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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-06 · 54 added, 54 removed, 246 unchanged (31% of the section changed)

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In clinical studies across more than 400 patients, palazestrant has demonstrated strong anti-tumor activity, attractive pharmacokinetics and prolonged drug exposure, favorable tolerability, and combinability with CDK4/6 inhibitors with no significant drug-drug interaction.

Palazestrant is being evaluated as a single agent in an ongoing Phase 3 clinical trial, OPERA-01, and in Phase 1/2 combination studies with a CDK4/6 inhibitor (palbociclib or ribociclib), a phosphatidylinositol 3 kinase alpha, or PI3Ka, inhibitor (alpelisib), and an anticipated Phase 1b/2 combination study with an mTOR inhibitor (everolimus).

Palazestrant is being evaluated as a single agent in an ongoing Phase 3 clinical trial, OPERA-01, and in Phase 1/2 combination studies with a CDK4/6 inhibitor (palbociclib or ribociclib), a phosphatidylinositol 3 kinase alpha, or PI3Ka, inhibitor (alpelisib), and a Phase 1b/2 combination study with an mTOR inhibitor (everolimus).

We reported positive Phase 2 clinical results for palazestrant as a monotherapy in October 2023 at the European Society for Medical Oncology, or ESMO, Congress 2023, which demonstrated compelling progression-free survival, or PFS, a favorable tolerability profile and attractive pharmacokinetics in a heavily pretreated patient population.

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We anticipate the top-line results from the OPERA-01 trial in 2026.

We are investigating palazestrant in combination with CDK4/6 inhibitors, palbociclib and ribociclib, and a PI3Ka inhibitor, alpelisib.

We are investigating palazestrant in combination with CDK4/6 inhibitors, palbociclib and ribociclib, a PI3Ka inhibitor, alpelisib, and an mTOR inhibitor, everolimus.

In October 2024, at the 2024 EORTC-NCI-AACR Symposium on Molecular Targets and Cancer Therapeutics (ENA 2024), we presented pre-clinical posters showing that palazestrant demonstrates combinability and enhanced tumor suppression with both everolimus and capivasertib, a pan-AKT inhibitor.

We presented interim results from the Phase 2 portion of the palazestrant-ribociclib combination clinical study at the ESMO Breast Cancer Annual Congress 2024 in May 2024 in Berlin, Germany.

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In October 2023, we announced the expansion of our clinical collaboration with Novartis Institutes for BioMedical Research, Inc., or Novartis, increasing the size of the ongoing Phase 1/2 clinical study testing palazestrant in combination with ribociclib to approximately 60 patients, and in March 2024, we further increased the size of the ongoing Phase 1/2 clinical study testing palazestrant in combination with ribociclib by an additional 15 patients exploring 90 mg of palazestrant in combination with 600 mg of ribociclib.

We also plan to initiate evaluation of palazestrant in combination with an mTOR inhibitor, everolimus, in a Phase 1b/2 clinical study, anticipated in the third quarter of 2024.

We also initiated our Phase 1b/2 clinical study of palazestrant in combination with an mTOR inhibitor, everolimus, in the third quarter of 2024.

In July 2022, we were granted Fast Track designation from the FDA for palazestrant for patients with ER+/HER2- metastatic breast cancer that has progressed following one or more lines of endocrine therapy with at least one line given in combination with a CDK4/6 inhibitor.

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In January 2024, we nominated a development candidate for this program, OP-3136.

We have completed Investigational New Drug, or IND, enabling studies for OP-3136, and we anticipate providing additional pre-clinical data for OP-3136 in the fourth quarter of 2024.

We expect to file an IND application with the FDA in late 2024 and advance into clinical development.

In a non-clinical xenograft model, OP-3136 caused dose-dependent tumor growth inhibition and tumor regression comparable to or better than a positive-control patented KAT6 inhibitor and demonstrated synergy in combination with CDK4/6 inhibitors or palazestrant.

In October 2024, we presented new pre-clinical data at ENA 2024 on the combination of OP-3136 with endocrine therapy, including palazestrant, and a CDK4/6 inhibitor, ribociclib.

We have completed Investigational New Drug, or IND, enabling studies for OP-3136, and we expect to file the IND application with the FDA in late 2024 and advance into clinical development in early 2025.

In non-clinical xenograft models, OP-3136 caused dose-dependent tumor growth inhibition and tumor regression comparable to or better than a positive-control patented KAT6 inhibitor and demonstrated synergy in combination with CDK4/6 inhibitors or palazestrant.

We are advancing the development of this program in collaboration with Aurigene Oncology, or Aurigene.

On October 17, 2024, we signed an out-license of our de-prioritized TRPM4 targeted research program to Black Shadow Therapeutics LLC in exchange for potential single-digit royalties on world-wide net sales should a product be approved by regulatory authorities.

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, research and development activities, business planning, raising capital, establishing and maintaining our intellectual property portfolio, conducting non-clinical studies and clinical trials and providing general and administrative support for these operations.

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We have incurred significant operating losses since the commencement of our operations.

Our net losses were $30.4 million and $20.1 million for the three months ended June 30, 2024 and 2023, respectively, and $61.4 million and $48.4 million for the six months ended June 30, 2024 and 2023, respectively.

Our net losses were $34.6 million and $21.5 million for the three months ended September 30, 2024 and 2023, respectively, and $95.9 million and $69.9 million for the nine months ended September 30, 2024 and 2023, respectively.

We expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidates, make potential milestone payments to our licensors, and as we continue to operate as a public company.

Our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our research and development activities.

As of June 30, 2024, we had an accumulated deficit of $367.0 million.

As of September 30, 2024, we had an accumulated deficit of $401.5 million.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures and general and administrative expenditures.

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Results of operations

Comparison of the three months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Comparison of the three months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

(in thousands)

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Research and development expenses

The following table summarizes our research and development expenses by functional area for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

The following table summarizes our research and development expenses by functional area for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

(in thousands)

CROs, CMOs and other clinical development related third-party vendor expenses

Compensation and related benefits

Other research and development expenses

Compensation and related benefits

Stock-based compensation

Total research and development expenses

Research and development expenses for the three months ended June 30, 2024 were $29.1 million, compared to $18.0 million for the three months ended June 30, 2023.

The increase of $11.1 million was primarily due to (i) increased spending on clinical operations and development-related activities as we continue to advance palazestrant into late-stage clinical trials, (ii) other research and development activities associated with the advancement of our KAT6 inhibitor program, and (iii) personnel-related costs, including an increase in non-cash stock-based compensation expense of $1.3 million.

Research and development expenses for the three months ended September 30, 2024 were $33.2 million, compared to $19.5 million for the three months ended September 30, 2023.

The increase of $13.8 million was primarily due to (i) increased spending on clinical operations and development-related activities as we continue to advance palazestrant through late-stage clinical trials, (ii) other research and development activities associated with the advancement of our KAT6 inhibitor program, and (iii) personnel-related costs, including an increase in non-cash stock-based compensation expense of $1.5 million.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2024 were $4.4 million compared to $3.6 million for the three months ended June 30, 2023.

The increase of $0.8 million was primarily due to (i) increased spending on corporate-related costs, and (ii) an increase in non-cash stock-based compensation expense of $0.3 million.

Other income for the three months ended June 30, 2024 was $3.1 million, compared to $1.5 million for the three months ended June 30, 2023.

General and administrative expenses for the three months ended September 30, 2024 were $4.4 million compared to $3.9 million for the three months ended September 30, 2023.

The increase of $0.5 million was primarily due to (i) increased spending on corporate-related costs, and (ii) an increase in non-cash stock-based compensation expense of less than $0.1 million.

Other income for the three months ended September 30, 2024 was $3.1 million, compared to $1.8 million for the three months ended September 30, 2023.

The increase of $1.2 million was primarily due to an increase in interest income from our marketable securities.

Results of operations

Comparison of the six months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

Comparison of the nine months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

(in thousands)

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Research and development expenses

The following table summarizes our research and development expenses by functional area for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

The following table summarizes our research and development expenses by functional area for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

(in thousands)

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Total research and development expenses

Research and development expenses for the six months ended June 30, 2024 were $59.0 million, compared to $40.8 million for the six months ended June 30, 2023.

The increase of $18.2 million was primarily due to (i) increased spending on clinical operations and development-related activities as we continue to advance palazestrant into late-stage clinical trials, (ii) a $5.0 million milestone payment made to Aurigene in connection with the exclusive global license agreement entered into in June 2022 between the Company and Aurigene, or the Aurigene Agreement, (iii) other research and development activities associated with the advancement of our KAT6 inhibitor program, and (iv) personnel-related costs, including an increase in non-cash stock-based compensation expense of $1.6 million.

Research and development expenses for the nine months ended September 30, 2024 were $92.2 million, compared to $60.3 million for the nine months ended September 30, 2023.

The increase of $32.0 million was primarily due to (i) increased spending on clinical operations and development-related activities as we continue to advance palazestrant through late-stage clinical trials, (ii) other research and development activities associated with the advancement of our KAT6 inhibitor program, (iii) a $5.0 million milestone payment made to Aurigene in connection with the exclusive global license agreement entered into in June 2022 between the Company and Aurigene, or the Aurigene Agreement, and (iv) personnel-related costs, including an increase in non-cash stock-based compensation expense of $3.1 million.

The increase was offset by $1.8 million one-time restructuring charge recorded in the nine months ended September 30, 2023.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2024 were $8.9 million compared to $10.4 million for the six months ended June 30, 2023.

General and administrative expenses for the nine months ended September 30, 2024 were $13.3 million compared to $14.3 million for the nine months ended September 30, 2023.

The decrease of $1.0 million was primarily due to (i) decreased spending on corporate- and legal-related costs, and (ii) decreased personnel-related expenses, including a $1.0 million one-time restructuring charge recorded in the first quarter of 2023.

The decrease was partially offset by an increase in non-cash stock-based compensation expense of $0.3 million.

Other income for the six months ended June 30, 2024 was $6.5 million, compared to $2.8 million for the six months ended June 30, 2023.

Other income for the nine months ended September 30, 2024 was $9.6 million, compared to $4.7 million for the nine months ended September 30, 2023.

The increase of $4.9 million was primarily due to an increase in interest income from our marketable securities.

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Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations.

Our net losses were $30.4 million and $20.1 million for the three months ended June 30, 2024 and 2023, respectively.

Through June 30, 2024, we had received aggregate gross proceeds of $551.3 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes, stock option exercises, and sale of stock through the Company’s 2020 Employee Stock Purchase Plan, or ESPP.

As of June 30, 2024, we had $239.1 million in cash, cash equivalents and marketable securities and accumulated deficit of $367.0 million.

We had no debt outstanding as of June 30, 2024.

Our net losses were $34.2 million and $21.5 million for the three months ended September 30, 2024 and 2023, respectively.

Through September 30, 2024, we had received aggregate gross proceeds of $551.4 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes, stock option exercises, and sale of stock through the Company’s 2020 Employee Stock Purchase Plan, or ESPP.

As of September 30, 2024, we had $214.8 million in cash, cash equivalents and marketable securities and accumulated deficit of $401.5 million.

We had no debt outstanding as of September 30, 2024.

In September 2023, we entered into a stock purchase agreement for a private placement of 13,211,381 shares of our common stock, at a price of $9.84 per share, to selected institutional and accredited investors, or the Private Placement, resulting in gross proceeds of approximately $130.0 million.

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The Amendment amends the Original Loan Agreement in order to, among other things, (i) increase the aggregate principal amount of the Original Credit Facility from up to $50.0 million to up to $100.0 million, or the Credit Facility, of which $25.0 million is currently available, an additional $25.0 million will become available upon achieving certain milestones related to execution of a first-line pivotal Phase 3 clinical trial of palazestrant in combination with ribociclib, and an additional $50.0 million which may be made available upon approval of the Bank in its discretion, and (ii) extend the maturity date to July 1, 2028.

As of June 30, 2024, we had not drawn down from the Credit Facility.

common stock, having an aggregate offering price of up to $150.0 million, or the ATM Shares.

As of September 30, 2024, we had not drawn down from the Credit Facility.

On January 5, 2024, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or TD Cowen, as sales agent, pursuant to which we may offer and sell, from time to time, shares of our common stock, having an aggregate offering price of up to $150.0 million, or the ATM Shares.

The sales, if any, of the ATM Shares will be made by any method permitted that is deemed to be an “at-the-market”, or ATM, equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through the Nasdaq Global Select Market.

We have agreed to pay TD Cowen a commission of up to 3.0% of the aggregate gross proceeds from any ATM Shares sold by TD Cowen.

During the three months ended June 30, 2024, we issued 1,225,952 shares of our common stock under the Sales Agreement at a weighted-average price of $12.14 per share for net proceeds of $14.9 million after deducting related issuance costs.

During the six months ended June 30, 2024, we issued 1,772,278 shares of our common stock under the Sales Agreement at a weighted-average price of $13.19 for net proceeds of $22.8 million after deducting related issuance costs.

As of June 30, 2024, approximately $126.6 million remained available for issuance under the Sales Agreement.

During the nine months ended September 30, 2024, we issued 1,772,278 shares of our common stock under the Sales Agreement at a weighted-average price of $13.19 for net proceeds of $22.8 million after deducting related issuance costs.

As of September 30, 2024, approximately $126.6 million remained available for issuance under the Sales Agreement.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of palazestrant, OP-3136 and non-clinical studies.

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The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts.

We expect our cash, cash equivalents, and marketable securities as of June 30, 2024, as well as the available balance under the Credit Facility, will enable us to fund our current operating plan for at least the next 12 months from the filing date of these condensed consolidated financial statements.

We expect our cash, cash equivalents, and marketable securities as of September 30, 2024, as well as the available balance under the Credit Facility, will enable us to fund our current operating plan for at least the next 12 months from the filing date of these condensed consolidated financial statements.

Refer to Note 10 of our notes to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q for further information regarding our material cash requirements;

other than as set forth therein, there have been no material changes outside the ordinary course of business during the three months ended June 30, 2024 to our commitments and contingencies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

other than as set forth therein, there have been no material changes outside the ordinary course of business during the three months ended September 30, 2024 to our commitments and contingencies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

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.

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The following table shows a summary of our cash flows for each of the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash provided by investing activities

Net cash provided by financing activities

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Operating activities

Net cash used in operating activities during the six months ended June 30, 2024 consisted primarily of our net loss of $61.4 million and non-cash interest income on our marketable securities of $4.5 million, offset by a net increase in operating assets and liabilities of $4.0 million and non-cash charges of $10.8 million.

Net cash used in operating activities during the nine months ended September 30, 2024 consisted primarily of our net loss of $95.5 million and non-cash interest income on our marketable securities of $6.5 million, offset by non-cash charges of $16.5 million and net increase in operating assets and liabilities of $7.8 million.

The net loss consisted primarily of $92.2 million in research and development expenses and $13.3 million in general and administrative expenses.

The non-cash charges consisted primarily of stock-based compensation expense of $16.3 million, depreciation and amortization expenses of $0.3 million, and non-cash lease expense of less than $0.1 million, net of cash payments of $0.9 million.

The net increase in operating assets and liabilities was primarily due to (i) an increase of $3.2 million in accrued and other current liabilities, (ii) an increase of $1.7 million in accounts payable, and (iii) a decrease of $1.6 million in prepaid expenses and other current assets, which is primarily due to the reimbursable research and development costs received from a collaboration partner.

The changes were partially offset by an increase of $2.4 million in other assets and long-term deposits.

Net cash used in operating activities in the six months ended June 30, 2023 consisted primarily of our net loss of $48.4 million and a net decrease in operating assets and liabilities of $1.1 million, partially offset by non-cash charges of $7.0 million.

The net increase in operating assets and liabilities was primarily due to (i) an increase of $9.0 million in accrued and other current liabilities and (ii) a decrease of $1.5 million in prepaid expenses and other current assets, which is primarily due to the reimbursable research and development costs received from a collaboration partner.

The net increases in operating liabilities were primarily offset by (i) an increase of $2.6 million in other assets and long-term deposits.

Net cash used in operating activities during the nine months ended September 30, 2023 consisted primarily of our net loss of $69.9 million and a net increase in operating assets and liabilities of $5.4 million, partially offset by non-cash charges of $10.1 million.

The net loss consisted primarily of $60.3 million in research and development expenses and $14.3 million in general and administrative expenses.

The non-cash charges consisted primarily of stock-based compensation expense of $12.9 million and depreciation and amortization expenses of $0.3 million, primarily offset by non-cash interest income on our marketable securities of $3.3 million.

The net decrease in operating assets and liabilities was primarily due to (i) a decrease of $2.7 million in accrued and other current liabilities and (ii) an increase of $0.1 million in other assets and long-term deposits.

The net increase in operating assets and liabilities was primarily due to (i) an increase of $5.3 million in other assets and long-term deposits, and (ii) a decrease of $2.2 million in accrued and other current liabilities.

The changes were partially offset by (i) an increase of $1.8 million in accounts payable, which is primarily a result of timing of invoice payment, and (ii) a decrease of $0.3 million in prepaid expenses and other current assets.

Investing Activities

Net cash used in investing activities during the six months ended June 30, 2024 was predominantly due to purchases of marketable securities which were partially offset by maturities of marketable securities.

Net cash provided by investing activities during the six months ended June 30, 2023 was predominantly due to maturities of marketable securities which were offset by purchases of marketable securities.

Net cash used in investing activities during the nine months ended September 30, 2024 was predominantly due to purchases of marketable securities which were partially offset by maturities of marketable securities.

Net cash provided by investing activities during the nine months ended September 30, 2023 was predominantly due to maturities of marketable securities which were offset by purchases of marketable securities.

Financing activities

Net cash provided by financing activities during the six months ended June 30, 2024 consists of $22.8 million in net proceeds from the sale of ATM Shares, $1.0 million from the exercise of stock options, and $0.7 million from the sale of our common stock under the ESPP.

Net cash provided by financing activities during the six months ended June 30, 2023 consists of $1.6 million and $0.7 million in net proceeds from the exercise of stock options and the sale of our common stock under the ESPP, respectively.

Net cash provided by financing activities during the nine months ended September 30, 2024 consists of $22.8 million in net proceeds from the sale of ATM Shares, $1.1 million from the exercise of stock options, and $0.7 million from the sale of our common stock under the ESPP.

Net cash provided by financing activities during the nine months ended September 30, 2023 consists of $129.8 million in net proceeds from the Private Placement, $2.4 million from the exercise of stock options, and $0.7 million from the sale of our common stock under the ESPP.

Critical accounting policies and significant judgments and estimates

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Our actual results may differ from these estimates under different assumptions or conditions.

During the three months ended June 30, 2024, there were no material changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K.

During the three months ended September 30, 2024, there were no material changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk.

During the three months ended June 30, 2024, there were no material changes to our market risk disclosures reported in our Annual Report on Form 10-K.

During the three months ended September 30, 2024, there were no material changes to our market risk disclosures reported in our Annual Report on Form 10-K.

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