JASPER THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "Quarterly Report") and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 filed with theSecurities and Exchange Commission onMarch 18, 2022 . Certain of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled "Risk Factors", in Part II, Item 1A of this Quarterly Report, 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. You should carefully read the section entitled "Risk Factors" to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section of this Quarterly Report entitled "Cautionary Note Regarding Forward-Looking Statements." The events and circumstances reflected in our forward-looking statements may not be achieved or may not occur, and actual results could differ materially from those described in or implied by the forward-looking statements contained in the following discussion and analysis. As a result of these risks, you should not place undue reliance on these forward-looking statements. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law. Overview We are a clinical-stage biotechnology company dedicated to enabling cures through hematopoietic stem cell therapy. We are focused on the development and commercialization of safer and more effective conditioning agents and mRNA-based stem cell engineering to allow for expanded use of stem cell transplantation and ex vivo gene therapy, a technique in which genetic manipulation of cells is performed outside of the body prior to transplantation. We are also developing novel therapeutics directed at diseased hematopoietic stem cells. Our drug development pipeline includes multiple product candidates designed to improve hematopoietic stem cell therapy. Our lead product candidate, JSP191, is in clinical development as a novel conditioning antibody that clears hematopoietic stem cells from bone marrow in patients prior to undergoing allogeneic stem cell therapy or stem cell gene therapy. We plan to initiate a registrational clinical study in acute myeloid leukemia ("AML") patients undergoing stem cell transplantation by the end of the first quarter of 2023. Based on the single agent depletion observed in our Phase 1 study of myelodysplastic syndrome ("MDS") patients undergoing stem cell transplant, we are also initiating a pilot study of JSP191 as a therapeutic in lower-risk MDS, which we expect to commence in the second half of this year. Beyond JSP191, we are developing stem cell grafts transiently reprogrammed using mRNA that have a competitive advantage over endogenous hematopoietic stem cells ("HSCs"), enabling higher levels of engraftment designed to remove the need for highly toxic conditioning of the patient and lower the risk of other serious complications that limit current stem cell transplants. We plan to continue to expand our pipeline to include other novel stem cell therapies based on immune modulation, graft engineering and cell or gene therapies. Our goal is to expand the use of curative stem cell transplant and gene therapies for all patients, including children and the elderly. Stem cell transplantation is among the most widely practiced forms of cellular therapy and has the potential to cure a wide variety of diseases, including cancers, genetic disorders, and autoimmune diseases. Yet currently, patients must receive highly toxic and potentially life-threatening conditioning agents to prepare their bone marrow for transplantation with either donor stem cells or their own gene-edited stem cells. Younger, fitter patients capable of surviving these toxic side effects are typically given myeloablative, or high-intensity, conditioning whereas older or less fit patients are typically given reduced intensity, but still toxic, conditioning which leads to less effective transplants. These toxicities include a range of acute and chronic effects to the gastrointestinal tract, kidneys, liver, lung, endocrine, and neurologic tissues. Depending upon the conditioning regimen, fitness of the patient, and compatibility between the donor and recipient, the risk of transplant-related mortality ranges from 10% to more than 50% in older patients. Less toxic ways to condition patients have been developed to enable transplant for older patients or those with major comorbidities, but these regimens risk less potent disease elimination and higher rates of disease relapse. Even though stem cell therapy can be one of the most powerful forms of disease cure, these limitations of non-targeted conditioning regimens have seen little innovation over the past decade. 20 Our lead product candidate, JSP191, is a monoclonal antibody designed to block the specific signal on stem cells required for survival. It is currently in development as a highly targeted conditioning agent prior to stem cell therapy as well as a therapeutics in lower-risk MDS patients, which we expect to commence in the second half of 2022. We are also sponsoring two clinical studies of JSP191 as a conditioning agent prior to stem cell transplant. The first clinical study is an open label Phase 1/2 trial in two cohorts of severe combined immunodeficiency ("SCID") patients: patients with a history of a prior allogeneic transplant for SCID but with poor graft outcomes and newly diagnosed SCID patients. The primary endpoint in this study is to evaluate the safety and tolerability of JSP191. The secondary goal of this study is to evaluate the efficacy of JSP191 as a conditioning agent in conjunction with a stem cell transplant. Based on preliminary results from our ongoing Phase 1/2 clinical trial, we believe JSP191 has demonstrated the ability as a single agent to enable engraftment of donor HSCs as determined by donor chimerism, or the percentage of bone marrow cells in the patient that are of donor origin after transplant. Engraftment was observed in seven out of ten T-B-NK+ SCID patients with prior allogeneic transplant, as evidenced by CD15+ donor chimerism of more than 5% averaged from 12-24 weeks post-transplant. Increased naïve donor T cell production was observed in the majority of T-B-NK+ subjects, as well as clinical improvement. No JSP191 treatment-related serious adverse events ("SAEs") have been reported to date and pharmacokinetics have been consistent with earlier studies in healthy volunteers. We expect to complete enrollment in this Phase 1/2 clinical trial by mid-2023.
The FDA has granted rare pediatric disease designation to JSP191 as a conditioning treatment for patients with SCID. In addition, the FDA granted orphan drug designation to JSP191 for conditioning treatment prior to hematopoietic stem cell transplantation.
We also are evaluating JSP191 in an open label Phase 1 clinical trial in patients with MDS or AML undergoing donor stem cell transplant, but ineligible for myeloablative conditioning. The primary endpoints are to evaluate the safety, tolerability, and pharmacokinetic parameters of JSP191. Data from the initial dose finding Phase1a portion of this trial as well as the Phase 1b dose expansion cohort have been reported. Initial results from the first twenty-four patients show that 0.6 mg/kg JSP191-based conditioning was well-tolerated with all twenty-four patients achieving successful primary engraftment. These initial results also show that twelve of twenty Phase 1a and 1b patients with MRD at screening achieved clearance of multimodality MRD using three methods of detection: conventional cytogenetics, flow cytometry, and next generation sequencing. No JSP191 related serious adverse events have been reported. As of reporting of these initial results, four patients have come off study due to relapse or progression. We presented these data at the 2022 Transplant and Cellular Therapy (TCT) meeting onApril 26, 2022 . We have entered into a clinical collaboration withStanford University ("Stanford") to study JSP191-based conditioning in patients with Fanconi anemia undergoing stem cell transplant. This study is currently open for patient recruitment and has enrolled the first patient. We are also collaborating with theNational Institutes of Health to conduct clinical trials of JSP191-based conditioning in patients with sickle cell disease ("SCD"), with chronic granulomatous disease ("CGD") and with GATA-2 mutated MDS. We believe that JSP191 may also be useful for conditioning in allogenic transplant for other diseases beyond which we are currently studying, including autoimmune diseases. We also believe that targeted JSP191-based conditioning may improve the efficacy and safety of gene therapies. We are working with Graphite Bio, Inc. ("Graphite Bio") for gene therapy in patients with X-linked severe combined immunodeficiency ("X-SCID") first as a non-clinical collaboration with an option to expand to clinical trials, as well as withAruvant Sciences GmbH ("Aruvant Sciences") for gene therapy in patients with SCD and withAVROBIO, Inc. ("Avrobio") for gene therapy in patients with Gaucher disease. We plan to evaluate JSP191 as a therapeutic for patients with disorders of the hematopoietic stem cell. MDS is a heterogeneous disorder of the bone marrow which typically occurs in an older population and can progress to AML. Lower-risk MDS patients typically suffer from anemia, thrombocytopenia or neutropenia and are given drug therapies such as an erythropoiesis stimulating agent ("ESA") to stimulate production of new red blood cells to correct their deficiency. However, these agents do not target the diseased hematopoietic stem cell and patientswho become refractory toESA are dependent on routine blood transfusions, which is associated with poor survival.ESA -refractory low-risk MDS patients have few treatment options and are a significant unmet medical need. JSP191 and other anti-CD117 monoclonal antibodies have been shown to deplete normal and diseased MDS human hematopoietic stem cells in clinical and pre-clinical studies. In studies of non-human primates and healthy volunteers, administration of a single dose of JSP191 resulted in depletion of healthy hematopoietic stem cells followed by recovery in approximately six weeks. Additional recent clinical data in MDS patients undergoing stem cell transplant showed depletion of hematopoietic stem cells after administration of JSP191 alone. By depleting diseased and healthy hematopoietic stem cells, we believe that JSP191 may allow for preferential recovery of healthy hematopoietic stem cells and restoration of normal hematopoiesis. We intend to study JSP191 monotherapy in lower-risk MDS patients with documented cytopeniawho are refractory toESA therapy. 21
Our mRNA stem cell grafts platform is designed to overcome key limitations of
stem cell transplant and stem cell gene therapy. By using mRNA delivery and/or
gene editing, we believe we can transiently reprogram donor or gene corrected
stem cells to have a transient proliferative and survival advantage over a
patient's existing cells. We believe initial preclinical experiments by Jasper
demonstrate multiple different mRNAs can be used to improve engraftment of
modified stem cells. One approach engineers mRNA stem cell grafts that express
variants of CXCR4 designed to improve stem cell homing and engraftment in the
bone marrow. Another approach leverages expression of a modified stem cell
factor receptor that can lead to cell line proliferation independent of stem
cell factor ("SCF") concentration, enabling our mRNA stem cell grafts to
outcompete unmodified HSCs through better survival and engraftment. Also, since
JSP191 only blocks signaling through the stem cell factor receptor, these grafts
are not affected by JSP191 when used in combination. Other initial experiments
have shown that mRNA can be used to express these receptor variants on the cell
surface. We have identified other potential receptor modifications that prevent
the binding of JSP191 but retain the ability to bind SCF, therefore allowing the
mRNA stem cell grafts to proliferate normally even in the presence of JSP191.
We intend to become a fully integrated discovery, development, and commercial
company in the field of hematopoietic stem cell therapy. We are developing our
product candidates to be used individually or, in some cases, in combination
with one another. As a result, we believe our pipeline could be tailored to the
patient-specific disease so that a patient may receive more than one of our
therapies as part of his or her individual allogeneic or gene-edited stem cell
therapy. Our goal is to advance our product candidates through regulatory
approval and bring them to the commercial market based on the data from our
clinical trials and communications with regulatory agencies and payor
communities. We expect to continue to advance our pipeline and innovate through
our research platform.
We have an exclusive license agreement with Amgen Inc. ("Amgen") for the
development and commercialization of the JSP191 monoclonal antibody in all
indications and territories worldwide. We also have an exclusive license
agreement with Stanford for the right to use JSP191 in the clearance of stem
cells prior to the transplantation of HSCs. We also entirely own the
intellectual property for our mRNA stem cell grafts platform, which has been
internally developed.
AMHC was incorporated in the State of Delaware in August 2019 . Old Jasper was
incorporated in the State of Delaware in March 2018 and did not have any
significant operations or research and development activities until November
2019 , when it entered into a license agreement with Amgen for a license to
certain patents and know-how related to Amgen's proprietary monoclonal antibody
known as AMG-191, which we later renamed as JSP191.
Since Old Jasper's inception in March 2018 , we have devoted substantially all of
our resources to performing research and development, enabling manufacturing
activities in support of our product development efforts, hiring personnel,
acquiring and developing our technology and product candidates, performing
business planning, establishing our intellectual property portfolio, raising
capital and providing general and administrative support for these activities.
We do not have any products approved for sale and have not generated any revenue
from product sales. We expect to continue to incur significant and increasing
expenses and substantial losses for the foreseeable future as we continue our
development of and seek regulatory approvals for our product candidates and
commercialize any approved products, seek to expand our product pipeline and
invest in our organization. We expect to incur increased expenses associated
with operating as a public company, including significant legal, audit,
accounting, regulatory, tax-related, director and officer insurance, investor
relations and other expenses.
We have incurred significant losses and negative cash flows from operations since our inception. During the three months endedMarch 31, 2022 and 2021, we incurred net losses of$2.2 million and$9.8 million , respectively. We generated negative operating cash flows of$14.2 million and$6.2 million for the three months endedMarch 31, 2022 and 2021, respectively. As ofMarch 31, 2022 , we had an accumulated deficit of$69.7 million . We had cash and cash equivalents of$70.4 million as ofMarch 31, 2022 . Given our recurring losses from operations and negative cash flows, and based on our current operating plan, these funds would not be sufficient to fund our operations in the foreseeable future and we will need to raise additional financing. As a result, we concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report. We expect to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development, approval and commercialization of our product candidates and upon achievement of sufficient revenues to support our cost structure. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. We may never achieve profitability, and unless we do and until then, we will need to continue to raise additional capital. 22 Our management plans to monitor expenses and raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and licensing arrangements. Our ability to access capital when needed is not assured and, if capital is not available to us when, and in the amounts, needed, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidate, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially harm our business, financial condition and results of operations.
We expect our expenses will increase substantially in connection with our ongoing and planned activities, as we:
? advance product candidates through preclinical studies and clinical trials;
? procure the manufacture of supplies for our preclinical studies and clinical
trials; ? acquire, discover, validate, and develop additional product candidates;
? attract, hire and retain additional personnel;
? operate as a public company;
? implement operational, financial and management systems;
? pursue regulatory approval for any product candidates that successfully
complete clinical trials;
? establish a sales, marketing, and distribution infrastructure to commercialize
any product candidate for which we may obtain marketing approval and related
commercial manufacturing build-out; and
? obtain, maintain, expand, and protect our portfolio of intellectual property
rights.
We do not currently own or operate any manufacturing facility. We rely on
contract manufacturing organizations ("CMOs") to produce our drug candidates in
accordance with the FDA's current good manufacturing practices ("cGMP")
regulations for use in our clinical studies. Under our license agreement with
Amgen, we received a substantial amount of drug product to support initiation of
our planned clinical trials of JSP191. Since November 2019 , we have entered into
development and manufacturing agreements with Lonza Sales AG ("Lonza") relating
to the manufacturing of JSP191 drug substance and drug product and product
quality testing. The facility of Lonza in Slough, United Kingdom is responsible
for production and testing of drug substance. The facility of Lonza in Stein,
Switzerland is responsible for production and testing of drug product.
Labelling, packaging and storage of finished drug product is provided by PCI
Pharma Services , in San Diego, California .
Given our stage of development, we do not yet have a marketing or sales
organization or commercial infrastructure. Accordingly, if we obtain regulatory
approval for any of our product candidates, we also expect to incur significant
commercialization expenses related to product sales, marketing, manufacturing,
and distribution.
Because of the numerous risks and uncertainties associated with product
development, we are unable to predict the timing or amount of increased expenses
or when or if we will be able to achieve or maintain profitability. Even if we
are able to generate revenue from the sale of our product candidates, we may not
become profitable. If we fail to become profitable or are unable to sustain
profitability on a continuing basis, then we may be unable to continue our
operations at planned levels and may be forced to reduce our operations.
Business Impact of the COVID-19 Pandemic
InMarch 2020 , theWorld Health Organization declared the global COVID-19 outbreak a pandemic. The global COVID-19 pandemic continues to evolve rapidly, including with respect to the spread of variants, and we will continue to monitor it closely. While our operations to date have not been significantly impacted by the COVID-19 pandemic, we cannot at this time predict the specific extent, duration, or full impact that the continuing COVID-19 pandemic will have on our business, financial condition and operations, including ongoing and planned clinical trials and clinical development timelines, particularly as we advance our product candidates to clinical development, the continued spread of COVID-19 and its variants, including Omicron, and the measures taken by the governmental authorities could disrupt the supply chain and the manufacture or shipment of drug substances and finished drug products for our product candidates for use in our clinical trials, impede our clinical trial initiation and recruitment and the ability of patients to continue in clinical trials, impede testing, monitoring, data collection and analysis and other related activities. The COVID-19 pandemic could also potentially affect the business of the FDA or other regulatory authorities, which could result in delays in meetings related to our ongoing and planned clinical trials. We experienced slower than anticipated patient enrollment in our SCID clinical trial in 2020 due to reluctance of these immunocompromised patients to travel and undergo hospitalization during the pandemic. We may continue to experience interruptions to our clinical trials due to the COVID-19 pandemic. The impact of the COVID-19 pandemic on our financial performance will depend on future developments, including the duration and spread of the pandemic, its impact on our clinical trial enrollment, trial sites, contract research organizations ("CROs"), CMOs, and other third parties with whom we do business, its impact on regulatory authorities and our key scientific and management personnel, progress of vaccination and related governmental advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets or the overall economy are impacted for an extended period, our business may be materially adversely affected. 23 Amgen License Agreement OnNovember 21, 2019 , we entered into a license agreement with Amgen (the "Amgen License Agreement") pursuant to which we obtained an exclusive, sublicensable license for certain patents, data, and non-data know-how related to Amgen's proprietary monoclonal antibody known as AMG191, as renamed to JSP191. The Amgen License Agreement terminates on a country -by-country basis on the 10-year anniversary of the date on which the exploitation of the licensed products is no longer covered by a valid claim under a licensed patent in such country. On a country-by-country basis, upon the expiration of the term in each country with respect to the licensed products, the licenses granted to us by Amgen become fully paid and non-exclusive. We and Amgen have the right to terminate the agreement for a material breach as specified in the agreement.
Stanford License Agreement
InMarch 2021 , we entered into a license agreement withStanford (the "Stanford License Agreement"). We received a worldwide, exclusive license with a right to sublicense for JSP191 in the field of depleting endogenous blood stem cells in patients for whom hematopoietic cell transplantation is indicated.Stanford transferred to us certain know-how and patents related to JSP191. Under the terms of the Stanford License Agreement, we agreed to use commercially reasonable efforts to develop, manufacture, and sell licensed product and to develop markets for a licensed product. In addition, we agreed to use commercially reasonable efforts to meet the milestones as specified in the agreement over the next six years and must notifyStanford in writing as each milestone is met. We will pay annual license maintenance fees, beginning on the first anniversary of the effective date of the Stanford License Agreement and ending upon the first commercial sale of a product, method, or service in the licensed field of use, as follows:$25,000 for each first and second year,$35,000 for each third and fourth year, and$50,000 at each anniversary thereafter ending upon the first commercial sale. We are also obligated to pay late stage clinical development milestones and first commercial sales milestone payments of up to$9.0 million in total. We will also pay low single-digit royalties on net sales of licensed products, if approved. We paid a$25,000 license maintenance fee inMarch 2022 , which was recognized as research and development expense in the condensed statements of operations and comprehensive loss for the three months endedMarch 31, 2022 .
The Stanford License Agreement expires on a country-by-country basis on the last-to-expire valid claim of a licensed patent in such country. We may terminate the agreement by givingStanford written notice at least 12 months in advance of the effective date of termination. We may also terminate theStanford License Agreement solely with respect to any particular patent application or patent by givingStanford written notice at least 60 days in advance of the effective date of termination.Stanford may terminate the Stanford License Agreement after 90 days written notice byStanford , specifying a problem, including a delinquency on any report required pursuant to the agreement or any payment, missing a milestone or for a material breach, unless we remediate the problem in that 90-day period. 24
Other collaboration and clinical trial agreements
Collaboration with
EffectiveSeptember 2020 , we entered into a sponsored research agreement withStanford , pursuant to whichStanford will execute a Phase 1/2 clinical trial utilizing JSP191 to treat Fanconi Anemia patients in Bone Marrow Failure requiring allogeneic transplant with non-sibling donors atStanford Lucile Packard Children's Hospital . As consideration for the services performed byStanford under this agreement, we will payStanford a total of$0.9 million over approximately three years upon the achievement of the first development and clinical milestone, including FDA filings and patients' enrollment. As ofDecember 31, 2020 , we accrued$0.3 million related to the achievement of the first milestone under this agreement, which was paid inFebruary 2021 . InFebruary 2022 , the second milestone was achieved. The Company paid$0.3 million inMarch 2022 , and recognized this as a research and development expense in the condensed statements of operations and comprehensive loss for the three months endedMarch 31, 2022 . The third milestone is based on the progress of the clinical trials and will be recognized when achieved. We have other collaboration and clinical trial agreements, including with Zai Lab Limited, Graphite Bio, Aruvant Sciences andAvrobio , to study JSP191 as targeted, non-toxic conditioning for investigational gene therapies. These collaborations are non-exclusive, and we have agreed with these collaborators to provide materials to use by the collaborators in their products' development studies and clinical studies. InAugust 2021 , we entered into a clinical trial agreement with theNational Cancer Institute ("NCI") for the clinical development of JSP191 for the treatment of GATA2 deficiency, whereby NCI will perform the preclinical studies and submit an Investigational New Drug application ("IND") for this indication to the FDA, and we will provide materials to use in such studies. We have also entered into clinical trial agreements with the National Heart, Lung, andBlood Institute ("NHLBI") and theNational Institute of Allergy and Infectious Diseases ("NIAID"), pursuant to which NHLBI and NIAID will serve as the IND sponsors of a Phase 1/2 clinical trial to evaluate JSP191 as a targeted, non-toxic conditioning regimen prior to allogeneic transplant for SCD and for CGD, respectively. Each party incurs its own costs under these agreements.
Components of Results of Operations
Operating Expenses Research and Development The largest component of our total operating expenses since our inception has been research and development activities, including the preclinical and clinical development of our product candidates. Research and development expenses consist primarily of compensation and benefits for research and development employees, including stock-based compensation; expenses incurred under agreements with CROs and investigative sites that conduct preclinical and clinical studies; the costs of acquiring and manufacturing clinical study materials and other supplies; payments under licensing and research and development agreements; other outside services and consulting costs; and facilities, information technology and overhead expenses. Research and development costs are expensed as incurred.
External research and development costs include:
? costs incurred under agreements with third-party CROs, CMOs and other third
parties that conduct preclinical and clinical activities on our behalf and
manufacture our product candidates;
? costs associated with acquiring technology and intellectual property licenses
that have no alternative future uses;
25
? consulting fees associated with our research and development activities; and
? other costs associated with our research and development programs, including
laboratory materials and supplies.
Internal research and development costs include:
? employee-related costs, including salaries, benefits and
stock-based compensation expense for our research and development personnel;
and
? other expenses and allocated overheads incurred in connection with our research
and development programs. We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical trials, pursue regulatory approval of our product candidates and expand our pipeline of product candidates. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors, including the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if approved.
Our future research and development costs may vary significantly based on factors, such as:
? the scope, rate of progress, expense and results of our discovery and
preclinical development activities;
? the costs and timing of our chemistry, manufacturing and controls activities,
including fulfilling cGMP-related standards and compliance, and identifying and
qualifying suppliers;
? per patient clinical trial costs;
? the number of trials required for approval;
? the number of sites included in our clinical trials;
? the countries in which the trials are conducted;
? delays in adding a sufficient number of trial sites and recruiting suitable
patients to participate in our clinical trials;
? the number of patients that participate in the trials;
? the number of doses that patients receive;
? patient drop-out or discontinuation rates;
? potential additional safety monitoring requested by regulatory agencies;
26
? the duration of patient participation in the trials and follow up;
? the cost and timing of manufacturing our product candidates;
? the phase of development of our product candidates;
? the efficacy and safety profile of our product candidates;
? the timing, receipt, and terms of any approvals from applicable regulatory
authorities, including the FDA and non-
? maintaining a continued acceptable safety profile of our product candidates
following approval, if any, of our product candidates;
? significant and changing government regulation and regulatory guidance;
? changes in the standard of care on which a clinical development plan was based,
which may require new or additional trials;
? the extent to which we establish additional strategic collaborations or other
arrangements; and
? the impact of any business interruptions to our operations or to those of the
third parties with whom we work, particularly in light of the current COVID-19 pandemic environment. General and Administrative General and administrative expenses consist primarily of personnel costs and expenses, including salaries, employee benefits, stock-based compensation for our executive and other administrative personnel; legal services, including relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect our general and administrative expenses to increase substantially for the foreseeable future as we anticipate an increase in our personnel headcount to support expansion of research and development activities, as well as to support our operations generally. We also expect an increase in expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with applicable Nasdaq andSEC requirements; additional director and officer insurance costs; and investor and public relations costs.
Other Income (Expense), Net
Other income (expense), net includes changes in the fair value of common stock warrant liability and earnout liability, which were recorded at the closing of the Business Combination, changes in the fair value of our derivative tranche liabilities, which were settled inFebruary 2021 , foreign currency transactions gains and losses, and interest income. These financial instruments were classified as liabilities in our consolidated balance sheets and re-measured at each reporting period end until they are exercised, settled or have expired. 27 Results of Operations
Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
March 31, Change Change
2022 2021 $ %
Operating expenses
Research and development $ 8,188 $ 4,420 $ 3,768 85 %
General and administrative 4,590 1,834 2,756 150 %
Total operating expenses 12,778 6,254 6,524 104 %
Loss from operations (12,778 ) (6,254 ) (6,524 ) 104 %
Change in fair value of earnout
liability 4,593 - 4,593 100 %
Change in fair value of common
stock warrant liability 6,050 - 6,050 100 %
Change in fair value of derivative
liability - (3,501 ) 3,501 -100 %
Other income (expense), net (72 ) 1 (73 ) *
Total other income (expense), net 10,571 (3,500 ) 14,071 -402 %
Net loss and comprehensive loss $ (2,207 ) $ (9,754 ) $ 7,547 -77 % * not meaningful
Research and Development Expenses
The following table summarizes our research and development expenses for the
three months ended
Three Months Three Months
Ended Ended
March 31, March 31, Change Change
2022 2021 $ %
External costs:
CRO, CMO and other third-party
preclinical studies and clinical trials $ 3,418 $ 1,714 $ 1,704 99 %
Consulting costs 927 967 (40 ) -4 %
Other research and development costs,
including laboratory materials and
supplies 714 490 224 46 %
Internal costs:
Personnel-related costs 1,986 1,226 760 62 %
Facilities and overhead costs 1,143 23 1,120 *
Total research and development expense: $ 8,188 $ 4,420 $ 3,768 85 % * not meaningful Research and development expenses increased by$3.8 million , from$4.4 million for the three months endedMarch 31, 2021 to$8.2 million for the three months endedMarch 31, 2022 . External clinical research organizations ("CRO"), contract manufacturing organization ("CMO") and other third-party preclinical studies and clinical trials expenses increased by$1.7 million , from$1.7 million for the three months endedMarch 31, 2021 to$3.4 million for the three months endedMarch 31, 2022 . The increase is primarily related to an increase in our CRO expenses related to our ongoing SCID and MDS/AML clinical trials and increased CMO product development and manufacturing expenses. Other external research and development costs increased by$0.2 million , from$0.5 million for the three months endedMarch 31, 2021 to$0.7 million for the three months endedMarch 31, 2022 due to increases in purchases of laboratory materials and supplies and
other miscellaneous costs.
28
Our external costs by program for the three months ended
Three Months Ended
March 31,
2022 2021
JSP191 platform $ 2,592 $ 2,007
MDS/AML clinical trial 948 612
SCID clinical trial 832 361
Other 687 191
Total external costs $ 5,059 $ 3,171 Employee payroll and related expenses increased by$0.8 million , from$1.2 million for the three months endedMarch 31, 2021 to$2.0 million for the three months endedMarch 31, 2022 , as we continue hiring employees in our research and development organization. Stock-based compensation expenses were$0.2 million for each of the three months endedMarch 31, 2022 and 2021. Facilities and allocated overhead expenses increased by$1.1 million , as we commenced using our laboratory space fromJuly 2021 and increased our research and development headcount.
General and Administrative Expenses
General and administrative expenses increased by$2.8 million , from$1.8 million for the three months endedMarch 31, 2021 to$4.6 million for the three months endedMarch 31, 2022 . Employee payroll and related expenses increased by$0.9 million , from$0.5 million for the three months endedMarch 31, 2021 to$1.4 million for the three months endedMarch 31, 2022 , as a result of continued hiring of executives and administrative employees. Stock-based compensation expenses were$0.6 million and$0.1 million for the three months endedMarch 31, 2022 and 2021, respectively. Expenses related to professional services increased by$2.2 million , from$1.0 million for the three months endedMarch 31, 2021 to$3.2 million for the three months endedMarch 31, 2022 , due to increased spending on consulting, insurance costs, recruiting, legal, audit, accounting and other services to support our growing operations as a public company and as we continue to expand our operations to support our business strategy and product development. Other Income (Expense), Net Total other income (expense), net increased by$14.1 million to$10.6 million net income from$3.5 million net expense for the three months endedMarch 31, 2022 and 2021, respectively. We recognized a loss of$3.5 million during the three months endedMarch 31, 2021 related to the change in fair value of our derivative tranche liability and did not have such expense in the 2022 period, as the derivative was settled inFebruary 2021 and was no longer outstanding. As ofMarch 31, 2022 , we have outstanding warrants to purchase an aggregate of 4,999,863 shares of our common stock, which were recognized upon the closing of the Business Combination onSeptember 24, 2021 . The warrants were concluded to be derivative financial instruments and are measured at fair value at each reporting period end until these are exercised, have expired or are redeemed. The warrants are publicly traded, and the fair value is estimated using the closing price of a warrant at the period end. We recognized$6.1 million of other income related to the change in fair value of common stock warrants for the three months endedMarch 31, 2022 , due to the decrease in the closing price of the warrants during the period. Upon the closing of the Business Combination onSeptember 24, 2021 , we recognized earnout liability related to the Sponsor Earnout Shares placed in escrow. These shares will be released from escrow upon achieving agreed upon common stock price targets within the specified period. This liability is recorded at fair value using a Monte Carlo simulation model and is re-measured at each period end until shares are released or forfeited. The significant inputs used in theMonte Carlo model include the expected volatility of our common stock and the expected term when shares will be released. We recognized$4.6 million of other income related to the change in the fair value of the earnout liability for the three months endedMarch 31, 2022 , mainly due to the decrease in our common stock price during the period. 29
Liquidity and Capital Resources
Prior to the closing of the Business Combination, we funded our operations primarily from the issuance of redeemable convertible preferred stock shares and the issuance of convertible promissory notes. We received net cash proceeds of$95.3 million at the closing of the Business Combination, which includes the remaining cash in our trust account after redemptions and the payment of the closing costs and$100.0 million received from thePIPE Investors . As ofMarch 31, 2022 , we had$70.4 million of cash and cash equivalents.
Future Funding Requirements - Going Concern
Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to advance our product candidates, expand our corporate infrastructure, operate as a public company, further our research and development initiatives for our product candidates, scale our laboratory and manufacturing operations, and incur marketing costs associated with potential commercialization. We are subject to all the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.
We have incurred significant losses and negative cash flows from operations since our inception. As ofMarch 31, 2022 , we had an accumulated deficit of$69.7 million . Given our recurring losses from operations and negative cash flows, and based on our current operating plan, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the issuance date of these condensed consolidated financial statements. We expect to finance our future cash needs through public or private equity or debt financings, collaborations or a combination of these approaches. The sale of equity or convertible debt securities may result in dilution to our stockholders, and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt or making capital expenditures. Our ability to raise additional funds may be adversely impacted by negative global economic conditions and any disruptions to and volatility in the credit and financial markets inthe United States and worldwide that may result from the ongoing COVID-19 pandemic or other factors. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs.
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with CROs for clinical trials, with CMOs for clinical supplies manufacturing and with other vendors for preclinical studies, supplies and other services and products for operating purposes. These contracts generally provide for termination on notice or may have a potential termination fee if a purchase order is cancelled within a specified time, and therefore are cancelable contracts. We do not expect any such contracts terminations and do not have any non-cancellable obligations under these agreements as ofMarch 31, 2022 .
We have contractual obligations and commitments as described in Note 9, Commitments and Contingencies, within our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
Leases
InAugust 2020 , we leased approximately 7,781 square feet of space for our headquarters inRedwood City, California . InJanuary 2022 , we amended our lease agreement and added 5,611 square feet, previously leased on a month-to-month basis, to our lease agreement. The lease will expire inAugust 2026 , but we have an option to extend the term for an additional five years toAugust 2031 . In addition to base rent, we pay our share of operating expenses and taxes. As ofMarch 31, 2022 , our rent commitments under the amended lease agreement are$1.0 million within the next 12 months fromMarch 31, 2022 and$3.9 million for
the
remainder of the lease term.
30
Our future financing requirements will depend on many factors, including:
? the timing, scope, progress, results and costs of research and development,
preclinical and non-clinical studies and clinical trials for our current and
future product candidates;
? the number, scope and duration of clinical trials required for regulatory
approval of our current and future product candidates;
? the outcome, timing and costs of seeking and obtaining regulatory approvals
from the FDA and comparable foreign regulatory authorities for our product
candidates, including any requirement to conduct additional studies or generate
additional data beyond that which we currently expect would be required to
support a marketing application;
? the costs of manufacturing clinical and commercial supplies of our current and
future product candidates;
? the costs and timing of future commercialization activities, including product
manufacturing, marketing, sales and distribution, for any of our product
candidates for which we receive marketing approval;
? any product liability or other lawsuits related to our product candidates;
? the revenue, if any, received from commercial sales of any product candidates
for which we may receive marketing approval;
? our ability to establish a commercially viable pricing structure and obtain
approval for coverage and adequate reimbursement from third-party and
government payers;
? the costs to establish, maintain, expand, enforce and defend the scope of our
intellectual property portfolio, including the amount and timing of any
payments we may be required to make, or that we may receive, in connection with
licensing, preparing, filing, prosecuting, defending and enforcing our patents
or other intellectual property rights;
? expenses incurred to attract, hire and retain skilled personnel;
? the costs of operating as a public company; and
? the impact of the COVID-19 pandemic, which may exacerbate the magnitude of the
factors discussed above.
A change in the outcome of any of these or other variables could significantly
change the costs and timing associated with the development of our product
candidates. Furthermore, our operating plans may change in the future, and we
may need additional funds to meet operational needs and capital requirements
associated with such change.
31
Cash Flows
The following table summarizes our sources and uses of cash for the periods
presented (in thousands):
Three Months
Ended
March 31,
2022 2021Net cash used in operating activities$ (14,213 ) $ (6,195 ) Net cash used in investing activities (29 ) (960 ) Net cash provided by financing activities 13
10,752
Net increase (decrease) in cash and cash equivalents and restricted cash$ (14,229 ) $ 3,597
Cash Flows Used in Operating Activities
Net cash used in operating activities was
Cash used in operating activities in the three months endedMarch 31, 2022 was primarily due to our net loss for the period of$2.2 million adjusted by non-cash net gain of$9.6 million and a net change of$2.4 million in our net operating assets and liabilities. The non-cash amounts consisted of$10.6 million net gain related to the changes in fair value of common stock warrant liability and the earnout liability, reduced by non-cash expenses, which included$0.8 million related to stock-based compensation expense, and$0.2 million related to depreciation and amortization expense. The changes in our net operating assets and liabilities were primarily due to a decrease of$2.5 million in accounts payable due to the timing of payments to our vendors, an increase of$0.3 million in prepaid expenses and other current assets and, a decrease of$0.1 million in operating lease liability, partially offset by an increase of$0.4 million in accrued expenses and other current liabilities. Cash used in operating activities during the three months endedMarch 31, 2021 was primarily due to our net loss for the quarter of$9.8 million and a net change of$0.4 million in our net operating assets and liabilities adjusted by non-cash loss of$3.9 million . The non-cash charges consisted of$3.5 million related to changes in the fair value of the derivative tranche liabilities,$0.3 million related to stock-based compensation expense and$0.1 million of non-cash operating lease expense. The changes in our net operating assets and liabilities were primarily due to an increase of$0.8 million in prepaid expenses and other current assets, a decrease of$0.6 million in other receivables, a decrease of$0.3 million in accrued expenses and other current liabilities and a$0.1 million decrease in accounts payable. The decrease in accounts payable and accrued liabilities resulted from the timing of payments to our service providers. 32
Cash Flows Used in Investing Activities
Cash used in investing activities was less than$0.1 million and$1.0 million for the three months endedMarch 2022 and 2021, respectively, which primarily consisted of purchases of the lab equipment and leasehold improvements.
Cash Flows from Financing Activities
Cash provided by financing activities for the three months endedMarch 31, 2022 was less than$0.1 million , which consisted of cash received from exercised
of stock options.
Cash provided by financing activities for the three months endedMarch 31, 2021 was$10.8 million , which consisted primarily of net proceeds from the issuance of Series A-1 redeemable convertible preferred stock shares upon the settlement of the second tranche liability.
Critical Accounting Policies and Significant Judgments and Estimates
Our critical accounting policies are disclosed in Note 2 of the notes to the consolidated financial statements included in Part II, Item 8 of the Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onMarch 18, 2022 . Since the date of such financial statements, there have been no material changes to our significant accounting policies other than those described in Note 2 of the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
Recently Issued Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements for more information regarding recently issued accounting pronouncements.
JOBS Act The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had aU.S. Securities Act of 1933, as amended, registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have opted to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) followingNovember 22, 2024 , (b) in which we have total annual gross revenue of at least$1.07 billion , or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds$700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which we have issued more than$1.00 billion in non-convertible debt securities during the prior three-year period. References herein to "emerging growth company" have the meaning associated with it in the JOBS Act. 33
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