Cardiff Oncology, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding the future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. In addition, our business and financial performance may be affected by the factors that are discussed under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 25, 2021. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The following discussion and analysis is qualified in its entirety by, and should be read in conjunction with, the more detailed information set forth in the financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. Overview We are a clinical stage biotechnology company, developing new treatment options for cancer patients in indications with the greatest medical need. Our goal is to overcome resistance, extend duration of response and increase overall survival. We are developing onvansertib, a first-in-class, third-generation Polo-like Kinase 1 ("PLK1") inhibitor, in combination with standard-of-care chemotherapy and targeted therapeutics. Our clinical development programs incorporate tumor genomics and biomarker technology to enable assessment of patient response to treatment. We licensed onvansertib from Nerviano Medical Sciences ("NMS") pursuant to a license agreement with NMS dated March 13, 2017. This exclusive, world-wide license agreement includes 3 issued patents for onvansertib which cover composition of matter, salt forms of onvansertib and combination of onvansertib with other drugs. Onvansertib is highly potent against the PLK1 enzyme (concentration for 50% inhibition [IC 50 ] = 2nM), whereas low or no activity was observed on a panel of 63 kinases (IC 50 >500 nM), including the PLK members PLK2 and PLK3 (IC 50 >10 μM). Onvansertib was developed to have ideal pharmacokinetics, including oral bioavailability and administration and a drug half-life of approximately 24 hours, allowing for flexible dosing and scheduling, with only mild to moderate side effects reported to-date. A Phase 1 safety study of onvansertib was successfully completed in patients with advanced metastatic solid tumors and published in 2017 in Investigational New Drugs . PLK1, a serine/threonine kinase, is a master regulator of mitotic progression with various roles and localizations during the different mitotic phases. Upon PLK1 depletion in cancer cells by RNA interference ("RNAi"), inhibition of proliferation and decreased viability, resulting from cell cycle arrest with 4N DNA content followed by apoptosis, are observed. PLK1 depletion also results in an increase in the number of cells containing abnormal spindle formation and misaligned chromosomes. Expression of PLK1 is seen in all proliferating normal tissues, and PLK1 is overexpressed in a number of tumors (including breast, prostate, ovary, lung, gastric and colon cancers), as well as in hematologic cancers. 18 Table of Contents Onvansertib has been tested for antiproliferative activity on a panel of 148 tumor cell lines and appeared highly active with an IC 50 (a measure concentration for 50% target inhibition) below 100 nM in 75 cell lines and IC 50 values below 1 uM in 133 out of 148 cell lines. Onvansertib also appears active in cells expressing multi-drug resistant (“MDR”) transporter proteins and we believe its apparent ability to overcome the MDR transporter resistance mechanism in cancer cells could prove useful in broader drug combination applications. Additionally, onvansertib has been tested in in-vivo xenograft and transgenic models of different cancer types with the demonstration of tumor growth inhibition or tumor regression. Onvansertib has been evaluated preclinically and has demonstrated to have synergy with chemotherapies, including irinotecan, 5-FU, cisplatin, cytarabine, doxorubicin, gemcitabine and paclitaxel, and with targeted therapeutics including abiraterone, PARP inhibitor, venetoclax, histone deacetylase ("HDAC") inhibitors, fms-like tyrosine kinase 3 ("FLT3") inhibitors, sorafenib, and bortezomib. These therapies are used clinically for the treatment of many hematologic and solid cancers, including acute myeloid leukemia ("AML"), non-Hodgkin’s lymphoma ("NHL"), metastatic CRC, metastatic castration resistant prostate cancer ("mCRPC"), adrenocortical carcinoma ("ACC"), triple negative breast cancer ("TNBC"), small cell lung cancer ("SCLC"), and ovarian cancer. These preclinical studies are the foundation of the scientific rationale for the use of specific combinations in indicated cancer types within our ongoing and planned clinical trials for the drug development of onvansertib. We believe the high-selectivity of onvansertib to PLK1, its 24-hour half-life and oral bioavailability, as well as evidence of safety and clinical benefit, with expected on-target, easy to manage and reversible side effects, may prove beneficial in addressing clinical therapeutic needs across a variety of cancers. Clinical Program Updates Significant clinical updates: • TROV-054 is a Phase 1b/2 open-label multi- center clinical trial of onvansertib in combination with FOLFIRI and bevacizumab ("Avastin ® ") for the second line treatment of patients with KRAS-mutated mCRC, which is being conducted at 6 clinical trial sites across the U.S. - USC Norris Comprehensive Cancer Center, The Mayo Clinic Cancer Centers (Arizona, Minnesota and Florida), Kansas University Medical Center ("KUMC") and CARTI Cancer Center; • TROV-053 is a Phase 2 open-label multi-center clinical trial of onvansertib in combination with abiraterone acetate (Zytiga ® ) and prednisone in patients with mCRPC, which is being conducted at Beth Israel Deaconess Medical Center ("BIDMC"), Dana-Farber Cancer Institute ("DFCI"), and Massachusetts General Hospital ("MGH"); • CRDF-001 is a Phase 2 open-label mutli-center clinical trial of onvansertib in combination with nanoliposomal irinotecan (“Onivyde ® ”), leucovorin, and fluorouracil for second line treatment of patients with metastatic pancreatic ductal adenocarcinoma ("PDAC"), which is being conducted at 6 clinical trial sites across the U.S. – The Mayo Clinic Cancer Centers (Arizona, Minnesota and Florida), Kansas University Medical Center (“KUMC”), University of Nebraska Medical Center (“UNMC”) and Inova Schar Cancer Institute. KRAS-mutated mCRC TROV-054 is a Phase 1b/2 study of onvansertib for the second-line treatment of patients with KRAS-mutated metastatic colorectal cancer ("mCRC") in combination with standard-of-care FOLFIRI and bevacizumab (Avastin ® ). The primary objective of this study is to evaluate the dose-limiting toxicities ("DLTs") and maximum tolerated dose ("MTD") or recommended Phase 2 dose ("RP2D") of onvansertib in combination with FOLFIRI and bevacizumab (Phase 1b) and to continue to assess the safety and preliminary efficacy of onvansertib in combination with FOLFIRI and bevacizumab (Phase 2). The rationale for this clinical trial is based on three key principles including synthetic lethality, synergy and proof-of-concept clinical benefit. Synthetic lethality arises when a combination of deficiencies in the expression of two genes leads to cell death, whereas a deficiency in only one of these genes does not. The deficiencies can arise through mutations, epigenetic alterations or inhibitors of the protein encoded by one of the genes. In reference to onvansertib, CRC tumor cells harboring KRAS mutations are more vulnerable to cell death with PLK1 inhibition versus KRAS wild-type isogenic cells. Synergy occurs when the combination of two drugs results in an unexpected greater activity than an expected additive effect of the two drugs. Onvansertib in combination with irinotecan and 5-FU (components of FOLFIRI) demonstrate synergy in colorectal cancer cell lines and the combination has demonstrated significantly greater tumor growth inhibition than either drug alone. Proof-of- 19 Table of Contents concept clinical response has been demonstrated in a previously completed Phase 1 trial in solid tumors in which 3 of 5 patients showing stable disease had a KRAS mutation; 2 in colorectal cancer and 1 in pancreatic cancer. Data presented on April 12, 2021, at a key opinion leader webinar, provided an update of the ongoing phase 1b/2 clinical study in KRAS-mutated metastatic colorectal cancer. Of the 18 patients evaluable for efficacy, 7 (39%) achieved an objective response (partial response; PR); 4 patients have had a confirmed PR; 1 patient with a non-confirmed PR went off study due to an unrelated event prior to their 16-week confirmatory scan and 2 patients await their respective confirmatory scans. This objective response rate (ORR) compares favorably with current standard of care benchmarks that range from 5 to 13%. To-date, the time to achieving a PR ranges from 2 to 6 months in patients on treatment. Objective responses were observed across different KRAS variants, including the 3 most common in CRC. Median progression free survival (mPFS) is currently 9.4 months which compares favorably with the current standard of care benchmarks that range from 4.5 to 5.7 months. 16 of 18 patients had a KRAS variant detected by ddPCR at baseline (all had a KRAS mutation detected by NGS). The greatest decreases in KRAS mutant allelic frequency (MAF) after 1 cycle of treatment were observed in patients achieving a PR (ranging from a decrease ranging from 78% to 100%), while the 2 patients who progressed showed a more modest reduction in KRAS MAF (decrease of 55% and 26%, respectively). Patients with PR and stable disease (SD) tended to have lower on-treatment KRAS MAF than patients with early progressive disease (PD). Of all adverse events (AEs) associated with onvansertib in combination with FOLFIRI/bevacizumab, only 11% have been grade 3 or 4. Grade 4 adverse events were attributed to the 5-FU bolus component of the combination regimen, which was eliminated in subsequent cycles of treatment per protocol and institutional guidelines. The only G3/G4 AE reported in ≥2 patients was neutropenia (n=8), which was managed by dose delay, growth factor therapy and/or discontinuation of the 5-FU bolus; no patients went off trial due to neutropenia. To-date, no major or unexpected toxicities have been attributed to onvansertib. Key News Releases On April 12, 2021, we announced a KOL Event Webinar presentation of Phase 1b/2 data from our ongoing trial in KRAS-mutated mCRC demonstrating continued robust response to treatment and progression-free survival. On April 10, 2021, we announced an electronic oral poster presentation of findings from our Expanded Access Program ("EAP") demonstrating the clinical benefit of onvansertib in KRAS-mutated mCRC at the American Association for Cancer Research ("AACR") Annual Meeting 2021. On January 15, 2021, we announced an electronic poster presentation of clinical data further demonstrating the clinical benefit of onvansertib in KRAS-mutate mCRC and initial findings from our Expanded Access Program ("EAP") in mCRC. mCRPC TROV-053 is a Phase 2 study of onvansertib in combination with Zytiga ® (abiraterone) and prednisone for the treatment of patients with metastatic castration resistant prostate cancer ("mCRPC"). The primary objective of this study is to observe the effects of onvansertib in combination with abiraterone and prednisone on disease control as assessed by prostate specific antigen ("PSA") decline or stabilization after 12 weeks of study treatment in patients with mCRPC showing early signs of resistance to abiraterone. The rationale for this trial is based on the mechanism of action ("MOA") of onvansertib and Zytiga ® and the synergy of these two drugs when used in combination. Onvansertib inhibits tumor cell division (mitosis) by inducing G2/M arrest of tumor cells and the combination of onvansertib and Zytiga ® significantly increases mitotic arrest and is synergistic when used in combination. Additionally, PLK1 inhibition appears to enhance the efficacy of androgen signaling blockade in castration-resistant prostate cancer. Data presented on February 11, 2021, at the American Society of Clinical Oncology Genitourinary Cancers Symposium (“ASCO-GU”) provided evidence of the safety and efficacy of onvansertib in combination with abiraterone. Arms A (n=17) and B (n=12) showed similar response with 29% and 25% of patients achieving the primary endpoint and 53% and 42% of patients with SD at 12 weeks, respectively. The more continuous dosing schedule of Arm C (n=8) has shown a higher response rate with 63% of patients, to-date, achieving the primary endpoint and 75% with SD at 12 weeks. Evidence of efficacy was observed in patients harboring AR alterations across all 3 arms. ctDNA analysis revealed differences in baseline genomic profiles of patients achieving SD at 12 weeks vs patients progressing before or at 12 weeks. Mutations exclusively present in 20 Table of Contents patients with SD were associated with cell cycle and DNA repair pathways that may result in increased sensitivity to onvansertib and efficacy of the combination. Onvansertib + abiraterone has demonstrated safety across all 3 dosing schedules. Key News Releases On April 10, 2021, we announced, in collaboration with MIT, the presentation of an electronic oral poster presentation featuring gene signature analyses data identifying androgen-independent mechanism for onvansertib-abiraterone synergy in mCRPC. On February 11, 2021, we announced an electronic poster presentation of clinical data further demonstrating the safety, efficacy and durability of response in patient with mCRPC at the American Society of Clinical Oncology Genitourinary Cancers Symposium (“ASCO-GU”). PDAC CRDF-001 is a Phase 2 Study of onvansertib in combination with nanoliposomal irinotecan and 5-FU for the second line treatment of patients with metastatic pancreatic ductal adenocarcinoma ("PDAC"). The first patient enrolled is anticipated in the first half of 2021. The objective of this trial is to assess the safety and preliminary efficacy of onvansertib in combination with nanoliposomal irinotecan (Onyvide ® ), 5-FU and leucovorin as a second-line treatment in patients with metastatic PDAC who have failed first-line gemcitabine-based therapy. The trial is expected to enroll approximately 45 patients across six sites in the U.S. including the three Mayo Clinic Cancer Centers (Arizona, Minnesota and Florida), Kansas University Medical Center, University of Nebraska Medical Center and Inova Schar Cancer Institute. Key News Releases On January 26, 2021, we announced that the FDA provided a "study may proceed" notification to the Company to initiate our study in metastatic PDAC. Company Updates Our accumulated deficit through March 31, 2021 is $236.7 million. To date, we have generated minimal revenues and expect to incur additional losses to perform further research and development activities. Our drug development efforts are in their early stages, and we cannot make estimates of the costs or the time that our development efforts will take to complete, or the timing and amount of revenues related to the sale of our drugs. The risk of completion of any program is high because of the many uncertainties involved in developing new drug candidates to market, including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of research and development expenses, and competing technologies being developed by organizations with significantly greater resources. Off-Balance Sheet Arrangements We had no off-balance sheet arrangements as of March 31, 2021. Critical Accounting Policies Our accounting policies are described in ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of our Annual Report on Form 10-K as of and for the year ended December 31, 2020, filed with the SEC on February 25, 2021. There have been no changes to our critical accounting policies since December 31, 2020. 21 Table of Contents Three Months Ended March 31, 2021 and 2020 Revenues Total revenues was $0.1 million for three months ended March 31, 2021 as compared to $0.1 million for the prior period. Revenues are from our sales-based or usage-based royalties on other intellectual property licenses, unrelated to onvansertib. Revenue recognition of the royalty depends on the timing and overall sales activities of the licensees. Research and Development Expenses Research and development expenses consisted of the following: Three Months Ended March 31, (in thousands) 2021 2020 Increase (Decrease) Salaries and staff costs $ 282 $ 424 $ (142) Stock-based compensation 40 77 (37) Clinical trials, outside services, and lab supplies 2,800 1,974 826 Facilities and other 157 231 (74) Total research and development $ 3,279 $ 2,706 $ 573 Research and development expenses increased by $0.6 million for the three months ended March 31, 2021 compared to the same period in 2020. The overall increase in research and development expenses was primarily due to costs associated with clinical programs and outside service costs for three ongoing clinical trials related to the development of our lead drug candidate, onvansertib. Salaries and staff costs decreased primarily due to departmental changes of certain executives in the current period. Selling, General and Administrative Expenses Selling, general and administrative expenses consisted of the following: Three Months Ended March 31, (in thousands) 2021 2020 Increase (Decrease) Salaries and staff costs $ 568 $ 494 $ 74 Stock-based compensation 228 100 128 Outside services and professional fees 971 495 476 Facilities and other 468 397 71 Total selling, general and administrative $ 2,235 $ 1,486 $ 749 Selling, general and administrative expenses increased by $0.7 million for the three months ended March 31, 2021 compared to the same period in 2020. The significant components of the increase were outside services and stock-based compensation. The increase in outside services and professional fees is primarily due to increased legal fees mainly related to the expansion of our patent portfolio and recruiting fees. The increase in stock-based compensation is primarily due to stock options granted in June 2020. Change in Fair Value of Derivative Financial Instruments — Warrants We have issued warrants that are accounted for as derivative liabilities. As of March 31, 2021, the derivative financial instruments — warrants liabilities were revalued to $0.1 million, resulting in an decrease in value of $0.2 million from December 31, 2020, based primarily upon the fluctuation in our stock price as well as the decrease in the remaining life of the warrants, volatility, and risk-free interest rates for the expected term. The change in value upon remeasurement at March 31, 2021 was recorded as a gain from the change in fair value of derivative financial instruments — warrants in the condensed statement of operations. 22 Table of Contents Net Loss Net loss and per share amounts were as follows: Three Months Ended March 31, (in thousands, except per share amounts) 2021 2020 Increase (Decrease) Net loss $ (5,179) $ (4,089) $ 1,090 Preferred stock dividend (6) (6) — Net loss attributable to common shareholders $ (5,185) $ (4,095) $ 1,090 Net loss per common share — basic and diluted $ (0.14) $ (0.41) $ (0.27) Weighted average shares outstanding — basic and diluted 37,164 9,910 27,254 The $1.1 million increase in net loss attributable to common shareholders was primarily the result of an increase in operating expenses for the three months ended March 31, 2021 compared to the same period in the prior year. The $0.27 decrease in basic net loss per share was impacted by the increase in basic weighted average shares outstanding resulting primarily from the issuance of approximately 26.5 million shares of common stock from April 1, 2020 through March 31, 2021. LIQUIDITY AND CAPITAL RESOURCES The COVID-19 outbreak in the United States has caused business disruptions. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and impact on our clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. The economic effects of the outbreak could also have an adverse effect on our ability to raise additional capital. At this point, the extent to which COVID-19 may impact our future financial condition or results of operations is uncertain. Net cash used in operating activities for the three months ended March 31, 2021 was $5.9 million, compared to $3.4 million for the three months ended March 31, 2020. Our use of cash was primarily a result of the net loss of $5.2 million for the three months ended March 31, 2021, adjusted for non-cash items related to release of clinical trial funding commitment of $0.4 million, stock-based compensation of $0.3 million, and depreciation of $0.1 million. The net change in our operating assets and liabilities was $1.5 million increasing cash used in operations. At our current and anticipated level of operating loss, we expect to continue to incur an operating cash outflow for the next several years. Net cash used in investing activities was $111.7 million during the three months ended March 31, 2021, compared to no investment activities for the same period in 2020, investment activities during the current period were primarily related to net purchases of marketable securities. Net cash provided in financing activities was $1.3 million during the three months ended March 31, 2021, compared to $2.5 million for the same period in 2020. Net cash provided in financing activities during the three months ended March 31, 2021 was from $1.3 million of proceeds from the exercise of warrants. Net cash provided in financing activities during the three months ended March 31, 2020 was from $1.5 million of proceeds from the exercise of warrants and $1.0 million from the sale of common stock and warrants. As of March 31, 2021, and December 31, 2020, we had working capital of $124.1 million and $127.2 million, respectively. We have incurred net losses since our inception and have negative operating cash flows. As of March 31, 2021, we had $125.6 million in cash, cash equivalents and short-term investments and we believe we have sufficient cash to meet our funding requirements for at least the next 12 months following the issuance date of these financial statements. For the foreseeable future, we expect to continue to incur losses and require additional capital to further advance its clinical trial programs and support its other operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we can raise additional funds by issuing equity securities, our stockholders may experience additional dilution. The economic effects of COVID-19 could also have an adverse effect on our ability to raise additional capital. 23 Table of Contents CONTRACTUAL OBLIGATIONS For a discussion of our contractual obligations see (i) our Financial Statements and Notes to Financial Statements Note 10. Commitments and Contingencies , and (ii) Item 7 Management Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations and Commitments , included in our Annual Report on Form 10-K as of December 31, 2020. There have been no material changes to our contractual obligations in our Form 10-K for the year ended December 31, 2020. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.