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, 2022, filed on March 2, 2023. 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 leveraging PLK1 inhibition, a well-validated oncology drug target, to develop novel therapies across a range of cancers with the greatest unmet medical need. Our goal is to target tumor vulnerabilities with treatment combinations of onvansertib, our oral and highly selective PLK1 inhibitor, and standard-of-care therapeutics. We are focusing our clinical program in indications such as RAS-mutated metastatic colorectal cancer ("mCRC") and metastatic pancreatic ductal adenocarcinoma ("mPDAC"), as well as in investigator-initiated trials in small cell lung cancer ("SCLC") and triple negative breast cancer ("TNBC"). Our clinical development programs incorporate tumor genomics and biomarker assays to refine assessment of patient response to treatment. Our Lead Drug Candidate, Onvansertib Onvansertib is an oral, small molecule drug candidate that is highly specific for PLK1 inhibition with a 24-hour half-life. We believe the attributes of onvansertib described below, as well as clinical evidence of favorable safety and efficacy, with expected on-target, easy to manage and reversible side effects, may prove beneficial in addressing clinical therapeutic needs across a variety of cancers: • Onvansertib is highly potent and highly selective against the PLK1 enzyme (IC 50 = 2nM; IC 50 is the concentration for 50% inhibition), compared to prior PLK1 inhibitors that were pan-inhibitors of several PLK targets. Low or no activity of onvansertib was observed on a panel of 63 kinases (IC50>500 nM), including the PLK members PLK2 and PLK3 (IC 50 >10,000 nM); • Onvansertib is orally bioavailable, allowing for relative ease and flexibility of dosing. 16 Table of Contents • Onvansertib has a relatively short drug half-life of 24 hours, allowing for flexible dosing and scheduling which has shown favorable safety and tolerability across multiple clinical trials; In vitro studies have shown synergistic effects when onvansertib was administered in combination with different cytotoxic agents including microtubule-targeting agents, topoisomerase 1 inhibitors, antimetabolites, alkylating agents, proteasome inhibitors, kinase inhibitors, PARP inhibitors, BCL-2 inhibitors, and androgen biosynthesis inhibitors. In addition, in vivo combination studies have confirmed the positive results obtained in vitro and synergistic effects have been observed in xenograft models of onvansertib in combination with irinotecan, 5-fluorouracil ("5-FU"), abiraterone, PARP inhibitors, venetoclax, and paclitaxel, while additive effects in combination with cytarabine or bevacizumab have been demonstrated. Combining onvansertib with standard-of-care cancer agents provides opportunities for synergy with many cancer therapies. There are five ongoing and planned clinical trials of onvansertib: one trial (CRDF-004) in first line treatment in patients with RAS-mutated mCRC, one trial (TROV-054) in second line treatment in patients with KRAS-mutated mCRC, one trial in second line treatment in patients with mPDAC, and two investigator-initiated trials in patients with relapsed extensive-stage SCLC and locally advanced or metastatic TNBC. RAS-mutated mCRC Program: CRDF-004 Clinical Trial in RAS-mutated mCRC CRDF-004 is a Phase 2 open-label, randomized multi-center clinical trial of onvansertib in combination with standard-of-care FOLFIRI and bevacizumab or FOLFOX and bevacizumab for the first line treatment of patients with RAS-mutated mCRC. The primary objectives of the CRDF-004 trial are to evaluate onvansertib’s safety and efficacy in combination with the standard-of-care, as well as to evaluate two doses of onvansertib, 20mg and 30mg, given in combination with standard-of-care, against standard-of-care alone. The primary endpoint of the trial is objective response rate. Progression-free survival and duration of response will be secondary endpoints. We expect to begin enrollment during the fourth quarter of 2023, with interim data anticipated in mid-2024. Pfizer Ignite is responsible for the clinical execution of the trial and it is expected to enroll approximately 90 evaluable patients. For more information, please visit NCT06106308 at www.clinicialtrials.gov . Contingent upon the results of CRDF-004, Cardiff Oncology plans to initiate CRDF-005, a Phase 3, randomized trial with registrational intent. The FDA has agreed that a seamless trial with objective response rate (ORR) at an interim point is an acceptable endpoint to pursue accelerated approval, with progression-free survival and trend in overall survival being the endpoints for full approval. Phase 1b/2 Clinical Trial in KRAS-mutated mCRC TROV-054 is a Phase 1b/2 open-label multi-center clinical trial of onvansertib in combination with standard-of-care FOLFIRI and bevacizumab for the second line treatment of patients with KRAS-mutated mCRC. This trial completed enrollment in October 2022. The primary objectives of this trial are to evaluate the Dose-Limiting Toxicities ("DLTs"), maximum tolerated dose ("MTD") and 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 patients with KRAS-mutated mCRC (Phase 2). For more information, please visit NCT03829410 at www.clinicialtrials.gov . Data presented on August 7, 2023, provided an update of the ongoing TROV-054 Phase 1b/2 single arm clinical trial in KRAS-mutated metastatic colorectal cancer: • Objective response rate ("ORR") across all evaluable patients was 29%, with 19 of 66 evaluable patients achieving an objective response. Responses have been observed across multiple KRAS variants; • Median duration of response ("mDoR") across all evaluable patients was 12.0 months (95% confidence interval ("CI"): 8.9 – not reached); 17 Table of Contents • Median progression free survival ("mPFS") across all evaluable patients was 9.3 months (95% CI: 7.8 – 14). Historical control trials of different drug combinations, including the standard-of-care of FOLFIRI with bevacizumab, in similar patient populations have shown ORR and mPFS of 5 – 13% and ~4.5 – 6.7 months, respectively. • A subgroup analysis of patients who were bevacizumab naïve when they entered 2 nd line therapy vs patients who had received prior bevacizumab in 1 st line therapy showed that patients who were bevacizumab naïve (n=15) had an ORR of 73% and mPFS of 15 months, which is well above historical controls. In contrast, patients previously treated with bevacizumab (n=51) had an ORR of 16% and mPFS of 7.8 months. In reviewing the TROV-054 clinical data, we originally designed the ONSEMBLE trial (CRDF-003) as the next phase of our mCRC program. Upon review of the clinical data from the bevacizumab naïve subgroup (those patients who did not receive bevacizumab in their 1 st line therapy), the preclinical data on the mechanism of action and the feedback from the FDA on our clinical development strategy, we made the decision to discontinue enrollment in the ONSEMBLE trial and to initiate the CRDF-004 clinical trial. mDPAC Program: Phase 2 Clinical Trial in mPDAC CRDF-001 is a Phase 2 open-label multi-center clinical trial of onvansertib in combination with nanoliposomal irinotecan (Onivyde ® ), leucovorin, and fluorouracil for 2 nd line treatment of patients with mPDAC, which is being conducted at six clinical trial sites across the U.S. – The Mayo Clinic Cancer Centers (Arizona, Minnesota, and Florida), Kansas University Medical Center, Inova Schar Cancer Institute, and the University of Nebraska Medical Center. The first patient was dosed in June 2021. Enrollment for this trial closed in October 2023. 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 2 nd line treatment in patients with mPDAC who have failed 1 st line gemcitabine-based therapy. For more information, please visit NCT04752696 at www.clinicialtrials.gov . Preliminary data presented on September 26, 2023 provided an update of the ongoing CRDF-001 Phase 2 open label clinical trial in mPDAC: • Preliminary data from 21 patients evaluable for radiographic response showed 1 patient achieving a confirmed partial response (“PR”) and 3 patients achieving a partial response that are awaiting confirmatory scans; • 19% objective response rate (“ORR”) achieved compared to historical control of 7.7% in 2nd line setting; • 5.0 months median progression-free survival (“mPFS”) achieved compared to historical control of 3.1 months with standard of care (“SoC”); mPDAC biomarker discovery trial The investigator-initiated biomarker discovery trial is exploring the impact of onvansertib 10-day monotherapy on tumors in mPDAC patients, and is currently enrolling at the Oregon Health & Science University (OHSU) Knight Cancer Institute. Two patients have been enrolled as of September 13, 2023. Preliminary data were presented on September 26, 2023. One patient demonstrated an 86% decrease in Ki67, a well-established biomarker of tumor proliferation, and a 28% decrease in CA 19-9, a clinically-used biomarker to monitor treatment response. 18 Table of Contents Other Clinical Programs: Phase 2 Investigator-Initiated Clinical Trial in SCLC A single-arm, two-stage, Phase 2 trial of onvansertib monotherapy in patients with relapsed SCLC is open for enrollment at the University of Pittsburgh Medical Center ("UPMC"). The trial is designed to enroll 15 patients in Stage 1, with the study proceeding to Stage 2 if 2 or more Stage 1 patients achieve an objective response. Stage 2 is designed to enroll an additional 20 patients. The primary endpoint of the trial is ORR, while key secondary endpoints include PFS and overall survival. For more information, please visit NCT05450965 at www.clinicialtrials.gov . An examination of the safety data from the first six patients by the institutional review board confirmed the trial can continue to enroll as planned. Preliminary efficacy data for seven patients presented on September 26, 2023, showed 1 confirmed partial response (“PR”), three stable disease (“SD”) and three progressive disease (“PD”). The disease control rate, including PR and SD, is 57% (4 of 7 patients). Phase 1b/2 Investigator-Initiated Clinical Trial in TNBC A single-arm, Phase 1b/2 trial of onvansertib in combination with paclitaxel in patients with unresectable locally advanced or metastatic TNBC is open for enrollment at Dana Farber Cancer Institute ("DFCI"). In Phase 1b, approximately 14-16 patients will be treated with different doses of onvansertib in combination with a fixed dose of paclitaxel to determine the maximum tolerated dose and RP2D of onvansertib. In Phase 2, approximately 34 patients will be treated with the selected onvansertib RP2D in combination with paclitaxel. The primary endpoint of Phase 2 of the trial is ORR, with PFS included as a secondary endpoint. For more information, please visit NCT05383196 at www.clinicialtrials.gov . 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, 2022, filed with the SEC on March 2, 2023. There have been no changes to our critical accounting policies since December 31, 2022. RESULTS OF OPERATIONS Three Months Ended September 30, 2023 and 2022 Revenues Total revenues were $141,000 for the three months ended September 30, 2023, as compared to $93,000 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 September 30, (in thousands) 2023 2022 Increase (Decrease) Salaries and staff costs $ 1,615 $ 1,000 $ 615 Stock-based compensation 294 286 8 Clinical trials, outside services, and lab supplies 5,603 4,279 1,324 Facilities and other 510 444 66 Total research and development $ 8,022 $ 6,009 $ 2,013 19 Table of Contents Research and development expenses increased by $2.0 million for the three months ended September 30, 2023, compared to the same period in 2022. The overall increase in expenses was primarily due to costs associated with clinical programs and outside service costs related to the development of our lead drug candidate, onvansertib. The increase in salaries and staff costs from additional hires in senior management and our clinical operations team (research and development average headcount grew by 50% over the comparative period). Selling, General and Administrative Expenses Selling, general and administrative expenses consisted of the following: Three Months Ended September 30, (in thousands) 2023 2022 Increase (Decrease) Salaries and staff costs $ 731 $ 808 $ (77) Stock-based compensation 661 751 (90) Outside services and professional fees 1,011 840 171 Facilities and other 536 678 (142) Total selling, general and administrative $ 2,939 $ 3,077 $ (138) Selling, general and administrative expenses decreased by $0.1 million for the three months ended September 30, 2023, compared to the same period in 2022. Salary and staff costs and stock-based compensation decreased due to lower headcount. Facilities and other costs were lower as a result of a reduction of insurance costs compared to the prior period. The increase in outside services and professional fees was due mainly to additional legal fees for contract reviews. Interest Income, Net Interest income, net was $1.1 million for the three months ended September 30, 2023 as compared to $0.5 million for the same period of 2022. The increase in interest income was primarily due to higher interest rates on our short-term investments portfolio for the three months ended September 30, 2023 as compared to the same period of 2022. Nine Months Ended September 30, 2023 and 2022 Revenues Total revenues were $332,000 for the nine months ended September 30, 2023, as compared to $258,000 for the same period in 2022. 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: Nine Months Ended September 30, (in thousands) 2023 2022 Increase (Decrease) Salaries and staff costs $ 4,475 $ 3,131 $ 1,344 Stock-based compensation 985 746 239 Clinical trials, outside services, and lab supplies 18,118 15,699 2,419 Facilities and other 1,516 1,089 427 Total research and development $ 25,094 $ 20,665 $ 4,429 Research and development expenses increased by $4.4 million for the nine months ended September 30, 2023, compared to the same period in 2022. The overall increase in expenses was primarily due to costs associated with clinical programs and outside service costs related to the development of our lead drug candidate, onvansertib. Salaries and staff costs increased primarily from additional hires in senior management and our clinical operations team (research and development average headcount grew by 37% over the comparative period). The increase in facilities and other costs is primarily due to increased allocation of facilities cost resulting from headcount growth compared to the prior period. 20 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses consisted of the following: Nine Months Ended September 30, (in thousands) 2023 2022 Increase (Decrease) Salaries and staff costs $ 2,888 $ 2,460 $ 428 Stock-based compensation 2,615 2,498 117 Outside services and professional fees 3,102 3,119 (17) Facilities and other 1,713 2,026 (313) Total selling, general and administrative $ 10,318 $ 10,103 $ 215 Selling, general and administrative expenses increased by $0.2 million for the nine months ended September 30, 2023, compared to the same period in 2022. Salaries and staff costs increased due to an employee severance agreement. The decrease in facilities and other costs was primarily due to reduced insurance costs compared to the prior period. Interest Income, Net Interest income, net was $3.1 million for the nine months ended September 30, 2023 as compared to $0.8 million for the same period of 2022. The increase in interest income was primarily due to higher interest rates on our short-term investments portfolio for the nine months ended September 30, 2023 as compared to the same period of 2022. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities for the nine months ended September 30, 2023, was $23.7 million, compared to $24.4 million for the nine months ended September 30, 2022. Our use of cash was primarily a result of the net loss of $32.1 million for the nine months ended September 30, 2023, adjusted for non-cash items related to stock-based compensation of $3.6 million. The net change in our operating assets and liabilities decreased cash used in operations by $5.2 million. 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 provided by investing activities was $22.6 million primarily related to sales and maturities in excess of purchases of marketable securities for the nine months ended September 30, 2023, compared to net cash provided by investing activities of $31.1 million primarily related to sales and maturities in excess of purchases of marketable securities during the same period in 2022. Net cash provided in financing activities was $0 for the nine months ended September 30, 2023, compared to net cash provided by financing activities of $0.1 million during the same period of 2022. As of September 30, 2023, and December 31, 2022, we had working capital of $74.9 million and $103.5 million, respectively. We have incurred net losses since our inception and have negative operating cash flows. As of September 30, 2023, we had $81.4 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 this Quarterly Report on Form 10-Q. Based on our current projections we expect that our capital resources are sufficient to fund our operations into 2025. 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 drug candidates. 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. 21 Table of Contents For the foreseeable future, we expect to continue to incur losses and require additional capital to further advance our clinical trial programs and support our 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.