Item 7. Management’s Discussion and Analysis
Item 7. 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 financial statements and the related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this report.
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 S-methyl-5'-thioadenosine phosphorylase, or MTAP, deletions.
We are leading research and development of IDE397 through early clinical development, in collaboration with GSK pursuant to the GSK Collaboration Agreement. Our initial clinical development plans to evaluate IDE397 include a dose escalation portion of the Phase 1 clinical trial. 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.
We are currently enrolling patients into Cohort 6 of the dose escalation cohort of the Phase 1 clinical trial. As of March 1, 2022, we have enrolled an aggregate total of 16 patients in the Phase 1 IDE397 clinical. These patients collectively have various solid tumor types with MTAP-deletion, including NSCLC, pancreatic cancer, thymic cancer, adenoid cystic carcinoma, gastroesophageal cancer, and bladder cancer. As of March 1, 2022, IDE397 has been generally well tolerated with mainly Grade 1/2 drug-related adverse events, and one patient who experienced drug-related Grade 3 asthenia that resolved after reducing the dose of IDE397. There were no reported drug-related serious adverse events, no observed dose limiting toxicities, or DLTs, and IDE397 had not yet reached its maximum tolerated dose, or MTD.
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 monotherapy expansion arms focused on one or more selected solid tumor indications. We also plan to evaluate IDE397 in combination with one or more combination agents in patients having tumors with MTAP-deletion. Potential solid tumors we are considering for future evaluation in one or more expansion arm(s) and/or combination arm(s) of the clinical trial evaluating IDE397 include NSCLC, head and neck cancer, bladder cancer, gastric cancer, pancreatic cancer and esophagogastric cancer, among others.
We have submitted a protocol amendment to the FDA to support cohort expansion as monotherapy in NSCLC, esophagogastric cancer and other indications, including potentially in one or more basket cohorts. This amendment will also support evaluation of IDE397 combination therapies with taxanes and other potential combination agents, for example, in NSCLC, esophagogastric and/or pancreatic cancer. Subject to satisfactory progression of the dose escalation portion of the Phase 1 clinical trial, we are targeting cohort expansion mid-year 2022. The timing of the expansion and/or combination cohorts may be influenced by when we define the MTD. The clinical trial design for the expansion portion of the Phase 1 clinical trial includes an aggregate of 150 or more patients across expansion cohorts.
We are obtaining patient biopsies for translational research from dose escalation cohorts and tumor biopsy backfill cohorts in the IDE397 Phase 1 clinical trial and we also plan to obtain patient biopsies from expansion cohorts in the clinic al trial. We are evaluating pharmacodynamic, or PD, biomarkers, such as peripheral or plasma SAM and tumor SAM, as well as SDMA.
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We observed dose-proportional pharmacokinetic exposures across dose ranges of Cohort 1 through Cohort 5 of the Phase 1 dose escalation. The observed exposures at doses of Cohort 4 and Cohort 5 exceeded active exposure targets established from preclinical models.
We observed preliminary clinical activity with monotherapy in early dose escalation cohorts, including pharmacodynamic response in plasma SAM and tumor reductions in multiple patients with MTAP deleted advanced or metastatic solid tumors.
We observed a dose- and/or exposure-dependent pharmacodynamic modulation, reflected as a reduction in plasma SAM, a proximal pharmacodynamic marker, in evaluable plasma samples across dose ranges of Cohort 1 through Cohort 5 of the IDE397 Phase 1 dose escalation clinical trial, satisfying the clinical protocol threshold of approximately 60% or greater. We have initiated tumor biopsy cohorts in 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 observed robust, dose- and/or exposure-dependent pharmacodynamic modulation of symmetric dimethyl arginine, or SDMA, in evaluable tumor biopsies from Cohort 4 and Cohort 5.
We also observed tumor shrinkage in multiple patients in early dose escalation Cohorts 2 and 3 (n=3, n=2, respectively), including in a Cohort 2 NSCLC patient (approximately 15% reduction in target lesions) and in a Cohort 3 adenoid cystic carcinoma patient with a lung metastasis (approximately 11% reduction in target lesions), pursuant to RECIST v1.1 criteria.
Subject to initiation of an expansion cohort or establishing a MTD, we are targeting delivery of an IDE397 option data package to GSK mid-year 2022. Delivery of the option data package would trigger an evaluation period for GSK to make a decision on whether to exercise its option to develop IDE397. We have a program objective to obtain additional clinical PD data during dose escalation.
The GSK option data package comprises 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. The GSK option is exercisable within a certain period after we deliver the option data package. Subject to GSK’s election to opt‐in and , if required, HSR clearance, we are entitled to receive a $50 million opt‐in payment from GSK.
If GSK exercises its option and makes the related $50 million payment to us, GSK would lead later-stage global clinical development. We will be responsible for 20% of future development costs 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. If GSK decides to exercise the option and upon commercialization, we will also receive 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, or TGI, when MAT2A was pharmacologically inhibited with IDE397 as monotherapy. In this study, we observed greater than 60% TGI, in approximately 75% of the models and greater than 75% TGI in approximately 50% of models, in each case across major solid tumor types. We also observed tumor regressions, with greater than 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 greater than 60% TGI in 12 independent NSCLC PDX models out of 14 models evaluated, including in seven NSCLC adenocarcinoma PDX models out of nine evaluated and in five NSCLC squamous carcinoma PDX models out of five evaluated. Tumor regressions were observed in three of five NSCLC squamous PDX models, including a complete response in one model.
Additionally, we have observed preclinical dose- and/or exposure-dependent modulation of selected PD biomarkers, including SDMA, ADMA and SAM, in these in vivo models, including in NSCLC and HCT-116 MTAP deletion cell derived xenograft, or CDX, models. We also observed a correlation of in vivo efficacy with dose-dependent PD modulation in MTAP-deletion CDX model in NSCLC. We have ongoing mechanistic studies, including evaluating various pathway constituents such as SAM, MTA, SDMA, ADMA and other downstream metabolic and gene expression changes in in vitro and in vivo models.
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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.
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 TGI for IDE397 in combination with a taxane in a pancreatic cancer PDX model. We have also demonstrated preclinical in vivo efficacy of IDE397 plus standard-of-care combination agents, including with paclitaxel in head and neck cancer PDX model. We have also observed in vivo efficacy with enhanced TGI in CDX / PDX models for IDE397 in combination with other DNA Damage Response, or DDR, target inhibitors, and for IDE397 in combination with certain precision medicine target inhibitors in tumors having certain identified genetic alterations as co-alterations with MTAP.
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.
We are targeting to submit an IND for our development candidate, IDE161, in the fourth quarter of 2022, subject to satisfactory completion of ongoing preclinical and IND-enabling studies. We are also continuing preclinical evaluation of additional compounds in the lead series as an additional potential development candidate or back-up compound.
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, PAR, polymer chains across multiple in vivo CDX models, including in ovarian cancer, gastric cancer and breast cancer models.
We are preclinically evaluating and conducting IND-enabling studies for IDE161, our PARG inhibitor development candidate. Such studies include evaluation of IDE161 as monotherapy in in vivo efficacy studies ongoing in multiple genetic settings, as well as in cell panel studies to validate and potentially identify new biomarker hypotheses. We are supplementing our data set for indications and patient settings which are sensitive to pharmacological inhibition of our PARG inhibitors.
In January 2022, we exercised our option under the Evaluation, Option and License Agreement between IDEAYA and Cancer Research Technologies, also known as Cancer Research United Kingdom, or Cancer Research UK, and the University of Manchester, pursuant to which we hold exclusive worldwide license rights covering a broad class of PARG inhibitors.
We have an ongoing 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.
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.
Subject to further preclinical studies, we are, in collaboration with GSK, targeting to initiate IND-enabling studies for our Pol Theta small molecule Pol Theta ATPase domain inhibitor in the first half of 2022.
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We have shown combination activity of our Pol Theta ATPase inhibitor with multiple PARP inhibitors, including niraparib. We have demonstrated synergistic in vivo efficacy of a Pol T heta ATPase inhibitor with niraparib: the combination of our Pol Theta ATPase 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.
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. We have the potential to receive up to $20 million in aggregate milestone payments from GSK for certain milestones, which may occur as we, in collaboration with GSK, advance a Pol Theta helicase inhibitor from preclinical development into early Phase 1 clinical trials.
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.
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.
We observed Werner Helicase inhibitor in vivo efficacy in a CDX model with approximately 100% tumor growth inhibition. We are, in collaboration with GSK, targeting nomination of a Werner Helicase inhibitor development candidate in 2023.
For this program, we plan to continue further development in collaboration with GSK pursuant to the GSK Collaboration Agreement. We have the potential to receive up to $20 million in aggregate milestone payments from GlaxoSmithKline for certain milestones which may occur as we, in collaboration with GSK, advance a Werner Helicase inhibitor from preclinical into early Phase 1 clinical trials.
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 as a combination of two synthetic lethality therapeutics for patients selected based on tumors harboring MTAP deletion.
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.
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.
In December 2021, we acquired our INQUIRE™ Chemical Library to enhance our synthetic lethality drug discovery platform INQUIRE is a proprietary, expert-curated small-molecule library of over 200,000 chemical compounds, which we believe will enhance our hit discovery capabilities across a broad range of novel synthetic lethality targets and historically difficult-to-drug target classes, such as helicases and endonucleases.
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Darovasertib – PKC Inhibitor Clinical Candidate
Synthetic Lethality Combination Therapies Targeting Oncogenic Pathways
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.
Our clinical trial strategy in MUM is to pursue darovasertib as a combination therapy with crizotinib, an investigational cMET inhibitor, pursuant to the Pfizer Agreement. We have formed a joint development committee with Pfizer responsible for coordinating all regulatory and other activities under the Pfizer Agreement. If the clinical data from the combination study is positive, we plan to enter into good faith negotiations with Pfizer to determine a regulatory submission strategy.
We are targeting to obtain guidance from the FDA in mid-year 2022 on a clinical trial design for enabling a potential registrational trial in MUM. We are planning to present additional interim clinical data in from the MUM Phase 2 darovasertib/crizotinib arm of the clinical trial in mid-year 2022. The timing of the clinical data and FDA guidance may be influenced by data maturity, including for example, appropriate interim assessments of median duration of response, or DOR, and/or median progression free survival, or mPFS. Subject to FDA guidance, we will evaluate darovasertib and Pfizer’s cMET inhibitor, crizotinib, as a combination therapy in MUM in a Phase 2 potential registration-enabling clinical trial pursuant to the Second Pfizer Agreement.
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.
In coordination with St. Vincent’s Hospital Sydney Limited, we plan to initiate an Investigator Sponsored Trial, or IST, to evaluate darovasertib in a neo-adjuvant and adjuvant setting in primary, non-metastatic uveal melanoma, or UM, patients. Data from this potential clinical trial may offer proof of concept on our hypothesis that earlier treatment of UM patients with darovasertib, prior to tumor metastasis, may lead to improved patient outcomes.
We are also clinically evaluating darovasertib in combination with crizotinib in non-MUM cancers having GNAQ/11 mutations, with a current focus in skin melanoma, pursuant to the Pfizer Agreement.
We are also evaluating other potential expansion opportunities in oncology for darovasertib. We are planning to evaluate, subject to preclinical validation, darovasertib in combination with crizotinib in cMET-driven solid tumors such as hepatocellular carcinoma, or HCC, or NSCLC in a Phase 1 clinical trial pursuant to the Third Pfizer Agreement. We are preclinically studying darovasertib in combination with a KRAS inhibitor in certain solid tumors.
Darovasertib / Crizotinib Synthetic Lethality Combination Therapy
In December 2020, we initiated a combination arm of our Phase 1/2 clinical trial under the Pfizer Agreement to evaluate darovasertib in combination with crizotinib in patients having tumors harboring activating GNAQ or GNA11 hotspot mutations. An initial dose escalation portion of this arm of the clinical trial evaluated the safety and efficacy of darovasertib in combination with crizotinib at various dose combinations. We initiated a Phase 2 expansion cohort in June 2021 to evaluate darovasertib / crizotinib combination therapy in MUM.
We are continuing patient enrollment into the Phase 2 clinical trial to evaluate the darovasertib / crizotinib combination in MUM and in patients having other solid tumors with activating GNAQ/11 mutations, with a focus on GNAQ/11 skin melanoma. As of March 1, 2022, we have enrolled an aggregate total of 53 MUM patients in the darovasertib / crizotinib arm of Phase 1/2 clinical trial.
In MUM, we reported preliminary clinical data from the Phase 2 expansion cohort evaluating darovasertib and crizotinib synthetic lethal combination in December 2021, based on a data and analyses cutoff on November 25, 2021. The preliminary interim data included: (i) 100% Disease Control Rate, or DCR: 16 of 16 evaluable patients with at least one post-baseline scan showed tumor shrinkage as determined by target lesion size reduction; (ii) 31% Overall Response Rate, or ORR: 4 of 13 patients with at least two post-baseline scans had a confirmed partial response, or PR, as determined by RECIST 1.1 based on investigator or central review; and no patients have come off-treatment prior to the second scan; and (iii) 46% of patients (6
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of 13) with at least two post-baseline scans observed greater than 30% tumor reduction, including one patient with an unconfirmed PR as determined by RECIST 1.1 .
The darovasertib and crizotinib combination therapy demonstrated a manageable side effect profile in MUM patients (n=22) as of the November 25, 2021 data cutoff, with predominantly Grade 1/2 drug-related adverse events. As of November 25, 2021, one patient experienced a drug-related serious adverse event of diarrhea. Eighteen patients experienced a drug-related adverse events, of which six patients experienced Grade 3 drug-related adverse events, and no patients observed Grade 4 or Grade 5 drug-related adverse events.
These preliminary clinical data provide clinical proof-of-concept for the darovasertib and crizotinib synthetic lethal combination treatment in MUM. These data also inform potential expansion opportunities in other cMET-driven tumors.
These data are also consistent with the company’s translational research discovery that Phase 1 clinical response to darovasertib monotherapy associated with low cMET activity, as measured by gene signature score or cMET expression. We identified cMET as a potential biomarker and a cMET inhibitor as potential combination agent though our darovasertib translational research studies, or darovasertib 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 also independently supported cMET expression / activation as potential biomarker / combination agent.
We presented data summarizing the results of certain darovasertib cMET translational studies at AACR in April 2021.
Darovasertib Monotherapy
The 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 reported clinical data in April 2021 for darovasertib monotherapy in MUM patients enrolled across the IDEAYA and Novartis Phase 1/2 clinical trials. At the time of data and analyses cutoff on April 13, 2021, an aggregate of 88 patients were evaluable for safety and an aggregate of 81 patients were 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 to RECIST 1.1guidelines, including 15 patients (20%) with greater than thirty percent (30%) target lesion reduction, including one confirmed complete response.
Preliminary clinical data from darovasertib monotherapy arm shows that darovasertib activity is independent of HLA status.
In the skin melanoma cohort, 80% (n=4) of evaluable patients (n=5) had tumor reduction per RECIST 1.1. evaluation, including one confirmed partial response.
The overall safety profile of darovasertib monotherapy, as of the April 13, 2021 data and analyses cutoff, was consistent with prior experience and included 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.
Darovasertib was initially developed as a monotherapy by Novartis, and we obtained an exclusive, worldwide license to darovasertib 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 darovasertib, 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 darovasertib 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 / Potentially Registration-Enabling Clinical Trial
We plan to evaluate additional clinical tolerability and efficacy data from the ongoing darovasertib and crizotinib combination therapy Phase 2 portion 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. We are planning to obtain guidance from the FDA on a clinical trial design for enabling a potential registrational trial.
Subject to feedback and guidance from the FDA, we are considering scenarios for potential registrational clinical studies. In one scenario, a single-arm Phase 2 clinical trial could comprise further enrollment of patients into the current single-arm Phase 2 clinical trial evaluating darovasertib and crizotinib as combination therapy in MUM. In an alternative scenario, a randomized Phase 2 clinical trial could comprise a darovasertib and crizotinib combination arm as well as comparative arm in MUM. The comparative agent could be, for example, darovasertib monotherapy. In either approach, we believe there may be an opportunity for an accelerated approval based on the Phase 2 ORR as a primary endpoint, with a post-approval randomized Phase 3 as a confirmatory study based on a progression free survival, or PFS, and/or overall survival, or OS, as endpoints.
Other Potential Indications
We are preclinically evaluating potential expansion opportunities in oncology for darovasertib – including in cMET-driven solid tumors such as HCC or NSCLC. In March 2022, we entered into the Third Pfizer Agreement, pursuant to which we plan to evaluate, subject to preclinical validation, darovasertib and Pfizer’s cMET inhibitor, crizotinib, as a combination therapy in cMET-driven tumors such as HCC or NSCLC in a Phase 1 clinical trial. We will provide IDE196 and pay for the costs of this combination study; Pfizer will provide crizotinib for this combination study at no cost to us.
We are also preclinically evaluating potential expansion opportunities in KRAS-driven solid tumors, evaluating darovasertib in combination with a KRAS inhibitor.
In addition, we are exploring potential expansion opportunities in GNAQ/11 rare diseases, such as Sturge Weber Syndrome, or SWS, and Port Wine Stain, or PWS.
2020 Public Offering and Sale of IDEAYA Common Stock
On June 22, 2020, we closed on an underwritten public offering, or the Offering, of 6,666,667 shares of our common stock at an offering price of $15.00 per share, pursuant to which we received gross proceeds of $100.0 million, before deducting underwriting discounts and commissions and other offering expenses.
On July 22, 2020, as part of the Offering, we sold and issued an additional 500,000 shares of common stock upon the exercise of the overallotment option by the underwriters for gross proceeds of $7.5 million before deducting underwriting discounts and commissions and other offering. We realized aggregate gross proceeds of $107.5 million from the Offering, including gross proceeds from the sale of shares in the base Offering and the sale of shares from exercise of the overallotment option, and before deducting underwriting discounts and commissions and other offering expenses payable by us.
2020 Private Placement of IDEAYA Common Stock with GSK
On June 17, 2020, we entered into a stock purchase agreement with Glaxo Group Limited, or GGL, an affiliate of GlaxoSmithKline, pursuant to which GGL agreed to purchase in a private placement, subject to certain conditions, 1,333,333 shares of our common stock at a price per share of $15.00, which is equal to the public offering price per share in the Offering. The common stock sold pursuant thereto was not registered under the Securities Act of 1933, as amended, or the Securities Act. The closing of this private placement occurred on August 3, 2020, following HSR Clearance of the associated GSK Collaboration Agreement, described below, and satisfaction of other certain customary closing conditions.
On August 3, 2020, following HSR Clearance of the associated GSK Collaboration Agreement, we closed on the private placement with GGL. We received proceeds of $20.0 million from the sale of these shares in this private placement.
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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 may offer and sell shares of our common stock, $0.0001 par value per share, having an aggregate offering price of up to $50,000,000 from time to time through Jefferies acting as agent. Pursuant to the August 2020 Sales Agreement, Jefferies, as sales agent, receives a commission of 3.0% of the aggregate gross proceeds that we receive from each sale of its shares of common stock sold under the August 2020 Sales Agreement .
During the year ended December 31, 2020, we sold 410,896 shares of our common stock for aggregate net proceeds of $6.6 million after deducting sales commission and other expenses at a weighted average sales price of approximately $16.92 per share under an at-the-market offering pursuant to the August 2020 Sales Agreement with Jefferies as sales agent.
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. Under the January 2021 Sale Agreement, we will pay Jefferies a commission equal to three percent (3.0%) of the aggregate gross proceeds from each sale of shares sold through Jefferies under the January 2021 Sale Agreement.
During the year ended December 31, 2021, we sold an aggregate of 3,407,872 shares of our common stock for aggregate net proceeds of $57.3 million at a weighted average sales price of approximately $17.40 per share under the at-the-market offering pursuant to the August 2020 and January 2021 Sales Agreements with Jefferies as sales agent. As of December 31, 2021, approximately $73.8 million of common stock remained available to be sold under the ATM facility.
In January 2022, we sold an aggregate of 2,173 shares of our common stock for aggregate net proceeds of $0.05 million at a weighted average sales price of approximately $24.01 per share under the at-the-market offering pursuant to the January 2021 Sales Agreements with Jefferies as sales agent.
2021 Public Offering and Sale of IDEAYA Common Stock
On July 12, 2021, we completed an underwritten public offering of 5,333,333 shares of our common stock at an offering price to the public 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 $86.0 million, after deducting underwriting discounts and commissions and other offering expenses.
Management / Leadership Team
We continue to enhance our leadership team. Michael White, Ph.D., joined as Senior Vice President and Chief Scientific Officer, in November 2021. Dr. White was previously Chief Scientific Officer and Head of Tumor Biology at Pfizer, Inc. and at UT Southwestern, where he was a Professor of Cell Biology and founding Director of the Cancer Intervention and Prevention Discovery Program. Matthew Maurer, M.D. joined us as Vice President, Head of Clinical Oncology and Medical Affairs in January 2021. Dr. Maurer was previously with Bristol Myers Squibb, and was earlier an oncologist and Assistant Professor of Medicine at Columbia University College of Physicians and Surgeons.
Board of Directors
Susan L. Kelley, M.D. has joined as a member of our board of directors effective February 12, 2021, serving as a Class III director, with an initial term expiring at our 2022 annual meeting of stockholders. Dr. Kelley has over 25 years of experience in oncology drug research and development, including most recently as Chief Medical Officer of the Multiple Myeloma Research Consortium (MMRC), and previously at Bayer Healthcare Pharmaceuticals and Bayer-Schering Pharma, and at Bristol-Myers Squibb.
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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 December 31, 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 GGL 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 $49.8 million and $34.5 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $176.7 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 / 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 December 31, 2021, we had cash, cash equivalents, and short-term and long-term marketable securities of $368.1 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 twelve months from the date of the issuance of our Annual Report on Form 10-K filed March 17, 2022.
These funds will support our efforts through potential achievement of multiple preclinical and clinical milestones across multiple programs.
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 consists exclusively of collaboration revenue under the GSK Collaboration Agreement, including amounts that are recognized related to previously received upfront payments and amounts due and payable 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 various factors, such as the timing and amount of license, research and development services, and milestone and other payments. The revenue we recognize or generate under
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the GSK Collaboration Agreement may also fluctuate from period to period due to changes to prospective collaboration research budgets or changes to respective allocation of resources as between the parties and as between internal or external (e.g., CRO) sources, in each case on a program by program basis, as part of ongoing collaboration research management.
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:
Year Ended December 31,
2021
2020
External clinical development expenses (1) :
IDE397
$
3,952
$
2,162
IDE196
7,587
7,093
Personnel related and stock-based compensation
18,656
10,669
Other research and development expenses
27,963
19,774
Total research and development expenses
$
58,158
$
39,698
(1)
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.
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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.
Results of Operations
A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020 is presented below. A discussion regarding our financial condition and results of operations for fiscal year 2020 compared to fiscal year 2019 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 23, 2021.
Comparison of the Years Ended December 31, 2021 and December 31, 2020
The following table summarizes our results of operations for the periods indicated (in thousands):
Year Ended December 31,
2021
2020
Change
% Change
Revenue
Collaboration revenue
$
27,941
$
19,538
$
8,403
43
%
Operating expenses
Research and development
58,158
39,698
18,460
47
%
General and administrative
20,051
15,184
4,867
32
%
Total operating expenses
78,209
54,882
23,327
43
%
Loss from operations
(50,268
)
(35,344
)
(14,924
)
42
%
Other income (expense)
Interest income and other income, net
506
849
(343
)
(40
%)
Net loss
$
(49,762
)
$
(34,495
)
$
(15,267
)
44
%
Collaboration Revenue
Collaboration revenue increased by $8.4 million, or 43%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. 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 may vary due to changes to prospective collaboration research budgets or changes to respective allocation of resources and in any case require significant judgment, and may cause fluctuation in the revenue recognized from period to period. Collaboration revenue recognized in the year ended December 31, 2020 also included $3.0 million of revenue from the exercise by GSK of the material right associated with the option to license IDEAYA-owned technology under the MAT2A program to the extent necessary for preclinical activities.
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Research and Development Expenses
Research and development expenses increased by $18.5 million, or 47%, during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase in research and development expenses was primarily due to increases of $8.0 million in personnel-related expenses, including salaries, benefits and stock-based compensation, related to an increase in headcount to support our growth, $6.6 million in fees paid to CROs, CMOs and consultants related to the advancement of our lead product candidates through preclinical and clinical studies, and $3.9 million in costs for laboratory supplies, facilities and software to support our research programs.
General and Administrative Expenses
General and administrative expenses increased by $4.9 million, or 32%, during the year ended December 31, 2021 compared to the year ended December 31, 2020 . The increase in general and administrative expenses was primarily due to increases of $3.7 million in personnel-related expenses, including salaries, benefits and stock-based compensation, related to an increase in headcount to support our growth, $0.5 million in software licenses, $0.3 million for consulting services related mainly to information technology support, and $0.3 million in directors’ and officers’ liability insurance premiums.
Interest Income and Other Income (Expense), Net
Interest income decreased by $0.3 million, or 40%, during the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to lower cash, cash equivalents and marketable securities balances and lower interest rate yields.
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 December 31, 2021, we had cash, cash equivalents and marketable securities of $368.1 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 years ended December 31, 2021 and December 31, 2020, we had net losses of $49.8 million and $34.5 million, respectively, and we expect to incur substantial additional losses in future periods. As of December 31, 2021, we had an accumulated deficit of $176.7 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 for at least the next 12 months from the issuance date of this Annual Report on Form 10-K.
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;
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•
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.
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 December 31, 2021, we expect to make the total lease payments of $5.7 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 option to obtain an exclusive, sublicensable license to make, have made, use, sell, offer for sale and import MAT2A Compounds and MAT2A Products, 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 the 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. In consideration of license and rights granted under the license agreement, we made a one-time cash payment of $2.5 million to Novartis and issued 263,615 shares of Series B redeemable convertible preferred stock to an affiliate of Novartis. 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.
Adequate additional funding may not be available to us on acceptable terms or at all. See the section of this Annual Report titled “Part I, Item 1A. – Risk Factors” for additional risks associated with our substantial capital requirements.
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Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
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):
Year Ended December 31,
2021
2020
Net cash (used in) provided by:
Operating activities
$
(55,779
)
$
55,463
Investing activities
(69,666
)
(146,243
)
Financing activities
145,454
128,750
Net increase in cash, cash equivalents and restricted cash
$
20,009
$
37,970
Cash Flows from Operating Activities
Net cash used in operating activities was $55.8 million for the year ended December 31, 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 $49.8 million, adjusted for net non-cash charges of $11.8 million and changes in net operating assets and liabilities of $17.8 million. Our non-cash charges consisted of $8.2 million in stock-based compensation, $1.9 million amortization of premium on marketable securities and $1.7 million in depreciation. The net change in our operating assets and liabilities consisted primarily of decreases of $23.5 million in contract liabilities due to revenue recognized under the GSK Collaboration Agreement, $1.5 million in lease liabilities, $1.3 million in right-of-use assets and $0.8 million in accounts receivable from GSK for estimated program costs under the GSK Collaboration Agreement, partially offset by increases of $4.2 million in accrued and other liabilities d ue to CRO fees in support of research and manufacturing activities and $1.2 million in accounts payable.
Net cash provided by operating activities was $55.5 million for the year ended December 31, 2020. Cash provided by operating activities was primarily due to an increase in contract liability of $83.8 million as a result of the up-front payment received from GSK, stock-based compensation expense of $3.6 million, an increase of accrued and other liabilities of $3.0 million due to fees to CROs in support of research and manufacturing activities and an increase in accrued payroll expenses due to increased headcounts, and depreciation and amortization expense of $1.4 million , partially offset by the use of funds in our operations to develop our product candidates resulting in a net loss of $34.5 million and an increase in accounts receivable of $1.9 million due to the estimated program costs for the fourth quarter of 2020 reimbursable by GSK under the GSK Collaboration Agreement.
Cash Flows from Investing Activities
Net cash used in investing activities was $69.7 million for the year ended December 31, 2021, which consisted primarily of $315.0 million used to purchase marketable securities and $2.6 million used to purchase property and equipment, partially offset by $244.0 million provided by maturities of marketable securities and $4.0 million from sale of marketable securities.
Net cash used in investing activities was $146.2 million for the year ended December 31, 2020, which consisted primarily of $242.3 million used to purchase marketable securities and $0.5 million used to purchase property and equipment, partially offset by $96.6 million provided by maturities of marketable securities.
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Cash Flows from Financing Activities
Net cash provided by financing activities was $145.5 million for the year ended December 31, 2021, which consisted primarily of $86.0 million of net proceeds from our follow-on offering, $57.3 million of proceeds from ATM offering, $1.5 million of proceeds from exercise of common stock options, and $0.7 million of proceeds from ESPP purchase .
Net cash provided by financing activities was $128.8 million for the year ended December 31, 2020, which consisted primarily of $100.7 million of net proceeds from our follow-on offering, $20.0 million of net proceeds from our private placement of common stock, $6.6 million of proceeds from ATM offering, $1.2 million of proceeds from exercise of common stock options, and $0.3 million of proceeds from ESPP purchase .
Critical Accounting Policies and Estimates
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 financial statements appearing elsewhere in this Annual Report on Form 10-K.
Revenue Recognition
Licenses of intellectual property: If a license to our intellectual property is determined to be distinct from the other promised goods or services identified in an arrangement, we recognize revenue from non-refundable, upfront fees allocated to the license at the point in time when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other goods or services, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress toward satisfying the performance obligation for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition.
Customer options for additional goods or services: If a contract contains customer options that allow the customer to acquire additional goods or services, including a license to our intellectual property, the goods and services underlying the customer options are evaluated to determine whether they are deemed to represent a material right. In determining whether the customer option has a material right, we assess whether there is an option to acquire additional goods or services at a discount. If the customer option is determined not to represent a material right, the option is not considered to be a performance obligation. If the customer option is determined to represent a material right, the material right is recognized as a separate performance obligation. We allocate the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until the option is exercised.
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Milestone payments: At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. ASC 606 prescribes two methods to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. Whichever method is used, it should be consistently applied throughout the life of the contract; however, it is not necessary for us to use the same approach for all contracts. If it is probable that a significant revenue reversal would not occur when the uncertainty associated with the milestone is resolved, the associated milestone value is included in the transaction price. Milestone payments that are highly susceptible to factors outside our influence, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If there is more than one performance obligation, the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis. We recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability or achievement of each milestone and any related constraint, and if necessary, adjusts our estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Upfront payments and fees are recorded as contract liabilities upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts payable to us are recorded as accounts receivable when our right to consideration is unconditional. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
Contractual cost sharing payments received from a customer or collaboration partner are accounted for as variable consideration. We include an expected value in the transaction price. Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to the transaction price if such payments are not related to distinct goods or services received from the customer or collaboration partner.
Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is accounted for as a separate contract. If a contract modification is not accounted for as a separate contract, we account for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. We account for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).
Upfront payment contract liabilities resulting from our license and collaboration agreements do not represent a financing component as the payment is not financing the transfer of goods and services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us. As such, we do not adjust our revenues for the effects of a significant financing component.
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Determination of the estimate of standalone selling price (“SSP”)
Prior to entering into the GSK Collaboration Agreement, we have never entered into a similar collaboration agreement nor have ever recognized any revenue, and the SSP of performance obligations identified in the GSK Collaboration Agreement is not directly observable. Accordingly, we developed an estimate of the SSP of each performance obligation based on the information known to us on the Effective Date and on input from an independent third-party valuation firm.
We applied the income approach as a primary methodology to determine the SSP of each performance obligation. Specifically, based on our early stage of development and other relevant factors, we determined to use the following methodologies:
(1)
Preclinical and Phase 1 Monotherapy clinical research and development services under the MAT2A program (“MAT2A R&D Services”) – the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;
(2)
Preclinical research services and the related license to IDEAYA-owned technology under the Pol Theta program (“Pol Theta R&D Services”) – a combination of risk-adjusted net present value analysis and the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;
(3)
Preclinical research services and the related license to IDEAYA-owned technology under the WRN program (“WRN R&D Services”) – a combination of risk-adjusted net present value analysis and the expected costs of satisfying the performance obligation, adjusted for probabilities of technical success where appropriate;
(4)
The Option – risk-adjusted net present value analysis;
(5)
Material right associated with the option to license to IDEAYA-owned technology under the MAT2A program to the extent necessary for preclinical activities in preparation for the MAT2A Combination Trial (“Preclinical MAT2A License”) – the expected costs of satisfying the performance obligation; and,
(6)
Material right associated with the supply of MAT2A product for the MAT2A Combination Trial (“MAT2A Supply”) – the expected costs of satisfying the performance obligation.
The assumptions used to determine the SSP of each performance obligation are based on numerous objective and subjective factors, combined with management judgment, including:
•
projected preclinical and clinical research and development expenses;
•
the probability of technical success for the development, regulatory approval and commercialization of our product candidates;
•
projected cash flow during development and commercialization periods;
•
discount rates based on cost of capital;
•
the probability of exercise of the Option; and,
•
the projected manufacturing cost and overhead expense for IDE 397.
We considered reasonably available data points, market conditions and entity-specific factors in estimating the SSP of performance obligations. However, some of these assumptions are specific to us and are not directly observable. We also applied our own judgment as management in determining these assumptions. Accordingly, these assumptions are subject to uncertainty, and changing methodology and/or assumption could materially impact the estimate of the SSP of performance obligations, and as a result, an amount of subsequent revenue recognition and/or its timing.
Determination of the timing of satisfaction of performance obligations
We recognize revenue from the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services over time, as GSK simultaneously receives and consumes the benefits provided by our performance as we perform. We measure our progress toward complete satisfaction of the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services based on the costs incurred as a percentage of the estimated total costs to be incurred to complete the performance obligations.
The estimated total costs to be incurred to complete the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services may evolve and be updated throughout the performance period with the consultation with GSK through the joint development committee. Also, the expected timing of completing the MAT2A R&D Services, Pol Theta R&D Services and WRN R&D Services may be updated. The change in the estimated total costs and/or the timing of completion may materially impact an amount of subsequent revenue recognition and/or its timing.
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JOBS Act Accounting Election
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. However, we have chosen to irrevocably “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.
Recent Accounting Pronouncements
See the section titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
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