CYMABAY THERAPEUTICS, INC. Operating results for the three months endedMarch 31, 2021 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year. This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, that involve risks and uncertainties. Words such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "potential," "seek," "target," "goal," "intend," variations of such words, and similar expressions are intended to identify forward-looking statements. These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current expectation, belief, or intent, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding our expectations with respect to the following: our business and scientific strategies; the progress of our product development programs, including whether we may resume clinical testing, and the timing of results thereof; regulatory submissions and approvals; the impact of the COVID-19 pandemic on our company and operations; our drug discovery technologies; our research and development expenses; protection of our intellectual property; sufficiency of our cash and capital resources and the need for additional capital; and our operations and legal risks. You should not place undue reliance on these forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements for many reasons. Factors that might cause such a difference include those discussed under the caption "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this Quarterly Report. OverviewCymaBay Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need. Our lead product candidate, seladelpar, is a potent and selective agonist of peroxisome proliferator activated receptor delta (PPAR d ), a nuclear receptor that regulates genes directly or indirectly involved in the synthesis of bile acids/sterols, metabolism of lipids and glucose, inflammation and fibrosis. We have been developing seladelpar for the treatment of: • primary biliary cholangitis (PBC), an autoimmune disease that causes progressive destruction of the bile ducts in the liver resulting in impaired bile flow (cholestasis) and inflammation; and • nonalcoholic steatohepatitis (NASH), a prevalent and serious chronic liver disease caused by excessive fat accumulation in the liver that results in inflammation and cellular injury that can progress to fibrosis and cirrhosis, and potentially liver failure and death. In late 2019, we terminated our NASH Phase 2b study and our ongoing PBC studies. The decision to halt development of seladelpar was based on initial histological observations in the NASH Phase 2b study that were observed in the first blinded tranche of liver biopsies in the trial. These observations were characterized by an interface hepatitis presentation, with or without biliary injury. Although these patients had stable or improving biochemical markers of liver disease, the decision to halt development was based on a need to understand the significance of the observations, and possible impact on patients, before dosing additional patients with seladelpar. TheU.S. Food and Drug Administration (FDA) agreed with this decision and subsequently placed a formal clinical hold on seladelpar. Thereafter, inDecember 2019 , we announced a restructuring plan to reduce our workforce by approximately 60% to control our operating costs, and we commenced a process to evaluate strategic alternatives to maximize stockholder value, pending further investigation of the histological observations. InMay 2020 , an independent expert panel completed a review of the findings and unanimously concluded that the data in aggregate did not support liver injury related to seladelpar. We subsequently discussed the data, the panel's conclusions, and other matters with the FDA and inJuly 2020 , the FDA lifted the clinical hold, thereby permitting us to reinstate clinical development of seladelpar. Specifically, we made the strategic decision to refocus our strategy primarily on clinical development of seladelpar in PBC and to explore the potential to partner seladelpar in NASH in a combination study with other complimentary agents. In addition, we are evaluating opportunities to develop other internal programs and possibly acquire or in-license new compounds or programs. 14
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Table of Contents Seladelpar Primary Biliary Cholangitis (PBC) Following the decision to reinstate clinical development of seladelpar, in late 2020, we commenced startup and site feasibility activities for RESPONSE, a new global Phase 3 registration study to evaluate seladelpar in patients with PBC. The Phase 3 study is a 52-week, placebo-controlled, randomized, global, registration study evaluating the safety and efficacy of seladelpar in patients with PBC. The study is intended to enroll 180 patients,who have an inadequate response to, or intolerance to, ursodeoxycholic acid, in a 2:1 randomization to oral, once daily seladelpar 10 mg or placebo. The primary outcome measure will be the responder rate at 52 weeks. A responder is defined as a patientwho achieves an alkaline phosphatase level less than 1.67 times the upper limit of normal with at least a 15% decrease from baseline and has a normal level of total bilirubin. Additional key outcomes of efficacy will compare the rate of normalization of alkaline phosphatase at 52 weeks and the level of pruritus at six months for patients with moderate to severe pruritus at baseline assessed by a numerical rating scale recorded with an electronic diary. In addition to RESPONSE we also commenced startup activities in late 2020 for ASSURE, a new long-term safety study, which is open to patientswho were eligible for our previous long-term extension study that was terminated early in late 2019, including those patients from our previously completed Phase 2 open label study and our Phase 3 ENHANCE study, as well as patientswho complete treatment in RESPONSE in the future. Previously, inOctober 2018 , we commenced enrollment of ENHANCE, a global Phase 3 registration study to evaluate seladelpar in patients with PBC and inOctober 2019 , the trial was fully enrolled with 265 patients, but we terminated the trial early inDecember 2019 after the seladelpar program was placed on clinical hold. InAugust 2020 , we shared data accumulated through trial termination for ENHANCE, which we believe demonstrated seladelpar to be safe, well-tolerated, and efficacious in patients with PBC. Nonalcoholic Steatohepatitis (NASH) InMay 2018 , we initiated a randomized, placebo-controlled Phase 2b proof-of-concept study to evaluate seladelpar at three doses in biopsy-proven NASH. The primary efficacy outcome is the change from baseline in liver fat content at 12 weeks measured by magnetic resonance imaging using the proton density fat fraction method (MRI-PDFF). The study also included pathology assessments of liver biopsy samples at baseline and at 52 weeks to examine the potential of seladelpar treatment to resolve NASH and/or decrease fibrosis. In preclinical studies, Seladelpar was found to reverse NASH pathology, decrease fibrosis, inflammation, hepatic lipids and reverse insulin resistance in the
foz
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mouse which is a diabetic obese model of NASH. InFebruary 2019 , we announced full enrollment of 181 patients with liver biopsy proven NASH at specializedU.S. investigational centers. InJune 2019 , we announced results from the primary efficacy outcome, which were that treatment with seladelpar resulted in significant reductions in liver fat but that these changes were not significant when compared to placebo, which also had significant reductions. Treatment with seladelpar did, however, result in robust and clinically meaningful reductions in markers associated with liver injury. InNovember 2019 , we terminated this trial based on initial histological observations. Although these patients had stable or improving biochemical markers of liver disease, we halted dosing of patients with seladelpar due to the lack of understanding the significance of the observations, and possible impact on patients. Subsequent investigation indicated there was no seladelpar-induced liver injury in the Phase 2b study patients. As we continue to believe seladelpar may have therapeutic benefit in NASH patients, using the data accumulated to date from our Phase 2b study, we intend to explore the potential to partner seladelpar in NASH in a combination study with other complementary agents. MBX-2982 MBX-2982 targets G protein-coupled receptor 119 (GPR119), a receptor that interacts with bioactive lipids known to stimulate glucose-dependent insulin secretion. InNovember 2020 , we announced a study to evaluate the potential for MBX-2982 to stimulate the release of the hormone glucagon in response to hypoglycemia in patients with type 1 diabetes (T1D). The Phase 2a proof-of-pharmacology study will assess whether MBX-2982 can enhance glucagon secretion during insulin-induced hypoglycemia in subjects with T1D. If successful, studies to evaluate MBX-2982 as a potential preventive therapy for hypoglycemia in patients with T1D may be warranted. The study is being led by theAdventHealth Translational Research Institute inOrlando, Florida and is fully funded byThe Leona M. and Harry B. Helmsley Charitable Trust . We retain full commercial rights to MBX-2982. We believe MBX-2982 may also have utility in various inflammatory diseases and are currently exploring potential opportunities to advance development. CB-0406 In 2020 we began to evaluate CB-0406, the active metabolite of arhalofenate, a pro-drug previously studied for chronic metabolic diseases, in a single and multiple ascending dose study in healthy subjects to establish its pharmacokinetics, safety and maximum tolerated dose. Decisions on any future development are contingent on it achieving a favorable profile with respect to safety and exposure. We believe CB-0406 may have utility in various inflammatory diseases and are currently exploring potential opportunities to advance development. 15
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Table of Contents COVID-19 Pandemic InMarch 2020 , theWorld Health Organization declared the global novel coronavirus disease (COVID-19) outbreak a pandemic. Accordingly, economic and health conditions inthe United States and across most of the globe have changed rapidly since the end of the first quarter of 2020. As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions that could impact aspects of our business, including our progress towards the initiation and completion of certain clinical studies, and other associated drug development activities. Possible future disruptions are currently difficult to foresee. We continue to monitor areas of potential risk which include, but are not limited to, the following: • Remote workforce operations -To date, our workforce has adapted to remotely working to maintain operations. Our increased and continuing reliance on personnel working from home could potentially negatively impact future productivity, or disrupt, delay, or otherwise adversely impact our business. In addition, remote operations could increase our cyber-security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations, or delay necessary interactions with regulators, contract manufacturers, contract research organizations, clinical trial sites, and other important agencies and contractors, which may result in increased costs to us. • Clinical trial and drug manufacturing operations -In collaboration with our clinical research organization partners, we sponsor clinical trials that take place at investigator sites inthe United States and internationally. We also partner with contract manufacturing organizations to develop, manufacture, and distribute our product candidate drug supplies. To date, these collective research and development personnel and vendors have adapted to COVID-19 related travel restrictions and reduced access to work facilities through the use of remote working technologies and other measures as they continue to progress toward completion of our existing clinical trials. However, in the future, as we look to enroll and complete the clinical development of seladelpar and initiate other programs, our research and development employees and contractors may not be able to sufficiently access their applicable work facilities as a result of continued facility closure orders and the possibility that governmental authorities might further modify such restrictions. Furthermore, patients we expect to enroll in our future clinical trials may also be impacted by any ongoing travel and facility access restrictions. Although we and our contractors continue to plan for and develop pandemic-related risk mitigation strategies, it is uncertain whether these plans will continue to be sufficient to fully offset the potential impact that travel and facility access restrictions (or other unanticipated impediments) may have on our ability to execute our research and development activities in a timely and cost-effective manner. Drug regulator interactions -The FDA and comparable foreign regulatory agencies may experience operational interruptions or delays, which could impact timelines for regulatory meetings, submissions, trial initiations, and regulatory approvals • Financial reporting and compliance -To date, there has been no adverse impact on our ability to maintain our established financial reporting functions and internal controls over financial reporting. However, our ability to prepare our financial results timely and accurately is partially dependent upon the availability of third-party information systems and other cloud-based services. Any degradation in the quality or timeliness of critical third-party information or cloud-based services could adversely impact our financial reporting capabilities. Overall, we cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on our consolidated financial condition and operations. The impact of the COVID-19 coronavirus outbreak on our financial performance will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions, which could result in unexpected costs to us. These developments and the impact of COVID-19 on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected. Critical Accounting Policies and Use of Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States (GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other factors that we believe to be materially reasonable under the circumstances, the results of which form our basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources, and evaluate our estimates on an ongoing basis. Actual results may materially differ from those estimates under different assumptions or conditions. There have been no changes to our critical accounting policies since we filed our Annual Report on Form 10-K for the year endedDecember 31, 2020 with theSEC onMarch 25, 2021 . For a description of our critical accounting policies, please refer to our Annual Report on Form 10-K. 16
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Table of Contents Recent Accounting Pronouncements Refer to "Note 2. Summary of Significant Accounting Policies" in the notes to our unaudited interim condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a discussion of recent accounting pronouncements. Results of Operations General To date, we have not generated any income from operations. As ofMarch 31, 2021 , we had an accumulated deficit of$694.4 million , primarily as a result of expenditures for research and development and general and administrative expenses from inception to that date. All of our product candidates are at various stages of development and will require additional work and regulatory approval before they can be licensed or commercialized. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate sufficient revenue to achieve and sustain profitability. Until we can generate a sufficient amount of product revenue, which we may never do, we will need to finance future cash needs through potential collaborative, partnering or other strategic arrangements, as well as through public or private equity offerings, debt financings or a combination of the foregoing. Operating Results Our results of operations are presented below (in thousands): Three Months Ended March 31, Change Q1 2021 2020 2021 vs 2020 ($ in thousands) Operating expenses: Research and development$ 12,382 $ 9,509 $ 2,873 General and administrative 5,236 4,418 818 Total operating expenses 17,618 13,927 3,691 Loss from operations (17,618 ) (13,927 ) (3,691 ) Interest income 67 839 (772 ) Net loss$ (17,551 ) $ (13,088 ) $ (4,463 )
Research & Development Expenses
Conducting research and development is central to our business model. Research
and development expenses increased
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For the three months ended
Three Months Ended Change
March 31, Q1
2021 2020 2021 vs 2020
Project costs:
Seladelpar PBC clinical studies $ 5,903 $ 5,584 $ 319
Seladelpar NASH clinical studies (10 ) 897 (907 )
Seladelpar PSC clinical studies - 252 (252 )
Seladelpar drug manufacturing & development 754 237 517
Seladelpar other studies 123 125 (2 )
Non-seladelpar studies 982 230 752
Total project costs 7,752 7,325 427
Internal research and development costs 4,630 2,184 2,446
Total research and development $ 12,382 $ 9,509 $ 2,873 Our project costs consist primarily of:
• expenses incurred under agreements with contract research organizations,
investigative sites and consultants that conduct our clinical trials and
a substantial portion of our preclinical activities;
• the cost of acquiring and manufacturing clinical trial and other
materials; and
• other costs associated with development activities, including additional
studies.
Internal research and development costs consist primarily of salaries and
related fringe benefits costs for our employees (such as workers' compensation
and health insurance premiums), stock-based compensation charges, travel costs,
and overhead expenses. Internal costs generally benefit multiple projects and
are not separately tracked per project.
Comparison of three months ended March 31, 2021 and 2020
Total project costs increased by $0.4 million to $7.8 million from $7.3 million
for the three months ended March 31, 2021 and 2020, respectively. Project costs
for the three months ended March 31, 2021 and 2020 primarily consisted of
seladelpar-related clinical trial expenses for PBC. These cost increases were
primarily driven by the decision to restart development of the seladelpar
program in July 2020 following the FDA's decision to lift the clinical hold on
the program. Internal research and development costs increased by $2.4 million
to $4.6 million from $2.2 million for the three months ended March 31, 2021 and
2020, respectively, primarily due to higher employee compensation incurred in
the first three months of 2021 as compared to the first quarter of 2020 as we
hired additional research and development personnel to support the restart of
our clinical studies. As we continue to progress late-stage development of
seladelpar in PBC as well as development activities associated with other
product candidates, we expect both total project and internal costs to increase
in the future.
General and Administrative Expenses
General and administrative expenses consist principally of personnel-related
costs, professional fees for legal, consulting, and accounting services, rent,
and other general operating expenses not otherwise included in research and
development.
Comparison of three months ended March 31, 2021 and 2020
General and administrative expenses increased by $0.8 million to $5.2 million
from $4.4 million for the three months ended March 31, 2021 and 2020,
respectively. The increase was driven primarily by the hiring of additional
general and administrative personnel in the second of half of 2020 after we made
the decision to restart our development activities. We expect general and
administrative expenses to increase in the future as we continue to add
administrative personnel and expand our infrastructure in support of our drug
development activities.
Interest Income
Interest income decreased by $0.8 million to $0.1 million from $0.8 million for
the three months ended March 31, 2021 and 2020, respectively. The decrease in
interest income was driven primarily by lower prevailing interest rates and a
reduced investment portfolio balance compared to the prior year period.
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Table of Contents Liquidity and Capital Resources We have financed our operations primarily through the sale of equity securities, licensing fees, issuance of debt and collaborations with third parties. AtMarch 31, 2021 , cash, cash equivalents and marketable securities totaled$125.5 million , compared to$146.3 million atDecember 31, 2020 . Our cash, cash equivalents and investments are held in a variety of interest-bearing instruments, including deposits, money market funds, corporate debt, commercial paper, asset-backed securities,U.S. treasury securities, and supranational debt securities investments. We invest cash in excess of immediate requirements with a view toward liquidity and capital preservation, and we seek to minimize the potential effects of concentration and degrees of risk. We believe these funds are sufficient to fund our current operating plan into mid-2022. Cash Flows The following table sets forth a summary of the net cash flow activity for each of the periods indicated below (in thousands): Three Months EndedMarch 31, 2021 2020
Net cash used in operating activities
Net increase in cash and cash equivalents
Operating Activities : Net cash used in operating activities for the three months endedMarch 31, 2021 increased by$5.9 million to$20.6 million as compared to$14.7 million for the same period in the prior year, primarily due to an increase in our net loss to$17.6 million from$13.1 million in the prior year period as a result of our restart of the seladelpar development program following the lifting of the clinical hold inJuly 2020 . In addition, cash was used to fund changes in our working capital. Investing Activities: Net cash provided by investing activities was$35.7 million for the three months endedMarch 31, 2021 compared to$46.6 million for the same period in the prior year, primarily due to the timing of our investments in marketable securities and portfolio risk management. Off-Balance Sheet Arrangements We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. 19
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