You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A. "Risk Factors" and "Special Note Regarding Forward-Looking Statements" in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
For the discussion of our financial condition and results of operations for the
year ended
Overview
We are a clinical-stage biotechnology company focused on the discovery and development of novel glycomimetic drugs to address unmet medical needs resulting from diseases in which carbohydrate biology plays a key role. We are developing a pipeline of glycomimetics, which are molecules that mimic the structure of carbohydrates involved in important biological processes, to inhibit disease-related functions of carbohydrates such as the roles they play in inflammation, cancer and infection. We believe this represents an innovative approach to drug discovery to treat a wide range of diseases. We are focusing our efforts on drug candidates for rare diseases that we believe will qualify for orphan drug designation.
Our proprietary glycomimetics platform is based on our expertise in carbohydrate chemistry and our understanding of the role carbohydrates play in key biological processes. Most human proteins are modified by the addition of complex carbohydrate structures to the surface of such proteins, which affects the functions of the proteins and their interactions with other molecules. Our initial research and development efforts have focused on drug candidates targeting selectins, which are proteins that serve as adhesion molecules and bind to carbohydrates that are involved in the inflammatory component and progression of a wide range of diseases, including hematologic disorders, cancer and cardiovascular disease. For example, we believe that members of the selectin family play a key role in tumor metastasis and resistance to chemotherapy. Inhibiting specific carbohydrates from binding to selectins has long been viewed as a potentially attractive approach for therapeutic intervention. The ability to successfully develop drug-like compounds that inhibit binding with selectins, known as selectin antagonists, has historically been limited by the complexities of carbohydrate chemistry. We believe our expertise in carbohydrate chemistry enables us to design selectin antagonists and other glycomimetics that may inhibit the disease-related functions of certain carbohydrates in order to develop novel drug candidates to address orphan diseases with high unmet medical need.
Our lead glycomimetic drug candidate, uproleselan, is a specific E-selectin
inhibitor that we are developing to be used in combination with chemotherapy to
treat patients with acute myeloid leukemia, or AML, a life-threatening
hematologic cancer, and potentially other hematologic cancers. We completed an
initial Phase 1 trial in healthy volunteers for uproleselan, and in
In
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will be overall survival; importantly, the FDA has advised us that data on overall survival will not need to be censored for transplant in the primary efficacy analysis, meaning that patients who proceed to transplant will continue to be included as part of the survival analysis. All patients will be treated with standard chemotherapy of either MEC (mitoxantrone, etoposide and cytarabine) or FAI (fludarabine, cytarabine and idarubicin), with approximately one-half of the patients randomized to receive uproleselan in addition to chemotherapy. Patients receiving uproleselan will be dosed for one day prior to initiation of chemotherapy, twice a day through the chemotherapy regimen, and then for two days after the end of chemotherapy, which was the same regimen as in the Phase 1/2 trial. The dose regimen will be fixed, rather than weight-based, which we believe will simplify administration. We plan to offer up to three cycles of consolidation therapy in both arms of the trial for patients who achieve remission. We believe that multiple cycles of treatment in patients who respond may drive an even deeper response in patients treated with uproleselan. If this is the case, it could lengthen the duration of remission with potential for additional benefit on survival. Key secondary endpoints of the Phase 3 trial will include the incidence of severe mucositis and remission rate, which will be assessed in a hierarchical fashion which may provide supportive data. We expect to complete enrollment of the trial in the second half of 2021.
Uproleselan received orphan drug designation from the FDA in
In
As a potential life-cycle extension to uproleselan, our scientists have rationally designed an innovative antagonist of E-selectin, GMI-1687, that could be suitable for subcutaneous administration. When given by subcutaneous injection in animal models, GMI-1687 has been observed to have equivalent activity to uproleselan, but at an approximately 1,000-fold lower dose. We believe that GMI-1687 could be developed to broaden the clinical usefulness of an E-selectin antagonist to conditions where outpatient treatment is preferred or required. We are currently conducting studies with GMI-1687 to support our planned submission of an investigational new drug application, or IND, to the FDA.
We are developing an additional drug candidate, GMI-1359, that simultaneously
targets both E-selectin and a chemokine receptor known as CXCR4. Since
E-selectin and CXCR4 are implicated in the retention of cancer cells in the bone
and bone marrow, we believe that targeting both E-selectin and CXCR4 with a
single compound could improve efficacy in the treatment of cancers that affect
the bone and bone marrow, particularly solid tumors that have a propensity to
metastasize to bone, such as breast and prostate cancer. We completed a Phase 1
randomized, double-blind, placebo-controlled, single-dose escalation trial of
GMI-1359 in healthy volunteers. In this trial, volunteer participants received a
single injection of either GMI-1359 or placebo, after which they were evaluated
for safety, tolerability and pharmacokinetics, or PK. This trial was conducted
at a single site in
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escalation as well as safety, PK and pharmacodynamics markers of biologic
activity in these patients. In
In addition to our programs described above, we are also advancing other preclinical-stage programs. These programs include small-molecule glycomimetic compounds that inhibit the protein galectin-3, which we believe may have potential to be used for the treatment of fibrosis, cancer and cardiovascular disease.
We previously developed another glycomimetic drug candidate, rivipansel, a
pan-selectin antagonist for the potential treatment of vaso-occlusive crisis, a
debilitating and painful condition that occurs periodically throughout the life
of a person with sickle cell disease, or SCD. Rivipansel received fast track
designation from the FDA as well as orphan drug designation from the FDA in
We commenced operations in 2003, and our operations to date have been limited to
organizing and staffing our company, business planning, raising capital,
developing our glycomimetics platform, identifying potential drug candidates,
undertaking preclinical studies and conducting, both alone and in collaboration
with third parties, clinical trials of uproleselan, GMI-1359 and rivipansel. To
date, we have financed our operations primarily through private placements of
our securities, up-front and milestone payments under our license and
collaboration agreements and the net proceeds from public offerings of common
stock, including sales of common stock under at-the-market sales facilities with
Since inception, we have incurred significant operating losses. We had an
accumulated deficit of
· initiate and conduct our planned clinical trials of uproleselan, GMI-1359 and
GMI-1687, including fulfilling our funding and supply commitments related to
the clinical trial of uproleselan being conducted in collaboration with NCI;
· further NDA-enabling activities related to manufacture, toxicology and clinical
pharmacology;
· manufacture additional uproleselan drug supplies for validation and prepare for
commercialization;
· seek to discover and develop additional drug candidates;
· seek regulatory approvals for any drug candidates that successfully complete
clinical trials;
· ultimately establish a sales, marketing and distribution infrastructure and
scale up external manufacturing capabilities to commercialize any drug
candidates for which we may obtain regulatory approval;
· maintain, expand and protect our intellectual property portfolio;
· hire additional clinical, quality control, regulatory and scientific personnel;
and
· add operational, financial and management information systems and personnel,
including personnel to support our drug development and potential future
commercialization efforts.
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To fund further operations, we will need to raise capital. We may obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings, potentially including the use of our at-the-market sales facility with Cowen, or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan. Although it is difficult to predict future liquidity requirements, we believe that our existing cash and cash equivalents will be sufficient to fund our operations into 2022. However, our ability to successfully transition to profitability will be dependent upon achieving a level of revenues adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Our Collaboration and License Agreements
In
In
We have entered into a research services agreement, or the Research Agreement,
with the
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 generally accepted accounting principles in
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We define our critical accounting policies as those accounting principles
generally accepted in
Revenue Recognition
Effective
We enter into licensing agreements which are within the scope of Topic 606, under which we license certain of our product candidates' rights to third parties. The terms of these arrangements typically include payment of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; and royalties on net sales of the licensed product. In determining the appropriate amount of revenue to be recognized as we fulfill our obligation under our agreements, we perform the five steps described above. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement of personnel costs, discount rates and probabilities of technical and regulatory success.
Licensing of Intellectual Property: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we will recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front-fees. We evaluate the measure of progress each reporting period, and, if necessary, adjust the measure of performance and related revenue recognition.
Milestone Payments: At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal will not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in their period of adjustment.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, for which the license is deemed to be the predominant item to which royalties relate, we recognize revenue at the
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later of (i) when the related sales occur, or (ii) when the performance obligation to which some of all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue from our license agreements.
Stock-Based Compensation
We issue stock-based compensation awards to our employees and non-employee
directors, including stock options. We measure stock-based compensation expense
related to these awards based on the fair value of the award on the date of
grant and recognize stock-based compensation expense on a straight-line basis
over the requisite service period of the awards, which generally equals the
vesting period. We grant stock options with exercise prices equal to the
estimated fair value of our common stock on the date of grant. Effective on
Risk-Free Interest Rate-The risk-free interest rate assumption is based on
observed interest rates for constant maturity
Expected Term-The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. Under the simplified method, the expected life of an option is presumed to be the midpoint between the vesting date and the end of the contractual term. We used the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options.
Expected Volatility-Expected volatility is based on the historical volatilities of a peer group of comparable publicly traded companies with drug candidates in similar stages of development along with our historical volatility since our public offering.
Expected Dividend Yield-We have assumed no dividend yield because we do not expect to pay dividends in the future, which is consistent with our history of not paying dividends.
Research and Development Expenses, Including Clinical Trial Accruals/Expenses
Research and development costs consist of salaries and benefits, including related stock-based compensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations, or CROs, and contract manufacturing organizations, or CMOs. Research and development costs are expensed as incurred.
Clinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these clinical trial activities to third parties. Third-party clinical trial expenses include investigator fees, site and patient costs, CRO costs, and costs for central laboratory testing and data management. The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs. These inputs are required to be estimated due to a lag in receiving the actual clinical information from third parties. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the balance sheets as prepaid assets or accrued expenses. These third-party agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered for future research and development activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. When evaluating the adequacy of the accrued expenses, we analyze progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made. Our historical clinical accrual estimates have not been materially different from our actual costs.
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Components of Operating Results
Revenue
To date, we have not generated any revenue from the sale of our drug candidates and do not expect to generate any revenue from the sale of drugs in the near future. Substantially all of our historical revenue consisted of the upfront and milestone payments under the Pfizer Agreement.
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full-time research and development employees, facilities expenses, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, fees paid to CROs and other consultants and other outside expenses. Other preclinical research and platform programs include activities related to exploratory efforts, target validation, lead optimization for our earlier programs and our proprietary glycomimetics platform. Our research and development expenses have related primarily to the development of rivipansel, uproleselan and our other drug candidates.
We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis because we are organized and record expense by functional department and our employees may allocate time to more than one development project. Accordingly, we only allocate a portion of our research and development expenses by functional area and by drug candidate.
Research and development costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business model. Drug 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 our research and development expenses to increase over the next several years as we seek to progress uproleselan, GMI-1359 and our other drug candidates into and through clinical development. However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical studies and clinical trials of our drug candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our drug candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our drug candidates.
The duration, costs and timing of clinical trials and development of our drug candidates will depend on a variety of factors that include:
· per patient trial costs;
· the number of patients that participate in the trials;
· the number of sites included in the trials;
· the countries in which the trial is conducted;
· the length of time required to enroll eligible patients;
· the number of doses that patients receive;
· the drop-out or discontinuation rates of patients;
· potential additional safety monitoring or other studies requested by regulatory
agencies;
· the duration of patient follow-up; and
· the safety and efficacy profile of the drug candidate.
In addition, the probability of success for each drug candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how
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much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate's commercial potential.
General and Administrative
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and consulting services. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities.
Interest Income
Other income consists of interest income earned on our cash and cash equivalents.
Results of Operations for the Years Ended
The following table sets forth our results of operations for the years endedDecember 31, 2019 and 2018. YEAR ENDED PERIOD-TO DECEMBER 31, PERIOD (in thousands) 2019 2018 CHANGE Revenue $ - $ - $ - Costs and expenses: Research and development expense 47,029 40,092 6,937 General and administrative expense 14,360 11,413 2,947 Total costs and expenses 61,389 51,505 9,884 Loss from operations (61,389) (51,505) (9,884) Interest income 3,497 3,231 266 Net loss and comprehensive loss$ (57,892) $ (48,274) $ (9,618)
Research and Development Expense
The following table summarizes our research and development expense by
functional area for the years ended
YEAR ENDED PERIOD-TO DECEMBER 31, PERIOD (in thousands) 2019 2018 CHANGE Clinical development$ 11,898 $ 5,450 $ 6,448 Manufacturing and formulation 18,077 20,692 (2,615) Contract research services, consulting and other costs 2,644 2,511 133 Laboratory costs 2,146 2,004 142 Personnel-related 9,862 7,726 2,136 Stock-based compensation 2,402 1,709 693 Research and development expense$ 47,029 $ 40,092 $ 6,937 62 Table of Contents
The following table summarizes our research and development expense by drug
candidate for the years ended
YEAR ENDED PERIOD-TO DECEMBER 31, PERIOD (in thousands) 2019 2018 CHANGE Uproleselan$ 30,033 $ 26,775 $ 3,258 GMI-1359 425 348 77 Other research and development 4,307 3,534 773
Personnel-related and stock-based compensation 12,264 9,435 2,829 Research and development expense
$ 47,029 $ 40,092 $ 6,937
Research and development expense increased by
General and Administrative Expense
The following table sets forth the components of our general and administrative
expense for the years ended
YEAR ENDED PERIOD-TO DECEMBER 31, PERIOD (in thousands) 2019 2018 CHANGE Personnel-related$ 4,783 $ 3,553 $ 1,230 Stock-based compensation 3,813 2,878 935 Legal, consulting and other professional expenses 4,849 4,157 692 Other 915 825 90 General and administrative expense$ 14,360 $ 11,413 $ 2,947
General and administrative expense increased for the year ended
Interest Income
Interest income increased by
Liquidity and Capital Resources
Sources of Liquidity
We have historically financed our operations primarily through public offerings
and private placements of our capital stock, including sales agreements with
Cowen, and upfront and milestone payments from our license and collaboration
agreements. As of
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In
In
In
In
As described above, we entered into a collaboration and license agreement with
Apollomics in
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs.
The successful development of any of our drug candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of uproleselan or our other drug candidates. We are also unable to predict when, if ever, material net cash inflows will commence from uproleselan or our other drug candidates. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
· successful enrollment in, and completion of, clinical trials;
· receipt of marketing approvals from applicable regulatory authorities;
· establishing commercial manufacturing capabilities or making arrangements with
third-party manufacturers;
· obtaining and maintaining patent and trade secret protection and regulatory
exclusivity for drug candidates;
· launching commercial sales of drugs, if and when approved, whether alone or in
collaboration with others; and
· obtaining and maintaining healthcare coverage and adequate reimbursement.
A change in the outcome of any of these variables with respect to the development of any of our drug candidates would significantly change the costs and timing associated with the development of that drug candidate. Because our drug candidates are in various stages of clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our drug candidates or whether, or when, we may achieve profitability. Until such time, if ever, as
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we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements, including our existing license agreement with Apollomics. Except for Apollomics' obligation to make milestone and royalty payments under our license agreement, we do not have any committed external source of liquidity.
To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations.
We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our 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 when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.
Outlook
Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2022. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain.
Cash Flows
The following table summarizes our cash flows for the years endedDecember 31, 2019 , 2018 and 2017. YEAR ENDED DECEMBER 31, (in thousands) 2019 2018 2017 Net cash provided by (used in): Operating activities$ (51,984) $ (43,331) $ (29,768) Investing activities (145) (126) (294) Financing activities 413 129,450 113,945 Net change in cash and cash equivalents$ (51,716) $ 85,993 $ 83,883
In assessing cash used in operating activities, we consider several principal factors: (i) net loss for the period; (ii) adjustments for non-cash charges including stock-based compensation expense and depreciation and amortization of property and equipment; and (iii) the extent to which receivables, accounts payable and other liabilities, or other working capital components increase or decrease.
Year Ended
Operating Activities
Net cash used in operating activities was
Investing Activities
Net cash used in investing activities, consisting of purchases of scientific
equipment and computers, was
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Net cash provided by financing activities of
Contractual Obligations
As of
The following table depicts our obligations under this lease as ofDecember 31, 2019 . Payments Due by Period After Total 2020 2021 2022 2023 2024 2024 (In thousands) Operating leases$ 4,174 $ 1,051 $ 1,078 $ 1,104 $ 941 $ - $ -
The foregoing table does not include various agreements that we have entered into for services with third-party vendors, including agreements to conduct clinical trials, to manufacture products, and for consulting and other contracted services due to the cancelable nature of the services. We accrue the costs of these agreements based on estimates of work completed to date.
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
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