What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-10 · 63 added, 87 removed, 181 unchanged (45% of the section changed)

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You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the U.S.

Securities and Exchange Commission, or the SEC, on March 17, 2021, or our Annual Report on Form 10-K.

Securities and Exchange Commission, or the SEC, on February 28, 2022, or our Annual Report on Form 10-K.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next generation targeted therapies for women’s cancers.

Our team has spent the past decade characterizing the structure and function of the ER, a key driver of breast cancer in approximately 75% of patients, in order to develop more potent, oral therapies that completely inactivate this signaling pathway.

Our wholly owned lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a CERAN and a SERD, which we believe will drive deeper, more durable responses than existing therapies.

OP-1250, both as a monotherapy and in combination with inhibitors of CDK4/6 demonstrated robust tumor shrinkage in several xenograft models, including a breast cancer brain metastasis model.

In August 2020, we initiated an ongoing Phase 1/2 dose escalation and expansion trial evaluating OP-1250 for the treatment of recurrent, locally advanced or metastatic ER+, HER2- breast cancer, and expect to report initial data from the dose-escalation portion of trial in the fourth quarter of 2021.

Our team has spent the past decade characterizing the structure and function of the estrogen receptor, or ER, a key driver of breast cancer in approximately 75% of patients, in order to develop more potent, oral therapies that completely inactivate this signaling pathway.

Our lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete ER antagonist, or CERAN, and a selective ER degrader, or SERD, which we believe will drive deeper, more durable responses than existing therapies.

OP-1250, both as a monotherapy and in combination with inhibitors of cyclin-dependent kinase 4 and 6, or CDK4/6, demonstrated robust tumor shrinkage in several xenograft models, including a breast cancer brain metastasis model.

In August 2020, we initiated an ongoing Phase 1/2 dose escalation and expansion trial evaluating OP-1250 for the treatment of recurrent, locally advanced or metastatic ER-positive, or ER+, human epidermal growth factor receptor 2-negative, or HER2-, breast cancer.

We reported initial data from the Phase 1 dose escalation portion of this trial in November 2021, which provide proof-of-concept for OP-1250 as a monotherapy treatment for ER+/HER2- breast cancer.

We are continuing to enroll patients in the dose expansion phase of our ongoing Phase 1/2 trial and expect to report updated clinical results in 2022.

We have also initiated a Phase 1b dose escalation trial evaluating OP-1250 in combination with palbociclib for the treatment of recurrent, locally advanced or metastatic ER-positive, or ER+, human epidermal growth factor receptor 2-negative, or HER2-, breast cancer.

We own worldwide development and commercialization rights to OP-1250.

Our plan is to develop OP-1250 in a number of ER+ breast cancer indications, both as a monotherapy and in combination with approved targeted therapies that have shown improved outcomes with other endocrine therapies.

We believe OP-1250’s oral formulation and dual mechanism of action directly address the limitations of current endocrine therapies, such as fulvestrant and tamoxifen, and position OP-1250 as a potential endocrine therapy of choice for the treatment of ER+ breast cancers.

Our goal is to transform the standard of care for women living with cancers by developing more effective therapies that apply our deep understanding and collective expertise in endocrine-driven cancers, nuclear receptor activities and mechanisms of acquired resistance.

Our goal is to transform the standard of care for women living with cancers by developing more effective therapies that apply

our deep understanding and collective expertise in endocrine-driven cancers, nuclear receptor activities and mechanisms of acquired resistance .

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 nonclinical studies and clinical trials and providing general and administrative support for these operations .

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We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates .

As of September 30, 2021, we had cash, cash equivalents, and marketable securities of $306.0 million.

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements through the end of 2023.

As of March 31, 2022, we had cash, cash equivalents, and marketable securities of $267.9 million.

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2024.

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

Our net losses were $17.7 million and $7.8 million for the three months ended September 30, 2021 and 2020, respectively, and $49.5 million and $12.0 million for the nine months ended September 30, 2021 and 2020, respectively, and we expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidate, and as we transition to operating as a public company.

Our net losses were $23.0 million and $15.3 million for the three months ended March 31, 2022 and 2021, respectively, and we expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidate, 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 September 30, 2021, we had an accumulated deficit of $82.6 million.

As of March 31, 2022, we had an accumulated deficit of $127.2 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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To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with many of our employees working remotely.

We continue to actively monitor the rapidly evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

Through September 30, 2021, although we modified our operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, our business, operations and development timelines were not material adversely affected.

However, the extent to which the COVID-19

pandemic may affect our business, operations and development timelines and plans in the future, including the resulting impact on our expenditures and capital needs, remains uncertain.

we do business.

During 2021, although we modified our operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, our business, operations and development timelines were not material adversely affected.

In October 2021, we re-opened our offices to administrative employees, however due to the resurgence of cases relating to the spread of the Delta and Omicron variants, we continued to limit access to its offices.

In March 2022, we fully re-opened our offices to all employees and continue to comply with protocols implemented by respective health authorities.

We continue to monitor developments related to COVID-19 and may close its offices again in the future as the COVID-19 pandemic continues to evolve.

The extent to which the COVID-19 pandemic may affect our business, operations and development timelines and plans in the future, including the resulting impact on our expenditures and capital needs, remains uncertain .

Critical Accounting Policies and Estimates

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We expense research and development expenses in the periods in which they are incurred.

Costs for certain activities, such as manufacturing and nonclinical studies and clinical trials, are generally recognized based on

an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

Costs for certain activities, such as manufacturing and nonclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

We typically use our employee, consultant and infrastructure resources across our development programs.

We track outsourced development costs by product candidate or nonclinical program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or nonclinical programs.

Research and development expenses to advance the development of our lead product candidate and nonclinical program were $12.5 million and $4.7 million for the three months ended September 30, 2021 and 2020, respectively, and $35.1 million and $7.4 million for the nine months ended September 30, 2021 and 2020, respectively.

Research and development expenses to advance the development of our lead product candidate and nonclinical program were $16.0 million and $10.7 million for the three months ended March 31, 2022 and 2021, respectively.

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance OP-1250 or any other future product candidates we may develop into and through nonclinical studies and clinical trials and pursue regulatory approval of our product candidates.

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We expect that our general and administrative expenses will increase substantially in the foreseeable future as we increase our headcount to support the continued research and development of our programs and the growth of our business.

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to ongoing financial statement audit and interim-period quarterly reviews, internal control over financial reporting compliance and audit, legal, other regulatory and compliance, director and officer insurance, investor and public relations, IT infrastructure, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, and other administrative and professional services.

Total other income (expense), net

Total other income (expense), net consists of interest income, interest expense, and other income and expense .

Interest income primarily consists of interest income on our cash, cash equivalents, and marketable securities.

Interest expense during the nine months ended primarily consisted of interest on our convertible promissory notes, and a non-cash interest charge related to a beneficial conversion feature on a convertible note that was issued in January 2020.

Other income and expense consists of miscellaneous income and expenses not related to operating activities.

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to ongoing financial statement audit and interim-period quarterly reviews, internal control over financial reporting compliance and audit, legal, other regulatory and compliance, director and officer insurance, investor and public relations and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Total other income

Total other income consists of interest income and other income (expense).

Interest income primarily consists of interest income on our cash equivalents and marketable securities.

Other income (expense) consists of miscellaneous income (expense) not related to operating activities.

Results of operations

Comparison of the three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

Three Months Ended September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net:

Interest income

Interest expense

Other income (expense)

Total other income (expense), net

Research and development expenses

Research and development expenses for the three months ended September 30, 2021 were $12.5 million, compared to $4.7 million for the three months ended September 30, 2020.

The increase of $7.8 million was primarily due to increased spending in (i) advancing the clinical study of our lead product candidate OP-1250 and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, and an increase in the non-cash stock-based compensation of $2.0 million recognized during the three months ended September 30, 2021.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2021 were $5.2 million compared to $3.2 million for the three months ended September 30, 2020.

The increase of $2.0 million was primarily due to increased (i) personnel-related costs due to increased headcount, including the expansion of our executive team (ii) expenses associated with external consultants for accounting and regulatory compliance as a result of operating as a public company, and (iii) the non-cash stock-based compensation of $1.6 million recognized during the three months ended September 30, 2021.

Other income (expense), net

Other income (expense), net for the three months ended September 30, 2021 was less than $0.1 million, which primarily consisted of interest income from our marketable securities.

Comparison of the nine months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

Comparison of the three months ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands)

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Loss from operations

Other income (expense), net:

Other income:

Interest income

Interest expense

Other income (expense)

Total other income (expense), net

Total other income

Research and development expenses

Research and development expenses for the nine months ended September 30, 2021 were $35.1 million, compared to $7.4 million for the nine months ended September 30, 2020.

The increase of $27.7 million was primarily due to increased spending in (i) advancing the clinical study of our lead product candidate OP-1250 and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount and an increase in the non-cash stock-based compensation of $5.9 million recognized during the nine months ended September 30, 2021.

Research and development expenses for the three months ended March 31, 2022 were $16.0 million, compared to $10.7 million for the three months ended March 31, 2021.

The increase of $5.3 million was primarily due to increased spending in (i) advancing the clinical study for our lead product candidate OP-1250 and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, including non-cash stock-based compensation expenses increase of $1.3 million.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2021 were $14.6 million compared to $4.0 million for the nine months ended September 30, 2020.

The increase of $10.6 million was primarily due to increased (i) personnel-related costs due to increased headcount, including the expansion of our executive team (ii) expenses associated with external consultants for accounting and regulatory compliance as a result of operating as a public company, and (iii) the non-cash stock-based compensation of $4.6 million recognized during the nine months ended September 30, 2021.

Other income (expense), net

Other income (expense), net for the nine months ended September 30, 2021 was $0.3 million, which primarily consisted of interest income from our marketable securities, compared to $0.6 million expense for the nine months ended September 30, 2020.

The increase of $0.9 million was primarily due to the non-cash interest charge recognized in 2020 related to a beneficial conversion feature on a convertible note that was issued in January 2020.

General and administrative expenses for the three months ended March 31, 2022 were $7.2 million compared to $4.8 million for the three months ended March 31, 2021.

The increase of $2.5 million was primarily due to higher personnel-related expenses, including non-cash stock-based compensation expenses increase of $0.4 million, and other corporate costs.

Other income for the three months ended March 31, 2022 was $0.2 million, which primarily consisted of interest income from our marketable securities.

Liquidity and capital resources

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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 $49.5 million and $12.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Through September 30, 2021,

we had received aggregate gross proceeds of $391.9 million from sales of our common stock from the initial public offering in November 2020, issuances of convertible preferred stock and convertible promissory notes since our inception, stock option exercises, and the sale of stock through the ESPP.

As of September 30, 2021, we had $306.0 million in cash, cash equivalents and marketable securities.

As of September 30, 2021, we had accumulated deficit of $82.6 million.

We had no debt outstanding as of September 30, 2021.

Our net losses were $23.0 million and $15.3 million for the three months ended March 31, 2022 and 2021, respectively.

Through March 31, 2022, we had

received aggregate gross proceeds of $392.7 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes, stock option exercises, and the sale of stock through the ESPP.

As of March 31, 2022, we had $267.9 million in cash, cash equivalents and marketable securities.

As of March 31, 2022, we had accumulated deficit of $127.2 million.

We had no debt outstanding as of March 31, 2022.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the nonclinical and clinical development of OP-1250.

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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 existing cash, cash equivalents, and marketable securities will enable us to fund our operating expenses and capital expenditure requirements through the end of 2023 at which point we would need to obtain substantial additional funding in connection with our continuing operations.

We expect our existing cash, cash equivalents, and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into 2024 at which point we would 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.

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

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Operating activities

Net cash used in operating activities in the nine months ended September 30, 2021 consisted primarily of our net loss of $49.5 million, partially offset by non-cash charges of $11.6 million and a net change of $5.8 million in net operating assets and liabilities.

Net cash used in operating activities in the three months ended March 31, 2022 consisted primarily of our net loss of $23.0 million, offset by non-cash charges of $5.1 million and a net increase in net operating assets and liabilities of $0.1 million.

The net loss consisted primarily of $16.0 million in research and development expenses and $7.2 million in general and administrative expenses.

The non-cash charges

consisted primarily of stock-based compensation of $11.3 million and depreciation and amortization expenses of $0.3 million, primarily related to premium amortization on our marketable securities.

The change in operating assets and liabilities was primarily due to an increase of $5.1 million in other current liabilities, primarily related to the increased spending in (i) research and development related costs, including contract manufacturing and clinical research organization expenses as a result of our continued advancement of our lead product program, and (ii) personnel related expenses, including employee bonuses, due to increased headcount, and a net decrease in prepaid expense and other current assets and other assets of $1.2 million, offset by a decrease in accounts payable of $0.5 million .

Net cash used in operating activities during the nine months ended September 30, 2020 consisted primarily of our net loss of $12.0 million and cash used in changes in operating assets and liabilities of $0.2 million, partially offset by net non-cash charges of $1.4 million.

The changes in operating assets and liabilities consisted primarily of an increase in prepaid expenses and other current assets of $1.3 million and an increase of accounts payable and other current liabilities of $1.1 million.

The increase in prepaid expenses and other current assets was driven by an increase in prepaid clinical trial costs.

The increase in accounts payable and other liabilities was driven by an increase in costs related to research and development and professional costs incurred in preparation for our planned initial public offering.

The non-cash charges primarily consisted of stock compensation of $0.7 million and non-cash interest expense of $0.6 million.

The non-cash charges consisted primarily of stock-based compensation of $5.0 million and depreciation and amortization expenses of $0.1 million, and non-cash lease expense of less than $0.1 million, net of cash payments of $0.3 million.

The net increase in operating assets and liabilities was primarily due to (i) a net decrease of $0.2 million in prepaid expenses and other current assets and (ii) an increase of $0.2 million in accounts payable, which is primarily a result of timing of invoice payment.

The changes are partially offset by (i) a net increase of $0.2 million in other assets and (ii) a net decrease of $0.1 million in other current liabilities.

Net cash used in operating activities in the three months ended March 31, 2021 consisted primarily of our net loss of $15.3 million, partially offset by non-cash charges of $3.3 million and a net change of $1.0 million in net operating assets and liabilities.

The net loss consisted primarily of $10.7 million in research and development expenses and $4.8 million in general and administrative expenses.

The non-cash charges consisted primarily of stock-based compensation of $3.2 million and depreciation and amortization expenses of $0.1 million, primarily related to premium amortization on our marketable securities.

The change in operating assets and liabilities was primarily due to an increase of $1.0 million in other current liabilities, primarily related to the increased spending in contract manufacturing expenses as a result of our continued advancement of our lead product program.

The increase is partially offset by a decrease of $0.3 million in accounts payable, primarily as a result of timing of invoice payment, and a decrease in prepaid expenses and other current assets of $0.3 million.

Investing Activities

Net cash used in investing activities in the nine months ended September 30, 2021 was predominately due to purchases of marketable securities which was financed through the proceeds from the IPO and convertible preferred stock sale, and purchases of equipment, partially offset by the maturities of marketable securities.

Net cash used in investing activities in the nine months ended September 30, 2020 was for purchases of equipment.

Net cash provided by investing activities in the three-month ended March 31, 2022 was predominately due to maturities of marketable securities which was offset by purchase of marketable securities.

Net cash used in investing activities in the three-month ended March 31, 2021 was predominately due to purchases of marketable securities which was financed through the use of proceeds from the IPO and convertible preferred stock sale.

Financing activities

Net cash provided by financing activities in the nine months ended September 30, 2021 consisted of $0.4 million and $0.2 million in net proceeds from the sale of our common stock under the 2020 ESPP and the exercise of stock options, respectively.

Net cash provided by financing activities during the nine months ended September 30, 2020 consisted primarily of $3.0 million in proceeds from the sale and issuance of our convertible promissory notes, $50.6 million in net proceeds from the sale and issuance of our Series B convertible preferred stock, $87.4 million in net proceeds from the sale and issuance of our Series C convertible preferred stock, $0.6 million of proceeds from the exercise of employee stock options and $0.1 million proceeds from the settlement of non-recourse notes, net of issuance costs.

These cash inflows were partially offset by cash outflows of $2.3 million for the repurchase of Series A convertible preferred stock and Series A-1 convertible preferred stock and $0.9 million in payments of offering costs associated with our planned initial public offering.

Net cash provided by financing activities during the three months ended March 31, 2022 represents less than $0.1 million from the exercise of stock options.

There were no financing activities during the three months ended March 31, 2021.

Contractual obligations and commitments

Refer to Note 10 of our notes to the Company’s condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q for further information.

There have been no significant changes outside the ordinary course of business during the nine months ended September 30, 2021 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 for the year ended December 31, 2020 filed on March 17, 2021 with the SEC.

There have been no significant changes outside the ordinary course of business during the three months ended March 31, 2022 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 for the year ended December 31, 2021 filed on February 28, 2022 with the SEC.

Off-balance sheet arrangements

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Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

generally accepted accounting principles, or U.S.

The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and the disclosure of our contingent liabilities in our condensed consolidated financial statements.

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

During the nine months ended September 30, 2021, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K.

During the three months ended March 31, 2022, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk.

During the nine months ended September 30, 2021, there were no material changes to our market risk disclosures reported in our Annual Report on Form 10-K.

During the three months ended March 31, 2022, 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