ONCORUS, INC. You should read the following discussion of our financial condition and results
of operations in conjunction with our unaudited interim condensed consolidated
financial statements and the related notes and other financial information
included elsewhere in this Quarterly Report on Form 10-Q. In addition to
historical financial information, this discussion contains forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as statements of our plans, objectives, expectations, intentions and
belief. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including those
set forth in the section titled "Risk Factors" under Part II, Item 1A, below and
under "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the
year ended
These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Introduction
Our Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is provided in addition to the accompanying unaudited interim condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. Our MD&A is organized as follows:
Overview - A discussion of our business and overall analysis of financial and other highlights in order to provide context for the remainder of MD&A.
Results of Operations - An analysis of our financial results comparing the three
months ended
Liquidity and Capital Resources - An analysis of changes in our unaudited interim condensed consolidated balance sheets and cash flows, and discussion of our financial condition and potential sources of liquidity.
Critical Accounting Policies and Significant Judgments and Estimates - A discussion of critical accounting policies and those that require us to make subjective estimates and judgments.
Overview
We are a clinical-stage biopharmaceutical company focused on developing next-generation, systemically active viral immunotherapies to transform outcomes for cancer patients. Using our two distinct proprietary platforms, we are developing a pipeline of intratumorally and intravenously administered product candidates designed to selectively attack and kill tumor cells and deliver transgenes to stimulate multiple arms of the immune system against tumors. We believe that the therapies we are developing could bring significant benefit to many patients who are currently underserved by approved immuno-oncology therapies, including other viral immunotherapies and immune checkpoint inhibitors.
Our HSV Platform
Our lead product candidate, ONCR-177, is an intratumorally administered viral immunotherapy based on our oncolytic HSV-1 platform, referred to as our HSV Platform, which leverages the Herpes Simplex Virus type 1, or HSV-1, a virus which has been clinically proven to effectively treat certain cancers. Using our HSV Platform, we engineered ONCR-177 to overcome the limitations of existing viral immunotherapies by enhancing potency and driving strong systemic anti-tumor immune responses at injected as well as distant non-injected tumor sites. ONCR-177 is armed with five immunostimulatory transgenes-a greater number of transgenes than viral immunotherapies that are either currently approved or in clinical development. Product candidates from our HSV Platform are designed to maintain full viral replication competency in tumors and to be selectively attenuated in healthy tissues, meaning they replicate and express transgenes only in tumor cells while disabling potentially harmful effects on healthy tissues. In multiple preclinical cancer models, we observed that these attributes of ONCR-177 were achieved without either the systemic release of cytokines that can be associated with toxicity or significant presence of the virus in non-injected tumors or in circulation, in addition to favorable tolerability when administered via intravenous and intratumoral injection in a validated murine model of HSV-1 infection. We believe this combination of features allows our HSV Platform to overcome the safety versus potency trade-off that has generally limited the viral immunotherapy field to date. Based on safety and tolerability profile observed to date and its ability to stimulate multiple arms of the immune system to attack cancer systemically, we also believe that ONCR-177 has potential in pre-surgical, or neoadjuvant, settings.
In
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dose expansion monotherapy portion of the trial. In the fully enrolled and completed surface lesion dose escalation portion of the trial, ONCR-177 administered to heavily pretreated patients with advanced, injectable solid tumors was well tolerated with no dose-limiting toxicities. No treatment-related adverse events exceeded Grade 2, and no infectious virions were detected in skin swabs. After four weeks of monotherapy treatment with ONCR-177 at the recommended Phase 2 dose, or RP2D, three of eight evaluable patients (one with cutaneous melanoma, one with squamous cell carcinoma of the head and neck, or SCCHN, and one with mucosal melanoma) had demonstrated clinical benefit. We have initiated enrollment in the surface lesion dose combination expansion portion of the clinical trial. Patients in the trial will receive ONCR-177 in combination with Merck's KEYTRUDA® (pembrolizumab), an immune checkpoint inhibitor. In addition, we are enrolling and currently dosing separate cohorts of patients with visceral tumors in the liver with the goal of showing additional safety data. We plan to report additional surface lesion monotherapy expansion data as well as initial surface lesion combination expansion data in the second half of 2022.
In addition to ONCR-177, we also have additional preclinical stage programs within our HSV Platform addressing both intratumoral and intravenous solutions to other unmet medical needs, including ONCR-GBM, our program designed to target brain cancer through intratumoral injection.
Our Selectively Self-Amplifying vRNA Immunotherapy Platform
We are also developing a broad pipeline of product candidates that leverages our second platform, our selectively self-amplifying viral RNA, or vRNA, immunotherapy platform, referred to as our vRNA Immunotherapy Platform, which aims to enable repeat intravenous, or IV, administration of viral immunotherapies to treat cancers that are less amenable to intratumoral injection due to safety and feasibility reasons, such as cancers of the lung. Our IV-administered approach involves encapbsulating in a lipid nanoparticle, or LNP, the genomes of RNA viruses known to kill cancer cells, creating a selectively self-amplifying vRNA immunotherapy. We believe this approach will avoid the rapid immune clearance from circulation caused by neutralizing antibodies otherwise observed to date with IV-administered oncolytic viruses and thought to limit their effectiveness in the clinic. Once inside the tumor, the synthetic viral genome from our synthetic viruses is first amplified and then instructs tumor cells to synthesize actual infectious virions, which can cause tumor lysis before infecting nearby tumor cells while stimulating immune cell recruitment and activity.
Our two product candidates from our vRNA Immunotherapy Platform are ONCR-021 and
ONCR-788. ONCR-021 encodes an optimized strain of Coxsackievirus A21, or CVA21,
and ONCR-788 encodes for a modified version of the Seneca Valley Virus, or SVV.
Both CVA21 and SVV have extensive clinical experience and favorable safety
profiles when administered IV. We believe our selectively self-amplifying vRNA
Immunotherapy Platform holds the potential for IV administration and avoids the
challenge of neutralizing antibodies seen in previous approaches with
IV-administered RNA-based oncology therapeutics. We plan to investigate our
novel vRNA immunotherapies in multiple histologies, including cancers of the
lung, both as monotherapy and in combination with immune checkpoint inhibitors
and other cancer treatments. We plan to submit an IND to the
Manufacturing
We plan to manufacture our product candidates at our approximately 105,000
square foot manufacturing facility in
Financial
Since inception in 2015, our operations have focused on organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, establishing our intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies, commencing a clinical trial, and manufacturing scale-up activities. We do not have any products approved for sale and have not generated any revenue from product sales. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities.
We have funded our operations primarily through the sale of redeemable convertible preferred stock, including Series A-1 redeemable convertible preferred stock, or Series A-1, and Series B redeemable convertible preferred stock, or Series B, our initial public offering, or IPO, of our common stock and a follow-on public offering, or the Follow-on Offering, of our common stock. Through our Series
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A-1 and Series B financings we raised
Since inception, we have incurred significant operating losses. Our net losses
were
We will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition.
As of
Recent Developments
On
The Lenders may elect at any time following the closing and prior to the full
repayment of the term loans to convert any portion of the principal amount of
the term loans then outstanding, up to an aggregate of
On
Impact of the COVID-19 Pandemic on Our Business
In response to the COVID-19 pandemic, we implemented a work-from-home policy allowing employees who can work from home to do so. We are in the process of transitioning back to in-office work for the majority of our employees. We have taken measures to secure our research and development project activities, while work in laboratories has been organized to reduce risk of COVID-19 transmission. Business travel was previously suspended but is now limited, and online and teleconference technology continues to be used regularly. We continue to monitor health guidance measures and may adjust our plans based upon the status of the pandemic.
Components of Operating Results
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Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research and development activities, including our product candidate discovery efforts, preclinical and clinical studies under our research programs, which include:
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employee-related expenses, including salaries, bonuses, benefits and stock-based compensation expense for our research and development personnel;
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costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on our behalf;
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costs of manufacturing drug product and drug supply related to our current or future product candidates;
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costs of conducting preclinical studies and clinical trials of our product candidates;
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consulting and professional fees related to research and development activities, including stock-based compensation to non-employees;
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costs of maintaining our laboratory, including purchasing laboratory supplies and non-capital equipment used in our preclinical studies;
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costs related to compliance with clinical regulatory requirements;
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facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies; and
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fees for maintaining licenses and other amounts due under our third-party licensing agreements.
Research and development costs are expensed as incurred. Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our preclinical and clinical studies or other services performed. Significant judgment and estimates are made in determining the accrued expense balances at the end of any reporting period.
We track external research and development costs on a program-by-program basis
beginning, with respect to each program, upon our internal nomination of a
candidate in that program for further preclinical and clinical development. For
example, ONCR-021 and ONCR-788 were both nominated as candidates in
The successful development of our product candidates is highly uncertain. We cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete development of our current or future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of our product candidates, if they are approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
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the scope, rate of progress, and expenses of our ongoing research activities as well as any preclinical studies and clinical trials and other research and development activities;
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establishing an appropriate safety profile;
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successful enrollment in and completion of clinical trials;
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whether our product candidates show safety and efficacy in our clinical trials;
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receipt of marketing approvals from applicable regulatory authorities;
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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
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commercializing product candidates, if and when approved, whether alone or in collaboration with others; and
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continued acceptable safety profile of the products following any regulatory approval.
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A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as we commence clinical trials and continue the development of our current and future product candidates. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
General and Administrative Expenses
General and administrative expenses include salaries, bonuses and other compensation-related costs, including stock-based compensation, for personnel in executive, finance and accounting, business development, operations and administrative roles. Other significant costs include professional service and consulting fees including legal fees relating to intellectual property and corporate matters, audit and tax fees, recruiting costs, costs for consultants who we utilize to supplement our personnel and insurance costs. General and administrative expenses also include travel costs, facility and office-related costs that are not included in research and development expenses, as well as depreciation and amortization.
We anticipate that our general and administrative expenses will increase in the
future as our business expands to support expected growth in research and
development activities, including our future clinical programs. These increases
will likely include increased costs related to the hiring of additional
personnel and fees to outside service providers, among other expenses. We also
anticipate increased expenses associated with being a public company, including
costs for audit, legal, regulatory and tax-related services related to
compliance with the rules and regulations of the
Other Income (Expense)
Other income (expense) primarily consists of interest income from our short-term investments and cash equivalents.
Results of Operations
The following table summarizes our results of operations for the periods
indicated.
THREE MONTHS ENDED
MARCH 31, CHANGE
2022 2021 $ %
(in thousands, except percentages)
Operating expenses:
Research and development $ 12,469 $ 8,447 $ 4,022 48 %
General and administrative 5,349 4,222 1,127 27 %
Total operating expenses 17,818 12,669 5,149 41 %
Loss from operations (17,818 ) (12,669 ) (5,149 ) -41 %
Total other income (expense), net 38 6 32 533 %
Net loss $ (17,780 ) $ (12,663 ) $ (5,117 ) -40 %
Three Months Ended
Research and Development Expenses
The table below summarizes our research and development expenses by product candidate or development program and unallocated research and development expenses for each of the periods presented:
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THREE MONTHS ENDED
MARCH 31,
2022 2021 CHANGE
(in thousands)
Direct external expenses by program
ONCR-177 $ 3,127 $ 1,630 $ 1,497
ONCR-021 925 - 925
ONCR-788 46 - 46
Platform development, early stage research
and unallocated
expenses:
Employee compensation and related 4,600 3,011 1,589 External research, development and consulting 284 857 (573 ) Laboratory supplies 958 924 34 Facility-related 1,793 1,522 271 Other expenses 736 503 233 Total research and development$ 12,469 $ 8,447 $ 4,022
Research and development expenses increased from
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a
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General and Administrative Expenses
THREE MONTHS ENDED
MARCH 31,
2022 2021 CHANGE
(in thousands)
Employee compensation and related $ 2,535 $ 1,649 $ 887 Professional service and consultant fees 1,922 2,089 (168 ) Facility-related
301 108 193
Other expenses 591 376 215
Total general and administrative expenses
General and administrative expenses increased from
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Other Income (Expense)
Other income (expense) for the three months ended
Liquidity and Capital Resources
Sources of Liquidity
From inception through
Cash Flows
THREE MONTHS ENDED
MARCH 31,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (23,437 ) $ (10,379 )
Investing activities (1,868 ) (385 )
Financing activities 62 53,081
Net (decrease) increase in cash and cash equivalents
Operating Activities
Net cash used in operating activities for the three months ended
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a net use of cash of
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a source of cash of
Net cash used in operating activities for the three months ended
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a net source of cash of
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a net source of cash of
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a net source of cash of
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a net use of cash of
Investing Activities
Net cash used in investing activities for the three months ended
Financing Activities
Net cash provided by financing activities for the three months ended
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Funding Requirements
We expect our expenses to increase in connection with our ongoing activities,
particularly as we continue our research and development, initiate clinical
trials, continue the buildout of our
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into early 2024. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on a number of factors, including:
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the costs of conducting preclinical studies and clinical trials;
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the costs of manufacturing;
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the scope, progress, results and costs of discovery, preclinical development, laboratory testing, and clinical trials for product candidates we may develop, if any;
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the costs, timing, and outcome of regulatory review of our product candidates;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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the achievement of milestones or occurrence of other developments that trigger payments under any license or collaboration agreements we might have at such time;
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the costs associated with the ongoing buildout of our
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the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights, and defending intellectual property-related claims;
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our headcount growth and associated costs as we expand our business operations, research and development activities and manufacturing capabilities; and
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the costs of operating as a public company.
Our cash and cash equivalents as of
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests of stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of our common stockholders. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through potential collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Policies and Significant Judgments and Estimates
Our unaudited interim condensed consolidated financial statements and
accompanying notes have been prepared in accordance with
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assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of expenses during the reported periods. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates.
There have been no significant changes to our critical accounting policies or
other significant judgements and estimates from those described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in our Annual Report on Form 10-K for the year ended
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under
Contractual Obligations
As of
See "-Recent Developments" above for a discussion of our Loan Agreement with
K2HV, which we entered into on
Emerging Growth Company and Smaller Reporting Company Status
We are an ''emerging growth company,'' or EGC, under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities.
As an EGC, we may also take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:
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we may present only two years of audited financial statements and only two years
of related Management's Discussion and Analysis of Financial Condition and
Results of Operations in our annual reports on Form 10-K filed with the
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we will avail ourselves of the exemption from providing an auditor's attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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we will avail ourselves of the exemption from complying with any requirement
that may be adopted by the
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we may provide reduced disclosure about our executive compensation arrangements
in our proxy statements filed with the
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we will not require nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments.
We will remain an EGC until the earliest of (i)
We are also a ''smaller reporting company,'' meaning that the market value of
our stock held by non-affiliates is less than
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If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to EGCs, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recent Accounting Pronouncements
Refer to Note 2 in the accompanying notes to our unaudited interim condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
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