COGENT BIOSCIENCES, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption "Risk Factors" in this Quarterly Report on Form 10-Q.
Overview
We are a biotechnology company focused on developing precision therapies for genetically defined diseases. Our approach is to design rational precision therapies that treat the underlying cause of disease and improve the lives of patients. Our lead drug candidate, bezuclastinib, is designed to target exon 17 mutations found within the KIT receptor tyrosine kinase, including KIT D816V. WhenKIT D816V remains in a perpetual 'on' state it causes mast cells, a type of white blood cell, to accumulate in various internal organs including the bone marrow. The result is an orphan disease called Systemic Mastocytosis ("SM"). Exon 17 mutations have also been found in advanced Gastrointestinal Stromal Tumors ("GIST"), which have a strong dependence on oncogenic KIT signaling. Bezuclastinib is a highly selective and potent KIT inhibitor with the potential to provide a powerful new treatment option for patients with both of these diseases. In addition to bezuclastinib, the Cogent Research Team is developing a portfolio of novel targeted therapies to help patients fighting serious, genetically driven diseases initially targeting FGFR2 and ErbB2.
Pipeline
Our current pipeline is below:
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Bezuclastinib
Bezuclastinib is a selective tyrosine kinase inhibitor that is designed to
potently inhibit the KIT D816V mutation as well as other mutations in KIT exon
17. KIT D816V is responsible for driving systemic mastocytosis, a serious
disease caused by unchecked proliferation of mast cells. Exon 17 mutations are
also found in patients with GIST, a type of cancer with strong dependence on
oncogenic KIT signaling
We are pursuing the development of bezuclastinib in patients living with GIST
based on our study of more than 50 advanced solid tumor and GIST patients in a
Phase 1/2 clinical trial, with the vast majority of those patients living with
advanced GIST. GIST is a disease frequently driven by KIT mutations, and
resistance to currently available therapeutics is frequently associated with the
emergence of other KIT mutations. Anti-tumor activity for bezuclastinib was
observed in both single agent and combination settings, including in combination
with sunitinib, an approved treatment option for GIST patients. Clinical data
from this trial have been published in the Journal of American Medical
Association and have been presented at several scientific conferences, including
most recently by Cogent at the 2020 annual Connective Tissue Oncology Society
("CTOS") meeting, and previously by Plexxikon Inc. ("Plexxikon"), a member of
the Daiichi Sankyo Group , at the 2018 annual American Society of Clinical
Oncology meeting and the 2017 annual CTOS meeting. Within the group of 15
heavily pre-treated GIST patients who received the combination of bezuclastinib
and sunitinib, and who had not received prior treatment with bezuclastinib, the
confirmed objective response rate was twenty percent, including two partial
responses and one complete response, while the estimated median progression free
survival ("mPFS") for this group was twelve months. Four subjects continued to
receive bezuclastinib via individual patient INDs beyond the conclusion of the
trial. In October 2021 , we presented preclinical data in a virtual poster at the
2021 AACR-NCI-EORTC Virtual International Conference on Molecular Targets and
Cancer Therapeutics that identified bezuclastinib as a differentiated, potent
and selective KIT mutant inhibitor with unique selectivity for KIT D816V and
minimal evidence of brain penetration that avoids targeting PDGFR isoforms. In
April 2022 , we presented additional preclinical data at the 2022 American
Associated for Cancer Research annual meeting ("AACR") demonstrating that
bezuclastinib potently inhibits A loop-mutations exquisitely selective against
other closely related kinases, and differentiates bezuclastinib by its lack of
brain penetration. These data support that bezuclastinib inhibits KIT downstream
signaling and may drive tumor regressions at clinically achievable doses.
We are continuing the development bezuclastinib in GIST in our PEAK study. PEAK
is our randomized open-label, global Phase 3 clinical trial designed to evaluate
the safety, tolerability, and efficacy of bezuclastinib in combination with
sunitinib compared to sunitinib alone in patients with locally advanced,
unresectable or metastatic GIST who have received prior treatment with imatinib.
The FDA has granted orphan drug designation to bezuclastinib for the treatment
of GIST.
In November 2021 , through a partnership with Serán Biosciences, we announced the
development of an optimized formulation of bezuclastinib, which was used in the
PEAK lead-in study. Based on the data from the PEAK lead-in study we have
initiated the randomized portion of PEAK using a 600 mg dose of a new
formulation of bezuclastinib, which in the lead-in portion of the study
demonstrated clinical exposure equivalent to the 1,000 mg original formulation
used in our GIST Phase 1/2 clinical trial. Initial safety and pharmacokinetic
data from the PEAK lead-in study will be presented at the CTOS annual meeting in
November 2022 . We expect to present initial efficacy data from the PEAK lead-in
study in the first half of 2023.
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Along with the development of bezuclastinib in GIST, we are continuing the
development of bezuclastinib in patients living with Advanced Systemic
Mastocytosis ("AdvSM") and Non-Advanced Systemic Mastocytosis ("Non-AdvSM"). The
vast majority of AdvSM and Non-AdvSM patients have a KIT D816V mutation.
Patients with AdvSM have a significantly diminished lifespan with a median
survival of less than 3.5 years. For patients with Non-AdvSM, there are no
available approved therapies, and while their lifespan is not impacted by the
disease, these patients suffer from a poor quality of life and new treatment
options are badly needed.
APEX is our global, open-label, multi-center, Phase 2 clinical trial in patients
with AdvSM evaluating the safety, efficacy, pharmacokinetic, and pharmacodynamic
profiles of bezuclastinib. In June 2022 , we reported positive initial clinical
data from the ongoing APEX trial at the 2022 European Hematology Association
Annual Congress. As of the data cutoff date of May 24, 2022 , 11 out of 11
patients treated with bezuclastinib achieved at least a 50% reduction in serum
tryptase, with a median reduction of 89%, regardless of prior KIT D816V
inhibitor treatment; 8 of 8 bone marrow biopsy-assessed patients achieved at
least a 50% bone marrow mast cell reduction and decreases in blood KIT D816V
variant allele fraction. Bezuclastinib was generally well-tolerated at all doses
and all patients remained on study. We believe that this early data demonstrates
a favorable initial safety and tolerability profile with no reported periorbital
or peripheral edema, cognitive effects or intracranial bleeding events. The
majority of adverse events were Grade 1/2 and seen in no more than one patient
with one serious adverse event and no Grade 4 events reported. We plan to
present updated APEX clinical data in an oral presentation at the American
Society of Hematology Annual Meeting in December 2022 .
SUMMIT is our randomized, double-blind, placebo-controlled, global multi-center
Phase 2 clinical trial for patients with Non-AdvSM. The study is designed to
evaluate the safety and efficacy of bezuclastinib in patients with moderate to
severe Indolent Systemic Mastocytosis or Smoldering Systemic Mastocytosis. Based
on the performance of bezuclastinib's new formulation in the PEAK lead-in trial,
as well as in a healthy normal volunteer study, the SUMMIT trial protocol will
be amended to allow for the new formulation to be introduced during the dose
exploration phase. We expect to report initial data from the SUMMIT trial in the
second half of 2023.
Worldwide rights to develop and commercialize bezuclastinib are exclusively
licensed from Plexxikon . Under the terms of the license agreement, Plexxikon
received an upfront payment and is eligible for additional development
milestones of up to $7.5 million upon the satisfaction of certain clinical
milestones and up to $25.0 million upon the satisfaction of certain regulatory
milestones. In April 2022 , as a result of our review of the progression of the
Peak study and discussions with Plexxikon , the first clinical milestone was
deemed to have been achieved, triggering a payment of $2.5 million to Plexxikon
in Q2 2022.
Patents protecting bezuclastinib include composition of matter claims which have
been issued in the US and other key territories and provide exclusivity through
2033 and potentially beyond through patent term extensions. In addition, we
intend to file a provisional patent application seeking to protect our new
formulation of bezuclastinib, which could potentially provide exclusivity
through at least 2043.
Research programs
During the second quarter of 2021, we announced the formation of the Cogent Research Team, a highly experienced discovery and research group. Based inBoulder, Colorado , the Cogent Research Team is focused on pioneering best-in-class, small molecule therapeutics to expand our pipeline and deliver novel precision therapies for patients living with unmet medical needs. Our research team is building a pipeline of small molecule inhibitors, with our first efforts aimed toward targeting currently undrugged mutations in fibroblast growth factor receptor ("FGFR"). FGFR mutations are well-established oncogenic drivers in multiple diseases, but approved medicines fail to capture the full landscape of FGFR altered tumor types, with FGFR1-mediated hyperphosphatemia serving as the most common dose-limiting toxicity for pan-FGFR inhibitors. Preclinical data presented at EORTC-NCI-AACR in October of 2022, detailed our next-generation fibroblast growth factor receptor 2 ("FGFR2") program. The current series retains potency across all primary, gatekeeper and molecular brake resistance mutations. The disclosure includes an overview of ongoing optimization of the Cogent lead series, pharmacokinetic and pharmacodynamic assessment of an FGFR1-sparing novel molecule, as well as robust efficacy in model of FGFR2 clinical resistance (N549K). We remain on track for an IND in 2023 for a potentially best-in-class, FGFR1-sparing, pan-FGFR2 mutation tyrosine kinase inhibitor with IND enabling studies in early 2023. We are also advancing a novel, ErbB2 mutant program, which is focused on actionable and underserved mutations in a variety of solid tumor indications. Currently available oral ErbB2 inhibitors struggle to provide broad mutant coverage while sparing EGFR activity. Our exemplar molecule demonstrates robust cellular inhibition of all key resistance and primary driver mutations, while sparing wild type EGFR target engagement. Preclinical data presented at EORTC-NCI-AACR in October of 2022, focused on a single advanced exemplar compound, which demonstrated dose ascendable pharmacokinetics, robust tumor phospho-ErbB2 suppression (L755S), and superior tumor growth inhibition when compared to the clinical competitor tucatinib.
For both FGFR and ErBB2, we see an opportunity to provide a more robust molecular response compared to existing therapies.
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Since our inception in 2014, we have focused significant efforts and financial
resources on establishing and protecting our intellectual property portfolio,
conducting research and development of our product candidates, manufacturing
drug product material for use in preclinical studies and clinical trials,
staffing our company, and raising capital. We do not have any products approved
for sale and have not generated any revenue from product sales. Our ability to
generate product revenue sufficient to achieve profitability will depend heavily
on the successful development and eventual commercialization of one or more of
our product candidates. Our net losses were $100.6 million for the nine months
ended September 30, 2022 compared to net losses of $47.4 million for the nine
months ended September 30, 2021 . As of September 30, 2022 , we had an accumulated
deficit of $371.6 million . We expect to continue to incur significant expenses
and operating losses for at least the next several years. We expect that our
expenses and capital requirements will increase substantially in connection with
our ongoing activities, particularly if and as we:
•
initiate and increase enrollment for our existing and planned clinical trials for our product candidates;
•
continue to discover and develop additional product candidates, including
through the creation of the Cogent Research Team in
•
acquire or in-license other product candidates and technologies;
•
maintain, expand, and protect our intellectual property portfolio;
•
hire additional research, clinical, scientific, and commercial personnel;
•
establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
•
seek regulatory approvals for any product candidates that successfully complete clinical trials;
•
establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
•
add operational, financial, and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing, and distribution. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As ofSeptember 30, 2022 , we had cash, cash equivalents and marketable securities of$289.1 million . Based on our current plans, we expect that our current cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into 2025. 19 --------------------------------------------------------------------------------
The COVID-19 Pandemic
InMarch 2020 , theWorld Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which has spread throughoutthe United States and worldwide. We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of COVID-19 or variants thereof. We continue to monitor the pandemic and have taken steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic. The spread of COVID-19 has caused us to modify our business practices, including implementing a work-from-home policy for all employeeswho are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19. Given the fluidity of the COVID-19 pandemic however, we do not yet know the full extent of the potential impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict with certainty the extent to which our business, financial condition and results of operations will be affected. We will continue to work diligently with our partners and stakeholders to continue advancing our product candidate under regulatory review as well as in our clinical studies to the extent safe to do so for patients, caregivers and healthcare practitioners, and ensuring the continuity of our manufacturing and supply chain.
Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:
•
expenses incurred in connection with the discovery, preclinical and clinical
development of our product candidates, including under agreements with third
parties, such as consultants, contractors and contract research organizations
("CROs");
•
the cost of manufacturing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants, contractors and contract manufacturing organizations ("CMOs");
•
employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;
•
laboratory supplies and animal care;
•
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and
•
payments made under third-party licensing agreements.
We expense research and development costs as incurred. Advance payments that we
make for goods or services to be received in the future for use in research and
development activities are recorded as prepaid expenses. The prepaid amounts are
expensed as the related goods are delivered or the services are performed.
Certain of our direct research and development expenses are tracked on a
program-by-program basis and consist of costs, such as fees paid to consultants,
contractors, CMOs, and CROs in connection with our discovery, preclinical and
clinical development activities. We do not allocate employee costs, costs
associated with the manufacture of bezuclastinib, costs associated with our
discovery efforts, laboratory supplies, and facilities, including depreciation
or other indirect costs, to specific product development programs because these
costs are deployed across multiple product development programs and, as such,
are not separately classified.
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Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that our research and development expenses will increase substantially
in connection with our planned clinical and preclinical development activities
in the near term and in the future. At this time, we cannot reasonably estimate
or know the nature, timing, and costs of the efforts that will be necessary to
complete the preclinical and clinical development of any of our product
candidates. The successful development and commercialization of our product
candidates is highly uncertain. This is due to the numerous risks and
uncertainties associated with product development and commercialization,
including the following:
•
the timing and progress of our preclinical and clinical development activities;
•
the number and scope of preclinical and clinical programs we decide to pursue;
•
the progress of the development efforts of parties with whom we have entered, or may enter, into collaboration arrangements;
•
our ability to maintain our current research and development programs and to establish new ones;
•
our ability to establish new licensing or collaboration arrangements;
•
the future productivity of the Cogent Research Team in
•
the successful completion of clinical trials with safety, tolerability, and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
•
the receipt of regulatory approvals from applicable regulatory authorities;
•
the success in establishing and operating a manufacturing facility, or securing manufacturing supply through relationships with third parties;
•
our ability to obtain and maintain patents, trade secret protection, and
regulatory exclusivity, both in
•
our ability to protect our rights in our intellectual property portfolio;
•
the commercialization of our product candidates, if and when approved;
•
the acceptance of our product candidates, if approved, by patients, the medical community, and third-party payors;
•
competition with other products; and
•
a continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, and audit services. We anticipate that our general and administrative expenses will increase in the future as a result of the costs associated with the expansion of operations to support our on-going discovery, preclinical and clinical activities.
Interest Income
Interest income consists of interest earned on our cash equivalents and marketable securities balances.
Other Income, Net
Other income consists of miscellaneous income and expense unrelated to our core operations, primarily income from subleasing a portion of our headquarters facilities.
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--------------------------------------------------------------------------------Change in Fair Value of the CVR liability
This consists of changes in the fair value of the CVR liability.
Income Taxes
Since our inception, we have not recorded any current or deferred tax benefit for the net losses we have incurred in each year or for our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is more likely than not that our net operating loss carryforwards and tax credits will not be realized. Accordingly, a full valuation allowance has been established against the deferred tax assets as ofDecember 31, 2021 . We reevaluate the utilization of net operating loss carryforwards and tax credits at each reporting period. As ofDecember 31, 2021 , we hadU.S. federal and state net operating loss carryforwards of$128.8 million and$47.1 million , respectively, which may be available to offset future income tax liabilities and begin to expire in 2035. Of the federal net operating loss carryforwards atDecember 31, 2021 ,$125.5 million is available to be carried forward indefinitely but we are permitted to offset a maximum of 80% of taxable income per year. As ofDecember 31, 2021 , we also hadU.S. federal and state research and development tax credit carryforwards of$3.1 million and$0.8 million , respectively, which may be available to offset future income tax liabilities and begin to expire in 2040 and 2035, respectively. Utilization of theU.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.
We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended September 30,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development 29,936 14,798 15,138
General and administrative 6,885 5,021 1,864
Total operating expenses 36,821 19,819 17,002
Loss from operations (36,821 ) (19,819 ) (17,002 )
Other income:
Interest income 1,500 115 1,385
Other income, net 259 620 (361 )
Total other income, net 1,759 735 1,024
Net loss $ (35,062 ) $ (19,084 ) $ (15,978 )
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Research and Development Expenses
The following table summarizes our research and development expenses for the
three months ended
Three Months Ended September 30,
2022 2021 Change
(in thousands)
Direct external research and development
expenses:
Bezuclastinib $ 12,824 $ 6,686 6,138
Preclinical research and discovery 4,310 1,446 2,864
Unallocated expenses:
Personnel related (including stock-based
compensation) 9,289 5,218 4,071
Laboratory supplies, facility related and
other 3,513 1,448 2,065
Total research and development expenses
14,798$ 15,138 Total research and development expense increased by$15.1 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 and the increase was driven by higher external research and development costs associated with the manufacture and development of bezuclastinib, including costs associated with the APEX, SUMMIT and PEAK trials, and the continued development of our research pipeline. Additionally, there was an increase in unallocated expenses driven by higher personnel costs due to an increase in headcount, including stock-based compensation expense which increased by$0.6 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This is further driven by increased lab supplies and other facilities costs to support the build-out of the Cogent Research Team.
General and Administrative Expenses
General and administrative expenses for the three months endedSeptember 30, 2022 were$6.9 million , compared to$5.0 million for the three months endedSeptember 30, 2021 . The increase in general and administrative expenses was primarily due to higher personnel costs driven by an increase in headcount, including stock-based compensation expense which increased by$0.5 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . Interest Income Interest income for the three months endedSeptember 30, 2022 was$1.5 million , compared to$0.1 million for the three months endedSeptember 30, 2021 . The increase is due to higher average invested balances in cash equivalents and marketable securities.
Other Income, Net
Other income, net was$0.3 million in the three months endedSeptember 30, 2022 , compared to$0.6 million for the three months endedSeptember 30, 2021 . Other income represents sublease income recognized resulting from the sublease of a portion of our former corporate headquarters space, partially offset by the right-of-use asset impairment charge recorded for this space.
Change in Fair Value of CVR Liability
There was no change in fair value of the CVR liability for the three months
ended
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Comparison of the Nine Months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended September 30,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 84,885 35,399 49,486
General and administrative 19,209 14,512 4,697
Total operating expenses 104,094 49,911 54,183
Loss from operations (104,094 ) (49,911 ) (54,183 )
Other income:
Interest income 1,879 360 1,519
Other income, net 1,592 1,847 (255 )
Change in fair value of CVR liability - 343 (343 )
Total other income, net 3,471 2,550 921
Net loss $ (100,623 ) $ (47,361 ) $ (53,262 ) Research and Development Expenses
The following table summarizes our research and development expenses for the
nine months ended
Nine Months Ended September 30,
2022 2021 Change
(in thousands)
Direct external research and development
expenses:
Bezuclastinib $ 42,357 $ 19,300 23,057
Preclinical research and discovery 9,280 1,877 7,403
Unallocated expenses:
Personnel related (including stock-based
compensation) 25,238 10,408 14,830
Laboratory supplies, facility related and
other 8,010 3,814 4,196
Total research and development expenses
35,399$ 49,486 Total research and development expense increased by$49.5 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 and the increase was driven by higher external research and development costs associated with the manufacture and development of bezuclastinib, including costs associated with the APEX, SUMMIT and PEAK trials, and the continued development of our research pipeline. Additionally, there was an increase in unallocated expenses driven by higher personnel costs due to an increase in headcount, including stock-based compensation expense which increased by$3.4 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This is further driven by increased lab supplies and other facilities costs to support the build-out of the Cogent Research Team.
General and Administrative Expenses
General and administrative expenses for the nine months endedSeptember 30, 2022 were$19.2 million , compared to$14.5 million for the nine months endedSeptember 30, 2021 . The increase in general and administrative expenses was primarily due to higher personnel costs driven by an increase in headcount, including stock-based compensation expense which increased by$2.1 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 .
Interest Income
Interest income for the nine months ended
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--------------------------------------------------------------------------------Other Income, Net
Other income, net was$1.6 million in the nine months endedSeptember 30, 2022 , compared to$1.8 million for the nine months endedSeptember 30, 2021 . Other income represents sublease income recognized resulting from the sublease of a portion of our former corporate headquarters space, partially offset by the right-of-use asset impairment charge recorded for this space.
Change in Fair Value of CVR Liability
There was no change in fair value of the CVR liability for the nine months endedSeptember 30, 2022 . Any settlement of the remaining liability will be a cash settlement.
Liquidity and Capital Resources
We have incurred certain costs related to the COVID-19 outbreak as a result of taking necessary precautions for essential personnel to operate safely both in person as well as remotely. Costs incurred include items like incremental payroll costs, consulting support, IT infrastructure and facilities related costs. The estimated impact of COVID-19 is currently unknown. The final impact may vary based on the duration of the current social and economic conditions. To the extent the COVID-19 pandemic continues, it may materially impact our financial condition, liquidity or results of operations in the future. We do not currently believe the accumulated costs will present a material impact to our financial liquidity or position. Since our inception, we have incurred significant operating losses. We have generated limited revenue to date from funding arrangements with our former collaboration partner. 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. We have historically funded our operations primarily through the public offering and private placement of our securities and consideration received from our collaborative agreements. OnMay 6, 2022 , we filed a shelf registration statement on Form S-3 with theSEC . The shelf registration statement allows us to sell from time-to-time up to$300.0 million of common stock, preferred stock, debt securities, warrants or units comprised of any combination of these securities, for our own account in one or more offerings. The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with theSEC prior to the completion of any such offering. Additionally, onMay 6, 2022 , pursuant to the Form S-3, we entered into a Sales Agreement (the "Sales Agreement") withGuggenheim Securities, LLC ("Guggenheim Securities "), pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to$75.0 million throughGuggenheim Securities , as the sales agent. As ofSeptember 30, 2022 , no shares have been sold under the Sales Agreement. OnJune 13, 2022 , we completed an underwritten public offering of 17,899,698 shares of our common stock at a public offering price of$8.25 per share (including the exercise in full by the underwriters of their 30-day option to purchase up to 2,730,000 additional shares of common stock) and, in lieu of common stock to certain investors, pre-funded warrants to purchase 3,030,302 shares of our common stock at a purchase price of$8.24 per underlying share. The net proceeds from the offering were approximately$161.9 million , after deducting the underwriting discounts and commissions and estimated offering expenses. As ofSeptember 30, 2022 , the Company has 90,726,532 shares outstanding on a fully diluted and as-converted basis, including the 69,857,972 shares of common stock outstanding, the 606,060 pre-funded warrants that are exercisable for shares of common stock, and the 81,050 shares of Series A Preferred stock, which are convertible into 20,262,500 shares of common stock.
As of
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Nine Months Ended September 30,
2022 2021
(in thousands)
Cash used in operating activities $ (89,230 ) $ (37,986 )
Cash used in investing activities (153,129 ) (1,286 )
Net cash (used in) provided by financing activities 163,243 (30 )
Net (decrease) increase in cash, cash equivalents and
restricted cash $ (79,116 )$ (39,302 ) 25
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Operating Activities
During the nine months endedSeptember 30, 2022 , operating activities used$89.2 million of cash, primarily resulting from our net loss of$100.6 million and net cash used in changes in our operating assets and liabilities of$6.0 million , partially offset by net noncash charges of$17.4 million . Net cash used in changes in our operating assets and liabilities for the nine months endedSeptember 30, 2022 consisted primarily of a$3.1 million increase in prepaid expenses other current assets, a$1.0 million increase in other assets, and a$8.3 million decrease in the operating lease liability partially offset by a$6.4 million increase in accounts payable and accrued expenses and other current liabilities. During the nine months endedSeptember 30, 2021 , operating activities used$38.0 million of cash, primarily resulting from our net loss of$47.4 million , partially offset by net cash provided by changes in our operating assets and liabilities of$1.8 million and by net noncash charges of$7.6 million . Net cash provided by changes in our operating assets and liabilities for the nine months endedSeptember 30, 2021 consisted primarily of a$5.9 million increase in accounts payable and accrued expenses and other current liabilities, and a$1.3 million decrease in the right-of-use asset, partially offset by a$1.9 million increase in prepaid expenses and other current assets, a$2.0 million increase in other assets and a$1.5 million decrease in the operating lease liability.
Investing Activities
During the nine months ended
During the nine months ended
Financing Activities During the nine months endedSeptember 30, 2022 , net cash provided by financing activities was$163.2 million , which consisted of$161.9 million in proceeds from the issuance of common stock and pre-funded warrants in an underwritten public offering, net of paid offering costs, proceeds from the issuance of common stock under the Employee Stock Purchase Plan, proceeds from the issuance of common stock upon stock option exercises and proceeds from pre-funded warrant exercises.
During the nine months ended
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we advance the clinical development of our current and any future product candidates and conduct additional research, development and preclinical activities. The timing and amount of our operating expenditures will depend largely on:
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the initiation, progress, timing, and completion of preclinical studies and clinical trials for our current and future potential product candidates, including the impact of COVID-19 on our ongoing and planned research and development efforts;
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any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority's review of such filings, including without limitation theFDA's issuance of a "refusal to file" letter or a request for additional information;
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adverse results or delays in clinical trials;
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our decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial;
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adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;
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changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;
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adverse developments concerning our manufacturers;
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our inability to obtain adequate product supply for any approved product or our inability to do so at acceptable prices;
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our inability to establish collaborations, if desired or needed;
•
our failure to commercialize our product candidates;
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the cost and timing of completion of the build out of our new office and
laboratory facility in
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additions or departures of key scientific or management personnel;
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unanticipated serious safety concerns related to the use of our product candidates; and
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the impact of COVID-19 on the operations of key governmental agencies, such as the FDA, which may delay the development of our current product candidates or any future product candidates. Based on our current plans, we believe that our existing cash, cash equivalents and marketable securities of$289.1 million as ofSeptember 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. The Company will require additional funding to complete the critical activities planned to support ongoing research and development programs. 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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. 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. Critical Accounting Estimates There have been no material changes in our critical accounting policies during the three months endedSeptember 30, 2022 , as compared to those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in our Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC .
Contractual Obligations and Commitments
A description of our material cash requirements, including commitments for capital expenditures, is described above and disclosed in Note 7 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012 ("JOBS Act") permits an
"emerging growth company" such as us to take advantage of an extended transition
period to comply with new or revised accounting standards applicable to public
companies until those standards would otherwise apply to private companies. We
have irrevocably elected to "opt out" of this provision and, as a result, we
will comply with new or revised accounting standards when they are required to
be adopted by public companies that are not emerging growth companies.
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