ALX ONCOLOGY HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results
of operations together with our unaudited condensed consolidated financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q. Some of the information contained in this discussion and analysis,
including information with respect to our plans and strategy for our business,
include forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth under "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a clinical-stage immuno-oncology company focused on helping patients fight cancer by developing therapies that block the CD47 checkpoint pathway and bridge the innate and adaptive immune system. Cancer cells leverage CD47, a cell surface protein, as a "don't eat me" signal to evade detection by the immune system. Our company is developing a next-generation checkpoint inhibitor designed to have a high affinity for CD47 and to avoid the limitations caused by hematologic toxicities inherent in other CD47 blocking approaches. We believe our lead product candidate, evorpacept (also known as ALX148), will have a wide therapeutic window to block the "don't eat me" signal on cancer cells, and to leverage the immune activation of broadly used anti-cancer agents through combination strategies. As ofSeptember 30, 2021 , we had dosed over 185 subjects with evorpacept across a range of hematologic and solid malignancies in combination with a number of leading anti-cancer agents. We plan to initiate additional studies in combination with leading anti-cancer agents. In hematologic malignancies, we have dosed 13 subjects for the treatment of myelodysplastic syndromes, or MDS, and intend to advance evorpacept into clinical development for the treatment of acute myeloid leukemia, or AML, in the fourth quarter of 2021. In solid tumors, we have initiated two randomized Phase 2 trials of evorpacept for the treatment of first-line head and neck squamous cell carcinoma, or HNSCC, and dosed the first subject in the first trial inMay 2021 , and dosed the first subject in the second trial inJuly 2021 , and we also initiated a Phase 1 trial in collaboration with Zymeworks for the treatment of breast cancer and dosed the first subject inOctober 2021 . We intend to initiate a randomized Phase 2 trial of evorpacept for the treatment of second line gastric/gastroesophageal junction, or GEJ, cancer in the fourth quarter of 2021. Based on our clinical results to date in multiple oncology indications showing encouraging anti-tumor activity and tolerability and our clinical development plans, our strategy is to pursue evorpacept as a potentially critical component for future combination treatments in oncology. Our predecessor company,ALX Oncology Limited , an Irish private company limited by shares, was initially incorporated inIreland onMarch 13, 2015 under the nameAlexo Therapeutics Limited and changed its name toALX Oncology Limited onOctober 11, 2018 . We were then incorporated inDelaware onApril 1, 2020 under the nameALX Oncology Holdings Inc. and completed an internal reorganization effective as of the same date wherebyALX Oncology Limited became our wholly-owned subsidiary and all of the stockholders, warrant holders and option holders ofALX Oncology Limited became our stockholders, warrant holders and option holders, holding the same number of corresponding shares, warrants and/or options in us as they did inALX Oncology Limited immediately prior to the internal reorganization. The information included herein are presented as that ofALX Oncology Holdings Inc. , unless such information refers to a date prior toApril 1, 2020 , in which case it will reflect that of our predecessor company. Since our founding, we have devoted substantially all of our resources to identifying and developing evorpacept, advancing preclinical programs, scaling up manufacturing, conducting clinical trials and providing general and administrative support for these operations. We have no products approved for marketing and we have never received any revenue from drug product sales. InJuly 2020 , we consummated our initial public offering, raising net proceeds of$169.5 million , after deducting underwriting discounts and commissions of$13.0 million and offering-related expenses of$3.2 million . InDecember 2020 , we consummated a follow-on public offering, raising net proceeds of$194.9 million , after deducting underwriting discounts and commissions of$12.5 million and offering-related expenses of$0.7 million . From inception throughSeptember 30, 2021 , we have raised an aggregate of$545.3 million to fund our operations, of which$175.1 million were net proceeds from sales of our convertible preferred stock,$5.8 million were net proceeds from borrowings under a term loan,$169.5 million were net proceeds from our initial public offering and$194.9 million were net proceeds from our follow-on public offering. We have incurred net losses in each year since inception. Our net losses were$24.6 million and$10.2 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$55.0 million and$27.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively. As ofSeptember 30, 2021 , we had an accumulated deficit of$173.5 million . Substantially all of our operating losses are a result of expenses incurred in connection with our research and development programs, primarily evorpacept, and from general and administrative expenses associated with our operations. 17
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We expect to continue to incur significant expenses and increasing operating losses over at least the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, as we:
• advance evorpacept through multiple clinical trials in multiple indications;
• pursue regulatory approval of evorpacept in hematological malignancies and
solid tumors;
• continue our discovery and preclinical and clinical development efforts,
including our collaborations with Tallac Therapeutics and Zymeworks and
our recent acquisition of ScalmiBio;
• obtain and maintain patent, trade secret and other intellectual property
protection and regulatory exclusivity for our product candidates;
• manufacture supplies for our preclinical studies and clinical trials; and
• continue to add operational, financial and management information systemsto support ongoing operations as a public company.
Components of Results of Operations
Related-Party Revenue
To date, we have not generated any revenue from product sales, licenses or collaborations and do not expect to generate any revenue from the sale of products in the foreseeable future. We recognized related-party revenue related to research and development services to Tallac Therapeutics, which ceased as ofJuly 1, 2020 . If our clinical development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue from future product sales. If we enter into license or collaboration agreements for any of our product candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates including evorpacept. We may never succeed in obtaining regulatory approval for any of our product candidates. Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our lead product candidate, evorpacept, which include:
• expenses incurred in connection with the preclinical and clinical
development, including expenses incurred under agreements with contract
research organizations, or CROs;
• expenses incurred in connection with the preclinical and clinicaldevelopment, including expenses incurred under collaboration agreements;
• employee-related expenses, including salaries, related benefits, travel
and stock-based compensation expense for employees engaged in research and
development functions;
• expenses related to production of clinical materials, including fees paid
to contract manufacturing organizations, or CMOs;
• laboratory and vendor expenses related to the execution of preclinical
studies and clinical trials; and
• facilities and other expenses, which include expenses for rent and
maintenance of facilities, depreciation and amortization expense and other
supplies.
We expense research and development costs as incurred. Nonrefundable advance
payments for goods or services to be received in future periods for use in
research and development activities are deferred and capitalized. The
capitalized amounts are then expensed as the related goods are delivered or as
services are performed. We record accruals for estimated costs of research,
preclinical studies and clinical trials and manufacturing development, which are
a significant component of research and development expenses. We determine the
estimated costs through discussions with internal personnel and external service
providers as to the progress or stage of completion of the services and the
agreed-upon fees to be paid for such services.
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Our research and development expenses consist primarily of costs associated with
the development of our lead product candidate evorpacept and include external
costs, such as fees paid to consultants, central laboratories, contractors,
collaborators, CMOs and CROs in connection with our preclinical and clinical
development activities.
Almost all of our research and development expenses to date related to the
clinical development of our lead product candidate, evorpacept. We expect our
research and development expenses to increase substantially for the foreseeable
future as we continue to invest in research and development activities related
to progress on our existing product candidates and developing new product
candidates. As our product candidates advance into later stages of development,
we begin to conduct larger clinical trials. The process of conducting the
necessary clinical trials to obtain regulatory approval is costly and
time-consuming, and the successful development of our product candidates is
highly uncertain. 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 and sale of any of
our product candidates. In addition, we will incur expenses related to the
preclinical research conducted internally and through the contract with Tallac
Therapeutics, as further described in Note 9 to our condensed consolidated
financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
The successful development of our current and future product candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following:
• successful completion of preclinical studies and clinical trials;
• delays in regulators or institutional review boards authorizing us or our
investigators to commence our clinical trials or in our ability to
negotiate agreements with clinical trial sites or CROs;
• the number and location of clinical sites included in the trials;
• raising additional funds necessary to complete clinical development of our
product candidates;
• obtaining and maintaining patent, trade secret and other intellectual
property protection and regulatory exclusivity for our product candidates;
• contracting with third-party manufacturers for clinical supplies of our
product candidates;
• protecting and enforcing our rights in our intellectual property
portfolio, including, if necessary, litigation; and
• maintaining a continued acceptable safety profile of the products
following approval.
A change in the outcome of any of these variables with respect to the development of our product candidates may significantly impact the costs and timing associated with the development of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. Research and development activities are central to our business model. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact the success, cost or timing of our clinical development programs.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related expenses, business development expenses, facilities expenses, depreciation and amortization expenses and professional services expenses, including legal, human resources, audit, accounting and tax-related services, and directors and officers liability insurance premiums. Personnel and related costs primarily consist of salaries, benefits and stock-based compensation expense. Facilities costs primarily consist of rent and maintenance of facilities. We anticipate that our general and administrative expenses will continue to increase as a result of increased headcount, expanded infrastructure and higher consulting, legal, tax and regulatory-related services associated with maintaining compliance with stock exchange listing andSEC requirements, audit and investor relations costs, director and officer insurance premiums and other costs associated with being a public company. 19
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Cost of Services for Related-Party Revenue
We previously incurred costs associated with related-party contract research services including direct labor and associated employee benefits, laboratory supplies and other expenses. These costs were recorded in cost of services for related-party transactions as a component of total operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Interest Expense
Historically, our interest expense consisted primarily of interest expense on the term loan, amortization of deferred debt issuance costs, and interest related to finance leases.
Other Income (expense), Net
Our other income (expense), net, consists of interest income on cash balances, changes in the fair value of our convertible preferred stock warrant liability and compound derivative liability, and foreign currency re-measurement and transaction gains and losses. Prior to our initial public offering, the underlying shares of our Series B convertible preferred stock warrants were contingently redeemable, and we accounted for these warrants as a liability at fair value and re-measured the fair value at each balance sheet date. As a result of the completion of our initial public offering, the Series B convertible preferred stock warrant liability was reclassified to stockholders' equity and re-measurement was no longer required. The compound derivative liability was extinguished upon the extinguishment of the host instrument inDecember 2020 .
Results of Operations and Net Loss
The following table summarizes our results of operations for the three and nine
months ended
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Related-party revenue $ - $ - $ - NM % $ - $ 1,182 $ (1,182 ) (100 ) %
Operating expenses
Research and
development 18,214 5,328 12,886 242 % 39,276 16,819 22,457 134 %
General and
administrative 6,362 4,481 1,881 42 % 15,807 9,126 6,681 73 % Cost of services for related party revenue - - - NM % - 1,075 (1,075 ) (100 ) % Total operating expenses 24,576 9,809 14,767 151 % 55,083 27,020 28,063 104 % Loss from operations (24,576 ) (9,809 ) (14,767 ) 151 % (55,083 ) (25,838 ) (29,245 ) 113 % Interest expense (4 ) (226 ) 222 (98 ) % (10 ) (660 ) 650 (98 ) % Other income (expense), net 14 (111 ) 125 (113 ) % 68 (409 ) 477 (117 ) % Loss before income taxes (24,566 ) (10,146 ) (14,420 ) 142 % (55,025 ) (26,907 ) (28,118 ) 105 % Income tax provision - (35 ) 35 (100 ) % - (59 ) 59 (100 ) % Net loss and comprehensive loss (24,566 ) (10,181 ) (14,385 ) 141
% (55,025 ) (26,966 ) (28,059 ) 104 % Cumulative dividends allocated to preferred stockholders - (578 ) 578 (100 ) % - (5,202 ) 5,202 (100 ) % Net loss attributable to common stockholders$ (24,566 ) $ (10,759 ) $ (13,807 ) 128 %$ (55,025 ) $ (32,168 ) $ (22,857 ) 71 % Related-Party Revenue Related-party revenue for the three and nine months endedSeptember 30, 2020 was zero and$1.2 million , respectively, which was generated solely from payments received for reimbursement of research and development expenses pursuant to the Tollnine Agreement, as further described in Note 9 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Related-party revenue for the three and nine months endedSeptember 30, 2021 was zero due to the termination of the Tollnine Agreement as ofJuly 1, 2020 . 20
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Research and Development Expenses
The following table summarizes our research and development expenses incurred for the three and nine months endedSeptember 30, 2021 and 2020 (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, Change September 30, Change 2021 2020 $ % 2021 2020 $ % Clinical development costs$ 14,618 $ 4,612 $ 10,006 217 %$ 30,724 $ 11,913 $ 18,811 158 % Personnel and related costs 1,936 1,039 897 86 % 5,146 2,741 2,405 88 % Stock-based compensation expense 1,519 (359 ) 1,878 (523 ) % 2,813 2,008 805 40 % Other research and development costs 141 36 105 292 % 593 157 436 278 % Total research and development expense$ 18,214 $ 5,328 $ 12,886 242 % 39,276 16,819$ 22,457 134 % Research and development expenses for the three months endedSeptember 30, 2021 was$18.2 million , compared to$5.3 million for the three months endedSeptember 30, 2020 . The increase of$12.9 million was primarily attributable to (i) an increase of$10.0 million in clinical and development costs due to$8.7 million higher expenses associated with increased clinical costs mainly associated with a higher number of active clinical trials and increased patient enrollment and other research costs in advancement of our current lead product candidate, evorpacept,$0.8 million related to collaborations, of which$0.6 million was related to the Tallac Collaboration, and$0.3 million related to regulatory consulting expenses, (ii) an increase of$1.9 million in stock-based compensation expense mainly due to additional stock option awards granted in 2021 at higher fair values and negative stock-based compensation expense due to a reduction recorded in the corresponding prior period, (iii) an increase of$0.9 million in personnel expense due to$0.7 million increase driven by headcount growth and our share of Tallac's personnel expenses of$0.2 million related to the collaboration and (iv) an increase of$0.1 million in other research and development costs due to increase in clinical trial insurance as we continue to initiate new trials. Research and development expenses for the nine months endedSeptember 30, 2021 was$39.3 million , compared to$16.8 million for the nine months endedSeptember 30, 2020 . The increase of$22.5 million was primarily attributable to (i) an increase of$18.8 million in clinical and development costs due to$16.4 million higher expenses associated with increased pre-clinical costs, increased clinical costs mainly associated with a higher number of active clinical trials and increased patient enrollment and other research costs in advancement of our current lead product candidate, evorpacept,$1.6 million related to collaborations, of which$1.0 million was related to the Tallac Collaboration, and an increase of$0.5 million in regulatory consulting expenses, (ii) an increase of$2.4 million in personnel and related costs due to$2.0 million higher expense driven by headcount growth and recruiting expenses and our share of Tallac's personnel expenses of$0.4 million related to the collaboration, (iii) an increase of$0.8 million in stock-based compensation expense mainly due to an increase of$3.1 million in stock-based compensation expense driven by additional stock option awards granted in 2021 at higher fair values, offset by a decrease of$2.3 million expense as we modified stock option awards for former employees who transferred to Tallac Therapeutics in the nine months endedSeptember 30, 2020 and (iv) an increase of$0.4 million in other research and development costs due to an increase of$0.3 million milestone payments triggered by the initiation of our Phase 2 trials and an increase of$0.1 million clinical trial insurance as we continue to initiate our trials.
General and Administrative Expenses
The following table summarizes our general and administrative expenses incurred for the three and nine months endedSeptember 30, 2021 and 2020 (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, Change September 30, Change 2021 2020 $ % 2021 2020 $ % Personnel and related costs$ 1,444 $ 1,339 $ 105 8 %$ 3,839 $ 2,577 $ 1,262 49 % Stock-based compensation expense 2,672 1,048 1,624 155 % 5,415 1,685 3,730 221 % Other general and administrative costs 2,246 2,094 152 7 % 6,553 4,864 1,689 35 % Total general and administrative expenses$ 6,362 $ 4,481 $ 1,881 42 %$ 15,807 $ 9,126 $ 6,681 73 % 21
-------------------------------------------------------------------------------- General and administrative expenses for the three months endedSeptember 30, 2021 was$6.4 million , compared to$4.5 million during the three months endedSeptember 30, 2020 . This increase of$1.9 million was primarily attributable to (i) an increase of$1.6 million in stock-based compensation driven by$1.8 million increase due to additional stock option awards granted in 2021 at higher fair values, offset by a decrease of$0.2 million as we recorded additional expense related to the modification of stock option awards for a former employee in the three months endedSeptember 2020 , (ii) an increase of$0.1 million other general and administrative costs primarily driven by an increase of$0.5 million due to corporate legal fees, general business insurance fees, SOX and compliance fees, partially offset by a decrease of$0.4 million in accounting and consulting service fees, which were higher in the three months endedSeptember 30, 2020 due to the IPO and (iii) an increase of$0.1 million in personnel and related costs mainly driven by the headcount growth. General and administrative expenses for the nine months endedSeptember 30, 2021 was$15.8 million , compared to$9.1 million during the nine months endedSeptember 30, 2020 . This increase of$6.7 million was primarily attributable to (i) an increase of$3.9 million in stock-based compensation expense driven by additional stock option awards granted in 2021 at higher fair values, offset by a decrease of$0.2 million as we recorded additional expense related to the modification of stock option awards for a former employee in the nine months endedSeptember 2020 while we did not have any such modification in the nine months endedSeptember 30, 2021 , (ii) an increase of$1.7 million in other general and administrative costs primarily driven by$2.2 million increase due to general business insurance fees, corporate legal fees, SOX and compliance fees, and filing fees, partially offset by a decrease of$0.5 million in accounting and consulting service fees, which were higher in the nine months endedSeptember 30, 2020 due to the IPO, and (iii) an increase of$1.3 million personnel and related costs primarily driven by headcount growth.
Cost of Services for Related-Party Revenue
Cost of services for related-party revenue for the three and nine months endedSeptember 30, 2020 was zero and$1.1 million , respectively, which are attributable to fee-for-service hours provided to Tallac Therapeutics. Cost of services for related-party revenue for the three and nine months endedSeptember 30, 2021 was zero due to the termination of the Tollnine Agreement as ofJuly 1, 2020 .
Liquidity and Capital Resources; Plan of Operations
Sources of Liquidity
Since our inception, we have incurred significant operating losses and have not generated any product revenue. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all, subject to marketing approval of any of our product candidates. To date, we have funded our operations with proceeds from the sales of shares of our common stock and convertible preferred stock and borrowings under our term loan. ThroughSeptember 30, 2021 , we have received net proceeds from sales of our convertible preferred stock, borrowings under our term loan, our initial public offering and our follow-on public offering of$175.1 million ,$5.8 million ,$169.5 million and$194.9 million , respectively. As ofSeptember 30, 2021 , we had cash and cash equivalents of$385.1 million .
Debt Extinguishment
InDecember 2020 , we used approximately$6.5 million of the net proceeds from our follow-on public offering to repay the outstanding principal amount of$6.0 million and early extinguish the outstanding Term Loan with SVB and WestRiver. As a result, we recognized a$0.6 million loss on early debt extinguishment, representing the difference between the reacquisition price of debt and the net carrying amount of the loan as of the date of the payoff.
Funding Requirements
We have incurred losses and negative cash flows from operations since inception and anticipate that we will continue to incur net losses for the foreseeable future. As ofSeptember 30, 2021 , we had an accumulated deficit of$173.5 million . We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development. In addition, we expect to incur additional costs associated with operating as a public company. Management recognizes the need to raise additional capital to fully implement its business plan. The timing and amount of such future capital requirements are difficult to forecast and will depend on many factors, including:
• the timing and progress of preclinical and clinical development activities;
• successful enrollment in and completion of clinical trials;
• the timing and outcome of regulatory review of our product candidates;
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--------------------------------------------------------------------------------• our ability to establish agreements with third-party manufacturers for
clinical supply for our clinical trials and, if any of our product
candidates are approved, commercial manufacturing;
• addition and retention of key research and development personnel;
• our efforts to enhance operational, financial and information management
systems, and hire additional personnel, including personnel to support
development of our product candidates;
• the costs and timing of future commercialization activities, including
product manufacturing, marketing, sales and distribution, for any of our
product candidates for which we obtain marketing approval;
• the legal patent costs involved in prosecuting patent applications and
enforcing patent claims and other intellectual property claims;
• the terms and timing of any collaboration, license or other arrangement,
including the terms and timing of any milestone and royalty payments
thereunder; and
• the impact of the COVID-19 pandemic, which may exacerbate the magnitude of
the factors discussed above.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not currently have any committed external source of funds. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets inthe United States and worldwide resulting from the ongoing COVID-19 pandemic. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves. InJuly 2020 , we completed our initial public offering pursuant to a registration statement on Form S-1. In the initial public offering, we issued and sold an aggregate of 9,775,000 shares of common stock, including the underwriters' exercise in full of their overallotment option, under the registration statement at a public offering price of$19.00 per share. Net proceeds were approximately$169.5 million , after deducting underwriting discounts and commissions of$13.0 million and offering-related expenses of$3.2 million . InDecember 2020 , we completed our follow-on public offering pursuant to a registration statement on Form S-1. In the follow-on public offering, we issued and sold an aggregate of 2,737,000 shares of common stock, including the underwriters' exercise in full of their overallotment option, under the registration statement at a public offering price of$76.00 per share. Net proceeds were approximately$194.9 million , after deducting underwriting discounts and commissions of$12.5 million and offering-related expenses of$0.7 million . We believe our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through 2024. We have based these estimates on assumptions in which actuals may materially differ, and we could utilize our available capital resources sooner than we expect. 23
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Cash Flows
The following table presents a summary of the net cash flow activity for each of the periods set forth below:
Nine Months Ended
September 30,
2021 2020
(in thousands)
Net cash (used in)/provided by:
Operating activities $ (50,613 ) $ (24,674 )
Investing activities (405 ) 621
Financing activities 1,948 274,520
Net (decrease)/increase in cash and cash equivalents
Operating Activities In the nine months endedSeptember 30, 2021 , cash used in operating activities of$50.6 million was attributable to a net loss of$55.0 million and a net change of$4.3 million in our operating assets and liabilities, partially offset by$8.7 million in non-cash charges. The change in operating assets and liabilities was primarily due to$3.6 million increase in accounts payable due to timing of invoice and payments, offset by$6.6 million increase in other assets related to long-term prepaid clinical costs and$2.0 million increases in prepaid expenses and other current assets. The non-cash charges mainly consisted of stock-based compensation of$8.2 million and non-cash lease costs of$0.4 million . In the nine months endedSeptember 30, 2020 , cash used in operating activities of$24.7 million was attributable to a net loss of$27.0 million and a change of$2.5 million in our net operating assets and liabilities, partially offset by$4.8 million in non-cash charges. The non-cash charges consisted of stock-based compensation of$3.7 million , change in fair value of Series B convertible preferred stock warrant liability and term loan compound derivative of$0.7 million , depreciation and amortization of$0.2 million and amortization of term loan discount and issuance costs of$0.3 million , partially offset by a gain on assignment of lease of$0.1 million . The change in operating assets and liabilities was primarily due to a$2.3 million decrease in accounts payable,$2.1 million increase in prepaid expenses and other current assets, partially offset by a$2.0 million increase in accrued expenses and other current liabilities. This is primarily due to timing of cash payments for clinical-related activities. Investing Activities
In the nine months ended
In the nine months ended
Financing Activities
In the nine months endedSeptember 30, 2021 , cash provided by financing activities was$1.9 million , which were driven by$2.0 million proceeds from exercise of common stock under equity incentive plans and$0.1 million proceeds from issuance of common stock pursuant to employee stock purchase plan, offset by$0.2 million of principal payments on finance leases. In the nine months endedSeptember 30, 2020 , cash provided by financing activities was$274.5 million , primarily from the net proceeds of our initial public offering of$172.7 million , after deducting underwriting commissions and discounts, the sale and issuance of Series C convertible preferred stock with gross proceeds of$105.0 million , net of$0.3 million in issuance costs, and proceeds from the exercise of common stock under equity incentive plans of$0.3 million , partially offset by payment of offering costs of$3.2 million . 24
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Contractual Obligations and Commitments
We have contractual obligations from our operating lease, finance leases,
manufacturing and service contracts, and other research and development
activities. The following table aggregates our material expected contractual
obligations and commitments as of
Payments Due By Period
Total 2021 (4) 2022 - 2023 2024 - 2025 Thereafter
Operating lease obligations $ 2,283 $ 102 $ 1,001 $ 879 $ 301
(1)
Finance lease obligations 108 720
(2) 828 - -
Manufacturing and service 7,481 17,297
contracts (3) 25,006 198 30
Total $ 28,117 $ 7,691 $ 19,018 $ 1,077 $ 331
(1) The payments consist of (i) payments due for the office space in
expires in 2023, and (ii) payments due for the office space in South San
Francisco,
expires in 2026. See Note 5 to our condensed consolidated financial
statements appearing elsewhere in this Quarterly Report on Form 10-Q for
details of related commitments.
(2) Payments due for embedded finance leases related to a pharmaceutical
support service contract. See Note 5 to our condensed consolidated
financial statements appearing elsewhere in this Quarterly Report on Form
10-Q for details of related commitments.
(3) In
with
development and cGMP manufacturing of evorpacept for use in clinical
trials on a project basis. The MSA had an initial term of three years with
successive one-year renewal periods, is cancellable upon notice and is
non-exclusive. Statements of work under the MSA commit us to certain
future purchase obligations of approximately
we have commitments with two other drug product manufacturers that commit
us to certain future purchase obligations of approximately
These amounts are based on non-cancellable commitments and forecasts that
include estimates of future market demand, quantity discounts and
manufacturing efficiencies that may impact timing of purchases.
(4) Remaining three months.
We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments are not included in the table of contractual obligations above.
Off-Balance Sheet Arrangements
During the period presented, we did not have, nor do we currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles, orU.S. GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and the disclosure of our contingent liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates under different assumptions or conditions. Our critical accounting policies are more fully described in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 . During the three and nine months endedSeptember 30, 2021 , there were no material changes to our critical accounting policies from those discussed in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 filed with theSEC onMarch 18, 2021 . 25
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