What changed in this filing

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Item 1. Financial Statements

2021-08-02 compared with 2021-04-29 · 87 added, 64 removed, 393 unchanged (28% of the section changed)

39 unchanged sentences

$ 0.0001 par value;

10,000,000 shares authorized at March 31, 2021 and December 31, 2020;

0 shares issued and outstanding at March 31, 2021 and December 31, 2020

10,000,000 shares authorized at June 30, 2021 and December 31, 2020;

0 shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock:

$ 0.0001 par value;

290,000,000 shares authorized at March 31, 2021 and December 31, 2020;

38,309,551 and 28,372,634 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

290,000,000 shares authorized at June 30, 2021 and December 31, 2020;

42,421,159 and 28,372,634 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Operating expenses:

9 unchanged sentences

Unrealized gain (loss) on marketable securities

Cumulative foreign currency translation adjustment

Comprehensive loss

3 unchanged sentences

(in thousands, except share data)

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Comprehensive

6 unchanged sentences

Balance at March 31, 2021

Three Months Ended March 31, 2020

Stock-based compensation expense

Unrealized gain on marketable securities

Foreign currency translation adjustment

Issuance of common stock in connection with at-the-market offering, net

Balance at June 30, 2021

Six Months Ended June 30, 2020

Comprehensive

4 unchanged sentences

Balance at March 31, 2020

Common stock issued on exercise of stock options

Stock-based compensation expense

Unrealized gain on marketable securities

Balance at June 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

17 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of common stock, net (includes $ 4,850 in aggregate gross proceeds from related parties for the three months ended March 31, 2021)

Proceeds from issuance of common stock, net (includes $ 4,850 in aggregate gross proceeds from related parties for the six months ended June 30, 2021)

Proceeds from issuance of common stock in connection with at-the-market offering, net

Proceeds from exercise of common stock options

Net cash provided by financing activities

26 unchanged sentences

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations.

Since commencing operations in 2014, the majority of the Company’s efforts have been focused on the research and development of CPI-006, CPI-818 and ciforadenant.

The Company believes that it will continue to expend substantial resources for the foreseeable future as it continues clinical development of, seek regulatory approval for and, if approved, prepare for the commercialization of CPI-006, CPI-818 and ciforadenant, as well as product candidates under the Company’s other development programs.

These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, obtaining regulatory approvals, manufacturing and

supply, sales and marketing and general operations.

Since commencing operations in 2014, the majority of the Company’s efforts have been focused on the research and development of mupadolimab (formerly CPI-006), CPI-818 and ciforadenant.

The Company believes that it will continue to expend substantial resources for the foreseeable future as it continues clinical development of, seek regulatory approval for and, if approved, prepare for the commercialization of mupadolimab, CPI-818 and ciforadenant, as well as product candidates under the Company’s other development programs.

These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, obtaining regulatory

approvals, manufacturing and supply, sales and marketing and general operations.

In addition, other unanticipated costs may arise.

Because the outcome of any clinical trial and/or regulatory approval process is highly uncertain, the Company may not be able to accurately estimate the actual amounts necessary to successfully complete the development, regulatory approval process and commercialization of CPI-006, CPI-818, and ciforadenant or any other product candidates.

The Company does not expect its existing capital resources to be sufficient to enable it to fund the completion of its clinical trials and remaining development program of CPI-006, CPI-818 and ciforadenant through commercialization.

Because the outcome of any clinical trial and/or regulatory approval process is highly uncertain, the Company may not be able to accurately estimate the actual amounts necessary to successfully complete the development, regulatory approval process and commercialization of mupadolimab, CPI-818, and ciforadenant or any other product candidates.

The Company does not expect its existing capital resources to be sufficient to enable it to fund the completion of its clinical trials and remaining development program of mupadolimab, CPI-818 and ciforadenant through commercialization.

In addition, its operating plan may change as a result of many factors, including those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 25, 2021.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 234.7 million as of March 31, 2021.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 246.5 million as of June 30, 2021.

The Company has historically financed its operations primarily through the sale of redeemable convertible preferred stock and common stock.

1 unchanged sentence

Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of March 31, 2021, the Company had cash, cash equivalents and short-term marketable securities of $ 68.0 million.

As of June 30, 2021, the Company had cash, cash equivalents and short-term marketable securities of $ 66.5 million.

Management believes that the Company’s current cash, cash equivalents and short-term marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements.

1 unchanged sentence

The extent to which COVID-19 impacts the Company’s business, including its clinical trials and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

As COVID-19 continues to spread around the globe, we will likely experience disruptions, including delays or difficulties in enrolling patients in our clinical trials, delays or difficulties in clinical site initiation, interruption of key clinical trial activities, delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials and delays in necessary interactions with local regulatory authorities.

As COVID-19 continues to spread around the globe, including the spread of more contagious and virulent variants, we will likely experience disruptions, including delays or difficulties in enrolling patients in our clinical trials, delays or difficulties in clinical site initiation, interruption of key clinical trial activities, delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials and delays in necessary interactions with local regulatory authorities.

COVID-19 may also impact the Company’s ability to raise additional capital on a timely basis or at all, which could negatively impact short-term and long-term liquidity.

4 unchanged sentences

In accordance with Accounting Standards Codification Topic 505, Equity, and Accounting Research Bulletin 43, the Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and elected to record the excess over par value as a debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date.

The Exchange Warrants are classified as equity in accordance with Accounting Standards Codification Topic 480, Distinguishing Liabilities from Equity, and Accounting Standards Codification Topic 815, Derivatives and Hedging, and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and is not subject to remeasurement.

The Company determined that

the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants.

As of March 31, 2021, none of the Exchange Warrants have been exercised.

was recorded as a credit to additional paid-in capital and is not subject to remeasurement.

The Company determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants.

As of June 30, 2021, none of the Exchange Warrants have been exercised.

Summary of Significant Accounting Policies

2 unchanged sentences

The Company’s functional and reporting currency is the U.S.

dollar, except for its investment in its equity method investee which is the Chinese yuan.

dollar, except for its investment in its equity method investee which is the Chinese renminbi (RMB).

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business.

Since its inception, the Company has incurred significant losses and negative cash flows from operations.

As of March 31, 2021, the Company had an accumulated deficit of $ 234.7 million and cash, cash equivalents and marketable securities of $ 68.0 million.

As of June 30, 2021, the Company had an accumulated deficit of $ 246.5 million and cash, cash equivalents and marketable securities of $ 66.5 million.

The Company has financed its operations primarily with the proceeds from the sale of stock.

4 unchanged sentences

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

The condensed consolidated results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The condensed consolidated results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2021.

3 unchanged sentences

Actual results could differ from such estimates.

Foreign Currency Translation

Angel Pharmaceutical’s functional currency is the Chinese renminbi (RMB).

Angel’s financial statements are reported in RMB.

Financial information is translated from RMB to the U.S.

dollar (the reporting currency) for inclusion in our consolidated financial statements.

Income, expenses and cash flows are translated at average exchange rates prevailing during the fiscal period, assets and liabilities are translated at fiscal period-end exchange rates, and stockholders’ equity is held at historical rates.

Resulting translation adjustments are included as a component of accumulated other comprehensive income in stockholders' equity.

Out of Period Adjustment

In the three months ended June 30, 2021, the Company recorded a cumulative translation adjustment that affected the Company’s balance sheet at June 30, 2021 by increasing its investment in Angel Pharmaceuticals and accumulated other comprehensive income in the equity section of the balance sheet by $ 1.4 million.

$ 0.9 million of this amount was an out of period adjustment related to the year ended December 31, 2020.

The impact of the out of period adjustment in the quarter ended March 31, 2021 was to reduce its investment in Angel Pharmaceuticals and other comprehensive income by $ 83,000 .

The Company has concluded that the out of period adjustment is not material to the consolidated financial statements for the fiscal year ended December 31, 2020 or the interim financial statements for the quarter ended March 31, 2021.

Concentrations of Credit Risk and Other Risks and Uncertainties

7 unchanged sentences

The Company has not experienced any losses on its deposits of cash, cash equivalents or marketable securities.

product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, and protection of proprietary technology.

The Company is subject to a number of risks similar to other early stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain marketing approval for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, and protection of proprietary technology.

If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

3 unchanged sentences

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

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

There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2021.

Recent Accounting Pronouncements

9 unchanged sentences

Three Months Ended

Six Months Ended

Net loss - basic and diluted

1 unchanged sentence

Net loss per share, basic and diluted

Weighted average common shares outstanding for the three months ended March 31, 2021 and 2020 include 1,458,000 shares of common stock issuable on the conversion of pre-funded warrants described in Note 1.

Weighted average common shares outstanding for the three and six months ended June 30, 2021 and 2020 include 1,458,000 shares of common stock issuable on the conversion of pre-funded warrants described in Note 1.

The amounts in the table below were excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect:

Three Months Ended

Six Months Ended

Outstanding options

Total shares of common stock equivalents

Fair Value Measurements

11 unchanged sentences

These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs.

The following tables present information as of March 31, 2021 and December 31, 2020 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

March 31, 2021

The following tables present information as of June 30, 2021 and December 31, 2020 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

June 30, 2021

Fair Value Measured Using

5 unchanged sentences

Marketable securities

As of March 31, 2021, marketable securities had a maximum remaining maturity of eight months .

As of March 31, 2021 and December 31, 2020, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

March 31, 2021

As of June 30, 2021, marketable securities had a maximum remaining maturity of ten months .

As of June 30, 2021 and December 31, 2020, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

June 30, 2021

Treasury securities

4 unchanged sentences

Equity Method Investment

As of March 31, 2021 and December 31, 2020, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

The Company recognized its share of losses in Angel for the total amount of $ 0.1 million as loss from equity method investment on the consolidated statement of operations for the three months ended March 31, 2021.

The Company’s maximum exposure to losses from its investment in Angel is to the extent of the carrying value of its investment since the Company is not obligated to provide additional financial support.

At March 31, 2021 the Company reviewed its investment in Angel for impairment by determining whether events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.

In making this judgment, the Company considered available quantitative and qualitative evidence in evaluating potential impairment of these investments.

The Company determined that the carrying value of the investment did not exceed its fair value and, therefore, there are no indicators that its investment in Angel is impaired.

As of June 30, 2021 and December 31, 2020, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

The Company recognized its share of losses in Angel for the total amount of $ 0.5 million and $ 0.6 million as loss from equity method investment on the consolidated statement of operations for the three and six months ended June 30, 2021, respectively.

Summary Financial Information

1 unchanged sentence

Balance Sheet Data (unaudited)

March 31, 2021

June 30, 2021

December 31, 2020

5 unchanged sentences

Three Months Ended

Six Months Ended

Statement of Operations Data (unaudited)

March 31, 2021

March 31, 2020

(In thousands)

2 unchanged sentences

Scripps Licensing Agreement

In December 2014, the Company entered into a license agreement with The Scripps Research Institute (“Scripps”), pursuant to which it was granted a non-exclusive, world-wide license for all fields of use under Scripps’ rights in certain know-how and technology related to a mouse hybridoma clone expressing an anti-human CD73 antibody, and to progeny, mutants or unmodified derivatives of such hybridoma and any antibodies expressed by such hybridoma, from which we developed CPI-006.

Scripps also granted the Company the right to grant sublicenses in conjunction with other proprietary rights the Company holds, or to others collaborating with or performing services for the Company.

4 unchanged sentences

The Company is also required to make performance-based cash payments upon successful completion of clinical and sales milestones.

As of March 31, 2021, the Company recorded a liability of $ 0.1 million for a clinical milestone associated with the initiation of the Company’s COVID-19 Phase 3 clinical trial.

The aggregate potential milestone payments are $ 2.5 million.

The Company is also required to pay royalties on net sales of licensed products (including CPI-006) sold by it, its affiliates and its sublicensees at a rate in the low-single digits.

The Company is also required to pay royalties on net sales of licensed products (including mupadolimab) sold by it, its affiliates and its sublicensees at a rate in the low-single digits.

In addition, should the Company sublicense the rights licensed under the agreement, it has agreed to pay a percentage of sublicense revenue received at specified rates that start at double digit percentages and decrease to single digit percentages based on the elapsed time from the effective date of the agreement and the time of entry into such sublicense.

2 unchanged sentences

In addition, Scripps may terminate the license on a product-by-product basis, or the entire agreement, if the Company fails to meet specified diligence obligations related to the development and commercialization of licensed products.

Scripps may also terminate the agreement after the third anniversary of the effective date of the agreement if it reasonably believes, based on reports the Company provides to Scripps, that the Company has not used commercially reasonable efforts as required under the agreement, subject to a specified notice and cure period.

Scripps may also terminate the agreement after the third anniversary of the effective date of the agreement if it reasonably believes, based on reports the Company provides to

Scripps, that the Company has not used commercially reasonable efforts as required under the agreement, subject to a specified notice and cure period.

Vernalis Licensing Agreement

4 unchanged sentences

The aggregate potential milestone payments are approximately $ 220 million for all indications.

The Company has also agreed to pay Vernalis tiered incremental royalties based on the annual net sales of licensed products containing ciforadenant on a product-by-product and country-by-country basis, subject to certain

offsets and reductions.

The tiered royalty rates for products containing ciforadenant range from the mid-single digits up to the low-double digits on a country-by-country net sales basis.

14 unchanged sentences

The Company and Genentech each have the right to terminate the agreement for material breach by the other party.

In addition, the agreement may be terminated by either party due to safety considerations, if directed by a regulatory authority or if development of ciforadenant or Tecentriq is discontinued.

In addition, the agreement may be terminated by either party due to safety considerations, if directed by a

regulatory authority or if development of ciforadenant or Tecentriq is discontinued.

Further, the agreement will expire after a set period of time following the provision by the Company of the final clinical study report to Genentech.

32 unchanged sentences

Accrued legal and accounting

As of March 31, 2021, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

As of June 30, 2021, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

Each share of common stock is entitled to one vote.

Common stockholders are entitled to dividends if and when declared by the board of directors.

As of March 31, 2021, no dividends on common stock had been declared.

In March 2020, the Company 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 will act as its sales agent.

As of June 30, 2021, no dividends on common stock had been declared.

In March 2020, the Company 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 $ 50.0 million through an at-the-market equity offering program under which Jefferies will act as its sales agent.

The issuance and sale of shares of common stock by the Company pursuant to the Sales Agreement are deemed an “at-the-market” offering under the Securities Act of 1933, as amended.

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, the Company sold 153,257 shares under its at-the-market offering program resulting in net proceeds of $ 0.6 million.

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

During the six months ended June 30, 2021, the Company sold 4,264,865 shares under its at-the-market offering program resulting in net proceeds of $ 11.8 million.

As of June 30, 2021, $ 36.6 million remained available for sale under the Sales Agreement.

The Company has reserved shares of common stock for issuance as follows:

21 unchanged sentences

Options forfeited

Balance at March 31, 2021

Balance at June 30, 2021

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

Research and development

General and administrative

During the three months ended March 31, 2021 and 2020, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

During the three and six months ended June 30, 2021 and 2020, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

The Company continues to maintain a full valuation allowance against its net deferred tax assets.

9 unchanged sentences

Therefore, the non-lease components were not included in the right-of-use asset and liability and are reflected as an expense in the period incurred.

As of March 31, 2021 and December 31, 2020, the right-of-use asset under operating lease was $ 1.5 million and $ 1.6 million, respectively.

The elements of lease expense for the three months ended March 31, 2021 and 2020 were as follows (in thousands):

As of June 30, 2021 and December 31, 2020, the right-of-use asset under operating lease was $ 1.3 million and $ 1.6 million, respectively.

The elements of lease expense for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):

Three Months Ended

Six Months Ended

Statements of operations and

12 unchanged sentences

Discount rate

As of March 31, 2021, minimum rental commitments under this lease were as follows (in thousands):

As of June 30, 2021, minimum rental commitments under this lease were as follows (in thousands):

Year Ended December 31 (in thousands)

15 unchanged sentences

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions.

Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party

for losses suffered or incurred by the indemnified party.

Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party.

Some of the provisions will limit losses to those arising from third-party actions.

6 unchanged sentences

The Company is not a party to any material legal proceedings.

Related Party Transaction

Related Party Transactions

In February 2021, the Company completed a follow-on public offering in which the Company 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.

The aggregate net proceeds received by the Company from the offering were approximately $ 32.0 million, net of underwriting discounts and commissions and offering expenses.

The following aggregate number of shares of common stock were sold to our owners of more than 5% of our common stock, directors, or executive officers during the February 2021 underwritten public offering:

The following aggregate number of shares of common stock were sold to the Company’s owners of more than 5% of our common stock, directors, or executive officers during the February 2021 underwritten public offering:

Owners of More Than 5% of Our Common Stock

2 unchanged sentences

(1) Peter Thompson, M.D., a member of our Board of Directors since November 2014, is a Private Equity Partner at OrbiMed Advisors, LLC.

As more fully described in Note 5 to the Company’s consolidated financial statements for the year ended December 31, 2020, included in our Annual Report on Form 10-K, the Company holds a 49.7 % ownership in Angel Pharmaceuticals and, in connection with intellectual property licensing agreements between the Company and Angel Pharmaceuticals, the Company provides clinical drug supplies to Angel Pharmaceuticals for use in its clinical trials.

Third-party and internal personnel costs incurred by the Company associated with the manufacturing of these clinical supplies are billed to Angel Pharmaceuticals in the period incurred.

During the three months ended June 30, 2021, associated costs were not material.

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 1. Financial Statements