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 condensed consolidated financial statements and notes for the year ended December 31, 2024, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 25, 2025.
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 developing product candidates that precisely target proteins that are critical to immune cell maturation and function. We believe our proprietary product candidates have broad potential to address cancers, immune mediated diseases and inflammatory diseases. Our lead product candidate, soquelitinib (formerly CPI-818), is designed to bind specifically to a protein, interleukin 2 inducible T cell kinase (ITK), involved in T cell activation, T cell receptor signaling and T cell differentiation and function. Based on the proposed mechanism of action, we believe soquelitinib has the potential to be utilized to inhibit the production of a number of inflammatory cytokines involved in diseases such as atopic dermatitis, asthma, psoriasis and fibrotic diseases. In preclinical studies, soquelitinib has affected T cell differentiation leading to enhanced function of T cells involved in tumor cell killing.
Since the immune cells targeted by our product candidates play a role in many diseases, our strategy is to leverage our research and development capabilities by evaluating our product candidates in clinical trials where there is an understanding of the role of specific T cells in the target indication and where we believe such product candidates have the broadest potential. We believe this strategy has enabled us to move rapidly from preclinical to clinical trials in diverse disease areas, each with large unmet needs. Soquelitinib entered a registrational, Phase 3 clinical trial for relapsed T cell lymphomas and is also being evaluated in a randomized, placebo controlled Phase 1 trial in patients with atopic dermatitis. We have two additional product candidates which are in clinical development for the treatment of various solid tumors, also based on modulation of immune function.
Soquelitinib (CPI-818), ITK Inhibitor
Soquelitinib 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 uncontrolled tonic signaling through the T cell receptor pathway, which involves ITK. Inhibition of ITK with soquelitinib 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 environment in the tissues that inhibits an 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. A normal functioning immune system maintains balance between inflammation, needed to fight infection or eliminate noxious agents, and suppression of inflammation necessary when the inflammatory signals are eliminated. This balance is restored through the action of T regulatory cells, which dampen inflammatory responses. ITK plays a vital role in the function of these regulatory T cells where it acts to modulate immune responses.
In ITK genetic knockout mice, which completely lack expression of ITK, T cells exhibit defects in T helper cell differentiation and cytokine secretion but retain the ability to differentiate into cytotoxic T cells that secrete IL-2 and
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interferon gamma (“IFNg”), which are the cells responsible for tumor rejection. We believe that skewing T helper cell differentiation to favor cytotoxic T cells, known as Th1 skewing, may be beneficial in treating T cell lymphomas and many other types of cancer. Mice with genetic knock-out of ITK also demonstrate a reduction in Th2 cells, which produce the cytokines that are often responsible for autoimmunity and allergy such as interleukin (Il) Il-4, Il-5, Il-13, Il-17 and many others.
We have designed and developed soquelitinib to covalently target the cysteine amino acid residue at position 442 in the ITK protein. We believe this irreversible targeting of ITK has the potential to provide a potent, selective and prolonged duration of activity without the need for high systemic exposures and thereby improve the therapeutic window. This approach was previously used by our cofounders to generate ibrutinib. Selective inhibition of ITK can block the production and function of Th2 and Th17 helper T cells, potentially leading to a biasing toward the differentiation of naïve T cells into Th1 helper T 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, based on our preclinical and Phase 1/1b data from our T cell lymphoma clinical trial, that soquelitinib has the potential to reprogram normal immune responses that also could be beneficial for the treatment of certain autoimmune, inflammatory and allergic diseases. Overactive Th2 and Th17 cells are known to play a role in autoimmune, inflammatory and allergic diseases, which can potentially be ameliorated by selective ITK inhibition by blocking Th2 and Th17 function and their production of inflammatory cytokines such as IL4, IL5, IL13, IL17 and others.
Soquelitinib for treatment of T cell lymphomas
Soquelitinib is currently being studied both in cancer and in immune mediated disease. A Phase 1/1b clinical trial is being conducted in patients with relapsed T cell lymphomas that was designed to select the optimal dose of soquelitinib and evaluate its safety, pharmacokinetics (“PK”), target occupancy, immunologic effects, biomarkers and efficacy. The study is no longer enrolling new patients, however, some of the patients remain on therapy and are continuing to receive follow-up monitoring. The study employs an adaptive, expansion cohort design, with an initial phase that evaluated escalating doses (100, 200, 400 or 600 mg taken twice a day) in successive cohorts of patients, followed by a second phase that was designed to evaluate safety and tumor response to the recommended dose of soquelitinib in disease-specific patient cohorts. The study enrolled patients from the United States, Australia, China and South Korea with several types of advanced, refractory T cell lymphomas. No dose limiting toxicities were observed in any of the dose levels. As of November 27, 2024, and in a safety population of 75 patients, no hematologic, renal or hepatic treatment-related adverse events were observed and the most common grade 3 to 4 adverse event was pruritus, seen in four patients with lymphoma involving skin. The optimum dose was determined to be 200 mg twice per day based on anti-tumor efficacy and pharmacodynamic studies which revealed full occupancy of the ITK active site by the drug. This dose was also consistent with dose-response effects seen in preclinical experiments both in vitro and in vivo.
Interim data from the Phase 1/1b clinical trial were presented at the American Society of Hematology Annual Meeting (“ASH”) in December 2023. At that time, we also announced interim data from the trial as of November 21, 2023 on 21 evaluable patients receiving a dose of 200 mg twice per day (“200 mg BID”) and revealed an objective response rate (“ORR”) of 33.3% with 3 complete responses (“CRs”) and 4 partial responses (“PRs”).
As of July 16, 2024, 25 patients (≤ 3 prior therapies) were enrolled in the trial at the 200 mg BID dose, including 23 evaluable patients. For the 23 evaluable patients, objective responses (CR plus PR) were seen in nine patients (39%), including six CRs (26%) and three PRs. The median progression free survival was 6.2 months. As of November 27, 2024, four of the responding patients remained on therapy; 3 with CRs and one with a PR.
In March 2025, updated clinical results of the Phase 1/1b trial were presented at the T Cell Lymphoma Forum. For the 23 evaluable patients:
● Objective responses (CRs plus PRs) were seen in nine patients (39%), including six CRs (26%) and three PRs.
● The median duration of response for the nine patients with objective response by Lugano criteria was 17.2
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months.
● Three patients continue on therapy at 25+ months, 18+ months and 14+ months.
● Kaplan Meier estimated median progression free survival (“PFS”) was 6.2 months.
● At 18-month follow-up, the PFS rate was 30%, which compares favorably to 18-month PFS of <20% with belinostat or pralatrexate.
● Peripheral blood samples were collected from patients both prior to the initiation of soquelitinib therapy and during the course of treatment. These samples were analyzed for markers of T cell exhaustion in normal T cells. The results indicated that the majority of patients exhibited a reduction in T cell exhaustion markers on both CD4+ and CD8+ cells after 21 days of treatment. T cell exhaustion is a state in which T cells exhibit diminished functionality due to prolonged exposure to antigens.
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 peripheral T cell lymphoma (“PTCL”). The FDA provided feedback on our proposed registration trial, including the proposed endpoints. We initiated this clinical trial in the third quarter of 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. Patients are being randomized 1:1 to soquelitinib 200 mg two-times a day or one of the standard of care chemotherapies. The standard of care agent is selected based on the physician’s choice of either belinostat or pralatrexate. The primary endpoint is progression-free survival. Secondary endpoints include objective response rate, overall survival and duration of response. Leading academic and private medical centers with significant experience in lymphoma research are participating in the trial, including investigators who have conducted other Phase 3 clinical trials in T cell lymphoma and authored many peer-reviewed articles on lymphomas. There are currently no FDA fully approved agents for the treatment of relapsed PTCL. In July 2024, soquelitinib received Fast Track designation for treatment of adult patients with relapsed or refractory peripheral T cell lymphoma after at least 2 lines of systemic therapy.
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 based on its novel proposed mechanism of action. Tumor immune responses were enhanced by the modulation of T cell differentiation resulting in increased T cell cytolytic capacity, increased migration of T cells into the tumor and reduced T cell exhaustion.
We believe 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 trial of soquelitinib in solid tumors. We are planning a Phase 1b/2 clinical trial, in collaboration with the Kidney Cancer Research Consortium, of soquelitinib in solid tumors in patients with renal cell cancer who have failed checkpoint inhibitor therapy.
In December 2024, we and our academic collaborators published results describing the chemistry, enzymology and preclinical anti-tumor activity of soquelitinib in the journal npj Drug Discovery. Key results from the publication include 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.
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● 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.
In November 2023, we announced the posting of preclinical data on soquelitinib in bioRxiv that demonstrated that ITK’s selective inhibition produced therapeutic benefits in several autoimmune and allergy preclinical models, including psoriasis, asthma, pulmonary fibrosis, scleroderma and graft versus host disease. The mechanism of action involves the inhibition of Th2 and Th17 cells and their subsequent production of cytokines such as IL-4, IL-5, IL-17 and other cytokines involved in these diseases. The novel mechanism is a result of ITK inhibition and blockade of formation of Th2 and Th17 cells.
The FDA has granted Fast Track designation to soquelitinib for the treatment of adult patients with relapsed or refractory peripheral T cell lymphoma (“PTCL”) after at least two lines of systemic therapy. In addition to Fast Track designation, soquelitinib has also been granted FDA Orphan Drug Designation for the treatment of T cell lymphoma.
Soquelitinib for treatment of atopic dermatitis
In April 2024, we initiated a randomized, double-blind, placebo-controlled Phase 1 clinical trial with soquelitinib in patients with moderate to severe atopic dermatitis that previously failed one prior topical or systemic therapy. The clinical trial was planned to enroll 64 patients into one of four dosing cohorts in a 3:1 ratio (12 active and 4 placebo) to receive either soquelitinib or placebo. The cohorts are sequentially enrolled and will examine 100 mg oral twice per day, 200 mg oral once per day and 200 mg oral twice per day and 400 mg oral oncer per day. Patients are treated for 28 days and are then followed for an additional 30 days with no therapy. The primary endpoints include safety and tolerability, and efficacy, measured by improvement in Eczema Area and Severity Index (“EASI”) score, Investigator Global Assessment (“IGA”), reduction in itch and various cytokine biomarkers. EASI scores are also evaluated by the percent of patients that achieve a specified percent reduction in EASI score – EASI 50 for patients that achieved a 50% reduction; EASI 75 for a 75% reduction; and EASI 90 for a 90% reduction. Corvus and a data monitoring committee will be able to monitor the data from the trial as the trial progresses.
The doses in our Phase 1 atopic dermatitis clinical trial were selected based on the Company’s prior experience evaluating soquelitinib in T cell lymphoma patients. The doses in the atopic dermatitis trial studied in cohorts 1 and 2 are lower than the 200 mg orally twice a day dosing regimen (same dose as cohort 3 of the atopic dermatitis trial), which is the level that has been shown to provide complete ITK occupancy and that is being evaluated in the Company’s ongoing registrational Phase 3 clinical trial of soquelitinib in peripheral T cell lymphoma.
On January 13, 2025, we reported top-line results from 16 patients in Cohort 1 (12 patients in the soquelitinib group receiving 100 mg orally twice per day vs. four receiving placebo) and 10 patients in Cohort 2 (seven patients in the soquelitinib group receiving 200 mg orally once per day vs. three receiving placebo) for which 28 days of treatment had been completed. For those 19 patients in the soquelitinib group, 26% achieved IGA 0 or 1 and 37% achieved EASI 75; and of the seven in the placebo group, none achieved IGA 0 or 1 or EASI 75.
On May 8, 2025, we reported enrollment into cohorts 1, 2 and 3 has been completed for a total of 48 patients. The data covers 32 patients receiving soquelitinib and 12 placebos with 28-day follow-up, and four additional patients receiving soquelitinib with 15-day follow-up from cohort 3. These four patients have not yet completed the 28-day treatment course.
Patients enrolled in cohort 3 had more severe disease with higher mean baseline EASI scores compared to cohorts 1 and 2. A higher proportion also failed prior systemic therapies. Across all cohorts, the mean EASI scores are 22.3 and 21.2 for active and placebo, respectively. Placebo (n=12) and active (n=36) treatment groups were well-balanced with regard to baseline characteristics.
The percent reduction in mean EASI scores at 28 days for the combined cohort 1 and 2 group was 54.6% for
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patients receiving soquelitinib and 30.6% for patients receiving placebo. In cohort 3, the percent reduction in mean EASI score at 28 days was 71.1% for patients receiving soquelitinib and 42.1% for patients receiving placebo.
Figure 1 below shows the percent of patients that achieved IGA 0 or 1 or EASI 75 at day 28 of treatment. The placebo patients from cohort 1 (n=4), cohort 2 (n=4) and cohort 3 (n=4) are combined, with no placebo patients achieving IGA 0 or 1 or EASI 75. IGA 0 or 1 and EASI 75 have been determined by the U.S. Food and Drug Administration (FDA) to be clinically meaningful and approvable endpoints and have been the endpoints used in clinical trials for other FDA approved treatments for atopic dermatitis.
Figure 1: Percent Patients Achieving Endpoints IGA 0 or 1, EASI 75 at Day 28 of Treatment
Soquelitinib was well tolerated, with no dose limiting toxicities (DLTs) and no clinically significant laboratory abnormalities observed in any of the cohorts. No interruption of drug dosing was seen in any of the cohorts. Grade 1/2 adverse events (treatment related and unrelated) were seen in 33.3% of patients receiving soquelitinib and 25% receiving placebo. Only one treatment related adverse event of grade 1 nausea was reported with soquelitinib treatment. To date, over 100 patients have been treated with soquelitinib on our lymphoma and atopic dermatitis clinical trials. Some of the lymphoma patients received continuous therapy for up to two years.
As reported previously, relationships between reductions in certain cytokines with improvement in EASI scores were observed. Reductions in serum cytokine levels were seen for IL-5, IL-9, IL-17, IL-31, IL-33, TSLP and TARC. Differences between responding and non-responding patients were found, while no such relationships were seen in the placebo group. Increasing trends were seen in numbers of circulating T regulatory cells, consistent with the presumed mechanism of action of soquelitinib.
The Company amended the clinical trial protocol to replace cohort 4 (400 mg once per day) with 24 patients randomized 1:1 between active and placebo. Treatment for this group will be extended to 8 weeks with additional 30-day follow-up with no treatment. The dose level for this group is planned to be the same as cohort 3 – 200 mg orally twice per day.
Beyond our current and planned clinical trials for soquelitinib, we also continue to advance our next-generation ITK inhibitor preclinical product candidates, which were designed to deliver precise T-cell modulation that is optimized
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for specific immunology indications. The next-generation ITK inhibitor candidates are part of our ongoing business development efforts to maximize the potential of our ITK inhibitor programs and other programs.
We have issued patents covering composition of matter and uses of our ITK inhibitors and hold exclusive worldwide rights (except for greater China) for all indications.
Ciforadenant Adenosine A2A Receptor Antagonist
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. In 2018, we published preclinical findings in animal tumor models demonstrating that treatment with anti-CTLA4 antibody combined with ciforadenant provided synergistic anti-tumor activity based on a novel proposed mechanism of action. We are collaborating with the Kidney Cancer Research Consortium to evaluate ciforadenant in an open label Phase 1b/2 clinical trial as a first line therapy for metastatic RCC in combination with ipilimumab (anti-CTLA-4) and nivolumab (anti-PD-1). The efficacy endpoints for the trial are deep response rate, defined as CR plus PRs of greater than 50% tumor volume reduction as well as progression free survival. The protocol defined pre-specified statistical threshold for efficacy is a 50% increase above the 32% deep response rate seen with previous ipilimumab/nivolumab combination trials in RCC conducted by investigators at the Kidney Cancer Research Consortium. An interim analysis performed on May 31, 2024 determined the clinical trial has met the interim threshold for efficacy and therefore enrollment continued. Enrollment in the clinical trial now has been completed and patients are being followed.
Mupadolimab, B Cell Activating Anti-CD73 Antibody
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.
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 income for the three months ended March 31, 2025 was $15.2 million, which includes $25.1 million in non-operating income from the change in fair value of warrant liability. Our net loss for the three months ended March 31, 2024 was $5.7 million. As of March 31, 2025, we had an accumulated deficit of $381.8 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 March 31, 2025, 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 $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of $64.9 million, a follow on offering of our common stock in February 2021, in which we raised net proceeds of $32.0 million and a registered direct offering in May 2024, in which we sold shares of our common stock, pre-funded warrants and common warrants for net proceeds of $30.3 million. 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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On August 6, 2024, we entered into an open market sale agreement (the “2024 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 $100.0 million, 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 2024 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 of up to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the 2024 Sales Agreement.
During the three months ended March 31, 2025, we did not sell any shares of common stock under our at-the-market offering program and $100.0 million remained for sale under the 2024 Sales Agreement.
Our three product candidates, soquelitinib, ciforadenant and mupadolimab, are in clinical development by us and/or our partner, Angel Pharmaceuticals. Except for Greater China, we own the world-wide rights to our product candidates.
As a result of our ongoing development efforts, we anticipate needing to spend substantial resources for the foreseeable future. Consequently, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Such financing could result in dilution to stockholders and may include the 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 potential future revenue streams. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of factors such as the impacts of pandemics and increases in inflation rates or interest rates or the broad imposition of tariffs and other trade controls. As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
As of March 31, 2025, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $44.2 million. On May 7, 2025, we received approximately $31.3 million in cash from the early exercise of common stock warrants. We believe that our cash, cash equivalents and marketable securities as of March 31, 2025 with the addition of approximately $31.3 million in cash received from the early exercise of common stock warrants on May 7, 2025, will be sufficient to fund our planned operations for a period of at least 12 months from the date these condensed consolidated financial statements are issued. However, the Company will need to continue to raise additional capital to fund its operations. See “Risk Factors—Risks Related to Our Limited Operating History, Financial Condition and Need for Additional Capital” for additional information.
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, 2024 included in our Annual Report on Form 10-K filed with the SEC on March 24, 2025. There have been no material changes to our significant accounting policies during the three months ended March 31, 2025 from those discussed in our Annual Report on Form 10-K.
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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
● 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:
● completion of our ongoing Phase 1/1b clinical trial for soquelitinib in relapsed T cell lymphomas;
● enrollment and completion of our ongoing Phase 3 registrational clinical trial for soquelitinib in PTCL;
● enrollment and completion of our ongoing Phase 1 clinical trial for soquelitinib in atopic dermatitis;
● a potential Phase 2 clinical trial for soquelitinib in atopic dermatitis;
● a potential clinical trial for soquelitinib in solid tumors
● a potential clinical trial for soquelitinib in asthma;
● 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, including our preclinical next-generation ITK inhibitors, to build the value of our product candidate pipeline and our business.
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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 “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.
Results of Operations
Comparison of the periods below as indicated (in thousands) :
Three Months Ended
March 31,
2025
2024
Change
Operating expenses:
Research and development
$
7,453
$
4,075
$
3,378
General and administrative
2,469
2,178
291
Total operating expenses
9,922
6,253
3,669
Loss from operations
(9,922)
(6,253)
(3,669)
Interest income and other expense, net
525
316
209
Change in fair value of warrant liability
25,129
—
25,129
Income (loss) before equity method investment
15,732
(5,937)
21,669
Income (loss) from equity method investment
(539)
236
(775)
Net income (loss)
$
15,193
$
(5,701)
$
20,894
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Research and Development Expenses
Research and development expenses for the three months ended March 31, 2025 and 2024 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
March 31,
2025
2024
Change
Soquelitinib
$
4,249
$
1,338
$
2,911
Ciforadenant
33
182
(149)
Mupadolimab
17
96
(79)
Unallocated employee and overhead costs
3,154
2,459
695
$
7,453
$
4,075
$
3,378
For the three months ended March 31, 2025, the increase in soquelitinib costs of $2.9 million as compared to the three months ended March 31, 2024, primarily consisted of an increase of $1.6 million in drug manufacturing costs and an increase of $1.4 million in clinical trial expenses, which were partially offset by a decrease of $0.1 million in other outside service costs.
For the three months ended March 31, 2025, the decrease in ciforadenant costs of $0.1 million as compared to the three months ended March 31, 2024, primarily consisted of a decrease in clinical trial expenses.
For the three months ended March 31, 2025, the decrease in mupadolimab costs of $0.1 million as compared to the three months ended March 31, 2024, primarily consisted of a decrease in clinical trial expenses.
For the three months ended March 31, 2025, the increase in unallocated costs of $0.7 million as compared to the three months ended March 31, 2024, primarily consisted of an increase of $0.6 million in personnel and related costs and an increase of $0.1 million in other outside service costs.
General and Administrative Expense
For the three months ended March 31, 2025, the increase in general and administrative expenses of $0.3 million as compared to the three months ended March 31, 2024, primarily consisted of an increase in personnel and related costs.
Interest Income and Other Expense, net
For the three months ended March 31, 2025, the increase in interest income and other expense, net of $0.2 million primarily consisted of an increase in interest income earned due to an increase in cash equivalents and marketable securities.
Change in fair value of warrant liabilities
For the three months ended March 31, 2025, the change in fair value of warrant liability of $25.1 million represents a decrease in the fair value of common warrants from December 31, 2024 to March 31, 2025, which was primarily due to a decrease in the market price of the Company’s common stock.
Income (loss) from equity method investment
For the three months ended March 31, 2025, the increase in loss from equity method investment of $0.8 million as compared to the three months ended March 31, 2024, primarily consisted of an increase in Angel Pharmaceuticals’ loss for the three months ended March 31, 2025.
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Liquidity and Capital Resources
As of March 31, 2025, we had cash, cash equivalents and marketable securities of $44.2 million, and an accumulated deficit of $381.8 million.
Since our inception and through March 31, 2025, we have funded our operations primarily through the sale and issuance of preferred and common 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 of our common stock in February 2021, in which we raised net proceeds of approximately $32.0 million and a registered direct offering in May 2024, in which we sold shares of our common stock, pre-funded warrants and common warrants for net proceeds of approximately $30.3 million.
During the three months ended March 31, 2025, we did not sell any shares of common stock under our at-the-market offering program. As of March 31, 2025, $100 million remained available for sale under the 2024 Sales Agreement.
Funding Requirements
Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $381.8 million through March 31, 2025. We do not expect positive cash flows from operations in the foreseeable future, if ever. Historically, we have incurred operating losses as a result of ongoing efforts to develop our product candidates, including conducting ongoing research and development, clinical and preclinical studies and providing general and administrative support for these operations. We do not have any products approved for sale, and we do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current and future product candidates and/or enter into additional significant collaboration agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur net operating losses for at least the next several years and we expect the losses to increase as we advance our soquelitinib, ciforadenant and mupadolimab product candidates, as well as any future product candidates, through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization and continue our research and development efforts. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We do not yet have a sales organization or commercial infrastructure and, accordingly, we will need to incur significant expenses to develop a sales organization and commercial infrastructure in advance of generating any commercial product sales. Moreover, we incur substantial costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate a sufficient amount of revenue from the commercialization of our product candidates or from additional significant collaboration or license agreements with third parties, if ever, we expect to finance our future cash needs through private and public equity offerings, including our “at-the-market” offering program, debt financings, the potential exercise of outstanding common warrants with an exercise price of $3.50 per share and potential future collaboration, license and development agreements. Adequate funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be required to significantly reduce our operating expenses and may have to significantly delay, scale back or discontinue the development of one or more of our current or future product candidates. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term, but we may have to relinquish
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valuable rights to our product candidates or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition and prospects.
We expect to incur substantial additional losses in the future as we conduct our planned research and development activities. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operating and capital needs into the fourth quarter of 2026. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially based on a number of factors.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements depend on many 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; and
● other factors described in the section of this Quarterly Report on Form 10-Q entitled “Risk Factors.”
Summary of Statement of Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Three Months Ended
March 31,
2025
2024
Net cash provided by (used in):
Operating activities
$
(8,263)
$
(5,157)
Investing activities
4,243
(7)
Financing activities
279
—
Net decrease in cash and cash equivalents
$
(3,741)
$
(5,164)
Cash Flows from Operating Activities
Cash used in operating activities during the three months ended March 31, 2025 was $8.3 million, which primarily consisted of a net income of $15.2 million, adjusted by net non-cash transactions of $23.6 million, that primarily consisted of $1.3 million of stock-based compensation expense, $0.5 million of loss from equity method investment and a decrease of $25.1 million in the fair value of warrant liability; an increase of $1.2 million in prepaid and other current assets; a decrease of $1.3 million in accounts payable; an increase of $0.1 million in accrued and other
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current liabilities; 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 three months ended March 31, 2024 was $5.2 million, which primarily consisted of a net loss of $5.7 million, adjusted by non-cash charges of $0.4 million, that primarily consisted of $0.7 million of stock-based compensation expense and $0.2 million of income from equity method investment; a decrease of $0.1 million in prepaid and other current assets; an increase of $0.1 million in accounts payable; an increase of $0.1 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 assets amortization.
Cash Flows from Investing Activities
During the three months ended March 31, 2025. net cash flows provided by investing activities was $4.2 million, which primarily consisted of maturities of marketable securities of $12.0 million, which were partially offset by purchases of marketable securities of $7.7 million.
During the three months ended March 31, 2024, net cash flows from investing activities was negligible and primarily consisted of proceeds from maturities of marketable securities of $4.6 million, which were offset by purchases of marketable securities of $4.6 million.
Cash Flows from Financing Activities
During the three months ended March 31, 2025, cash provided by financing activities was $0.3 million, which primarily consisted of proceeds from the exercise of stock options .
During the three months ended March 31, 2024, 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, 2025, as compared to those disclosed in our Annual Report on Form 10-K filed with the SEC on March 25, 2025.
Critical Accounting Estimates
There have been no changes to our critical accounting estimates during the three months ended March 31, 2025, as compared to those disclosed in our Annual Report on Form 10-K filed with the SEC on March 25, 2025.
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.