continue as a going concern.

The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting standards set by the FASB. The FASB sets generally accepted accounting principles (GAAP) that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently reported. References to GAAP issued by the FASB in these notes to the condensed consolidated financial statements are to the FASB ASC. The Company has reclassified certain amounts relating to its prior period results to conform to its current period presentation.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Candel Therapeutics, Inc. and its wholly owned subsidiary Candel Therapeutics Securities Corporation. All intercompany transactions and balances have been eliminated.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company and the Company's chief operating decision maker, the Company's chief executive officer, views the Company's operations and manages its business as a single operating segment. The Company only operates in the United States.

Emerging Growth Company

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the Jobs Act). Under the Jobs Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the Jobs Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the Jobs Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity (deficit) for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023, and the related interim disclosures are unaudited. These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K on file with the SEC.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of accrued expenses, valuation of stock-based option awards, valuations of warrants, and income taxes. Actual results could differ from those estimates.

Restricted Cash

The Company had $0.3 million of restricted cash as of both June 30, 2024 and December 31, 2023, which represents cash held as a security deposit under the terms of the Company’s Needham, Massachusetts facility lease.

Recently Issued Accounting Standards

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative, which modifies the disclosure or presentation requirements related to a variety of FASB Accounting Standard Codification topics. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K is effective, with early adoption prohibited. If by

June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the associated amendment will be removed from the Codification and will not become effective for any entities. The Company is currently evaluating the potential impact that ASU 2023-06 may have on its condensed consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, which amends guidance in ASC 280, Segment Reporting. The amendments in this ASU expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment, among other disclosure requirements. The ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of ASU 2023-07 may have on its condensed consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends the guidance in ASC 740, Income Taxes. The ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. Adoption can be either prospectively or retrospectively applied, and the Company will adopt this ASU on a prospective basis. The Company is currently evaluating the potential impact that ASU 2023-09 may have on its condensed consolidated financial statements and related disclosures.

3. Fair Value of Financial Assets and Liabilities

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


	FAIR VALUE MEASUREMENTS AS OF JUNE 30, 2024 USING:
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Liabilities:
Warrant liability		—		—		14,248		14,248
Total	$	—	$	—	$	14,248	$	14,248


	FAIR VALUE MEASUREMENTS AS OF DECEMBER 31, 2023 USING:
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Liabilities:
Warrant liability		—		—		916		916
Total	$	—	$	—	$	916	$	916

The following table provides a roll forward of the aggregate fair values of the Company’s warrant liability, for which fair value is determined by Level 3 inputs (in thousands):


	SERIES B WARRANT LIABILITY
Balance at December 31, 2023	$	916
Change in fair value		13,332
Balance at June 30, 2024	$	14,248

4. Fixed Assets, Net

Fixed assets, net consisted of the following (in thousands):


	JUNE 30, 2024			DECEMBER 31, 2023
Laboratory equipment	$	1,219		$	1,209
Manufacturing equipment		733			730
Furniture and fixtures		159			159
Networking and computer equipment		88			88
Leasehold improvements		3,109			3,109
Total fixed assets	$	5,308		$	5,295
Less: accumulated depreciation		(2,589	)		(2,089	)
Fixed assets, net	$	2,719		$	3,206

Depreciation expense was $0.2 million and $0.5 million for each of the three and six months ended June 30, 2024 and 2023, respectively.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	JUNE 30, 2024		DECEMBER 31, 2023
Payroll and employee related expenses	$	2,021	$	2,017
Third-party research and development expenses		530		1,811
Professional fees and other		664		528
	$	3,215	$	4,356

6. Term Loan

On February 24, 2022, the Company entered into a four-year loan and security agreement (the Loan Agreement) with Silicon Valley Bank (SVB) pursuant to which SVB has agreed to provide term loans to the Company in an aggregate principal amount of up to $25.0 million. The Company borrowed $20.0 million upon entering into the Loan Agreement. The Company could have borrowed up to an additional aggregate principal amount not to exceed $5.0 million, at any time on or prior to December 31, 2022, upon achievement of all of the following milestones, inclusively: (a) positive phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its phase 3 CAN-2409 high-grade glioma clinical trial, and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $75.0 million from the issuance and sale of equity securities to investors acceptable to SVB. The Company did not borrow any of the additional aggregate principal amount on or prior to December 31, 2022. The term loan is secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement.

The term loans bear interest at a floating rate per annum equal to the greater of (A) 5.75% and (B) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.50%. The Company is required to make monthly interest payments, and commencing on February 1, 2024, 24 consecutive installments of principal plus monthly payments of accrued interest. The term loans mature on January 1, 2026. Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50% of the original principal amount of any funded term loan being repaid. The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB term loans, subject to a prepayment premium of 1% to 3% based upon the timing of the repayment.

During the three and six months ended June 30, 2024, the Company recorded interest expense relating to the Loan Agreement of $0.5 million and $1.2 million, respectively. During the three and six months ended June 30, 2023, the Company recorded interest expense relating to the Loan Agreement of $0.6 million and $1.2 million, respectively. The weighted average effective interest rate as of June 30, 2024 was 11.56%.

The Company incurred $89,000 of debt issuance costs and will incur a $0.9 million final payment fee, which were recorded as debt discount and are being amortized over the term of the Loan Agreement. The scheduled principal payments and net carrying amount of the term loan are as follows (in thousands):


YEAR ENDING DECEMBER 31,
2024 (remaining six months)	$	5,000
2025		10,000
2026		833
Total principal		15,833
Final payment fee		900
Less: debt discount		(989	)
Accretion of debt discount		770
Net carrying amount		16,514
Less current portion		(9,809	)
Long-term portion	$	6,705

The carrying value of the Company's term loan approximates fair value.

7. Other Long-Term Debt

Periphagen Note

On December 9, 2019, the Company entered into a series of asset purchase agreements with Periphagen, Inc. (Periphagen), a biopharmaceutical company focused on the development of gene therapy vectors. Under the terms of the asset purchase agreements, the Company assumed a $1.0 million promissory note bearing a contractual interest rate of 2% compounded annually, with the outstanding balance and accrued interest due upon maturity in November 2027, with no interim installments due. The estimated market rate for the Company for an unsecured loan with a maturity in November 2027 was determined to be 15.83% as of December 9, 2019. Although the Company does not have a public credit rating, management estimates a CCC credit rating based on the Company’s financial position and stage of development. Using the commensurate rate for a CCC rated company and based on the amount due at maturity, the present value of the future cash outflow was determined to be $0.4 million at the transaction date. As of June 30, 2024, the carrying value of the note is $0.8 million. The carrying value of the note approximates fair value. Upon maturity, the Company will pay Periphagen $1.4 million for the outstanding balance and accrued interest due.

8. Lease

On February 4, 2019, the Company signed a lease agreement for its corporate headquarters at 117 Kendrick Street in Needham, Massachusetts. The facility consists of a 15,197 square foot property which houses the corporate, clinical, laboratory and manufacturing operations for the Company. The lease term ends on August 31, 2026.

For the three and six months ended June 30, 2024, the Company recorded $90,000 and $0.2 million, respectively, of operating lease cost, and for the three and six months ended June 30, 2024, the Company recorded $44,000 and $83,000, respectively, of variable lease cost. The total lease expense for each of the three and six months ended June 30, 2024 was $0.1 million and $0.3 million, respectively.

For the three and six months ended June 30, 2023, the Company recorded $90,000 and $0.2 million, respectively, of operating lease cost, and for the three and six months ended June 30, 2023, the Company recorded $35,000 and $85,000, respectively, of variable lease cost. The total lease expense for the three and six months ended June 30, 2023 was $0.1 million and $0.3 million, respectively.

Cash paid for amounts included in the lease liability for each of the three and six months ended June 30, 2024 and 2023 was $0.1 million and $0.3 million, respectively.


	SIX MONTHS ENDED JUNE 30,
Other Information	2024			2023
Operating cash flows used for operating leases	$	296		$	289
Weighted-average remaining lease term (years)		2.2			3.2
Weighted-average incremental borrowing rate		7.02	%		7.02	%

The future lease payments under non-cancelable leases at June 30, 2024, are as follows (in thousands):


2024		301
2025		613
2026		415
Total future lease payments		1,329
Less: imputed interest		(92	)
Total lease liability	$	1,237

9. Common Stock

Common Stock

Common shares are voting and dividends may be paid when, as and if declared by the board of directors.

Common Stock Reserved

The Company has reserved the following shares of common stock for future issuance as of:


	JUNE 30, 2024		DECEMBER 31, 2023

Stock options outstanding		4,676,338		5,666,621
Unvested restricted stock		1,603,462		2,526,432
Shares available for future grant under stock option plan		1,940,642		252,053
Warrants		7,507,708		7,507,708
		15,728,150		15,952,814

Shelf Registration and At-the-Market Offerings

On August 5, 2022, the Company filed the Shelf with the SEC, which covers the offering, issuance, and sale by us of up to an aggregate of $200.0 million of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. We simultaneously entered into a sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale by us of up to $75.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf. The Shelf was declared effective by the SEC on August 12, 2022. As of June 30, 2024, the Company has sold and issued 584,890 shares of common stock under the ATM Program, with total net proceeds of $3.6 million. Subsequent to June 30, 2024 and through August 5, 2024, the Company has sold and issued 683,851 additional shares of common stock under the ATM Program, with total net proceeds of $4.1 million.

10. Warrants

The Company has the following warrants outstanding for the purchase of common stock as of June 30, 2024 and December 31, 2023:


WARRANTS	SHARES OF COMMON STOCK SUBJECT TO WARRANTS		EXERCISE PRICE PER SHARE		EXPIRATION DATES
Series B Warrants		3,672,484	$	6.81	November 2025
Conditional Series B Warrants		3,672,484	$	6.81	November 2025
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