What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 65 added, 42 removed, 168 unchanged (39% of the section changed)

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Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below.

These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, the impact of the COVID-19 pandemic, business strategy, market size, potential growth opportunities, preclinical and clinical development activities, efficacy and safety profile of our product candidates, use of net proceeds from our offerings, our ability to maintain and recognize the benefits of certain designations received by product candidates, the timing and results of preclinical studies and clinical trials, commercial collaborations with third parties and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates.

These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, the impact of the ongoing COVID-19 pandemic, business strategy, market size, potential growth opportunities, preclinical and clinical development activities, efficacy and safety profile of our product candidates, use of net proceeds from our offerings, our ability to maintain and recognize the benefits of certain designations received by product candidates, the timing and results of preclinical studies and clinical trials, commercial collaborations with third parties and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates.

The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “predict,” “target,” “intend,” “could,” “would,” “should,” “project,” “plan,” “expect,” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

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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 six investigational new drug applications, or INDs, and successfully advanced these programs into clinical trials.

In addition, we have two unique programs in various stages of preclinical development that we plan to advance into clinical development in 2022.

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

In addition, we have other unique programs in various stages of preclinical development and we plan to file an additional IND in 2022.

By focusing on developing agents using broad mechanisms that have multiple links to oncogenic driver pathways in select patients, we have developed a diverse pipeline consisting of six distinct programs spanning methyltransferases, kinases, protein-protein interactions and targeted protein degraders.

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We believe we can best address these diseases by developing therapies that target primary and secondary resistance mechanisms.

We have advanced four candidates in clinical trials and intend to file two INDs in the second half of 2022.

We have two clinical candidates that are designed to be oral, potent and selective inhibitors of protein arginine methyltransferase 5, or PRMT5.

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Focus clinical development in select patient populations where clinical activity has been observed.

Complete data analysis of the ongoing expansion cohorts by mid-year to determine further development.

Complete data analysis of the ongoing expansion cohorts by the second half of 2022 to determine further development.

Report next steps for the ongoing dose expansion cohorts in the second half of 2022.

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PRT1419, our next 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.

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 clinical trial for the oral formulation of PRT1419.

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We anticipate completing enrollment in the Phase 1 dose escalation study of PRT2527 with the goal of identifying a recommended Phase 2 dose in the second half of 2022.

In addition to our four clinical stage candidates, we are advancing two new preclinical programs.

Our most advanced preclinical program has led to the identification of PRT3645, a brain penetrant molecule that potently and selectively targets CDK4/6.

IND-enabling studies for PRT3645 are ongoing and we intend to complete IND-enabling studies, file an IND and initiate a Phase 1 clinical trial in the second half of 2022.

Our second pre-clinical program targets Brahma homologue, or BRM, otherwise known as SMARCA2.

We recently received clearance for an IND application for PRT3645, a brain penetrant molecule that potently and selectively targets CDK4/6.

We remain on track to initiate a clinical trial for PRT3645 by year end.

Our most advanced pre-clinical program targets Brahma homologue, or BRM, otherwise known as SMARCA2.

We have identified SMARCA2 protein degraders that appear to be potent based on preclinical data demonstrating degradation of SMARCA2 at sub-nanomolar concentrations.

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

Our net loss was $29.5 million and $21.3 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $248.6 million.

Our net loss was $56.8 million and $48.2 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $276.0 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 March 31, 2022 , we had $ 266.2 million in cash, cash equivalents, and marketable securities.

As of June 30, 2022, we had $246.3 million in cash, cash equivalents, and marketable securities.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expense and capital expenditures into the second half of 2024.

COVID-19 Impact

We are continuing to proactively monitor and assess the COVID-19 pandemic.

We are continuing to proactively monitor and assess the ongoing COVID-19 pandemic.

Since early March 2020 we have been monitoring the potential impact on our business that may result from this rapidly evolving crisis and to avoid any unnecessary potential delays to our programs.

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The safety and well-being of employees, patients and partners is our highest priority.

See the Risk Factor “ The COVID-19 pandemic could adversely impact our business, including our clinical trials and clinical trial operations ” in Part II, Item 1A.

See the Risk Factor “ The ongoing COVID-19 pandemic could adversely impact our business, including our clinical trials and clinical trial operations ” in Part II, Item 1A.

“Risk Factors” below.

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General and administrative expense also includes corporate facility costs not otherwise included in research and development expense, including rent, utilities, depreciation and maintenance, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.

We expect that our general and administrative expense will increase in the future to support our continued research and development activities and potential commercialization efforts.

We expect that our general and administrative expense will increase in the future to support our continued research and development activities and potential commercialization effort s .

These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, legal support and accountants, among other expenses.

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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2020

The following table sets forth our results of operations for the three months ended March 31, 2022 and 2021.

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table sets forth our results of operations for the three months ended June 30, 2022 and 2021.

Three months ended

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Research and Development Expenses

Research and development expenses increased by $6.4 million to $22.8 million for the three months ended March 31, 2022 from $16.5 million for the three months ended March 31, 2021.

Included in research and development expenses for the quarter ended March 31, 2022, was $3.2 million of non-cash expense related to stock-based compensation expense, including employee stock options, compared to $1.8 million for the three months ended March 31, 2021.

The increase in research and development expense was primarily due to an increase in discovery-stage program expenses and from the growth and advancement of our clinical pipeline.

Our chemistry, manufacturing and other costs for the trials also increased.

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 decreased by $1.1 million to $21.3 million for the three months ended June 30, 2022 from $22.4 million for the three months ended June 30, 2021.

Included in research and development expenses for the quarter ended June 30, 2022, was $2.5 million of non-cash expense related to stock-based compensation expense, including employee stock options, compared to $2.2 million for the three months ended June 30, 2021.

The decrease in research and development expense was primarily due to the wind down of PRT543 clinical development in the PRMT5 programs as we are concentrating further development efforts on our PRT811 candidate in biomarker-selected patients in specific cancer types .

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

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General and Administrative Expenses

General and administrative expenses increased by $2.0 million to $7.5 million for the three months ended March 31, 2022 from $5.5 million for the three months ended March 31, 2021.

Included in the general and administrative expenses for the quarter ended March 31, 2022, was $3.6 million of non-cash expense related to stock-based compensation expense, including employee stock options, as compared to $2.0 million for the same period in 2021.

The increase in general and administrative expense was primarily due to an increase in non-cash stock-based compensation expense along with professional fees as we expanded our operations to support our research and development efforts.

General and administrative expenses increased by $2.6 million to $8.2 million for the three months ended June 30, 2022 from $5.5 million for the three months ended June 30, 2021.

Included in the general and administrative expenses for the quarter ended June 30, 2022, was $3.6 million of non-cash expense related to stock-based compensation expense, including employee stock options, as compared to $2.0 million for the same period in 2021.

The increase in general and administrative expense was primarily due to an increase in non-cash stock-based compensation expense, an increase in personnel related expenses due to a higher employee headcount, and an increase in professional fees as we expanded our operations to support our research and development efforts.

Other Income, net

Other income, net increased by $0.2 million to $0.8 million for the three months ended March 31, 2022 from $0.7 million for the three months ended March 31, 2021, primarily due to the receipt and recognition of research and development tax credits from the State of Delaware during 2022, as well as interest earned on the investment of our cash proceeds.

Other income, net increased by $1.0 million to $2.1 million for the three months ended June 30, 2022 from $1.1 million for the three months ended June 30, 2021, primarily due to the receipt and recognition of research and development tax credits from the State of Delaware during 2022, as well as interest earned on the investment of our cash proceeds.

Results of Operations

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table sets forth our results of operations for the six months ended June 30, 2022 and 2021.

Six months ended

(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 $5.3 million to $44.1 million for the six months ended June 30, 2022 from $38.9 million for the six months ended June 30, 2021.

Included in research and development expenses for the six months ended June 30, 2022 , was $5.7 million of non-cash expense related to stock-based compensation expense, including employee stock options, compared to $4.0 million for the six months ended June 30, 2021 .

The increase in research and development expense was primarily due to an increase in discovery-stage program expenses and from the growth and advancement of our clinical pipeline.

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

Six months ended

(in thousands)

PRT1419 (Oral and IV)

Discovery programs

Internal costs, including personnel related

General and Administrative Expenses

General and administrative expenses increased by $4.6 million to $15.6 million for the six months ended June 30, 2022 from $11.0 million for the six months ended June 30, 2021.

Included in the general and administrative expenses for the six months ended June 30, 2022, was $7.2 million of non-cash expense related to stock-based compensation expense, including employee stock options, as compared to $4.1 million for the same period in 2021.

Other Income, net

Other income, net increased by $1.2 million to $2.9 million for the six months ended June 30, 2022 from $1.7 million for the six months ended June 30, 2021, primarily due to the receipt and recognition of research and development tax credits from the State of Delaware during 2022, as well as interest earned on the investment of our cash proceeds.

Liquidity and Capital Resources

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

As of March 31, 2022, we had $266.2 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $248.6 million.

As of June 30, 2022, we had $246.3 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $276.0 million.

We expect our existing cash, cash equivalents and marketable securities to enable us to fund our operating expenses and capital expenditure requirements into the second half of 2024 .

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

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants

limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.

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

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Six months ended

(in thousands)

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Operating Activities

During the three months ended March 31, 2022, we used $21.9 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $29.5 million and a $0.7 million net increase in our operating assets and liabilities, offset by noncash charges of $8.3 million, which consisted of $6.8 million in stock-based compensation, $0.7 million in amortization of premiums and discounts on marketable securities, $0.4 million noncash lease expense, and $0.3 million in depreciation.

During the six months ended June 30, 2022, we used $40.4 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $56.8 million offset by noncash charges of $16.5 million, which consisted of $12.9 million in stock-based compensation, $1.8 million in amortization of premiums and discounts on marketable securities, $0.8 million noncash lease expense, and $0.6 million in depreciation.

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

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.

During the six months ended June 30, 2021, we used $36.1 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $48.2 million, offset by a $3.1 million net decrease in our operating assets and liabilities and noncash charges of $9.1 million, which consisted of $0.4 million in depreciation, $0.6 million noncash lease expense and $8.1 million in stock-based compensation.

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

Investing Activities

During the three months ended March 31, 2022, net cash provided by investing activities consisted primarily of $42.5 million in proceeds from maturities of marketable securities.

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

During the six months ended June 30, 2022, net cash provided by investing activities of $58.7 million consisted primarily of $87.6 million in proceeds from maturities of marketable securities partially offset by $27.1 million used for purchases of marketable securities.

During the six months ended June 30, 2021 we used $1.4 million of cash for the purchase of property and equipment.

Financing Activities

During the three months ended March 31, 2022, financing activities provided $0.2 million from the exercise of stock options.

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 six months ended June 30, 2022, financing activities provided $0.5 million from the exercise of stock options and purchases of stock under the Employee Stock Purchase Plan.

During the six months ended June 30, 2021, financing activities provided $162.2 million, which reflected the receipt of net cash of $161.4 million from the sale of common stock as well as the receipt of $0.8 million from the exercise of stock options.

Critical Accounting Policies

During the three months ended March 31, 2022, 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 our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2022.

During the three months ended June 30, 2022, 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 our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2022.

JOBS Act Accounting Election

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Subject to certain conditions, as an emerging growth company, we may rely on certain other exemptions and reduced reporting requirements, including without limitation, exemption to the requirements for providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (i) following the fifth anniversary of the completion of our IPO, (ii) in which we have total annual gross revenues of at least $1.07 billion or (iii) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates

exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis