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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-10 · 41 added, 74 removed, 158 unchanged (42% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Financial Data” in this Quarterly Report on Form 10-Q and our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.

In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and belief.

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Since our inception in 2016, we have received clearance from the U.S.

Food and Drug Administration, or the FDA, for three investigational new drug applications, or INDs, and successfully advanced these three programs into clinical development.

Food and Drug Administration, or the FDA, for four investigational new drug applications, or INDs, and successfully advanced three of these programs into clinical development, with the fourth expected to begin clinical development in the coming months.

In addition, we have three unique programs in various stages of preclinical development that we plan to advance into clinical development beginning in 2021.

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We are currently advancing our first clinical candidate, PRT543, in a Phase 1 clinical trial in select solid tumors and myeloid malignancies in patients who are refractory to or intolerant of established therapies.

Interim Phase 1 results indicate dose-dependent increases in exposure and target engagement, and we have observed early signs of clinical activity, including a confirmed complete response, or CR, in a patient with HRD+ high grade serous ovarian cancer.

Interim Phase 1 results indicate dose-dependent increases in exposure and target engagement, and we have observed early signs of clinical activity, including an ongoing confirmed complete response, or CR, in a patient with HRD+ high grade serous ovarian cancer through nine months of therapy.

A complete response is defined as the disappearance of all target lesions.

While we need to enroll and demonstrate objective responses in additional patients to support further development, and potential approval by FDA or other regulatory authorities is not guaranteed, we are encouraged by the clinical activity to date.

We expect to begin patient enrollment into the select solid tumor expansion cohorts of our ongoing Phase 1 trial during the fourth quarter of 2020 and into the select myeloid malignancies cohorts early in 2021.

We anticipate obtaining initial clinical data from these expansion cohorts in the first half of 2021 and presenting these data at medical meetings in 2021.

We will need to enroll and demonstrate objective responses in additional patients to support further development and potential approval by the FDA or other regulatory authorities, and while such approval is not guaranteed, we are encouraged by the clinical activity as of the date of this Quarterly Report on Form 10-Q.

Patient enrollment is complete in the adenoid cystic carcinoma expansion cohort of the Phase 1 trial, and enrollment is underway in additional expansion cohorts of solid tumors and hematological malignancies.

We anticipate presenting initial clinical data from the Phase 1 trial at medical meetings in the second half of 2021.

We are also advancing PRT811, a second PRMT5 inhibitor that we have optimized for high brain exposure, in a Phase 1 clinical trial in solid tumors, including GBM.

To date, the trial has demonstrated early signs of clinical activity and tolerability.

The previously disclosed refractory GBM patient whose tumor had demonstrated a 66% reduction on monotherapy PRT811 has subsequently undergone a follow-up MRI at week 16 con firming a partial response (PR) per RANO (response assessment in neuro-oncology) criteria.

We expect to begin enrolling patients in the dose expansion portion of the Phase 1 clinical trial in the first half of 2021 and anticipate initial clinical data fro m these expansion cohorts by the end of 2021.

We have also received FDA clearance of our IND for PRT1419, which is designed to be a potent and selective inhibitor of the anti-apoptotic protein, MCL1.

The potency and selectivity of PRT1419 is supported by p reclinical data demonstrating nanomolar inhibition of MCL1 and no inhibition of related enzymes at 200 times higher concentration of our product candidate.

We recently initiat ed a Phase 1 clinical trial in relapsed/refractory patients with myelodysplastic syndrome, or MDS, acute myeloid leukemia, or AML, non-Hodgkin’s lymphoma, or NHL, and multiple myeloma, or MM.

As of the date of this Quarterly Report on Form 10-Q, the trial has demonstrated early signs of clinical activity and tolerability.

The previously disclosed refractory GBM patient whose tumor had demonstrated a 66% reduction on monotherapy PRT811 subsequently underwent a follow-up MRI at week 18 and the regression has improved to 77% from baseline, confirming a partial response, or PR, per RANO (response assessment in neuro-oncology) criteria.

We expect to begin enrolling patients in the expansion portion of the Phase 1 clinical trial by mid-2021 and anticipate obtaining initial clinical data from this trial by the end of 2021.

PRT1419, our third clinical candidate, is designed to be a potent and selective inhibitor of the anti-apoptotic protein, MCL1.

The potency and selectivity of PRT1419 is supported by preclinical data demonstrating nanomolar inhibition of MCL1 and no inhibition of related enzymes at 200 times higher concentration of our product candidate.

We have begun enrolling patients with hematologic malignancies, including patients with myelodysplastic syndrome, or MDS, acute myeloid leukemia, or AML, non-Hodgkin’s lymphoma, or NHL, and multiple myeloma, or MM, into the Phase 1 open-label, multicenter clinical trial for the oral formulation of PRT1419.

We expect to add dose expansion and combination cohorts to this Phase 1 clinical trial in the second half of 2021.

Additionally, in March 2021, the FDA cleared our IND for an intravenous (IV) formulation of PRT1419.

A Phase 1 trial of the IV formulation, which leverages the optimized physicochemical properties of MRT1419, is expected to commence in the coming months.

We were incorporated in February 2016 under the laws of the State of Delaware.

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We have incurred recurring losses, the majority of which are attributable to research and development activities, and negative cash flows from operations.

We have funded our operations primarily through the sale of convertible preferred stock and common stock through our IPO.

Our net loss was $14.7 million and $27.6 million for the years ended December 31, 2018 and 2019, respectively, and $16.8 and $37.7 million for the three and nine months ended September 30, 2020.

As of September 30, 2020, we had an accumulated deficit of $88.2 million.

We have funded our operations primarily through the sale of convertible preferred stock and common stock.

Our net loss was $21.3 million for the three months ended March 31, 2021 as compared to $9.5 million for the three months ended March 31, 2020, and as of March 31, 2021, we had an accumulated deficit of $128.7 million.

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

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If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

As of September 30, 2020, we had $234.8 million in cash and cash equivalents.

We expect our existing cash and cash equivalents to enable us to fund our operating expenses and capital expenditure requirements into the second half of 2022.

As of March 31, 2021, we had $363.0 million in cash and cash equivalents.

We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditures into 2023.

COVID-19 Impact

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To date, we have not recognized any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the foreseeable future.

If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales.

If our development efforts for our product candidates are successful

and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales.

However, there can be no assurance as to when we will generate such revenue, if at all.

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We anticipate re-applying for the grant from the State of Delaware from time to time as long as we maintain qualifying headcount levels in the State of Delaware.

We expect our interest income, net to increase due to our investment of cash received from the IPO.

We expect our interest income, net to increase due to our investment of cash received our stock offerings.

Since our inception, we have not recorded any income tax benefits for the net operating losses, or NOLs, we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized.

Results of Operations

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

The following table sets forth our results of operations for the three months ended September 30, 2020 and 2019.

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table sets forth our results of operations for the three months ended March 31, 2021 and 2020.

Three months ended

September 30,

(in thousands)

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Research and Development Expenses

Research and development expenses increased by $9.8 million to $15.3 million for the three months ended September 30, 2020 from $5.5 million for the three months ended September 30, 2019.

The increase was mainly due to increased clinical research costs for the PRT543 and PRT811 clinical trials and increased costs associated with the initiation of the clinical trial for PRT1419, which began in the third quarter of 2020.

Research and development expenses increased by $7.9 million to $16.5 million for the three months ended March 31, 2021 from $8.5 million for the three months ended March 31, 2020.

We also incurred an increase in chemistry, manufacturing and other costs for those trials.

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Three months ended

September 30,

(in thousands)

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General and Administrative Expenses

General and administrative expenses increased by $1.5 million to $2.9 million for the three months ended September 30, 2020 from $1.4 million for the three months ended September 30, 2019.

General and administrative expenses increased by $4.3 million to $5.5 million for the three months ended March 31, 2021 from $1.2 million for the three months ended March 31, 2020.

The increase was primarily due to an increase in personnel related expense due to increases in employee headcount and an increase in our professional fees as we expanded our operations to support our research and development efforts and incurred additional costs to operate as a public company.

Other Income, net

Other income, net increased by $1.2 million primarily due to the receipt and recognition of a research and development tax credit from the State of Delaware in the third quarter of 2020.

Comparison of the Nine Month s Ended September 30, 2020 and 2019

The following table sets forth our results of operations for the nine months ended September 30, 2020 and 2019.

Nine months ended

September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income, net

Research and Development Expenses

Research and development expenses increased by $18.2 million to $33.6 million for the nine months ended September 30, 2020 from $15.4 million for the nine months ended September 30, 2019.

The increase was mainly due to increased patient enrollment and monitoring costs for the PRT543 and PRT811 clinical trials and increased costs associated with the initiation of the clinical trial for PRT1419, which began in the third quarter of 2020.

We also incurred an increase in chemistry, manufacturing and other costs for those trials.

We track our external research and development expenses on a program-by-program basis, such as fees paid to CROs, CMOs and research laboratories in connection with our pre-clinical development, process development, manufacturing and clinical development activities.

However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, early research and other costs which are deployed across multiple projects under development.

Research and development expenses by program are summarized in the table below:

Nine months ended

September 30,

(in thousands)

Discovery programs

Internal costs, including personnel related

General and Administrative Expenses

General and administrative expenses increased by $3.1 million to $5.7 million for the nine months ended September 30, 2020 from $2.6 million for the nine months ended September 30, 2019.

We also incurred additional expenses as we began to operate as a public company.

Other Income, net

Other income, net increased by $1.2 million primarily due to the receipt and recognition of a research and development tax credit from the State of Delaware in the third quarter of 2020.

Liquidi ty and Capital Resources

Other income, net increased by $0.4 million primarily due to the receipt and recognition of a research and development tax credit from the State of Delaware in the first quarter of 2021.

Liquidity and Capital Resources

Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations.

We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all.

Since our inception through August 2020, we have funded our operations through the sale of convertible preferred stock, receiving aggregate net proceeds of $144.4 million.

Upon the completion of our IPO in September 2020, we received net proceeds of $166.6 million.

As of September 30, 2020, we had $234.8 million in cash and cash equivalents and had an accumulated deficit of $88.2 million.

We expect our existing cash and cash equivalents to enable us to fund our operating expenses and capital expenditure requirements into the second half of 2022.

Since our inception, we have funded our operations through the sale of convertible preferred stock and common stock .

As of March 31, 2021, we had $363.0 million in cash and cash equivalents and had an accumulated deficit of $128.7 million.

We expect our existing cash and cash equivalents to enable us to fund our operating expenses and capital expenditure requirements into 2023.

We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

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

Nine months ended

September 30,

Three months ended

(in thousands)

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Operating Activities

During the nine months ended September 30, 2020, we used $31.3 million of cash in operating activities.

During the three months ended March 31, 2021, we used $16.1 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $21.3 million, offset by a $0.8 million net decrease in our operating assets and liabilities and noncash charges of $4.3 million, which consisted of $0.2 million in depreciation and $3.9 million in stock-based compensation.

The primary use of cash was to fund our operations related to the development of our product candidates.

During the nine months ended September 30, 2019, we used $17.2 million of cash in operating activities.

During the three months ended March 31, 2020, we used $9.9 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $9.5 million and a net increase of $0.9 million in our operating assets and liabilities, offset by $0.5 million of noncash charges, which consisted of $0.1 million in depreciation and amortization and $0.4 million in stock-based compensation.

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Investing Activities

During the nine months ended September 30, 2020 and 2019, we used $0.3 million and $0.6 million of cash, respectively, for the purchase of property and equipment.

During the three months ended March 31, 2021 and 2020, we used $1.0 million and $0.1 million of cash, respectively, for the purchase of property and equipment.

Financing Activities

During the nine months ended September 30, 2020, financing activities provided $247.5 million.

During the nine months ended September 30, 2020, we completed our IPO and received net cash of $167.9 million.

We also received $49.8 million from the sale of our Series C convertible preferred stock, $29.9 million from the sale of our Series B convertible preferred stock and $96,000 from the exercise of stock options.

During the nine months ended September 30, 2020, we made $0.3 million in payments for our capital lease obligation.

During the nine months ended September 30, 2019 net cash provided by financing activities consisted of $29.8 million from the sale of our Series B convertible preferred stock and $5,000 of proceeds received from the exercise of stock options, offset by payments of $31,000 for our capital lease obligation.

During the three months ended March 31, 2021, financing activities provided $161.8 million, which reflected the receipt of net cash of $161.4 million from the sale of common stock as well as the receipt of $0.4 million from the exercise of stock options.

During the three months ended March 31, 2020 net cash provided by financing activities consisted of $29.8 million from the sale of our Series B convertible preferred stock, offset by payments of $95,000 for our capital lease obligation.

Off-Balance Sheet Arrangements

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Critical Accounting Policies

During the nine months ended September 30, 2020, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in the Prospectus.

During the three months ended March 31, 2021, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” on our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2021.

JOBS Act Accounting Election

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Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and i rrevocably opt out of the extended transition period provided in the JOBS Act.

We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we ( i ) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

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Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Quantitative and Q ualitati ve Disclosures About Market Risk.

Quantitative and Qualitati ve Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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