Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes for the year ended December 31, 2022, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 28, 2023.
This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.
Overview
We are a clinical stage biopharmaceutical company. Our strategy is to focus our efforts on the development of immune modulator product candidates with the potential to treat solid cancers, T cell lymphomas, autoimmune, allergic and infectious diseases. We have three product candidates which are in clinical development for treatment of various solid tumors and lymphomas.
Our lead product candidate, soquelitinib (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 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 through the function of Th2 cells. 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. 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. 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. 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 soquelitinib in disease-specific patient cohorts. By protocol design, treatment is discontinued after one year or upon disease progression. 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 preclinical 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:
20
Table of Contents
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.
● 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 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.
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 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)
21
Table of Contents
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.
In August 2023, we completed an End-of-Phase/Pre-Phase 3 meeting with the Food and Drug Administration (“FDA”) regarding our plans to conduct a potentially registrational Phase 3 clinical trial of soquelitinib in relapsed PTCL. The FDA provided feedback on our plans and proposed registration trial and we anticipate that we will be able to initiate this clinical trial in early 2024. The clinical trial is designed to enroll a total of 150 patients with relapsed PTCL that have received ≥ 1 prior therapy and ≤ 3 prior therapies. Number of prior therapies in this range selects for immunocompetent patients. Patients will be randomized 1:1 to soquelitinib 200 mg two-times a day or standard of care chemotherapy. The standard of care agent will be based on physicians choice of either gemcitabine, belinostat or pralatrexate. The primary endpoint will be progression-free survival. Secondary endpoints will include objective response rate and overall survival. We are recruiting investigators and anticipate that leading academic and private medical centers with significant experience in lymphoma research will participate in the trial, including a principal investigator who has conducted other Phase 3 clinical trials in T cell lymphoma and authored many peer-reviewed articles on lymphomas.
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.
22
Table of Contents
● 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 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 in early 2024. 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. 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.
23
Table of Contents
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 – 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 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 and nine months ended September 30, 2023 was $6.0 million and $20.4 million, respectively. As of September 30, 2023, we had an accumulated deficit of $328.1 million. We expect our 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 September 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.
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.
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 nine months ended September 30, 2023, we sold 2,461,903 shares of common stock under our 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.
24
Table of Contents
As of September 30, 2023, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $32.2 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 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. Such financing would result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates, including possible future revenue streams. In addition, additional funding may not be available to us on acceptable terms or at all and any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.
We currently have no manufacturing capabilities and do not intend to establish any such capabilities. We have no commercial manufacturing facilities for our product candidates. As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices.
Significant Accounting Policies
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, 2023.
Components of Results of Operations
Revenue
To date, we have not generated any revenues. We do not expect to receive any revenues from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into revenue-generating collaboration agreements with third parties.
Research and Development Expenses
Our research and development expenses consist primarily of costs incurred to conduct research and development of our product candidates. We record research and development expenses as incurred. Research and development expenses include:
● employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense;
● external research and development expenses incurred under arrangements with third parties, such as contract research organizations, preclinical testing organizations, contract manufacturing organizations, academic and non-profit institutions and consultants;
● costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;
● license fees; and
25
Table of Contents
● other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.
We plan to increase our research and development expenses substantially as we continue the development and potential commercialization of our product candidates. Our current planned research and development activities include the following:
● enrollment and completion of our ongoing Phase 1/1b clinical trial of soquelitinib;
● a potential Phase 3 registrational clinical trial for soquelitinib in PTCL;
● enrollment and completion of our Phase 1b/2 clinical trial with ciforadenant in collaboration with the Kidney Cancer Research Consortium;
● a potential clinical trial of soquelitinib in solid tumors;
● a potential clinical trial of soquelitinib in atopic dermatitis;
● process development and manufacturing of drug supply of soquelitinib and ciforadenant; and
● preclinical studies under our other programs in order to select development product candidates.
In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business.
Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in “Part II, Item 1A—Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses include personnel costs, expenses for outside professional services and allocated expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expense related to our office and research and development facility.
We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of one or more of our product candidates.
26
Table of Contents
Results of Operations
Comparison of the periods below as indicated (in thousands) :
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
Change
2023
2022
Change
Operating expenses:
Research and development
$
3,965
$
10,365
$
(6,400)
$
12,527
$
20,388
$
(7,861)
General and administrative
1,595
2,108
(513)
5,229
6,511
(1,282)
Total operating expenses
5,560
12,473
(6,913)
17,756
26,899
(9,143)
Loss from operations
(5,560)
(12,473)
6,913
(17,756)
(26,899)
9,143
Interest income and other expense, net
425
225
200
1,204
336
868
Sublease income - related party
—
147
(147)
56
439
(383)
Loss from equity method investment
(865)
(2,730)
1,865
(3,880)
(5,367)
1,487
Net loss
$
(6,000)
$
(14,831)
$
8,831
$
(20,376)
$
(31,491)
$
11,115
Research and Development Expenses
Research and development expenses for the three and nine months ended September 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
Nine Months Ended
September 30,
September 30,
2023
2022
Change
2023
2022
Change
Soquelitinib (CPI-818)
$
1,183
$
858
$
325
$
3,836
$
1,953
$
1,883
Ciforadenant
287
186
101
826
1,116
(290)
Mupadolimab
195
6,681
(6,486)
619
9,948
(9,329)
Unallocated employee and overhead costs
2,300
2,640
(340)
7,246
7,371
(125)
$
3,965
$
10,365
$
(6,400)
$
12,527
$
20,388
$
(7,861)
For the three months ended September 30, 2023, the increase in soquelitinib costs of $0.3 million as compared to the three months ended September 30, 2022, primarily consisted of an increase of $0.1 million in clinical trial expenses and an increase of $0.5 million in other outside service costs, which were partially offset by a decrease of $0.3 million in drug manufacturing costs.
For the nine months ended September 30, 2023, the increase in soquelitinib costs of $1.9 million as compared to the nine months ended September 30, 2022, primarily consisted of an increase of $0.4 million in drug manufacturing costs, an increase of $0.6 million in clinical trial expenses and an increase of $0.9 million in other outside service costs.
For the three months ended September 30, 2023, the increase in ciforadenant costs of $0.1 million as compared to the three months ended September 30, 2022, primarily consisted of an increase of $0.3 million in clinical trial expenses, which was partially offset by a decrease of $0.2 million other outside service costs.
For the nine months ended September 30, 2023, the decrease in ciforadenant costs of $0.3 million as compared to the nine months ended September 30, 2022, primarily consisted of a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.2 million in other outside service costs, which were partially offset by an increase of $0.2 million in clinical trial expenses.
For the three months ended September 30, 2023, the decrease in mupadolimab costs of $6.5 million as compared to the three months ended September 30, 2022, primarily consisted of a decrease of $6.3 million in drug manufacturing costs and a decrease of $0.2 million in clinical trial expenses as a result of pausing development of this product candidate.
27
Table of Contents
For the nine months ended September 30, 2023, the decrease in mupadolimab costs of $9.3 million as compared to the nine months ended September 30, 2022, primarily consisted of a decrease of $7.7 million in drug manufacturing costs, a decrease of $1.3 million in clinical trial expenses and a decrease of $0.3 million in other outside service costs as a result of pausing development of this product candidate.
For the three months ended September 30, 2023, the decrease in unallocated costs of $0.3 million as compared to the three months ended September 30, 2022, primarily consisted of a decrease in personnel and related costs.
For the nine months ended September 30, 2023, the decrease in unallocated costs of $0.1 million as compared to the nine months ended September 30, 2022, primarily consisted of a decrease of $0.6 million in personnel and related costs, which was partially offset by an increase of $0.5 million in other outside costs.
General and Administrative Expense
For the three months ended September 30, 2023, the decrease in general and administrative expenses of $0.5 million as compared to the three months ended September 30, 2022, primarily consisted of a decrease of $0.1 million in personnel and related costs and a decrease of $0.4 million in outside costs.
For the nine months ended September 30, 2023, the decrease in general and administrative expenses of $1.3 million as compared to the nine months ended September 30, 2022, primarily consisted of a decrease of $0.6 million in personnel and related costs and a decrease of $0.7 million in outside costs.
Interest Income and Other Expense, net
For the three months ended September 30, 2023, the increase in interest income and other expense, net of $0.2 million as compared to the three months ended September 30, 2022, primarily consisted of an increase in interest income earned due to an increase in interest rates.
For the nine months ended September 30, 2023, the increase in interest income and other expense, net of $0.9 million as compared to the nine months ended September 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 September 30, 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 nine months ended September 30, 2023, the decrease in sublease income of $0.4 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, 2023, the decrease in loss from equity method investment of $1.9 million as compared to the three months ended September 30, 2022, primarily consisted of a decrease in Angel Pharmaceuticals’ loss for the three months ended September 30, 2023.
For the nine months ended September 30, 2023, the decrease in loss from equity method investment of $1.5 million as compared to the nine months ended September 30, 2022, primarily consisted of a decrease in Angel Pharmaceuticals’ loss for the nine months ended September 30, 2023.
28
Table of Contents
Liquidity and Capital Resources
As of September 30, 2023, we had cash, cash equivalents and marketable securities of $32.2 million, and an accumulated deficit of $328.1 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 September 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, a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, and the sale of common stock through at-the-market equity offering programs, in which we raised approximately $38.0 million, in each case net of underwriting discounts and commissions and offering expenses.
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, 2023. The amounts and timing of our actual expenditures depend on numerous factors, including:
● 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;
● the number and scope of preclinical and clinical programs we decide to pursue;
● the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights;
● the cost and timing of regulatory approvals;
● 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;
● other factors described in the section of this report entitled “Risk Factors.”
We expect to increase our spending in connection with the development and commercialization of our product candidates. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings. We may also enter into additional collaboration arrangements or selectively partner for clinical development and commercialization. The sale of additional equity would result in dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. In addition, sufficient additional funding may not be available on acceptable terms, or at all. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could have a material effect on our business, financial condition and results of operations.
29
Table of Contents
Summary of Statement of Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Nine Months Ended
September 30,
2023
2022
Net cash provided by (used in):
Operating activities
$
(18,768)
$
(19,476)
Investing activities
17,859
(19,394)
Financing activities
7,855
—
Net increase in cash and cash equivalents
$
6,946
$
(38,870)
Cash Flows from Operating Activities
Cash used in operating activities during the nine months ended September 30, 2023 was $18.8 million, which primarily consisted of a net loss of $20.4 million, adjusted by non-cash charges of $4.8 million, that primarily consisted of $1.6 million of stock compensation expense and $3.9 million of loss from equity method investment; an increase of $0.1 million in prepaid and other current assets, a decrease of $0.6 million in accounts payable, a decrease of $3.0 million in accrued and other current liabilities, a decrease of $0.6 million in accounts receivable – related party and a decrease of $0.1 million in operating lease liability net of operating lease right-of-use assets amortization.
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 Flows from Investing Activities
During the nine months ended September 30, 2023, cash provided by investing activities was $17.9 million, which primarily consisted of proceeds from maturities of marketable securities of $53.5 million, which were partially offset by purchases of marketable securities of $35.6 million.
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.
Cash Flows from Financing Activities
During the nine months ended September 30, 2023, the cash provided by financing activities of $7.9 million primarily consisted of net proceeds from the issuance of common stock through our at-the-market offering program.
During the nine months ended September 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 nine months ended September 30, 2023, as compared to those disclosed in our Annual Report on Form 10-K.
30
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.