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, 2023, filed on February 29, 2024. 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 ("SoC") therapeutics. We are focusing our clinical program in indications such as RAS-mutated metastatic colorectal cancer ("mCRC"), as well as in investigator-initiated ongoing or planned trials in metastatic pancreatic ductal adenocarcinoma ("mPDAC"), 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 early clinical evidence of favorable safety and efficacy, with expected on-target, manageable and transient 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; 17 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 additive or synergistic effects on efficacy have been observed in xenograft models of onvansertib in combination with irinotecan, 5-fluorouracil ("5-FU"), abiraterone, PARP inhibitors, venetoclax, paclitaxel, or bevacizumab. Combining onvansertib with SoC cancer agents provides opportunities for synergy with many cancer therapies. There are several ongoing and planned clinical trials of onvansertib in multiple indications: one trial (CRDF-004) in first-line treatment in patients with RAS-mutated mCRC, and investigator-initiated trials in first-line mPDAC, relapsed SCLC and unresectable locally advanced or metastatic TNBC. RAS-mutated mCRC Program: CRDF-004 Randomized Clinical Trial in First-Line RAS-mutated mCRC CRDF-004 is a Phase 2 open-label, randomized multi-center clinical trial of onvansertib in combination with SoC 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 SoC, as well as to evaluate two doses of onvansertib, 20mg and 30mg, given in combination with SoC, against SoC alone. The primary endpoint of the trial is objective response rate ("ORR"). Progression-free survival and duration of response will be secondary endpoints. We anticipate releasing initial data from the CRDF-004 trial in the second half of 2024. This trial is conducted in partnership with Pfizer Ignite, an end-to-end service for biotech companies, and it is expected to enroll approximately 90 evaluable patients. In February 2024 it was announced that the first patient dosed for this trial. For more information, please visit NCT06106308 at www.clinicialtrials.gov . Contingent upon the results of CRDF-004, we plan to initiate CRDF-005, a Phase 3, randomized trial with registrational intent. The FDA has agreed that a seamless trial with 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 Second-Line KRAS-mutated mCRC TROV-054, a Phase 1b/2 open-label multi-center clinical trial of onvansertib in combination with SoC FOLFIRI and bevacizumab for the second-line treatment of patients with KRAS-mutated mCRC, completed enrollment in October 2022. The primary objectives of this trial were 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: • 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); 18 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 SoC 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 second-line therapy vs. patients who had received prior bevacizumab in first-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. • Data on Treatment Emergent Adverse Events ("TEAEs") on the trial showed that onvansertib is well-tolerated when used in combination with FOLFIRI and bevacizumab. The more severe, grade 4 TEAEs are either neutropenia or leukopenia, which are common events in patients treated with FOLFIRI and bevacizumab. None of the patients with grade 4 TEAEs discontinued treatment due to their condition and all resolved without issue. There were no major or unexpected toxicities seen in the trial. • Data from the Phase 1b portion of this trial was published in the peer-reviewed journal Clinical Cancer Research, February 6, 2024 edition. Based on the interim results of the TROV-054 trial, we previously designed the ONSEMBLE trial (CRDF-003) as the next phase of our mCRC program. Upon further review of the clinical data from the bevacizumab naïve subgroup (those patients who did not receive bevacizumab in their first-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. Phase 2 Clinical Trial in Second-Line RAS-mutated mCRC The ONSEMBLE trial (CRDF-003) is a Phase 2 randomized, open-label multi-center clinical trial of onvansertib in combination with SoC FOLFIRI and bevacizumab for the second-line treatment of patients with RAS-mutated mCRC. The primary objectives of the ONSEMBLE trial are to evaluate onvansertib’s safety and efficacy in combination with FOLFIRI and bevacizumab, as well as to evaluate two doses of onvansertib, 20mg and 30mg, given in combination with FOLFIRI and bevacizumab, against FOLFIRI and bevacizumab alone. The primary endpoint of the trial is ORR. For more information, please visit NCT05593328 at www.clinicialtrials.gov . The ONSEMBLE trial enrollment was closed in August 2023 as part of our shift to a first-line mCRC program, and the 23 patients enrolled continued treatment per protocol. Data presented on February 29, 2024, provided the first update of the ongoing ONSEMBLE Phase 2 randomized clinical trial in RAS-mutated mCRC: • ORR data for each arm of the trial and for the two experimental arms combined are shown in the table below. The table also presents ORR data for two subgroups of patients: those who were bevacizumab naïve when they entered second-line therapy vs. patients who had received prior bevacizumab in first-line therapy. Objective Response Rate Bevacizumab Naïve Patients (1) Bevacizumab Exposed Patients All Patients FOLFIRI/bev (SoC alone); (N=6) 0% (0 of 3) 0% (0 of 3) 0% (0 of 6) Onvansertib 20mg + SoC; (N=8) 50% (1 of 2) 0% (0 of 6) 13% (1 of 8) Onvansertib 30mg + SoC; (N=7) 50% (1 of 2) 0% (0 of 5) 14% (1 of 7) Onvansertib (all doses) + SoC; (N=15) 50% (2 of 4) 0% (0 of 11) 13% (2 of 15) (1) The two partial responses were confirmed on the patients' subsequent scans. • Data on TEAEs on the trial showed that onvansertib is well-tolerated when used in combination with FOLFIRI and bevacizumab. No Grade 4 TEAEs were observed for the arms of FOLFIRI and bevacizumab alone and onvansertib 30mg given in combination with FOLFIRI and bevacizumab. Two Grade 4 TEAEs of neutropenia were seen in patients receiving 20mg onvansertib given in combination with FOLFIRI and bevacizumab. Both patients recovered within 7 and 10 days after withholding the study treatment and no dose reductions in subsequent treatment cycles were needed. There were no major or unexpected toxicities seen in the trial. 19 Table of Contents The ORR data from the randomized ONSEMBLE trial validates the findings observed in our earlier single-arm Phase 1b/2 KRAS-mutated mCRC trial (TROV-054). In the ONSEMBLE trial, objective responses were observed only in bevacizumab naïve patients versus bevacizumab exposed patients. In addition, these objective responses were present only in bevacizumab naïve patients randomized to the experimental arms of onvansertib in combination with FOLFIRI and bevacizumab versus bevacizumab naïve patients randomized to the FOLFIRI and bevacizumab alone control arm. mPDAC Program: Phase 2 Investigator-Initiated Clinical Trial in First-Line mPDAC In February 2024, the FDA approved NALIRIFOX as a first-line treatment option for mPDAC. As a result, we are currently planning to support a new investigator-initiated mPDAC Phase 2 trial of onvansertib in combination with first-line SoC NALIRIFOX, details of which we will announced when available. The trial would replace a previously planned two-cohort, non-randomized Phase 2 trial of onvansertib in combination with first-line SoC Gemzar ® and Abraxane ® which was to be conducted at the OHSU Knight Cancer Institute. 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. 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 first-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 unconfirmed PR that were awaiting confirmatory scans; • 19% objective response rate ORR achieved compared to historical control of 7.7% in second-line setting; • 5.0 months mPFS achieved compared to historical control of 3.1 months with SoC; An update provided on February 29, 2024 indicated 3 of the 4 PRs are confirmed PRs and 1 of the 4 PRs did not confirm on their subsequent scan. 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 at the University of Pittsburgh Medical Center ("UPMC"), completed enrollment in July 2023. 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 one confirmed PR, three stable disease (“SD”) and three progressive disease (“PD”). The disease control rate (“DCR”), including PR and SD, is 57% (4 of 7 patients). 20 Table of Contents 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, 2023, filed with the SEC on February 29, 2024. There have been no changes to our critical accounting policies since December 31, 2023. RESULTS OF OPERATIONS Three Months Ended June 30, 2024 and 2023 Revenues Total revenues were $163,000 for the three months ended June 30, 2024, as compared to $108,000 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 June 30, (in thousands) 2024 2023 Increase (Decrease) Salaries and staff costs $ 1,714 $ 1,487 $ 227 Stock-based compensation 397 297 100 Clinical trials, outside services, and lab supplies 6,950 5,670 1,280 Facilities and other 432 566 (134) Total research and development $ 9,493 $ 8,020 $ 1,473 Research and development expenses increased by $1.5 million for the three months ended June 30, 2024, compared to the same period in 2023. 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 was primarily from key hires in research and development and clinical operations (research and development average headcount grew by 19% over the comparative period). 21 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses consisted of the following: Three Months Ended June 30, (in thousands) 2024 2023 Increase (Decrease) Salaries and staff costs $ 807 $ 1,358 $ (551) Stock-based compensation 782 1,284 (502) Outside services and professional fees 1,167 1,070 97 Facilities and other 459 584 (125) Total selling, general and administrative $ 3,215 $ 4,296 $ (1,081) Selling, general and administrative expenses decreased by $1.1 million for the three months ended June 30, 2024, compared to the same period in 2023. The overall decrease in expenses was primarily due to salaries and staff costs due to an employee severance agreement which was expensed during the prior period. Stock-based compensation expense decreased due to a modification of stock options that occurred during the prior period. 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 $0.8 million for the three months ended June 30, 2024 as compared to $1.1 million for the same period of 2023. The decrease in interest income was primarily due to a lower balance of our short-term investments portfolio and money market accounts for the three months ended June 30, 2024 as compared to the same period of 2023. Six Months Ended June 30, 2024 and 2023 Revenues Total revenues were $368,000 for the six months ended June 30, 2024, as compared to $191,000 for the same period in 2023. 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: Six Months Ended June 30, (in thousands) 2024 2023 Increase (Decrease) Salaries and staff costs $ 3,582 $ 2,860 $ 722 Stock-based compensation 786 691 95 Clinical trials, outside services, and lab supplies 12,202 12,515 (313) Facilities and other 931 1,006 (75) Total research and development $ 17,501 $ 17,072 $ 429 Research and development expenses increased by $0.4 million for the six months ended June 30, 2024, compared to the same period in 2023. The overall increase in expenses was primarily due to salaries and staff costs generally from key hires in research and development and clinical operations (research and development average headcount grew by 27% over the comparative period). Outside services costs decreased due to recruitment fees for key hires that occurred during the prior period. 22 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses consisted of the following: Six Months Ended June 30, (in thousands) 2024 2023 Increase (Decrease) Salaries and staff costs $ 1,714 $ 2,157 $ (443) Stock-based compensation 1,517 1,954 (437) Outside services and professional fees 2,150 2,091 59 Facilities and other 964 1,177 (213) Total selling, general and administrative $ 6,345 $ 7,379 $ (1,034) Selling, general and administrative expenses decreased by $1.0 million for the six months ended June 30, 2024, compared to the same period in 2023. The overall decrease in expenses was primarily due to salaries and staff costs due to an employee severance agreement which was expensed during the prior period. Stock-based compensation expense decreased due to a modification of stock options that occurred during the prior period. 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 $1.7 million for the six months ended June 30, 2024 as compared to $2.0 million for the same period of 2023. The decrease in interest income was primarily due to a lower balance of our short-term investments portfolio and money market accounts for the six months ended June 30, 2024 as compared to the same period of 2023. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2024, and December 31, 2023, we had working capital of $49.7 million and $67.0 million, respectively. We have incurred net losses since our inception and have negative operating cash flows. As of June 30, 2024, we had $60.3 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 through the end of the third quarter of 2025. From July 1, 2024 through August 6, 2024, we raised gross proceeds of $2.3 million from the sale of 0.9 million shares of our Common Stock. 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. 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. Cash Flow Summary 23 Table of Contents Six Months Ended June 30, (in thousands) 2024 2023 Net cash used in operating activities $ (16,970) $ (15,791) Net cash provided by investing activities 18,651 18,813 Net cash provided by financing activities 2,165 — Net change in cash and equivalents $ 3,846 $ 3,022 Operating Activities Net cash used in operating activities for the six months ended June 30, 2024, was $17.0 million. Our primary use of cash was from our net loss of $21.8 million, adjusted for non-cash items of $2.2 million primarily related to stock-based compensation. The net change in our operating assets and liabilities decreased cash used in operations by $2.6 million. Net cash used in operating activities for the six months ended June 30, 2023, was $15.8 million. Our primary use of cash was from our net loss of $22.4 million, adjusted for non-cash items of $2.4 million primarily related to stock-based compensation. The net change in our operating assets and liabilities decreased cash used in operations by $4.2 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. Investing Activities Net cash provided by investing activities for the six months ended June 30, 2024 was $18.7 million, primarily related to maturities in excess of purchases of marketable securities. Net cash provided by investing activities for the six months ended June 30, 2023 was $18.8 million, primarily related to sales and maturities in excess of purchases of marketable securities. Financing Activities Net cash provided by financing activities for the six months ended June 30, 2024 was $2.2 million, from the sale of common stock and employee stock options exercises. Net cash provided by financing activities for the six months ended June 30, 2023 was $0. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.