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Item 2. Management’s Discussion and Analysis

2021-04-29 compared with 2020-10-29 · 87 added, 206 removed, 113 unchanged (72% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.

We are a clinical stage biopharmaceutical company.

Our strategy is to identify and utilize novel biomarkers to enhance selection of patients with cancer that we believe will be most likely to benefit from treatment with our product candidates.

We have utilized adaptive clinical protocol designs that enable us to evaluate our agents in multiple dosing regimens and for a range of cancer types.

Since we began operations in November 2014, we have built a pipeline of multiple oncology development programs and a coronavirus disease 2019 (“COVID-19”) development program.

Three product candidates are now in international multicenter clinical trials directed against a broad number of cancer indications and one of our product candidates is also being tested in a COVID-19 clinical trial.

We are developing small molecules that are designed to selectively inhibit the binding of immunosuppressive adenosine to either A2A receptors (ciforadenant, formerly CPI-444) or to A2B receptors.

Another small molecule inhibitor that we are developing (CPI-818) is designed to block the function of ITK, a kinase protein inside T-cells that is crucial to T-cell activation and differentiation.

We also are developing injectable monoclonal antibodies.

One of these antibodies (CPI-006) is designed to block the production of adenosine by tumors by inhibiting the cell surface enzyme CD73.

This antibody is also designed to stimulate various immune cells, which we believe may have potential for the treatment of COVID-19 patients.

Another of our antibodies is designed to bind to the chemokine receptor CXCR2 on myeloid cells to block the activity of immunosuppressive myeloid cells that infiltrate tumors, and is in preclinical development.

Our product candidates are designed to exhibit a high degree of specificity, which has the potential to provide greater safety compared to other cancer therapies and may facilitate their development either as monotherapies or in combination with other cancer therapies such as immune checkpoint inhibitors or chemotherapy.

Ciforadenant (formerly CPI-444), is an oral, small molecule antagonist of the A2A receptor for adenosine and is currently being studied under a Phase 2 expansion protocol in combination with Genentech, Inc.’s cancer immunotherapy, Tecentriq ® (atezolizumab) for patients with either advanced, refractory renal cell cancer (“RCC”) or patients with refractory metastatic castration resistant prostate cancer (“mCRPC”).

Our second clinical product candidate, CPI-006, is an anti-CD73 monoclonal antibody that is designed to both inhibit the production of adenosine and stimulate various immune cells.

CPI-006 is currently being studied in a Phase 1/1b clinical trial as a monotherapy and in combination with ciforadenant, in combination with pembrolizumab and in triplet combination with both ciforadenant and pembrolizumab.

In addition, we recently initiated an open-label, Phase 1 clinical trial of CPI-006 in COVID-19 patients with mild to moderate symptoms.

Our third clinical product candidate, CPI-818, is a selective, covalent inhibitor of ITK and is in a multi-center Phase 1/1b clinical trial in patients with various malignant T-cell lymphomas.

CPI-818 is designed to be directly cytotoxic to certain malignant T-cells and we believe has the potential to regulate immune responses to tumors.

We believe the breadth and status of our pipeline demonstrates our management team’s expertise in understanding and developing oncology assets as well as in identifying product candidates that can be in-licensed and further developed internally to treat many types of cancer.

We hold worldwide rights to all of our product candidates (other than in greater China).

To date, the majority of our efforts have been focused on the research, development and advancement of ciforadenant, CPI-006 and CPI-818, and we have not generated any revenue from product sales.

As a result, we have incurred significant losses.

We are a clinical stage, immunology focused biopharmaceutical company developing drugs and antibodies that target the most critical cellular elements of the immune system.

Our strategy is to focus our efforts on the development of immune modulator product candidates to treat COVID-19, T-cell lymphomas, other cancers and autoimmune diseases.

We have built a pipeline of five programs, three of which are in clinical development.

Our lead product candidate is CPI-006, a potent humanized monoclonal antibody that is designed to react with a specific site on CD73.

In both preclinical and in vivo studies in cancer patients and patients with COVID-19, CPI-006 has demonstrated binding to various immune cells and the inducement of a humoral adaptive immune response.

We believe CPI-006 has the potential to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad range of infectious diseases and cancers.

We are evaluating CPI-006 in a global, randomized, double-blind, Phase 3 trial designed to evaluate the efficacy and safety of CPI-006 compared to placebo in hospitalized patients with mild-to-moderate COVID-19.

The trial is planned to enroll up to 1,000 patients, who will be randomized into one of three arms and receive either 1.0 mg/kg or 2.0 mg/kg of CPI-006, or placebo.

The primary endpoint of the study is the proportion of patients that progress to requiring mechanical ventilation or death within 28 days of dosing.

The trial was designed with input from the U.S.

Food and Drug Administration, or FDA and will include an interim safety and futility analysis with enrollment expected to be completed in the fourth quarter of 2021.

Our next product candidate, CPI-818, is a selective, covalent inhibitor of ITK and is in a multi-center Phase 1/1b clinical trial in patients with various malignant T-cell lymphomas.

CPI-818 is designed to inhibit the proliferation of certain malignant T-cells, and we believe it also has the potential to regulate the growth of abnormal T cells involved in autoimmunity.

CPI-818 is currently being studied in a Phase 1/1b clinical in patients with several types of advanced, refractory T cell lymphomas at sites in the United States, Australia, and South Korea.

Interim data from the Phase 1/1b clinical trial of CPI-818 for T cell lymphoma demonstrated tumor responses in very advanced, refractory, difficult to treat T cell malignancies.

As of March 4, 2021, of seven patients with PTCL, there has been one complete response lasting over 15 months and one partial response lasting for over five months;

both responses are ongoing.

The interim data was presented at the 62nd American Society of Hematology (ASH) Annual Meeting & Exposition in December 2020.

Based on interim data from our Phase 1/1b clinical trial, Angel Pharmaceuticals plans to file an investigational new drug application (IND) for CPI-818 by mid-year in China.

If approved, Angel plans to initiate a Phase 2 clinical trial of CPI-818 for the treatment of refractory T cell lymphomas in late 2021, with the potential to expand into autoimmune and dermatological diseases over time.

Our third product candidate, ciforadenant (formerly CPI-444), is an oral, small molecule antagonist of the A2A receptor for adenosine with which we completed a Phase 2 expansion protocol in combination with Genentech, Inc.’s cancer immunotherapy, Tecentriq® (atezolizumab) for patients with either advanced or refractory renal cell cancer (“RCC”).

Ciforadenant is designed to disable a tumor’s ability to subvert attack by the immune system by blocking the binding of adenosine in the tumor microenvironment to the A2A receptor.

In addition to its B cell activating properties, CPI-006 is a monoclonal antibody that is designed to react with the active site of CD73, blocking the conversion of AMP

to adenosine.

Ciforadenant and CPI-006 provide complementary approaches to a cancer immunotherapy approach via the adenosine pathway.

The Company also discovered the Adenosine Gene Signature, which has demonstrated the potential to serve as a biomarker to identify patients most likely to respond to treatment with ciforadenant.

We have refined our strategy with ciforadenant and plan to collaborate with the Kidney Cancer Consortium to evaluate ciforadenant in a Phase 2 clinical trial in first-line therapy for metastatic RCC in combination with pembrolizumab and lenvatinib.

The trial is expected to enroll approximately 60 patients and is intended to increase complete responses and deep responses in the front-line setting.

Preclinical studies indicate adenosine may be a cause of resistance to current therapies with anti PD(L)-1 and tyrosine kinase inhibitors.

Tumor biopsies will be evaluated for expression of the Adenosine Gene Signature.

To date, the majority of our efforts have been focused on the research, development and advancement of CPI-006, CPI-818 and ciforadenant, and we have not generated any revenue from product sales and, as a result, we have incurred significant losses.

We expect to continue to incur significant research and development and general and administrative expenses related to our operations.

Our net loss for the nine months ended September 30, 2020 was $33.3 million.

As of September 30, 2020, we had an accumulated deficit of $250.5 million.

We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for, and begin to commercialize ciforadenant, CPI-006 and CPI-818, and as we develop other product candidates.

Our net loss for the three months March 31, 2021 was $11.6 million.

As of March 31, 2021, we had an accumulated deficit of $234.7 million.

We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for and begin to commercialize CPI-006, CPI-818 and ciforadenant, and as we develop other product candidates.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Since our inception and through September 30, 2020, we have funded our operations primarily through the sale and issuance of stock.

On March 22, 2016, our registration statement on Form S-1 (File No.

333-208850) relating to our initial public offering (“IPO”) of our common stock was declared effective by the SEC.

Shares of our common stock began trading on the Nasdaq Global Market on March 23, 2016.

The IPO closed on March 29, 2016, pursuant to which we sold 4,700,000 shares of our common stock at a public offering price of $15.00 per share.

In April 2016, we sold an additional 502,618 shares of our common stock to the underwriters upon partial exercise of their over-allotment option, at the initial offering price of $15.00 per share.

We received aggregate net proceeds of approximately $70.6 million, after underwriting discounts, commissions and offering expenses.

Immediately prior to the consummation of the IPO, all of our outstanding shares of convertible preferred stock were converted into 14.3 million shares of our common stock.

Since our inception and through March 31, 2021, we have funded our operations primarily through the sale and issuance of stock.

In March 2018, in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of $8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock.

We received aggregate net proceeds of approximately $64.9 million, after underwriting discounts, commissions and offering expenses.

In March 2020, we entered into an open market sale agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jefferies will act as our sales agent.

Jefferies is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreement.

As of September 30, 2020, we had not sold any shares of our common stock pursuant to the Sales Agreement.

In February 2021, we completed a follow-on public offering in which we sold 9,783,660 shares of common stock at a price of $3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock.

We received aggregate net proceeds of approximately $32.0 million, net of underwriting discounts and commissions and offering expenses.

In March 2020, we entered into an open market sales agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jefferies acts as our sales agent.

Jefferies is entitled to compensation for its services equal to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreement.

During the three months ended March 31, 2021, we received net proceeds of approximately $0.6 million from the sale of 153,257 shares of our common stock pursuant to the Sales Agreement.

As of March 31, 2021, $48.1 million remained for sale under the Sales Agreement.

In October 2020, we announced the formation and launch of Angel Pharmaceuticals Co., Ltd.

(“Angel Pharmaceuticals”), a new China based biopharmaceutical company with a mission to bring innovative quality medicines to Chinese patients for treatment of serious diseases including cancer, autoimmune diseases and infectious diseases.

We formed Angel Pharmaceuticals as a wholly-owned subsidiary and it launched with a post-money valuation of approximately $106.0 million, based on an approximate $41.0 million cash investment from a Chinese investor group that includes funds associated with Tigermed and Betta Pharmaceuticals, Hisun Pharmaceuticals and Zhejiang Puissance Capital, $6.6 million of such investments are subject to the satisfaction of certain customary conditions.

We formed Angel Pharmaceuticals as a wholly owned subsidiary and it launched with a post-money valuation of approximately $106.0 million, based on an approximate $41.0 million cash investment from a Chinese investor group that includes funds associated with Tigermed and Betta Pharmaceuticals, Hisun Pharmaceuticals and Zhejiang Puissance Capital.

Such cash is not available for our use.

Contemporaneously with the financing, Angel Pharmaceuticals licensed the rights to develop and commercialize our three clinical-stage candidates – ciforadenant, CPI-006 and CPI-818 – in greater China and obtained global rights to our BTK inhibitor preclinical programs.

Under the collaboration, we will initially retain a 49.7% equity stake in Angel Pharmaceuticals and will be entitled to designate three individuals on Angel’s five-person Board of Directors.

As of September 30, 2020, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $51.4 million.

We do not expect our existing capital resources to be sufficient to enable us to fund the completion of all of our ongoing or planned clinical trials and remaining development program of any of ciforadenant, CPI-006 or CPI-818 through commercialization.

In addition, our operating plan may change as a result of many factors, including those described in the section of this report entitled “Risk Factors” and others currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, debt financings or other sources, such as strategic collaborations.

Contemporaneously with the financing, Angel Pharmaceuticals licensed the rights to develop and commercialize our three clinical-stage candidates – CPI-006, CPI-818 and ciforadenant – in greater China and obtained global rights to our BTK inhibitor preclinical programs.

Under the collaboration, we currently have a 49.7% equity interest in Angel Pharmaceuticals, excluding 7% of Angel’s equity reserved for issuance under the Angel ESOP, and are entitled to designate three individuals on Angel’s five-person Board of Directors.

As of March 31, 2021, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $68.0 million.

We do not expect our existing capital resources to be sufficient to enable us to fund the completion of all of our ongoing or planned clinical trials and remaining development program of any of CPI-006, CPI-818 or ciforadenant through commercialization.

In addition, our operating plan may change as a result of many factors,

including those described in the section of this report entitled “Risk Factors” and others currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, debt financings or other sources, such as strategic collaborations.

Such financing would result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business.

If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates, including possible future revenue streams.

In addition, additional funding may not be available to us on

acceptable terms or at all and any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

In addition, additional funding may not be available to us on acceptable terms or at all and any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

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As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices.

COVID-19 Update

Impact of COVID-19

COVID-19 was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization.

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We also follow FDA guidance on clinical trial conduct during the COVID-19 pandemic, including the remote monitoring of clinical data.

However, while we had begun Investigational New Drug (“IND”)-enabling studies and scale-up manufacturing for CPI-182, our anti-CXCR2 antibody designed to block myeloid suppression, we paused this work in mid-March 2020 as a result of the COVID-19 pandemic.

We have not experienced any disruption in our supply chain of drug candidate necessary to conduct our clinical trials and believe we will be able to utilize our inventories to supply the drug needs of all of our clinical trials in 2020.

In alignment with public health guidance designed to slow the spread of COVID-19, as of mid-March 2020, we implemented a reduced onsite staffing model and transitioned to a remote work plan for all employees other than those providing essential services, such as our laboratory staff.

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We may need to undertake additional actions that could impact our operations if required by applicable laws or regulations or if we determine such actions to be in the best interests of our employees.

Product Pipeline

Our product candidate pipeline includes the following:

Ciforadenant Adenosine A2A Receptor Antagonist.

Our initial product candidate, ciforadenant, is an oral, small molecule antagonist of the A2A receptor for adenosine that we in-licensed from Vernalis in February 2015.

In January 2016, we began enrolling patients in a large expansion cohort trial for ciforadenant.

This Phase 1/1b clinical trial is designed to examine safety, tolerability, biomarkers and preliminary efficacy of ciforadenant in several solid tumor types, both as a single agent and in combination with Genentech, Inc.’s cancer immunotherapy, Tecentriq, a fully humanized monoclonal antibody targeting PD-L1.

In November 2016, we completed enrollment of 48 patients in the first step of the Phase 1/1b clinical trial, which was designed to determine the optimal dose of ciforadenant as both a single agent therapy and in combination with Tecentriq for use in the cohort expansion stage of the clinical trial.

The expansion cohort portion of the clinical trial enrolled patients with non-small cell lung cancer (“NSCLC”), RCC, melanoma (“MEL”), triple negative breast cancer (“TNBC”) and other cancers including colorectal cancer, prostate cancer, head and neck cancer and bladder cancer at leading medical centers in the United States, Australia and Canada.

We have enrolled over 300 patients in this clinical trial to date.

In 2017, both the single agent and combination arms of the NSCLC and RCC cohorts met the protocol-defined criteria for expansion from 14 to 26 patients, and both arms of the RCC cohort further met the protocol-defined criteria for expansion to 48 patients.

In December 2017, Genentech began enrolling patients in a Phase 1b/2 clinical trial that is evaluating ciforadenant in combination with Tecentriq in patients with NSCLC under an umbrella protocol known as Morpheus.

Enrollment in this trial has been completed and the patients are being followed.

In 2018, we amended our Phase 1/1b protocol to enroll patients in a Phase 1b/2 clinical trial with RCC who have failed therapies with both anti-PD-(L)1 antibodies and tyrosine kinase inhibitors (“TKI”).

Based on data observed in the Phase 1b/2 clinical trial in 2019, we began enrolling patients with metastatic castration-resistant prostate cancer (“mCRPC”) in a Phase 2 expansion arm of our ongoing Phase 1/1b clinical trial with mCRPC who will receive the combination of ciforadenant with Tecentriq based on data from the Phase 1b/2 clinical trial that showed activity in this disease.

As of August 2020, the key findings from our clinical trials of ciforadenant included:

● Ciforadenant has been well-tolerated at doses that achieved substantial receptor blockade;

● Ciforadenant has shown evidence of anti-tumor activity as a monotherapy and in combination with atezolizumab;

● Of cancers studied, RCC, mCRPC and NSCLC have appeared most responsive to therapy;

● Identification of a gene expression signature, known as the adenosine gene signature, that enhances selection of patients we believe are most likely to benefit from therapy and may be a useful biomarker for selection of patients in future clinical trials.

At the June 2020 American Society of Clinical Oncology (ASCO) annual virtual meeting, we presented updated interim data from our clinical trials with ciforadenant and atezolizumab in RCC.

The data reported in 51 patients showed an objective response rate of 17% by RECIST criteria in the adenosine signature positive patients (n=31) and 0% ORR in the adenosine signature negative group (n=20).

We also reported on the use of a simpler, modified biomarker based on immunohistochemistry staining of tumor tissue with anti-CD68.

In 53 patients tested, the ORR was 26.7% in CD68 positive patients (4 of 15) and 3% in CD68 negative patients (1 of 38).

We expect to meet with the FDA in December 2020 to discuss the study design and plans for a ciforadenant pivotal study in advanced refractory RCC using the adenosine gene signature as a biomarker.

The issued U.S.

patents that we in-licensed from Vernalis for ciforadenant are directed to the composition of matter of ciforadenant and its method of use for treating disorders treatable by purine receptor blocking.

The composition of matter patent covering ciforadenant is expected to expire in the United States in July 2029, excluding any patent term extension that may be available.

We hold an exclusive, worldwide license under these patent rights and related know-how, including a limited right to grant sublicenses, for all fields of use, to develop, manufacture and commercialize products containing certain adenosine receptor antagonists, including ciforadenant (other than in greater China).

We have also filed patent applications covering the use of ciforadenant in combination with other checkpoint inhibitors, and the use of various biomarkers to select and monitor patients receiving therapy.

CPI-006, Immunomodulatory Anti-CD73 Antibody and B-Cell Activator.

Our second clinical product candidate, CPI-006, is an anti-CD73 monoclonal antibody that is designed to inhibit the production of adenosine and has demonstrated immunomodulatory activity, which we in-licensed from Scripps in December 2014.

CPI-006 was developed into a humanized anti-CD73 monoclonal antibody from a mouse hybridoma clone expressing an anti-human CD73 antibody.

We have further modified CPI-006 to improve binding to CD73 and maximize its inhibition of catalytic activity.

CD73 is an ectonucleotidase often found on lymphocytes, tumors and other tissues and is believed to play an important role in tumor immune suppression by catalyzing the production of extracellular adenosine.

In preclinical in vitro studies, our humanized monoclonal anti-CD73 antibody has been shown to inhibit the catalytic activity of CD73, resulting in the blocking of extracellular adenosine production by tumor cells, which we believe could stimulate or enhance immune response to tumors.

In addition to its role in the production of adenosine, CD73 also functions as an immunomodulatory receptor present on B-cells, T-cells and certain myeloid cells.

In February 2018, we initiated a Phase 1/1b clinical trial with CPI-006 administered alone and in combination with ciforadenant and in combination with pembrolizumab.

In addition, we recently added a treatment arm to the study to evaluate the triplet combination of CPI-006, ciforadenant and pembrolizumab.

As of June 2020, we had completed enrollment in three dose escalation arms of the trial and continue to enroll in the triplet combination dose escalation arm.

Over 90 cancer patients had been treated with CPI-006 in the Phase 1/1b clinical trial, with dosing as high as 24 mg/kg every three weeks.

The key findings from this clinical trial have included the observation that CPI-006 has been well-tolerated and evidence of B-cell activation and lymphocyte trafficking was observed in patients that received single doses as low as 1 mg/kg.

Treatment with CPI-006 has also been associated with increases in memory B-cells, the emergence of new B-cell clones and, in some patients, the production of novel anti-tumor antibodies.

We plan to present updated clinical data from the Phase 1/1b clinical trial in late 2020.

CPI-006 COVID-19 Phase 1 Clinical Trial Update

In June 2020, we initiated a Phase 1 clinical trial to investigate CPI-006 as a novel immunotherapy approach for the treatment of patients with COVID-19 based on CPI-006’s potential immunomodulatory effects.

In prior clinical trials, administration of CPI-006 led to increased levels of memory B-cells, which are the cells responsible for long-term immunity.

We believe that the similar production of antibodies and memory cells to pathogens such as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes COVID-19, may provide clinical benefits for patients, including potentially shortened recovery time and improved protective immunity based on pre-clinical studies and early Phase 1 clinical results.

The open-label, Phase 1 clinical trial is expected to enroll up to 30 hospitalized COVID-19 patients with mild to moderate symptoms.

Patients will receive a single dose of CPI-006, with levels of 0.3, 1.0, 3.0 and 5.0 mg/kg, escalating in four cohorts as the study progresses.

Patients will receive medications, therapies, and interventions per standard treatment protocols for COVID-19 for the duration of the study.

The primary efficacy endpoint is the change in serum immunoglobulin (IgM and IgG) anti-SARS-CoV-2 levels compared to baseline at day 28.

The study also will examine safety and other clinical endpoints, including time to resolution of symptoms and duration of hospitalization.

We initially reported data from the Phase 1 clinical trial in September 2020.

On October 5, 2020, we announced updated data, which includes a longer, 56-day follow-up results from the first two cohorts (0.3 mg/kg and 1.0 mg/kg dose) and initial results from the third cohort (3.0 mg/kg).

In the 56-day follow-up, the results show a dose-response with higher and more prolonged titers in the 1.0 mg/kg cohort compared to the 0.3 mg/kg cohort.

In addition, the results show increased levels of memory B cells and memory T cells, and there are no reports of any drug-related safety issues in all 15 patients treated so far.

To-date, the first three cohorts of the study have been enrolled and the final cohort is currently enrolling patients.

This includes a new study site, El Centro Regional Medical Center in El Centro, CA, which is affiliated with the University of California, San Diego Health Care Network and serves Imperial and Riverside counties in southern California.

We continue to anticipate that we will complete the study and report results during the fourth quarter of 2020, including a presentation of data at the Society for Immunotherapy of Cancer (SITC) annual meeting in November.

Based on these data, and assuming the remainder of the data in the study supports it, we plan to initiate a pivotal, randomized, double blind study in hospitalized COVID-19 patients before year-end.

In the first three cohorts of the study, the median age of the patients was 63 years (range 26-76 years) and 12 of 15 patients were minorities at higher risk for COVID-19 disease complications (7 African American and 5 Latino).

All of the patients had comorbidities that increased their COVID-19 risk including diabetes, hypertension, obesity, chronic lung disease and/or cancer.

The median duration of symptoms prior to treatment with CPI-006 was five days (range 1-21 days).

The key highlights from these 15 patients, beyond the data already reported from the first 10 patients, include:

● 14 of 14 patients with pre-treatment serum samples available had low pre-treatment levels of anti-SARS-CoV-2 antibodies independent of the duration of their prior COVID-19 symptoms.

● IgG and IgM antibody titers against the SARS-CoV-2 trimeric spike and/or receptor binding domain (“RBD”) increased in all evaluable patients within 7 days of a single infusion of CPI-006.

As previously reported, one patient did not have a pre-treatment serum sample available but had a sample collected one day after receiving CPI-006 and this sample exhibited a high titer, which continued to increase as of September 28, 2020.

● In 11 of 11 patients with serum samples available to be tested, the combined IgG and IgM antibody responses continued to increase out to 28 days post treatment with CPI-006 as of September 28, 2020, in-line with the prior study data.

● In three of three patients tested, memory B cells, and memory CD4 and CD8 T effector memory cells, increased at 28 days post-treatment, and for one of such patients memory B cells increased from 1.8% to 7.9% of B cells at 56 days post-treatment.

● As of September 28, 2020, 14 of 15 patients were discharged from the hospital with clinical improvement after a median of 4.5 days.

One patient remains in the hospital with improvement of symptoms.

● There have been no drug-related toxicity or safety issues reported.

The 28-day and 56-day anti-SARS-CoV-2 antibody data for patients receiving 0.3 mg/kg (cohort 1) and 1.0 mg/kg (cohort 2) doses showed a dose-response with higher and more prolonged titers observed in the 1.0 mg/kg cohort compared to the 0.3 mg/kg cohort as reflected in the figures below.

In particular:

● IgG and IgM titers to trimeric spike and receptor binding domain (RBD) of SARS-CoV-2 were measured and compared to convalescent serum obtained from recovered COVID-19 patients.

● Geometric mean titers (and range) were evaluated and revealed robust response at 28 days for both cohorts with higher and more sustained levels at day 56 seen in the 1.0 mg cohort.

For example, day 56 IgG to spike protein titer was 49,519 as compated to 204,800 in patients receiving 0.3 and 1.0 mg/kg, respectively.

Day 56 titers to RBD were 37,286 as compared to 144,815 in patients receiving 0.3 and 1.0 mg/kg, respectively.

● Sustained and high IgM titers were also observed and exhibited a similar dose-response.

Anti-SARS-CoV-2 antibody response (IgG and IgM) to spike protein and RBD of SARS-CoV-2.

Patients receive 0.3 or 1.0 mg/kg single dose of CPI-006 and antibody titers measured at pre-treatment and at Days 28 and 56.

Data are shown as box and whisker plot with geometric mean and interquartile ranges

We believe the totality of the data from the Phase 1 clinical continues to support the potential of CPI-006 as a treatment for COVID-19.

CPI-006, when administered at very low doses, has demonstrated a boost in antibody responses to the SARS-CoV-2 virus.

The responses have been long-lived and the data reflects a clear dose response relationship with 1.0 mg/kg having produced higher and more prolonged titers than 0.3 mg/kg;

especially of IgM.

CPI-818, ITK Inhibitor.

Our third clinical product candidate, CPI-818, is a selective, covalent inhibitor of ITK.

ITK, an enzyme that functions in T-cell signaling and differentiation, is expressed predominantly in T-cells, which are lymphocytes that play a vital role in immune responses.

One of the key survival mechanisms of tumors is believed to be the reprogramming of T-cells to create an inflammatory environment that inhibits anti-tumor immune response and favors tumor growth.

We believe highly selective inhibitors of this enzyme will facilitate induction of T-cell anti-tumor immunity and also may be useful in the treatment of T-cell lymphomas.

CPI-818 is orally bioavailable and has been

shown to achieve cellular occupancy of the target in vivo in various animal models.

Pre-clinical studies have demonstrated that CPI-818 was well-tolerated in vivo and resulted in inhibition of T-cell activation.

In March of 2019, we initiated a Phase 1/1b study of CPI-818 in patients with advanced refractory T-cell lymphomas.

Early interim results from the dose-escalation portion of the study were presented in December 2019 at the American Society of Hematology (ASH) meeting and in February 2020 at the 12 th Annual T-cell Lymphoma Forum, showing that, CPI-818 was well-tolerated and achieved substantial ITK target occupancy, one of the goals of the study.

We have completed enrollment in the dose escalation portion (N=16) of our Phase 1/1b clinical trial, which included patients with several types of advanced, refractory T-cell lymphomas.

Based on results from this portion of the study, including a confirmed complete response in one patient with peripheral T-cell lymphoma (PTCL) who previously failed chemotherapy and high dose chemotherapy with autologous bone marrow transplantation, we selected the optimum dose and began the next portion of the study with a focus on patients with PTCL and cutaneous T-cell lymphoma (CTCL).

We recently announced a second patient with PTCL who achieved a partial response.

Seven patients with PTCL have been treated on the trial.

We are continuing to enroll PTCL and cutaneous t-cell lymphoma (CTCL) patients in our trial.

We plan to present updated clinical data from the CPI-818 Phase 1/1b clinical trial at the American Society of Hematology (ASH) annual meeting in December 2020.

We have filed patent applications covering composition of matter and uses of our ITK inhibitors and hold exclusive worldwide rights for all indications (other than in greater China).

CPI-182, Anti-CXCR2 Antibody designed to block Myeloid Suppression.

In 2017, we in-licensed this monoclonal antibody designed to block CXCR2, a novel target expressed on myeloid derived suppressor cells (“MDSC”).

Preclinical studies have demonstrated that this antibody blocked MDSCs and also may have reacted with CXCR2 present on certain cancers such as acute myeloid leukemia cells and other cancers.

We had begun IND-enabling studies and scale-up manufacturing for this product candidate but paused this work in mid-March 2020 as a result of the COVID-19 pandemic.

CPI-935, Adenosine A2B Receptor Antagonist.

Adenosine A2B receptors have been found to play an important role in the immune response to tumors as well as in inflammation and fibrosis.

Similar to adenosine A2A receptors, adenosine binds to adenosine A2B receptors, which leads to immunosuppression.

Preclinical models have shown that inhibition of A2B receptors prevents fibrosis.

In 2018, we selected a development candidate for this program, a small molecule antagonist of the A2B receptor.

Significant Accounting Policies

Our significant accounting policies are described in Note 2 to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K.

There have been no material changes to our significant accounting policies during the nine months ended September 30, 2020.

There have been no material changes to our significant accounting policies during the three months ended March 31, 2021.

Components of Results of Operations

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Our current planned research and development activities include the following:

● enrollment and completion of our Phase 1/1b clinical trial and amended Phase 1b/2 clinical trial of ciforadenant;

● enrollment and completion of our Phase 1/1b clinical trial of CPI-006 in cancer patients;

● enrollment of COVID-19 patients in our ongoing Phase 1 trial of CPI-006;

● initiate a pivotal clinical trial of CPI-006 in hospitalized COVID-19 patients;

● enrollment and completion of our Phase 1/1b clinical trial of CPI-818;

● process development and manufacturing of drug supply of ciforadenant, CPI-006 and CPI-818;

● enrollment and completion of our Phase 3 clinical trial of CPI-006 in hospitalized COVID-19 patients;

● completion of our Phase 1/1b clinical trial and amended Phase 1b/2 clinical trial of ciforadenant;

● completion of our ongoing Phase 1/1b clinical trial of CPI-006 in cancer patients;

● enrollment and completion of our ongoing Phase 1/1b clinical trial of CPI-818;

● process development and manufacturing of drug supply of CPI-006, CPI-818 and ciforadenant;

● preclinical studies under our other programs in order to select development product candidates.

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Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

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Interest income and other expense, net

Loss from equity method investment

Research and Development Expense

Research and development expenses for the three and nine months ended September 30, 2020 and 2019 consisted of the following costs by program (specific program costs consist solely of external costs):

Research and development expenses for the three months ended March 31, 2021 and 2020 consisted of the following costs by program (specific program costs consist solely of external costs):

Three Months Ended

Nine Months Ended

September 30,

Ciforadenant (formerly CPI-444)

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Unallocated employee and overhead costs

For the three months ended September 30, 2020, the decrease in ciforadenant costs of $0.1 million as compared to the three months ended September 30, 2019, primarily consisted of a decrease of $0.1 million in clinical trial expenses and a decrease of $0.1 million in other outside service costs, partially offset by an increase of $0.1 million in drug manufacturing costs.

For the nine months ended September 30, 2020, the decrease in ciforadenant costs of $1.1 million as compared to the nine months ended September 30, 2019, primarily consisted of a decrease of $0.7 million in clinical trial expenses, a decrease of $0.2 million in drug manufacturing costs and a decrease of $0.2 million in other outside services.

For the three months ended September 30, 2020, the negligible decrease in CPI-006 costs as compared to the three months ended September 30, 2019, primarily consisted of an increase of $0.1 million in outside services, offset by a decrease of $0.1 million in drug manufacturing costs.

For the nine months ended September 30, 2020, the increase in CPI-006 costs of $1.1 million as compared to the nine months ended September 30, 2019, primarily consisted of an increase of $2.4 million in clinical trial expenses and an increase of $0.3 million in other outside services, partially offset by a decrease of $1.6 million in drug manufacturing costs.

For the three months ended September 30, 2020, the decrease in CPI-818 costs of $1.2 million as compared to the three months ended September 30, 2019, primarily consisted of a decrease of $0.8 million in drug manufacturing costs and a decrease of $0.3 million in other outside services.

For the nine months ended September 30, 2020, the decrease in CPI-818 costs of $2.7 million as compared to the nine months ended September 30, 2019, primarily consisted of a decrease of $2.2 million in drug manufacturing costs and a decrease of $0.6 million in other outside services, partially offset by an increase of $0.1 million in clinical trial expenses.

For the three months ended September 30, 2020, the decrease in other program costs of $0.4 million as compared to the three months ended September 30, 2019, primarily consisted of a decrease of $0.3 million in outside services and a decrease of $0.1 million in drug manufacturing costs.

For the nine months ended September 30, 2020, the decrease in other program costs of $0.2 million as compared to the nine months ended September 30, 2019, primarily consisted of a decrease of $0.7 million in outside services, partially offset by an increase of $0.5 million in drug manufacturing costs.

For the three months ended September 30, 2020, the decrease in unallocated costs of $0.7 million as compared to the three months ended September 30, 2019, primarily consisted of a decrease of $0.5 million in personnel and related costs and a decrease of $0.2 million in other outside services.

For the nine months ended September 30, 2020, the decrease in unallocated costs of $1.5 million as compared to the nine months ended September 30, 2019, primarily consisted of a decrease of $1.1 million in outside services and a decrease of $0.4 million in personnel and related costs.

For the three months ended March 31, 2021, the decrease in ciforadenant costs of $0.8 million as compared to the three months ended March 31, 2020, primarily consisted of a decrease of $0.7 million in clinical trial expenses and a decrease of $0.1 million in other outside service costs.

For the three months ended March 31, 2021, the increase in CPI-006 costs of $1.3 million as compared to the three months ended March 31, 2020, primarily consisted of an increase of $1.0 million in clinical trial expenses and an increase of $0.4 million in licensing expense associated with the initiation of the Company’s COVID-19 Phase 3 clinical trial, partially offset by a decrease of $0.1 million in other outside service costs.

For the three months ended March 31, 2021, the decrease in CPI-818 costs of $0.8 million as compared to the three months ended March 31, 2020, primarily consisted of a decrease of $0.4 million in clinical trial expenses, a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.1 million in other outside service costs.

For the three months ended March 31, 2021, the decrease in other program costs of $0.6 million as compared to the three months ended March 31, 2020, primarily consisted of a decrease in drug manufacturing costs.

For the three months ended March 31, 2021, the decrease in unallocated costs of $1.0 million as compared to the three months ended March 31, 2020, primarily consisted of a decrease of $0.7 million in personnel and related costs and a decrease of $0.3 million in other outside service costs.

General and Administrative Expense

For the three months ended September 30, 2020, the increase in general and administrative expenses of $0.7 million as compared to the three months ended September 30, 2019, primarily consisted of an increase of $1.0 million in professional service costs, partially offset by a $0.3 million decrease in stock-based compensation expense.

For the nine months ended September 30, 2020, the increase of $0.9 million in general and administrative expenses as compared to the nine months ended September 30, 2019, primarily consisted of an increase of $1.6 million in professional service costs and an increase of $0.2 million in personnel costs, partially offset by a decrease of $0.9 million in stock-based compensation expense.

For the three months ended March 31, 2021, the increase in general and administrative expenses of $0.1 million as compared to the three months ended March 31, 2020, primarily consisted of an increase in professional service costs.

Interest Income and Other Expense, net

For the three months ended September 30, 2020, the decrease in interest income and other expense, net of $0.5 million as compared to the three months ended September 30, 2019, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities and a decrease in interest rates.

For the nine months ended September 30, 2020, the decrease in interest income and other expense, net of $1.3 million as compared to the nine months ended September 30, 2019, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities and a decrease in interest rates.

For the three months ended March 31, 2021, the decrease in interest income and other expense, net of $0.3 million as compared to the three months ended March 31, 2020, primarily consisted of a decrease in interest income earned due to a decrease in interest rates.

Loss from equity method investment

For the three months ended March 31, 2021, the loss from equity method investment of $0.1 million represents our share of the Angel Pharmaceutical’s loss for the period.

Liquidity and Capital Resources

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $51.4 million, and an accumulated deficit of $250.5 million, compared to cash and cash equivalents and marketable securities of $78.0 million and an accumulated deficit of $217.1 million as of December 31, 2019.

As of March 31, 2021, we had cash, cash equivalents and marketable securities of $68.0 million, and an accumulated deficit of $234.7 million, compared to cash and cash equivalents and marketable securities of $44.3 million and an accumulated deficit of $223.1 million as of December 31, 2020.

We have financed our operations primarily through private placements of convertible preferred stock and the sale of common stock.

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We received aggregate net proceeds of approximately $64.9 million, after underwriting discounts, commissions and offering expenses.

In March 2020, we entered into the Sales Agreement with Jefferies to sell shares of our common stock, from time to time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jefferies will act as its sales agent.

As of September 30, 2020, we had received no proceeds from the sale of shares of common stock pursuant to the Sales Agreement.

We believe our current cash, cash equivalents and marketable securities will be sufficient to fund our planned expenditures and meet our obligations through at least the next twelve months from the issuance of our financial statements as of and for the three and nine months ended September 30, 2020.

We received aggregate net proceeds of approximately $32.0 million, net of underwriting discounts and commissions and offering expenses.

In March 2020, we entered into a Sales Agreement with Jefferies LLC to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $50,000,000, through an at the market equity offering program under which Jefferies acts as our sales agent.

Jefferies is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreement.

During the three months ended March 31, 2021, we received net proceeds of approximately $0.6 million from the sale of 153,257 shares of our common stock pursuant to the Sales Agreement.

As of March 31, 2021, $48.1 million remained for sale under the Sales Agreement.

The amounts and timing of our actual expenditures depend on numerous factors, including:

● the progress, timing, costs and results of clinical trials for ciforadenant, CPI-006 and CPI-818;

● the progress, timing, costs and results of clinical trials for CPI-006, CPI-818 and ciforadenant;

● the extent to which the COVID-19 coronavirus may impact our business, including our clinical trials and financial condition;

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The sale of additional equity would result in dilution to our stockholders.

The incurrence of debt financing would result in debt service

obligations and the governing documents would likely include operating and financing covenants that would restrict our operations.

The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations.

In addition, sufficient additional funding may not be available on acceptable terms, or at all.

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The following table summarizes our cash flows for the periods indicated (in thousands):

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used in):

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Financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash Flows from Operating Activities

Cash used in operating activities during the nine months ended September 30, 2020 was $26.6 million, which primarily consisted of a net loss of $33.3 million, adjusted by non-cash charges of $5.0 million, primarily consisting of $4.5 million of stock compensation expense, an increase of $1.6 million in accounts payable and accrued and other current liabilities, and a decrease in prepaid and other current assets of $0.2 million.

Cash used in operating activities during the nine months ended September 30, 2019 was $28.8 million, which primarily consisted of a net loss of $35.6 million, adjusted by non-cash charges of $5.6 million, primarily consisting of stock compensation expense, and an increase of $1.8 million in accounts payable and accrued and other current liabilities, partially offset by an increase in prepaid and other current assets of $0.4 million.

Cash used in operating activities during the three months ended March 31, 2021 was $8.8 million, which primarily consisted of a net loss of $11.6 million, adjusted by non-cash charges of $1.6 million, primarily consisting of

$1.2 million of stock compensation expense, an increase of $1.7 million in accounts payable and accrued and other current liabilities, a decrease in prepaid and other current assets of $0.2 million, and an increase in other assets of $0.7 million.

Cash used in operating activities during the three months ended March 31, 2020 was $9.4 million, which primarily consisted of a net loss of $12.9 million, adjusted by non-cash charges of $2.0 million, primarily consisting of $1.8 million of stock compensation expense, a decrease in prepaid and other current assets of $0.2 million, and an increase of $1.4 million in accounts payable and accrued and other current liabilities.

Cash Flows from Investing Activities

During the nine months ended September 30, 2020, cash provided in investing activities was $44.3 million, which consisted of proceeds from maturities of marketable securities of $78.8 million and proceeds from sales of marketable securities of $1.0 million, partially offset by purchases of marketable securities of $35.5 million.

During the nine months ended September 30, 2019, cash used in investing activities was $1.3 million, which consisted of purchases of marketable securities of $114.9 million, partially offset by proceeds from maturities of marketable securities of $113.6 million.

During the three months ended March 31, 2021, cash provided in investing activities was $4.8 million, which consisted of proceeds from maturities of marketable securities of $8.2 million, partially offset by purchases of marketable securities of $3.3 million.

During the three months ended March 31, 2020, cash provided in investing activities was $27.7 million, which consisted of proceeds from maturities of marketable securities of $38.1 million and proceeds from sales of marketable securities of $1.0 million, partially offset by purchases of marketable securities of $11.4 million.

Cash Flows from Financing Activities

During the nine months ended September 30, 2020, cash provided by financing activities was $0.1 million, which consisted of proceeds from the exercise of stock options.

During the nine months ended September 30, 2019, cash provided by financing activities was negligible.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

During the three months ended March 31, 2021, cash provided by financing activities was $32.6 million, which consisted of $32.0 million in net proceeds from our February 2021 follow-on public offering and $0.6 million in net proceeds from the issuance of common stock through our at-the-market offering program,

During the three months ended March 31, 2020, cash provided by financing activities was negligible.

Contractual Obligations

There have been no material changes outside the ordinary course of our business to our contractual obligations during the nine months ended September 30, 2020, as compared to those disclosed in our Annual Report on Form 10-K.

There have been no material changes outside the ordinary course of our business to our contractual obligations during the three months ended March 31, 2021, as compared to those disclosed in our Annual Report on Form 10-K.

JOBS Act Accounting Election

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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-Q

Item 2. Management’s Discussion and Analysis