SecProbe.io

CORRESP
1
filename1.htm

CORRESP

12670 High Bluff Drive

San Diego, California 92130

Tel: +1.858.523.5400 Fax: +1.858.523.5450

www.lw.com

FIRM / AFFILIATE OFFICES

 Austin

Milan

 Beijing

Munich

 Boston

New York

 Brussels

Orange County

 Century City

Paris

 Chicago

Riyadh

FOIA CONFIDENTIAL TREATMENT REQUEST

 Dubai

 San Diego

 Düsseldorf

 San Francisco

 Frankfurt

 Seoul

The entity requesting confidential treatment is:

 Hamburg

 Silicon Valley

 Hong Kong

 Singapore

CG Oncology, Inc.

 Houston

 Tel Aviv

 London

 Tokyo

Los Angeles

 Washington, D.C

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested by CG Oncology, Inc. with respect to this
letter.

Madrid

 January 5, 2024

 VIA
EDGAR

 Jimmy McNamara

 Office of Life Sciences

Division of Corporation Finance

 U.S. Securities and Exchange
Commission

 100 F Street N.E.

 Washington, D.C. 20549

Re:
 CG Oncology, Inc. | Anticipated Price Range

Registration Statement on Form S-1 (File
No. 333-276350)

 Dear Mr. McNamara:

Rule 83 Confidential Treatment Requested by CG Oncology, Inc.

This letter is furnished supplementally on behalf of CG Oncology, Inc. (the “Company”) in response to comments from the
staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) received by letter dated November 24, 2023, and in connection with the review by the Commission of the
above-mentioned Registration Statement on Form S-1 (the “Registration Statement”). To assist the Staff in its review, the Company advises the Staff that it presently estimates,
considering information currently available and current market conditions and based in part on information received by the lead underwriters, that the initial public offering price per share for the initial public offering
(“IPO”) pursuant to the Registration Statement will be between $[***] and $[***] (without giving effect to any reverse stock split that the Company will effect prior to the offering, the “Preliminary Price
Range”). For clarity, the Company advises the Staff that, given the volatility of the public trading markets and the uncertainty of the timing of the IPO, the Company and the lead underwriters have not yet finally agreed to a price
range for the IPO. The Company advises the Staff that the final range to be included in a pre-effective amendment to the Registration Statement, after giving effect to an appropriate stock split, will include
a price range of no more than $2.00 or 20% of the high end of the range, unless otherwise approved by the Staff.

 U.S. Securities and Exchange Commission

FOIA CONFIDENTIAL TREATMENT REQUEST

  Page
 2

 Recent Stock Option Grants

The Company’s grants of stock options during the 12 months preceding the latest balance sheet date presented in the Registration
Statement, as well as those made since the latest balance sheet, are set forth below.

 Grant Date

Number of Shares
Underlying
Options Granted

Per Share
Exercise Price
of Options

Per Share Fair
Value of Shares
on Grant Date

 October 19, 2022

5,671,051

$
0.24

$
0.24

 December 14, 2022

325,576

$
0.24

$
0.24

 March 15, 2023

445,897

$
0.24

$
0.24

 June 14, 2023

8,433,171

$
0.39

$
0.39

 August 15, 2023

13,214,000

$
0.53

$
0.53

 October 9, 2023

5,870,000

$
0.70

$
0.70

 November 20, 2023

1,000,000

$
0.82

$
0.82

 December 13, 2023

2,950,000

$
1.32

$
1.32

 Common Stock Valuation Methodologies

The Company has historically determined the fair value of its common stock using methodologies, approaches and assumptions consistent with the
American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation (the “AICPA Practice Guide”). In addition, the
Company’s Board of Directors (the “Board”) considered numerous objective and subjective factors, along with input from management and third-party valuations, to determine the fair value of the Company’s common stock
as further disclosed on pages 98 and 99 of the Registration Statement.

 Based on the Company’s early stage of development, the
difficulty in predicting the range of specific outcomes (and their likelihood) and other relevant factors, a hybrid method computing the probability-weighted value across two scenarios (the Current Value Method scenario and the Option Pricing Method
(“OPM”) scenario) was considered most appropriate for valuations prior to April 2023. In addition, as a result of the closings of the Company’s Series E redeemable convertible preferred stock financing in September and
October 2022, in the valuation completed in September 2022 effective as of June 30, 2022, the Company used the backsolve method to determine equity value in the OPM scenario. The backsolve method is a market approach that derives an implied
total equity value from the sale price of the Company’s equity securities in a recent arm’s length transaction.

 For valuations
performed on and after April 2023, the Company used a hybrid method of the Probability-Weighted Expected Return Method (“PWERM”) and OPM depending on the scenario, as the Company believed it could reasonably estimate
potential future liquidity outcomes given the late clinical-stage nature of its product candidate, cretostimogene, as well as having better visibility into the timing of a potential IPO. The PWERM is a scenario-based analysis that estimates the
value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes considered by the Company, as well as the economic and control rights of each share class. In addition,
in certain cases the valuations took into account secondary sales of the Company’s common stock.

 U.S. Securities and Exchange Commission

FOIA CONFIDENTIAL TREATMENT REQUEST

  Page
 3

 As shown below, the PWERM applied probabilities to four possible outcomes: (i) a remain
private (i.e., the Company remained a private enterprise) (the “Remain Private Scenario”); (ii) an IPO as of January 31, 2024, February 28, 2024 or April 30, 2024, as applicable (the “Early IPO
Scenario”); (iii) an IPO as of June 30, 2024 or September 30, 2024, as applicable (the “Late IPO Scenario” and together with the Early IPO Scenario, the “IPO Scenarios”); and
(iv) dissolution. In determining the enterprise value for the Remain Private scenarios, the Company applied the OPM backsolve method to the Company’s Series F redeemable convertible preferred stock financing in July 2023.

For each IPO Scenario, the Company estimated its equity value based on, among other things, the value of public companies deemed similar to
the Company at the time of their IPOs and/or investor and underwriter feedback following testing-the-waters meetings. In addition, the Company determined that dates
ranging between January 31, 2024 and September 30, 2024 were the most likely dates to complete an IPO and the Company used these dates to calculate the present value as of each valuation date in each IPO scenario. The dissolution scenario
was assigned a $0 value given that if the Company’s clinical trials failed, with no other assets beyond cretostimogene, any cash on hand after satisfying liabilities would be used in its entirety to pay liquidation preferences to the holders of
redeemable convertible preferred stock.

 In order for the Board to determine the estimated fair value of the Company’s common stock,
the Company obtained independent third-party valuations of its common stock as of June 30, 2022 (the “June 30, 2022 Valuation”), April 30, 2023 (the
“April 30, 2023 Valuation”), July 31, 2023 (the “July 31, 2023 Valuation”), September 20, 2023 (the
“September 20, 2023 Valuation”), October 27, 2023 (the “October 27, 2023 Valuation”) and
December 4, 2023 (the “December 4, 2023 Valuation”).

 At each option grant
date, the Board considered whether any events occurred that would trigger any material changes to the business or would require adjustment to the estimated fair value from the previous valuation date. The Company does not expect to make any
additional grants prior to the completion of its IPO other than grants made concurrent with the IPO at an exercise price equal to the final IPO price (if any).

Grant Date Fair Value Determinations

October 2022—March 2023 Option Grants.

The Board, with input from management, determined the fair value of the Company’s common stock to be $0.24 per share for options granted
in October and December 2022 and March 2023, after considering the June 30, 2022 Valuation.

 For the June 30, 2022 Valuation,
the Company utilized the OPM to derive the implied equity value for the Company. For the OPM, the market approach, utilizing the backsolve method, was used to determine the implied total enterprise value of the Company by accounting for all share
class rights and preferences. For purposes of the June 30, 2022 Valuation, the backsolve method reflected the Company’s sale and issuance of 112,422,700 shares of Series E redeemable convertible preferred stock in the Series E financing in
September 2022 and October 2022, at a purchase price of $1.0674 per share, for aggregate gross proceeds of approximately $120 million. In addition, an option-based approach based on the Finnerty Model was performed to estimate the appropriate
discount for lack of marketability (“DLOM”) for the common stock. A DLOM of 27.6% was used for the June 30, 2022 Valuation.

For the period from the date of the June 30, 2022 Valuation to March 15, 2023, the Board determined there were no internal or
external developments since the date of such valuation that warranted a change in the estimated fair value of the common stock, other than the Company’s Series E redeemable convertible preferred stock financing that was already reflected in the
June 30, 2022 Valuation.

 U.S. Securities and Exchange Commission

FOIA CONFIDENTIAL TREATMENT REQUEST

  Page
 4

 June 2023 Option Grants.

The Board, with input from management, determined the fair value of the Company’s common stock to be $0.39 per share as of June 14,
2023, after considering the April 30, 2023 Valuation. In reaching this determination, the Board determined that no material changes had occurred in the business since the date of the third-party valuation report, and that the forecasted
financial information reviewed as part of the April 30, 2023 Valuation was still appropriate.

 Among the qualitative factors
considered by the Board in determining the fair value of the Company’s common stock were the following developments in the Company’s business subsequent to March 15, 2023:

•

 continued progress in the Company’s ongoing clinical trials, including:

•

 enrollment of patients in the Phase 3 BOND-003 clinical trial;

•

 positive data announced at the American Urological Association conference from the Phase 2 CORE-001 clinical trial; and

•

 the secondary sales of the Company’s common stock, as described below.

As a result of the developments described above, the Company concluded it was appropriate to incorporate various IPO scenarios into the
valuation. As discussed above, the valuation analysis was performed using the PWERM to establish the following scenarios and relative weightings and values, as well as taking into account the secondary sale of an aggregate of 17,747,000 shares of
the Company’s common stock to investors for a per share purchase price of $0.80 (the “Secondary Common Stock Transaction”).

 Scenario

Future Value
Per Share

Assigned
Weight

Present Value
Per Share

Discount for
Lack of
Marketability
(1)

Weighted
Estimated
Fair
Value Per
Share

 Remain Private

$
[***]

60.0
%

$
[***]

29.0
%

$
[***]

 Early IPO Scenario (April 30, 2024)

$
[***]

5.0
%

$
[***]

23.6
%

$
[***]

 Late IPO Scenario (September 30, 2024)

$
[***]

15.0
%

$
[***]

26.4
%

$
[***]

 Dissolution

$
0.00

20.0
%

$
0.00

27.7
%

$
0.00

 Concluded PWERM Fair Value (80% weighting)

80
%

$
0.29

$
0.23

 Secondary Common Stock Transaction (20% weighting)

20
%

$
0.80

$
0.16

 Concluded Fair Value

$
0.39

(1)
 Each DLOM was based on the application of the Finnerty or Average Strike put option analysis.

 U.S. Securities and Exchange Commission

FOIA CONFIDENTIAL TREATMENT REQUEST

  Page
 5

 The Company estimated the expected timing of a potential liquidity event was 2.0 years in the
Remain Private Scenario and 1.0 and 1.42 years in the Early IPO and Late IPO Scenarios, respectively, based on management’s best estimates and an analysis of market conditions. The Company utilized a $[***] million equity value for each of the
IPO scenarios included in the table above.

 August 2023 Option Grants.

The Board, with input from management, determined the fair value of the Company’s common stock to be $0.53 per share as of August 15,
2023, after considering the July 31, 2023 Valuation. In reaching this determination, the Board determined that no material changes had occurred in the business since the date of the third-party valuation report, and that the forecasted
financial information reviewed as part of the July 31, 2023 Valuation was still appropriate.

 Among the qualitative factors
considered by the Board in determining the fair value of the Company’s common stock were the following developments in the Company’s business subsequent to June 14, 2023;

•

 continued progress in the Company’s ongoing clinical trials, including increased enrollment in the
Company’s Phase 3 BOND-003 clinical trial; and

•

 the closing of the Company’s Series F redeemable convertible preferred stock financing in July 2023.

 As discussed above, the valuation analysis was performed using the PWERM to establish the following scenarios and
relative weightings and values, as well as taking into account the Secondary Common Stock Transaction (with a reduced weighting compared to the April 30, 2023 Valuation given the elapsed period of time since the Secondary Common Stock
Transaction).

 Scenario

Future Value
Per Share

Assigned
Weight

Present Value
Per Share

Discount for
Lack of
Marketability
(1)

Weighted
Estimated
Fair
Value Per
Share

 Remain Private

$
[***]

50.0
%

$
[***]

29.9
%

$
[***]

 Early IPO Scenario (April 30, 2024)

$
[***]

20.0
%

$
[***]

22.4
%

$
[***]

 Late IPO Scenario (September 30, 2024)

$
[***]

10.0
%

$
[***]

26.1
%

$
[***]

 Dissolution

$
0.00

20.0
%

$
0.00

24.1
%

$
0.00

 PWERM Value (85% weighting)

85
%

$
0.48

$
0.41

 Secondary Common Stock Transaction (15% weighting)

15
%

$
0.80

$
0.12

 Concluded Fair Value

$
0.53

(1)
 Each DLOM was based on the application of the Finnerty or Average Strike put option analysis.

 U.S. Securities and Exchange Commission

FOIA CONFIDENTIAL TREATMENT REQUEST

  Page
 6

 The Company estimated the expected timing of a potential liquidity event was 2.0 years in the
Remain Private Scenario and 0.75 and 1.17 years in the Early IPO and Late IPO Scenarios, respectively, based on management’s best estimates and an analysis of market conditions. The Company continued to utilize a $[***] million equity value for
each of the IPO scenarios included in the table above.

 October 2023 Option Grants.

The Board, with input from management, determined the fair value of the Company’s common stock to be $0.70 per share as of October 9,
2023, after considering the September 20, 2023 Valuation. In reaching this determination, the Board determined that no material changes had occurred in the business since the date of the third-party valuation report, and that the forecasted
financial information reviewed as part of the September 20, 2023 Valuation was still appropriate.

 Among the qualitative factors
considered by the Board in determining the fair value of the Company’s common stock were the following developments in the Company’s business subsequent to Aug