JOUNCE THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report on Form 10-K, including those factors set forth in the section entitled "Cautionary Note Regarding Forward-Looking Statements and Industry Data" and in the section entitled "Risk Factors" in Part I, Item 1A.
Business Combination with Redx
OnFebruary 23, 2023 , we announced that we had reached an agreement on the terms of a recommended all-share combination, or the Scheme, between us and Redx Pharma plc, or Redx, a clinical-stage biotechnology company incorporated inEngland andWales . In connection with the proposed transaction, (i) we entered into a Co-operation Agreement with Redx onFebruary 23, 2023 and (ii) we and one of our wholly-owned subsidiaries, or Merger Sub, entered into a merger agreement withRM Special Holdings 3, LLC, an entity controlled byRedmile Group, LLC , orRM3 , which contemplates a merger transaction among us,RM3 and Merger Sub, or the Merger. The Merger and the Scheme are collectively referred to as the Business Combination. The Scheme will be implemented by means of a court-sanctioned scheme of arrangement under theU.K. Companies Act 2006, as amended, immediately preceded by the Merger, which together will result in Jounce owning the entire issued and to be issued ordinary share capital of Redx. Under the terms of the Scheme, holders of ordinary shares of Redx will be entitled to receive 0.2105 shares of our common stock per ordinary share, subject to adjustment in the event of a reverse stock split. Completion of the Business Combination is subject to certain closing conditions, including, among others, (i) the approval of the Scheme by a majority in number of Redx's shareholders present and voting (and entitled to vote) at the meeting(s) of Redx's shareholders, representing not less than 75 percent in value of the Redx shares held by such shareholders (or the relevant class or classes thereof), (ii) the sanction of the Scheme by theHigh Court of Justice of England andWales , (iii) the approval of the issuance of common stock by our stockholders in connection with the Business Combination, and (iv) the Scheme becoming effective no later thanJuly 31, 2023 , which date may be extended by mutual agreement of the parties. Subject to the approval of our stockholders, we intend to conduct a 5:1 reverse stock split of our common stock in conjunction with the Business Combination. We expect that, subject to the satisfaction or waiver of all relevant conditions, the Business Combination will be completed in the second quarter of 2023. However, there is no assurance that the Business Combination will be consummated on the proposed terms, timing or at all. At or prior to the closing of the Business Combination, we plan to enter into a Contingent Value Rights Agreement, or CVR Agreement, with a rights agent and a representative, agent and attorney-in-fact of the holders of contingent value rights, or CVRs. We expect to distribute CVRs to our stockholders of record and holders of vested options to purchase common stock immediately prior to the closing of the Business Combination in the form of a dividend in respect of each outstanding share of our common stock or vested option to purchase common stock. Each CVR will represent a contractual right to receive contingent cash payments upon our receipt of 80% net proceeds payable, if any, from any license or disposition of any or all rights to JTX-8064, vopratelimab, pimivalimab, and two preclinical programs, JTX-1484 and JTX-2134, that occurs within one year of the closing time of the Business Combination, subject to a six-month adjustment in certain circumstances. In the event that no disposition is made within such period, holders of CVRs will not receive any payment pursuant to the CVR Agreement.
Jounce Programs
Our JTX-8064 program is being developed for patients with either PD-(L)1 inhibitor resistant or PD-(L)1 inhibitor sensitive tumors. JTX-8064 is the first tumor-associated macrophage candidate to emerge from our Translational Science Platform. JTX-8064 is a monoclonal antibody that binds to Leukocyte Immunoglobulin Like Receptor B2, or LILRB2 (also known as ILT4), which is a cell surface receptor expressed on macrophages and other myeloid cells. Our INNATE clinical trial is a Phase 1/2 clinical trial of JTX-8064 as a monotherapy and in combination with our PD-1 inhibitor, pimivalimab, in patients with solid tumors. The Phase 2 portion of the INNATE trial is comprised of one monotherapy and eight combination indication-specific expansion cohorts. Vopratelimab is a clinical-stage monoclonal antibody that binds to and activates the Inducible T cell CO-Stimulator, or ICOS, a protein on the surface of certain T cells commonly found in many solid tumors. The SELECT trial is a randomized Phase 2 proof-of-concept trial outsidethe United States evaluating two doses of vopratelimab in combination with pimivalimab compared to pimivalimab alone in biomarker-selected, second-line, PD-(L)1 inhibitor naive NSCLC patients. 57
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Pimivalimab is a clinical-stage anti-PD-1 monoclonal antibody that we are developing primarily for use in combination with our product candidates, as we believe that combination therapy has the potential to be a mainstay of cancer immunotherapy. We presented safety and preliminary efficacy data from our monotherapy Phase 1 clinical trial of pimivalimab in 2019. Based on the results of that clinical trial, we are using pimivalimab in combination with JTX-8064 in INNATE and vopratelimab in SELECT.
GS-1811, formerly JTX-1811, which we sold to Gilead Sciences, Inc., or Gilead,
in
JTX-1484 is a monoclonal antibody designed to block human Leukocyte Immunoglobulin Like Receptor B4, or LILRB4 (also known as ILT3), on various myeloid cells which we believe may lead to reduced immune suppression and enhancement of T cell functionality. We are currently conducting investigational new drug application, or IND, enabling activities for JTX-1484.
JTX-2134 is a monoclonal antibody designed to block human LILRB1 on various myeloid cells, as well as on subsets of NK and T cells, which we believe may lead to reduced immune suppression and enhancement of T and NK cell functionality. We have identified a Development Candidate for the JTX-2134 program, but have decided not to initiate IND-enabling studies at this time.
Beyond our product candidates, we continue to advance and build our discovery pipeline. We are discovering and developing next-generation immunotherapies by leveraging our Translational Science Platform to systematically and comprehensively interrogate cell types within the tumor microenvironment. Our broad discovery pipeline includes multiple programs targeting myeloid cells such as macrophages, T regulatory cells and non-immune cells. We believe that the use of our Translational Science Platform to efficiently identify novel immuno-oncology targets and advance them from discovery to IND stage is a sustainable approach that we plan to continually apply across our broad discovery pipeline and target selection process. Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, developing our Translational Science Platform and conducting research, preclinical studies and clinical trials. We do not have any products approved for sale. We are subject to a number of risks comparable to those of other similar companies, including dependence on key individuals; the need to develop commercially viable products; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of our products. We have funded our operations primarily through proceeds received from public offerings and private placements of our stock totaling$389.5 million and payments from license and collaboration or asset sale agreements totaling$467.0 million . Due to our significant research and development expenditures, we have accumulated substantial losses since our inception. As ofDecember 31, 2022 , we had an accumulated deficit of$292.8 million . We expect to incur additional losses in the future; however, during the pendency of the Business Combination activities we do not expect to expand our research and development activities or increase our business development costs.
Financial Operations Overview
Revenue
For the year endedDecember 31, 2022 , we recognized$82.0 million of license revenue under agreements with Gilead,$15.0 million of which related to the achievement of a clinical and development milestone and$67.0 million of which related to the sale of GS-1811 to Gilead. For the year endedDecember 31, 2021 , we recognized$26.9 million of license and collaboration revenue under the Gilead License Agreement primarily relating to a$25.0 million milestone achievement for FDA clearance of the IND for GS-1811 and$1.9 million related to the completion of research and transition services. In the future, we may generate revenue from product sales or collaboration agreements, strategic alliances and licensing arrangements, including potential milestone payments and royalties. We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing and amount of license fees, milestones, reimbursement of costs incurred and other payments, if any, and product sales, to the extent any products are successfully commercialized. If we or third parties fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected. 58
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Operating Expenses
Research and Development Expenses
Research and development expenses represent costs incurred by us for the discovery, development and manufacture of our current and future product candidates and include: external research and development expenses incurred under arrangements with third parties, including contract research organizations, contract manufacturing organizations, academic and non-profit institutions and consultants; salaries and personnel-related costs, including non-cash stock-based compensation expense; license fees to acquire in-process technology and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. We use our employee and infrastructure resources across multiple research and development programs and for identifying, testing and developing product candidates from our Translational Science Platform. We manage certain activities such as contract research and manufacture of our product candidates and discovery programs through our third-party vendors. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:
•whether or not we complete the Business Combination;
•whether we successfully license or dispose of the assets subject to the CVR Agreement if the Business Combination is completed, or if it is not completed, whether we are able to seek business development opportunities for both the JTX-8064 and vopratelimab programs;
•retention of key research and development personnel;
•establishing an appropriate safety profile with IND-enabling toxicology studies and clinical trials;
•the cost to acquire or make therapies to study in combination with our immunotherapies;
•successful completion of clinical trials;
•establishing agreements with third-party contract manufacturing organizations for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved;
•receipt of marketing approvals from applicable regulatory authorities;
•commercializing products, if and when approved, whether alone or in collaboration with others;
•the costs associated with the development of any additional product candidates we acquire through third-party collaborations or identify through our Translational Science Platform;
•the terms and timing of any collaboration, license or other arrangement, including any milestone payments thereunder;
•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our products, if and when approved; and
•continued acceptable safety profiles of the products following approval.
A change in the outcome of any of these variables with respect to the
development of any of our product candidates would significantly change the
costs, timing and viability associated with the development of that product
candidate. We plan to increase our research and development expenses for the
foreseeable future as we advance our product candidates through clinical trials
and continue the enhancement of our Translational Science Platform and the
progression of our pipeline.
Due to the inherently unpredictable nature of preclinical and clinical
development, we do not allocate all of our internal research and development
expenses on a program-by-program basis as they primarily relate to personnel and
lab consumables costs that are deployed across multiple programs under
development. Our research and development expenses also include external costs,
which we do track on a program-by-program basis following the program's
nomination as a development candidate. We began incurring such external costs
for vopratelimab in 2015, pimivalimab in 2016, JTX-8064 in 2017, GS-1811 in 2019
and JTX-1484 in 2021.
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Included below are external research and development and external clinical and
regulatory costs for JTX-8064, vopratelimab (which includes our SELECT trial),
pimivalimab, GS-1811, JTX-1484 and our pre-development candidates:
Year Ended December 31,
(in thousands) 2022 2021
JTX-8064 $ 30,804 $ 18,903
Vopratelimab 11,110 18,942
Pimivalimab 6,194 2,603
JTX-1484 3,549 170
GS-1811 - 2,405
Pre-development candidates 3,147 1,683Total external research and development and clinical and regulatory costs
$
54,804
Research and development activities account for a significant portion of our operating expenses. We expect to incur research and development expenses over the next several years as we implement our current business strategy and: •continue our INNATE trial of JTX-8064 as a monotherapy and in combination with pimivalimab (if such programs are not disposed of as contemplated by the CVR Agreement);
•continue advancing JTX-1484 through IND-enabling activities (if such program is not disposed of as contemplated by the CVR Agreement);
•continue to identify and develop potential predictive biomarkers for our product candidates; and
•continue to develop and enhance our Translational Science Platform and advance our pipeline of immunotherapy programs and our early research activities into IND-enabling activities.
Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
General and Administrative Expenses
General and administrative expenses consist of salaries and personnel-related costs, including non-cash stock-based compensation expense, for our personnel in executive, business development, legal, finance and accounting, human resources and other administrative functions, consulting fees, facility costs not otherwise included in research and development expenses, fees paid for accounting and tax services, insurance expenses and legal costs. Legal costs include general corporate legal fees, patent legal fees and related costs. As a result of the reduction in force we announced inFebruary 2023 , we anticipate that our general and administrative expenses will increase in the first quarter of 2023, as a result of severance and employee related costs, and may decrease in the future due to overall reduced headcount.
Other Income, Net
Other income, net, consists primarily of interest and investment income on our cash, cash equivalents and investments.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience, known facts and trends, and other market specific or relevant assumptions we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates in light of changes in circumstance, facts or experience. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements. 60
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Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. In applying ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The terms of our license agreements include upfront and license fees, milestones and other contingent payments for the achievement of defined certain clinical, regulatory and sales-based milestone events, as well as royalties on sales of commercialized products. Arrangements that include upfront payments may require deferral of revenue recognition to a future period until obligations under such arrangements are fulfilled. The event-based milestone payments represent variable consideration, and we use the "most likely amount" method to estimate this variable consideration. Given the high degree of uncertainty around the occurrence of these events, we determined the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. Revenue will be recognized from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet date. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. This process involves reviewing open contracts and purchase orders, communicating with internal personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We periodically confirm the accuracy of our estimates with our service providers and make adjustments if necessary. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. The financial terms of agreements with these service providers are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows. In circumstances where amounts have been paid in excess of costs incurred, we record a prepaid expense. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Stock-based Compensation
We account for stock-based payments in accordance with ASC Topic
718, Compensation-Stock Compensation. This guidance requires all stock-based
payments to employees, including grants of employee stock options, restricted
stock awards and restricted stock units, to be recognized as expense in the
consolidated statements of operations and comprehensive income (loss) based on
their grant date fair values. For stock options granted to employees and to
members of our board of directors for their services on the board of directors,
we estimate the grant date fair value of each stock option using the
Black-Scholes option-pricing model. For restricted stock awards and restricted
stock units granted to employees, we estimate the grant date fair value of each
award using intrinsic value, which is based on the value of the underlying
common stock less any purchase price. For stock-based payments subject to
service-based vesting conditions, we recognize stock-based compensation expense
equal to the grant date fair value of stock-based payment on a straight-line
basis over the requisite service period.
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The BlackScholes option pricing model requires the input of certain subjective assumptions, including (i) the calculation of expected term of the stock-based payment, (ii) the riskfree interest rate, (iii) the expected stock price volatility and (iv) the expected dividend yield. We use the simplified method as prescribed bySEC Staff Accounting Bulletin No. 107 to calculate the expected term for stock options granted to employees as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. We determine the riskfree interest rate based on a treasury instrument whose term is consistent with the expected term of the stock options. Because there had been no public market for our common stock prior to our initial public offering in 2017, there is a lack of historical and implied volatility data. Accordingly, we base our estimates of expected volatility on a combination of our own historical volatility and historical volatility of a group of publicly-traded companies with characteristics similar to ours, including stage of product development and therapeutic focus within the life sciences industry. Historical volatility is calculated over a period of time commensurate with the expected term of the stock-based payment. We use an assumed dividend yield of zero as we have never paid dividends on our common stock, nor do we expect to pay dividends on our common stock in the foreseeable future.
We account for forfeitures of all stock-based payments when such forfeitures occur.
Income Taxes Income taxes are recorded in accordance with ASC Topic 740, Income Taxes, which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We account for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position.
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, (in thousands) 2022 2021 $ Change Revenue: License and collaboration revenue-related party$ 82,000 $ 26,907 $ 55,093 Operating expenses: Research and development 103,273 88,979 14,294 General and administrative 30,969 28,984 1,985 Total operating expenses 134,242 117,963 16,279 Operating loss (52,242) (91,056) 38,814 Other income, net 1,458 199 1,259 Loss before provision for income taxes (50,784) (90,857) 40,073 Provision for income taxes 135 15 120 Net loss$ (50,919) $ (90,872) $ 39,953
License and Collaboration Revenue
For the year endedDecember 31, 2022 , we recognized$82.0 million of license and collaboration revenue under (i) the Gilead asset purchase and license amendment agreement related to the sale of GS-1811 inDecember 2022 and transfer of certain patents and know-how related to licensed products to Gilead and (ii) the Gilead License Agreement related to the achievement of a clinical development and regulatory milestone. For the year endedDecember 31, 2021 , we recognized$26.9 million of license and collaboration revenue under the Gilead License Agreement related to the achievement of a$25.0 million clinical development and regulatory milestone for FDA clearance of the IND for GS-1811 and$1.9 million related to the completion of research and transition services. 62
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Research and Development Expenses
The following table summarizes our research and development expenses for the
years ended
Year Ended December 31,
(in thousands) 2022 2021 $ Change
Employee compensation $ 32,537 $ 30,780 $ 1,757
External research and development 27,604 16,771 10,833
External clinical and regulatory 27,200 27,935 (735) Lab consumables 9,097 6,151 2,946 Facility costs 4,691 5,329 (638) Other research 2,144 2,013 131 Total research and development expenses$ 103,273 $ 88,979
Research and development expenses increased by
•$1.8 million of increased employee compensation costs primarily attributable to increased headcount;
•$10.8 million of increased external research and development costs associated with manufacturing and IND-enabling activities for our development programs;
•$2.9 million of increased lab consumables to support research activities; partially offset by,
•$0.7 million of decreased external clinical and regulatory costs primarily attributable to decreased development consulting required for our clinical trials; and
•$0.6 million in decreased depreciation expense.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the
years ended
Year Ended December 31,
(in thousands) 2022 2021 $ Change
Employee compensation $ 15,146 $ 15,123 $ 23
Professional services 6,411 4,895 1,516
Facility costs 4,050 4,133 (83)
Other 5,362 4,833 529
Total general and administrative expenses $ 30,969 $
28,984
General and administrative expenses increased by$2.0 million from$29.0 million for the year endedDecember 31, 2021 to$31.0 million for the year endedDecember 31, 2022 . The increase in general and administrative expenses was primarily attributable to increased consulting and other administrative costs for the year endedDecember 31, 2022 .
Other Income, net
Other income, net, increased by$1.3 million from$0.2 million for the year endedDecember 31, 2021 to$1.5 million for the year endedDecember 31, 2022 . The increase in other income, net is attributable to increased rates of return on our investments.
Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations primarily through proceeds received from public
offerings and private placements of our stock totaling
OnNovember 4, 2021 , we entered into a new Sales Agreement (the "2021 Sales Agreement") withCowen and Company, LLC , or Cowen, pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to$75.0 million under an ATM offering program (the "2021 ATM Offering"). The 2021 Sales Agreement provides that Cowen 63
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will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the 2021 ATM Offering. No sales were made under the 2021 ATM Offering during the year endedDecember 31, 2022 . During the first quarter of 2021, we completed a follow-on public offering of our common stock, selling an aggregate of 5,750,000 shares of common stock at a public offering price of$11.25 per share for net proceeds of$60.6 million . OnDecember 17, 2019 , we entered into a Sales Agreement with Cowen, pursuant to which we could offer and sell shares of our common stock with an aggregate offering price of up to$50.0 million under an "at the market" offering program (the "2019 ATM Offering"). During the first quarter of 2021, we sold an aggregate of 3,156,200 shares at an average price of$9.87 per share for net proceeds of$30.2 million , which completed the sale of all available amounts under the 2019 ATM Offering. Funding Requirements Due to our significant research and development expenditures, we have generated substantial operating losses since inception. We have incurred an accumulated deficit of$292.8 million throughDecember 31, 2022 . Whether or not we successfully complete the Business Combination, we expect to incur additional losses in the future as we conduct research and development activities. Based on our research and development plans, we expect that our existing cash, cash equivalents and investments of$189.5 million will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the filing date of this Annual Report on Form 10-K. However, we have based this estimate on assumptions that may prove to be incorrect, and we could exhaust our capital resources sooner than we expect. The timing and amount of our operating expenditures will depend largely on:
•whether or not we complete the Business Combination;
•whether we successfully license or dispose of the assets subject to the CVR Agreement if the Business Combination is completed, or if it is not completed, whether we are able to seek business development opportunities for both the JTX-8064 and vopratelimab programs;
•the timing and progress of preclinical and clinical development activities;
•the cost to access, acquire or develop therapies to study in combination with our immunotherapies;
•completion of clinical trials;
•our ability to maintain our current research and development programs and enhancement of our Translational Science Platform;
•addition and retention of key research and development personnel;
•our efforts to enhance operational, financial and information management systems;
•the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;
•the costs and ongoing investments to in-license or acquire additional technologies, including the in-license of intellectual property related to our potential product candidates; and
•the terms and timing of any future collaboration, license or other arrangement, including the terms and timing of any option and milestone payments thereunder.
A change in the outcome of any of these or other variables with respect to the
development of any of our product candidates could significantly change the
costs and timing associated with the development of that product candidate.
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 operating plans or we may conduct additional reductions in force.
In addition to the variables described above, if and when any of our product
candidates successfully complete development, we expect to incur substantial
additional costs associated with regulatory filings, marketing approval,
post-marketing requirements, maintaining our intellectual property rights, and
regulatory protection, in addition to other costs. We cannot reasonably estimate
these costs at this time.
Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our cash needs through a combination of equity or debt
financings, collaborations, licensing arrangements and strategic alliances. We
currently do not have a credit facility or committed sources of capital. To the
extent that we raise additional capital through the future sale of equity or
debt, the ownership interests 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 debt securities, these securities could contain
covenants that would restrict our operations. We
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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 technologies, future revenue streams or product 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 development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Cash Flows
The following table provides information regarding our cash flows for the years
ended
Year Ended December 31,
(in thousands) 2022 2021
Net cash (used in) provided by:
Operating activities $ (28,877) $ (83,494)
Investing activities 83,478 (60,514)
Financing activities 442 92,044
Net increase in cash, cash equivalents and restricted cash
$ (51,964)
Cash Used in Operating Activities
Net cash used in operating activities for the year endedDecember 31, 2022 was$28.9 million , compared to$83.5 million for the year endedDecember 31, 2021 . Cash used in operating activities decreased by$54.6 million due to increased revenue recognition under agreements with Gilead during year endedDecember 31, 2022 as compared to the year endedDecember 31, 2021 .
Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities for the year endedDecember 31, 2022 was$83.5 million , compared to net cash used in investing activities of$60.5 million for the year endedDecember 31, 2021 . Cash provided by investing activities increased by$144.0 million due to decreased purchases of investments and timing of maturities for the year endedDecember 31, 2022 as compared to the year endedDecember 31, 2021 .
Cash Provided by Financing Activities
Net cash provided by financing activities for the year endedDecember 31, 2022 was$0.4 million , compared to$92.0 million for the year endedDecember 31, 2021 . Cash provided by financing activities decreased by$91.6 million due to proceeds received from our follow-on public offering and 2019 ATM Offering completed during the first quarter of 2021 while no proceeds were received from financing facilities during the year endedDecember 31, 2022 .
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