CALITHERA BIOSCIENCES, INC. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are identified by words such as "believe," "will," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "could," "potentially" or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A - "Risk Factors," and elsewhere in this report. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements.
Overview
We are a fully-integrated, clinical stage precision oncology biopharmaceutical company. Driven by a commitment to rigorous science and a passion for improving the lives of people impacted by cancer, we are advancing a pipeline of investigational, small molecule oncology compounds with a biomarker-driven approach.
Targeted, Biomarker-Defined Small Molecules
Our core expertise is in oncology, discovering and developing novel small molecule enzyme inhibitors. We are well-versed and nimble in conducting biomarker-driven early and late stage clinical trials, and are leveraging this expertise by developing the mid-stage clinical assets we have recently added to our precision oncology pipeline. InOctober 2021 , we entered into an Asset Purchase Agreement, or APA, withMillennium Pharmaceuticals, Inc. , or Millennium, a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited, or Takeda, to acquire two clinical-stage compounds, both of which have demonstrated single-agent clinical activity in biomarker-defined cancer patient populations. The compounds are the TORC1/2 inhibitor sapanisertib (CB-228) and the spleen tyrosine kinase (SYK) inhibitor mivavotinib (CB-659), both of which significantly strengthen our precision oncology pipeline. This was a transformative transaction that aligns with Calithera's focus and deep expertise in targeted, small-molecule cancer therapies. Our near-term clinical development plans are to leverage our expertise in conducting biomarker focused clinical trials by developing sapanisertib in NRF2 (also known as NFE2L2)-mutated squamous non-small cell lung cancer, and mivavotinib in activated B-cell (ABC), or non-GCB, diffuse large B-cell lymphoma (DLBCL) with and without MYD88/CD79b mutations. By focusing on well-characterized genetic vulnerabilities with molecules that have already shown single-agent activity, we will be able to generate phase 2 data with targeted, efficient study designs and design potential paths for rapid approval in genetically-defined patient populations. We intend to announce data from these studies by the first quarter of 2023.
SYK Inhibitor Mivavotinib (CB-659)
DLBCL is the most common form of lymphoma, representing approximately 30% of all NHL diagnoses. Approximately 24,000 people are diagnosed with DLBCL in the US each year, with approximately a 60% five-year survival rate. DLBCL treatments are the same for all patients, despite the fact that it is a biologically heterogeneous disease with different cell-of-origin: approximately 40% GCB, approximately 50%ABC and approximately 10% unclassified. DLBCL cell-of-origin is routinely collected at the time of initial diagnosis, using an immunohistochemistry (IHC) assay called the Hans algorithm, which classifies tumors as GCB or non-GCB. Currently, R-CHOP (rituximab plus cyclophosphamide, doxorubicin, vincristine, and prednisone) is the standard of care for newly diagnosed DLBCL patients. While a fraction of patients will go into remission following R-CHOP, 40-50% of patients relapse or are refractory to R-CHOP. For those patients, the options are salvage chemotherapy, stem cell transplant, and more recent entrants to the treatment landscape such as chimeric antigen receptor-T cell therapy (CAR-T), antibody drug conjugates like polatuzumab and loncastuximab, and other drugs like tafasitamab and selinexor. However, high unmet need remains for patients who are ineligible for, 27 -------------------------------------------------------------------------------- or relapse after, CAR-T, stem cell transplant, or other salvage therapies. Currently, there are no defined patient selection strategies to optimize therapy for patients in the relapsed or refractory setting. Patients with ABC DLBCL have a poorer prognosis than others; they have fewer curative responses to R-CHOP and shorter median overall survival, or OS. Currently there are no approved treatments specifically for non-GCB (ABC) DLBCL patients. Mivavotinib is a SYK inhibitor that targets the constitutively activated B-cell receptor, or BCR, pathway in DLBCL and other non-Hodgkin lymphomas, or NHL, and has durable single agent responses in unselected relapsed/refractory DLBCL. Clinical data show mivavotinib is differentiated from other SYK inhibitors, as it showed substantially higher single agent response rates than other SYK inhibitors, which had monotherapy response rates of less than 10% in similar DLBCL patient populations. In separate preclinical experiments, mivavotinib showed high tissue distribution, a large volume of distribution, and high tumor:plasma exposure ratio. Therefore, the greater clinical activity seen with mivavotinib than with other SYK inhibitors could be due to higher tissue penetration and duration of target engagement.
The safety profile of mivavotinib is favorable for development as a monotherapy or in combination with other drugs. Over 300 patients with hematologic malignancies have been treated with mivavotinib, with a wide range of well-tolerated, therapeutically efficacious doses. The most common adverse events with mivavotinib monotherapy in NHL patients were asymptomatic and reversible laboratory abnormalities. Mivavotinib is also combinable with bendamustine-rituximab, ibrutinib, and R-CHOP, as demonstrated by prior studies.
SYK is known to activate multiple cell-signaling pathways in activated B-cell like (ABC) DLBCL including NF-kB and phosphoinositide 3-kinase (PI3K) pathways, compared to germinal center B-cell like (GCB) DLBCL, where it primarily activates the PI3K pathway. We conducted a retrospective analysis and found a substantially higher response rate in non-GCB (ABC) of 53% compared to GCB at 22%. Median duration of response (DoR) in non-GCB responders was 15.7 months (95% CI 2.2, NE). In addition, recent preclinical studies have shown enhanced SYK activity, and sensitivity to SYK inhibition in DLBCL with mutations in MyD88 and/or CD79, and this subset ofABC patients are known to have poorer outcomes to standard of care therapies. Approximately 50% of all ABC DLBCL tumors have one or both of these mutations. The compelling single agent overall response rate, or ORR, in non-GCB (ABC) DLBCL, and potential for further enrichment of in a genetically-defined subset of ABC DLBCL with MyD88/CD79 mutations provide a well-defined, efficient development path. Based on the combined clinical and preclinical data, we designed a two-part multicenter phase 2 trial of mivavotinib in relapsed or refractory non-GCB (ABC) DLBCL with enrichment of MYD88/CD79b mutated tumors using liquid NGS testing. The phase 2a portion of the study will confirm activity in the biomarker-defined subsets and further refine dose/schedule. The trial will enroll approximately 50 non-GCB DLBCL patients based on Hans algorithm, and MyD88 and CD79 mutation status will be collected using ctDNA based liquid NGS to accrue a pre-specified number of patients harboring MyD88 or CD79b mutations. Patients will be randomized to either a standard dosing schedule of 100mg QD or an induction dosing schedule of 120mg QD for 14 days, followed by 80mg QD. First patient in, or FPI, was enrolled inJune 2022 . We intend to announce data from this open-label study by the first quarter of 2023. Data from Phase 2a will inform Phase 2b, which could be registration-enabling and could potentially enroll expansion cohorts comprised of non-GCB (ABC) DLBCL and MyD88 and/or CD79m DLBCL, with a primary endpoint of ORR to target accelerated approval as a single agent in these biomarker-defined subsets.
In
While the single agent biomarker-defined phase 2 may provide an initial indication in R/R non-GCB (ABC) DLBCL and/or MYD88/CD79b mutated DLBCL, there will be future opportunities to pursue combination strategies with novel and/or standard-of-care therapies to expand development in earlier lines of therapy in DLBCL. Additional paths for monotherapy and combination development include Waldenstrom's Macroglobulinemia (which has a 95% prevalence of MYD88 mutation), a biomarker-defined subset of GCB DLBCL, and other indolent lymphomas where mivavotinib has shown compelling single agent responses in completed trials. Lastly, based on its dual SYK and FLT3 inhibition profile, and encouraging single agent response rate in relapsed/refractory AML, we are also interested in exploring its activity in biomarker-defined subsets of AML where SYK inhibition has been shown to be particularly effective. We believe mivavotinib has the potential to be the first treatment specifically for non-GCB (ABC) DLBCL, a population of patients with a historically poorer prognosis and therefore high unmet need, and potential to be the first treatment for a genetically-defined subset ofABC in patients with MyD88/CD79 mutations. An oral drug with enriched efficacy in a subset of DLBCL with high unmet need would address an important therapeutic gap in the current treatment landscape. 28 --------------------------------------------------------------------------------
mTORC1/2 Inhibitor Sapanisertib (CB-228)
A total of 50,000-60,000 sqNSCLC patients are diagnosed inthe United States each year, comprising 25-30% of all NSCLC. Only 1-5% of squamous NSCLC tumors have actionable mutations, such as EGFR, KRAS, etc. The five-year metastatic survival rate among sqNSCLC patients is 7%. Standard-of-care for 1L therapy consists of an anti-PD-1 agent and chemotherapy. For 2L therapy, standard of care is salvage chemotherapy, which is associated with a median progression-free survival, or PFS, of 3 to 4.5 months. NRF2 (also known as NFE2L2) mutations occur in approximately 15% of patients, and KEAP mutations occur in approximately 12% of patients with sqNSCLC. Patients with tumors harboring the NRF2 or KEAP1 mutation are known to have significantly poorer outcomes compared to wild-type NRF2/KEAP1 tumors. Therefore, NRF2 mutated sqNSCLC represents an especially high unmet need subpopulation of lung cancer for which there are currently no effective therapies. Sapanisertib is a potent and selective dual mTORC1/2 inhibitor that targets a key survival mechanism in KEAP1/NRF2-mutated tumor cells. Activating mutations in NRF2 or inactivating mutations in KEAP1 lead to constitutive activation of the oxidative stress pathway, enhancing tumor growth and survival. NRF2 activation has been shown to upregulate the mTOR pathway. In preclinical studies evaluating the anti-tumor activity of sapanisertib across a panel of NSCLC cell lines, the most potent antitumor activity was seen in NRF2 mutant sqNSCLC, while it was not active in NRF2 wild-type cell lines. Additionally, it showed moderate activity in KEAP1 mutant cell lines and was inactive in KEAP1 WT cells. In a preclinical study where a panel of mTORC inhibitors were tested on a NRF2 mutated sqNSCLC mouse xenograft model, only sapanisertib showed strong single agent efficacy, while TORC1 inhibitors everolimus and deferolimus were inactive, supporting the need for dual TORC1/2 inhibition in NRF2 mutated sqNSCLC. In a recent Phase 2 trial, sapanisertib demonstrated durable single agent activity with 27% (or 3/11) confirmed ORR in a subset of heavily pretreated NRF2-mutated sqNSCLC patients. In comparison, ORR was 17% (or 1/6) in KEAP1-mutated sqNSCLC and 0% (or 0/5) in patients with KEAP1-mutated/KRAS-mutated adenocarcinoma subtype of NSCLC. Responses in NRF2-mutated sqNSCLC patients were durable, and the NRF2-mutant cohort had a median PFS of 8.9 months (95% CI: 7 months, not reached). Historic standard of care treatment with salvage chemotherapy has a median PFS of 3 to 4.5 months. These promising data and high unmet need led us to design a two-part phase 2 study of relapsed/refractory sqNSCLC patients with or without NRF2-mutations as detected by next generation sequencing, or NGS. Sapanisertib has a well-established and manageable safety profile. In three separate trials in patients with NSCLC and other R/R solid tumors, sapanisertib at 3-5mg QD was well tolerated, with treatment-emergent adverse events, or TEAE, being predominantly Grade 1/2. The most commonly observed TEAE was hyperglycemia, which was well controlled with oral hypoglycemic therapy and home glucose monitoring. Out of 93 patients treated across these five studies, only one patient discontinued for hyperglycemia at evaluated QD doses. The most common Grade ³3 TEAE was hyperglycemia at 25% (or 23/93), followed by rash macular and fatigue at 8% each, and hypophosphatemia, abdominal pain, and hyponatremia at 4% each. We have initiated a two-part multicenter phase 2 study of sapanisertib monotherapy in NRF2-mutated sqNSCLC patients. The phase 2a part of the study will evaluate sapanisertib 2 mg BID or 3 mg QD in patients with sqNSCLC harboring either WT or mutated NRF2, as detected by NGS. The objectives of phase 2a are dose refinement and confirmation of the selective activity in NRF2-mutated tumors compared to WT tumors to validate NRF2 mutation as the selection biomarker. The first patient was enrolled inJuly 2022 . We intend to announce data from this study by the first quarter of 2023. Data generated from this open-label study could position the company to initiate a registrational study in NRF2-mutated squamous NSCLC. The phase 2b part of the study, which could be registration enabling, will be informed by data from phase 2a, and is planned to be a single-arm expansion study evaluating sapanisertib in NRF2-mutated sqNSCLC patients at the selected dose targeting accelerated approval, and/or a randomized study comparing sapanisertib versus standard of care. Subsequent development in sqNSCLC could involve monotherapy and/or combinations with standard of care therapies in earlier lines of therapy within the biomarker-defined populations. NRF2- and KEAP1-mutations have been detected across several tumor types at frequencies up to 27%, providing additional indications for development of sapanisertib as a monotherapy and in combination beyond sqNSCLC. InAugust 2022 , dose-escalation data for an investigator-led multi-center phase 1/2 trial combining sapanisertib (CB-228) and telaglenastat (CB-839) in biomarker-defined cohorts of patients with advanced non-small cell lung cancer (NSCLC) was presented at theInternational Association for Lung Cancer (IASLC) 2022World Conference on Lung Cancer (WCLC). In pre-clinical studies, combining sapanisertib and telaglenastat showed synergistic anti-tumor activity. After evaluating five combination dosing levels in 13 patients, researchers determined that the sapanisertib/telaglenastat combination has a favorable tolerability profile at 2 mg sapanisertib once daily, 800 mg telaglenastat twice daily. Early evidence of clinical benefit was observed in dose escalation, including a partial response in NRF2-mutant squamous patient and stable disease in a KEAP1/KRAS-mutant adenosquamous patient. The investigators are continuing dose escalation with the combination to determine 29 -------------------------------------------------------------------------------- the final recommended expansion dose. Upon determination of final recommended dose, study investigators plan to enroll patients into one of four expansion cohorts evaluating sapanisertib plus telaglenastat in squamous NSCLC with and without NRF2 or KEAP1 mutations, and adenocarcinoma NSCLC with KRAS and KEAP1 or NRF2 mutations. We believe sapanisertib has the potential to be a first-in-class treatment for NRF2-mutated sqNSCLC patients, a patient population with poorer prognosis, high unmet need, and no targeted therapies, as well as a possible treatment for other NRF2-mutated cancers beyond NSCLC.
Synthetic Lethality Preclinical Pipeline
We continue to leverage our discovery engine to build a preclinical pipeline of synthetic lethality targets with a focus on paralog genes. InJune 2021 , we became a member of theBroad Institute of MIT and Harvard's , or theBroad Institute's , Cancer Dependency Map, or DepMap, Consortium. The goal of the DepMap initiative at theBroad Institute is to discover new targets and biomarkers for precision cancer medicines. Membership in theDepMap Consortium is an opportunity for us to generate novel data for discovery programs and forge deeper collaborations with theBroad Institute's data and computational scientists in order to enable translational decisions for our programs. We utilized this partnership with theBroad Institute to explore biomarkers for our clinical programs, as well as identify biomarker-defined subpopulations of cancer patients for undisclosed pipeline programs.
VPS4A Inhibitors
We presented data describing novel VPS4A inhibitors discovered by Calithera at theAmerican Association for Cancer Research , or AACR, 2022 Annual Meeting. The presented poster detailed Calithera's discovery of a novel series of VPS4A inhibitors that are currently advancing through lead optimization. These data validate the synthetic lethal interaction between the gene paralogs vacuolar protein sorting-associated protein 4A (VPS4A) and 4B (VPS4B), and provide the first preclinical evidence supporting a newly discovered series of compounds designed to target these proteins for cancer treatment. We mined CRISPR genetic loss-of-function data and associated molecular datasets from the DepMap project datasets to identify pairs of gene paralogs, which were then prioritized for potential drug targets. This work resulted in the identification of VPS4A and VPS4B as promising targets. We then conducted multiple studies to validate the paralog gene pair, demonstrating that cells with VPS4B homozygous or heterozygous loss are sensitive to VPS4A knock down while cells without VPS4B loss are not. In addition, simultaneously knocking down VPS4A and VPS4B consistently resulted in cell death. We have identified a novel series of small molecule inhibitors of VPS4A and VPS4B. Among the findings shared at AACR are data detailing the performance of one inhibitor of VPS4A and VPS4B ATPase activity, compared to notably inactive previously reported VPS4 inhibitors. To our knowledge, our internally-discovered VPS4 inhibitors are the first active, on-target inhibitors of VPS4. Potent, selective, and pharmacologically active VPS4 inhibitors are expected to be well-tolerated and have strong single-agent activity in tumors with these mutations. We are currently advancing multiple series through lead optimization.
Additional Small Molecule Programs
IL4I1 Inhibitor CB-668
We have also discovered CB-668, a first-in-class, potent, orally administered inhibitor of the immune-suppressive enzyme IL4I1. IL4I1 is an enzyme that is expressed by tumor cells and antigen presenting cells that metabolizes phenylalanine, tyrosine and tryptophan to produce hydrogen peroxide, an inhibitor of T-cell function. In particular, IL4I1 can metabolize tryptophan to kynurenic acid and other metabolites that lead to immunosuppression in the tumor microenvironment. Preclinical data were presented at the 2020Society for Immunotherapy of Cancer (SITC) Annual Meeting. In syngeneic mouse models CB-668 exhibited immune mediated, single agent activity and augmented activity in combination with checkpoint inhibitors. IL4I1 expression has been correlated with poor clinical outcomes and expression is elevated in multiple tumor types including ovarian and B-cell tumors.
Arginase Inhibitor for Cystic Fibrosis (CB-280)
Our product candidate, CB-280 is a novel oral inhibitor of arginase that was being evaluated for the treatment of cystic fibrosis, or CF. In 2020, we were awarded up to$2.4 million from theCystic Fibrosis Foundation to support development of CB-280. In 2021 we presented interim data from the Phase 1b trial at theNorth American Cystic Fibrosis Conference (NACFC) for cohorts 1-3. CB-280 was well tolerated, demonstrated linear pharmacokinetics (PK), and showed complete and continuous target inhibition in plasma at doses at or above 100mg. CB-280 also demonstrated robust pharmacodynamic (PD) effects, with rapid and significant dose-proportional increases in plasma arginine, the key driver of NO production. The study is now complete. We plan on publishing the Ph1b data in the future. We are not pursuing further development of CB-280 in CF at this time, due to recent significant shifts in the CF therapeutic and regulatory landscape. 30 --------------------------------------------------------------------------------
Glutaminase Inhibitor telaglenastat (CB-839)
InNovember 2021 , we announced the discontinuation of the phase 2 telaglenastat KEAPSAKE clinical trial in patients with non-squamous NSCLC with genetic mutations in KEAP1/NRF2 based on a lack of clinical benefit observed in patients treated with telaglenastat in an interim analysis. The phase 2 randomized, placebo-controlled, double-blind KEAPSAKE study was designed to evaluate the safety and anti-tumor activity of telaglenastat plus standard-of-care chemoimmunotherapy as front-line therapy among patients with stage IV non-squamous non-small cell lung cancer (NSCLC) whose tumors have a KEAP1 or NRF2 mutation. At the time of unblinding onOctober 27, 2021 , there were 40 patients randomized. The available efficacy data at unblinding, including investigator-assessed progression-free survival (PFS), did not demonstrate clinical benefit, and analysis of the data led to the conclusion that there was a very low probability for the study to achieve a positive result. No difference in safety profile was seen between the two arms.
Partnered Programs
Arginase Inhibitor for Oncology (INCB001158)
An additional arginase inhibitor, INCB001158, was discovered by Calithera and is being developed by Incyte Corporation, or Incyte, for oncology and hematology indications, and is currently being evaluated in Phase 1/2 trials in combination with other anti-cancer agents.
CD73 Inhibitor (CB-708; ATG037) for Oncology
A highly potent, selective, orally-bioavailable small molecule inhibitor of CD73, CB-708 (now ATG037) was discovered by Calithera. Preclinical data were presented at the AACR 2019 Annual Meeting and the 2019 SITC meeting demonstrating that CB-708 has immune-mediated, single agent activity in syngeneic mouse tumor models. InMay 2021 , we entered into a license agreement withAntengene Investment Limited , or Antengene, a wholly-owned subsidiary of Antengene Corporation, where we granted Antengene an exclusive, worldwide license to develop and commercialize CB-708 (now ATG-037). InFebruary 2022 , Antengene announced the approval of a first-in-human study of ATG-037 in patients with locally advanced or metastatic solid tumors and inJune 2022 announced the first patient had been dosed inAustralia .
Critical Accounting Policies and Estimates
There have been no significant changes in our critical accounting policies and
estimates disclosed in our Annual Report on Form 10-K for the year ended
Reverse Stock Split
A 1-for-20 reverse stock split, or the Reverse Stock Split, of our common stock became effective onJune 14, 2022 . Unless expressly stated herein, all share amounts of our common stock presented in this Quarterly Report have been adjusted to reflect the Reverse Stock Split.
Financial Overview
Our Ability to Continue as a Going Concern
We had cash and cash equivalents of$41.8 million as ofJune 30, 2022 . In accordance with Accounting Standards Codification, or ASC, 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued onAugust 15, 2022 . This evaluation initially does not take into consideration the potential mitigating effect of our plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, we evaluate whether the mitigating effect of our plans sufficiently alleviate substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. In performing this analysis, we excluded certain elements of our operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future sales of shares of our capital stock, if received, cannot be considered probable at this time because none of the plans are entirely within our control and have not been approved by our board of directors as of the date of the financial statements. Therefore, our expectation to generate operating losses and negative operating cash flows in the future and our need for additional funding to support our planned operations raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these financial statements are issued. 31 -------------------------------------------------------------------------------- The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
Research and Development Expenses
Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred. Costs associated with co-development activities performed under our collaboration agreements and award are included in research and development expenses, with any reimbursement of costs reflected as a reduction of such expenses.
Research and development expenses consist primarily of the following:
•
employee-related expenses, which include salaries, benefits and stock-based compensation;
•
expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf;
•
laboratory and vendor expenses related to the execution of preclinical studies and clinical trials;
•
contract manufacturing expenses, primarily for the production of clinical supplies;
•
facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation expense and other supplies; and
•
license fees and milestone payments related to our licensing agreements.
The largest component of our total operating expenses has historically been our investment in research and development activities including the clinical development of our product candidates. We allocate to research and development expenses the salaries, benefits, stock-based compensation expense, and indirect costs of our clinical and preclinical programs on a program-specific basis, and we include these costs in the program-specific expenses.
The following table shows our research and development expenses for the three
and six months ended
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(in thousands)
Development candidate:
Sapanisertib (CB-228) $ 2,067 $ - $ 4,368 $ -
Mivavotinib (CB-659) 1,996 - 3,977 -
Telaglenastat (CB-839) 656 9,052 2,915 20,757
CB-280 557 1,768 1,404 3,547
Total development 5,276 10,820 12,664 24,304
Preclinical and research:
Preclinical and research 2,482 2,000 4,660 3,855
Total $ 7,758 $ 12,820 $ 17,324 $ 28,159
We expect our research and development expenses will increase during the next
few years as we advance our product candidates into and through clinical trials,
and pursue regulatory approval of our product candidates. 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 our
product candidates. The probability of success of our product candidates may be
affected by numerous factors, including clinical data, 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 and sale of any of our product candidates.
32
--------------------------------------------------------------------------------General and Administrative Expenses
General and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, audit and accounting services, insurance, investor relations and other expenses associated with being a public company. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation expense and other supplies. We have incurred and expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of theSEC and other governing bodies and, potentially, the costs related to increases in our administrative functions to support the growth of our business as we advance our product candidates.
Results of Operations
Comparison of the Three Months Ended
Three Months
Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Revenue:
License revenue $ - $ 3,000 $ (3,000 ) (100 %)
Total revenue - 3,000 (3,000 ) (100 %)
Operating expenses:
Research and development 7,758 12,820 (5,062 ) (39 %)
General and administrative 3,618 4,487 (869 ) (19 %)
Total operating expenses 11,376 17,307 (5,931 ) (34 %)
Loss from operations (11,376 ) (14,307 ) 2,931 (20 %)
Other income (expense):
Transaction costs allocable to (475 ) (475 ) NM
warrant liabilities -
Change in fair value of warrant 2,706 2,706 NM
liabilities -
Interest and other income 68 (4 ) 72 (1800 %)
(expense), net
Other income (expense), net 2,299 (4 ) 2,303 NM
Net loss (9,077 ) (14,311 ) 5,234 (37 %)Deemed contribution from Series A
preferred stock extinguishment 18,360 - 18,360 NM Adjustment to allocate undistributed income to participating security (1,362 ) - (1,362 ) NM Net income (loss) attributable to common stockholders$ 7,921 $ (14,311 ) $ 22,232 (155 %) NM: Not Meaningful
License Revenue. For the three months ended
Research and Development. Research and development expenses decreased$5.1 million , or 39%, from$12.8 million for the three months endedJune 30, 2021 , to$7.7 million for the three months endedJune 30, 2022 . The decrease of$5.1 million was due to an$8.4 million decrease in the telaglenastat program and a$1.2 million decrease in the CB-280 program, partially offset by a$2.0 million increase in the sapanisertib program, a$2.0 million increase in the mivavotinib program, and a$0.5 million increase in our early stage research. General and Administrative. General and administrative expenses decreased$0.9 million , or 19%, from$4.5 million for the three months endedJune 30, 2021 , to$3.6 million for the three months endedJune 30, 2022 . The decrease of$0.9 million was primarily due to a decrease in personnel-related costs, mainly related to decreases in stock-based compensation expense and fewer personnel. Transaction Costs Allocable to Warrant Liabilities. Transaction costs allocable to the warrants liabilities of$0.5 million were recorded for the three months endedJune 30, 2022 , in connection with the warrants issued related to theApril 2022 public offering, consisting principally of underwriting discounts and commissions and offering costs. 33 -------------------------------------------------------------------------------- Change in Fair Value of Warrant Liabilities. A gain of$2.7 million related to the change in the fair value of the warrant liabilities was recorded for the three months endedJune 30, 2022 . Interest and Other Income (Expense), net. Interest and other income (expense), net increased$72,000 , from ($4,000 ) for the three months endedJune 30, 2021 , to$68,000 for the three months endedJune 30, 2022 . The increase of$0.1 million related to increased interest income during the three months endedJune 30, 2022 as a result of higher interest rates. Deemed Contribution from Series A Preferred Stock Extinguishment. OnMay 23, 2022 , we filed a Certificate of Amendment that limits the aggregate number of shares to be issued upon conversion of the Series A preferred stock to a maximum of 6,644,014 shares of common stock, which we accounted for as an extinguishment. As a result, we recognized a deemed contribution of$18.4 million representing the difference between the carrying value of the existing Series A preferred stock and the estimated fair value of the new Series A preferred stock for the three months endedJune 30, 2022 .
Comparison of the Six Months Ended
Six Months
Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Revenue:
License revenue $ - $ 3,000 $ (3,000 ) (100 %)
Total revenue - 3,000 (3,000 ) (100 %)
Operating expenses:
Research and development 17,324 28,159 (10,835 ) (38 %)
General and administrative 7,878 9,915 (2,037 ) (21 %)
Total operating expenses 25,202 38,074 (12,872 ) (34 %)
Loss from operations (25,202 ) (35,074 ) 9,872 (28 %)
Other income (expense):
Transaction costs allocable to (475 ) (475 ) NM
warrant liabilities -
Change in fair value of warrant 2,706 2,706 NM
liabilities -
Interest and other income 59 368 (309 ) (84 %)
(expense), net
Other income (expense), net 2,290 368 1,922 522 %
Net loss (22,912 ) (34,706 ) 11,794 (34 %)Deemed contribution from Series A
preferred stock extinguishment 18,360 - 18,360 NM Adjustment to allocate undistributed income to participating security - - - NM
Net loss attributable to common
stockholders$ (4,552 ) $ (34,706 ) $ 30,154 (87 %) NM: Not Meaningful
License Revenue. For the six months ended
Research and Development. Research and development expenses decreased$10.8 million , or 38%, from$28.2 million for the six months endedJune 30, 2021 , to$17.3 million for the six months endedJune 30, 2022 . The decrease of$10.8 million was due to a$17.8 million decrease in the telaglenastat program and a$2.1 million decrease in the CB-280 program, partially offset by a$4.3 million increase due to the sapanisertib program, a$4.0 million increase due to the mivavotinib program, and an$0.8 million increase in our early stage research. General and Administrative. General and administrative expenses decreased$2.0 million , or 21%, from$9.9 million for the six months endedJune 30, 2021 , to$7.9 million for the six months endedJune 30, 2022 . The decrease of$2.0 million was primarily due to a decrease in personnel-related costs, mainly related to decreases in stock-based compensation expense and fewer personnel. 34 -------------------------------------------------------------------------------- Transaction Costs Allocable to Warrant Liabilities. Transaction costs allocable to the warrants liabilities of$0.5 million were recorded for the six months endedJune 30, 2022 , in connection with the warrants issued related to theApril 2022 public offering, consisting principally of underwriting discounts and commissions and offering costs. Change in Fair Value of Warrant Liabilities. A gain of$2.7 million related to the change in the fair value of the warrant liabilities was recorded for the six months endedJune 30, 2022 . Interest and Other Income (Expense), net. Interest and other income (expense), net decreased$0.3 million , or 84%, from$0.4 million for the six months endedJune 30, 2021 to$0.1 million for the six months endedJune 30, 2022 . The decrease of$0.3 million mainly related to a gain on the remeasurement of our lease liability during the six months endedJune 30, 2021 . Deemed Contribution from Series A Preferred Stock Extinguishment. OnMay 23, 2022 , we filed a Certificate of Amendment that limits the aggregate number of shares to be issued upon conversion of the Series A preferred stock to a maximum of 6,644,014 shares of common stock, which we accounted for as an extinguishment. As a result, we recognized a deemed contribution of$18.4 million representing the difference between the carrying value of the existing Series A preferred stock and the estimated fair value of the new Series A preferred stock for the six months endedJune 30, 2022 .
Liquidity and Capital Resources
As ofJune 30, 2022 , we had cash and cash equivalents totaling$41.8 million . Our operations to date have been financed by net proceeds from the sale of shares of our capital stock and payments from our collaboration and licensing agreements. Public Offering OnApril 1, 2022 , we closed an underwritten public offering of 925,925 shares of our common stock and accompanying warrants at a combined offering price to the public of$10.80 per share, for$10 million in gross proceeds, resulting in$8.5 million of net proceeds after deducting underwriting discounts and commissions and offering costs. The common stock was accompanied by short-term warrants to purchase 925,925 shares of common stock at an exercise price of$10.80 per share, which are immediately exercisable and will expire 18 months from the date of issuance, and long-term warrants to purchase 925,925 shares of common stock at an exercise price of$10.80 per share, which are immediately exercisable and will expire 5 years from the date of issuance.
Millennium Asset Purchase Agreement
OnOctober 18, 2021 , we entered into an Asset Purchase Agreement, or APA, with Millennium, as amended. In accordance with the APA, we entered into a Preferred Stock Purchase Agreement pursuant to which we agreed to issue to Millennium 1,000,000 shares of our Series A convertible preferred stock, or the Series A preferred stock. The Series A preferred stock is initially convertible at the option of the holder into 857,843 shares of common stock, based on our$40.80 per share closing stock price fromOctober 15, 2021 . The conversion rate of the Series A preferred stock is subject to anti-dilution adjustments that if triggered would result in the issuance of additional shares of common stock upon conversion. OnMay 23, 2022 , we filed a Certificate of Amendment to the Certificate of Designations, which limits the aggregate number of shares to be issued upon conversion to a maximum of 6,644,014 shares of common stock. The Series A preferred stock has the preferences, rights and limitations set forth in the Certificate of Designations, as filed with the Secretary of State of theState of Delaware , as amended. If Millennium is unable to convert as a result of the Accounting Cap (defined as 19.99% of the outstanding common stock of the Company on any date) any portion of the Series A preferred stock to common stock by the five year anniversary of the issue date, then on each yearly anniversary thereafter, any shares of Series A preferred stock that remain outstanding shall automatically be converted into common stock at the applicable conversion ratio, in each case subject to the Accounting Cap, until such point in time as all shares of Series A preferred stock have been converted. OnJuly 1, 2022 , Millennium transferred their ownership interest in the Series A preferred stock toTakeda Ventures, Inc. , a wholly-owned subsidiary ofTakeda Pharmaceuticals Company Limited . Shelf Registration Statement InAugust 2020 , we filed a shelf registration statement on Form S-3 with theSecurities and Exchange Commission , orSEC , which permits the offering, issuance and sale by us of up to a maximum aggregate offering price of$250 million of our common stock. As ofJune 30, 2022 ,$227.9 million of our common stock remained available for sale, of which$62.9 million may be issued and sold pursuant to an "at-the-market" offering program, or ATM program, for sales of our common stock under a sales agreement withJefferies LLC , subject to certain conditions as specified in the sales agreement. Our ability to sell securities under the shelf registration statement and the ATM program will be limited until we are no longer subject to theSEC's "baby shelf" limitations. 35 -------------------------------------------------------------------------------- Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Our expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these condensed consolidated financial statements are issued onAugust 15, 2022 . We believe that our existing cash and cash equivalents as ofAugust 15, 2022 , will be sufficient for us to meet our current operating plan through the second quarter of 2023. However, our forecast of 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 based on a number of factors including the extent and magnitude of the impact from the COVID-19 pandemic, in particular the challenges associated with opening new and enrolling existing clinical studies. Based on current planning assumptions, we intend to announce data from our sapanisertib and mivavotinib Phase 2 studies by the first quarter of 2023. If data from these trials are not available until after the end of the second quarter of 2023, we will require additional capital to release these data. In addition, in order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
•
the timing and costs of our planned clinical trials for our product candidates;
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the timing and costs of our planned preclinical studies of our product candidates;
•
our success in establishing and scaling commercial manufacturing capabilities;
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the number and characteristics of product candidates that we pursue;
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the outcome, timing and costs of seeking regulatory approvals;
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subject to receipt of regulatory approval, revenue received from commercial sales of our product candidates;
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the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;
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the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other intellectual property rights; and
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the extent to which we in-license or acquire other products and technologies.
We plan to continue to fund our operations and capital funding needs through equity and/or debt financing. We may also consider further collaborations or selectively partnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are not able to secure adequate additional funding we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. The continued spread of COVID-19 and uncertain market conditions may limit our ability to access capital. Any of these actions could harm our business, results of operations and future prospects.
Reverse Stock Split
OnJune 14, 2022 , we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation, or the Amendment, to effect a 1-for-20 reverse stock split of our outstanding common stock, effective as ofJune 14, 2022 , or the Reverse Stock Split. A series of alternate amendments to effect the Reverse Stock Split was approved by our stockholders at our Annual Meeting of Stockholders held onJune 1, 2022 , and the specific 1-for-20 ratio was subsequently approved by our Board of Directors. Our common stock began trading on the Nasdaq Global Select Market on a split-adjusted basis onJune 15, 2022 . On the effective date of the Reverse Stock Split, every 20 shares of our issued and outstanding common stock was automatically converted into one issued and outstanding share of common stock, without any change in par value per share. The Reverse Stock Split affected all shares of our common stock outstanding immediately prior to the effective time of the Reverse Stock Split, as well as the number of shares of common stock available for issuance under our equity incentive plans and employee stock purchase plan. In addition, the Reverse Stock Split effected a reduction in the number of shares of common stock issuable upon the conversion of the shares of our Series A preferred stock and upon the exercise of stock options and warrants outstanding immediately prior to the 36 -------------------------------------------------------------------------------- effectiveness of the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Six Months
Ended June 30,
2022 2021
(in thousands)
Cash used in operating activities $ (27,274 ) $ (33,123 ) Cash (used in) provided by investing activities
$ 9,636 $ 10,012 Cash used in operating activities was$27.3 million for the six months endedJune 30, 2022 , compared to$33.1 million for the six months endedJune 30, 2021 . The decrease of$5.8 million in cash used in operating activities mainly related to decreased research and development costs, primarily in our telaglenastat and CB-280 programs. For the six months endedJune 30, 2022 , net loss of$22.9 million was affected by noncash charges related to the decrease in the fair value of the warrant liabilities of$2.7 million . Cash (used in) provided by investing activities was($0.1) million and$8 million for the six months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 , cash used in investing activities of$0.1 million related to the purchase of property and equipment. For the six months endedJune 30, 2021 , cash provided by investing activities of$8.0 million was related to proceeds from the sale and maturity of investments. Cash provided by financing activities was$9.6 million and$10.0 million for the six months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 , we received$8.5 million in net proceeds from the sale and issuance of common stock and accompanying warrants from a public offering, net of issuance costs,$1.1 million in net proceeds from the sale and issuance of common stock related to our at-the-market offering program, and$12,000 in proceeds from the issuance of common stock upon the exercise of stock options and from employee stock plan purchases. For the six months endedJune 30, 2021 , we received$9.9 million in net proceeds from the sale and issuance of common stock related to our at-the-market offering program and$0.1 million in proceeds from the issuance of common stock upon the exercise of stock options and employee stock purchase plan purchases.
Contractual Obligations and Other Commitments
There have been no material changes to the contractual obligations during the six months endedJune 30, 2022 , as compared to those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Recent Accounting Pronouncements
Please refer to Note 2 to our unaudited condensed consolidated financial statements appearing under Part I, Item 1 for a discussion of recent accounting pronouncements.
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