Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis should be read in conjunction with our financial statements and the accompanying notes included in this report and the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 7, 2023. Our financial results for the three and nine months ended September 30, 2023 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.
This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), that involve risks and uncertainties. We usually use words such as “may,” “will,” “would,” “should,” “could,” “expect,” “plan,” “anticipate,” “might,” “believe,” “estimate,” “predict,” “intend,” or the negative of these terms or similar expressions to identify these forward-looking statements. These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current expectations, beliefs or intent, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to: our expectations regarding the impact of the global pandemic; our business and scientific strategies; risks and uncertainties associated with the commercialization and marketing of our products in the US and outside the US; risks that the FDA, EMA, the Medicines and Healthcare Products Regulatory Agency (MHRA) or other regulatory authorities may make adverse decisions regarding our products; the progress of our and our collaborators’ product development programs, including clinical testing, and the timing of results thereof; our corporate collaborations and revenues that may be received from our collaborations and the timing of those potential payments; our expectations with respect to regulatory submissions and approvals; our drug discovery technologies; our research and development expense; protection of our intellectual property and our intention to vigorously enforce our intellectual property rights; sufficiency of our cash and capital resources and the need for additional capital; and our operations and legal risks. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a result of the risks and uncertainties discussed under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by applicable law. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements .
22
Table of Contents
Overview
We are a biotechnology company dedicated to discovering, developing and providing novel therapies that significantly improve the lives of patients with hematologic disorders and cancer. We focus on products that address signaling pathways that are critical to disease mechanisms.
Our first product approved by the FDA is TAVALISSE (fostamatinib disodium hexahydrate) tablets, the only approved oral SYK inhibitor for the treatment of adult patients with chronic ITP who have had an insufficient response to a previous treatment. The product is also commercially available in Europe and the UK (as TAVLESSE), and in Canada, Israel and Japan (as TAVALISSE) for the treatment of chronic ITP in adult patients.
Our second FDA approved product is REZLIDHIA (olutasidenib) capsules for the treatment of adult patients with R/R AML with a susceptible IDH1 mutation as detected by an FDA-approved test. We began our commercialization of REZLIDHIA in December 2022. W e in-licensed olutasidenib from Forma (now Novo Nordisk), with exclusive, worldwide rights for its development, manufacturing and commercialization.
We continue to advance the development of our IRAK 1/4 inhibitor program, in an open-label, Phase 1b trial to determine the tolerability and preliminary efficacy of the drug in patients with lower-risk MDS who are refractory or resistant to prior therapies.
We have a RIPK1 inhibitor program in clinical development with our partner Lilly. We also have product candidates in clinical development with partners BerGenBio and Daiichi.
Business Updates
TAVALISSE IN ITP
For the nine months ended September 30, 2023, net product sales of TAVALISSE were $68.1 million, a 26% increase compared to the same period in 2022. The increase in our TAVALISSE net product sales was primarily driven by the increase in quantities sold as a result of increased number of patients under therapy, and increase in price per bottle, partly offset by the increase in revenue reserves mainly due to higher government rebates. Our first quarter net sales are typically impacted by the first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole.
REZLIDHIA in R/R AML with mIDHI
For the nine months ended September 30, 2023, we recognized $6.7 million of net product sales of REZLIDHIA. We began the commercialization of REZLIDHIA in December 2022 following the FDA approval. On December 1, 2022, the FDA approved REZLIDHIA capsules for the treatment of adult patients with R/R AML with a susceptible IDH1 mutation as detected by an FDA-approved test. Our commercial efforts focus on targeting healthcare professionals (HCPs) who manage patients with R/R AML. For further discussions and other updates including recent publications on REZLIDHIA, refer to “Commercial Products – REZLIDHIA in R/R AML with mIDH1” section below.
W e in-licensed olutasidenib from Forma (now Novo Nordisk), with exclusive, worldwide rights for development, manufacturing and commercialization of olutasidenib for any uses, including for the treatment of AML and other malignancies. In accordance with the terms of the license and transition services agreement, we paid an upfront fee of $2.0 million, with the potential to pay up to $67.5 million additional payments upon achievement of specified development and regulatory milestones and up to $165.5 million additional payments upon achievement of certain commercial milestones. In addition, subject to the terms and conditions of the license and transition services agreement, Forma (now Novo Nordisk) would be entitled to tiered royalty payments on net sales of licensed products at percentages ranging from low-teens to mid-thirties, as well as certain portions of our sublicensing revenue, subject to certain standard reductions and offsets. During the year ended December 31, 2022, certain milestones were met which entitled Forma (now Novo Nordisk) to receive a $17.5 million milestone payments. No new milestone was met during the nine months ended September 30, 2023. For further discussions, see “Note 4 - Sponsored Research and License Agreements and Government Contract” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
23
Table of Contents
R289, an Oral IRAK1/4 Inhibitor for Hematology-Oncology, Autoimmune, and Inflammatory Diseases
We continue to advance the development of our IRAK 1/4 inhibitor program, completing the evaluation of a new pro-drug formulation of R835, R289, in single-ascending and multiple ascending dose studies with positive safety results in 2021. In January 2022, we received clearance from the FDA on our clinical trial design to explore R289 in lower-risk MDS . The open-label, Phase 1b trial will determine the tolerability and preliminary efficacy of R289 in patients with lower-risk MDS who are refractory or resistant to prior therapies. In December 2022, we announced that we dosed the first patient in our Phase 1b trial of R289. The Phase 1b trial of R289 is expected to enroll approximately 22 patients. The primary objective of the trial is safety, with secondary and exploratory objectives to assess preliminary efficacy and characterize the pharmacokinetic and pharmacodynamic profile of R289. The safety and efficacy data from this Phase 1b trial, along with the safety and pharmacokinetic/pharmacodynamic data from the completed first-in-human study in heathy volunteers, are intended to be used to determine the recommended Phase 2 dose for future clinical development of R289 targeting lower-risk MDS. To date, target enrollment in the second cohort of the trial has been completed and we are currently enrolling patients in the third cohort. Preliminary results are expected by mid-year 2024.
Global Strategic Partnership with Lilly
Lilly is continuing to advance R552, an investigational, potent and selective RIPK1 inhibitor. Lilly has initiated the Phase 2a trial studying R552 in adult patients with moderately to severely active rheumatoid arthritis. The trial plans to enroll 100 patients globally. RIPK1 is implicated in a broad range of key inflammatory cellular processes and plays a key role in tumor necrosis factor signaling, especially in the induction of pro-inflammatory necroptosis. The program also includes RIPK1 compounds that cross the blood-brain barrier (CNS-penetrants) to address neurodegenerative diseases such as Alzheimer’s disease and amyotrophic lateral sclerosis.
Under the Lilly Agreement, we are responsible for 20% of the development costs for R552 in the US, Europe, and Japan, up to a specified cap. Lilly is responsible for funding the remainder of all development activities for R552 and other non-CNS disease development candidates. Under the Lilly Agreement (prior to an amendment as discussed below), we have the right to opt-out of co-funding the R552 development activities in the US, Europe and Japan at two different specified times and as a result receive lesser royalties from sales. Prior to us providing our first opt-out notice as discussed below, under the Lilly Agreement, we were required to fund our share of the R552 development activities in the US, Europe, and Japan up to a maximum funding commitment of $65.0 million through April 1, 2024. On September 28, 2023, we entered into an amendment to the Lilly Agreement which provides, among others, that if we exercise our first opt-out right, we have the right to opt-in to co-funding of R552 development, upon us providing notice to Lilly within 30 days of certain events, as specified in the Lilly Agreement. If we decide to exercise our opt-in right, we will be required to continue to share in global development costs, and if we later exercise our second opt-out right (no later than April 1, 2025), our share in global development costs will be up to a specified cap through December 31, 2025, as provided for in the Lilly Agreement. On September 29, 2023, we provided the first opt-out notice to Lilly. We will continue to fund our share of the R552 development activities up to $22.6 million through April 1, 2024 as provided for in the amended Lilly Agreement. Through September 30, 2023, Lilly billed us $17.7 million of the funding development costs and the amounts were fully paid as of September 30, 2023.
Fostamatinib in Hospitalized COVID-19 patients
We previously announced in November 2022 the top-line results from the FOCUS Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors did not meet statistical significance in the primary efficacy endpoint of the number of days on oxygen through Day 29. Upon further analysis, we discovered an error by the contract research organization (CRO) in the application of a statistical stratification factor. The contracted programming CRO misinterpreted receipt of prior COVID-19 treatment of interest 14 days before randomization (regardless of continuation post randomization), as those medications taken 14 days before the date of randomization and ended prior to the day of randomization. After correcting for this statistical error, the primary endpoint of the study was met; those who received fostamatinib had lower mean days on oxygen than those who received placebo (4.8 vs. 7.6 days, p=0.0136). Further, fostamatinib showed significance or trend towards significance in all secondary endpoints of reducing mortality and morbidity compared to placebo after correcting for the error. The results were recently presented at the IDWeek 2023 held on October 11-15, 2023 in Boston, Massachusetts. During our continued analysis regarding fostamatinib in hospitalized COVID-19
24
Table of Contents
patients, we provided the updated analysis to the FDA and our partner, the US Department of Defense. Given the end of the federal COVID-19 Public Health Emergency (PHE) in May 2023 , and based on feedback from the FDA, US Department of Defense and other advisors regarding the program’s regulatory requirements, costs, timeline and potential for success, we decided not to submit an Emergency Use Authorization (EUA) or sNDA.
The Accelerating COVID-19 Therapeutic Inventions and Vaccines Phase 2/3 trial (ACTIV-4 Host Tissue Trial), conducted and sponsored by the National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI), is a randomized, placebo-controlled trial of therapies, including fostamatinib, targeting the host response to COVID-19 in hospitalized patients. The ACTIV-4 Host Tissue Trial evaluated fostamatinib in a targeted population of approximately 600 hospitalized patients with COVID-19, 300 fostamatinib versus 300 placebo. During the first quarter of 2023, an interim analysis of the trial was completed by the Data and Safety Monitoring Board (DSMB) with a recommendation for the trial to continue. In September 2023, the DSMB recommended that the fostamatinib study arm of the ACTIV-4 Host Tissue Trial platform cease enrollment. Based on the DSMB’s review of a conditional power analysis, the DSMB determined that there was an extremely low likelihood of fostamatinib providing benefits related to the primary outcome (oxygen free days) or other secondary outcomes in patients hospitalized and on oxygen therapy for COVID-19. No safety concerns were identified. The NIH/NHLBI concurs with the DSMBs recommendation and has asked the trial investigators to cease enrollment, complete follow-up for participants already enrolled, and complete study closeout. The full study data will be analyzed and disseminated as previously planned.
Update on Current and Potential Future Impact of COVID-19 on our Business
The COVID-19 pandemic has adversely impacted our business and operations. Although the World Health Organization declared the end of COVID-19 PHE in May 2023, the degree to which another global pandemic may affect our business and operations and financial condition in the future will depend on developments that are highly uncertain and beyond our knowledge or control. As such, we cannot ascertain the full extent of the future impacts it may have on our business. See also “Part I, Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q for additional information on risks and uncertainties related to the COVID-19 pandemic.
Our Product Portfolio
The following table summarizes our portfolio:
25
Table of Contents
Commercial Products
TAVALISSE/Fostamatinib in ITP
Chronic ITP affects an estimated 81,300 adult patients in the US. In patients with ITP, the immune system attacks and destroys the body’s own blood platelets, which play an active role in blood clotting and healing. ITP patients can suffer extraordinary bruising, bleeding and fatigue as a result of low platelet counts. Current therapies for ITP include steroids, blood platelet production boosters that imitate thrombopoietin (TPO) and splenectomy.
Taken in tablet form, fostamatinib blocks the activation of SYK inside immune cells. ITP is typically characterized by the body producing antibodies that attach to healthy platelets in the blood stream. Immune cells recognize these antibodies and affix to them, which activates the SYK enzyme inside the immune cell, and triggers the destruction of the antibody and the attached platelet. When SYK is inhibited by fostamatinib, it interrupts this immune cell function and allows the platelets to escape destruction. The results of our Phase 2 clinical trial, in which fostamatinib was orally administered to 16 adults with chronic ITP, published in Blood , showed that fostamatinib significantly increased the platelet counts of certain ITP patients, including those who had failed other currently available agents.
Our Fostamatinib for Immune Thrombocytopenia (FIT) Phase 3 clinical program had a total of 150 ITP patients which were randomized into two identical multi-center, double-blind, placebo-controlled clinical trials. The patients were diagnosed with persistent or chronic ITP, and had blood platelet counts consistently below 30,000 per microliter of blood. Two-thirds of the subjects received fostamatinib orally at 100 mg twice daily (bid) and the other third received placebo on the same schedule. Subjects were expected to remain on treatment for up to 24 weeks. At week four of treatment, subjects who failed to meet certain platelet counts and met certain tolerability thresholds could have their dosage of fostamatinib (or corresponding placebo) increased to 150 mg bid. The primary efficacy endpoint of this program was a stable platelet response by week 24 with platelet counts at or above 50,000 per microliter of blood for at least four of the final six qualifying blood draws. In August 2016, we announced the results of the first FIT study, reporting that fostamatinib met the study’s primary efficacy endpoint. The study showed that 18% of patients receiving fostamatinib achieved a stable platelet response compared to none receiving a placebo control. In October 2016, we announced the results of the second FIT study, reporting that the response rate (16% in the treatment group, versus 4% in the placebo group) was consistent with the first study, although the difference was not statistically significant. In the ITP double-blind studies, the most commonly reported adverse reactions occurring in at least 5% of patients treated with TAVALISSE were diarrhea, hypertension, nausea, dizziness, increased alanine aminotransferase, increased aspartate aminotransferase, respiratory infection, rash, abdominal pain, fatigue, chest pain, and neutropenia. Serious adverse drug reactions occurring in at least 1% of patients treated with TAVALISSE in the ITP double-blind studies were febrile neutropenia, diarrhea, pneumonia, and hypertensive crisis. A post-hoc analysis from our Phase 3 clinical program in adult patients with chronic ITP, highlighting the potential benefit of using TAVALISSE in earlier lines of therapy, was published in the British Journal of Haematology in July 2020. In addition, a report describing the long-term safety and durable efficacy of TAVALISSE with up to 5 years of treatment was published in Therapeutic Advances in Hematology in 2021.
TAVALISSE was approved by the FDA in April 2018 for the treatment of ITP in adult patients who have had an insufficient response to a previous treatment, and successfully launched in the US in May 2018. The FDA granted orphan drug designation for fostamatinib for the treatment of ITP in August 2015.
In January 2020, the EC granted a centralized MA for fostamatinib (TAVLESSE) valid throughout the European Union (EU) and in the UK after the departure of the UK from the EU for the treatment of chronic ITP in adult patients who are refractory to other treatments. In December 2022, Japan’s PMDA approved the NDA for fostamatinib in chronic ITP.
26
Table of Contents
Competitive landscape for TAVALISSE
Our industry is intensely competitive and subject to rapid and significant technological change. TAVALISSE is competing with other existing therapies. In addition, a number of companies are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are targeting. For example, there are existing therapies and drug candidates in development for the treatment of ITP that may be alternative therapies to TAVALISSE.
Currently, corticosteroids remain the most common first line therapy for ITP, occasionally in conjunction with intravenous immunoglobulin (IVIg) or anti-Rh(D) to help further augment platelet count recovery, particularly in emergency situations. However, it has been estimated that frontline agents lead to durable remissions in only a small percentage of newly diagnosed adults with ITP. Moreover, concerns with steroid-related side effects often restrict therapy to approximately four weeks. As such, many patients progress to persistent or chronic ITP, requiring other forms of therapeutic intervention. In long-term treatment of chronic ITP, patients are often cycled through several therapies over time in order to maintain a sufficient response to the disease.
Other approaches to treat ITP are varied in their mechanism of action, and there is no consensus about the sequence of their use. Options include splenectomy, thrombopoietin receptor agonists (TPO-RAs) and various immunosuppressants (such as rituximab). The response rate criteria of the above-mentioned options vary, precluding a comparison of response rates for individual therapies.
Even with the above treatment options, a significant number of patients remain severely thrombocytopenic for long durations and are subject to risk of spontaneous or trauma-induced hemorrhage. The addition of fostamatinib to the currently available treatment options could be beneficial because it has a different mechanism of action than any of the therapies that are currently available. Fostamatinib is a potent and relatively selective SYK inhibitor, and its inhibition of Fc receptors and B-cell receptors of signaling pathways make it a potentially broad immunomodulatory agent.
Other products in the US that are approved by the FDA to increase platelet production through binding to TPO receptors on megakaryocyte precursors include PROMACTA ® (Novartis International AG (Novartis)), Nplate ® (Amgen, Inc.) and DOPTELET ® (Swedish Orphan Biovitrum AB). In the longer term, we may eventually face competition from potential manufacturers of generic versions of our marketed products, including the proposed generic version of TAVALISSE that is the subject of an Abbreviated New Drug Application (ANDA) submitted to the FDA by Annora Pharma Private Limited (Annora), which, if approved and allowed to enter the market, it could result in significant decreases in the revenue derived from sale of TAVALISSE and thereby materially harm our business and financial condition.
Commercial activities, including sales and marketing
Our marketing and sales efforts are focused on hematologists and hematologist-oncologists in the US who manage chronic adult ITP patients. We have a fully integrated commercial team consisting of sales, marketing, market access, and commercial operations functions. Our sales team promotes our products in the US using customary pharmaceutical company practices, and we concentrate our efforts on hematologists and hematologist-oncologists. Our products are sold initially through third-party wholesale distribution and specialty pharmacy channels and group purchasing organizations before being ultimately prescribed to patients. To facilitate our commercial activities in the US, we also enter into arrangements with various third parties, including advertising agencies, market research firms and other sales-support-related services as needed. We believe that our commercial team and distribution practices are adequate to ensure that our marketing efforts reach relevant customers and deliver our products to patients in a timely and compliant fashion. Also, to help ensure that all eligible patients in the US have appropriate access to our products, we have established a reimbursement and patient support program called Rigel OneCare (ROC). Through ROC, we provide co-pay assistance to qualified, commercially insured patients to help minimize out-of-pocket costs and provide free product to uninsured or under-insured patients who meet certain established clinical and financial eligibility criteria. In addition, ROC is designed to provide reimbursement support, such as information related to prior authorizations, benefits investigations and appeals.
27
Table of Contents
We have entered into various license and commercial agreements to commercialize fostamatinib globally, but we retain the global rights to fostamatinib outside of the respective territories under such license and commercial agreements. Our collaborative partner Grifols has launched TAVLESSE in the UK and certain countries in Europe including Germany, France, Italy and Spain, and continues a phased rollout across the rest of Europe. Our collaborative partner Medison has also launched TAVALISSE in Canada and Israel. Further, our collaborative partner Kissei has also recently launched TAVALISSE in Japan.
Fostamatinib in Europe/Turkey
We have a commercialization license agreement with Grifols entered in January 2019, for an exclusive rights to commercialize fostamatinib for human diseases, including chronic ITP and AIHA, and non-exclusive rights to develop, fostamatinib in their territory. Grifols territory includes Europe, the UK, Turkey, the Middle East, North Africa and Russia (including Commonwealth of Independent States).
We are responsible for performing and funding certain development activities for fostamatinib for ITP and AIHA and Grifols is responsible for all other development activities for fostamatinib in such territories. We remain responsible for the manufacturing and supply of fostamatinib for all development and commercialization activities under the agreement. Under the terms of the agreement, we received an upfront cash payment of $30.0 million and will be eligible to receive regulatory and commercial milestones of up to $297.5 million. In January 2020, the EC granted a MA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments. With this approval, we received a $20.0 million non-refundable milestone payment, consisted of a $17.5 million payment due upon MAA approval by the EMA of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment due upon EMA approval of fostamatinib in the first indication. We are also entitled to receive stepped double-digit royalty payments based on tiered net sales which may reach 30% of net sales.
Fostamatinib in Japan/Asia
We have an exclusive license and supply agreement with Kissei entered in October 2018, to develop and commercialize fostamatinib in all current and potential indications in Kissei’s territory which includes Japan, China, Taiwan and the Republic of Korea. Kissei is a Japan-based pharmaceutical company addressing patients’ unmet medical needs through its research, development and commercialization efforts, as well as through collaborations with partners.
Under the terms of the agreement, we received an upfront cash payment of $33.0 million, with the potential for an additional $147.0 million in development and commercial milestone payments, and will receive product transfer price payments in the mid to upper twenty percent range based on tiered net sales for the exclusive supply of fostamatinib. Kissei receives exclusive rights to fostamatinib in ITP and all future indications in Kissei’s territory.
In September 2019, Kissei initiated a Phase 3 trial in Japan of fostamatinib in adult Japanese patients with chronic ITP. The efficacy and safety of orally administered fostamatinib was assessed by comparing it with placebo in a randomized, double-blind study. Japan has the third highest prevalence of chronic ITP in the world behind the US and Europe. In February 2020, Kissei was granted orphan drug designation from the Japanese Ministry of Health, Labor and Welfare for R788 (fostamatinib) in chronic ITP. In December 2021, Kissei reported positive top-line results for a Phase 3 clinical trial, meeting its primary endpoint. The Phase 3 clinical trial showed that patients receiving fostamatinib achieved a stable platelet response significantly higher than patients receiving a placebo control. Based on the positive Phase 3 results, in April 2022, Kissei submitted an NDA to Japan’s PMDA for fostamatinib in chronic ITP. With this milestone event, we received $5.0 million non-refundable and non-creditable payment from Kissei and recognized the amount as revenue in the second quarter of 2022. In December 2022, Japan’s PMDA approved TAVALISSE for the treatment of chronic ITP. With this milestone event, we were entitled to receive $20.0 million non-refundable and non-creditable payment from Kissei based on the terms of our collaboration agreement, and such amount was recognized as revenue in the fourth quarter of 2022. The amount was subsequently collected in January 2023. In April 2023, Kissei announced the commercial launch of TAVALISSE for chronic ITP in Japan.
28
Table of Contents
Fostamatinib in Canada/Israel
We have two exclusive commercial and license agreements with Medison entered in October 2019, to commercialize fostamatinib in all potential indications in Canada and Israel. Under the terms of the agreements, we received an upfront payment of $5.0 million with the potential for approximately $35.0 million in regulatory and commercial milestones. In addition, we will receive royalty payments beginning at 30% of net sales. Under our agreement with Medison for the Canada territory, we have the option to buy back all rights to the product upon regulatory approval in Canada for the indication of AIHA. The buyback provision, if exercised, would require both parties to mutually agree on commercially reasonable terms for us to purchase back the rights, taking into account Medison’s investment and the value of the rights, among others. Pursuant to this exclusive commercialization license agreement, in August 2020, we entered into a commercial supply agreement with Medison.
In November 2020, Health Canada approved the New Drug Submission for TAVALISSE for the treatment of thrombocytopenia in adult patients with chronic ITP who have had an insufficient response to other treatments. In August 2021, Medison Israel received the licenses for registrational approval from the Ministry of Health, which event entitled us to receive $0.1 million of non-refundable milestone payment. In November 2022, Medison Israel made its first commercial sale of TAVALISSE and obtained its national reimbursement in February 2023.
Fostamatinib in Latin America
In May 2022, we entered into commercial license agreement with Knight for the commercialization of fostamatinib for approved indications in Latin America, consisting of Mexico, Central and South America, and the Caribbean. Pursuant to such commercial license agreement, we received a $2.0 million one-time, non-refundable, and non-creditable upfront payment, with potential for up to an additional $20.0 million in regulatory and sales-based commercial milestone payments, and will receive twenty- to mid-thirty percent, tiered, escalated net-sales based royalty payments. We are also responsible for the exclusive manufacture and supply of fostamatinib for all future development and commercialization activities under a Commercial and Supply Agreement. In August 2023, Knight submitted MAA for regulatory approval in Mexico and Colombia for fostamatinib for the treatment of adult patients with ITP who had insufficient response to a previous treatment.
REZLIDHIA in R/R AML with mIDH1
mIDH1 alterations are seen in AML, glioma, chondrosarcoma, and intrahepatic cholangiocarcinoma. It is estimated that there are approximately 1,000 adult patients, a well-identified patient population, with mIDH1 R/R AML, part of an AML market estimated to have an incidence of 20,000 cases in the US and estimated 120,000 cases globally. Despite having approved treatment options for R/R AML patients who are mIDH1 positive, an unmet need remains.
Olutasidenib, an oral, small molecule drug designed to selectively bind to and inhibit mIDH1, is a treatment option with durable remissions, reduced QTc potential, and a stable pharmacokinetics profile that enables a consistent drug exposure over time. This targeted agent has the potential to provide therapeutic benefit by reducing 2-hydroxyglutarate levels and restoring normal cellular differentiation. IDH1 is a natural enzyme that is part of the normal metabolism of all cells. When mutated, IDH1 activity can promote blood malignancies and solid tumors. Olutasidenib was designated by the FDA as an orphan drug for the treatment of AML, which provides orphan drug market exclusivity from the time of marketing approval on December 1, 2022.
REZLIDHIA (olutasidenib) is designed to bind to and inhibit mIDH1 to reduce 2-hydroxyglutarate levels and restore normal cellular differentiation of myeloid cells. REZLIDHIA is a novel, non-intensive monotherapy treatment in the R/R AML setting demonstrating a CR+CRh rate of 35% in patients with over 90% of those responders in complete remission. The safety of REZLIDHIA 150 mg administered twice daily was evaluated in 153 adults with relapsed or refractory AML with an IDH1 mutation.
On December 1, 2022, the FDA has approved REZLIDHIA capsules for the treatment of adult patients with R/R AML with IDH1 mutation as detected by an FDA approved test. On December 22, 2022, we began the commercialization of REZLIDHIA and made it available to patients. The recommended dosage of REZLIDHIA is 150 mg taken orally twice daily until disease progression or unacceptable toxicity. The FDA approval was based on the NDA
29
Table of Contents
for olutasidenib for the treatment of m1DH1 R/R AML submitted by Forma (now Novo Nordisk) , that had a PDUFA action date for the application of February 15, 2023. The NDA application was supported with a Phase 2 registrational trial for olutasidenib in mIDH1 R/R AML. Interim results from the Phase 2 registrational trial were reported at the American Society of Clinical Oncology (ASCO) annual meeting in June 2021. The interim results of this trial of 153 patients showed that olutasidenib demonstrated a favorable tolerability profile as a monotherapy in patients with R/R AML who have a susceptible mIDH1, and achieved a complete remission (CR) plus CR with partial hematologic recovery (CRh) rate of 33.3% (30% CR and 3% CRh), the primary efficacy endpoint. While a median duration of CR/CRh was not yet reached, a sensitivity analysis (with a hematopoietic stem cell transplant as the end of a response) indicated the median duration of CR/CRh was 13.8 months . The overall response rate, comprised CR, CRh, CRi, partial response, and morphologic leukemia-free state (MLFS), was 46% and the median duration of overall response rate (ORR) was 11.7 months. The median overall survival was 10.5 months. For patients with CR/CRh, the median overall survival was not reached, but the estimated 18-month survival was 87%. The most frequently reported treatment emergent adverse events were nausea, constipation, increased white blood cell count, decreased RBC count, pyrexia, febrile neutropenia, and fatigue.
In November 2022, we announced the presentation of five posters highlighting data from our commercial and clinical hematology-oncology portfolio at the 64 th American Society of Hematology (ASH) Annual Meeting and Exposition which was held in December 2022. An updated interim analysis from the Phase 2 registrational trial of olutasidenib in patients with R/R AML demonstrated robust efficacy and safety results. The registrational cohort of the Phase 2 trial enrolled 153 patients with mIDH1 R/R AML who received olutasidenib monotherapy 150 mg twice daily. The efficacy evaluable population was 147 patients who received their first dose at least six months prior to the interim analysis cutoff date of June 18, 2021. The primary endpoint was a CR/CRh defined as less than 5% blasts in the bone marrow, no evidence of disease, and partial recovery of peripheral blood counts (platelets >50,000/microliter and absolute neutrophil count >500/microliter). The results from the updated interim analysis of patients with mIDH1 R/R AML demonstrated a 35% CR+CRh rate with a median duration of 25.9 months. The ORR a secondary end point, was 48%, and was defined as the rate of CR, CRh, CR with incomplete blood count recovery (CRi), partial remission (which required recovery of neutrophil and platelet counts consistent with a CR), or MLFS. Olutasidenib was effective in a broad range of patients including those with prior high-intensity chemotherapy and/or post-venetoclax. The abstract concluded that the observed activity is clinically meaningful and represents a therapeutic advance in the treatment of this patient population. In this pivotal cohort, olutasidenib was well tolerated with an adverse event profile largely characteristic of symptoms or conditions experienced by patients undergoing treatment for AML or of the underlying disease itself.
In November 2022, we announced the publication of data in The Lancet Haematology, which summarizes the Phase 1 results of the Phase 1/2 trial of olutasidenib . The objectives of the first phase of the multi-center, open-label Phase 1/2 trial were to assess the safety, pharmacokinetic and pharmacodynamic profile, and clinical activity of olutasidenib, both as monotherapy and in combination with azacitidine, in patients with treatment-naïve or R/R AML or MDS harboring IDH1 mutations. The published data suggest that olutasidenib, with or without azacitidine, was well-tolerated and was associated with improvements in clinical efficacy endpoints in patients with mIDH1 AML. This trial showed that olutasidenib has the potential to provide an additional treatment option for mIDH1 AML.
In January 2023, we announced that REZLIDHIA has been added by the National Comprehensive Cancer Network (NCCN) to the latest NCCN Clinical Practice Guidelines in Oncology (NCCN Guidelines) for AML. REZLIDHIA is now included as a recommended targeted therapy for adult patients with R/R AML with IDH1 mutation.
In February 2023, we announced peer-reviewed publication data in Blood Advances , which summarize clinical results from the Phase 2 registrational trial of REZLIDHIA in patients with mIDH1 R/R AML. The published data demonstrate that REZLIDHIA induced durable remissions and transfusion independence with a well-characterized safety profile. The observed efficacy is clinically meaningful and represents a therapeutic advance in this poor prognosis patient population with limited treatment options. REZLIDHIA demonstrated both a high rate of response and an extended median duration of complete response of 28.1 months, which is more than a year longer than what is reported with the Standard of Care (SoC). In June 2023, we announced the second REZLIDHIA publication in Blood Advances , a review article examining the preclinical and clinical development, and the positioning of olutasidenib in the mIDH1 AML treatment landscape. The review concluded that the approval of REZLIDHIA is a critical addition to the mIDH1 AML treatment landscape. Further, the available data support the use of REZLIDHIA as monotheraphy in R/R AML
30
Table of Contents
patients who have failed intensive chemotheraphy or venetoclax plus hypomethylating agents (HMA) combination therapy.
In June 2023, we announced presentation of data from an analysis from the Phase 2 study of REZLIDHIA in 17 patients with mIDH1 AML who were previously treated with venetoclax. Data was featured in a poster presentation at the European Hematology Association 2023 Hybrid Congress. The data support olutasidenib induced durable remissions in patients with mIDH1 AML in this poor-prognosis patient population who were relapsed or refractory to venetoclax-based treatment.
We plan to pursue strategic actions to further develop olutasidenib for the treatment of other malignancies and expansion of commercialization.
Competitive landscape for REZLIDHIA
There is currently one other product approved in the US for patients with IDH1 mutation. The FDA granted approval to TIBSOVO ® (ivosidenib), an oral targeted IDH1 mutation inhibitor, (i) in July 2018, for adult patients with R/R AML with a susceptible IDH1 mutation, (ii) in May 2019, for newly diagnosed AML with a susceptible IDH1 mutation who are at least 75 years old or who have comorbidities that preclude use of intensive induction chemotherapy, (iii) in August 2021, for adult patients with previously treated, locally advanced or metastatic cholangiocarcinoma with an IDH1 mutation as detected by an FDA-approved test, and (iv) in May 2022, in combination with azacitidine (azacitidine for injection) for newly diagnosed AML with a susceptible IDH1 mutation, as detected by an FDA-approved test in adults 75 years or older, or who have comorbidities that preclude use of intensive induction chemotherapy. In addition, some clinicians may utilize non-targeted treatments for patients with mIDH1 R/R AML, including use of venetoclax combinations, hypomethylating agents, other chemotherapy regimens, or investigational agents that may be available to them.
Commercial activities, including sales and marketing
REZLIDHIA is highly synergistic with our existing hematology-oncology focused commercial and medical affairs infrastructure. Our commercial efforts will focus on targeting HCPs who manage patients with R/R AML with mIDH1. We plan to enter collaborations with third parties to commercialize REZLIDHIA outside of US.
Clinical Stage Programs
R289, an Oral IRAK 1/4 Inhibitor for Hematology-Oncology, Autoimmune, and Inflammatory Diseases
During the second quarter of 2018, we selected R835, the active metabolite of R289, a proprietary molecule from our IRAK 1/4 inhibitor program for human clinical trials. This investigational candidate is an orally administered, potent and selective inhibitor of IRAK1 and IRAK4 that blocks inflammatory cytokine production in response to toll-like receptor (TLR) and the interleukin-1 receptor (IL-1R) family signaling. TLRs and IL-1Rs play a critical role in the innate immune response and dysregulation of these pathways can lead to a variety of inflammatory conditions. R835 prevents cytokine release in response to TLR and IL-1R activation in vitro. R835 is active in multiple rodent models of inflammatory disease including psoriasis, arthritis, lupus, multiple sclerosis and gout. Preclinical studies show that R835 inhibits both the IRAK1 and IRAK4 signaling pathways, which play a key role in inflammation and immune responses to tissue damage. Dual inhibition of IRAK1 and IRAK4 allows for more complete suppression of pro-inflammatory cytokine release than inhibition of either one individually.
In October 2019, we announced results from a Phase 1 clinical trial of R835 in healthy subjects to assess safety, tolerability, pharmacokinetics (PK) and pharmacodynamics. The Phase 1 trial was a randomized, placebo-controlled, double-blind trial in 91 healthy subjects, ages 18 to 55. The Phase 1 trial showed positive tolerability and PK data as well as established proof-of-mechanism by demonstrating the inhibition of inflammatory cytokine production in response to a lipopolysaccharide (LPS) challenge.
31
Table of Contents
We continue to advance the development of our IRAK 1/4 inhibitor program, completing the evaluation of a new pro-drug formulation of R835, R289, in single-ascending and multiple ascending dose studies with positive safety results in 2021. In January 2022, we received clearance from the FDA on our clinical trial design to explore R289 in lower-risk MDS. The open-label, Phase 1b trial will determine the tolerability and preliminary efficacy of R289 in patients with lower-risk MDS who are refractory or resistant to prior therapies. In December 2022, we announced that we dosed the first patient in our Phase 1b trial of R289. The Phase 1b trial of R289 is expected to enroll approximately 22 patients. The primary objective of the trial is safety, with secondary and exploratory objectives to assess preliminary efficacy and characterize the pharmacokinetic and pharmacodynamic profile of R289. The safety and efficacy data from this Phase 1b trial, along with the safety and pharmacokinetic/pharmacodynamic data from the completed first-in-human study in heathy volunteers, are intended to be used to determine the recommended Phase 2 dose for future clinical development of R289 targeting lower-risk MDS. To date, target enrollment in the second cohort of the trial has been completed and and we are currently enrolling patients in the third cohort. Preliminary results are expected by mid-year 2024.
Fostamatinib in Hospitalized COVID-19 Patients
COVID-19 is the infectious disease caused by Severe Acute Respiratory Syndrome Coronavirus-2 (SARS-CoV-2). SARS-CoV-2 primarily infects the upper and lower respiratory tract and can lead to acute respiratory distress syndrome (ARDS). Additionally, some patients develop other organ dysfunction including myocardial injury, acute kidney injury, shock resulting in endothelial dysfunction and subsequently micro and macrovascular thrombosis. Much of the underlying pathology of SARS-CoV-2 is thought to be secondary to a hyperinflammatory immune response associated with increased risk of thrombosis. SYK is involved in the intracellular signaling pathways of many different immune cells. Therefore, SYK inhibition may improve outcomes in patients with COVID-19 via inhibition of key Fc gamma receptor and c-type lectin receptor mediated drivers of pathology, such as inflammatory cytokine release by monocytes and macrophages, production of NETs by neutrophils, and platelet aggregation. Furthermore, SYK inhibition in neutrophils and platelets may lead to decreased thromboinflammation, alleviating organ dysfunction in critically ill patients with COVID-19.
Rigel-led Phase 3 Trial. In November 2020, we launched our FOCUS Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors. In January 2021, we were awarded $16.5 million from the US Department of Defense’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND) to support this Phase 3 clinical trial. This multi-center, double-blind, placebo-controlled, adaptive design study randomly assigns either fostamatinib plus SoC or matched placebo plus SoC (1:1) to targeted evaluable patients. Treatment is administered orally twice daily for 14 days with follow up to day 60. In December 2021, we expanded the inclusion criteria to include patients with more severe disease (NIAID Ordinal Scale 6) to more accurately reflect the clinically predominant patient population hospitalized with COVID-19 and help speed enrollment . In collaboration with the FDA and Department of Defense, we also updated the primary endpoint for the trial from progression to severe disease within 29 days, to the number of days on oxygen through day 29. This endpoint allows for closer comparison of the results with earlier results from the NIH/NHLBI Phase 2 clinical trial with fostamatinib and various other NIH-sponsored trials, such as the ACTIV-4 Host Tissue Trial, which uses a similar outcome measure as a primary endpoint. In July 2022, we completed enrollment with 280 patients. The trial had originally targeted a total of 308 patients; however, we determined the trial would be sufficiently powered with 280 patients to potentially provide a clinically meaningful result and determine the efficacy and safety of fostamatinib in hospitalized COVID-19 patients. We previously announced in November 2022 the top-line results from the FOCUS Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors did not meet statistical significance in the primary efficacy endpoint of the number of days on oxygen through Day 29. Upon further analysis, we discovered an error by the CRO in the application of a statistical stratification factor. The contracted programming CRO misinterpreted receipt of prior COVID-19 treatment of interest 14 days before randomization (regardless of continuation post randomization), as those medications taken 14 days before the date of randomization and ended prior to the day of randomization. After correcting for this statistical error, the primary endpoint of the study was met; those who received fostamatinib had lower mean days on oxygen than those who received placebo (4.8 vs. 7.6 days, p=0.0136). Further, fostamatinib showed significance or trend towards significance in all secondary endpoints of reducing mortality and morbidity compared to placebo after correcting for the error. The results were recently presented at the IDWeek 2023 held on October 11-15, 2023 in Boston, Massachusetts. During our
32
Table of Contents
continued analysis regarding fostamatinib in hospitalized COVID-19 patients, we provided the updated analysis to the FDA and our partner, the US Department of Defense. Given the end of the federal COVID-19 PHE in May 2023 , and based on feedback from the FDA, US Department of Defense and other advisors regarding the program’s regulatory requirements, costs, timeline and potential for success, we decided not to submit an EUA or sNDA.
NIH/NHLBI-sponsored Phase 2 Trial. In September 2020, we announced a Phase 2 clinical trial sponsored by the NIH/NHLBI to evaluate the safety of fostamatinib for the treatment of hospitalized COVID-19 patients. This multi-center, double-blind, placebo-controlled trial randomly assigned fostamatinib or matched placebo (1:1) to 59 evaluable patients. Treatment was administered orally twice daily for 14 days, and a follow-up period to day 60. The primary endpoint of this trial was cumulative incidence of Serious Adverse Events (SAEs) through day 29. The trial also included multiple secondary endpoints designed to assess the early efficacy and clinically relevant endpoints of disease course. The trial completed the enrollment in March 2021. In April 2021, w e announced that the Phase 2 clinical trial met its primary endpoint of safety. Fostamatinib reduced the incidence of SAEs by half. By day 29, there were three SAEs in the fostamatinib plus SoC group of thirty patients compared to six SAEs in the placebo plus SoC group of twenty-nine patients (p=0.23). Of these, there was a reduction for the disease related SAE of hypoxia in the fostamatinib group compared to placebo (1 vs 3, respectively; p=0.29). The data from the NIH/NHLBI-Sponsored Phase 2 trial was published in Clinical Infectious Diseases, an official publication of the Infectious Disease Society of America in September 2021.
In May 2021, the NIH/NHLBI Phase 2 clinical data were submitted as part of a request for an EUA from the FDA for fostamatinib as a treatment for hospitalized patients with COVID-19. In August 2021, the FDA informed us that the clinical data submitted from the NIH/NHLBI-sponsored Phase 2 trial of fostamatinib to treat hospitalized patients suffering from COVID-19 was insufficient for an EUA.
ACTIV-4 Host Tissue Phase 2/3 Trial. In June 2021, we announced that fostamatinib had been selected for the NIH ACTIV-4 Host Tissue Trial in hospitalized patients with COVID-19. The ACTIV-4 Host Tissue Trial, initiated and funded by NHLBI, is a randomized, placebo-controlled trial of therapies, including fostamatinib, targeting the host response to COVID-19 in hospitalized patients. The master protocol for this trial was designed to be flexible in the number of study arms, the use of a single placebo group, and the stopping and adding of new therapies. Eligible participants include patients hospitalized for COVID-19 with laboratory-confirmed SARS-CoV-2 infection and a new need for oxygen therapy. The primary outcome is oxygen-free days through day 28. Secondary outcomes include 28-day hospital mortality, use of mechanical ventilation, and severity of disease as measured by World Health Organization (WHO) scale scores. The ACTIV-4 Host Tissue Trial is evaluating fostamatinib in a targeted population of approximately 600 hospitalized patients with COVID-19, 300 fostamatinib versus 300 placebo. During the first quarter of 2023, an interim analysis of the trial was completed by the DSMB with a recommendation for the trial to continue. In September 2023, the DSMB recommended that the fostamatinib study arm of the ACTIV-4 Host Tissue Trial platform cease enrollment. Based on the DSMB’s review of a conditional power analysis, the DSMB determined that there was an extremely low likelihood of fostamatinib providing benefits related to the primary outcome (oxygen free days) or other secondary outcomes in patients hospitalized and on oxygen therapy for COVID-19. No safety concerns were identified. The NIH/NHLBI concurs with the DSMBs recommendation and has asked the trial investigators to cease enrollment, complete follow-up for participants already enrolled, and complete study closeout. The full study data will be analyzed and disseminated as previously planned.
Imperial College of London Phase 2 Trial. In July 2020, we announced a Phase 2 clinical trial sponsored by Imperial College of London to evaluate the efficacy of fostamatinib for the treatment of COVID-19 pneumonia. This is a two-stage, open label, controlled clinical trial with patients randomized (1:1:1) to fostamatinib plus SoC, ruxolitinib plus SoC, or SoC alone. Treatment was administered twice daily for 14 days and patients receive a follow-up assessment at day 14 and day 28 after the first dose. The primary endpoint of this trial is progression from mild to severe COVID-19 pneumonia within 14 days in hospitalized patients (WHO COVID-19 Severity Scale 3-4). In April 2022, Imperial College of London completed a pre-planned interim analysis of the primary endpoint, patients progressing from mild or moderate (modified WHO COVID-19 scale 3-4) to severe disease (modified WHO COVID-19 scale ≥5) within 14 days, in the Phase 2 MATIS trial. The independent data monitoring committee determined that the fostamatinib plus SoC arm did not meet the prespecified criteria for continuation to the next stage of the trial. No safety concerns were identified. The trial remains blinded and Imperial College of London plans to share results with us and scientific community once the trial is complete.
33
Table of Contents
Other Publications. Researchers at MIT and Harvard led a screen to identify FDA-approved compounds that reduce MUC1 protein abundance. MUC1 is a biomarker used to predict the development of ALI and ARDS and correlates with poor clinical outcomes. In June 2020, the results were presented, and of the 3,713 compounds that were screened, fostamatinib was the only compound identified which both decreased expression of MUC1 and is FDA approved. Fostamatinib demonstrated preferential depletion of MUC1 from epithelial cells without affecting cell viability. The research was focused on drug repurposing for the much lower risk of toxicity and the ability of FDA-approved treatments to be delivered on a shortened timescale, which is critical for patients afflicted with lung disease resulting from COVID-19.
In addition, the in vitro studies led by the Amsterdam University Medical Center at the University of Amsterdam, showed that R406, the active metabolite of fostamatinib, blocked macrophage hyperinflammatory responses to a combination of immune complexes formed by anti-Spike IgG in serum from severe COVID-19 patients. Anti-Spike IgG levels are known to correlate with the severity of COVID-19. These results, presented in July 2020, suggest that by inhibiting anti-Spike IgG-mediated hyperinflammation, R406 could potentially play a role in the prevention of cytokine storms as well as pulmonary edema and thrombosis associated with severe COVID-19.
In December 2020, the Journal of Infectious Diseases published research from NIH which demonstrated that R406, the active metabolite of fostamatinib, was able to inhibit NETosis ex vivo in donor plasma from patients with COVID-19. NETosis is a unique type of cell death resulting in the release of NETs. NETs contribute to thromboinflammation and have been associated with mortality in COVID-19. These data provide insights for how fostamatinib may mitigate neutrophil-associated mechanisms contributing to COVID-19 immunopathogenesis.
Fostamatinib in wAIHA
AIHA is a rare, serious blood disorder where the immune system produces antibodies that result in the destruction of the body’s own red blood cells. Symptoms can include fatigue, shortness of breath, rapid heartbeat, jaundice or enlarged spleen. While no medical treatments are currently approved for AIHA, physicians generally treat acute and chronic cases of the disorder with corticosteroids, other immuno-suppressants, or splenectomy. Research has shown that inhibiting SYK with fostamatinib may reduce the destruction of red blood cells. AIHA affects an estimated 45,000 Americans, and approximately 36,000 of those patients have wAIHA, where no approved treatment options currently exist.
We completed our Phase 2 clinical trial, also known as the SOAR study, in patients with wAIHA. This trial was an open-label, multi-center, two-stage study that evaluated the efficacy and safety of fostamatinib in patients with wAIHA who had previously received treatment for the disorder but have relapsed. The primary efficacy endpoint of this study was to achieve increased hemoglobin levels by week 12 of greater than 10 g/dL, and greater than or equal to 2 g/dL higher than baseline. In November 2019, we announced updated data that in a Phase 2 open-label study of fostamatinib in patients with wAIHA, data showed that 44% (11/25) of evaluable patients met the primary efficacy endpoint of a hemoglobin level >10 g/dL with an increase of ≥2 g/dL from baseline by week 24. Including one late responder at week 30, the overall response rate was 48% (12/25). Adverse events were manageable and consistent with those previously reported with fostamatinib. In February 2022, the American Journal of Hematology published the data from our Phase 2 clinical trial of fostamatinib in adults with wAIHA who have failed at least one prior treatment. The published data demonstrate that fostamatinib rapidly and durably increased hemoglobin levels, with clinically meaningful hemoglobin responses observed in nearly half of the patients, and a safety and tolerability profile consistent with the existing fostamatinib safety database of patients across multiple disease programs studied.
In January 2021, we announced that the FDA had granted Fast Track designation to fostamatinib for the treatment of wAIHA. The FDA granted orphan drug designation for fostamatinib for the treatment of wAIHA in January 2018.
In March 2019, we initiated our wAIHA pivotal Phase 3 clinical trial of fostamatinib, known as the FORWARD study. The clinical trial protocol calls for a placebo-controlled study of 90 patients with primary or secondary wAIHA who have failed at least one prior treatment. The primary endpoint is a durable hemoglobin response, defined as hemoglobin >10 g/dL and >2 g/dL increase from baseline and durability measure, with the response not being attributed to rescue therapy. In November 2020, we reached an agreement with the FDA on the durable response
34
Table of Contents
measure for the primary efficacy endpoint of the trial as well as the inclusion of additional secondary endpoints. In November 2021, we completed the enrollment of this study. In April 2022, we completed the treatment period for the last patient under the trial . I n June 2022, we announced top-line efficacy and safety data from the FORWARD study with 90 patients. Patients were randomized 1:1 to receive fostamatinib or matching placebo twice daily for 24 weeks. The primary efficacy endpoint of hemoglobin response was defined as achieving a hemoglobin ≥10 g/dL with an increase from baseline ≥2 g/dL on three consecutive available visits during the 24-week treatment period. The trial did not demonstrate statistical significance in the primary efficacy endpoint of durable hemoglobin response in the overall study population. The trial also included key secondary endpoints, including hemoglobin response on at least one visit, change in hemoglobin from baseline of ≥2 g/dL, use of permitted rescue therapy after week 4, change in hemoglobin from baseline to end of treatment and change from baseline to week 24 in Functional Assessment of Chronic Illness Therapy – Fatigue scale. Across the trial’s overall patient population, fostamatinib was generally well-tolerated. The safety profile of the product was consistent with prior clinical experience and no new safety issues were discovered. The most common adverse events (≥10%) with fostamatinib and placebo were diarrhea, hypertension, fatigue, pyrexia, nausea, and dyspnea. Treatment-related SAEs were 6.7% (3/45) for fostamatinib and 4.4% (2/45) for placebo. There were five deaths on the trial (2 with fostamatinib and 3 with placebo), all of which were determined to be unrelated to study drug. The safety results were consistent with the overall safety profile data collected to date, which includes more than 5,000 patients across multiple diseases. We conducted an in-depth analysis of these data to better understand differences in patient characteristics and outcomes and submitted these findings to the FDA. In October 2022, we announced that we received guidance from the FDA’s review of these findings. Based on the result of the trial and the guidance from the FDA, we did not file an sNDA for this indication.
Of the 90 patients that completed the FORWARD study, 71 (79%) enrolled in the open-label extension study. We plan on closing this study by the end of the year.
Partnered Clinical Programs
BGB324 – BerGenBio
We have an exclusive, worldwide research, development and commercialization agreement with BerGenBio for our investigational AXL receptor tyrosine kinase inhibitor, BGB324/R428 (now referred to as bemcentinib). In October 2022, BerGenBio announced the initiation of a Phase 1b/2a trial evaluating bemcentinib in combination with the current SoC, checkpoint inhibitor pembrolizumab and doublet chemotheraphy, for the treatment of first line non-small cell lung cancer (NSCLC) patients harboring serine/threonine kinase 11 mutations. In February 2023, BerGenBio also announced positive data from Phase 2 trial of bemcentinib in combination with pembrolizumab in patients with second-line NSCLC. The treatment with bemcentinib in combination with pembrolizumab demonstrated long survival benefit and sustained disease control, particularly in patients with AXL TPS > 5, substantiating the relevance of AXL as a target and bemcentinib’s selective inhibition capabilities in NSCLC. In March 2023, BerGenBio announced its first patient dosed in Phase 1B/2A trial evaluating bemcentinib in first-line NSCLC patients harboring STK11 mutations. The product is also being investigated in Phase 2 clinical trials in patients with AML and COVID-19. Bemcentinib is being studied in over 600 patients, demonstrating its safety as a monotherapy and in combination with chemotheraphy and immune checkpoint inhibition.
DS-3032 - Daiichi
DS-3032 is an investigational oral selective inhibitor of the MDM2 protein investigated by Daiichi in three Phase 1 clinical trials for solid and hematological malignancies including AML, acute lymphocytic leukemia, chronic myeloid leukemia in blast phase, lymphoma and MDS. Preliminary safety and efficacy data from a Phase 1 trial of DS-3032 suggests that DS-3032 may be a promising treatment for hematological malignancies including R/R AML and high-risk MDS. In September 2020, worldwide rights to DS-3032 (milademetan) were out-licensed from Daiichi to Rain Oncology Inc., formerly Rain Therapeutics Inc. (Rain).
In July 2021, Rain announced that it initiated a Phase 3 trial to evaluate the efficacy and safety of milademetan (RAIN-32) for the treatment of patients with unresectable or metastatic dedifferentiated liposarcoma, a rare cancer originating from fat cells located in the soft tissues of the body, and announced the completion of enrollment in August 2022. In May 2023, Rain announced that the trial did not meet its primary endpoint of progression free survival by blinded independent central review compared to the standard of care. Based on the topline results, Rain does not expect
35
Table of Contents
to pursue further development of milademetan in dedifferentiated liposarcoma.
In late 2021, Rain commenced its second clinical trial of milademetan in patients with MDM2-amplified solid tumors. In November 2022, Rain provided an interim analysis of the trial which showed that the drug safety profile of milademetan is preliminarily consistent with its prior Phase 1 trial. In May 2023, Rain announced its plan to suspend the enrollment of its Phase 2 trial of milademetan in patients with MDM2-amplified solid tumors, and terminate its plans to initiate the Phase 1/2 study evaluating the safety and efficacy of milademetan in patients with CDKN2A loss/ TP53 wild type advanced solid tumors.
Research, Preclinical and Clinical Development Programs
We have retained a selected team of experts in drug discovery and preclinical development to leverage our existing proprietary collection of inhibitors, small-molecule compound libraries and large database of associated phenotypic and biochemical assay results of therapeutic interest. We maintain leading expertise on specific areas of operation such as inhibition of SYK, IRAK 1/4, RIPK1 and mIDH1 kinases to assist clinical development and commercial affairs, as well as to expand and explore additional opportunities for such inhibitors in the clinical space. Our preclinical operations involve collaborations with clinical research organizations, leading investigators from universities and research organizations around the world, and strategic collaborations with other pharmaceutical companies.
We have assembled a team of experts in drug development to design and implement clinical trials and to analyze the data derived from these trials. The clinical development group possesses expertise in project management and regulatory affairs. We work with external clinical research organizations with expertise in managing clinical trials, drug formulation, and the manufacture of clinical trial supplies to support our drug development efforts.
Commercialization and Sponsored Research and License Agreements
For a discussion of our Sponsored Research and License Agreements and Government Contract, see “Note 4 - Sponsored Research and License Agreements and Government Contract” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
36
Table of Contents
Results of Operations
Revenues
Three Months Ended September 30,
Aggregate
Nine Months Ended September 30,
Aggregate
2023
2022
Change
2023
2022
Change
(in thousands)
(in thousands)
Product sales, net
$
27,129
$
19,188
$
7,941
$
74,755
$
53,935
$
20,820
Contract revenues from collaborations
1,005
722
283
5,335
12,529
(7,194)
Government contract
—
2,500
(2,500)
1,000
2,500
(1,500)
Total revenues
$
28,134
$
22,410
$
5,724
$
81,090
$
68,964
$
12,126
The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more (wherein * denotes less than 10%) of the total net product sales and revenues from collaborations:
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
McKesson Specialty Care Distribution Corporation
49%
44%
46%
38%
Cardinal Healthcare
28%
27%
27%
22%
ASD Healthcare and Oncology Supply
18%
25%
20%
21%
Kissei
*
*
*
11%
Net product sales pertained to sales of our products in the US, net of chargebacks, discounts and fees, government and other rebates and returns. For the three and nine months ended September 30, 2023, net product sales increased by 41% and 39%, respectively, compared to the same periods in 2022. The increase was primarily driven by increased TAVALISSE net product sales and the current period net product sales from REZLIDHIA. TAVALISSE net product sales increased by $5.3 million or 27% in the three months ended September 30, 2023, and $14.1 million or 26% in the nine months ended September 30, 2023, compared to the same periods in 2022, primarily as a result of increased quantities sold as a result of increased number of patients under therapy, and higher price per bottle, partly offset by the increase in revenue reserves mainly due to higher government rebates. We began our commercialization of REZLIDHIA in December 2022. In the three and nine months ended September 30, 2023, we recognized $2.7 million and $6.7 million, respectively, of net product sales from REZLIDHA.
Contract revenues from collaborations in the three and nine months ended September 30, 2023 include royalty revenue from Grifols of $0.8 million and $2.3 million, respectively, and revenue from Medison of $0.2 million for each of the respective periods, related to the delivery of drug supplies and a milestone pursuant to the commercial license agreement. In addition, the nine months ended September 30, 2023 consisted of revenue from Grifols of $2.8 million related to the delivery of drug supplies. Contract revenues from collaborations in the three and nine months ended September 30, 2022 include $0.7 million and $2.4 million, respectively, in revenue from Grifols related delivery of drug supplies, deferred revenue recognized associated with the remaining performance obligation to research and development services, and royalty revenue. In addition, the nine months ended September 30, 2022 also include $7.6 million of revenue from Kissei related to a milestone payment and delivery of drug supplies, $2.0 million in revenue related to our license agreement with Knight, and $0.5 million of revenue from Lilly related to the delivery of CNS penetrant IP.
Government contract revenue in the respective periods presented above were related to the income we recognized upon achievement of certain milestones from the $16.5 million government award granted to us, pursuant to the agreement we entered in January 2021 with the US Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients. Through September 30, 2023, we received $16.0 million of the awards which we recognized as revenue in the respective periods, with remaining $0.5 million available, subject to us meeting certain milestone and approval by the US Department of Defense as specified in the agreement.
37
Table of Contents
Our potential future revenues may include product sales, payments from our collaboration partners and from new collaboration partners with whom we enter into agreements in the future, if any, and from existing government grants and any future grants we may be entitled to, if any, the timing and amount of which is unknown at this time. Our net product sales may be impacted by changes to the government program rebates and new private payer rebate contracts we entered or may enter in the future. As of September 30, 2023, we had deferred revenues of $1.4 million, which we will recognize as revenue upon satisfaction of our remaining performance obligations under our collaboration agreement with Kissei.
Cost of Product Sales
Three Months Ended September 30,
Aggregate
Nine Months Ended September 30,
Aggregate
2023
2022
Change
2023
2022
Change
(in thousands)
(in thousands)
Cost of product sales
$
1,268
$
250
$
1,018
$
3,320
$
1,407
$
1,913
The cost of product sales includes the cost of inventories sold to specialty distributors and to our collaborative partners. Inventories sold for the periods presented include inventory quantities acquired or produced prior to the FDA approval of the product, and do not reflect the full cost of the inventories sold, since such costs incurred prior to FDA approval were previously expensed and charged to research and development expense. As such, we recognize lower cost of product sales in the periods where we sell inventory quantities acquired or produced prior to the FDA approval of the product. As we acquire or produce more FDA approved inventory quantities in the future, our inventory cost in the balance sheet and cost of product sales will reflect the full cost of acquiring or producing such products. Cost of product sales may also include reserves for potential excess, dated or obsolete inventories based upon assumptions about future demand and market conditions, as well as product shelf life. Further, following the approval of REZLIDHIA, we recognize amortization expense from capitalized intangible asset and royalty expense on REZLIDHIA sales within cost of sales.
Cost of product sales in the three and nine months ended September 30, 2023 increased compared to the same periods in 2022 primarily due to amortization of capitalized intangible asset recorded in the three and nine months ended September 30, 2023 of $0.3 million and $0.8 million, respectively, and royalty expense of $0.4 million and $1.0 million, respectively. In addition, during the three and nine months ended September 30, 2023, we recorded $0.4 million of inventory reserves. No such expenses were incurred in the same periods in 2022. These increases were partly offset by the decrease in cost of product sales due to the timing of delivery of drug supplies pursuant to our supply agreements with our collaborative partners.
Research and Development Expense
Three Months Ended September 30,
Aggregate
Nine Months Ended September 30,
Aggregate
2023
2022
Change
2023
2022
Change
(in thousands)
(in thousands)
Research and development expense
$
6,475
$
14,666
$
(8,191)
$
21,336
$
44,907
$
(23,571)
Stock-based compensation expense included in research and development expense
$
347
$
588
$
(241)
$
1,746
$
1,514
$
232
Stock-based compensation expense in the nine months ended September 30, 2023 above include an incremental charge of approximately $0.5 million from stock option modifications recorded in the first quarter of 2023 related to the acceleration of vesting and extension of exercise period of vested stock option grants made to a former officer whose employment ended in March 2023.
The decrease in research and development expense in three months ended September 30, 2023 compared to the same period in 2022 was partly due to timing of trial completion activities of our Phase 3 clinical trials of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 of $2.3 million and for the treatment of w AIHA of $1.7 million. In addition, research and development expense in the three months ended September 30, 2022 included a
38
Table of Contents
$2.0 million upfront payment to Forma (now Novo Nordisk) that was recorded as acquired IPR&D. Further, personnel-related costs decreased by $0.9 million, consultants and third party services decreased by $0.8 million, and other research and development expense, including allocated facilities and laboratory costs, decreased by $1.6 million. These decreases were partially offset by the increase in our research and development expense of our IRAK 1/4 inhibitor program of $1.1 million.
The decrease in research and development expense in the nine months ended September 30, 2023 compared to the same period in 2022 was partly due to timing of trial completion activities of our Phase 3 clinical trials of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 of $6.1 million and for the treatment of w AIHA of $4.8 million, and timing of activities related to our IRAK 1/4 inhibitor program of $2.8 million. In addition, research and development expense in the nine months ended September 30, 2022 included $2.0 million upfront payment to Forma (now Novo Nordisk) that was recorded as acquired IPR&D. Further, personnel-related costs decreased by $2.0 million, consultants and third party services decreased by $1.9 million, and other research and development expense including allocated facilities and laboratory costs decreased by $4.0 million.
Our research and development expenditures include costs related to preclinical and clinical trials, scientific personnel, supplies, equipment, consultants, sponsored research, stock-based compensation, allocated facility costs, and upfront payment related to our in-licensed agreement with Forma (now Novo Nordisk). W e expect to continue to incur significant research and development expense as we continue our activities in our clinical studies including our IRAK 1/4 inhibitor program and any other clinical programs we may pursue in the future. In July 2022, we completed the enrollment of the FOCUS Phase 3 clinical trial of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19. We previously announced in November 2022 the top-line results did not meet statistical significance in the primary efficacy endpoint of the number of days on oxygen through Day 29. Upon further analysis, we discovered an error by the CRO in the application of a statistical stratification factor. After correcting for this statistical error, the primary endpoint of the study was met. Given the end of the federal COVID-19 PHE in May 2023, and based on feedback from the FDA, US Department of Defense and other advisors regarding the program’s regulatory requirements, costs, timeline and potential for success, we decided not to submit an EUA or sNDA. Our Phase 3 clinical trial for hospitalized COVID-19 patients was partially funded by the award granted to us by the US Department of Defense as discussed above. Our P hase 3 wAIHA study completed enrollment in November 2021, and in June 2022, we announced that the top-line results did not demonstrate statistical significance in the primary efficacy endpoint. In October 2022, we announced that we received guidance from the FDA’s further review of these findings. Based on the result of the trial and the guidance from FDA, we did not file an sNDA for this indication.
We do not track fully burdened research and development costs separately for each of our drug candidates. We review our research and development expense by focusing on three categories: research, development, and other. Our research team is focused on identifying and evaluating product candidates in our focused range of therapeutic indications that can be developed into small molecule therapeutics in our own proprietary programs or with potential collaborative partners. “Research” expenses relate primarily to personnel expenses, lab supplies, fees to third party research consultants and compounds. Our development group leads the implementation of our clinical and regulatory strategies and prioritizes disease indications in which our compounds may be studied in clinical trials. “Development” expenses relate primarily to clinical trials, personnel expenses, costs related to our regulatory filings, lab supplies and fees to third party research consultants. “Other” expenses primarily consist of allocated facilities costs and allocated stock-based compensation expense relating to personnel in research and development groups. “Other” expenses also include the upfront payment to Forma (now Novo Nordisk) and pre-regulatory approval milestone recorded as research and development expense in 2022.
In addition to reviewing the three categories of research and development expense described in the preceding paragraph, we principally consider qualitative factors in making decisions regarding our research and development programs, which include enrollment in clinical trials and the results thereof, the clinical and commercial potential for our drug candidates and competitive dynamics. We also make our research and development decisions in the context of our overall business strategy, which includes the evaluation of potential collaborations for the development of our drug candidates.
39
Table of Contents
We do not have reliable estimates regarding the timing of our clinical trials. Preclinical testing and clinical development are long, expensive and uncertain processes. In general, biopharmaceutical development involves a series of steps, beginning with identification of a potential target and including, among others, proof of concept in animals and Phase 1, 2 and 3 clinical trials in humans. Significant delays in clinical testing could materially impact our product development costs and timing of completion of the clinical trials. We do not know whether planned clinical trials will begin on time, will need to be halted or revamped or will be completed on schedule, or at all. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a trial, delays from scale up, delays in reaching agreement on acceptable clinical trial agreement terms with prospective clinical sites, delays in obtaining institutional review board approval to conduct a clinical trial at a prospective clinical site or delays in recruiting subjects to participate in a clinical trial.
We currently do not have reliable estimates of total costs for a particular drug candidate to reach the market. Our potential products are subject to a lengthy and uncertain regulatory process that may involve unanticipated additional clinical trials and may not result in receipt of the necessary regulatory approvals. Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected. In addition, clinical trials of our potential products may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval.
The following table presents our total research and development expense by category (In thousands).
Three Months Ended September 30,
Nine Months Ended September 30,
From January 1, 2007*
2023
2022
2023
2022
to September 30, 2023
Categories:
Research
$
375
$
545
$
1,332
2,460
$
268,615
Development
5,616
10,304
17,379
35,432
560,199
Other
484
3,817
2,625
7,015
276,781
$
6,475
$
14,666
$
21,336
$
44,907
$
1,105,595
* We started tracking research and development expense by category on January 1, 2007.
“Other” expenses in the three and nine months ended September 30, 2023 consisted of allocated facilities costs of $0.1 million and $0.9 million, respectively, and allocated stock-based compensation expense of $0.3 million and $1.7 million, respectively. “Other” expenses for the three and nine months ended September 30, 2022 consisted of allocated facilities costs of $1.2 million and $3.5 million, respectively, allocated stock-based compensation expense of $0.6 million and $1.5 million, respectively, and acquired IPR&D of $2.0 million related to our in-license agreement with Forma (now Novo Nordisk) for each of the respective periods.
The major portion of our total research and development expense in the three and nine months ended September 30, 2023 was associated with our IRAK 1/4 inhibitor program. In the three and nine months ended September 30, 2022, the major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK 1/4 inhibitor program.
Selling, General and Administrative Expense
Three Months Ended September 30,
Aggregate
Nine Months Ended September 30,
Aggregate
2023
2022
Change
2023
2022
Change
(in thousands)
(in thousands)
Selling, general and administrative expense
$
24,856
$
25,897
$
(1,041)
$
78,891
$
80,279
$
(1,388)
Stock-based compensation expense included in selling, general and administrative expense
$
1,596
$
2,119
$
(523)
$
5,127
$
6,791
$
(1,664)
40
Table of Contents
Stock-based compensation expense in the nine months ended September 30, 2022 above include an incremental charge of approximately $0.8 million from stock option modifications recorded in the first quarter of 2022 related to the extension of the exercise period of the stock option grants made to our two former Board of Directors whose terms expired in May 2022.
The decrease in selling, general and administrative expense in the three months ended September 30, 2023 compared to the same period in 2022 was mainly due to lower stock-based compensation expense of $0.5 million and lower other various sales, general and administrative costs including allocated facilities of $0.5 million.
The decrease in selling, general and administrative expense in the nine months ended September 30, 2023 compared to the same period in 2022 was mainly due to lower stock-based compensation expense of $1.7 million partly due to stock option modification as discussed above, and lower other various sales, general and administrative costs including allocated facilities of $1.7 million. These decreases we partially offset by higher commercial-related expenses of $1.0 million and higher travel-related expenses of $1.0 million.
We expect to incur significant selling, general and administrative expenses, as we expect our commercial related expenses to increase as we continue to expand our commercial activities of our products. We continue to deploy resources to enable our field-based employees to engage with healthcare providers. These engagements have enabled our field team to cover existing prescribers, as well as develop relationships with new prescribers to identify appropriate patients for our products.
Interest Income and Interest Expense
Three Months Ended September 30,
Aggregate
September 30,
Aggregate
2023
2022
Change
2023
2022
Change
(in thousands)
(in thousands)
Interest income
$
672
$
192
$
480
$
1,594
$
255
$
1,339
Interest expense
$
(1,899)
$
(826)
$
(1,073)
$
(4,965)
$
(2,600)
$
(2,365)
Interest income is related to our interest-bearing cash and investment balances. The increase interest income in the three and nine months ended September 30, 2023, compared to the same periods in 2022, was primarily driven by higher interest rates.
Interest expense comprised primarily of interest on the outstanding term loan with MidCap. The increase in interest expense in the three and nine months ended September 30, 2023, compared to the same periods in 2022, was primarily due to higher interest expense on our term loan with Midcap of $1.1 million and $3.1 million, respectively, driven by higher outstanding term loan balance, as well as higher interest rates. The increase interest expense in the nine months ended September 30, 2023 compared to the same period of 2022 was partly offset by the interest expense recognized in first quarter of 2022 related to the accretion of financing liability with Lilly of $0.7 million.
Critical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting estimates are described in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” in our Annual Report on Form 10-K. There had been no material changes to these accounting policies.
41
Table of Contents
Our significant accounting policies are described in “Note 1 – Description of Business and Summary of Significant Accounting Policies” to our “Notes to Financial Statements” contained in “Part II, Item 8, Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to these accounting policies.
Recent Accounting Pronouncements
No new accounting guidance was adopted during the period. Recently issued accounting guidance is not applicable or did not have, or is not expected to have, a material impact to us.
Liquidity and Capital Resources
Liquidity
As of September 30, 2023 and December 31, 2022, we had approximately $62.4 million and $58.2 million, respectively, in cash, cash equivalents and short-term investments. We continue to maintain investment portfolios primarily in money market funds, US treasury bills, government-sponsored enterprise securities, and corporate bonds and commercial paper. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. We view our investments portfolio as available-for-sale and are available for use in current operations. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk. We continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary.
Following summarizes our cash flow activity for the periods presented:
Nine Months Ended September 30,
2023
2022
(in thousands)
Net cash provided by (used in):
Operating activities
$
497
$
(51,849)
Investing activities
2,577
54,179
Financing activities
17,881
8,646
Net increase in cash and cash equivalents
$
20,955
$
10,976
Net cash provided in operating activities for the nine months ended September 30, 2023 was primarily due the proceeds from sales of our products (TAVALISSE and REZLIDHIA), cash receipt from our collaboration partners, including the $20.0 million regulatory milestone payment from Kissei received in January 2023, and cash received from the awards granted by the US Department of Defense, partially offset by the payments of our operating expenses. Net cash used in operating activities for the nine months ended September 30, 2022 was primarily due to payments for our operating expenses, partially offset by the proceeds from sales of our product (TAVALISSE), and cash received from collaboration partners.
Net cash provided by investing activities for the nine months ended September 30, 2023 comprises net maturities of short-term investments of $17.4 million and proceeds from sale of property and equipment of $0.1 million, partially offset by the payment of milestone obligations to Forma (now Novo Nordisk) recorded as intangible assets of $15.0 million. Net cash provided by investing activities for the nine months ended September 30, 2022 comprises net maturities of short-term investments of $54.0 million and proceeds from sale of property and equipment of $0.5 million, partially offset by purchases of property and equipment of $0.4 million.
Net cash provided by financing activities for the nine months ended September 30, 2023 was primarily due to the net cash proceeds from term loan financing (Tranche 5) of $20.0 million and proceeds from exercise of stock options and participation in the Purchase Plan of $0.6 million, partially offset by our cost share payments to Lilly of $2.6 million. Net cash provided by financing activities for the nine months ended September 30, 2022 was primarily due to the net cash proceeds from term loan financing (Tranche 3) of $19.5 million and proceeds from exercise of stock options and participation in the Purchase Plan of $1.5 million, partially offset by our payment of cost share to Lilly of $12.4 million.
42
Table of Contents
We believe that our existing capital resources will be sufficient to support our current and projected funding requirements, including the continued commercialization of our products, through at least the next 12 months from the Form 10-Q filing date. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with commercializing a product, the development of our product candidates and other research and development activities, we are unable to estimate with certainty our future product revenues, our revenues from our current and future collaborative partners, the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials and other research and development activities.
Capital Resources
Since inception, we have financed our operations primarily through sales of equity securities, debt financing, from sales of our products, and contract payments under our collaboration agreements.
Under our existing collaboration agreements that we entered in the ordinary course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements. As of September 30, 2023, total future contingent payments to us under our existing agreements, excluding terminated agreements, could exceed $1.3 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements. This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products. Future events that may trigger payments to us under the agreements are based solely on our partners’ future efforts and achievements of specified development, regulatory and/or commercial events. See further discussion in “Note 4 – Sponsored Research and License Agreements and Government Contract” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In January 2021, we were awarded $16.5 million by the US Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients. Under the agreement with the US Department of Defense, we are entitled to receive such award based on the agreed-upon payment schedule, subject to submission of proper documentation as evidence of completion of certain clinical trial events or milestones as specified in the agreement, and approval by the US Department of Defense that such events or milestones have been met. Through September 30, 2023, we received $16.0 million of the awards which we recognized as revenue in the respective periods, with remaining $0.5 million available, subject to us meeting certain milestone and approval by the US Department of Defense that such milestone has been met, as specified in the agreement.
In August 2020, we entered into an Open Market Sale Agreement with Jefferies LLC (Jefferies), as a sole agent, pursuant to which we may sell from time to time, through Jefferies, shares of our common stock in sales deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act, subject to conditions specified in the Open Market Sale Agreement, including maintaining an effective registration statement covering the sale of shares under the Open Market Sale Agreement. We have a shelf registration statement filed with the SEC that was declared effective on May 3, 2022, which registered, among other securities, a base prospectus which covers the offering, issuance, and sale by us of up to $250.0 million in the aggregate of the securities identified from time to time in one or more offerings, which include the $100.0 million of shares of our common stock that may be offered, issued and sold under the Open Market Sale Agreement. As of September 30, 2023, we have not sold any shares of common stock under such Open Market Sale Agreement.
We have a Credit Agreement with MidCap entered in September 2019, and subsequently amended in March 2021 (First Amendment), in February 2022 (Second Amendment) and in July 2022 (Third Amendment). The Credit Agreement provides for $60.0 million term loan credit facility, which was fully funded as of September 30, 2023. To date, no remaining funds are available for draw under the term loan credit facility with Midcap.
Our operations will require significant additional funding in the foreseeable future. Unless and until we can generate sufficient cash from our operating activities, we may choose to raise additional funds through public and/or private offerings of equity securities, debt financings, or from other sources. However, certain external factors such as global pandemics, the global tensions arising from the Russia-Ukraine war and Hamas-Israel war, political and economic legislations, and other factors may continue to rapidly evolve which could significantly disrupt the global financial
43
Table of Contents
markets. Our ability to raise additional funds may be adversely impacted by potential worsening of global economic conditions and volatility in the credit and financial markets in the US and worldwide. We could experience an inability to access additional funds, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make important, opportunistic investments. To the extent that we raise additional funds through the sale of equity, our shareholders’ ownership interest may experience substantial dilution . Our current credit facility with MidCap and any debt financing that we can obtain in the future may involve operating covenants that may restrict our business. To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish some of our rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.
Our future funding requirements will depend upon many factors, including, but not limited to:
● the ongoing costs to commercialize our products, or any other future product candidates, if any such candidate receives regulatory approval for commercial sale;
● our ability to generate expected revenue from our commercialization efforts;
● the progress and success of our clinical trials and preclinical activities (including studies and manufacture of materials) of our product candidates conducted by us;
● our ability to secure and maintain our patent protection and regulatory rights;
● our ability to meet operating covenants under our current and future credit facilities, if any;
● our ability to enter into partnering opportunities across our pipeline within and outside the US;
● the costs and timing of regulatory filings and approvals by us and our collaborators;
● the progress of research and development programs carried out by us and our collaborative partners;
● any changes in the breadth of our research and development programs;
● the ability to achieve the events identified in our collaborative agreements that may trigger payments to us from our collaboration partners;
● our ability to acquire or license other technologies or compounds that we may seek to pursue;
● our ability to manage our growth;
● competing technological and market developments;
● the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights, including regulatory rights such as regulatory data exclusivities; and
● expenses associated with any unforeseen litigation, including any arbitration and securities class action lawsuits.
Insufficient funds may require us to delay, scale back or eliminate some or all of our commercial efforts and/or research or development programs, to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose or may adversely affect our ability to operate as a going concern.
Material Cash Requirements
We conduct our commercial activities and research and development programs internally and through third parties that include, among others, arrangements with vendors, consultants, contract research organizations (CROs) and universities. We have contractual arrangements with these parties, however our contracts with them are cancelable generally on reasonable notice within one year and our obligations under these contracts are primarily based on services performed. We do not have any purchase commitments under any collaboration arrangements.
We have agreements with certain clinical research organizations to conduct our clinical trials and with third parties relative to our commercialization of our products. The timing of payments for any amounts owed under the respective agreements will depend on various factors including, but not limited to, patient enrollment and other progress
44
Table of Contents
of the clinical trial and various activities related to commercial launch. We expect we will continue to enter into contracts in the normal course of business with various third parties who support our clinical trials, support our preclinical research studies, and provide other services related to our operating purposes as well as our commercialization of our products. We can terminate these agreements at any time, and if terminated, we would not be liable for the full amount of the respective agreements. Instead, we will be liable for services provided through the termination date plus certain cancellation charges, if any, as defined in each of the respective agreements. In addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the parties.
As discussed in detail in “Note 4 – Sponsored Research and License Agreements and Government Contract” of our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, pursuant to the amended Lilly Agreement, and us providing the first opt-out notice to Lilly on September 29, 2023, we are responsible for funding the development costs for R552 in the US, Europe, and Japan, up to $22.6 million through April 1, 2024. Through September 30, 2023, Lilly billed us $17.7 million of the funding development costs and the amounts were fully paid as of September 30, 2023. The amended Lilly Agreement, however, provides us the right to opt- -in to co-funding the R552 development, upon us providing notice to Lilly within 30 days of certain events, as specified in the Lilly Agreement. If we decide to exercise our opt-in right, we will be required to continue to share in global development costs, and if we later exercise our second opt-out right (no later than April 1, 2025), our share in global development costs will be up to a specified cap through December 31, 2025, as provided for in the Lilly Agreement.
Additionally, as discussed in detail in “Note 4 – Sponsored Research and License Agreements and Government Contract” of our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, pursuant to our license and transition services agreement, Forma (now Novo Nordisk) is entitled to potential development and regulatory milestone payments of up to $67.5 million, commercial milestone payments of up to $165.5 million, and tiered royalty payments. As of December 31, 2022, certain milestones were met which entitled Forma (now Novo Nordisk) to receive $17.5 million milestone payments, of which, $2.5 million was paid in the fourth quarter of 2022 and $15.0 million was paid in the first quarter of 2023. No new milestone was met during the nine months ended September 30, 2023.
As of September 30, 2023, we have a contractual commitment related to our leased facilities of $1.2 million, with approximately $0.7 million payable within 12 months. See “Note 10 – Leases” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussions of our leases.
As discussed above, we have a contractual commitment with respect to our credit facility with MidCap. Under the amended Credit Agreement, the term loans mature on September 1, 2026, and the interest-only period is through October 1, 2024. The interest rate applicable to the term loans under the amended Credit Agreement is the sum of one-month SOFR, plus an adjustment of 0.11448%, subject to 1.50% applicable floor, plus applicable margin of 5.65%. A final payment fee of 2.5% of principal is due at maturity date of the term loans. As of September 30, 2023, the outstanding principal amount of the loan was $60.0 million, and no principal payments are due within 12 months. We are also obligated to pay annual administrative fees. As of September 30, 2023, future interest calculated using the base interest rate as per the Credit Agreement, and the final fee payments associated with the credit facility amounted to $10.5 million, with approximately $4.4 million payable within 12 months.
We are also subject to claims related to the patent protection of certain of our technologies, as well as purported securities class action lawsuit, other litigations, and other contractual agreements. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual matter. We do not have other material contractual commitments with respect to matters discussed above.
45
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.