What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-10 compared with 2021-03-25 · 72 added, 92 removed, 155 unchanged (51% of the section changed)

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We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Form 10-K.

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 are a clinical stage biopharmaceutical company.

Our strategy is to focus our efforts on the development of immune modulator product candidates with the potential to treat solid cancers, T-cell lymphomas, autoimmune diseases and infectious 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 primary endpoint of the trial is the proportion of patients progressing to respiratory failure or death during the 28 days after dosing.

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

Food and Drug Administration, or FDA.

Our lead product candidate is mupadolimab (formerly CPI-006), a 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, mupadolimab has demonstrated binding to various immune cells and the enhancement of immune responses by activating B cells.

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

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 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 and allergy.

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”).

We have identified a novel biomarker that may enable us to select patients most likely to benefit from ciforadenant.

In studies presented at the American Society of Oncology (“ASCO”) meeting in 2020, patients expressing this marker in their tumor had a 17% response rate.

Activity was seen with both CPI-444 as a monotherapy and in combination with Tecentriq.

We have refined our strategy with ciforadenant and plan to collaborate with an academic consortium to evaluate ciforadenant in a first line RCC Phase 2 trial as a triplet combination with pembrolizumab and a tyrosine kinase inhibitor (“TKI”).

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.

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

Our molecularly targeted product candidates are designed to exhibit a high degree of specificity, which we believe 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.

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

Our diverse and versatile product candidates have also enabled us to address opportunities in foreign markets.

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.

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 – mupadolimab, 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 Employee Stock Ownership Plan (“ESOP”), and are entitled to designate three individuals on Angel’s five-person Board of Directors.

To date, the majority of our efforts have been focused on the research, development and advancement of mupadolimab, 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.

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As of December 31, 2021, we had an accumulated deficit of $266.4 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.

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 mupadolimab, 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 December 31, 2019, 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.

Since our inception and through December 31, 2021, we have funded our operations primarily through the sale and issuance of stock, including through our initial public offering (“IPO”) in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million and a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, in each case net of underwriting discounts and 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.

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 a open market sales agreement (the “Sales Agreement”) with Jefferies LLC (“Jeffries”) 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 Jeffries acts as our sales agent.

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

As of December 31, 2020, we had sold 310,734 shares of our common stock for net proceeds of approximately $1.2 million pursuant to the Sales Agreement.

As of December 31, 2020, $48.7 million remained for sale under the Sales Agreement.

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

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 – 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.

In March 2020, we entered into an open market sale agreement (the “2020 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.

In November 2021, we entered into another Sale Agreement (“2021 Sales Agreement”) with Jefferies to sell shares of our common stock from time-to-time, with aggregate gross sales proceeds of up to $40,000,000.

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 2020 Sales Agreement and 2021 Sales Agreement.

During the year ended December 31, 2021, we sold 6,609,605 shares under our at-the-market offering program resulting in net proceeds of $29.0 million.

As of December 31, 2021, $18.9 million remained for sale under the 2020 Sales Agreement and $40.0 million remained for sale under the 2021 Sales Agreement.

As of December 31, 2021, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $69.5 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.

While we believe that our current cash, cash equivalents and short-term marketable securities will be sufficient to fund our planned operations for at least 12 months from the date of the issuance of these financial statements, 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 mupadolimab, 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.

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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.

COVID-19 has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials.

These strains have resulted in institutions prohibiting the initiation of new clinical trials, enrollment in existing clinical trials and restricting the on-site monitoring of clinical trials.

As our oncology clinical trial enrollment goals for 2020 were largely completed in our first quarter, we have not been significantly affected by any clinical trial enrollment restrictions.

Patients in our ongoing oncology clinical trials have generally completed their scheduled visits and we have been able to collect the essential data from those visits.

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

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.

In July 2021, we started transitioning back to office work for employees not providing essential services.

For our onsite employees, we have implemented heightened health and safety measures designed to comply with applicable federal, state and local guidelines in response to the COVID-19 pandemic.

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Our current planned research and development activities include the following:

● 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 Phase 1/1b clinical trial of mupadolimab in patients with NSCLC and advanced, HPV+ head and neck cancer;

● 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;

● enrollment and completion of our Phase 2 clinical trial of mupadolimab;

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

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

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Gain on deconsolidation of Angel Pharmaceuticals

Sublease income - related party

Loss from equity method investment

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Ciforadenant (formerly CPI-444)

Mupadolimab (formerly CPI‑006)

Other programs

Unallocated employee and overhead costs

For the year ended December 31, 2021, the decrease in ciforadenant costs of $2.3 million as compared to the year ended December 31, 2020, primarily consisted of a decrease of $1.9 million in clinical trial expenses and a decrease of $0.5 million in other outside services, partially offset by an increase of $0.1 million in drug manufacturing costs.

For the year ended December 31, 2021, the increase in mupadolimab costs of $5.2 million as compared to the year ended December 31, 2020, primarily consisted of an increase of $3.1 million in clinical trial expenses, an increase of $1.8 million in drug manufacturing costs as well as an increase of $0.3 million in other outside services.

For the year ended December 31, 2021, the decrease in CPI-818 costs of $1.8 million as compared to the year ended December 31, 2020, primarily consisted of a decrease of $1.0 million in clinical trial expenses, a decrease of $0.1 million in other outside services and a decrease of $0.1 million in drug manufacturing costs.

Additionally, $0.6 million in drug manufacturing costs, which were expensed in prior years, were billed to Angel Pharmaceuticals during the year ended December 31, 2021.

For the year ended December 31, 2021, the decrease in costs related to other programs of $0.6 million as compared to the year ended December 31, 2020, primarily consisted of a decrease of $0.5 million in manufacturing costs and a decrease of $0.1 million in other outside services.

For the year ended December 31, 2021, the decrease in unallocated costs of $3.3 million as compared to the year ended December 31, 2020, primarily consisted of a decrease of $2.7 million in personnel and related costs and a decrease of $0.6 million in outside services.

For the year ended December 31, 2020, the decrease in ciforadenant costs of $2.0 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $1.5 million in clinical trial expenses, a decrease of $0.2 million in drug manufacturing costs and a decrease of $0.3 million in other outside services.

For the year ended December 31, 2020, the increase in CPI-006 costs of $2.2 million as compared to the year ended December 31, 2019, primarily consisted of an increase of $3.5 million in clinical trial expenses as well as an increase of $0.4 million in other outside services, partially offset by a decrease of $1.7 million in drug manufacturing costs.

For the year ended December 31, 2020, the increase in mupadolimab costs of $2.2 million as compared to the year ended December 31, 2019, primarily consisted of an increase of $3.5 million in clinical trial expenses as well as an increase of $0.4 million in other outside services, partially offset by a decrease of $1.7 million in drug manufacturing costs.

For the year ended December 31, 2020, the decrease in CPI-818 costs of $3.8 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $2.7 million in drug manufacturing costs, a decrease of $0.4 million in clinical trial expenses and a decrease of $0.7 million in other outside services.

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For the year ended December 31, 2020, the decrease in unallocated costs of $2.2 million as compared to the year ended December 31, 2019, primarily consisted of a decrease of $1.5 million in outside services and a decrease of $0.7 million in personnel and related costs.

For the year ended December 31, 2019, the decrease in ciforadenant costs of $4.6 million as compared to the year ended December 31, 2018, primarily consisted of a decrease of $2.8 million in drug manufacturing costs, a decrease of $1.3 million in clinical trial expenses associated with lower enrollment in accordance with our protocol amendment focusing on RCC and mCRPC patients and a decrease of $0.5 million in other outside services.

For the year ended December 31, 2019, the increase in CPI-006 costs of $0.7 million as compared to the year ended December 31, 2018, primarily consisted of an increase of $1.2 million in clinical trial expenses, partially offset by a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.2 million in other outside services.

For the year ended December 31, 2019, the increase in CPI-818 costs of $1.9 million as compared to the year ended December 31, 2018, primarily consisted of an increase of $2.2 million in clinical trial expenses, an increase of $0.6 million in drug manufacturing costs, and an increase of $0.2 million in other outside services, partially offset by a decrease of $1.1 million in IND-enabling study costs.

For the year ended December 31, 2019, the increase in costs related to other programs of $0.1 million as compared to the year ended December 31, 2018, primarily consisted of outside chemical synthesis and testing of research compounds.

For the year ended December 31, 2019, the increase in unallocated costs of $1.4 million as compared to the year ended December 31, 2018, primarily consisted of an increase in personnel and related costs.

General and Administrative Expenses

For the year ended December 31, 2020, the increase in general and administrative expenses of $1.1 million as compared to the year ended December 31, 2019, primarily consisted of an increase of $1.9 million in outside professional services, partially offset by a decrease of $0.8 million in personnel and related costs.

For the year ended December 31, 2019, the increase in general and administrative expenses of $0.2 million as compared to the year ended December 31, 2018, primarily consisted of an increase in personnel and related costs.

For the year ended December 31, 2021, the decrease in general and administrative expenses of $2.4 million as compared to the year ended December 31, 2020, primarily consisted of an increase of $1.3 million in outside professional services and an increase of $1.1 million in personnel and related costs.

For the year ended December 31, 2020, the increase in general and administrative expenses of $1.1 million as compared to the year ended December 31, 2019, primarily consisted of an increase of $1.9 million in outside professional services, which was partially offset by a decrease of $0.8 million in personnel and related costs.

Interest Income and Other Expense, net

For the year ended December 31, 2021, the decrease in interest income and other expense, net of $0.6 million as compared to the year ended December 31, 2020, primarily consisted of a decrease in interest income earned due to a decrease in interest rates.

For the year ended December 31, 2020, the decrease in interest income and other expense, net of $1.6 million as compared to the year ended December 31, 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 year ended December 31, 2019, the decrease in interest income and other expense, net of $0.1 million as compared to the year ended December 31, 2018, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities.

Gain on deconsolidation of Angel Pharmaceuticals

For the year ended December 31, 2020, the gain on deconsolidation of Angel Pharmaceuticals of $37.5 million represents the fair value of our investment in Angel Pharmaceuticals at the date Angel Pharmaceuticals was deconsolidated from our financial statements.

Sublease income – related party

For the year ended December 31, 2021, the sublease income – related party of $0.2 million represents rent payments made by Angel Pharmaceuticals pursuant to the facility sublease entered into in August 2021.

Loss from equity method investment

For the year ended December 31, 2020, the loss from equity method investment of $0.2 million represents our share of the Angel Pharmaceutical’s loss for the period from deconsolidation of our investment in Angel Pharmaceuticals through December 31, 2020.

For the year ended December 31, 2021, the increase in loss from equity method investment of $4.6 million as compared to the year ended December 31, 2020, primarily consisted of an increase in our share of Angel Pharmaceutical’s loss for the year ended December 31, 2021.

For the year ended December 31, 2020, the loss from equity method investment of $0.2 million represents our share of Angel Pharmaceutical’s loss for the period from deconsolidation of our investment in Angel Pharmaceuticals through December 31, 2020.

Liquidity and Capital Resources

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We have financed our operations primarily through sales of our common stock and convertible preferred stock.

In March 2016, we consummated our IPO and sold 4,700,000 shares of our common stock at a price of $15.00 per share, and in April 2016, sold 502,618 shares at a price of $15.00 per share pursuant to the partial exercise of the underwriters’ option to purchase additional shares of common stock.

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

Immediately prior to the consummation of our IPO, all outstanding shares of the convertible preferred stock were converted into common stock on a one-for-one basis.

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

On February 17, 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 $31.8 million, net of underwriting discounts and commissions and offering expenses.

In March 2020, we entered into a Sales Agreement 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 Jeffries acts as our sales agent.

Jeffries 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 Jeffries under the Sales Agreement.

During the year ended December 31, 2020, we received net proceeds of approximately $1.2 million from the sale of 310,734 shares of our common stock pursuant to the Sales Agreement.

As of December 31, 2020, $48.7 million remained for sale under the Sales Agreement.

We believe our current cash, cash equivalents and marketable securities, including the net proceeds from our February 2021 follow-on offering, will be sufficient to fund our planned expenditures and meet our obligations through at least the next twelve months from the issuance of our consolidated financial statements as of and for year ended December 31, 2020.

Since our inception and through December 31, 2021, we have funded our operations primarily through the sale and issuance of stock, including through our IPO in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million and a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, in each case net of underwriting discounts and 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.

In March 2020, we entered into the 2020 Sales Agreement with 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.

In November 2021, we entered into the 2021 Sales Agreement with Jefferies to sell shares of our common stock from time-to-time, with aggregate gross sales proceeds of up to $40,000,000.

During the year ended December 31, 2021, we sold 6,609,605 shares under its at-the-market offering program resulting in net proceeds of $29.0 million.

As of December 31, 2021, $18.9 million remained for sale under the 2020 Sales Agreement and $40.0 million remained for sale under the 2021 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 consolidated financial statements as of and for year ended December 31, 2021.

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

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

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

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

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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 year ended December 31, 2021 was $36.7 million, which primarily consisted of a net loss of $43.2 million, adjusted by non-cash charges of $9.8 million, primarily consisting of $4.2 million of stock compensation expense and $4.8 million in loss from equity method investment, and an increase of $0.2 million in other assets, partially offset by a decrease of $2.4 million in accounts payable and accrued and other liabilities, an increase of $0.5 million in accounts receivable – related party, an increase of $0.3 million in prepaid and other current assets and an increase of $0.2 million in operating lease right-of-use asset, net of operating lease liability.

Cash used in operating activities during the year ended December 31, 2020 was $34.8 million, which primarily consisted of a net loss of $6.0 million, adjusted by non-cash charges of $6.8 million, primarily consisting of $5.7 million of stock compensation expense, a non-cash gain on deconsolidation of Angel Pharmaceuticals of $37.5 million, an increase of $1.7 million in accounts payable and accrued and other liabilities and a decrease of $0.4 million in prepaid and other current and non-current assets, partially offset by a decrease of $0.2 million in operating lease liability, net of operating lease right-of-use asset amortization.

Cash used in operating activities during the year ended December 31, 2019 was $37.3 million, which primarily consisted of a net loss of $46.7 million, adjusted by non-cash charges of $7.4 million, primarily consisting of $7.3 million of stock compensation expense, an increase of $2.5 million in accounts payable and accrued and other liabilities and an increase of $0.4 million in prepaid and other current assets, primarily associated with the timing of payments to vendors.

Cash used in operating activities during the year ended December 31, 2018 was $41.0 million, which primarily consisted of a net loss of $46.9 million, adjusted by non-cash charges of $7.4 million, primarily consisting of $7.1 million of stock compensation expense, a decrease of $2.0 million in accounts payable and accrued and other liabilities and a decrease of $0.6 million in current and other assets, primarily associated with the timing of payments to vendors.

Cash Flows from Investing Activities

Cash provided by investing activities during the year ended December 31, 2021 was $21.6 million, which consisted of proceeds from maturities of marketable securities of $30.9 million, which were partially offset by purchases of marketable securities of $9.4 million

Cash provided by investing activities during the year ended December 31, 2020 was $44.8 million, which consisted of proceeds from maturities of marketable securities of $86.4 million and proceeds from sales of marketable securities of $1.0 million, partially offset by purchases of marketable securities of $42.5 million and purchases of property and equipment of $0.1 million .

Cash provided by investing activities during the year ended December 31, 2019 was $3.3 million, which consisted of proceeds from maturities of marketable securities of $141.9 million, which were partially offset by purchases of marketable securities of $138.6 million.

Cash used in investing activities during the year ended December 31, 2018 was $30.2 million, which consisted of purchases of marketable securities of $161.9 million and purchases of property and equipment of $0.4 million, which were partially offset by proceeds from maturities of marketable securities of $132.0 million.

Cash Flows from Financing Activities

Cash provided by financing activities during the year ended December 31, 2021 was $62.2 million, which consisted of $32.0 million in net proceeds from our February 2021 follow-on public offering, $29.0 million in net proceeds from the issuance of common stock through our at-the-market offering program, and $1.2 million in proceeds from the exercise of stock options.

Cash provided by financing activities during the year ended December 31, 2020 was $1.3 million, which consisted of $1.2 million in net proceeds from the issuance of common stock through our at-the-market offering program and $0.1 million of proceeds from the exercise of stock options.

Cash provided by financing activities during the year ended December 31, 2019 was negligible.

Cash provided by financing activities during the year ended December 31, 2018 was $65.3 million, consisting of $64.9 million of net proceeds from our follow-on offering and $0.4 million of proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

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Contractual Obligations

We lease our facilities under a non-cancelable operating lease that expires in 2023.

As of December 31, 2020, contractual obligations were as follows (in thousands):

Payment Due by Period

Contractual obligations:

Operating lease obligations

Total contractual obligations

In August 2015 we entered into an agreement for a line of credit of $0.1 million for the purpose of issuing our landlord a letter of credit of $0.1 million as a security deposit under our facility lease.

We pledged money market funds and marketable securities as collateral for the line of credit.

Pursuant to our license agreements with each of Vernalis and Scripps, we have obligations to make future milestone and royalty payments to these parties.

However, because these amounts are contingent, they have not been included on our balance sheet.

Critical Accounting Policies

Our principal commitments consist of obligations under our non-cancelable operating lease for our facilities that expires in 2025 and non-cancellable purchase commitments of $9.3 million for the purchase of drug substance in 2022.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S.

The preparation of these consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

On an ongoing basis, our management evaluates its estimates including, but not limited to:

those related to the accrual for certain liabilities, including accrued clinical trial liabilities;

valuations of equity awards used to determine stock-based compensation;

valuation of intangible assets and long-lived assets;

going concern assessment;

and the amounts of deferred tax assets and liabilities, including the related allowance.

We base our estimates on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

We believe our critical accounting policies relating to clinical trial accruals and stock-based compensation reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.

Our significant accounting policies are more fully described in Note 2 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10 K.

17 unchanged sentences

Clinical Trial Accruals

Costs for preclinical studies and clinical trial activities are recognized based on an evaluation of the vendors’ progress towards completion of specific tasks, using data such as clinical site activations, patient enrollment or information provided to us by our vendors regarding their actual costs incurred.

Costs for preclinical studies and clinical trial activities are recognized based on an evaluation of the vendors’ progress towards completion of specific tasks.

We apply significant judgment in developing estimates for clinical trial accruals based on assumptions related to vendors’ progress towards completion.

In developing these estimates, we estimate vendors’ progress towards completion using data such as clinical site activations, patient enrollment or information provided to us by our vendors regarding their actual costs incurred.

Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services are performed.

5 unchanged sentences

We have one primary business activity and operate as one reportable segment.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We also rely on other exemptions provided by the JOBS Act, including, without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

We will remain an emerging growth company until the earlier of (1) December 31, 2021, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are

deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such fiscal year, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which may allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

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-K

Item 7. Management’s Discussion and Analysis