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Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-03 · 130 added, 140 removed, 116 unchanged (70% of the section changed)

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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.

We have three product candidates which are in clinical development for treatment of various solid tumors.

Our lead product candidate is 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.

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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.

Inhibition of ITK could result in blockade of this signaling pathway and control the growth of the malignancy.

In addition, 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 normal T cell anti-tumor immunity and may be useful in the treatment of solid tumors as well as lymphomas.

We believe that CPI-818 can lead to reprograming of normal immune responses that could be beneficial for the treatment of certain autoimmune and allergic diseases.

Selective inhibition of ITK can induce the differentiation of naïve T cells into Th1 cells, a process known as Th1 skewing.

Th1 cells lead to the generation of killer T cells that can eliminate tumor cells or viral infected cells.

Selective ITK inhibition also results in the blockade of Th2 cells.

Overactive Th2 cells play a role in autoimmune and allergic diseases.

CPI-818 is currently being studied in a Phase 1/1b clinical trial that was designed to select the recommended Phase 2 dose of CPI-818 and evaluate its safety, pharmacokinetics (“PK”), target occupancy, immunologic effects, biomarkers and efficacy.

The study employs an adaptive, expansion cohort design, with an initial phase that evaluated escalating 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:

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

persisted beyond discontinuation of therapy (per the study protocol, the patient stopped receiving therapy after 12 months on study).

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”):

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.

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.

The study has enrolled patients from the United States, Australia, China and South Korea with several types of advanced, refractory T cell lymphomas.

During the dose escalation phase of the study, and with longer follow up, it became clear that the patients receiving the 200mg twice per day dose were demonstrating higher response rates as well as longer disease control.

This dose was determined to be the optimal dose and was consistent with dose-response effects seen in in vitro experiments described above.

In December 2022 at the American Society of Hematology Annual Meeting (“ASH”), we presented preliminary Phase 1/1b clinical data with CPI-818 in refractory T cell lymphomas.

The data presented were as of a September 2, 2022 data cut-off:

T Cell Lymphoma Interim Data Highlights

● 13 patients were enrolled in the 200 mg cohort and 11 were evaluable for response.

Overall objective responses were seen in 4 of 11 patients.

Enrolled patients were heavily pretreated receiving a median of 3 prior therapies.

In this group, there was one complete response (“CR”) lasting 25 months in a patient with peripheral T cell lymphoma (“PTCL”);

one nodal CR lasting 19 months in a patient with cutaneous T cell lymphoma;

and two partial responses (“PR”) ongoing at six and eight months follow up, respectively, in patients with PTCL and anaplastic large cell lymphoma.

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.

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.

● No dose limiting toxicities were observed, and a maximum tolerated dose was not reached at doses as high as 600 mg twice per day.

Immunologic Interim Data Highlights

● The 200 mg dose induced Th1 skewing and both Th2 and Th17 blockade based on peripheral blood samples from several patients:

o In one patient that had a substantial reduction of a large tumor on the abdominal wall, a blood sample analysis demonstrated an increase in blood Th1, a decrease in blood Th17, and a reduction of eosinophil count and IL-5 consistent with Th1 skewing and Th2 blockade.

Tumor samples in this patient were also analyzed and showed an increase in terminally differentiated T effector memory cells (“TEMRA” cells), which are T cells that have responded to an antigen and are able to mediate effector functions, such as the destruction of tumor cells.

o In four patients (two with PRs, one with stable disease (“SD”) and one with progressive disease (“PD”), the change in Th1 and CD8+ TEMRA cells was serially measured over time.

The PR and SD patients showed an increase in both Th1 and CD8+ TEMRA cells.

Of note, SD and PD patients were lymphopenic at baseline with absolute lymphocyte counts less than 1,000, suggesting the need for a minimal level of immune competence.

● In vitro data demonstrated that CPI-818 induced Th1 skewing and Th2 blockade in a dose-dependent manner that supported the selection of the 200 mg dose.

This includes an analysis of peripheral blood samples from 12 healthy volunteers that were stimulated in the presence of various concentrations of CPI-818 and other studies that showed that CPI-818 inhibited Th2 cytokine production from normal CD4+ and malignant Sezary cells.

● Other in vitro studies showed that CPI-818 inhibited the production of interleukin 4, 5 and 13 cytokines produced by Th2 cells.

● In vivo preclinical studies in mice with transplanted T cell lymphoma showed that CPI-818 led to an increase in infiltration of normal CD8+ T cells in the tumor and inhibition of tumor growth.

● The findings of the human and preclinical studies suggest that CPI-818 has the potential to enhance anti-tumor immunity representing a potentially novel approach to immunotherapy.

As of February 23, 2023, we enrolled a total of 53 patients with several types of advanced, refractory T cell lymphomas in our Phase 1/1b clinical trial.

Enrollment in the 200 mg cohort has continued with 20 patients enrolled, including 13 evaluable for tumor response.

There have been 1 complete response (CR) of 24 months duration, 1 equivocal CR awaiting confirmatory PET scan of 13+ months duration (a previous PR), 1 nodal CR of 21 months duration and 1 PR of 7 months duration.

Ten patients continue on therapy, including seven that have not yet been evaluated for tumor response.

Treating patients in the 200 mg cohort has identified a biomarker associated with response to CPI-818.

CPI-818 induces a host anti-tumor cell mediated immune response that requires normal functioning T cells.

Data from the 200 mg cohort in the Phase 1/1b clinical trial indicates that a minimum absolute lymphocyte count (ALC) above 900 cells per cubic milliliter of blood is required for tumor response and disease control.

Four of eight patients with ALC above 900

have objective responses (those four patients are described above), all eight have disease control (stable disease, PR, CR) and the median progression free survival (PFS) is 28.1 months.

No objective responses were seen in five patients (0 of 5) with ALC below 900 and the PFS is 2.1 months.

The ALC biomarker is routinely measured, is consistent with CPI-818’s presumed mechanism of action and is present in about 70% of patients based on the Company’s experience to-date.

In addition, as presented at the 10th Whistler Global Summit on Hematologic Malignancies, which took place March 29 to April 2, 2023 in Whistler British Columbia, Canada, data from our Phase 1/1b clinical trial also showed that this biomarker did not select for more favorable patients based on response to their last treatment regimen prior to receiving CPI-818.

This biomarker has been incorporated as an eligibility criterion in the ongoing Phase 1/1b clinical trial.

As of May 1, 2023, a total of 28 patients were enrolled in the trial at the optimum 200 mg BID dose, including 19 evaluable for tumor response.

There have been two CRs, one nodal CR and three PRs.

Two of the patients with PRs remain on therapy.

A total of nine patients remain on therapy, including five who have not had their initial tumor response evaluation.

For patients with ALC above 900 per cubic milliliter of blood, objective responses (CR plus PR) were seen in six of 13 patients with disease control (CR, PR and stable disease) in 11 of 13 patients.

No objective responses were seen in six patients (0 for 6) with ALC below 900.

The median progression free survival is 19.9 months versus 2.1 months for patients with ALC above 900 and ALC below 900, respectively.

Eligible patients for the clinical trial are now required to have ALC above 900.

Based on the current enrollment rate of our Phase 1/1b clinical trial, we believe that the number of patients treated in the clinical trial would provide adequate safety and preliminary efficacy data to inform the design of a registration clinical trial.

We expect such a trial to enroll patients with relapsed T cell lymphomas whose prognosis is poor with currently available therapies.

Although there are single agents approved for this disease, the current National Cooperative Cancer Network guidelines recommend that patients be enrolled in experimental therapies indicating a serious unmet need for improved therapies to treat T cell lymphomas.

We recently received a communication from the U.S.

Food and Drug Administration (FDA) regarding our clinical development plans for CPI-818.

As recommended by the FDA, we plan to request a meeting with the FDA to discuss the design of a registration Phase 3 clinical trial.

We anticipate that this meeting will take place in the third quarter of this year.

Our second product candidate, ciforadenant, is an oral, small molecule antagonist of the A2A receptor for adenosine 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.

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)

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

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.

In both preclinical and in vivo studies, mupadolimab has demonstrated binding to various immune cells and the enhancement of immune responses by activating B cells.

While 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, we are waiting to initiate a potential Phase 2 randomized clinical trial in order to prioritize the development of our other two lead product candidates.

Angel Pharmaceuticals is continuing the development of mupadolimab in China and is enrolling patients in a Phase 1 trial with mupadolimab alone and together with pembrolizumab in patients with advanced NSCLC and head and neck cancer.

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

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

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

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

(“Angel Pharmaceuticals”), a 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 – CPI-818, ciforadenant and mupadolimab – 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 CPI-818, ciforadenant, and mupadolimab, and we have not generated any revenue from product sales and, as a result, we have incurred significant losses.

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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.

Our net loss for the three months ended March 31, 2023 and 2022 was $7.9 million and $8.3 million, respectively.

As of March 31, 2023, we had an accumulated deficit of $315.6 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.

Since our inception and through March 31, 2023, 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 March 2020, we entered into an open market sale agreement (the “2020 Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of our common stock, from time-to-time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jefferies will act as 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-

818, ciforadenant or mupadolimab through commercialization.

On March 28, 2023, we terminated both the 2020 Sales Agreement and the 2021 Sales Agreement and concurrently entered into a new open market sale agreement (the “2023 Sales Agreement”) with Jefferies to sell shares of our common stock, from time-to-time, with aggregate gross sales proceeds of up to $90,000,000, through an at-the-market equity offering program under which Jefferies will act as our sales agent.

The issuance and sale of shares of common stock pursuant to the 2023 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 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the 2023 Sales Agreement.

During the three months ended March 31, 2023, we did not sell any shares of common stock under our at-the-market offering program.

As of March 31, 2023, we had sold 6,920,339 shares of common stock for gross proceeds of $31.1 million under the 2020 Sales Agreement.

As of March 28, 2023, at the time of the filing of our Annual Report on Form 10-K for the year ended December 31, 2022, and during the sixty-day period preceding this date, our calculated public float was below $75.0 million.

As a result, we have been and are subject to baby shelf rules for any offerings conducted on our shelf

registration statement, including any sales under our ATM with Jefferies LLC (“Jefferies”).

Such rules limit the amount we can raise until such time that our public float is above $75.0 million.

As of March 31, 2023, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $34.5 million.

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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Our significant accounting policies are described in Note 2 to our consolidated financial statements for the year ended December 31, 2022 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.

There have been no material changes to our significant accounting policies during the three months ended March 31, 2023.

Components of Results of Operations

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● 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;

● a potential registration clinical trial for CPI-818;

● enrollment and completion of our 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;

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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.

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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Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

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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):

Research and development expenses for the three months ended March 31, 2023 and 2022 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,

Unallocated employee and overhead costs

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.

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.

For the three months ended March 31, 2023, the increase in CPI-818 costs of $1.3 million as compared to the three months ended March 31, 2022, primarily consisted of an increase of $0.7 million in drug manufacturing costs, an increase of $0.4 million in clinical trial expenses and an increase of $0.2 million in other outside service costs.

For the three months ended March 31, 2023, the decrease in ciforadenant costs of $0.3 million as compared to the three months ended March 31, 2022, primarily consisted of a decrease of $0.1 million in drug manufacturing costs, a decrease of $0.1 million in clinical trial expenses and a decrease of $0.1 million in other outside service costs.

For the three months ended March 31, 2023, the decrease in mupadolimab costs of $1.6 million as compared to the three months ended March 31, 2022, primarily consisted of a decrease of $0.8 million in clinical trial expenses, a decrease of $0.7 million in drug manufacturing costs and a decrease of $0.1 million in other outside service costs.

For the three months ended March 31, 2023, the increase in unallocated costs of $0.2 million as compared to the three months ended March 31, 2022, primarily consisted of an increase 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.

For the three months ended March 31, 2023, the increase in general and administrative expenses of $0.3 million as compared to the three months ended March 31, 2022, primarily consisted of an increase in personnel and related 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.

For the three months ended March 31, 2023, the increase in interest income and other expense, net of $0.4 million as compared to the three months ended March 31, 2022, primarily consisted of an increase in interest income earned due to an increase in interest rates.

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.

For the three months ended March 31, 2023, the decrease in sublease income of $0.1 million was due to the expiration of the building sublease agreement with Angel Pharmaceuticals in January 2023.

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

For the three months ended March 31, 2023, the increase in loss from equity method investment of $0.7 million as compared to the three months ended March 31, 2022, primarily consisted of an increase in our share of Angel Pharmaceutical’s loss for the three months ended March 31, 2023.

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.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $34.5 million, and an accumulated deficit of $315.6 million, compared to cash and cash equivalents and marketable securities of $42.3 million and an accumulated deficit of $307.7 million as of December 31, 2022.

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.

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.

Since our inception and through March 31, 2023, 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.

The issuance and sale of shares of common stock pursuant to the 2023 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 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the 2023 Sales Agreement.

During the three months ended March 31, 2023, we did not sell any shares of common stock under our at-the-market offering program.

As of March 31, 2023, we had sold 6,920,339 shares of common stock for gross proceeds of $31.1 million under the 2020 Sales Agreement.

As a result, we have been and are subject to baby shelf rules for any offerings conducted on our shelf registration statement, including any sales under our ATM with Jefferies LLC (“Jefferies”).

Such rules limit the amount we can raise until such time that our public float is above $75.0 million.

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

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

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used in):

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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 used in operating activities during the three months ended March 31, 2023 was $8.1 million, which primarily consisted of a net loss of $7.9 million, adjusted by non-cash charges of $2.0 million, that primarily consisted of $0.5 million of stock compensation expense and $1.7 million of loss from equity method investment, a decrease of $0.1 million in prepaid and other current assets, a decrease of $0.6 million in accounts payable and a decrease of $1.9 million in accrued and other current liabilities.

Cash used in operating activities during the three months ended March 31, 2022 was $6.4 million, which primarily consisted of a net loss of $8.3 million, adjusted by non-cash charges of $1.9 million, that primarily consisted of $0.7 million of stock compensation expense and $1.0 million of loss from equity method investment, a decrease of $0.3 million in prepaid and other current assets, a decrease of $0.1 million in accounts receivable, a decrease of $0.5 million in accounts payable and accrued and other current liabilities.

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.

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.

During the three months ended March 31, 2023, cash provided by investing activities was $4.6 million, which primarily consisted of proceeds from maturities of marketable securities of $17.7 million, which were partially offset by purchases of marketable securities of $13.1 million.

During the three months ended March 31, 2022, cash used in investing activities was $25.6 million, that consisted of purchases of marketable securities of $26.4 million, which were partially offset by proceeds from maturities of marketable securities of $0.8 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.

During the three months ended March 31, 2023, the cash provided by financing activities were negligible.

During the three months ended March 31, 2022, there were no cash flows from financing activities.

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.

There have been no material changes outside the ordinary course of our business to our contractual obligations during the three months ended March 31, 2023, as compared to those disclosed in our Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis