Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes for the year ended December 31, 2021, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2022.
This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. 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.
Overview
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, allergic and infectious diseases. We have built a pipeline of five programs, three of which are in clinical development.
After our review of recent encouraging Phase 1 clinical data for our ITK inhibitor, CPI-818, in T cell lymphomas, demonstrated activity in several preclinical models with CPI-818 in autoimmune and allergic diseases, and the potential near-term timing of additional clinical data for CPI-818, we have decided to prioritize and focus our efforts on advancing the development of CPI-818.
CPI-818 is an investigational selective, orally bioavailable, 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. T cell lymphomas are malignancies of T cells that proliferate and spread throughout the body. These lymphomas often have tonic signaling through the T cell receptor pathway, which involves ITK. Inhibition of ITK could result in blockade of this signaling pathway and potential control of the malignancy. One of the key survival mechanisms of both lymphomas and solid tumors is believed to be the reprogramming of normal 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 may be useful in the treatment of solid tumors as well as lymphomas.
CPI-818 is currently being studied in a Phase 1/1b clinical trial that was designed to select the recommended Phase 2 clinical trial dose of CPI-818 and evaluate its safety, pharmacokinetics, target occupancy, immunologic effects, biomarkers and efficacy. The study employs an adaptive, expansion cohort design, with an initial phase that evaluated escalating oral doses (100, 200, 400, 600 mg taken twice a day) in successive cohorts of patients, followed by a second phase that is designed to evaluate safety and tumor response to the recommended dose of CPI-818 in disease-specific patient cohorts. By protocol design, treatment is discontinued after one year or upon disease progression.
In December 2020 at the American Society of Hematology Annual Meeting, we presented preliminary Phase 1/1b clinical data with CPI-818 in refractory T cell lymphomas in patients receiving adequate doses of the drug. The data presented were as follows:
•
Of the seven evaluable patients with peripheral T-cell lymphoma (“PTCL”), there were two objective tumor responses as of the cut-off date of October 5, 2020:
o
One patient, who previously failed chemotherapy and high dose chemotherapy with autologous bone marrow transplantation, achieved a complete response (“CR”) with CPI-818 that remained ongoing after 12 months on study. The patient received CPI-818 for 12 months and the CR
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persisted beyond discontinuation of therapy (per the study protocol, the patient stopped receiving therapy after 12 months on study).
o
One patient who failed multiple prior therapies achieved a partial response (“PR”) at four months on therapy. This patient then went on to receive a bone marrow transplant.
•
Of the 11 evaluable patients with cutaneous T-cell lymphoma (“CTCL”):
o
One patient achieved a complete response in lymph node disease and continued to have stable cutaneous disease at more than 12 months on therapy as of November 2, 2020.
o
Three patients achieved stable disease on therapy for between 3 and 5 months.
•
There was a dose dependent increase in receptor occupancy, with trough occupancy >75% observed at the 200, 400 and 600 mg doses.
•
No dose limiting toxicities and no grade 3 or 4 treatment related adverse events have been observed to date.
Based on the interim results from our Phase 1/1b clinical trial, Angel Pharmaceuticals joined this clinical trial. T cell lymphomas are more common in China than the United States representing approximately 26% of non-Hodgkins lymphomas in China. In January 2022, Angel Pharmaceuticals announced the enrollment of the first patient in the clinical trial in China.
After reviewing this clinical trial data in the second quarter of 2022, we identified the optimum dosing regimen for CPI-818. The dosing regimen of 200 mg orally twice per day was found to affect T cell differentiation and induce the generation of Th1 helper cells while blocking the development of Th2 cells. Th1 cells are required for immunity to tumors, viral infections and other infectious diseases. Th2 helper T cells are responsible for the production of several disease causing cytokines involved in autoimmunity and allergy. The immunologic effects of CPI-818 lead to what is known as Th1 skewing and is made possible by the high selectivity of the drug for ITK. In some patients, a decrease in blood eosinophil count has been observed, consistent with blockade of Th2 cells. As of July 22, 2022, 12 patients were enrolled in the 200 mg cohort and eight were evaluable for response. As of July 22, 2022, there had been one complete response (“CR”) lasting 25 months; one nodal CR lasting 16 months; one partial response (“PR”) ongoing at two months follow up. As of July 22, 2022, five patients had stable disease (“SD”), two of the patients with SD had been on treatment for approximately 12 weeks and continued on study. Two additional patients were on treatment and had not yet had their disease monitoring assessments. An additional patient in the 600 mg cohort also had a PR. We and Angel Pharmaceuticals continue to enroll additional patients with T cell lymphomas in the 200 mg cohort of the clinical trial.
Analysis of blood in four of four patients treated in the 200 mg cohort showed increases in Th1 cells compared to baseline and increases in terminally differentiated T effector memory cells, which are T cells that are antigen primed and capable of destroying tumor cells. A tumor biopsy from one patient taken during response demonstrated an increase in T effector memory cells in the tumor. Three of three patients with high baseline, pretreatment eosinophil counts showed reductions in circulating eosinophils during treatment with CPI-818. Eosinophils are white blood cells that play a key role in allergic and autoimmune diseases, and they are often elevated in patients with T Cell lymphomas (“TCL”). We expect to present additional data from this clinical trial at the 64th American Society of Hematology (ASH) Annual Meeting and Exposition in December.
We are also developing CPI-818 for autoimmune and allergic diseases and we are preparing to initiate potential clinical trials for certain autoimmune diseases. CPI-818 has demonstrated activity in various animal models of autoimmunity including models of systemic lupus erythematosus, psoriasis, inflammatory bowel disease and graft versus host disease. Some of the research detailing this activity was presented at the annual meetings of the American Society of Hematology in 2020 and 2021.
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Our second product candidate, ciforadenant, 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.
We also discovered the Adenosine Gene Signature, which we believe has demonstrated the potential to serve as a biomarker to identify patients most likely to respond to treatment with ciforadenant. The results of our Phase 1/1b clinical trial involving 68 patients with RCC were published in the journal Cancer Discovery in January 2020. This study reported that in 30 patients evaluated for the Adenosine Gene Signature, no patients showing a low Adenosine Gene Signature exhibited signs of tumor regression while 17% (3 of 18) of patients with a high Adenosine Gene Signature had an overall response rate by RECIST criteria. Based on these results, we are collaborating with the Kidney Cancer Research Consortium to evaluate ciforadenant in an open label Phase 1b/2 clinical trial as a first line therapy for metastatic RCC in combination with ipilimumab (anti-CTLA-4) and nivolumab (anti-PD-1). The clinical trial is expected to enroll approximately 60 patients. In the Phase 1b portion of the clinical trial (N=8), the primary endpoints are safety, tolerability and anti-tumor activity. In the Phase 2 portion of the clinical trial, the primary endpoint is the percent of patients that achieve a deep response, defined as complete response or depth of partial response of >50% tumor reduction. Historical data has shown that deep responses correlate with prolonged progression free survival and is seen in approximately 32% of patients receiving ipilimumab and nivolumab. Deep response rates in renal cell cancer have been found to correlate with long term progression free survival. The Adenosine Gene Signature biomarker also will be evaluated in tumor biopsy specimens. The trial design is based on our preclinical research published in 2018 in Cancer Immunology Research that demonstrated impressive antitumor control and cures in several animal models using ciforadenant in combination with anti-CTLA4 and anti-PD1. Preclinical studies and data from earlier clinical trials with ciforadenant, suggest adenosine may be a cause of resistance to current therapies with anti PD(L)-1. The Kidney Cancer Research Consortium is comprised of a group of leading cancer centers in the United States led by investigators at MD Anderson.
Our third product candidate is mupadolimab, 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.
Mupadolimab is a unique anti-CD73 antibody that is designed to bind to a critical epitope involved in B cell signaling. Our work in both cancer and viral diseases, such as COVID-19, have provided important insights and data into how we may best evaluate the biologic properties of our antibody candidate in the clinic. Our studies have uncovered a novel potential mechanism of action: mupadolimab has the ability to activate B cells which may then be driven into antibody producing plasma cells by the presence of tumor associated antigens within the tumor. Recent work by several groups have highlighted the importance of B cells in anti-tumor immunity. As published in Nature in 2020, investigators have shown that B cell infiltration in some tumors are strong predictors of response to immunotherapies and predictors of favorable outcomes.
In February 2018, we initiated a Phase 1/1b clinical trial with mupadolimab administered alone and in combination with ciforadenant or pembrolizumab, and in combination with ciforadenant and pembrolizumab. As of July 1, 2022, we have enrolled over 115 patients in this clinical trial at doses of up to 24 mg/kg every three weeks. Key findings from this trial as of July 1, 2022 include the observation that mupadolimab was 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 mupadolimab was also associated with increases in memory B-cells in the blood, the emergence of new B-cell clones and, in some patients, the production of novel anti-tumor antibodies.
At the 2021 Annual Meeting of the Society for Immunotherapy of Cancer (“SITC”) in November 2021, we presented interim data demonstrating anti-tumor activity in NSCLC and head and neck cancer (“HNSCC”) patients treated with 12 mg/kg or greater of mupadolimab as a single agent, in combination with ciforadenant, in combination with pembrolizumab or in combination with pembrolizumab and ciforadenant. These patients had advanced refractory
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disease and failed a median of three prior therapies. Further, all but one had failed therapy with prior anti PD(L)-1 antibodies. There were 16 evaluable NSCLC and HNSCC patients. Seven patients achieved tumor regression, which did not meet the criteria for partial response by RECIST. However, of the patients that showed tumor regression, six patients had progressive disease as their best response to their last treatment prior to entering the Phase 1/1b clinical trial, which indicates that the tumors in these patients were not responsive to their last therapy. The seven patients who showed tumor regression on the trial were treated for a period of 4.5 to 12.5 months.
We have completed enrollment in two Phase 1/1b clinical trial expansion cohorts of patients with (1) HNSCC that have failed previous treatment with anti-PD-1 therapy and chemotherapy and (2) relapsed refractory NSCLC who have failed previous treatment with anti-PD(L)-1 therapy and chemotherapy. Based on the available results from this trial, we believe this program is ready to advance into a randomized Phase 2 clinical trial evaluating mupadolimab in combination with pembrolizumab and chemotherapy as a front-line therapy for the treatment of patients with NSCLC. However, we are delaying the initiation of this clinical trial in order to prioritize the development of CPI-818 and to conserve capital. Angel Pharmaceuticals plans to continue the development of mupadolimab in China. The CDE (Center for Drug Evaluation) has approved an investigational new drug application (“IND”) to initiate a Phase 1 trial in China with mupadolimab alone and together with pembrolizumab in patients with advanced NSCLC and head and neck cancer.
To date, the majority of our efforts have been focused on the research, development and advancement of CPI-818, ciforadenant, and mupadolimab, 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. We expect to continue to incur significant research and development and general and administrative expenses related to our operations. Our net loss for the three and nine months ended September 30, 2022 was $14.8 million and $31.5 million, respectively. As of September 30, 2022, we had an accumulated deficit of $297.9 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-818, ciforadenant and mupadolimab, 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, 2022, 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 redeemable convertible preferred stock were converted into 14.3 million shares of our common stock.
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 nine months ended September 30, 2022, we did not sell any shares under our at-the-market offering program. As of September 30, 2022, we had sold 6,920,339 shares of common stock for gross proceeds of $31.1 million under the 2020 Sales Agreement. As of September 30, 2022, $18.9 million and $40.0 million remained for sale under the 2020 Sales Agreement and 2021 Sales Agreement, respectively.
As of September 30, 2022, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $49.6 million. 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 CPI-
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818, ciforadenant or mupadolimab 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. 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.
We currently have no manufacturing capabilities and do not intend to establish any such capabilities. We have no commercial manufacturing facilities for our product candidates. 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.
Impact of COVID-19
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. 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. We are further supporting all of our employees by leveraging virtual meeting technology and encouraging employees to follow local health authority guidance. 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.
Significant Accounting Policies
Our significant accounting policies are described in Note 2 to our consolidated financial statements for the year ended December 31, 2021 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, 2022.
Components of Results of Operations
Revenue
To date, we have not generated any revenues. We do not expect to receive any revenues from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into revenue-generating collaboration agreements with third parties.
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Research and Development Expenses
Our research and development expenses consist primarily of costs incurred to conduct research and development of our product candidates. We record research and development expenses as incurred. Research and development expenses include:
● employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense;
● external research and development expenses incurred under arrangements with third parties, such as contract research organizations, preclinical testing organizations, contract manufacturing organizations, academic and non-profit institutions and consultants;
● costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;
● license fees; and
● other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.
We plan to increase our research and development expenses substantially as we continue the development and potential commercialization of our product candidates. Our current planned research and development activities include the following:
● enrollment and completion of our ongoing Phase 1/1b clinical trial of CPI-818;
● planned enrollment and completion of clinical trials of CPI-818 for the treatment of certain autoimmune diseases;
● enrollment and completion of our planned Phase 1b/2 clinical trial with ciforadenant in collaboration with the Kidney Cancer Research Consortium;
● process development and manufacturing of drug supply of CPI-818 and ciforadenant; and
● preclinical studies under our other programs in order to select development product candidates.
In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business.
Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in “Part II, Item 1A—Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.
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General and Administrative Expenses
General and administrative expenses include personnel costs, expenses for outside professional services and allocated expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expense related to our office and research and development facility.
We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of one or more of our product candidates.
Results of Operations
Comparison of the periods below as indicated (in thousands) :
Three Months Ended
Nine Months Ended
September 30,
September 30,
2022
2021
Change
2022
2021
Change
Operating expenses:
Research and development
$
10,365
$
6,991
$
3,374
$
20,388
$
24,327
$
(3,939)
General and administrative
2,108
2,056
52
6,511
7,493
(982)
Total operating expenses
12,473
9,047
3,426
26,899
31,820
(4,921)
Loss from operations
(12,473)
(9,047)
(3,426)
(26,899)
(31,820)
4,921
Interest income and other expense, net
225
(11)
236
336
(7)
343
Sublease income - related party
147
94
53
439
94
345
Loss from equity method investment
(2,730)
(1,709)
(1,021)
(5,367)
(2,272)
(3,095)
Net loss
$
(14,831)
$
(10,673)
$
(4,158)
$
(31,491)
$
(34,005)
$
2,514
Research and Development Expenses
Research and development expenses for the three and nine months ended September 30, 2022 and 2021 consisted of the following costs by program as well as unallocated employee costs and overhead costs (specific program costs consist solely of external costs) (in thousands):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2022
2021
Change
2022
2021
Change
CPI-818
$
858
$
535
$
323
$
1,953
$
1,125
$
828
Ciforadenant
186
319
(133)
1,116
1,180
(64)
Mupadolimab
6,681
3,349
3,332
9,948
12,316
(2,368)
Unallocated employee and overhead costs
2,640
2,788
(148)
7,371
9,706
(2,335)
$
10,365
$
6,991
$
3,374
$
20,388
$
24,327
$
(3,939)
For the three months ended September 30, 2022, the increase in CPI-818 costs of $0.3 million as compared to the three months ended September 30, 2021, primarily consisted of an increase of $0.3 million in outside service costs and an increase of $0.1 million in drug manufacturing costs, which were partially offset by a decrease of $0.1 million in clinical trial expenses.
For the nine months ended September 30, 2022, the increase in CPI-818 costs of $0.8 million as compared to the nine months ended September 30, 2021, primarily consisted of an increase of $0.4 million in drug manufacturing costs and an increase of $0.4 million in other outside service costs.
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For the three months ended September 30, 2022, the decrease in ciforadenant costs of $0.1 million as compared to the three months ended September 30, 2021, primarily consisted of a decrease of $0.2 million in clinical trial expenses, which were partially offset by an increase of $0.1 million in other outside service costs.
For the nine months ended September 30, 2022, the decrease in ciforadenant costs of $0.1 million as compared to the nine months ended September 30, 2021, primarily consisted of a decrease of $0.5 million in clinical trial expenses, which were partially offset by an increase of $0.3 million in drug manufacturing costs and an increase of $0.1 million in other outside service costs.
For the three months ended September 30, 2022, the increase in mupadolimab costs of $3.3 million as compared to the three months ended September 30, 2021, primarily consisted of an increase of $5.4 million in drug manufacturing costs as a result of the purchase of antibody for our clinical trial for mupadolimab, which was subsequently paused, under a non-cancelable purchase commitment, which were partially offset by a decrease of $1.9 million in clinical trial expenses and a decrease of $0.2 million in other outside service costs.
For the nine months ended September 30, 2022, the decrease in mupadolimab costs of $2.4 million as compared to the nine months ended September 30, 2021, primarily consisted of a decrease of $7.6 million in clinical trial expenses, a decrease of $0.4 million in licensing expense and a decrease of $0.5 million in other outside service costs, which were partially offset by an increase of $6.1 million in drug manufacturing costs as a result of the purchase of antibody for our clinical trial for mupadolimab, which was subsequently paused, under a non-cancelable purchase commitment.
For the three months ended September 30, 2022, the decrease in unallocated costs of $0.1 million as compared to the three months ended September 30, 2021, primarily consisted of a decrease of $0.3 million in personnel and related costs, which were partially offset by an increase of $0.2 million in other outside service costs.
For the nine months ended September 30, 2022, the decrease in unallocated costs of $2.3 million as compared to the nine months ended September 30, 2021, primarily consisted of a decrease of $2.3 million in personnel and related costs and a decrease of $0.3 million in facility related expenses, which were partially offset by an increase of $0.3 million in other outside service costs.
General and Administrative Expense
For the three months ended September 30, 2022, the increase in general and administrative expenses of $0.1 million as compared to the three months ended September 30, 2021, primarily consisted of an increase of $0.4 million in professional service costs, which were partially offset by a decrease of $0.3 million in personnel and related costs.
For the nine months ended September 30, 2022, the decrease in general and administrative expenses of $1.0 million as compared to the nine months ended September 30, 2021, primarily consisted of a decrease of $1.2 million in personnel and related costs, which were partially offset by an increase of $0.2 million in professional service costs.
Interest Income and Other Expense, net
For the three months ended September 30, 2022, the increase in interest income and other expense, net of $0.2 million as compared to the three months ended September 30, 2021, primarily consisted of additional interest income earned due to a higher rate of return on investments.
For the nine months ended September 30, 2022, the increase in interest income and other expense, net of $0.3 million as compared to the nine months ended September 30, 2021, primarily consisted of additional interest income earned due to a higher rate of return on investments.
Sublease Income – Related Party
For the three and nine months ended September 30, 2022, sublease income of $0.1 million and $0.4 million, respectively, represents rental income associated with our building sublease to Angel Pharmaceuticals.
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Loss from equity method investment
For the three months ended September 30, 2022, the increase in loss from equity method investment of $1.0 million as compared to the three months ended September 30, 2021, primarily consisted of an increase in our share of Angel Pharmaceutical’s loss for the three months ended September 30, 2022.
For the nine months ended September 30, 2022, the increase in loss from equity method investment of $3.1 million as compared to the nine months ended September 30, 2021, primarily consisted of an increase in our share of Angel Pharmaceutical’s loss for the nine months ended September 30, 2022
Liquidity and Capital Resources
As of September 30, 2022, we had cash, cash equivalents and marketable securities of $49.6 million, and an accumulated deficit of $297.9 million, compared to cash and cash equivalents and marketable securities of $69.5 million and an accumulated deficit of $266.4 million as of December 31, 2021. We have financed our operations primarily through the sale of common stock and the private placements of redeemable convertible preferred stock.
Since our inception and through September 30, 2022, 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.
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. 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 nine months ended September 30, 2022, we did not sell any shares under our at-the-market offering program. As of September 30, 2022, we had sold 6,920,339 shares of common stock for gross proceeds of $31.1 million under the 2020 Sales Agreement. As of September 30, 2022, $18.9 million and $40.0 million remained for sale under the 2020 Sales Agreement and 2021 Sales Agreement, respectively.
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 months ended September 30, 2022. The amounts and timing of our actual expenditures depend on numerous factors, including:
● the progress, timing, costs and results of clinical trials for CPI-818, ciforadenant and mupadolimab;
● the timing, progress, costs and results of preclinical and clinical development activities for our other product candidates;
● the number and scope of preclinical and clinical programs we decide to pursue;
● the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights;
● the cost and timing of regulatory approvals;
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● our efforts to enhance operational systems and hire additional personnel, including personnel to support development of our product candidates and satisfy our obligations as a public company;
● the extent to which the COVID-19 pandemic may impact our business, including our clinical trials and financial condition; and
● other factors described in the section of this report entitled “Risk Factors.”
We expect to increase our spending in connection with the development and commercialization of our product candidates. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings. We may also enter into additional collaboration arrangements or selectively partner for clinical development and commercialization. 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. In addition, sufficient additional funding may not be available on acceptable terms, or at all. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could have a material effect on our business, financial condition and results of operations.
Summary of Statement of Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Nine Months Ended
September 30,
2022
2021
Net cash provided by (used in):
Operating activities
$
(19,476)
$
(29,859)
Investing activities
(19,394)
23,559
Financing activities
—
62,140
Net increase in cash and cash equivalents
$
(38,870)
$
55,840
Cash Flows from Operating Activities
Cash used in operating activities during the nine months ended September 30, 2022 was $19.5 million, which primarily consisted of a net loss of $31.5 million, adjusted by non-cash charges of $7.7 million, that primarily consisted of $2.1 million of stock compensation expense and $5.4 million of loss from equity method investment, a decrease of $0.2 million in prepaid and other current assets, an increase of $2.7 million in accounts payable, an increase of $1.5 million in accrued and other current liabilities and a decrease of $0.1 million in operating lease liability net of operating lease right-of-use asset amortization.
Cash used in operating activities during the nine months ended September 30, 2021 was $29.9 million, which primarily consisted of a net loss of $34.0 million, adjusted by non-cash charges of $4.6 million, primarily consisting of $3.5 million of stock compensation expense and $2.3 million of loss from equity method investment, an increase of $1.1 million in prepaid and other current assets, an increase of $0.3 million in accounts receivable, a decrease of $0.8 million in accounts payable and accrued and other current liabilities, and an increase in operating lease right-of-use asset of $0.2 million, net of a corresponding increase in operating lease liability.
Cash Flows from Investing Activities
During the nine months ended September 30, 2022, cash used in investing activities was $19.4 million, which primarily consisted of purchases of marketable securities of $46.9 million and purchases of property and equipment of $0.3 million, which were partially offset by proceeds from maturities of marketable securities of $27.8 million.
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During the nine months ended September 30, 2021, cash provided in investing activities was $23.6 million, which primarily consisted of proceeds from maturities of marketable securities of $28.4 million, partially offset by purchases of marketable securities of $4.9 million.
Cash Flows from Financing Activities
During the nine months ended September 30, 2022, there were no cash flows from financing activities.
During the nine months ended September 30, 2021, cash provided by financing activities was $62.1 million, which primarily 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.
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, 2022, as compared to those disclosed in our Annual Report on Form 10-K.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.