What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-12 compared with 2023-03-09 · 57 added, 63 removed, 212 unchanged (36% of the section changed)

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Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

We are a clinical-stage precision oncology medicine company focused on pioneering the discovery and development of novel MasterKey therapies.

We target families of oncogenic mutations in patients with genetically defined cancers.

We are a clinical-stage oncology company focused on the development of MasterKey therapies to treat patients with genetically defined tumors.

The foundation of our company is built upon a deep understanding of cancer genetics, onco-protein structure and function, and medicinal chemistry.

Our proprietary technology platform, which we refer to as our Mutation-Allostery-Pharmacology (MAP) drug discovery engine, is designed to allow us to analyze population-level genetic sequencing data to discover oncogenic mutations that promote cancer across tumor types.

Our goal is to identify families of mutations that can be inhibited with MasterKey therapies, thereby providing precision oncology to greater numbers of patients with genetically defined tumors.

We have designed our product candidates to be potent, brain penetrant and selective MasterKey inhibitors of oncogenic mutational families which occur across a range of tumor types.

Our lead product candidate, BDTX-1535, is designed to selectively and irreversibly inhibit a family of oncogenic mutations in the ErbB-1 epidermal growth factor receptor (EGFR) which are resistant to current generation tyrosine kinase inhibitors (TKIs), while sparing wild type EGFR (EGFR WT) activity.

We are currently evaluating BDTX-1535 in the dose escalation portion of a Phase 1 clinical trial in non-small cell lung cancer (NSCLC) patients with EGFR resistance mutations, with or without brain metastases and glioblastoma multiforme (GBM).

Our second product candidate, BDTX-4933, is designed to be a brain penetrant and highly selective and potent inhibitor of oncogenic BRAF Class I, II, III and active RAF dimers promoted by upstream oncogenic alterations, such as RAS mutations, which has the potential to avoid paradoxical activation.

We expect to initiate a Phase 1 clinical trial for BDTX-4933 in select indications for patients harboring all-class BRAF or RAS mutations in the first half of 2023.

We are also leveraging our MAP drug discovery engine to identify other families of oncogenic mutations in validated oncogenes, which have the potential to expand the reach of MasterKey therapies.

In order to focus on progressing our pipeline through important upcoming milestones for BDTX-1535 and BDTX-4933, as well as on our discovery efforts, in April 2022, we announced the discontinuation of the development of BDTX-189, our EGFR/HER2 Exon 20 targeted therapy.

In December 2022, we announced the spinout of certain early discovery stage antibody programs enabled by the MAP drug discovery engine into Launchpad Therapeutics, Inc.

(Launchpad), a new company formed to exploit the MAP drug discovery engine for the discovery, development and commercialization of large molecule therapeutics.

Our MasterKey therapies are designed to address a broad spectrum of genetically defined tumors, overcome resistance, minimize wild-type mediated toxicities, and be brain-penetrant to treat central nervous system (CNS) disease.

Our compounds target families of oncogenic mutations in clinically validated pathways.

We are advancing two clinical-stage programs:

BDTX-1535, a brain-penetrant, fourth-generation EGFR MasterKey inhibitor, targeting epidermal growth factor receptor mutant (EGFRm) non-small cell lung cancer (NSCLC) and glioblastoma (GBM), and BDTX-4933, a brain-penetrant, RAF MasterKey inhibitor targeting KRAS, NRAS and BRAF alterations in solid tumors.

We believe that our lead product candidate, BDTX-1535, has the potential to treat patients with EGFR mutated (EGFRm) NSCLC in both early-line and later-line settings based upon BDTX-1535’s ability to address approximately 50 oncogenic mutations with greater potency than other EGFR TKI’s, as well as uniquely target the C797S resistance mutation which can be acquired after treatment with osimertinib.

In our Phase 1 trial in patients with advanced/metastatic EGFR mutant NSCLC, BDTX-1535 was shown to be well tolerated and achieve durable clinical responses in patients whose tumors expressed a range of mutation subtypes, including the acquired C797S resistance mutation and a spectrum of non-classical mutations.

We are currently evaluating BDTX-1535 in a Phase 2 clinical trial in patients with EGFRm NSCLC in the second- and third-line settings with non-classical driver mutations and acquired C797S resistance mutation, and in the first-line setting in patients with EGFRm NSCLC harboring non-classical EGFR mutations.

We expect to announce results from the second- and third-line cohorts in the third quarter of 2024 and results from the first-line cohort in 2025.

We are also assessing the potential development of BDTX-1535 for patients with EGFRm NSCLC following adjuvant treatment with osimertinib, where the broad mutation coverage of BDTX-1535 of C797S and non-classical mutations may be of benefit.

We released top-line GBM results from the BDTX-1535 Phase 1 dose escalation study in the fourth quarter of 2023, showing clinical activity in heavily pretreated patients with GBM.

BDTX-1535 was shown to be generally well tolerated and no new safety signals were observed.

In the fourth quarter of 2023, enrollment began in a “window of opportunity” Phase 0/1 trial of BDTX-1535 in patients with recurrent high-grade glioma.

We expect to present Phase 1 data and “window of opportunity” results in the second quarter of 2024, which will inform potential next steps in the development of BDTX-1535 in GBM.

Our second product candidate, BDTX-4933, is designed to be a potent and selective, reversible oral inhibitor that targets broad families of oncogenic BRAF, KRAS and NRAS alterations.

BDTX-4933 selectively targets constitutively active RAF dimers resulting from either BRAF mutations or other upstream oncogenic MAPK pathway alterations, such as KRAS and NRAS alterations.

In preclinical tumor models, we observed that BDTX-4933 demonstrated brain-penetrant activity and achieved regression of tumors carrying a broad spectrum of KRAS mutations, NRAS alterations, as well as BRAF Class I, II, and III mutations.

We initiated a Phase 1 clinical trial for BDTX-4933 in the second quarter of 2023 in patients with BRAF and select KRAS and NRAS mutation-positive cancers, with an emphasis on patients with non-G12C KRAS mutant NSCLC.

The trial is currently in dose escalation with data expected in the fourth quarter of 2024.

Since our inception in 2014, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, discovering product candidates and securing related intellectual property rights while conducting research and development activities for our programs.

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We have not yet successfully completed any pivotal clinical trials, obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities.

To date, we have funded our operations with proceeds from the sale of preferred stock and common stock.

To date, we have funded our operations with proceeds from the sale of common stock and preferred stock.

Since inception, we have incurred significant operating losses.

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We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

• advance clinical studies for BDTX-1535 and BDTX-4933 and continue preclinical studies for our other product candidates;

• continue to identify additional product candidates from our proprietary MAP drug discovery engine;

• advance clinical trials for BDTX-1535 and BDTX-4933;

• obtain, maintain, expand and protect our intellectual property portfolio;

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We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates, and reduce headcount and general and administrative costs.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2022, we had cash, cash equivalents and investments of $122.8 million, which we believe will fund our operating expenses and capital expenditure requirements into the third quarter of 2024.

Additionally, we continue to actively monitor macroeconomic conditions and market volatility resulting from global economic developments, political unrest, high inflation, disruptions in capital markets, changes in international trade relationships and military conflicts, and health crises.

While we believe such factors have had no significant impact on our business or financial results during the periods presented, future developments and potential impacts on our business are uncertain and cannot be predicted with confidence.

As of December 31, 2023, we had cash, cash equivalents and investments of $131.4 million, which we believe will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

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If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or other research and development initiatives.

COVID-19 Considerations

We continue to monitor the impact of the COVID-19 pandemic on all aspects of our business and have taken steps to minimize its impact on our business and strategy, including devising contingency plans and securing additional resources from third-party service providers.

Scientists in our labs continue to operate under enhanced safety measures and we continue to support hybrid work arrangements for our office employees.

The extent to which future COVID-19 developments may impact our business, results of operations and financial condition are uncertain and cannot be predicted with confidence.

If we or any of the third parties with whom we engage, including our manufacturers, suppliers, clinical trial sites, service providers, regulators and other third parties with whom we conduct business, were to experience prolonged business shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.

In particular, if the operations of our third-party manufacturers of drug substances and drug products in China were to be negatively affected, it could result in delays or disruptions in the supply of our product candidates and the conduct of experiments and studies.

Our assessment of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain or treat its impacts and the economic impacts on local, regional, national and international markets.

COVID-19 has also caused, and may continue to cause for an extended period, volatility in the global financial markets and a slowdown in the global economy, which would reduce our ability to access capital and could negatively affect our liquidity.

Additionally, inflation due in part to COVID-19 generally affects us by increasing our employee-related costs and clinical trial expenses, as well as other operating expenses.

Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as global supply chain disruptions, global trade disputes or political instability.

Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.

Components of our results of operations

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• expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;

• expenses incurred under agreements with contract research organizations, or CROs, that are primarily engaged in the oversight and conduct of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations, or CMOs, that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs;

• other costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;

• expenses incurred under agreements with contract research organizations, or CROs, that are primarily engaged in the oversight and conduct of our drug discovery efforts, preclinical studies, and clinical trials as well as under agreements with contract manufacturing organizations, or CMOs, that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs;

• other costs related to the conduct of preclinical studies, clinical trials, and our drug discovery efforts, including acquiring and manufacturing materials, manufacturing validation batches, fees to investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development support services;

• payments made in cash or equity securities under third-party licensing, acquisition and option agreements;

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These employees work across multiple programs and, therefore, we do not track their costs by program.

Research and development activities are central to our business model.

Development activities are central to our business model.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we continue our clinical trials for BDTX-1535, as well as conduct other preclinical and clinical development, including submitting regulatory filings for other product candidates.

We expect our discovery research efforts and our related personnel costs will increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, will increase above current levels.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we continue our clinical trials for BDTX-1535 and BDTX-4933.

In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from any of our product candidates.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from any of our product candidates.

The successful development and commercialization of our product candidates is highly uncertain.

This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of the following:

• the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities;

• establishing an appropriate safety and efficacy profile with IND-enabling studies;

• the scope, progress, outcome and costs of our clinical trials and other development activities;

• successful patient enrollment in and the initiation and completion of clinical trials;

• the timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S.

• the timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the U.S.

Food and Drug Administration (FDA) and non-U.S.

• the extent of any required post-marketing approval commitments to applicable regulatory authorities;

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• maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.

Any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates.

Any changes in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of these product candidates.

For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

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General and administrative expenses also include direct and allocated facility-related costs as well as insurance costs and professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates and prepare for potential commercialization activities.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support continued development of our product candidates and prepare for potential commercialization activities.

Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of that product candidate.

Other income (expense)

Other income (expense) consists primarily of interest income earned on our cash equivalents and investment balances, realized and unrealized foreign currency transaction gains and losses, and gain (loss) on sale of IP related to equity method investment.

Other income (expense) consists primarily of interest income earned on our cash equivalents and investment balances, sublease income, realized and unrealized foreign currency transaction gains and losses, and gain (loss) on sale of IP related to equity method investment.

Equity in (losses) of unconsolidated entity

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$ 59,350 $ 64,437 $ (5,087)

The decrease of $32.4 million was primarily due to a net $12.9 million decrease in BDTX-4933 and other research programs and platform development expenses as we decreased research activities related to our platform and new programs, not including BDTX-4933.

We begin tracking expenses by development candidate at nomination;

therefore, BDTX-4933 expenses prior to January 2022 are included in other research programs and platform development expenses.

BDTX-189 expenses decreased $19.1 million due to reduced clinical trial activities stemming from the discontinuation of the development of BDTX-189 to focus on upcoming milestones for our pipeline programs, BDTX-1535 and BDTX-4933.

Costs related to BDTX-1535 increased $1.8 million due to the progression of our clinical trial.

Personnel expenses decreased $2.1 million as a result of the realignment of our workforce to focus on upcoming milestones for our pipeline programs.

The decrease of $5.1 million was primarily due to an increase of $12.7 million related to the progression of our clinical trial for BDTX-1535, offset by decreased spend relating to other research programs and platform development of $5.6 million due to reduced spending on early discovery projects as we deepen our focus on our clinical-stage assets.

In addition, BDTX-189 expenses decreased $7.1 million due to the discontinuation of the development of BDTX-189 to focus on the development of BDTX-1535 and BDTX-4933.

Personnel expenses decreased $4.5 million as a result of the realignment of our workforce in April 2022 to focus on upcoming milestones for our clinical trials.

General and administrative

General and administrative expenses were $27.1 million for the year ended December 31, 2023, compared to $28.4 million for the year ended December 31, 2022.

The decrease of $1.7 million was primarily due to an decrease in legal and other professional fees.

The decrease of $1.3 million was primarily due to a decrease in legal and other professional fees.

Other income (expense)

Other income was $4.0 million for the year ended December 31, 2023, compared to $3.9 million for the year ended December 31, 2022.

The increase was primarily attributable to the gain on sale of IP related to the equity method investment in Launchpad as well as amortization of premium on investments increasing at a higher rate in 2022 compared to 2021 and interest income staying relatively flat.

Although the increase of $0.1 million is low year over year, the composition changed in 2023 to primarily sublease income and accretion on investments, compared to 2022 when it was primarily the gain on sale of IP related to the equity method investment in Launchpad.

Equity in (losses) of unconsolidated entity

Equity in (losses) of unconsolidated entity was $2.3 million for the year ended December 31, 2022, compared to zero for the year ended December 31, 2021.

The decrease was attributable to our share of equity method investee losses on the basis of our equity ownership percentage and IPR&D charges resulting from basis differences, and no equity method investments in 2021.

There was no equity in (losses) of unconsolidated entity for the year ended December 31, 2023, compared to $2.3 million for the year ended December 31, 2022.

The increase was attributable to no equity method investments in 2023 compared to 2022 when we reported our share of equity method investee losses on the basis of our equity ownership percentage as well as IPR&D charges resulting from basis differences.

Liquidity and capital resources

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We have not yet commercialized any of our product candidates, and we do not expect to generate revenue from sales of any product candidates for several years, if at all.

We have funded our operations to date primarily with proceeds from the sale of preferred stock and common stock.

We have funded our operations to date primarily with proceeds from the sale of common and preferred stock.

On February 3, 2020, we completed an IPO of 12,174,263 shares of our common stock, including the exercise in full by the underwriters of their option to purchase up to 1,587,947 additional shares of common stock, for aggregate gross proceeds of $231.3 million.

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As of December 31, 2023, no sales have been made pursuant to the ATM Program.

On July 5, 2023, we completed an underwritten public offering (the Follow-on Offering) of 15,000,000 shares of our common stock at a price to the public of $5.00 per share.

The aggregate net proceeds from the Follow-on Offering totaled approximately $71.6 million after deducting underwriting discounts and commissions, as well as other offering expenses.

The underwriters did not exercise any portion of their 30-day overallotment option to purchase up to an additional 2,250,000 shares of the Company’s common stock at the public offering price, which expired on July 29, 2023, and therefore no additional proceeds from the Follow-on Offering were received.

The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):

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Operating activities

During the year ended December 31, 2023, we used cash in operating activities of $66.7 million, primarily resulting from our net loss of $82.4 million, partially offset by the non-cash charge related to stock compensation expense of $9.6 million, a decrease in prepaid expenses and other current assets as development services were performed, and an increase in accounts payable, accrued expenses and other current liabilities.

During the year ended December 31, 2022, we used cash in operating activities of $85.1 million, primarily resulting from our net loss of $91.2 million, partially offset by the non-cash charge related to stock compensation expense of $12.2 million, and a decrease in accounts payable, accrued expenses and other current liabilities.

During the year ended December 31, 2021, we used cash in operating activities of $100.1 million, primarily resulting from our net loss of $125.6 million, partially offset by the non-cash charge related to stock compensation expense of $14.0 million, an increase in prepaid expenses and other current assets due to payments for research services and a decrease in deferred offering costs.

Changes in accounts payable and accrued expenses in all periods were generally due to growth in our business, the advancement of our product candidates, and the timing of vendor invoicing and payments.

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Financing activities

During the year ended December 31, 2022, we had cash provided by financing activities of $0.2 million, consisting of proceeds from the exercise of stock options.

During the year ended December 31, 2023, we had cash provided by financing activities of $71.9 million, consisting of proceeds from the Follow-on Offering in July 2023 as well as participation in the employee stock purchase plan.

During the year ended December 31, 2022, we had cash provided by financing activities of $0.2 million, consisting of proceeds from the exercise of stock options.

Funding requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance clinical trials of our product candidates.

In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

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• advance BDTX-1535 and BDTX-4933 through clinical trials;

• advance preclinical development of our early stage programs, including our FGFR and other undisclosed program, including plans for nominating development candidates;

• manufacture, or have manufactured on our behalf, our preclinical and clinical drug material and develop processes for late state and commercial manufacturing;

• manufacture, or have manufactured on our behalf, our drug material and develop processes for late stage and commercial manufacturing;

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

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• obtain, maintain, expand and protect our intellectual property portfolio.

As of December 31, 2023, we had cash, cash equivalents and investments of $131.4 million, which we believe will fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

• the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical and clinical trials;

• the scope, progress, results and costs of developing our product candidates, and conducting clinical trials;

• the costs, timing and outcome of regulatory review of our product candidates;

• the costs, timing and ability to manufacture our product candidates to supply our clinical and preclinical development efforts and our clinical trials;

• the costs, timing and ability to manufacture our product candidates to supply our clinical development efforts and our clinical trials;

• the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

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As a result, we may face difficulties raising capital through sales of our common stock, and such sales may be on unfavorable terms.

Similarly, adverse macroeconomic conditions and market volatility resulting from global economic developments, political unrest, high inflation, the ongoing COVID-19 pandemic or other factors could materially and adversely affect our ability to consummate an equity or debt financing on favorable terms or at all.

Similarly, adverse macroeconomic conditions and market volatility resulting from global economic developments, political unrest, high inflation, global health crises, or other factors could materially and adversely affect our ability to consummate an equity or debt financing on favorable terms or at all.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.

To the extent that we raise additional capital through the sale of private or public equity or convertible debt securities, the ownership interest of our stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences and anti-dilution protections that could adversely affect the your rights as a of our common stockholders.

Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.

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Recently issued accounting pronouncements

There are no recently issued accounting pronouncements that are expected to have a material effect on our financial condition, results of operations or cash flows.

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report.

Emerging growth company and smaller reporting company status

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis