Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described, in or implied, by these forward-looking statements. Please also see the section of this Quarterly Report on Form 10-Q titled “Forward-Looking Statements.”
Overview
We are a synthetic lethality focused precision medicine oncology company committed to the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics. Our approach integrates small molecule drug discovery with extensive capabilities in identifying and validating translational biomarkers to develop targeted therapies for select patient populations most likely to benefit. Our small molecule drug discovery expertise includes discovery and development of small molecule inhibitors and protein degrader modalities. We are applying these capabilities to develop a robust pipeline in precision medicine oncology, with a research focus in synthetic lethality – which represents an emerging class of precision medicine targets.
IDE397 – MAT2A Inhibitor Clinical Candidate
Our most advanced synthetic lethality product candidate is IDE397, a clinical-stage methionine adenosyltransferase 2a, or MAT2A, inhibitor being developed for solid tumors with MTAP deletions.
MTAP-null cells lack the ability to metabolize 5-methylthioadenosine, or MTA, which is an essential step in a biochemical pathway involved in salvaging metabolite S-adenosyl methionine, or SAM. Increased levels of MTA partially inhibit the methyltransferase PRMT5 for which SAM is the methyl-donor substrate for methylation of various proteins. This partial inhibition of PRMT5 by increased levels of MTA renders MTAP-null cells more dependent on the activity of methionine adenosyltransferase II alpha or MAT2A, an enzyme that is responsible for the synthesis of SAM. Because of this enhanced dependence, loss of MTAP results in synthetic lethality when MAT2A is pharmacologically inhibited.
The prevalence of MTAP deletions is estimated to be approximately 15% of human tumors, translating to an estimated addressable population in major market countries, consisting of the US, EU5 and Japan, for patients having solid tumors with MTAP deletion to be approximately 75,000 annually.
We are actively enrolling patients into the dose escalation and tumor biopsy cohorts of a Phase 1 clinical trial, designated as IDE397-001 (ClinicalTrials.gov Identifier: NCT04794699) to evaluate IDE397 under an investigational new drug application, or IND.
As of June 25, 2021, we have enrolled patients in the IDE397 clinical trial having multiple solid tumor types with MTAP-deletion, including non-small cell lung cancer, pancreatic cancer, thymic cancer and adenoid cystic carcinoma. As of June 25, 2021, IDE397 has been generally well tolerated with only grade 1 drug-related adverse events, including onstipation, nausea and fatigue; there were no reported drug-related serious adverse events and no reported myelosuppression, or changes to bilirubin or to aminotransaminase (AST) or alanine aminotransferase (ALT) enzymes.
Our initial clinical development plans to evaluate IDE397 include a dose escalation portion of the Phase 1 clinical trial in which we are enrolling patients having solid tumors with MTAP deletion identified by commercial or institutional next generation sequencing, or NGS, panels or by MTAP immunohistochemistry, or IHC, assay with confirmation by NGS. Following and subject to satisfactory completion of the dose escalation portion of the Phase 1 clinical trial, we plan to enroll patients having solid tumors with MTAP deletion into one or more expansion arms focused on one or more selected solid tumor indications. Potential solid tumors we are considering for future evaluation in one or more expansion arm(s) of the clinical trial evaluating IDE397 include non-small cell lung cancer, or NSCLC, head and neck cancer, bladder cancer, gastric cancer, pancreatic cancer and esophageal cancer, among others.
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We observed a reduction in plasma S-adenosylmethionine, or SAM, a proximal pharmacodynamic marker, in each of the first two cohorts of the IDE397 Phase 1 dose escalation study, satisfying the clinical protocol threshold of approximately 60% or greater to initiate the tumor biopsy cohort of the IDE397 Phase 1 clinical trial to evaluate tumor pharmacodynamic, or PD, biomarkers. The clinical protocol threshold was established based on IDE397 preclinical in vivo efficacy data in MTAP-deletion xenograft models.
We plan to obtain patient biopsies for translational research from the dose escalation and expansion portions of the clinical trial, including evaluation of certain pharmacodynamic, or PD, biomarkers, such as plasma SAM and tumor SAM as well as tumor symmetric dimethylarginine, or SDMA.
We are targeting initiation of the tumor biopsy cohort in the third quarter of 2021 to evaluate tumor pharmacodynamic, or PD, biomarkers, and have a program objective to obtain tumor PD data, including tumor SAM and tumor SDMA, in the fourth quarter of 2021.
We are leading research and development of IDE397 through early clinical development, in collaboration with GlaxoSmithKline pursuant to the Collaboration, Option and License Agreement, or the GSK Collaboration Agreement, with an affiliate of GlaxoSmithKline, GLAXOSMITHKLINE INTELLECTUAL PROPERTY (NO. 4), Limited, or GSK.
We expect that the PD data to be obtained from the IDE397 tumor biopsy cohort will support an option data package for review by GSK in consideration of whether to exercise its option to develop IDE397. The GSK option is exercisable within a certain period after we deliver a data package comprising preclinical data and clinical data from the IDE397 monotherapy dose escalation study of the Phase 1 clinical trial, including safety and tolerability data, pharmacokinetic data and pharmacodynamic modulation of SAM and tumor SDMA.
If GSK exercises its option and makes the related payment to us of fifty million dollars ($50,000,000), GSK would lead later-stage global clinical development. For future development costs we will be responsible for 20% and GSK will be responsible for 80%. Assuming GSK decides to exercise the option, we will be eligible to receive future development and regulatory milestones of up to $465 million, 50% of U.S. net profits and tiered royalties on global non-U.S. net sales ranging from high single digit to sub-teen double digit percentages, as well as certain commercial milestones of up to $475 million.
Our evaluation of IDE397 as a clinical candidate is supported by preclinical data. We have evaluated the efficacy of IDE397 as monotherapy in over forty solid tumor patient derived xenograft, or PDX, models with homozygous MTAP deletions. Results of this IDE397 MTAP-deletion PDX panel study were reported at AACR 2021 and showed in vivo efficacy in multiple MTAP-null xenograft models demonstrating tumor growth inhibition when MAT2A was pharmacologically inhibited with IDE397 as monotherapy. In this study, we observed > 60% tumor growth inhibition, or TGI, in ~ 75% of the models and > 75% TGI in ~ 50% of models, in each case across major solid tumor types. We also observed tumor regressions, with > 100% TGI, in multiple PDX models and across multiple solid tumor types, including in NSCLC as well as in bladder and gastric cancer PDX models.
In NSCLC, data from the preclinical PDX Panel Study has shown > 60% TGI in 11 independent NSCLC PDX models out of 13 models evaluated, including in seven NSCLC adenocarcinoma PDX models out of 9 evaluated and in four NSCLC squamous carcinoma PDX models out of 4 evaluated. Tumor regressions were observed in 2 of 4 NSCLC squamous PDX models, including a complete response in one model.
Additionally, we have observed dose-dependent modulation of selected PD biomarkers, including SDMA and SAM, in these in vivo models, including in NSCLC and HCT-116 MTAP deletion CDX models. We also observed a correlation of in vivo efficacy with dose-dependent pharmacodynamic PD modulation in MTAP-deletion CDX model in NSCLC. We have observed IDE397 dose dependent increases in MTA levels and a variety of downstream metabolic and gene expression changes in our studies with in vitro and in vivo models.
Through our participation in the DepMap (Cancer Dependency Map) consortium led by the Broad Institute of MIT and Harvard, or Broad Institute, and in collaboration with GSK, we have conducted a PRISM screen of a panel of over 800 cell lines for pharmacological sensitivity to IDE397. This PRISM screen has identified differential selectivity across tumor lineages, potentially enabling additional biomarker discovery and clinical opportunity expansion for IDE397.
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Preclinical tolerability and efficacy studies are ongoing with IDE397 and various potential combination agents. Based on preliminary results, we have observed in vivo efficacy with enhanced tumor growth inhibition for IDE397 in combination with a taxane in a pancreatic cancer PDX model.
PARG
We are advancing our preclinical research for an inhibitor of poly (ADP-ribose) glycohydrolase, or PARG, for patients having tumors with homologous recombination deficiencies, or HRD, and potentially other genetic and/or molecular signatures.
PARG is a novel target in a clinically validated biological pathway. PARG functions as a regulator of DNA repair in the same biochemical pathway as poly (ADP-ribose) polymerase, or PARP. PARG hydrolyzes poly (ADP-ribose), or PAR, chains that are polymerized by PARP enzymes, completing the PAR cycle. Small molecule inhibitors of PARG result in a dose dependent increase in cellular PAR after DNA damage.
We are evaluating the efficacy of our PARG inhibitors as monotherapy across a number of solid tumor CDX and PDX models with specific genetic alterations. One of our PARG inhibitor compounds, designated as IDB-PARG, has demonstrated dose-dependent in vivo efficacy as monotherapy with tumor regression or stasis in multiple CDX models and PDX models, including in ovarian cancer, gastric cancer and breast cancer models. In vivo studies in CDX and PDX models have shown evidence of differentiation from a PARP inhibitor, niraparib, including enhanced TGI relative to such PARP inhibitor and, in certain models, tumor regressions in models which are refractory to such PARP inhibitor.
We have also observed dose-dependent modulation of a PD biomarker, poly (ADP-ribose), or PAR, polymer chains across multiple in vivo CDX models, including in ovarian cancer, gastric cancer and breast cancer models.
We have established a strategic collaboration with the Broad Institute focused on synthetic lethality target and biomarker discovery. Through this collaboration with the Broad Institute, we are evaluating paralog CRISPR knockdown in selected cell lines in conjunction with pharmacological inhibition of PARG to inform patient selection and combination strategies in ovarian and breast cancer.
We own or control all commercial rights in our PARG program, subject to certain economic obligations pursuant to our exclusive, worldwide license with Cancer Research UK / University of Manchester.
Subject to further preclinical studies, we plan to identify a PARG inhibitor development candidate in the fourth quarter of 2021.
Pol Theta
We are progressing our program targeting DNA Polymerase Theta, or Pol Theta or POLQ, in collaboration with GSK, for patients having solid tumors with BRCA or other homologous recombination deficiency, or HRD, mutations.
Pol Theta is involved in a DNA repair process called microhomology mediated end joining, or MMEJ, that is utilized when homologous recombination mediated repair is compromised, as happens in the case of certain BRCA1 or BRCA2 mutations. The expression of Pol Theta is largely absent in normal cells, but tumor cells harboring double strand break repair defects, such as BRCA1 or BRCA2, show synthetic lethality when Pol Theta is knocked down with siRNA.
Pol Theta is a large protein with two functional domains: a DNA polymerase domain and an ATP-dependent DNA helicase domain, alternatively referred to as a helicase domain or as an ATPase domain, linked by a RAD51 binding domain. We have established independent research programs to discover small molecule inhibitors of each of the Pol Theta polymerase domain and ATPase domain. We also have established an independent research approach targeting Pol Theta based on a protein degradation.
We have shown combination activity with multiple PARP inhibitors, including niraparib. We have demonstrated synergistic in vivo efficacy of a Pol Theta inhibitor with niraparib: the combination of our Pol Theta inhibitor with niraparib enhanced the activity of niraparib in the DLD1 BRCA2-/- xenograft model. Tumor regressions were observed for all animals in the study which were administered the combination.
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We plan to continue further development of our POLQ program, including both protein degraders and small molecule inhibitors , in collaboration with GSK pursuant to the GSK Collaboration Agreement, and are planning to select a development candidate for a Pol Theta small molecule inhibitor in the fourth quarter of 2021.
Werner Helicase
We are also continuing to advance our preclinical research in collaboration with GSK for an inhibitor targeting Werner Helicase, or WRN, for patients having tumors with high microsatellite instability, or MSI.
WRN protein is a RecQ enzyme involved in the maintenance of genome integrity. Germline loss of function mutations in WRN lead to premature aging and pre-disposition to cancer. MSI is a change in the DNA content of a tumor cell in which the number of repeats of microsatellites, short repeated sequences of DNA, differ as cells divide. High MSI is present in about 15% of gastrointestinal tumor cancers, including in approximately 22% of stomach adenocarcinoma and 16% of colorectal cancer. Tumors with high MSI are routinely assessed in multiple diagnostic profiling tests.
WRN is a protein having several functional domains, and we have shown that the helicase functional domain of WRN is responsible for this synthetic lethal interaction, as reflected in our publication in Cell Press - iScience, Werner Syndrome Helicase is Required for the Survival of Cancer Cells with Microsatellite Instability (March 2019).
We have observed dose-dependent cellular viability effect and a dose-dependent cellular PD, response in multiple endogenous MSI high cell lines. We have also demonstrated in vivo efficacy and PD response in a relevant MSI high model.
For this program, we plan to continue further development in collaboration with GSK pursuant to the GSK Collaboration Agreement.
Other Synthetic Lethality Pipeline Programs
We have initiated early preclinical research programs to identify small molecule inhibitors for a target in the MTAP-synthetic lethality pathway, or MTAP-SL. We believe an MTAP-SL inhibitor may be complementary to our IDE397 clinical candidate targeting MAT2A.
We have also initiated early preclinical research programs targeting multiple distinct DNA Damage Targets, or DDTs, for patients with solid tumors characterized by proprietary biomarkers or gene signatures.
We own or control all commercial rights in our MTAP-SL and DDT programs.
Synthetic Lethality Target and Biomarker Discovery Platform
Synthetic lethality continues to be our core research focus. We have invested significantly and continue to invest in capabilities for identification and validation of new synthetic lethality targets and biomarkers for patient selection. For targets of interest, we advance our research to discover therapeutic drug candidates and to further qualify relevant biomarkers.
Our synthetic lethality research platform integrates a broad set of computational and functional capabilities. These capabilities collectively reflect the convergence of advancements in biology, molecular biology, chemistry and information technologies. For example, molecular biology approaches such as gene knockdown using siRNA, gene editing using CRISPR, quantitative DNA/RNA analysis, protein expression profiling and genomic sequencing can be applied across broad cell lines to create substantial data sets. Data analytics and computational approaches are used to mine such data sets to identify novel targets and biomarker hypotheses. These hypotheses are experimentally validated by developing and applying relevant biological assays.
We have established a comprehensive platform to computationally and empirically identify high value synthetic lethal pairs in defined patient populations. This platform integrates information across parallel data sets, each including orthogonal content based on particular screening approaches. These screens include evaluation of curated, genetically defined and preselected model cell sets indicative of targeted patient populations. Our platform includes a proprietary library and data set resulting from our DECIPHER™ Dual CRISPR Synthetic Lethality library constructed in collaboration with University of California, San Diego. The platform includes data from our proprietary Paralogous Gene Evaluation in Ovarian cancer, or PAGEO™, library being developed in collaboration
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with the Broad Institute utilizing the Sellers L aboratory CRISPR paralog screening platform to evaluate functionally redundant paralogous genes across ovarian cancer subtypes. Additionally, we are members of the DepMap consortium through which we have access to a comprehensive data set of genome-wide cell-based screens, including isogenic screens, conducted by the Broad Institute and other contributing institutes, including pre-publication access to new data releases. As a further component of our synthetic lethality platform, we are conducting computational data mining and analysis of relevant public databases, such as The Cancer Genome Atlas, or TCGA, cBioPortal, and Cancer Cell Line Encyclopedia, or CCLE, among others. Such computational approaches include our proprietary algorithms which enable us to determine synthetic lethality targets and biomarkers enabling patient stratification.
We have established internal bioinformatics capabilities, which are supplemented by external resources. We are applying these capabilities and resources to integrate using proprietary algorithms and unsupervised machine learning across each of the orthogonal data sets in our platform. These integrated, comprehensive analysis efforts allow us to determine synthetic lethality target / biomarker pairs with the strongest signals across the data sets. Potential therapeutic targets are ranked based on several factors, including the strength of the synthetic lethal interaction, potential drugability, potential clinical development path, and potential market opportunity. The most promising therapeutic targets are validated empirically.
DECIPHER™ Dual CRISPER Synthetic Lethality Library – UCSD
We have constructed our DECIPHER Dual CRISPR library for synthetic lethality target and biomarker discovery in collaboration with the University of California, San Diego, and bioinformatics analysis and validation are ongoing. The DECIPHER 1.0 library is focused on DNA Damage Repair targets across various tumor suppressor genes and oncogenes of interest that were selected based on their known prevalence and role in solid tumors, enabling evaluation of approximately 50,000 independent gene knockout combinations of DDR pathway related drug targets across known tumor suppressor genes.
PAGEO™ Paralogous Gene Evaluation in Ovarian Cancer and Dep Map Consortium – Broad Institute
In October 2020, we entered into a strategic collaboration with the Broad Institute of MIT and Harvard focused on synthetic lethality target and biomarker discovery. This collaboration will use the large-scale CRISPR paralog screening platform developed at the laboratory of William R. Sellers, M.D., Core Institute Member, Broad Institute, to evaluate functionally redundant paralogous genes across ovarian cancer subtypes and to generate novel target and biomarker hypotheses. Dr. Sellers, who also serves on our Scientific Advisory Board, is the principal investigator for the strategic collaboration. We have also become a member of the Broad DepMap consortium to further enhance our efforts in bioinformatics and cell-based screening for synthetic lethality target and biomarker discovery and validation.
We are also continuing to invest in our capabilities to advance our research on newly identified synthetic lethality targets of interest, including to enable discovery of therapeutic drugs and relevant biomarkers. These investments include both additional research personnel and capital investments, which will enhance our capabilities broadly, including in target validation, biological assay development, protein synthesis, structural biology, computational chemistry, and analytical chemistry, among other core functional areas.
Darovasertib (IDE196) Overview – PKC Inhibitor for Patients having Tumors with GNAQ or GNA11 Mutations
Darovasertib (IDE196) is a clinical-stage, potent and selective small molecule inhibitor of protein kinase C, or PKC, for genetically-defined cancers having GNAQ or GNA11 gene mutations. PKC is a protein kinase that functions downstream of the GTPases GNAQ and GNA11.
We are clinically evaluating darovasertib in a Phase 1/2 clinical trial, designated as IDE196-001 in solid tumors harboring GNAQ or GNA11 hotspot mutations in a basket trial design, including in metastatic uveal melanoma, or MUM, and other solid tumor indications such as skin (cutaneous) melanoma.
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Our clinical trial strategy in MUM includes darovasertib monotherapy as well as darovasertib combination therapies, including with binimetinib, a MEK inhibitor, and independently with crizotinib, a cMET inhibitor . As of June 22, 2021, we have enrolled 30 MUM patients into the darovasertib/binimetinib combination arm, and 15 MUM patients into the darovasertib /crizotinib combination arm, and we are continuing patient enrollment in the dose expansion cohort of each of these combination arms .
We are expecting a clinical data update for the darovasertib combination(s) in the fourth quarter of 2021.
We are evaluating darovasertib in combination with binimetinib, and independently, with crizotinib pursuant to our Clinical Trial Collaboration and Supply Agreement, or Pfizer Agreement, with Pfizer, Inc. or Pfizer. We and Pfizer have formed a joint development committee responsible for coordinating all regulatory and other activities under the Pfizer Agreement, including for both the darovasertib / binimetinib combination arm and the darovasertib / crizotinib combination arm of the clinical trial. If the clinical data from either or both of these combination studies is positive, we plan to enter into good faith negotiations with Pfizer to determine a regulatory submission strategy.
We are also continuing to evaluate darovasertib as monotherapy in MUM and non-MUM cancers. In skin melanoma arm of the clinical trial, we are continuing to enroll into an expansion cohort.
Based on preliminary darovasertib monotherapy clinical data and its mechanism of action, we anticipate darovasertib clinical activity independent of Human Leukocyte Antigen, or HLA status in GNAQ/11-mutation cancers.
Scientific Rationale and Opportunity
PKC belongs to a family of closely related protein kinases that are involved in various aspects of signal transduction, such as transmitting extracellular growth factor or cytokine signals to other protein kinases involved in cellular proliferation or transcription regulation. PKC is important for signal transduction and survival of cells with constitutively active mutations in GNAQ or GNA11. Inactivation of PKC by specific inhibitors or reduction in protein expression using RNA all highlight the essential role of PKC in cells with GNAQ or GNA11 mutations.
Activating mutations in GNAQ or GNA11 are found in approximately 90% of uveal melanoma patients, resulting in a dependency on PKC activity which we believe may sensitize these tumors to the effects of darovasertib. Uveal melanoma is a cancer of the eye and the most common primary intraocular malignancy in adults. Treatment of the primary lesion involves radiation therapy, laser therapy and/or removal of the affected eye, and is effective in preventing local recurrence in over 80% of cases. However, approximately 50% of uveal melanoma patients treated in this manner will eventually develop metastatic disease, most commonly in the liver. We have estimated the addressable population in major market countries, consisting of the US, the five major countries in Europe, or EU5, and Japan, for patients having solid tumors with GNAQ or GNA11 mutations to include an annual incidence of about 3,500 in metastatic uveal melanoma. For solid tumor indications other than metastatic uveal melanoma, we believe about 2,500 patients annually have tumors with GNAQ or GNA11 “hotspot” mutations that are potentially pathogenic, based on the loci of such mutations relative to the loci of mutations in uveal melanoma. Thus, the addressable population in such major market countries is estimated to be about 6,000 patients having metastatic uveal melanoma or other solid tumors with potentially pathogenic GNAQ or GNA11 “hotspot” mutations.
Patients with metastatic uveal melanoma have a very poor prognosis, and there are no FDA-approved therapies for this disease. Metastases are most frequently localized to the liver where curative surgical approaches are rare, and chemotherapy or immunotherapy has limited efficacy. Without treatment, median overall survival of patients with metastatic uveal melanoma is approximately two to eight months. Historical response rates for uveal melanoma generally range from 0% to 10% across treatment types. A meta-analysis of 29 Phase 2 clinical trials of various therapies in metastatic uveal melanoma from 1988 to 2015 demonstrated no improvement in clinical response, with a median progression free survival of 3.29 months, median overall survival of 10.2 months, and a 1-year overall survival rate of 43%. A more recent meta-analysis of overall survival of patients with metastatic uveal melanoma based on PubMed publications over a broader time frame from 1980 to 2017 evaluated by treatment modality and lines of treatment reported a median overall survival of approximately 7 months, and a 1-year overall survival rate of 37%, in each case for patients with similar pretreatment as those in our ongoing Phase 1/2 monotherapy study. (Rantala et al. Melanoma Res. (2019). The poor prognosis associated with metastatic disease and the lack of effective therapies highlight the need for novel therapeutic approaches that specifically target metastatic uveal melanoma.
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Darovasertib / Binimetinib Combination Therapy
A combination arm of our Phase 1/2 clinical trial is evaluating darovasertib in combination with binimetinib in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations.
An ongoing dose expansion portion of this arm of the clinical trial is evaluating the safety and efficacy of darovasertib in combination with binimetinib in patients with MUM. Following our evaluation of tolerability and preliminary efficacy from the darovasertib / binimetinib combination arm of the clinical trial in MUM, we may also evaluate darovasertib / binimetinib combination therapy in patients having other solid tumors with activating GNAQ/11 hotspot mutations outside of uveal melanoma, such as skin melanoma.
As of April 13, 2021, 24 MUM patients have enrolled in the darovasertib and binimetinib combination study and 14 of these patients were evaluable, including eight patients dosed in the Phase 1/2 dose expansion cohort of the combination study. As of April 13, 2021 data and analyses cutoff, based on preliminary data from an unlocked database, we observed two partial responses, or PRs, including one confirmed PR and one unconfirmed PR with a 40.5% tumor reduction, which was subsequently confirmed with a 51.7% tumor reduction after the next scan following the data cut-off date. This reflects two confirmed PR out of nine evaluable MUM patients with at least two post-baseline scans (22%) per RECIST 1.1 guidelines. We also observed tumor reduction in 11 patients, reflecting seventy-nine percent (79%) of 14 evaluable MUM patients with at least one post-baseline scan.
Drug-related adverse events observed in the darovasertib/binimetinib combination arm in MUM as related to darovasertib as of June 22, 2021 primarily include: serious adverse events of liver toxicity, nausea and vomiting, syncope and fall; and adverse events, that occurred in greater than 10% of patients, of nausea, vomiting, diarrhea, rash, edema, aminotransminase, or AST, increase, alanine aminotransferase, or ALT, increase, fatigue, hypotension and creatine phosphokinase, or CK, increase.
We are continuing patient enrollment into the darovasertib / binimetinib combination Phase 1/2 expansion arm under the Pfizer Agreement. We and Pfizer amended the Pfizer Agreement in April 2021 to support a target enrollment of approximately 40 patients in the darovasertib and binimetinib clinical combination arm in MUM.
Darovasertib / Crizotinib Combination Therapy
We are also evaluating darovasertib and crizotinib as a combination therapy in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations.
An ongoing dose expansion portion of this arm of the clinical trial is evaluating the safety and efficacy of darovasertib in combination with crizotinib in patients with MUM. Following our evaluation of tolerability and preliminary efficacy from the darovasertib / crizotinib combination arm of the clinical trial in MUM, we may also evaluate darovasertib / crizotinib combination therapy in patients having other solid tumors with activating GNAQ/11 hotspot mutations outside of uveal melanoma, such as skin melanoma.
As of May 5, 2021, 6 MUM patients have enrolled in the darovasertib and crizotinib combination study and 2 of these patients were evaluable for response with one post-baseline scan. As of data and analyses cutoff on May 5, 2021 and based on preliminary data from an unlocked database, we observed early clinical efficacy of the darovasertib and crizotinib combination in MUM with tumor reduction in 2 of 2 evaluable patients in a first cohort, including one unconfirmed partial response in a 3rd-line patient with a 54% tumor reduction, which was subsequently confirmed with a 56.5% tumor reduction after the next scan following the data cut-off date. This represents the deepest response observed in the Phase 1/2 clinical trial evaluating darovasertib as monotherapy or in combinations, as reflected by the largest percentage reduction in tumor size.
Drug-related adverse events observed in the darovasertib/crizotinib combination arm in MUM as of June 22, 2021, based on preliminary data from an unlocked database, primarily include: serious adverse events of syncope and hypotension, each of which resolved with patients continuing dosing; and adverse events that occurred in at least two of the treated patients include nausea, diarrhea, vomiting, edema, decreased appetite, rash, hypotension and syncope. The observed syncope and hypotension were transient, often occurring in the first week of dosing, and are being managed and mitigated through a one week run-in dosing regimen and by limiting use of certain concurrent medications, such as diuretics.
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In June 2021, we initiated the dose expansion cohort of the darovasertib/crizotinib combination arm in MUM based on the observed early clinical activity of this combination. We are continuing patient enrollment into the Phase 1/2 darovasertib/crizotinib combination arm under the Pfizer Agreement. We and Pfizer amended the Pfizer Agreement in August 2021 to support a n additional 40 patients in the Phase 1 study in MUM .
We identified cMET as a potential biomarker and a cMET inhibitor as potential combination agent though our translational research studies, or IDE196 cMET Translational Studies. In these studies, we observed preclinical synergies between darovasertib and crizotinib in relevant cellular models under conditions simulating a tumor microenvironment in the liver, the site of approximately 90% of uveal melanoma metastases. Additionally, we conducted a retrospective analysis of human clinical samples from the Novartis darovasertib Phase 1 clinical trial, which correlated cMET express and activation to clinical response, and independently supported cMET expression / activation as potential biomarker / combination agent. We presented data summarizing the preclinical synergy results of the IDE196 cMET Translational Studies at AACR 2021.
Darovasertib Monotherapy
Our ongoing monotherapy arm of the Phase 1/2 clinical trial was initiated in June 2019 to evaluate darovasertib in solid tumors harboring GNAQ or GNA11 hotspot mutations in a basket trial design. We have completed enrollment in the monotherapy arm of the Phase 1/2 clinical trial in MUM. We are continuing enrollment of patients having other, non-MUM solid tumors harboring GNAQ or GNA11 hotspot mutations, such as skin melanoma into the monotherapy Phase 2 basket arm of the clinical trial.
There have been 81 darovasertib monotherapy BID MUM and seven darovasertib monotherapy BID skin melanoma patients enrolled across the IDEAYA and Novartis Phase 1/2 clinical trials at the time of data and analyses cutoff on April 13, 2021, with an aggregate of 88 patients evaluable for safety and an aggregate of 80 patients evaluable for efficacy pursuant to RECIST 1.1.
In the MUM cohort of the monotherapy arm, as of April 13, 2021 data and analyses cutoff based on preliminary data from an unlocked database, we observed (i) a fifty-seven percent (57%) 1-Year overall survival (OS) in predominantly second line, third line and heavily pre-treated (out to 7 and 8 lines of prior treatment) MUM patients with ninety-five percent (95%) confidence interval (44%, 69%), (ii) a median OS of 13.2 months in predominantly second line, third line and heavily pre-treated (out to 7 and 8 lines of prior treatment) MUM patients with ninety-five percent (95%) confidence interval (10.7 months, not reached), and (iii) sixty-one percent (61%) (n=46) of MUM patients out of 75 evaluable had tumor reduction pursuant toRECIST 1.1guidelines, including 15 patients (20%) with greater than thirty percent (30%) target lesion reduction, including one confirmed complete response.
The company’s development strategy in the monotherapy non-MUM GNAQ/11 arm of the clinical trial is focused on skin melanoma. We are actively enrolling for this Phase 2 cohort expansion in skin melanoma.
In the skin melanoma cohort of the monotherapy arm, as of April 13, 2021 data and analyses cutoff based on preliminary data from an unlocked database, four of five evaluable patients (80%) had tumor reduction pursuant to RECIST 1.1guidelines, including one confirmed PR.
The overall safety profile of darovasertib monotherapy is consistent with prior experience and includes primarily common low grade but manageable GI and skin toxicities. Drug-related adverse events observed with darovasertib as monotherapy include: serious adverse events of hypotension, nausea, vomiting, rash and liver toxicity; and adverse events that occurred in greater than 10% of patients of nausea, vomiting, diarrhea, fatigue, rash, edema, and abdominal distention.
Preliminary clinical data from darovasertib monotherapy arm shows that darovasertib activity is independent of HLA status.
Darovasetib was initially developed as a monotherapy by Novartis, and we obtained an exclusive, worldwide license to darovasetib from Novartis in September 2018. Pursuant to our license agreement with Novartis, except for Novartis’ ongoing Phase 1 clinical trial, we control all future clinical development, and all commercial rights to darovasetib, and may rely on and incorporate data previously submitted to the FDA by Novartis into our own regulatory submissions. Novartis has completed enrollment in a Phase 1 clinical trial it is conducting to evaluate darovasetib in metastatic uveal melanoma. Phase 1 monotherapy data from Novartis was presented at the American Association for Cancer Research, or AACR, in April 2019.
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Regulatory Strategy
We are planning to seek FDA regulatory guidance for darovasertib monotherapy based on observed overall survival data in MUM in the second half of 2021, and/or for darovasertib combination(s) on potential registration-enabling trial design in MUM in the first half of 2022.
We believe that the darovasertib monotherapy BID MUM data observed as of the April 13, 2021 data and analyses cutoff, and based on preliminary data from an unlocked database, supports a potential registrational study with a randomized design and OS endpoint in first line (1L) or second, third line or later lines (2L/3L+) of therapy MUM patients. We also believe that the preliminary data for the darovasertib / binimetinib combination therapy reported as of the April 13, 2021 data and analyses cutoff, and based on preliminary data from an unlocked database, subject to the data maturing with similar or improved efficacy and acceptable tolerability, may support a potential registrational study with a single arm design and an overall response rate, or ORR, endpoint in 1L or in 2L/3L+ MUM patients, and potentially with an accelerated approval pathway. Based on the target product profile darovasertib – including as an oral therapy and anticipated clinical activity independent of HLA status – we believe we may have optionality to pursue a registrational path in MUM 1L (e.g., in HLA‐A201 negative patients) or in MUM 2L/3L+ (independent of HLA Status).
As context, in a prior end-of-Phase 1 meeting with the FDA for darovasertib in the fourth quarter of 2019, the FDA indicated that our proposed single-arm Phase 2 portion of the IDE196-001 Phase 1/2 clinical trial may be adequate to support a new drug application, or NDA, seeking Accelerated Approval for darovasertib monotherapy in MUM. The FDA indicated that such a single-arm, potentially registration enabling part of the Phase 1/2 clinical trial could target enrollment of 60 evaluable MUM patients with the primary endpoint of ORR as determined by blinded independent central review, or BICR, supported by BICR determined duration of response, or DOR, as a secondary endpoint.
We plan to evaluate clinical tolerability and efficacy data from each of the ongoing darovasertib monotherapy Phase 1 portion of the clinical trial in MUM patients and the darovasertib combination therapy Phase 1/2 portions of the clinical trial in MUM patients, as well as potential strategic partnering of the darovasertib program, prior to initiation of a potentially registrational clinical trial in MUM.
Other Potential Indications
We are continuing our preclinical evaluation and are evaluating the potential for clinical evaluation of darovasertib in GNAQ mutation-mediated rare diseases, including in Sturge-Weber Syndrome, or SWS, and Port Wine Stains, or PWS, neurocutaneous disorders characterized by capillary malformations and associated with mutations in GNAQ.
We are targeting FDA clearance in the first half of 2022 to initiate a Phase 1 clinical trial to evaluate darovasertib in SWS and, subject to further preclinical and clinical data, potentially also in PWS patients with extensive involvement.
SWS is associated with a somatic, activating hotspot mutation in GNAQ through which PKC may mediate disease pathology, as reported by Shirley et al., NEJM (2013). SWS is physiologically characterized by facial birthmark (e.g., a port-wine stain), neurological abnormalities (e.g., seizures) and glaucoma. SWS, also known as encephalofacial angiomatosis, is a neurocutaneous disorder that occurs as a sporadic congenital condition. It is understood to affect the skin in the distribution of the ophthalmic branch of the trigeminal nerve and is associated with venous-capillary abnormalities of the leptomeninges. The US/EU5 prevalence of SWS patients who may potentially benefit from long term chronic treatment is approximately 13,000 to 33,000 patients. PWS is a potential related indication with an estimated US/EU5 prevalence of patients with extensive involvement – who have port-wine-stain over the trunk and extremities as well as the head and neck, of approximately 235,000 patients.
We entered into a Sponsored Research Agreement with Boston Children’s Hospital for preclinical evaluation of the role of PKC in SWS. Under the agreement, we are collaborating with and support research at Boston Children’s Hospital in the laboratory of Dr. Joyce Bischoff, Ph.D., Research Associate, Department of Surgery and Professor, Harvard Medical School, who is Principal Investigator of the research studies. The preclinical research is evaluating darovasertib in vitro to assess whether pharmacological inhibition of PKC in endothelial cells having GNAQ mutations will restore normal cell function, as well as in vivo to assess whether pharmacological inhibition of PKC can regulate blood vessel size in murine models that recapitulate enlarged vessels seen in SWS capillary malformations.
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Impact of COVID-19 Pandemic on IDE397-001 Phase 1 Clinical Trial and IDE196 -001 Phase 1/2 Clinical Trial
We continue to monitor the COVID-19 pandemic and its potential impact on the ongoing IDE397 and darovasertib (IDE196) clinical programs and timing of clinical data results. Generally, initiation of clinical trial sites, patient enrollment, ongoing monitoring of enrolled patients, including obtaining patient computed tomography (CT) scans, and trial data management may be impacted for our clinical trials evaluating IDE397 and darovasertib; the specific impacts are currently uncertain.
For the darovasertib (IDE196) clinical program, GNAQ/11 patients enrolled in the ongoing Phase 1/2 clinical trial and sites affected by COVID-19 restrictions are adapting to logistical constraints on activities, such as travel and site visits. For example, patients are continuing on darovasertib therapy, which is an oral drug and is being shipped to and self-administered by patients at home. Patients are being monitored through a combination of telemedicine visits and local visits. COVID‐19 infection rates have fluctuated over the course of the pandemic in several states in which our clinical trial sites are located.
Additionally, enrollment into the IDE397 and/or darovasertib clinical trials, including the Phase 1 dose escalation arm for IDE397 as monotherapy or the Phase 2 expansion arm for darovasertib as a monotherapy in non-MUM solid tumors having GNAQ or GNA11 hotspot mutations, may be delayed by circumstances resulting from the COVID-19 pandemic, including for example, as a result of increases in COVID-19 infection rates in several states in which our clinical trial sites are located, and by clinical site-specific policies and practices related to COVID-19. The specific impact on enrollment into these clinical trials is currently uncertain.
Enrollment into the combination arm evaluating darovasertib and binimetinib and/or the combination arm of darovasertib and crizotinib, in each case as combination therapy in MUM and non-MUM solid tumors having GNAQ or GNA11 hotspot mutations, may be delayed by circumstances resulting from the COVID-19 pandemic, including for example, by clinical site-specific policies and practices related to COVID-19. The specific impact on enrollment into these combination arms of the Phase 1/2 clinical trial is currently uncertain.
We plan to continue to use third-party service providers, including clinical research organizations, or CROs, and clinical manufacturing organizations, or CMOs, to carry out our preclinical and clinical development and manufacture and supply of our preclinical and clinical materials to be used during the development of our product candidates. Certain of our CROs have clinical trial support personnel, including personnel related to our data management and master file management, that are based in India which has experienced a recent surge in COVID-19 infections. To date, the COVID-19 pandemic has not materially affected our supply chain or development schedule, but further escalation of the health crisis has the potential to cause delays in our supply chain, manufacturing operations and trial support services, which could materially adversely impact our business.
Prospectus Supplement - At-the-Market Facility
On August 12, 2020, we filed a prospectus supplement to the prospectus dated June 10, 2020, activating our at-the-market, or ATM, facility by entering into an Open Market Sale Agreement, or August 2020 Sales Agreement, with Jefferies LLC, or Jefferies, relating to shares of our common stock offered by the prospectus supplement and the accompanying prospectus. Pursuant to the terms of the August 2020 Sales Agreement, we could offer and sell shares of our common stock, $0.0001 par value per share, having an aggregate offering price of up to $50.0 million from time to time through Jefferies acting as agent. As of January 15, 2021, we exhausted all sales under the August 2020 Sales Agreement. On January 20, 2021, we entered into a new Open Market Sale Agreement, or January 2021 Sale Agreement, with Jefferies, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having aggregate gross proceeds of up to $90.0 million through Jefferies as its sales agent. Pursuant to each of the August 2020 Sales Agreement and the January 2021 Sales Agreement, Jefferies, as sales agent, receives a commission of 3.0% of the aggregate gross proceeds that the Company receives from each sale of its shares of common stock sold under the August 2020 Sales Agreement.
During the three months ended March 31, 2021, we sold an aggregate of 2,712,654 shares of our common stock for net proceeds of $41.9 million at a weighted average sales price of approximately $15.98 per share under an at-the-market offering pursuant to the August 2020 and January 2021 Sales Agreements with Jefferies as sales agent.
During the three months ended June 30, 2021, we sold an aggregate of 695,218 shares of our common stock for net proceeds of $15.4 million at a weighted average sales price of approximately $22.95 per share under an at-the-market offering pursuant to the January 2021 Sales Agreements with Jefferies as sales agent.
35
Public Offering and Sale of IDEAYA Common Stock
On July 12, 2021, we closed on an underwritten public offering, or the Offering, of 5,333,333 shares of our common stock at an offering price of $17.25 per share, including 695,652 shares of common stock upon the exercise in full of the overallotment option by the underwriters, pursuant to which we received aggregate net proceeds of $86.5 million, after deducting underwriting discounts and commissions but before deducting other offering expenses.
Corporate Update
We do not have any products approved for sale and have not generated any revenue since inception. We have funded our operations through June 30, 2021 primarily through the sale and issuance of common stock, redeemable convertible preferred stock, and convertible promissory notes, including our initial public offering, or IPO, in May 2019, a follow-on underwritten public offering in June 2020, a direct private placement equity investment by Glaxo Group Limited, or GGL, an affiliate of GlaxoSmithKline, in June 2020, the sale and issuance of common stock under our at-the-market facility pursuant to the August 2020 and January 2021 Sales Agreements with Jefferies as sales agent, and through a follow-on underwritten public offering in July 2021. Additionally, we received a non-dilutive upfront cash payment from GSK in July 2020 in connection with the GSK Collaboration Agreement.
Since our inception in June 2015, we have devoted substantially all of our resources to discovering and developing our product candidates. We have incurred significant operating losses to date and expect that our operating expenses will increase significantly as we advance our product candidates through preclinical and clinical development; seek regulatory approval, and prepare for, and, if approved, proceed to commercialization; acquire, discover, validate and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Certain program costs that contribute to our operating expenses will be reimbursed by GSK pursuant to the GSK Collaboration Agreement, including 100% of costs we incur for research we perform in connection with the Pol Theta program and 80% of the aggregate program costs incurred by us and GSK for research each of us performs for the Werner Helicase program, and if GSK exercises their exclusive option to obtain an exclusive license to continue development of and commercialize MAT2A products arising out of the MAT2A program, also the MAT2A program. In addition, we expect to incur additional costs associated with operating as a public company.
Our net losses were $20.0 million and $24.4 million for the six months ended June 30, 2021 and June 30, 2020, respectively. As of June 30, 2021, we had an accumulated deficit of $147.0 million.
Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates, ourselves, or for some programs, in collaboration with our strategic partners. We are leading and solely responsible for preclinical, translational and clinical research and development, as applicable, for (i) the darovasertib monotherapy arm of our IDE196-001 clinical trial, (ii) our PARG program and (iii) our earlier pipeline programs, including our MTAP-SL program and our DNA Damage Target or DDT programs. We are leading clinical development in the ongoing darovasertib / binimetinib combination arm and the ongoing darovasertib /crizotinib combination arm of our IDE196-001 clinical trial, in each case in coordination with Pfizer pursuant to the Pfizer Agreement. We are leading preclinical development and early-stage clinical development for evaluation of IDE397 in the ongoing IDE397-001 Phase 1 clinical trial, in coordination with GSK pursuant to the GSK Collaboration Agreement. We are collaborating with GSK on preclinical research for our Pol Theta and Werner Helicase programs, pursuant to the GSK Collaboration Agreement.
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.
As of June 30, 2021, we had cash, cash equivalents, and short-term and long-term marketable securities of $312.4 million.
We believe that our cash, cash equivalents, and short-term and long-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.
These funds will support our efforts through potential achievement of multiple preclinical and clinical milestones across multiple programs.
36
Components of Operating Results
Collaboration Revenues
To date, we have not generated any revenue from product sales, and we do not expect to generate any revenue from product sales for the foreseeable future. Our revenue exclusively consists of collaboration revenue under the GSK Collaboration Agreement, including amounts that are recognized related to upfront payments and amounts due to us for research and development services. In the future, revenue may include additional milestone payments, option exercise payments, profit sharing, and royalties on any net product sales under our collaborations. We expect that any revenue we generate will fluctuate from period to period as a result of the timing and amount of license, research and development services, and milestone and other payments.
Operating Expenses
Research and Development Expenses
Substantially all of our research and development expenses consist of expenses incurred in connection with discovery and development of our product candidates. These expenses include certain payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expenses for our research and product development employees, fees to third parties to conduct certain research and development activities on our behalf including fees to CMOs and CROs in support of manufacturing and clinical activity for IDE397 and darovasertib (IDE196), consulting costs, costs for laboratory supplies, costs for product licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities. We expense both internal and external research and development expenses as they are incurred.
We have entered into various agreements with CMOs and CROs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.
Costs of certain activities, such as preclinical studies, are generally recognized based on an evaluation of the progress to completion of specific tasks. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.
We do not allocate our internal costs by product candidate, including internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead. With respect to internal costs, several of our departments support multiple product candidate research and development programs, and therefore the costs cannot be allocated to a particular product candidate or development program. The following table summarizes our external clinical development expenses by program for the three months ended June 30, 2021 and March 31, 2021:
Three Months Ended
June 30, 2021
March 31, 2021
External clinical development expenses (1) :
IDE397
$
850
$
1,023
IDE196
1,857
1,575
Personnel related and stock-based compensation
4,602
4,015
Other research and development expenses
7,670
4,953
Total research and development expenses
$
14,979
$
11,566
(1)
External clinical development expenses include manufacturing and clinical trial costs. These expenses are primarily for services provided by external consultants, CMOs and CROs.
The following table summarizes our external clinical development expenses by program for the six months ended June 30, 2021 and June 30, 2020:
37
Six Months Ended
June 30, 2021
June 30, 2020
External clinical development expenses (1) :
IDE397
$
1,873
$
280
IDE196
3,433
3,774
Personnel related and stock-based compensation
8,617
5,051
Other research and development expenses
12,623
8,517
Total research and development expenses
$
26,546
$
17,622
(2)
External clinical development expenses include manufacturing and clinical trial costs. These expenses are primarily for services provided by external consultants, CMOs and CROs.
We are focusing substantially all of our resources on the development of our product candidates. We expect our research and development expenses to increase substantially during the next few years, as we seek to initiate clinical trials for our product candidates, complete our clinical program, pursue regulatory approval of our product candidates and prepare for a possible commercial launch. Predicting the timing or the cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.
General and Administrative Expenses
General and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expense, professional fees for legal, patent, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.
We anticipate that our general and administrative expenses will increase, as a result of increased personnel costs, including salaries, benefits and stock-based compensation expense, patent costs for our product candidates, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with our NASDAQ stock exchange listing and requirements of the Securities and Exchange Commission, or the SEC, investor relations costs and director and officer insurance policy premiums associated with being a public company.
Other Income (Expense)
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net consists primarily of interest income earned on our cash, cash equivalents and marketable securities.
38
Results of Operations
Comparison of Three Months Ended June 30, 2021 and March 31, 2021
The following table summarizes our results of operations for the periods indicated (in thousands):
Three Months Ended
June 30, 2021
March 31, 2021
Change
% Change
Revenue:
Collaboration revenue
$
8,756
$
7,247
$
1,509
21
%
Operating expenses:
Research and development
14,979
11,566
3,413
30
%
General and administrative
4,828
4,816
12
0
%
Loss from operations
(11,051
)
(9,135
)
(1,916
)
(21
%)
Interest income and other income
(expense), net
104
114
(10
)
(9
%)
Net loss
$
(10,947
)
$
(9,021
)
$
(1,926
)
(21
%)
Collaboration Revenue
Collaboration revenue increased by $ 1.5 million, or 21%, in from the three months ended March 31, 2021 to the three months ended June 30, 2021. In July 2020, the GSK Collaboration Agreement became effective, and we started recognizing collaboration revenue, which consists of revenue from preclinical and Phase 1 monotherapy clinical research and development services under the MAT2A program as well as preclinical research services and the related license under the Pol Theta and WRN programs. Revenue we recognize from satisfaction of performance obligations under the GSK Collaboration Agreement is impacted by our estimates of the remaining costs to complete our obligations, which require significant judgment, and may cause fluctuation in the revenue recognized from period to period. The fluctuation from the three months ended March 31, 2021 to the three months ended June 30, 2021 is due to timing of services performed.
Research and Development Expenses
Research and development expenses increased by $3.4 million, or 30%, from the three months ended March 31, 2021 to the three months ended June 30, 2021. The increase in research and development expenses was primarily due to an increase in fees paid to CROs, CMOs and consultants of $2.5 million related to the advancement of our lead product candidates through preclinical studies, an increase in payroll expenses, including salaries, benefits and stock-based compensation expense of $0.6 million related to an increase in headcount to support our growth, an increase in external clinical development expenses for darovasertib of $0.3 million related to support costs for our Phase 1/2 clinical trial to evaluate darovasertib in solid tumors, and an increase in costs for laboratory supplies used in support of our research programs of $0.2 million, partially offset by a decrease in external clinical development expenses for IDE397 of $0.2 million related to manufacturing and method validation activities for our Phase 1 clinical trial.
General and Administrative Expenses
General and administrative expenses were in line from the three months ended March 31, 2021 to the three months ended June 30, 2021. Increase in general and administrative expenses due to an increase in payroll expenses, including salaries, benefits and stock-based compensation expense of $0.1 million related to increased headcount to support our growth as a public company were offset by a decrease in audit fees for the comparative periods.
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net decreased by $10,000, or 9%, from the three months ended March 31, 2021 to the three months ended June 30, 2021, primarily due to a decrease in interest income on our cash, cash equivalents, and short-term and long-term marketable securities balances, as a result of the lower interest rate yields.
39
Comparison of Six Months Ended June 30, 2021 and 2020
The following table summarizes our results of operations for the periods indicated (in thousands):
Six Months Ended June 30,
2021
2020
Change
% Change
Revenue:
Collaboration revenue
$
16,003
$
—
$
16,003
100
%
Operating expenses:
Research and development
26,546
17,622
8,924
51
%
General and administrative
9,643
7,446
2,197
30
%
Loss from operations
(20,186
)
(25,068
)
4,882
19
%
Interest income and other income
(expense), net
218
634
(416
)
(66
%)
Net loss
$
(19,968
)
$
(24,434
)
$
4,466
18
%
Collaboration Revenue
Collaboration revenue increased by $16.0 million in the six months ended June 30, 2021. In July 2020, the GSK Collaboration Agreement became effective, and we started recognizing collaboration revenue. We recognized revenue from preclinical and Phase 1 monotherapy clinical research and development services under the MAT2A program as well as preclinical research services and the related license under the Pol Theta and WRN programs in the six months ended June 30, 2021.
Research and Development Expenses
Research and development expenses increased by $8.9 million, or 51%, from the six months ended June 30, 2020 to the six months ended June 30, 2021. The increase in research and development expenses was primarily due to an increase in payroll expenses, including salaries, benefits and stock-based compensation expense, of $3.6 million related to an increase in headcount to support our growth, an increase in fees paid to CROs, CMOs and consultants of $2.5 million related to the advancement of our lead product candidates through preclinical studies, an increase in external clinical development expenses for IDE397 of $1.6 million related to manufacturing and clinical startup activities for our Phase 1 clinical trial, and an increase in costs for laboratory supplies, facilities and software to support our research programs of $1.6 million, partially offset by a decrease in external clinical development expenses for darovasertib of $0.3 million related to a decrease in manufacturing and clinical startup activities.
General and Administrative Expenses
General and administrative expenses increased by $2.2 million, or 30%, from the six months ended June 30, 2020 to the six months ended June 30, 2021. The increase in general and administrative expenses was primarily due to an increase in payroll expenses, including salaries, benefits and stock-based compensation expense, of $2.0 million related to increased headcount to support our growth as a public company, an increase in software licenses and facilities expenses of $0.4 million, and an increase in directors’ and officers’ liability insurance premiums of $0.2 million, partially offset by a decrease in legal costs of $0.3 million related to the GSK Collaboration Agreement, and a decrease in costs associated with the filing of a shelf registration statement on Form S-3 of $0.2 million.
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net decreased by $0.4 million, or 66%, from the six months ended June 30, 2020 to the six months ended June 30, 2021, primarily due to a decrease in interest income on our cash, cash equivalents, and short-term and long-term marketable securities balances, as a result of the lower interest rate yields.
40
Liquidity and Capital Resources ; Plan of Operations
Sources of Liquidity
We have funded our operations primarily through the sale and issuance of common stock, redeemable convertible preferred stock, and convertible promissory notes, as well as the up-front payment received from GSK. As of June 30, 2021, we had cash, cash equivalents and marketable securities of $312.4 million, consisting primarily of money market funds, U.S. government securities, commercial paper, and corporate bonds.
Material Cash Requirements
We have incurred net losses since our inception. For the six months ended June 30, 2021 and June 30, 2020, we had net losses of $20.0 million and $24.4 million, respectively, and we expect to incur substantial additional losses in future periods. As of June 30, 2021, we had an accumulated deficit of $147.0 million. Based on our current business plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations in support of our long term cash requirements.
To date, we have not generated any product revenue. We do not expect to generate any meaningful product revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, it will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. We are subject to all of 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. Moreover, we expect to incur additional costs associated with operating as a public company.
We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaboration or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:
•
the scope, timing, rate of progress and costs of our drug discovery, preclinical development activities, laboratory testing and clinical trials for our product candidates;
•
the number and scope of clinical programs we decide to pursue;
•
the scope and costs of manufacturing development and commercial manufacturing activities;
•
the extent to which we acquire or in-license other product candidates and technologies;
•
the cost, timing and outcome of regulatory review of our product candidates;
•
potential delays in our ongoing clinical programs as a result of the COVID-19 pandemic;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our ability to establish and maintain collaborations on favorable terms, if at all;
•
our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates;
•
the costs associated with being a public company; and
•
the cost and timing associated with commercializing our product candidates, if they receive marketing approval.
41
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.
We lease our laboratory and office facilities in South San Francisco, California under non-cancelable operating leases with expiration dates in July 2024. In May 2018, we amended our South San Francisco facility lease agreement to expand the size of the original premises by adding approximately 7,340 rentable square feet of additional space. In September 2019, we further amended our South San Francisco facility lease agreement to expand the size of the premises by adding 5,588 rentable square feet of additional space. As of June 30, 2021, we expect to make the total lease payments of $6.6 million through July 2024.
We enter into contracts in the normal course of business with third-party contract organizations for preclinical and clinical studies and testing, manufacture and supply of our preclinical and clinical materials and providing other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.
Pursuant to the GSK Collaboration Agreement, subject to GSK’s exercise of the Option, we will be responsible for 20% of further development costs for the MAT2A program thereafter. The cost-sharing percentages will be adjusted based on the actual ratio of U.S. to global profits for MAT2A products, as measured three and six years after global commercial launch thereof. Also, we will be responsible for 20% of global research and development costs for the WRN program. The cost-sharing percentages will be adjusted based on the actual ratio of U.S. to global profits for WRN products, as measured three and six years after global commercial launch thereof. We may opt out of 50% U.S. net profit share and corresponding development cost share for the MAT2A program and/or WRN program.
In September 2018, we entered into a license agreement with Novartis International Pharmaceuticals Ltd., or Novartis, to develop and commercialize Novartis’ LXS196 (also known as IDE196), a PKC inhibitor for the treatment of cancers having GNAQ and GNA11 mutations. Under the license agreement, we agreed to make contingent development and sales milestone payments of up to $29.0 million and mid to high single digit royalty payments of the net sales of licensed products. Such milestones and royalties are dependent on future activity or product sales and are not provided for in the table above as the timing and amounts, if any, are not estimable.
We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements.
Adequate additional funding may not be available to us on acceptable terms or at all. See the section of this Quarterly Report titled “Part II, Item 1A – Risk Factors” for additional risks associated with our substantial capital requirements.
Summary Statement of Cash Flows
The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for each of the periods presented below (in thousands):
Six Months Ended June 30,
2021
2020
Net cash provided by (used in):
Operating activities
$
(26,654
)
$
(23,151
)
Investing activities
(12,946
)
41,894
Financing activities
57,990
94,733
Net increase in cash, cash equivalents and restricted cash
$
18,390
$
113,476
42
Cash Flows from Operating Activities
Net cash used in operating activities was $26.7 million for the six months ended June 30, 2021. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $20.0 million, adjusted for a decrease in contract liabilities of $13.6 million due primarily to revenue recognized during six months ended June 30, 2021, offset by the cost reimbursement that became unconditionally due as of June 30, 2021, and an increase in prepaid expenses and other assets of $1.7 million due to advance payment for our D&O insurance policy premiums , partially offset by stock-based compensation expense of $4.0 million, an increase in accounts payable and accrued and other liabilities of $2.5 million due primarily to fees to third parties in support of clinical and preclinical activities, amortization of premiums on marketable securities of $0.9 million, and depreciation expense of $0.8 million.
Net cash used in operating activities was $23.2 million for the six months ended June 30, 2020. Cash used in operating activities was primarily due to the use of funds in our operations to develop our product candidates resulting in a net loss of $24.4 million, adjusted for an increase in prepaid expenses and other assets of $0.8 million mainly due to advance payment for our D&O insurance policy premiums, and a decrease in lease liabilities of $0.6 million due to lease amortization, partially offset by stock-based compensation expense of $1.6 million, depreciation and amortization expense of $0.7 million and a decrease in right-of-use assets of $0.5 million due to lease amortization.
Cash Flows from Investing Activities
Net cash used in investing activities was $12.9 million for the six months ended June 30, 2021, which consisted of $133.0 million used to purchase marketable securities and $1.6 million used to purchase property and equipment, partially offset by $117.7 million provided by maturities of marketable securities and $4.0 million provided by sales of marketable securities.
Net cash provided by investing activities was $41.9 million for the six months ended June 30, 2020, which consisted of $68.2 million provided by maturities of marketable securities, partially offset by $26.2 million used to purchase marketable securities and $0.1 million used to purchase property and equipment.
Cash Flows from Financing Activities
Net cash provided by financing activities was $58.0 million for the six months ended June 30, 2021, which consisted of $57.3 million of net proceeds from ATM offering, $0.3 million of proceeds from exercise of common stock options, and $0.3 million of proceeds from ESPP purchase.
Net cash provided by financing activities was $94.7 million for the six months ended June 30, 2020, which consisted of $93.9 million of net proceeds from our follow-on offering, $0.7 million of proceeds from exercise of common stock options, and $0.1 million of proceeds from ESPP purchase.
Critical Accounting Policies
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
For more detail on our critical accounting policies, refer to Note 2 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, and the notes to the financial statements appearing elsewhere in our Annual Report on Form 10-K filed with the SEC on March 23, 2021. During the three and six months ended June 30, 2021, except as described in Note 2 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K filed with the SEC on March 23, 2021.
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