What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 75 added, 76 removed, 419 unchanged (26% of the section changed)

14 unchanged sentences

Other Information

Risk Factor Summary

Below is a summary of the principal factors that make an investment in our common stock speculative or risky.

This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.

● We have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future.

We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it.

● We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts.

● Our product candidates are in various stages of development and may fail or suffer delays that materially and adversely affect their commercial viability.

If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize such product candidates, or experience significant delays in doing so, our business will be materially harmed.

● Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results.

Any product candidate we or any of our existing or potential future collaborators advance into clinical trials, including soquelitinib, ciforadenant and mupadolimab, may not have favorable results in later clinical trials, if any, or receive regulatory approval.

● Any termination or suspension of, or delays in the commencement or completion of, our planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

● Our product candidates are subject to extensive regulation, compliance with which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.

● We are conducting and plan to conduct clinical trials for soquelitinib, ciforadenant and mupadolimab, and we and Angel Pharmaceuticals may in the future, conduct additional clinical trials of product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

● If we encounter difficulties enrolling subjects in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

● The occurrence of serious complications or side effects in connection with use of our product candidates, either in clinical trials or post-approval, could lead to discontinuation of our clinical development programs, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business, prospects, operating results and financial condition.

● We may not be successful in our efforts to identify or discover additional product candidates.

● We rely, and expect to continue to rely, on third parties to conduct our clinical trials.

If these third parties do not meet our deadlines or otherwise conduct the trials as required, our clinical development programs could be

delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected, or at all.

● We rely on third parties to conduct some or all aspects of our manufacturing, research and preclinical and clinical testing, and these third parties may not perform satisfactorily.

● We, or our third-party manufacturers, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.

● If we are unable to commercialize our product candidates or if we experience significant delays in obtaining regulatory approval for, or commercializing, any or all of our product candidates, our business will be materially and adversely affected.

● If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and, as a result, our stock price may decline.

● We face competition from entities that have developed or may develop product candidates for cancer, including companies developing novel treatments and technology platforms.

If these companies develop technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.

● An active, liquid and orderly market for our common stock may not be sustained.

● The trading price of the shares of our common stock could be highly volatile, and investors in our common stock could incur substantial losses.

PART I - FINANCIAL INFORMATION

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

19 unchanged sentences

$ 0.0001 par value;

10,000,000 shares authorized at June 30, 2023 and December 31, 2022;

0 shares issued and outstanding at June 30, 2023 and December 31, 2022

10,000,000 shares authorized at September 30, 2023 and December 31, 2022;

0 shares issued and outstanding at September 30, 2023 and December 31, 2022

Common stock:

$ 0.0001 par value;

290,000,000 shares authorized at June 30, 2023 and December 31, 2022;

48,898,362 and 46,553,511 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

290,000,000 shares authorized at September 30, 2023 and December 31, 2022;

49,038,582 and 46,553,511 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses:

16 unchanged sentences

(in thousands, except share data)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Comprehensive

11 unchanged sentences

Balance at June 30, 2023

Six Months Ended June 30, 2022

Common stock issued on exercise of stock options

Stock-based compensation expense

Unrealized gain on marketable securities

Foreign currency translation adjustment

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

Balance at September 30, 2023

Nine Months Ended September 30, 2022

Comprehensive

9 unchanged sentences

Balance at June 30, 2022

Stock-based compensation expense

Unrealized loss on marketable securities

Foreign currency translation adjustment

Balance at September 30, 2022

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

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

21 unchanged sentences

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the period

24 unchanged sentences

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

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

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

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

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

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

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

manufacturing and supply, sales and marketing and general operations.

In addition, other unanticipated costs may arise.

2 unchanged sentences

In addition, its operating plan may change as a result of many factors, including those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 28, 2023 and this Quarterly Report on Form 10-Q.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 322.1 million as of June 30, 2023.

The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 328.1 million as of September 30, 2023.

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

1 unchanged sentence

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

As of June 30, 2023, the Company had cash, cash equivalents and short-term marketable securities of $ 37.0 million.

As of September 30, 2023, the Company had cash, cash equivalents and short-term marketable securities of $ 32.2 million.

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

8 unchanged sentences

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

The condensed consolidated results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The condensed consolidated results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2023.

26 unchanged sentences

The Company’s significant accounting policies are described in Note 2 to its consolidated financial statements for the year ended December 31, 2022, included in its Annual Report on Form 10-K.

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

There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2023.

Recent Accounting Pronouncements

15 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net loss - basic and diluted

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Outstanding options

12 unchanged sentences

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

The following tables present information as of June 30, 2023 and December 31, 2022 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

June 30, 2023

The following tables present information as of September 30, 2023 and December 31, 2022 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands):

September 30, 2023

Fair Value Measured Using

5 unchanged sentences

Marketable securities

As of June 30, 2023 marketable securities had a maximum remaining maturity of twelve months .

As of June 30, 2023 and December 31, 2022, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

June 30, 2023

As of September 30, 2023 marketable securities had a maximum remaining maturity of nine months .

As of September 30, 2023 and December 31, 2022, the fair value of available for sale marketable securities by type of security were as follows (in thousands):

September 30, 2023

Treasury securities

4 unchanged sentences

Equity Method Investment

As of June 30, 2023 and December 31, 2022, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

The Company recognized its share of losses in Angel for the total amount of $ 1.3 million and $ 3.0 million as loss from equity method investment on the consolidated statement of operations for the three and six months ended June 30, 2023, respectively.

As of September 30, 2023 and December 31, 2022, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP.

The Company recognized its share of losses in Angel for the total amount of $ 0.9 million and $ 3.9 million as loss from equity method investment on the consolidated statement of operations for the three and nine months ended September 30, 2023, respectively.

Summary Financial Information

1 unchanged sentence

Balance Sheet Data

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Statement of Operations Data

22 unchanged sentences

In February 2017, the Company made a milestone payment of $ 3.0 million to Vernalis following the expansion of a cohort of patients with renal cell cancer treated with single agent ciforadenant in the Company’s Phase 1/1b clinical trial.

During the six months ended June 30, 2023, no clinical or regulatory milestones were completed or paid to Vernalis and the aggregate potential milestone payments were approximately $ 220 million for all indications as of June 30, 2023.

During the nine months ended September 30, 2023, no clinical or regulatory milestones were completed or paid to Vernalis and the aggregate potential milestone payments were approximately $ 220 million for all indications as of September 30, 2023.

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

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

The royalties on other licensed products that do not include ciforadenant also increase with the amount of net sales on a product-by-product and country by country basis

and range from the low single digits up to the mid single digits on a country by country net sales basis.

The royalties on other licensed products that do not include ciforadenant also increase with the amount of net sales on a product-by-product and country

by country basis and range from the low single digits up to the mid single digits on a country by country net sales basis.

The Company is also obligated to pay to Vernalis certain sales milestones as indicated above when worldwide net sales reach specified levels over an agreed upon time period.

13 unchanged sentences

The Company is also required to make development and sales milestone payments to Monash with respect to the licensed products.

During the six months ended June 30, 2023, no development or sales milestones were completed or paid to Monash and the aggregate potential milestones were $ 45.1 million as of June 30, 2023.

During the nine months ended September 30, 2023, no development or sales milestones were completed or paid to Monash and the aggregate potential milestones were $ 45.1 million as of September 30, 2023.

The Company is also required to pay to Monash tiered royalties on net sales of licensed products sold by it, its affiliates and its sublicensees at a rate ranging in the low single digits.

4 unchanged sentences

Balance Sheet Components (in thousands)

September 30,

Prepaid and Other Current Assets

13 unchanged sentences

Accrued legal and accounting

During the three months ended June 30, 2023 and 2022, the Company recorded approximately $ 36,000 and $ 92,000 in depreciation expense, respectively, and during the six months ended June 30, 2023 and 2022, the Company recorded approximately $ 93,000 and $ 179,000 in depreciation expense, respectively.

As of June 30, 2023, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

During the three months ended September 30, 2023 and 2022, the Company recorded approximately $ 30,000 and $ 94,000 in depreciation expense, respectively, and during the nine months ended September 30, 2023 and 2022, the Company recorded approximately $ 123,000 and $ 273,000 in depreciation expense, respectively.

As of September 30, 2023, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock.

Each share of common stock is entitled to one vote.

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

As of June 30, 2023, no dividends on common stock had been declared.

As of September 30, 2023, no dividends on common stock had been declared.

In March 2020, the Company 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 its sales agent.

3 unchanged sentences

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 six months ended June 30, 2023, the Company sold 2,329,851 shares of common stock under its 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.

During the nine months ended September 30, 2023, the Company sold 2,461,903 shares of common stock under its at-the-market offering program resulting in net proceeds of $ 7.8 million.

As of September 30, 2023, $ 81.9 million remained available for sale under the 2023 Sales Agreement.

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

September 30,

Shares available for future option grants

18 unchanged sentences

Options granted

( 1,002,000 )

Options exercised

Options forfeited

Balance at June 30, 2023

Balance at September 30, 2023

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development

General and administrative

During the six months ended June 30, 2023 and 2022, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

During the nine months ended September 30, 2023 and 2022, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

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

9 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, the right-of-use asset under operating lease was $ 1.7 million and $ 2.2 million, respectively.

The elements of lease expense for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):

As of September 30, 2023 and December 31, 2022, the right-of-use asset under operating lease was $ 1.4 million and $ 2.2 million, respectively.

The elements of lease expense for the three and nine months ended September 30, 2023 and 2022 were as follows (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Statements of operations and

September 30,

comprehensive loss location

11 unchanged sentences

Discount rate

As of June 30, 2023, minimum rental commitments under this lease were as follows (in thousands):

As of September 30, 2023, minimum rental commitments under this lease were as follows (in thousands):

Year Ended December 31 (in thousands)

10 unchanged sentences

Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations.

For the three and six months ended June 30, 2023, the Company recognized $ 0.0 million and $ 0.1 million of sublease income, respectively.

For the three and nine months ended September 30, 2023, the Company recognized $ 0.0 million and $ 0.1 million of sublease income, respectively.

Commitments and Contingencies

19 unchanged sentences

Third-party and internal personnel costs incurred by the Company are billed to Angel Pharmaceuticals in the period incurred and recorded as an offset to expenses.

During the six months ended June 30, 2023 and 2022, the Company billed Angel for $ 0.0 million and approximately $ 120,000 , respectively, in internal personnel costs and approximately $ 48,000 and $ 252,000 , respectively, in third-party party costs.

During the nine months ended September 30, 2023 and 2022, the Company billed Angel for $ 0.0 million and approximately $ 140,000 , respectively, in internal personnel costs and approximately $ 59,000 and $ 631,000 , respectively, in third-party party costs.

In addition to the provision of clinical supplies to Angel Pharmaceuticals, Angel Pharmaceuticals may provide clinical supplies or research services to the Company on an as needed basis.

These costs are recorded as research and development expense.

During the three and six months ended June 30, 2023, Angel Pharmaceuticals billed the Company for approximately $ 0.1 million and $ 0.2 million in research services, respectively.

During the three and nine months ended September 30, 2023, Angel Pharmaceuticals billed the Company for approximately $ 9,000 and $ 225,000 million in research services, respectively.

In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel Pharmaceuticals.

2 unchanged sentences

Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations.

During the six months ended June 30, 2023 and 2022, the Company recognized approximately $ 0.1 million and $ 0.3 million of sublease income, respectively.

During the nine months ended September 30, 2023 and 2022, the Company recognized approximately $ 0.1 million and $ 0.3 million of sublease income, respectively.

In July 2021, Linda S.

1 unchanged sentence

ICON is a clinical research organization and provides services to support the Company’s clinical trials.

During the six months ended June 30, 2023 and 2022, the Company recorded approximately $ 0.2 million and $ 0.2 million, respectively, in clinical trial expenses under its agreements with ICON.

During the nine months ended September 30, 2023 and 2022, the Company recorded approximately $ 0.2 million and $ 0.2 million, respectively, in clinical trial expenses under its agreements with ICON.

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

What changed 10-Q

Item 1. Financial Statements