What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-08 · 119 added, 88 removed, 158 unchanged (57% of the section changed)

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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.

Our lead product candidate, soquelitinib (formerly 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.

These lymphomas sometimes have tonic signaling through the T cell receptor pathway, which involves ITK.

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.

Selective inhibition of ITK can block the production and function of Th2 cells, potentially leading to a biasing toward 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.

Th1 cells produce interferon gamma and tumor necrosis factor that are cytokines known to destroy cancer cells.

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

Overactive Th2 cells play a role in autoimmune and allergic diseases, which can potentially be ameliorated by selective ITK inhibition by blocking Th2 function and their production of inflammatory cytokines.

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

By protocol design, treatment is discontinued after one year or upon disease progression.

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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.

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

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

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

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● 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.

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 both, blood 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.

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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.

● In vitro data demonstrated that soquelitinib 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 soquelitinib and other studies that showed that soquelitinib inhibited Th2 cytokine production from normal CD4+ and malignant Sezary cells.

● Other in vitro studies showed that soquelitinib 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 soquelitinib 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 soquelitinib has the potential to enhance anti-tumor immunity representing a potentially novel approach to immunotherapy.

As of May 18, 2023, enrollment in the 200 mg cohort is continuing with 30 patients enrolled, including 20 evaluable for tumor response.

As of May 18, 2023, there were 3 CRs and 3 PRs with one of these PRs demonstrating continued regression of the tumor.

One of the patients with a CR and 2 with PRs remained on therapy.

A total of ten patients remained on therapy, including six who have not had their initial tumor response evaluation.

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

Soquelitinib is designed to induce 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 may be required for potential tumor response and disease control.

As of May 18, 2023, for patients with ALC above 900 per cubic milliliter of blood, objective responses (CR plus PR) were seen in 6 of 14 patients with disease control (CR, PR and stable disease) in 12 of 14 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.

The ALC biomarker is routinely measured, is consistent with soquelitinib’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 10 th 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 soquelitinib.

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

Waterfall Plot for Patients with ALC above 900 in the 200 mg Dose Cohort of the soquelitinib Phase 1/1b Clinical Trial for T Cell Lymphoma.

The plot shows the best percent change in tumor volume in the 14 patients (out of 20 total evaluable patients) that were measurable by CT scan with the exception of one patient measured by Modified Severity-Weighted Assessment Tool (“mSWAT”) as indicated in the plot below.

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.

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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 have received a communication from the U.S.

Food and Drug Administration (“FDA”) regarding our clinical development plans for soquelitinib.

As recommended by the FDA, we have requested a meeting with the FDA to discuss the design of a registrational Phase 3 clinical trial.

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

As reported at the International Conference of Malignant Lymphoma in June 2023, preclinical data suggest that ITK inhibition with soquelitinib has the potential to treat solid and hematological cancers through a novel mechanism of action that has modulated T cell differentiation and enhanced the anti-tumor immune response via Th1 skewing, increased T cell cytolytic capacity and reduced of T cell exhaustion in preclinical models.

Highlights of the presentation included:

● soquelitinib monotherapy provided statistically significant inhibition of tumor growth in established tumors in the following cancer models:

EL4 TCL, A20 B cell lymphoma and CT26 colon cancer.

● In the EL4 TCL model, treatment with soquelitinib led to increased infiltration of normal CD8+ T cells into the tumor.

In addition, these CD8+ T cells had higher expression of perforin, an effector molecule produced by killer T cells that is involved in killing cancer cells.

● In the CT26 colon cancer model, the depletion of CD8 cells reduced the activity observed for soquelitinib treatment, suggesting that its potential mechanism of action involves the production of normal CD8+ T cells.

● In the CT26 colon cancer model, treatment with soquelitinib reduced the expression of T cell exhaustion markers.

T cell exhaustion is a phenomenon seen in tumors and chronic infections where prolonged exposure to antigens results in exhausted or ineffective T cell function and inability to eliminate tumors or infections.

● In other murine studies using antigen primed T cells that were repeatedly stimulated, soquelitinib reduced the development of T cell exhaustion and reversed it in already exhausted T cells.

These reinvigorated T cells regained their cancer cell killing capacity.

These findings suggest that the inhibition of ITK by soquelitinib produced changes in the tumor microenvironment that enhanced anti-tumor immunity creating a less favorable environment for tumor growth and provides the rationale for clinical investigation in a monotherapy Phase 1 clinical trial of soquelitinib in solid tumors, which we plan to initiate in the first half of 2024.

On July 6, 2023, Corvus announced the publication of preclinical data on soquelitinib in bioRxiv, which highlighted the potential of selective inhibition of ITK to enhance anti-tumor immune response to hematologic and solid tumors and provide a novel approach to cancer immunotherapy.

Key results from the preclinical studies described in the publication demonstrated that soquelitinib:

● Selectively bound to and inhibited ITK function while sparing other closely related kinases, including resting lymphocyte kinase.

● Inhibited Th2 T cell function and the production of various Th2 cytokines leading to Th1 skewing and production of interferon gamma and tumor necrosis factor, which are important cytokines in tumor rejection.

Th2 cytokines have been previously implicated in promoting tumor growth and are also involved in autoimmune and allergic diseases.

● Activated cytotoxic killer cells and increases infiltration of these cells into tumors.

● Reduced and reversed T cell exhaustion resulting in a more potent and prolonged immune response.

T cell exhaustion is often a major reason for resistance to immune checkpoint therapy.

● Led to in vivo anti-tumor activity in several mouse tumor models, including colon, renal, melanoma, B cell and T cell tumor.

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)

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 renal cell cancer (“RCC”) in combination with ipilimumab (anti-CTLA-4) and nivolumab (anti-PD-1).

The clinical trial is expected to enroll up to 60 patients and interim data are anticipated before the end of 2023.

This study has fully enrolled patients in the Phase 1b safety portion of the trial and is now enrolling patients in the Phase 2 portion of the trial.

The safety portion of the study evaluated the safety of ciforadenant administered in combination with nivolumab and ipilimumab.

Ciforadenant preclinical data were presented at the Japanese Cancer Association and American Association for Cancer Research Precision Cancer Medicine International Conference, which is took place June 28 to June 30, 2023 in Kyoto, Japan.

The presentation highlighted data supporting the synergy between ciforadenant and immune checkpoint blockade (“ICB”), leading to a proinflammatory response.

Highlights of the presentation included:

● Depletion of myeloid cells abolished the synergy of ciforadenant and ICB in a murine melanoma model.

● The combination of ciforadenant with ICB upregulated the genes involved in the IL-12/STAT4 signaling axis, which led to the development of CXCR3+ IFNγ-producing Th1 helper cells.

● Ciforadenant treatment increased production of chemokine CXCL10, a ligand for recruitment of CXCR3+ Th1 helper cells into the tumor.

● Ciforadenant modulated antitumor responses by turning the tumor microenvironment into the proinflammatory state.

● The combination of ciforadenant with ICB promoted the production of several proinflammatory cytokines such as IL-6, TNFa, and IFNg.

Our third product candidate is mupadolimab, a humanized monoclonal antibody that is designed to react with a specific site on CD73.

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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.

Contemporaneously with the financing, Angel Pharmaceuticals licensed the rights to develop and commercialize our three clinical-stage candidates – soquelitinib, 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.

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

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.

Our net loss for the three and six months ended June 30, 2023 was $6.5 million and $14.4 million, respectively.

As of June 30, 2023, we had an accumulated deficit of $322.1 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 soquelitinib, 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 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.

Since our inception and through June 30, 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.

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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.

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.

During the six months ended June 30, 2023, we sold 2,329,851 shares of common stock under our at-the-market offering program resulting in net proceeds of $7.5 million.

As of June 30, 2023, $82.3 million remained available for sale under the 2023 Sales Agreement.

As of June 30, 2023, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $37.0 million.

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 soquelitinib, 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.

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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 three months ended March 31, 2023.

There have been no material changes to our significant accounting policies during the six months ended June 30, 2023.

Components of Results of Operations

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Our current planned research and development activities include the following:

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

● a potential registration clinical trial for CPI-818;

● enrollment and completion of our ongoing Phase 1/1b clinical trial of soquelitinib;

● a potential registrational clinical trial for soquelitinib;

● 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;

● a potential clinical trial of soquelitinib in solid tumors;

● process development and manufacturing of drug supply of soquelitinib and ciforadenant;

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

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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

Six Months Ended

Operating expenses:

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Research and Development Expenses

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):

Research and development expenses for the three and six months ended June 30, 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

Six Months Ended

Soquelitinib (formerly CPI-818)

Unallocated employee and overhead 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.

For the three months ended June 30, 2023, the increase in soquelitinib costs of $0.3 million as compared to the three months ended June 30, 2022, primarily consisted of an increase of $0.1 million in clinical trial expenses and an increase of $0.3 million in other outside service costs, which were partially offset by a decrease of $1.0 million in drug manufacturing costs.

For the six months ended June 30, 2023, the increase in soquelitinib costs of $1.6 million as compared to the six months ended June 30, 2022, primarily consisted of an increase of $0.6 million in drug manufacturing costs, an increase of $0.5 million in clinical trial expenses and an increase of $0.5 million in other outside service costs.

For the three months ended June 30, 2023, the decrease in ciforadenant costs of $0.1 million as compared to the three months ended June 30, 2022, primarily consisted of a decrease of $0.2 million in drug manufacturing costs, which were partially offset by an increase of $0.1 million in clinical trial expenses.

For the six months ended June 30, 2023, the decrease in ciforadenant costs of $0.4 million as compared to the six months ended June 30, 2022, primarily consisted of a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.1 million in other outside service costs.

For the three months ended June 30, 2023, the decrease in mupadolimab costs of $1.2 million as compared to the three months ended June 30, 2022, primarily consisted of a decrease of $0.9 million in drug manufacturing costs and a decrease of $0.3 million in clinical trial expenses as a result of pausing development of this product candidate.

For the six months ended June 30, 2023, the decrease in mupadolimab costs of $2.8 million as compared to the six months ended June 30, 2022, primarily consisted of a decrease of $1.5 million in drug manufacturing costs, a decrease of $1.1 million in clinical trial expenses and a decrease of $0.2 million in other outside service costs as a result of pausing development of this product candidate.

For the three months ended June 30, 2023, the increase in unallocated costs of less than $0.1 million as compared to the three months ended June 30, 2022, primarily consisted of an increase of $0.2 million in outside service costs, which were partially offset by a decrease of $0.2 million in personnel and related costs.

For the six months ended June 30, 2023, the increase in unallocated costs of $0.2 million as compared to the six months ended June 30, 2022, primarily consisted of an increase of $0.4 million in outside costs, which were partially offset by a decrease of $0.2 million in personnel and related costs.

General and Administrative Expense

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.

For the three months ended June 30, 2023, the decrease in general and administrative expenses of $0.4 million as compared to the three months ended June 30, 2022, primarily consisted of a decrease of $0.2 million in personnel and related costs and an decrease of $0.2 million in outside costs.

For the six months ended June 30, 2023, the decrease in general and administrative expenses of $0.8 million as compared to the six months ended June 30, 2022, primarily consisted of a decrease of $0.5 million in personnel and related costs and a decrease of $0.3 million in outside costs.

Interest Income and Other Expense, net

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.

For the three months ended June 30, 2023, the increase in interest income and other expense, net of $0.3 million as compared to the three months ended June 30, 2022, primarily consisted of an increase in interest income earned due to an increase in interest rates.

For the six months ended June 30, 2023, the increase in interest income and other expense, net of $0.7 million as compared to the six months ended June 30, 2022, primarily consisted of an increase in interest income earned due to an increase in interest rates.

Sublease Income – Related Party

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.

For the three months ended June 30, 2023, the decrease in sublease income of less than $0.1 million was due to the expiration of the building sublease agreement with Angel Pharmaceuticals in January 2023.

For the six months ended June 30, 2023, the decrease in sublease income of $0.2 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 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.

For the three months ended June 30, 2023, the decrease in loss from equity method investment of $0.3 million as compared to the three months ended June 30, 2022, primarily consisted of an decrease in our share of Angel Pharmaceutical’s loss for the three months ended June 30, 2023.

For the six months ended June 30, 2023, the increase in loss from equity method investment of $0.4 million as compared to the six months ended June 30, 2022, primarily consisted of an increase in our share of Angel Pharmaceutical’s loss for the six months ended June 30, 2023.

Liquidity and Capital Resources

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.

As of June 30, 2023, we had cash, cash equivalents and marketable securities of $37.0 million, and an accumulated deficit of $322.1 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 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.

Since our inception and through June 30, 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.

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.

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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.

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 March 31, 2023.

During the six months ended June 30, 2023, we sold 2,329,851 shares of common stock under our at-the-market offering program resulting in net proceeds of $7.5 million.

As of June 30, 2023, $82.3 million remained available for sale under the 2023 Sales Agreement.

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

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

● the progress, timing, costs and results of clinical trials for soquelitinib, including the potential registrational clinical trial for soquelitinib, and to a lesser extent, the timing, costs and results of the clinical trials for ciforadenant and mupadolimab;

● the timing, progress, costs and results of preclinical and clinical development activities for our other product candidates;

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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;

● other factors described in the section of this report entitled “Risk Factors.”

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

Three Months Ended

Six Months Ended

Net cash provided by (used in):

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Cash Flows from Operating Activities

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 used in operating activities during the six months ended June 30, 2023 was $13.3 million, which primarily consisted of a net loss of $14.4 million, adjusted by non-cash charges of $3.6 million, that primarily consisted of $1.0 million of stock compensation expense and $3.0 million of loss from equity method investment;

an increase of $0.1 million in prepaid and other current assets, an increase of $0.1 million in accounts payable, a decrease of $3.1 million in accrued and other current liabilities and a decrease of $0.6 million in accounts receivable – related party.

Cash used in operating activities during the six months ended June 30, 2022 was $12.5 million, which primarily consisted of a net loss of $16.7 million, adjusted by non-cash charges of $4.3 million, that primarily consisted of $1.4 million of stock compensation expense and $2.6 million of loss from equity method investment;

an increase of $0.4 million in prepaid and other current assets, a decrease of $0.1 million in accounts receivable, an increase of $0.8 million in accounts payable and a decrease of $0.7 million in accrued and other current liabilities.

Cash Flows from Investing Activities

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.

During the six months ended June 30, 2023, cash provided by investing activities was $0.3 million, which primarily consisted of proceeds from maturities of marketable securities of $34.2 million, which were partially offset by purchases of marketable securities of $33.8 million.

During the six months ended June 30, 2022, cash used in investing activities was $22.4 million, that consisted of purchases of marketable securities of $29.4 million, which were partially offset by proceeds from maturities of marketable securities of $7.0 million.

Cash Flows from Financing Activities

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.

During the six months ended June 30, 2023, the cash provided by financing activities of $7.5 million primarily consisted of net proceeds from the issuance of common stock through our at-the-market offering program.

During the six months ended June 30, 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 three months ended March 31, 2023, 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 six months ended June 30, 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