G1 THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this quarterly report. This discussion and other parts of this quarterly report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the "Risk Factors" section of our 2021 Form 10-K, and in our subsequently filed Quarterly Reports on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
In this Quarterly Report on Form 10-Q, the terms "we," "us," "our," the
"Company" and "G1" mean
Overview
We are a commercial-stage biopharmaceutical company focused on the development and commercialization of novel small molecule therapeutics for the treatment of patients with cancer. Our first product approved by theU.S. Food and Drug Administration ("FDA"), COSELA™ (trilaciclib), is the first and only therapy indicated to proactively help protect bone marrow from the damage of chemotherapy (myeloprotection) and is the first innovation in managing myeloprotection in decades. Trilaciclib was developed from a technology platform that targets key cellular pathways including transient arrest of the cell cycle at the G1 phase, prior to the beginning of DNA replication. Controlled administration and clean G1 arrest reduce hematologic adverse events ("AEs") caused by cytotoxic therapy and may increase the ability to receive longer treatment durations. Transient CDK4/6 inhibition also modulates multiple immune functions while allowing beneficial T cell proliferation which may improve patients' anti-tumor immune responses. We are exploring the use of trilaciclib in a variety of trials across multiple tumor types and treatment combinations to optimize these dual benefits of myeloprotection and improved anti-tumor efficacy for patients globally.
We shall use "COSELA" when referring to our FDA approved drug and "trilaciclib" when referring to our development of COSELA for additional indications.
COSELA is a prescription medicine used to help reduce the occurrence of low blood cell counts caused by damage to bone marrow from chemotherapy. COSELA is used to treat adults taking certain chemotherapies (platinum/etoposide or topotecan) for extensive-stage small cell lung cancer.
COSELA is an injection for intravenous (IV) use given within 4 hours before chemotherapy.
Commercial Product [[Image Removed]] OnFebruary 12, 2021 , COSELA (trilaciclib) for injection was approved by the FDA to decrease the incidence of chemotherapy-induced myelosuppression in adult patients treated with a platinum/etoposide-containing regimen or topotecan-containing regimen for ES-SCLC. COSELA became commercially available through our specialty distributor network onMarch 2, 2021 . We announced onMarch 25, 2021 that COSELA had been included in two updated National Comprehensive Cancer Network® ("NCCN") Clinical Practice Guidelines in Oncology (NCCN Guidelines®): The Treatment Guidelines for Small CellLung Cancer and the Supportive Care Guidelines for Hematopoietic Growth Factors. These guidelines document evidence-based, consensus-driven management to ensure that all patients receive preventive, diagnostic, treatment, and supportive services that are most likely to lead to optimal outcomes. OnOctober 1, 2021 , we announced that the permanent J-code for COSELA that was issued inJuly 2021 by theCenters for Medicare & Medicaid Services (CMS) is now effective for provider billing for all sites of care. All hospital outpatient departments, ambulatory surgery centers and physician offices inthe United States have one consistent Healthcare Common Procedure Coding System (HCPCS) code to standardize the submission and payment of COSELA insurance claims across Medicare, Medicare Advantage, Medicaid and commercial plans. Our new technology add-on payment (NTAP) for COSELA which provides additional payment to inpatient hospitals above the standardMedicare Severity Diagnosis-Related Group (MS-DRG) payment amount also became effective for provider billing onOctober 1, 2021 . We are also exploring potential use of trilaciclib in a variety of tumors, including colorectal cancer ("CRC"), breast cancer, bladder cancer, and in trials designed to inform the design of future additional pivotal studies across multiple tumor types and treatment combinations including targeted chemotherapy medicines called antibody-drug conjugates (ADCs). 22 -------------------------------------------------------------------------------- InJune 2020 , we entered into a three-year co-promotion agreement for COSELA inthe United States andPuerto Rico withBoehringer Ingelheim Pharmaceuticals, Inc. InDecember 2021 , the Company andBoehringer Ingelheim mutually agreed to end the co-promotion agreement for COSELA, effectiveMarch 2022 . At that time, we announced that we would hire and deploy a total of 34 oncology sales representatives to allow us to target all accounts to accelerate sales activities and help maximize the adoption of COSELA. As ofFebruary 21, 2022 , all 34 sales representatives have been hired, trained, and deployed into their respective regions. Product Portfolio Trilaciclib is a first-in-class therapy designed to help protect against chemotherapy-induced myelosuppression. Trilaciclib, a novel transient IV CDK4/6 inhibitor has unique attributes including rapid onset from IV administration, potent and selective CDK4 and CDK6 inhibition and a short half-life. Controlled administration and clean G1-phase arrest reduce hematologic AEs caused by cytotoxic therapy and may increase patients' abilities to receive longer treatment durations. Transient CDK4/6 inhibition also modulates multiple immune functions while allowing beneficial T cell proliferation which may improve patients' anti-tumor immune responses. Trilaciclib transiently blocks progression through the cell cycle. This provides benefits which manifest depending on the tumor type and therapeutic backbone, including: (1) proactive multi-lineage myeloprotection, and (2) potentially improved anti-tumor efficacy. First, trilaciclib provides proactive multi-lineage myeloprotection by transiently arresting hematopoietic stem and progenitor cells ("HSPCs"), helping to protect them from damage caused by cytotoxic therapy thereby minimizing cytopenias across neutrophils, erythrocytes, and platelets. These proactive multi-lineage myeloprotection benefits were seen in our three double-blind, placebo-controlled clinical trials in ES-SCLC, where highly myelosuppressive chemotherapy regimens are administered multiple days in a row. This myeloprotection benefit is being explored as the primary endpoint in our ongoing PRESERVE 1 trial in 1L colorectal cancer. Second, trilaciclib may have the ability to improve anti-tumor efficacy through a combination of potential factors, including increasing patients' ability to receive more cytotoxic therapy, protecting the immune system from damage caused by cytotoxic therapy, and favorably modulating multiple immune functions while also allowing beneficial T cell proliferation. In particular, these immune function improvements may include: (1) enhancing T cell activation (via increased antigen presentation and secretion of IL-2 and IFN?), (2) favorably altering the tumor microenvironment (via increased chemokines responsible for trafficking T cells to tumors and reducing the number and function of immunosuppressive cell populations), and (3) improving long-term immune surveillance (via increased generation of memory CD8+ T cells). A meaningful anti-tumor efficacy benefit was observed in our Phase 2 mTNBC study in which trilaciclib led to a significant improvement in overall survival when administered in combination with chemotherapy compared to chemotherapy alone. We are exploring these dual benefits of myeloprotection and anti-tumor efficacy across a variety of ongoing Phase 2 and Phase 3 clinical trials. We are executing on our tumor-agnostic strategy to evaluate the potential benefits of trilaciclib to patients with other tumors to continuously develop new data with trilaciclib in a variety of chemotherapeutic settings and in combination with other agents to maximize the applicability of the drug to potential future treatment paradigms. We currently have five ongoing clinical trials: a pivotal Phase 3 trial in 1L colorectal cancer ("CRC"), a pivotal Phase 3 trial in 1L mTNBC, a Phase 2 trial in 1L bladder cancer with chemotherapy induction and a checkpoint inhibitor maintenance, a Phase 2 trial in combination with an antibody-drug conjugate ("ADC") in 2L/3L mTNBC, and a Phase 2 trial in neoadjuvant TNBC designed to validate trilaciclib's immune-based mechanism of action ("MOA"). These studies across treatment settings and tumor types will evaluate trilaciclib's dual benefits of proactive multi-lineage myeloprotection and anti-tumor efficacy across tumor types. In addition, the MOA and ADC trials will inform the design of future additional pivotal studies across multiple tumor types and treatment combinations. We are also conducting significant preclinical work to assess the additive/synergistic potential of trilaciclib with a variety of novel and emerging therapeutic agents to identify synergies to evaluate in future clinical trials. Our clinical approach to designing our clinical program includes monitoring the evolution of future standards of care and develop trilaciclib with these in mind, allowing us to conduct or support trials that will generate important data to maximize future usage in a variety of future settings. 23 -------------------------------------------------------------------------------- Trilaciclib Product Portfolio Timing of Development & Initial Commercialization Rights Candidate Indication Current Status Results Endpoints (all indications) Registrational 1L metastatic Colorectal cancer Phase 3 trial 1Q 2023 Primary: myeloprotection* (CRC) (enrolling) Secondary: ORR*, PFS/OS, PRO 1L metastatic Triple negative Registrational Primary: OS* breast cancer (mTNBC) Phase 3 trial
2H 2023 Secondary: PRO,
(enrolling) myeloprotection, PFS/ORR
trilaciclib Phase 2 trial Primary: PFS G1 Therapeutics owns all global
1L Bladder cancer (mUC) (enrolling) 4Q 2022 Secondary: ORR*, OS, development and commercial rights
myeloprotection*, others across all indications, with the
Antibody-drug conjugate (ADC) Phase 2 trial Primary: PFS exception of Greater China
combination trial in mTNBC (enrolling) 4Q 2022 Secondary: ORR*, OS, (Simcere)
myeloprotection*, others
Mechanism of action trial in early Phase 2 trial Primary: Immune-based MOA*
stage neoadjuvant TNBC (enrolling) 4Q 2022 Secondary: pCR, immune
response, others
PFS=progression-free survival; OS=overall survival; PRO=patient reported outcome; ORR=overall response rate; pCR=pathological complete response; MOA=mechanism of action.
*Initial results: Phase 3 colorectal cancer trial: myeloprotection and ORR endpoints; Phase 3 1L mTNBC trial: interim results for OS; Phase 2 bladder cancer trial: ORR and myeloprotection endpoints; Phase 2 trial in combination with the ADC Trodelvy: ORR and myeloprotection endpoints; Phase 2 trial to confirm the immune-based mechanism of action (MOA) of trilaciclib in early-stage neoadjuvant TNBC: immune endpoints (e.g., CD8+ / Treg ratio)
Lerociclib
Lerociclib is a differentiated clinical-stage oral CDK4/6 inhibitor being developed for use in combination with other targeted therapies in multiple oncology indications. In 2020, we entered into separate, exclusive agreements with EQRx, Inc. (rights forU.S. ,Europe ,Japan and all markets outsideAsia-Pacific ) andGenor Biopharma Co. Inc. (rights forAsia-Pacific , excludingJapan ) for the development and commercialization of lerociclib in all indications. Combined, these agreements provide$26.0 million in upfront payments, along with sales-based royalties, and the opportunity for up to$330.0 million in potential milestone payments. EQRx, Inc. andGenor Biopharma Co. Inc. are responsible for all costs related to the development and commercialization of lerociclib in their respective territories.
Rintodestrant
Rintodestrant is an oral SERD, for use as a monotherapy and in combination with CDK4/6 inhibitors, initially Ibrance® (palbociclib), for the treatment of ER+, HER2- breast cancer. After completing the evaluation of our rintodestrant partnering options and recent data in the highly competitive oral SERD space, we have made the strategic decision to discontinue the program, including all clinical and partnering efforts. We will responsibly wind down all remaining clinical efforts for rintodestrant by the end of this year and revert the rights back to the originator (University of Illinois Chicago ); there are no additional financial obligations due to the originator resulting from the reversion. 24 --------------------------------------------------------------------------------
CDK2 Inhibitor
In 2020, we entered into a global license agreement withIncyclix Bio, LLC ("Incyclix"), formerlyARC Therapeutics, LLC , for the development and commercialization of an internally discovered cyclin dependent kinase 2 ("CDK2") inhibitor for all human and veterinary uses. Incyclix is currently granted an exclusive, royalty-bearing, license with the right to grant sublicenses to one of our solely owned patent families.
Coronavirus (COVID-19) impact on operations
We have implemented business continuity plans to address the COVID-19 pandemic and minimize disruptions to ongoing operations. Enrollment of patients in current and future clinical trials may be impacted by COVID-19. Although we have not had any significant supply chain delays or shortages as a result of the COVID-19 pandemic to date, we have experienced delays in the delivery of our investigational product to certain investigative sites due to shortages of ancillary materials and the delay of governmental inspections. To date, we are on track to meet all of our previously announced clinical milestones. If the COVID-19 pandemic continues or increases in severity, we could experience disruptions to our clinical development timelines. If we experience delays in patient enrollment, we could incur increased clinical program expense if it is deemed necessary or advisable to improve patient recruitment by opening additional clinical sites. COVID-19 travel limitations and government-mandated work-from-home or shelter-in-place orders may reduce the number of in-person meetings with prescribers and fewer patient visits with physicians, potentially resulting in fewer new prescriptions. We established a COVID-19 response team which continually monitors the impact of COVID-19 on our operations. The COVID-19 response team manages our workplace protocols that govern our employees' use of our office. To mitigate the impact of COVID-19 on our business, we put in place the following safety measures for our employees, patients, healthcare professionals, and suppliers to limit exposure: we substantially restricted travel, supplied personal protective equipment to employees, limited access to our headquarters and asked most of our staff to work remotely. As ofMarch 31, 2022 , the majority of our employees are still working remotely, which may negatively impact our ability to conduct research and development activities, engage in sales-related initiatives, or efficiently conduct day-to-day operations. In addition, we added bandwidth and VPN capacity to our infrastructure to facilitate remote work arrangements. We will continue to monitor the impact of COVID-19 on our operations, including how it will impact our employees, clinical trials, development programs, supply chain, and other aspects of our operations, and report to our Board of Directors regularly on the progress of our response to the COVID-19 outbreak.
Financial Overview
Since our inception in 2008, we have devoted substantially all of our resources to synthesizing, acquiring, testing and developing our product candidates, including conducting preclinical studies and clinical trials and providing selling, general and administrative support for these operations as well as securing intellectual property protection for our products. Currently, COSELA is our only product approved for sale. We began generating revenue for the net product sales from COSELA in March of 2021. We recorded$5.5 million and$11.1 million of net product sales from COSELA for the three months endedMarch 31, 2022 , and the year endedDecember 31, 2021 , respectively. We recorded$1.4 million and$20.4 million of license revenue for the three months endedMarch 31, 2022 , and the year endedDecember 31, 2021 , respectively. To date, we have financed our operations primarily through the sale of equity securities, our loan agreement with Hercules Capital, Inc., and licensing arrangements. Under our licensing arrangements, we are eligible to receive certain development and sales-based milestones. Our ability to earn these milestones and the timing of achieving these milestones is primarily dependent upon the outcome of the licensee's activities and is uncertain at this time. As ofMarch 31, 2022 , we had cash and cash equivalents of$183.0 million . Since inception we have incurred net losses. As ofMarch 31, 2022 , we had an accumulated deficit of$633.7 million . Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs, our commercial launch of COSELA, and from selling, general and administrative expenses associated with our operations. We expect to continue to incur significant expenses and increasing operating losses. We expect our research and development, commercial activities, and selling, general and administrative expenses will continue to increase in connection with our ongoing and future activities as we: • continue development of trilaciclib, including initiation of additional
clinical trials;
• identify and develop new product candidates;
• seek additional marketing approvals for trilaciclib upon successful completion
of clinical trials;
• grow our sales, marketing and distribution infrastructure to commercialize
COSELA and any future products for which we may obtain marketing approval;
• achieve market acceptance of our product in the medical community and with
third-party payors;
25
--------------------------------------------------------------------------------• maintain, expand and protect our intellectual property portfolio;
• hire additional personnel;
• enter into collaboration arrangements, if any, for the development of our
product or in-license other products and technologies;
• identify and develop new product candidates;
• add operational, financial and management information systems and personnel,
including personnel to support our product development and planned future
commercialization efforts; and
• continue to incur increased costs as a result of operating as a public company.
Components of our Results of Operations
Revenue
OnFebruary 12, 2021 , COSELATM was approved by the FDA and we began generating revenue for the product sales of COSELA inMarch 2021 . Prior to the approval of COSELA, our revenues have been derived from our license agreements. We entered into an exclusive license agreement withNanjing Simcere Dongyuan Pharmaceutical Co., Ltd ("Simcere") inAugust 2020 and granted them the rights to develop and commercialize trilaciclib in Greater China (mainlandChina ,Hong Kong ,Macau , andTaiwan ) (the "Simcere Territory"). We received an upfront payment of$14.0 million (less applicable withholding taxes of$1.4 million ) inSeptember 2020 . This was recognized as revenue once the transfer of the related technology and know-how was completed in the fourth quarter of 2020. We have the potential to receive$156.0 million upon reaching development and commercial milestones, and receive tiered low double-digit royalties on annual net sales of trilaciclib in the Simcere Territory. We did not receive any development milestones during the three months endedMarch 31, 2022 . We entered into an exclusive license agreement with EQRx, Inc. ("EQRx") inJuly 2020 and granted them the rights to develop and commercialize lerociclib in theU.S ,Europe ,Japan and all other global markets, excluding theAsia-Pacific region (exceptJapan ) (the "EQRx Territory"). We received an upfront payment of$20.0 million inAugust 2020 . This was recognized as revenue inSeptember 2020 when we transferred the license and related technology and know-how. We have the potential to receive$290.0 million upon reaching development and commercial milestones, and receive tiered royalties ranging from mid-single digits to mid-teens based on annual net sales of lerociclib in the EQRx Territory. We did not receive any development milestones during the three months endedMarch 31, 2022 . We entered into an exclusive license agreement withGenor Biopharma Co. Inc. ("Genor") inJune 2020 and granted them the rights to develop and commercialize lerociclib in theAsia-Pacific Region , excludingJapan (the "Genor Territory"). We received an upfront payment of$6.0 million inJuly 2020 . This was recognized as revenue inSeptember 2020 when we transferred the license and related technology and know-how. We have the potential to receive$40.0 million upon reaching development and commercial milestones, and receive tiered royalties ranging from high single to low double-digits based on annual net sales of lerociclib in the Genor Territory. We did not receive any development milestones during the three months endedMarch 31, 2022 . We entered into an exclusive license agreement withIncyclix Bio, LLC ("Incyclix"), formerlyARC Therapeutics, LLC , a company primarily owned by a former board member, inMay 2020 . We granted Incyclix an exclusive, worldwide, royalty-bearing license of its CDK2 inhibitor compounds in exchange for an upfront payment and equity in Incyclix with a total value of approximately$2.1 million , which resulted in the recognition of related party revenue. We are entitled to receive additional milestone payments and sales-based royalties, and has right of first negotiation to re-acquire these assets.
Operating expenses
We classify our operating expenses into three categories: cost of goods sold,
research and development and selling, general and administrative expenses.
Personnel costs, including salaries, benefits, bonuses, and stock-based
compensation expense, comprise a significant component of each of these expense
categories. We allocate expenses associated with personnel costs based on the
nature of work associated with these resources. In addition, costs to sell and
market COSELA are included within selling, general and administrative expense
categories.
26
--------------------------------------------------------------------------------Cost of goods sold
Cost of goods sold includes direct and indirect costs related to the manufacturing and distribution of COSELA, including third-party manufacturing costs, packaging services, freight-in, third-party logistics costs associated with COSELA, and personnel costs. Cost of goods sold may also include period costs related to certain inventory manufacturing services and inventory adjustment charges.
Research and development expenses
The largest component of our total operating expenses since inception has been research and development activities, including the preclinical and clinical development of our product candidates.
Research and development costs are expensed as incurred. Our research and development expense primarily consists of: • salaries and personnel-related costs, including bonuses, benefits and any
stock-based compensation, for our scientific personnel performing or managing
out-sourced research and development activities;
• costs incurred under agreements with contract research organizations and
investigative sites that conduct preclinical studies and clinical trials;
• costs related to manufacturing pharmaceutical active ingredients and drug
products for preclinical studies and clinical trials;
• costs related to upfront and milestone payments under in-licensing agreements;
• fees paid to consultants and other third parties who support our product
development; and
• allocated facility-related costs and overhead.
The successful development of our products are highly uncertain. Products 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. Accordingly, we expect research and development costs to increase as we conduct later stage clinical trials. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of clinical trials and development of our products will depend on a variety of factors, including: • the scope, rate of progress, and expenses of our ongoing as well as any
additional clinical trials and other research and development activities;
• future clinical trial results;
• achievement of milestones requiring payments under our in-licensing agreements;
• uncertainties in clinical trial enrollment rates or drop-out or discontinuation
rates of patients;
• potential additional studies requested by regulatory agencies;
• significant and changing government regulation; and
• the timing and receipt of any regulatory approvals.
We track research and development expenses on a program-by-program basis only for clinical-stage product candidates. Preclinical research and development expenses and chemical manufacturing research and development expenses are not assigned or allocated to individual development programs. As of the first quarter of 2022, we had two clinical-stage products, trilaciclib and rintodestrant.
Selling, general and administrative expenses
Selling, general and administrative expenses consist of personnel costs,
allocated expenses and other expenses for outside professional services,
including legal, audit and accounting services. Personnel costs consist of
salaries, bonuses, benefits and stock-based compensation. Other selling, general
and administrative expenses include facility-related costs not otherwise
allocated to research and development expense, professional fees,
commercialization costs, expenses associated with obtaining and maintaining
patents and costs of our information systems. We anticipate that our selling,
general and administrative expenses will continue to increase in the future as
we increase our headcount to support our continued research and development and
commercialization of COSELATM.
27
--------------------------------------------------------------------------------
We expect to continue to incur additional selling, general and administrative
expenses in the future in connection with the commercialization of COSELA, as we
support continued research and development activities, and as we support our
operations in a public company environment, including expenses related to
compliance with the rules and regulations of the SEC and Nasdaq, additional
insurance expenses, and expenses related to investor relations activities.
Total other income (expense), net
Total other income (expense), net consists of interest income earned on cash and cash equivalents and interest expenses incurred under our loan and security agreement with Hercules.
Income taxes
To date, we have not been required to payU.S. federal or state income taxes because we have not generated taxable income. Income tax expense recognized in 2021 related to the foreign withholding taxes incurred as a result of the milestone payments received from the Simcere license agreement during the quarter. We did not recognize any income tax expense for the three months endedMarch 31, 2022 . Results of Operations
Comparison of the three months ended
Three Months Ended March 31, Change
2022 2021 $
(in thousands)
Revenues:
Product sales, net $ 5,480 $ 609 $ 4,871
License revenue 1,422 13,609 (12,187 )
Total revenues 6,902 14,218 (7,316 )
Operating expenses:
Cost of goods sold 669 243 426
Research and development 26,305 16,540 9,765
Selling, general and administrative 26,709 22,970 3,739
Total operating expenses 53,683 39,753 13,930
Loss from operations (46,781 ) (25,535 ) (21,246 )
Other income (expense):
Interest income 9 19 (10 )
Interest expense (2,265 ) (748 ) (1,517 )
Other income (expense) (155 ) (40 ) (115 )
Total other income (expense), net (2,411 ) (769 ) (1,642 )
Loss before income taxes (49,192 ) (26,304 ) (22,888 )
Income tax expense - 138 (138 )
Net loss $ (49,192 ) $ (26,442 ) $ (22,750 )
Product sales, net
Product sales, net was $5.5 million and $0.6 million for the three months ended
March 31, 2022 , and 2021, respectively. The revenue for the three months ended
March 31, 2022 related to the product sales of COSELA. We received FDA approval
on February 12, 2021 and the product was commercially available beginning March
2, 2021 .
License Revenue
License revenue was $1.4 million and $13.6 million for the three months ended
March 31, 2022 , and 2021, respectively. The revenue for the three months ended
March 31, 2022 , primarily related to revenue recognized from amounts to be
reimbursed by EQRx and Simcere for the costs associated with the clinical
trials.
28
--------------------------------------------------------------------------------Cost of goods sold
Cost of goods sold was
Research and development
Research and development expenses were$26.3 million for the three months endedMarch 31, 2022 , compared to$16.5 million for the three months endedMarch 31, 2021 . The increase of$9.8 million , or 59%, was primarily due to an increase of$10.7 million in clinical trial costs offset by a decrease of$0.9 million in costs for manufacturing of active pharmaceutical ingredients and drug product to support clinical trials. The following table summarizes our research and development expenses allocated to trilaciclib, rintodestrant, lerociclib and unallocated research and development expenses for the periods indicated: Three Months EndedMarch 31, 2022 2021 (in thousands)
Clinical Program Expenses-trilaciclib
625 1,365
Clinical Program Expenses-lerociclib 604
1,027
Chemical Manufacturing and Development 852
1,745
Discovery, Pre-Clinical and Other Expenses 573
655
Selling, general and administrative
Selling, general and administrative expenses were$26.7 million for the three months endedMarch 31, 2022 , compared to$23.0 million for the three months endedMarch 31, 2021 . The increase of$3.7 million , or 16%, was due to an increase of$4.3 million in personnel costs due to increased headcount, of which$0.1 million related to non-cash stock compensation expense, and an increase of$0.1 million in professional services, insurance and other administrative costs. The increase is offset by a decrease in$0.5 million in medical affairs costs and$0.2 million in commercialization activities.
Total other income (expense), net
Total other income (expense), net was$(2.4) million for the three months endedMarch 31, 2022 , as compared to$(0.8) million for the three months endedMarch 31, 2021 . The increase of$1.6 million , or 214%, was primarily due to an increase in interest expense on our loan payable during the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 .
Income tax expense
There was no income tax expense recognized for the three months endedMarch 31, 2022 , as compared to$0.1 for the three months endedMarch 31, 2021 . Income tax expense in the prior period related to the foreign withholding taxes incurred as a result of the development milestone payments received from the Simcere license agreement during the quarter.
Liquidity and Capital Resources
We have incurred cumulative losses and negative cash flows from operations since our inception in 2008. As ofMarch 31, 2022 , we had an accumulated deficit of$633.7 million . We anticipate that we will continue to incur losses. As ofMarch 31, 2022 , we had cash and cash equivalents of$183.0 million . To date, we have funded our operations primarily through proceeds from our initial public offering, our follow-on stock offerings, our debt agreement with Hercules Capital, Inc. ("Hercules"), and proceeds from our license agreements. Under our licensing arrangements, we are eligible to receive certain development and sales-based milestones. Our ability to earn these milestones and the timing of achieving these milestones is primarily dependent upon the outcome of the licensee's activities and are uncertain at this time. 29 --------------------------------------------------------------------------------
Shelf registration statement
OnJuly 2, 2021 , we filed an automatically effective shelf registration statement (the "2021 Form S-3") with theSecurities and Exchange Commission (the "SEC"). Each issuance under the shelf registration statement would have required the filing of a prospectus supplement identifying the amount and terms of securities to be issued. The 2021 Form S-3 did not limit the amount of securities that could have been issued thereunder. Since we no longer qualify as a "well-known seasoned issuer" as such term is defined in Rule 405 under the Securities Act of 1933, as amended, at the time of the filing of our 2021 Form 10-K inFebruary 2022 , we filed an automatic post-effective amendment to the 2021 Form S-3 on Form POSASR prior to the filing of our 2021 Form 10-K, which became effective upon filing, to register for sale up to$300.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine and, as required bySEC rules, and another post-effective amendment to the 2021 Form S-3 on Form POS AM after the filing of our 2021 Form 10-K. The post-effective amendment to the 2021 Form S-3 on Form POS AM was declared effective by theSEC onMay 3, 2022 and the 2021 Form S-3 will remain in effect for up to three years from the date it originally became effective, which wasJuly 2, 2021 . We make no assurances as to our ability to continue to use the 2021 Form S-3.
At-the-market offerings
OnJune 15, 2018 , we entered into a sales agreement for "at the market offerings" withCowen and Company, LLC ("Cowen"), which allows us to issue and sell shares of common stock pursuant to a shelf registration statement for total gross sales proceeds of up to$125.0 million from time to time through Cowen, acting as our agent. BetweenJune 18, 2018 andAugust 2, 2018 , we sold 752,008 shares of common stock pursuant to this agreement resulting in$36.1 million in net proceeds, realizing$12.1 million in the second quarter and the remaining$24.0 million byAugust 2, 2018 .
Between
In connection with the 2021 Form S-3, onJuly 2, 2021 , we entered into a sales agreement for "at the market offerings" with Cowen, which allowed us to issue and sell shares of common stock pursuant to the 2021 Form S-3 for total gross sales proceeds of up to$150.0 million from time to time through Cowen, acting as our agent (the "2021 Sales Agreement"). We did not sell any shares of common stock or other securities under the 2021 Sales Agreement and we terminated the 2021 Sales Agreement onFebruary 23, 2022 . Also, onFebruary 23, 2022 , we entered into a sales agreement for "at the market offerings" with Cowen, which allows us to issue and sell shares of common stock pursuant to the 2021 Form S-3 for total gross sales proceeds of up to$100.0 million from time to time through Cowen, acting as our agent. As of the date hereof, we have not sold any shares of common stock or other securities under this sales agreement.
Loan and Security Agreement with Hercules
OnMay 29, 2020 , we entered into a loan and security agreement with Hercules Capital, Inc. ("Hercules") under which Hercules has agreed to lend us up to$100.0 million , to be made available in a series of tranches, subject to specified conditions. We borrowed$20.0 million at loan closing. The term of the loan is approximately 48 months, with a maturity date ofJune 1, 2024 . No principal payments are due during an interest-only period, commencing on the initial borrowing date and continuing throughJune 1, 2022 . The interest only period may be extended throughJanuary 1, 2023 upon satisfaction of certain milestones. Following the interest only period, we will repay the principal balance and interest of the advances in equal monthly installments throughJune 1, 2024 . OnMarch 31, 2021 , we entered into the First Amendment to Loan and Security Agreement (the "First Amendment") with Hercules whereby the Company drew the remaining$10.0 million of the first tranche and the interest rate and financial covenants were amended. Unless loan advances exceeded$40.0 million , no financial covenants were required. OnNovember 1, 2021 , we entered into a Second Amendment to the Loan and Security Agreement with Hercules under which Hercules has agreed to lend us up to$150.0 million , to be made available in a series of tranches, subject to certain terms and conditions. The first tranche was increased to$100.0 million . At close of the Second Amendment, we borrowed an additional$45.0 million from tranche 1 with$25.0 million remaining to be borrowed throughSeptember 15, 2022 . No principal payments are due during an interest-only period, commencing on the close of the Second Amendment and continuing throughDecember 1, 2024 . The interest only period may be extended throughDecember 1, 2025 , in quarterly increments, subject to compliance with covenants of the Second Amendment. Following the interest only period, we will repay the principal balance and interest of the advances in equal monthly installments through the maturity date ofNovember 1, 2026 . 30 --------------------------------------------------------------------------------
Genor License Agreement
OnJune 15, 2020 , we entered into an exclusive license agreement withGenor Biopharma Co. Inc. ("Genor") for the development and commercialization of lerociclib in theAsia-Pacific region , excludingJapan (the "Genor Territory"). Under the license agreement, we granted to Genor an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize lerociclib, in the Genor Territory. Under the license agreement, Genor agreed to pay us a non-refundable, upfront cash payment of$6.0 million with the potential to pay an additional$40.0 million upon reaching certain development and commercial milestones. In addition, Genor will pay us tiered royalties ranging from high single to low double-digits based on annual net sales of lerociclib in the Genor Territory. The upfront cash payment was received inJuly 2020 . InSeptember 2020 , we transferred to Genor the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize lerociclib in the Genor Territory. Genor will be responsible for the development of the product in the Genor Territory and will be responsible, at its sole cost, for obtaining supply of lerociclib to meet its development, regulatory approval, and commercialization obligations under the agreement. We did not recognize any revenue related to development milestones in the first quarter of 2022.
EQRx License Agreement
OnJuly 22, 2020 , we entered into an exclusive license agreement with EQRx, Inc. ("EQRx") for the development and commercialization of lerociclib in theU.S. ,Europe ,Japan and all other global markets, excluding theAsia-Pacific region (exceptJapan ) (the "EQRx Territory"). Under the license agreement, we granted to EQRx an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize lerociclib in the EQRx Territory. Under the license agreement, EQRx agreed to pay us a non-refundable, upfront cash payment of$20.0 million with the potential to pay an additional$290.0 million upon reaching certain development and commercial milestones. In addition, EQRx will pay us tiered royalties ranging from mid-single digits to mid-teens based on annual net sales of lerociclib in the EQRx Territory. The upfront cash payment was received inAugust 2020 . InSeptember 2020 , we transferred to EQRx the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize lerociclib in the EQRx Territory. EQRx will be responsible for the development of the product in the EQRx Territory. We will continue until completion, as the clinical trial sponsor, its two primary clinical trials at EQRx's sole cost and expense. EQRx will reimburse us for all of its out-of-pocket costs incurred after the effective date of the license agreement in connection with these clinical trials. We will invoice EQRx within 30 days following the end of the quarter, and EQRx will pay within 30 days after its receipt of such invoice. We did not recognize any revenue related to development milestones in the first quarter of 2022. Simcere License Agreement OnAugust 3, 2020 , we entered into an exclusive license agreement withNanjing Simcere Dongyuan Pharmaceutical Co., Ltd ("Simcere") for the development and commercialization of trilaciclib in all indications in Greater China (mainlandChina ,Hong Kong ,Macau , andTaiwan ) (the "Simcere Territory"). Under the license agreement, we granted to Simcere an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize trilaciclib in the Simcere Territory. Simcere expects to receive regulatory approval of trilaciclib inGreater China in the second half of 2022. Under the license agreement, Simcere agreed to pay us a non-refundable, upfront cash payment of$14.0 million with the potential to pay an additional$156.0 million upon reaching certain development and commercial milestones. In addition, Simcere will pay us tiered low double-digit royalties on annual net sales of trilaciclib in the Simcere Territory. The upfront payment of$14.0 million (less applicable withholding taxes of$1.4 million ) was received inSeptember 2020 . In return, we will furnish to Simcere the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize trilaciclib in the Simcere Territory. Simcere will be responsible for all development and commercialization costs in its territory and may be able to participate in global clinical trials as agreed upon by the companies. We did not recognize any revenue related to development milestones in the first quarter of 2022. 31
--------------------------------------------------------------------------------
Cash flows
The following table summarizes our cash flows for the periods indicated:
Three Months Ended March 31, Change
2022 2021 $
(in thousands)
Net cash used in operating activities $ (38,184 ) $ (26,880 ) $ (11,304 )
Net cash provided/used in investing
activities - - -
Net cash provided by financing activities 18 98,542 (98,524 )
Net change in cash, cash equivalents, and
restricted cash $ (38,166 ) $
71,662
Net cash used in operating activities
During the three months ended
During the three months endedMarch 31, 2021 , net cash used in operating activities was$26.9 million , which consisted primarily of a net loss of$26.4 million and a decrease in net operating assets and liabilities of$7.0 million , partially offset by non-cash stock compensation expense of$5.9 million ,$0.1 million of depreciation expense,$0.3 million in amortization of debt issuance costs, and$0.2 million of non-cash interest expense. Net cash used in operating activities increased by$11.3 million as compared to the three months endedMarch 31, 2021 primarily due to increase in net loss from an increase in research costs related to clinical trials as well as administrative costs operating as a commercial company.
Net cash used in investing activities
During the three months ended
Net cash provided by financing activities
During the three months endedMarch 31, 2022 , net cash provided by financing activities was$18 thousand , which consisted of proceeds from exercise of stock options. During the three months endedMarch 31, 2021 , net cash provided by financing activities was$98.5 million , which consisted of$86.4 million in net proceeds from our ATM offering after deducting cash paid in the quarter for underwriting discounts and commissions and other expenses,$9.9 million in net proceeds from debt funding, and$2.2 million from proceeds from the exercise of stock options.
Operating capital requirements and plan of operations
To date, we have generated limited revenue from product sales. We expect our expenses to increase as we continue the development of and seek additional regulatory approvals for trilaciclib, and continue to commercialize COSELA. As described in the risk factors included in the 2021 Form 10-K, we are subject to all of the risks inherent in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.
We believe that our existing cash and cash equivalents will be sufficient to fund our projected cash needs for at least the next 12 months.
32
--------------------------------------------------------------------------------
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 scope, progress, results and costs of nonclinical development,
laboratory testing and clinical trials for our product candidates;
• the scope, prioritization and number of our research and development
programs;
• the costs, timing and outcome of regulatory review of our product candidates;
• the extent to which we enter into non-exclusive, jointly funded clinical
research collaboration arrangements, if any, for the development of our
product candidates in combination with other companies' products;
• our ability to establish such collaborative co-development arrangements on
favorable terms, if at all;
• the achievement of milestones or occurrence of other developments that
trigger payments under our license agreements and any collaboration
agreements into which we enter;
• the extent to which we are obligated to reimburse, or entitled to
reimbursement of, clinical trial costs under future collaboration
agreements, if any;
• the extent to which we acquire or in-license product candidates and
technologies and the terms of such in-licenses;
• the costs of commercialization activities, including product sales,
marketing, manufacturing and distribution, for any of our product
candidates for which we receive marketing approval;
• revenue received from commercial sales of our product candidates; and
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims.
Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds except for amounts included under our licensing arrangements and the loan agreement with Hercules. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders' ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations, Commitments and Contingencies
There have been no material changes to our contractual obligations during the current period from those disclosed in our Annual Report on Form 10-K for year endedDecember 31, 2021 .
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 under applicable
33
--------------------------------------------------------------------------------Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America , orU.S. GAAP. The preparation of our financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the dates of the balance sheet, and the reported amount of expenses incurred during the reporting period. In accordance withU.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that our accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results. We discussed our accounting policies and significant assumptions used in our estimates in Note 2 of our audited financial statements included in our 2021 Form 10-K. There have been no material changes during the three months endedMarch 31, 2022 , to our critical accounting policies, significant judgments and estimates disclosed in our 2021 Form 10-K.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements included in Item 1 of this Quarterly Report on Form 10-Q for recently issued accounting pronouncements, including respective adoption dates and the potential impact on our financial statements.
© Edgar Online, source
