What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 49 added, 65 removed, 187 unchanged (38% of the section changed)

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Our pipeline consists of small molecule product candidates that target cancer signaling pathways where there is a strong scientific and clinical rationale to improve outcomes, and we intend to pair them with molecular or cellular diagnostics to identify those patients most likely to respond to treatment.

We presently have two clinical-stage product candidates for which we own global commercial rights, tipifarnib and KO-539, as well as additional programs that are at a discovery stage.

We presently have two clinical-stage product candidates, tipifarnib and KO-539, one preclinical-stage product candidate, KO-2806, currently in investigational new drug-enabling studies, as well as additional programs that are at a discovery stage.

We own global commercial rights to all of our programs and product candidates.

We plan to advance our product candidates through a combination of internal development and strategic partnerships while maintaining significant development and commercial rights.

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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.

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:

We are 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, which we call SEQ-HN .

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While these amendments do not change the primary outcome measure of an objective response rate, or ORR, in patients with high HRAS mutant variant allele frequency, the modifications will require us to enroll an increased number of evaluable HNSCC patients.

As a result of the pandemic caused by the coronavirus disease 2019, or COVID-19, and the additional patients required for the trial, we anticipate we will continue to 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.

As a result of the COVID-19 pandemic and the additional patients required

for the trial, we anticipate we will continue to 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.

On February 24, 2021, we announced that tipifarnib has been granted Breakthrough Therapy Designation from the U.S.

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Among these potential combinations, we have prioritized the combination of tipifarnib and an inhibitor of the PI3 kinase alpha enzyme for clinical evaluation in patients with biomarker-defined subsets of HNSCC.

On July 6, 2021, we announced a clinical collaboration with Novartis Pharma AG, or Novartis, to evaluate the combination of tipifarnib and alpelisib, a PI3 kinase alpha inhibitor, in patients with HNSCC whose tumors have HRAS overexpression or PIK3CA mutation and/or amplification.

We plan to commence a Phase 1/2 open-label, biomarker-defined cohort study, which we call the KURRENT trial, in the fourth quarter of 2021 to evaluate the safety and tolerability of the combination, determine the recommended dose and schedule for the combination, and assess early antitumor activity of the combination for the treatment of such patients.

Under the terms of our collaboration agreement with Novartis, we will sponsor the KURRENT trial and supply tipifarnib, and Novartis will supply alpelisib.

Although we believe tipifarnib has potential to modulate the CXCR4-expressing primary tumor cells in angioimmunoblastic T-cell lymphoma, or AITL, peripheral T-cell lymphomas, or PTCL, and other diseases such as relapsed or refractory acute myeloid leukemia, or AML, chronic myelomonocytic leukemia, diffuse large B-cell lymphoma, cutaneous T-cell lymphoma and pancreatic cancer, we suspended the initiation of a planned registration-directed study for tipifarnib in T-cell lymphoma and of a planned Phase 2 clinical trial for tipifarnib in pancreatic cancer as a result of a strategic review conducted in the spring of 2020.

We have continued preclinical work to validate tipifarnib in the CXCR4 receptor pathway and to assess the timing and strategy for further development.

We believe tipifarnib also has potential to drive clinical benefit in patients with peripheral T-cell lymphomas, or PTCL, including patients with angioimmunoblastic T-cell lymphoma, or AITL , as well as other subtypes of PTCL.

We anticipate that clinical data from our Phase 2 study in patients with relapsed and/ or refractory PTCL will be presented at the 2021 American Society of Hematology Annual Meeting.

As previously reported, we are developing a next-generation farnesyl transferase inhibitor which we believe demonstrates improved potency, pharmacokinetic and physicochemical properties relative to tipifarnib.

In June 2021, we nominated a development candidate, KO-2806, which we have advanced into investigational new drug-enabling studies.

We intend to direct this development candidate at innovative biology and larger disease indications in combination with other targeted therapies, and we expect to submit an investigational new drug application for KO-2806 by the end of 2022.

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

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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 AML, including NPM1-mutant AML and KMT2A-rearranged AML.

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%.

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As of the data cutoff date, no drug discontinuations due to treatment-related adverse events and no evidence of QTc prolongation were reported.

Treatment related adverse effects (grade ≥ 3) were reported to include pancreatitis, increased lipase, decreased neutrophil count, tumor lysis syndrome and deep venous thrombosis.

related adverse effects (grade ≥ 3) were reported to include pancreatitis, increased lipase, decreased neutrophil count, tumor lysis syndrome and deep venous thrombosis.

On May 6, 2021, we reported that we amended the KOMET-001 trial protocol to include two Phase 1b expansion cohorts at doses that cleared the safety threshold in dose escalation.

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Additional development opportunities include combination studies, other genetic subtypes, a pediatric development strategy and other indications, such as acute lymphocytic leukemia and myelodysplastic syndrome.

In June 2021, we nominated a development candidate, KO-2806, which we have advanced into investigational new drug-enabling studies.

Liquidity Overview

As of June 30, 2021, we had cash, cash equivalents and short-term investments of $567.5 million.

As of September 30, 2021, we had cash, cash equivalents and short-term investments of $543.4 million.

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.

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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, 2021, we have no in-licensed technologies that have alternative future uses in research and development projects or otherwise.

As of September 30, 2021, 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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Our future research and development expenses will depend on the preclinical and clinical success of each product candidate that we develop, as well as ongoing assessments of the commercial potential of such product candidates.

In addition, we cannot forecast

which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Completion of clinical trials may take several years or more, and the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

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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 (expense), net

Comparison of the Three Months Ended June 30, 2021 and 2020

Comparison of the Three Months Ended September 30, 2021 and 2020

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, 2021 compared to the same period in 2020 was primarily due to increases in patient screening costs and other clinical costs related to our registration-directed trial of tipifarnib.

The increase in KO-539-related research and development expenses for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases in costs related to our Phase 1/2 clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The increase in discovery stage program research and development expenses for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increased research activities for new programs.

The increase in KO-539-related research and development expenses for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to increases in costs related to our Phase 1/2 clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The increase in discovery stage program research and development expenses for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to increased research activities for new programs.

Personnel costs and other expenses include employee salaries and related expenses, facilities expenses, overhead expenses and costs related to the terminated ERK inhibitor program.

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General and Administrative Expenses .

The increase in general and administrative expenses for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases of $2.0 million in non-cash share-based compensation expense, $1.7 million in personnel costs due to additional headcount and $0.7 million in professional fees.

The increase in general and administrative expenses for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to increases of $1.7 million in non-cash share-based compensation expense, $0.9 million in professional fees and $0.8 million in personnel costs due to additional headcount.

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

Other income (expense), net .

The decrease in other income (expense), net for the three months ended June 30, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

Comparison of the Six Months Ended June 30, 2021 and 2020

The decrease in other income (expense), net for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

Comparison of the Nine Months Ended September 30, 2021 and 2020

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, 2021 compared to the same period in 2020 was primarily due to increases in companion diagnostics development activities, patient screening costs and other clinical costs related to our registration-directed trial of tipifarnib.

The increase in KO-539-related research and development expenses for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases in costs related to our Phase 1/2 clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The increase in discovery stage program research and development expenses for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increased research activities for new programs.

The increase in personnel costs and other expenses for the six months ended June 30, 2021 compared to the same period in 2020

was to support our registration-directed clinical trial of tipifarnib and Phase 1/2 clinical trial of KO-539 , partially offset by a reduction in costs due to the termination of the ERK inhibitor program in 2020 .

Personnel costs and other expenses include employee salaries and related expenses, facilities expense s, overhead expenses and cost s related to the terminated ERK inhibitor program .

The increase in tipifarnib-related research and development expenses for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to increases in companion diagnostics development activities, patient screening costs and other clinical costs related to our registration-directed trial of tipifarnib.

The increase in KO-539-related research and development expenses for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to increases in costs related to our Phase 1/2 clinical trial of KO-539 which was initiated in September 2019 and manufacturing development activities.

The increase in discovery stage program research and development expenses for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to increased research activities for new programs.

The increase in personnel costs and other expenses for the nine months ended September 30, 2021 compared to the same period in 2020 was to support our registration-directed clinical trial of tipifarnib and Phase 1/2 clinical trial of KO-539, partially offset by a reduction in costs due to the termination of the ERK inhibitor program in 2020.

Personnel costs and other expenses include employee salaries and related expenses, facilities expenses, overhead expenses and costs related to the terminated ERK inhibitor program.

General and Administrative Expenses .

The increase in general and administrative expenses for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases of $3.8 million in non-cash share-based compensation expense, $3.2 million in personnel costs due to additional headcount and $0.4 million in professional fees.

The increase in general and administrative expenses for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to increases of $ 5.

5 million in non-cash share-based compensation expense , $ 4.1 million in personnel costs due to additional headcount and $ 1.3 million in pr ofessional fees .

Other income (expense), net .

The decrease in other income (expense), net for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

The decrease in other income (expense), net for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in interest income.

Liquidity and Capital Resources

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

In November 2018, we entered into a loan and security agreement with Silicon Valley Bank, or the SVB Loan Agreement, providing for up to $20.0 million in a series of term loans.

Upon entering into the SVB Loan Agreement, we borrowed $7.5 million, or the Term Loan.

The Term Loan had a scheduled maturity date of May 1, 2023 .

On May 19, 2021, we paid $6.6 million to repay all amounts owed under the Term Loan, which included a final payment of $0.6 million, representing 7.75% of the Term Loan, and a prepayment fee of $30,000.

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

As of June 30, 2021, we had an accumulated deficit of $366.9 million.

As of September 30, 2021, we had an accumulated deficit of $400.2 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.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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, 2021, we had cash, cash equivalents and short-term investments of $567.5 million.

As of September 30, 2021, we had cash, cash equivalents and short-term investments of $543.4 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 2024.

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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 June 30,

Nine Months Ended

September 30,

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Operating Activities.

The increase in net cash used in operating activities for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to the increase of $24.7 million in net loss, $2.2 million in changes in accounts payable and accrued expenses, $1.8 million in changes in prepaid expenses and other current assets and $1.7 million in changes in other long-term assets, partially offset by increases of $5.4 million in non-cash share-based compensation expense and $2.1 million in amortization of premiums and accretion of discounts on marketable securities, net.

The increase in net cash used in operating activities for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to the increase of $34.3 million in net loss, $4.5 million in changes in accounts payable and accrued expenses, $1.6 million in changes in other long-term assets and $1.3 million in changes in prepaid expenses and other current assets, partially offset by increases of $8.1 million in non-cash share-based compensation expense and $3.1 million in amortization of premiums and accretion of discounts on marketable securities, net.

Investing Activities.

The increase in net cash used in investing activities for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to an increase of $256.3 million in purchases of marketable securities, partially offset by an increase of $26.1 million in maturities of marketable securities and a decrease of $0.9 million in purchases of property and equipment.

The increase in net cash used in investing activities for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to an increase of $236.4 million in purchases of marketable securities, partially offset by an increase of $74.4 million in maturities of marketable securities and a decrease of $0.9 million in purchases of property and equipment.

Financing Activities.

Net cash used in financing activities for the six months ended June 30, 2021 primarily related to the repayment of all amounts owed under the Term Loan, including a final payment and prepayment fees, totaling $7.9 million, partially offset by proceeds of $1.4 million from exercises of stock options and purchases under our employee stock purchase plan.

Net cash provided by financing activities for the six months ended June 30, 2020 consisted of proceeds of $135.2 million from our sale of common stock from our public offering in May 2020 and $2.4 million from exercises of stock options and purchases under our employee stock purchase plan.

Net cash used in financing activities for the nine months ended September 30, 2021 primarily related to the repayment of all amounts owed under our prior term loan facility with Silicon Valley Bank, including a final payment and prepayment fees, totaling $7.9 million, partially offset by proceeds of $3.6 million from exercises of stock options and purchases under our employee stock purchase plan.

Net cash provided by financing activities for the nine months ended September 30, 2020 consisted of proceeds of $135.0 million from our sale of common stock from our public offering in May 2020 and $7.3 million from exercises of stock options and purchases under our employee stock purchase plan.

Contractual Obligations

The following is a summary of our significant contractual obligations as of June 30, 2021, in thousands:

The following is a summary of our significant contractual obligations as of September 30, 2021, in thousands:

Payments Due by Period

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Such short-term agreements are generally outstanding for periods less than one year and are settled by cash payments upon delivery of goods and services.

The nature of the work being conducted under these agreements is such that, in most cases, the services may be cancelled upon prior notice of 90 days of less.

The nature of the work being conducted under these

agreements is such that, in most cases, the services may be cancelled upon prior notice of 90 days of less.

Payments due upon cancellation generally consist only of payments for services provided and expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.

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Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As of September 30, 2021, 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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There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Management Estimates,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We hold certain financial instruments for which a change in prevailing interest rates may cause the principal amount of the marketable securities to fluctuate.

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments.

We invest our excess cash primarily in money market funds, corporate debt securities, U.S.

Treasury securities, commercial paper, non-U.S.

government debt securities, supranational debt securities and U.S.

Agency bonds.

The primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable securities without significantly increasing risk.

Additionally, we established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

For our short-term investments, we do not believe that an increase or decrease in market rates would have a significant impact on the realized values or the unaudited condensed statements of operations and comprehensive loss.

We believe that should a 10.0% change in interest rates were to have occurred on June 30, 2021, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

Any changes would only be realized if we sold the investments prior to maturity.

Inflation Risk

Inflation generally affects us by increasing our clinical trial costs.

We do not believe that inflation has had a material effect on our business, financial condition or results of operations during any periods presented herein .

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