SIERRA ONCOLOGY, INC. The following discussion contains management's discussion and analysis of our
financial condition and results of operations and should be read together with
the unaudited condensed consolidated financial statements and the notes thereto
included in Part I, Item 1 of this Quarterly Report and with our audited
consolidated financial statements and related notes thereto for the year ended
Overview
We are a late stage drug development company focused on advancing our product candidate, momelotinib, a potent, selective and orally-bioavailable JAK1 (Janus kinase 1), JAK2 (Janus kinase 2) and ACVR1 (Activin A receptor type 1) inhibitor with a potentially differentiated therapeutic profile for the treatment of myelofibrosis. We have a highly experienced management team with a proven track record of success in hematology and oncology drug development. We are oriented towards achieving the successful registration and commercialization of momelotinib. During the third quarter of 2018, we acquired momelotinib from Gilead Sciences, Inc. (Gilead). Momelotinib has been investigated in two completed Phase 3 trials for the treatment of myelofibrosis. Data from these trials indicate a potentially differentiated therapeutic profile encompassing anemia-related clinical benefits, as well as achieving constitutional symptom control benefits and substantive splenic volume reductions (see additional discussion below under Momelotinib - A Potent and Selective JAK1, JAK2 and ACVR1 Inhibitor).
In
In the second quarter of 2019, we announced that we had obtained regulatory
clarity with the
Following receipt of this clarity, we announced the design of the MOMENTUM Phase
3 clinical trial in myelofibrosis, which we subsequently launched in the fourth
quarter of 2019. MOMENTUM is a randomized double-blind trial designed to enroll
180 myelofibrosis patients who are symptomatic and anemic and have been treated
previously with a JAK inhibitor. The Primary Endpoint of the trial is the Total
Symptom Score (TSS) response rate of momelotinib compared to danazol at Week 24
(99% power; p-value < 0.05). Danazol has been selected as an appropriate
treatment comparator given its use to ameliorate anemia in myelofibrosis
patients, as recommended by
During the fourth quarter of 2019, we reported new analyses of red blood cell
(RBC) transfusion data from SIMPLIFY-1,a double-blind Phase 3 trial of
momelotinib head-to-head versus ruxolitinib in JAK inhibitor naïve patients,
which were presented in a poster by Dr.
During the first quarter of 2020, we continued to operationalize the MOMENTUM trial, on a global basis. Due to the recent global outbreak of COVID-19, our clinical trials have been and may continue to be affected, and we are likely to experience delays in anticipated timelines and milestones, which will be difficult to predict until we have more visibility on the duration and impact of the COVID-19 pandemic and the potential institution of additional public health orders. We have experienced and may continue to experience some delays in planned site initiations, activations and overall enrollment. We believe that our current resources will be sufficient to execute on our development strategy for momelotinib into the second half of 2022, subject to the potential impact of COVID-19.
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Our portfolio also includes two DNA Damage Response (DDR) assets, consisting of SRA737 and SRA141. SRA737 is a potent, highly selective, orally bioavailable small molecule inhibitor of Checkpoint kinase 1 (Chk1). SRA141 is a potent, selective, orally bioavailable small molecule inhibitor of Cell division cycle 7 kinase (Cdc7). We have decided to suspend the continued development of our product candidates SRA737 and SRA141 to focus our resources on the development of momelotinib. We are exploring non-dilutive strategic options to support any future continued development of our portfolio of DDR assets.
We wholly own momelotinib, subject to future milestone payments and royalties, and retain the global commercialization rights to SRA737 and SRA141.
Since inception, we have devoted substantially all of our resources to research
and development activities, including the clinical development of momelotinib,
and SRA737, SRA141, and PNT2258 our former lead product candidate, and to
provide general and administrative support for these operations. We have never
generated revenue and have incurred significant net losses since inception. Our
net losses were
The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our clinical studies, employee or industry events, and effect on our suppliers and manufacturers, all of which are uncertain and cannot be predicted. The COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, our CROs, suppliers or third-party business partners conduct business and as a result, we have begun to experience more pronounced disruptions in our operations. We may experience constrained supply of momelotinib or, with respect to our clinical trials, delays in enrollment, site initiation, participant dosing, distribution of clinical trial materials, study monitoring and data analysis that could materially adversely impact our business, results of operations and overall financial performance in future periods. Specifically, we may experience impact from changes in how we and companies worldwide conduct business due to the COVID-19 pandemic, including but not limited to restrictions on travel and in-person meetings, prioritization of hospital resources toward pandemic effort, delays in review by the FDA and comparable foreign regulatory agencies, and disruptions in our supply chain for momelotinib. Any such delays to our planned MOMENTUM timeline could also impact the use and sufficiency of our existing cash reserves, and we may be required to raise additional capital earlier than we had previously planned. We may be unable to raise additional capital if and when needed, which may result in further delays or suspension of our development plans. As of the filing date of this Quarterly Report on Form 10-Q, the extent to which COVID-19 may impact our financial condition, results of operations or guidance is uncertain. The effect of the COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods. See the section entitled "Risk Factors" included elsewhere in this report for further discussion of the possible impact of the COVID-19 pandemic on our business.
We have funded our operations to date primarily from the issuance and sale of
our common stock and convertible voting preferred stock through public
offerings, and our convertible and redeemable convertible preferred stock in
private financings and, to a lesser extent, through exercises of our preferred
stock warrants in private financings. As of
Components of Statements of Operations
Operating Expenses
Research and Development
Research and development expenses consist primarily of the following:
• fees, milestone payments or other expenses incurred in connection with
asset purchase and license agreements and their related amendments;
• personnel-related costs, which include salaries, benefits, stock-based
compensation, recruitment fees and travel costs;
• costs associated with research and preclinical studies, clinical trials,
regulatory activities and manufacturing activities to support clinical
activities;
• fees paid to external service providers that conduct certain research and
development, clinical and manufacturing activities on our behalf; and
• facility-related costs, which include direct and allocated expenses for
rent and maintenance of facilities, depreciation and amortization
expenses and other supplies.
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The largest recurring component of our total operating expenses has historically
been our investment in research and development activities, including the
development of momelotinib. We expect our research and development expenses will
increase over the next few years as we advance momelotinib, achieve regulatory
milestones that trigger payments due under our Asset Purchase Agreement with
Gilead, pursue regulatory approval of momelotinib in
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for momelotinib. The probability of success of our product candidate may be affected by numerous factors, including clinical data, regulatory developments, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization of momelotinib.
General and Administrative
General and administrative expenses consist of personnel-related costs, facility-related costs, business insurance, allocated expenses and professional fees for services, including legal, patent prosecution and maintenance, human resources, audit and accounting services. Personnel-related costs consist of salaries, benefits, stock-based compensation, recruitment fees, severance costs and travel costs.
We expect to incur additional expenses associated with supporting our growing research and development activities, preparing for potential commercialization, continuing to operate as a public company and other administration and professional services.
Other Income (Expense), net
Changes in Fair Value of Warrant Liabilities
Our common stock warrants issued in connection with our
Other Income, net
Other income, net primarily consists of interest earned on our cash and cash
equivalents and foreign currency exchange gains and losses related to
transactions and monetary asset and liability balances denominated in currencies
other than the
Provision for (Benefit from) Income Taxes, net
Provision for (benefit from) income taxes, net consists of federal and state
income taxes in
We did not record a provision for
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Results of Operations
Three Months Ended
Three Months Ended
March 31, Change
2020 2019 $
(in thousands)
Operating expenses:
Research and development $ 11,591 $ 10,137 $ 1,454
General and administrative 4,544 3,365 1,179
Total operating expenses 16,135 13,502 2,633
Loss from operations (16,135 ) (13,502 ) (2,633 )
Other income (expense), net:
Changes in fair value of warrant liabilities (16,240 ) - (16,240 )
Other income, net 541 325 216
Total other income (expense), net (15,699 ) 325 (16,024 )
Loss before provision for (benefit from) income
taxes, net (31,834 ) (13,177 ) (18,657 )
Provision for (benefit from) income taxes, net 78 (145 ) 223
Net loss $ (31,912 ) $ (13,032 ) $ (18,880 )
Research and Development
Research and development expenses increased
General and Administrative
General and administrative expenses increased
Changes in Fair Value of Warrant Liabilities
The changes in the fair value of our warrant liabilities were directly attributable to the change in the fair value of the underlying stock and discount for lack of marketability.
Other Income (Expense), net
Other income, net increased from
Provision for (benefit from) income taxes, net
The provision for income taxes during the three months ended
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Liquidity and Capital Resources
Capital Resources
Since our inception, we have never generated revenue and have incurred
significant net losses. We have funded our operations to date primarily from the
issuance and sale of our common stock and convertible voting preferred stock
through public offerings, our convertible and redeemable convertible preferred
stock in private financings and, to a lesser extent, through exercises of our
preferred stock warrants issued in private financings. Our net losses for the
three months ended
In
We expect to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially as we:
• invest to further develop momelotinib;
• hire additional clinical, scientific, drug development and management
personnel, as well as personnel to support any future commercialization
efforts;
• invest in scaling our manufacturing capacity to support development and
our global commercialization strategy;
• seek regulatory and marketing approvals for any product candidates that
we may develop;
• achieve regulatory milestones that trigger payments due under our Asset
Purchase Agreement with Gilead;
• ultimately establish a sales, marketing and distribution infrastructure
to commercialize any drugs for which we may obtain marketing approval;
• acquire or in-license additional product candidates and technologies;
• develop additional product candidates;
• defend against potential lawsuits or other legal issues;
• maintain, expand and protect our intellectual property portfolio; and
• add operational, financial and management information systems and
personnel to continue to operate as a public company.
To fund our current operating plans, we will need to raise additional capital. Our existing cash and cash equivalents will not be sufficient for us to complete development and prepare for commercializing momelotinib. Accordingly, we will continue to require substantial additional capital to continue our clinical development and potential commercialization activities; however, we believe that our existing cash and cash equivalents will be sufficient to fund our current operating plans into the second half of 2022, subject to the potential impact of COVID-19. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. However, our forecast for the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts, including any potential impacts of the COVID-19 pandemic on our clinical development efforts.
We plan to continue to fund our current operating plans' needs through equity financings or other arrangements. To the extent that we raise additional capital through future equity financings, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. There can be no assurance that such additional financing, if available, can be obtained on terms acceptable to us. If we are unable to obtain such additional financing, we would need to reevaluate our future operating plans. We are exploring non-dilutive strategic options to support the continued development of SRA737 and SRA141 in the future. There can be no assurance that we will successfully obtain non-dilutive development support or obtain the funding or support necessary to advance SRA737 or SRA141 or obtain such funding or support on commercially reasonable terms.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
Three Months Ended
March 31,
2020 2019
(in thousands)
Cash used in operating activities $ (13,948 ) $ (15,566 )
Cash used in investing activities - (14 )
Cash provided by financing activities - 445
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
(46 ) (3 )
Net decrease in cash, cash equivalents and restricted cash
$ (13,994 ) $ (15,138 )
Cash Flows from Operating Activities
For the three months ended
For the three months ended
Cash Flows from Investing Activities
For the three months ended
For the three months ended
Cash Flows from Financing Activities
For the three months ended
For the three months ended
Off-Balance Sheet Arrangements
We do not currently engage in off-balance sheet financing arrangements. In addition, we do not have any interest in entities referred to as variable interest entities, which includes special purpose entities and other structure finance entities.
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Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in
accordance with
We believe that the assumptions and estimates associated with research and development expenses, stock-based compensation, warrant liabilities and securities issuance obligation have the most significant impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
There have been no significant changes in our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
disclosed in Management's Discussion and Analysis of Financial Condition and
Operations included in our Annual Report on Form 10-K for the year ended
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