What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-06 · 61 added, 65 removed, 172 unchanged (42% of the section changed)

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Our most advanced solid tumor indication for tipifarnib is in patients with head and neck squamous cell carcinoma, or HNSCC, that carry mutations in the HRAS gene.

In September 2017, we reported that our ongoing proof-of-concept Phase 2 clinical trial of tipifarnib in patients with HRAS mutant relapsed or refractory HNSCC, or RUN-HN, achieved its primary efficacy endpoint.

In October 2018, we reported updated data from RUN-HN showing a significant association between tumor HRAS mutant allele frequency and clinical benefit from tipifarnib.

Based upon these observations, we introduced a minimum HRAS mutant variant allele frequency as an entry criterion in the RUN-HN trial.

Following feedback from the U.S.

Food and Drug Administration, or the FDA, and other regulatory authorities, we initiated a global, multi-center, open-label, non-comparative registration-directed clinical trial of tipifarnib in HRAS mutant HNSCC in November 2018.

The clinical trial has two cohorts:

a treatment cohort, which we call AIM-HN, and a prospective observational cohort, which we call SEQ-HN.

AIM-HN is presently designed to enroll at least 59 evaluable HNSCC patients who have received prior platinum-based therapy.

On December 16, 2019, we reported that the FDA granted Fast Track Designation to tipifarnib for the treatment of patients with HRAS mutant HNSCC after progression on platinum therapy.

On May 29, 2020, we announced updated clinical data for our RUN-HN study presented at the American Society of Clinical Oncology Virtual Scientific Program, including data collected as part of the trial showing a median overall survival of 15.4 months, a median progression

free survival of 5.9 months and an objective response rate of 50% observed in recurrent/metastatic HRAS mutant HNSCC among the 18 patients on the RUN-HN study who were evaluable for efficacy.

On July 6, 2020, we amended the AIM-HN trial protocol to enable enrollment of patients with any HRAS mutation in order to assess the potential for clinical benefit in the overall HRAS mutant HNSCC population.

While these amendments do not change the primary outcome measure of objective response rate in patients with high HRAS mutant variant allele frequency, AIM-HN will require an increased number of evaluable HNSCC patients.

We are currently conducting a global, multi-center, open-label, non-comparative registration-directed clinical trial of tipifarnib in HRAS mutant HNSCC designed with two cohorts:

a treatment cohort, which we call AIM-HN, and a prospective observational cohort.

On July 6, 2020, we amended the AIM-HN trial protocol to enable enrollment of patients with any HRAS mutation in addition to patients with a high HRAS variant allele frequency in order to assess the potential for clinical benefit in the overall HRAS mutant HNSCC population, which increased the number of evaluable HNSCC patients for AIM-HN.

As a result of the COVID-19 pandemic and the additional patients required for the trial, we anticipate we will face delays in our timelines and milestones for the AIM-HN trial and, accordingly, are unable to reasonably forecast at this time when our AIM-HN trial will become fully enrolled.

In addition to studying tipifarnib in recurrent or metastatic HRAS mutant HNSCC as a monotherapy, we are also examining the potential use of tipifarnib in combination with other oncology therapies to address larger patient populations and pursue earlier lines of therapy.

In particular, we have been developing pre-clinical data to support the potential for using tipifarnib in HNSCC patients whose tumors overexpress the HRAS gene in combination with a PI3 kinase alpha inhibitor.

Our second product candidate, KO-539, is a potent, selective, reversible and oral small molecule inhibitor of the mixed-lineage leukemia 1, or MLL1, gene (now renamed Lysine K-specific MethylTransferase 2A, or KMT2A), or menin-KMT2A, protein-protein interaction.

and pursue earlier lines of therapy.

In particular, we are increasingly interested in HNSCC patients whose tumors are dependent on HRAS and/or PI3 kinase alpha, as evidenced by overexpression of the HRAS protein, or PIK3CA mutation or amplification.

HRAS and PI3 kinase alpha are believed to be “co-dependent” oncoproteins in HNSCC.

Our preclinical data support that notion and suggest that a combination approach has the potential to provide superior antitumor activity relative to inhibiting either target alone .

Based upon the unmet need and our encouraging preclinical data, we are prioritizing the clinical development of tipifarnib in combination with a PI3 kinase alpha inhibitor as a strategy to treat both HRAS -dependent and PI3K alpha- dependent HNSCC patients .

Our second product candidate, KO-539, is a potent, selective, reversible and oral small molecule inhibitor of the Lysine K-specific Methyl Transferase 2A gene, or KMT2A (formerly referred to as the mixed-lineage leukemia 1 gene, or MLL1), protein-protein interaction.

We have generated preclinical data that support the potential anti-tumor activity of KO-539 in genetically defined subsets of acute leukemia, including those with rearrangements or partial tandem duplications in the KMT2A gene as well as those with oncogenic driver mutations in genes such as nucleophosmin 1, or NPM1.

The novel mechanism of action targets epigenetic dysregulation and removes a key block to cellular differentiation to drive anti-tumor activity.

Our preclinical data support the hypothesis that KO-539 targets epigenetic dysregulation and removes a key block to cellular differentiation to drive anti-tumor activity.

We believe KO-539 has the potential to address approximately 35% of acute myeloid leukemia, or AML, including NPM1-mutant AML and KMT2A-rearranged AML.

In the pediatric population, KMT2A-rearranged leukemias make up approximately 10% of acute leukemias in all age groups and in the case of infant leukemias, the frequency of KMT2A rearrangements is 70–80%.

These pediatric leukemia sub-types portend a poorer prognosis and five-year survival rate that is lower than other leukemia sub-types and therefore represent significant unmet medical needs given the lack of curative therapeutic options.

In April 2020, a competitor reported that its menin-KMT2A inhibitor showed potential anti-tumor activity in KMT2A-rearranged AML.

We received orphan drug designation for KO-539 for the treatment of acute myeloid leukemia, or AML, from the FDA in July 2019.

These pediatric leukemia sub-types portend a poorer prognosis and five-year survival rate that is lower than other leukemia sub-types and therefore represent a significant unmet medical need given the lack of curative therapeutic options.

In April 2020, a competitor reported that its menin-KMT2A inhibitor showed potential anti-tumor activity in patients with KMT2A-rearranged AML.

We received orphan drug designation for KO-539 for the treatment of AML from the FDA in July 2019.

We initiated our Phase 1/2A clinical trial of KO-539 in relapsed or refractory AML in September 2019 and are actively recruiting at multiple sites in the United States and France with the anticipation of expanding to additional sites in the United States, France and other countries during the expansion phase of the study.

Our menin-KMT2A Phase 1/2A clinical trial, which we call the K ura O ncology ME nin-KMT2A T rial, or KOMET-001, has an accelerated design and will determine a recommended Phase 2 dose and schedule, or RP2D, using a modified toxicity probability interval, or MTPI, model.

We are seeking to achieve a RP2D for KO-539 with the potential to enrich in NPM1-mutant AML and KMT2A-rearranged genetically defined subgroups by the end of 2020.

Other Clinical Developments

On May 4, 2020, we announced the suspension and termination of certain development activities due to a strategic review.

These changes included suspension of the initiation of a planned registration directed study for tipifarnib in T-cell lymphoma, suspension of a planned Phase 2 clinical trial for tipifarnib in pancreatic cancer and termination of our KO-947 extracellular signal related kinase, or ERK, inhibitor program.

We expect to determine a RP2D for KO-539 in Q1 2021 and, if we determine the RP2D for KO-539, we intend to advance into genetically-defined expansion cohorts, including NPM1-mutant AML and KMT2A-rearranged AML.

An abstract reporting preliminary data from KOMET-001 and that will be the subject of an oral presentation at the 2020 Annual Meeting of the American Society of Hematology, or ASH, on December 5, 2020 was posted on the ASH website on November 4, 2020.

We anticipate sharing a more mature dataset from KOMET-001, including preliminary data from approximately 10 patients with relapsed/refractory AML, at the ASH oral presentation on December 5, 2020.

The COVID-19 Pandemic

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These precautions may continue to disrupt our business operations and prospects.

Since early March 2020, we have taken temporary precautionary measures intended to help minimize the risk of COVID-19 to our employees and their families, including temporarily requiring all employees to work remotely.

We have suspended non-essential travel worldwide for our employees and prohibited employee attendance at in-person gatherings.

Since early March 2020, we have taken temporary precautionary measures, including routine screening and remote working initiatives, intended to help minimize the risk of COVID-19 to our employees and their families.

We also suspended non-essential travel worldwide for our employees.

In addition, we have experienced, and expect to continue to experience, patient screening and enrollment at a slower pace at many of our clinical trial sites than what was projected when the trials began.

Some of our clinical sites have experienced challenges in conducting trial activities while they focus critical resources on caring for COVID-19 patients and due to facility restrictions, quarantines, travel restrictions, remote work requirements and other precautions.

To manage the COVID-19 impact on our business, we developed a comprehensive

COVID-19 contingency plan designed to work closely with our third-party contractors and investigators to ensure our ongoing clinical trials proceed safely and efficiently.

To manage the COVID-19 impact on our business, we developed a comprehensive COVID-19 contingency plan designed to work closely with our third-party contractors and investigators to ensure our ongoing clinical trials proceed safely and efficiently.

As a result of these efforts, we continue to accrue patients for our clinical trials, but we expect the disruption caused by and the challenges associated with COVID-19 to continue for the foreseeable future.

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Liquidity Overview

As of June 30, 2020, we had cash, cash equivalents and short-term investments of $338.9 million.

In May 2020, we completed a public offering in which we sold an aggregate of 10,465,000 shares of common stock at a price of $13.75 per share.

Net proceeds from the public offering, after deducting underwriting discounts, commissions and offering expenses, were approximately $134.9 million.

As of September 30, 2020, we had cash, cash equivalents and short-term investments of $325.4 million.

In May 2020, we completed a public offering that resulted in net proceeds to us, after deducting underwriting discounts, commissions and offering expenses, of approximately $134.9 million.

We have a term loan facility with Silicon Valley Bank under which we may, at our sole discretion, borrow up to an additional $12.5 million at any time until November 30, 2020.

In addition, we have an at-the-market issuance sales agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, or ATM facility, under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million.

In addition, we

have an at-the-market issuance sales agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, or ATM facility, under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million.

We have not yet sold any shares of our common stock under the ATM facility.

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Payments that we make in connection with in-licensed technology for a particular research and development project that have no alternative future uses in other research and development projects or otherwise and therefore, no separate economic values, are expensed as research and development costs at the time such costs are incurred.

As of June 30, 2020, we have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.

As of September 30, 2020, we have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development expenses

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Other income, net

Comparison of the Three Months Ended June 30, 2020 and 2019

Comparison of the Three Months Ended September 30, 2020 and 2019

Research and Development Expenses .

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Three Months Ended

September 30,

Tipifarnib-related costs

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Total research and development expenses

The increase in tipifarnib-related research and development expenses for the three months ended June 30, 2020 compared to the same period in 2019 was primarily due to increases in costs related to our ongoing AIM-HN pivotal trial and other Phase 2 clinical trials, manufacturing and other preclinical development activities.

The decrease in KO-947-related costs is due to the termination of the ERK inhibitor program.

The increase in KO-539-related research and development expenses for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases in costs related to our Phase 1/2A clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The increase in personnel costs and other expenses was to support our registration-directed clinical trial of tipifarnib and the Phase 1/2A clinical trial of KO-539.

Personnel costs and other expenses include employee salaries and related expenses, facilities expense and overhead expenses.

The increase in personnel costs and other expenses was to

support our registration-directed clinical trial for tipifarnib and the Phase 1 /2 A clinical trial of KO-539.

We expect our research and development expenses to increase in future periods as we continue clinical development activities for tipifarnib and KO-539.

General and Administrative Expenses .

The increase in general and administrative expenses for the three months ended June 30, 2020 compared to the same period in 2019 was primarily due to increases of $0.9 million in professional and legal fees, $0.8 million in pre-commercial planning expenses, $0.7 million in non-cash share-based compensation expense and $0.5 million in personnel costs.

The increase in general and administrative expenses for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases of $0.8 million in non-cash share-based compensation expense, $0.7 million in pre-commercial planning expenses and $0.6 million in personnel costs.

We expect our general and administrative expenses to increase in future periods to support our planned increase in research and development activities.

Comparison of the Six Months Ended June 30, 2020 and 2019

Other income, net .

The decrease in other income, net, for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to a decrease in interest income.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Research and Development Expenses .

The following table illustrates the components of our research and development expenses for the periods presented, in thousands:

Six Months Ended

Nine Months Ended

September 30,

Tipifarnib-related costs

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Total research and development expenses

The increase in tipifarnib-related research and development expenses for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to increases in costs related to our ongoing pivotal trial and other Phase 2 clinical trials, manufacturing and other preclinical development activities.

The increase in KO-539-related research and development expenses was primarily due to the initiation of the Phase 1/2A clinical trial for KO-539 in September 2019.

The increase in tipifarnib-related research and development expenses for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases in costs related to our ongoing registration-directed clinical trial and other Phase 2 clinical trials, manufacturing and other preclinical development activities.

The increase in KO-539-related research and development expenses was primarily due to increases in costs related to our Phase 1/2A clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The decrease in KO-947-related costs is due to the termination of the ERK inhibitor program.

Personnel costs and other expenses include employee salaries and related expenses, facilities expense and overhead expenses.

The increase in personnel costs and other expenses was to support our registration-directed clinical trial for tipifarnib and the Phase 1/2A clinical trial of KO-539.

The increase in personnel costs and other expenses was to support our registration-directed clinical trial of tipifarnib and the Phase 1/2A clinical trial of KO-539.

General and Administrative Expenses .

The increase in general and administrative expenses for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to increases of $1.8 million in professional and legal fees, $1.7 million in pre-commercial planning expenses, $1.3 million in non-cash share-based compensation expense and $1.1 million in personnel costs.

The increase in general and administrative expenses for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases of $2.4 million in pre-commercial planning expenses, $2.1 million in non-cash share-based compensation expense, $1.8 million in professional and legal fees and $1.7 million in personnel costs.

Other income, net .

The decrease in other income, net, for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to a decrease in interest income.

Liquidity and Capital Resources

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The loan and security agreement was subsequently amended in April 2020 to extend the second draw period.

The loan and security agreement, as amended, shall be referred to as the loan agreement.

Under the terms of the loan agreement, we borrowed $7.5 million, or Term A Loan, and we may, at our sole discretion, borrow up to an additional $12.5 million at any time until November 30, 2020, or Term B Loan, and together with Term A Loan, the Term Loans.

In addition, each Term B Loan must be in an amount equal to the lesser of $5.0 million or the amount that is

remaining under the Term B Loan.

All of the Term Loans will be due on the scheduled maturity date of May 1, 2023 , or Maturity Date.

The loan and security agreement, as amended, shall be referred to herein as the loan agreement.

Under the terms of the loan agreement, we borrowed $7.5 million, or the Term A Loan, and we may, at our sole discretion, borrow up to an additional $12.5 million at any time until November 30, 2020, or the Term B Loan, and together with the Term A Loan, the Term Loans.

In addition, each Term B Loan must be in an amount equal to the lesser of $5.0 million or the amount that is remaining under the Term B Loan.

All of the Term Loans will be due on the scheduled maturity date of May 1, 2023 , or the Maturity Date.

Repayment of the Term Loans is interest only through November 30, 2020, followed by 30 equal monthly payments of principal plus accrued interest commencing on December 1, 2020.

The per annum interest rate for the Term Loans is the greater of (i) 5.50% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal plus (b) 0.25%.

The per annum interest rate for the Term Loans is the greater of (i) 5.50% and (ii) the sum of (a) the prime rate reported in The Wall Street Journal plus

In addition, a final payment of 7.75% of the amounts of the Term Loans drawn will be due on the earlier of the Maturity Date, acceleration or prepayment of the Term Loans.

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We have incurred operating losses since inception and negative cash flows from operating activities.

As of June 30, 2020, we had an accumulated deficit of $252.6 million.

As of September 30, 2020, we had an accumulated deficit of $276.3 million.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue and initiate clinical trials of, and seek marketing approval for, our product candidates.

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If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

As of June 30, 2020, we had cash, cash equivalents and short-term investments of $338.9 million.

As of September 30, 2020, we had cash, cash equivalents and short-term investments of $325.4 million.

Based on our current plans, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into 2023.

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We do not know when, or if, we will generate any revenue from product sales.

We do not expect to generate significant revenue

from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.

We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.

We are subject to all of the risks incident in the development of new therapeutic products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

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Additional capital may not be available on reasonable terms, if at all.

Subject to limited exceptions, our term loan facility also prohibits us from incurring indebtedness without the prior written consent of the lender.

Subject to limited exceptions, our term loan facility also prohibits us from incurring indebtedness without the prior written consent of the l ender.

To the extent that we raise additional capital through the sale of stock or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

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The following table provides a summary of our net cash flow activities for the periods presented, in thousands:

Six Months Ended

Nine Months Ended

September 30,

Net cash used in operating activities

Net cash provided by investing activities

Net cash used in investing activities

Net cash provided by financing activities

Operating Activities.

The increase in net cash used in operating activities for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to an increase of $10.8 million in net loss, offset by a decrease of $2.8 million in payments of accounts payable and accrued expenses and an increase of $1.2 million in non-cash share based compensation expense.

The increase in net cash used in operating activities for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to an increase of $18.2 million in net loss, offset by a decrease of $3.2 million in payments of accounts payable and accrued expenses and an increase of $2.1 million in non-cash share-based compensation expense.

Investing Activities.

The decrease in net cash provided by investing activities for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to a decrease of $22.7 million in maturities and sales of marketable securities and an increase of $1.2 million in purchases of property and equipment, offset by a decrease of $5.1 million in purchases of marketable securities.

The increase in net cash used in investing activities for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to a decrease of $10.7 million in maturities and sales of marketable securities and an increase of $1.9 million in purchases of property and equipment, offset by a decrease of $3.9 million in purchases of marketable securities.

Financing Activities.

The increase in net cash provided by financing activities for the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to increases of $26.8 million in proceeds from sale of common stock and $0.9 million in proceeds from exercise of stock options and purchases under our employee stock purchase plan.

The increase in net cash provided by financing activities for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to increases of $26.8 million in proceeds from sale of common stock and $5.0 million in proceeds from exercise of stock options and purchases under our employee stock purchase plan.

Contractual Obligations

During the three months ended June 30, 2020, there were no material changes in contractual obligations from the amounts disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the period ended March 31, 2020.

There were no material changes in contractual obligations from the amounts disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the period ended March 31, 2020.

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As of September 30, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Management Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis