RAIN ONCOLOGY INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed financial statements and
the related notes and other financial information included elsewhere in this
Quarterly Report on Form 10-Q. This discussion and analysis contain
forward-looking statements based upon our current plans and expectations that
involve risks, uncertainties and assumptions, such as statements regarding our
plans, objectives, expectations, intentions and beliefs. Our actual results and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth under the section titled "Risk Factors" and included in our Annual Report
on Form 10-K for the year ended
Overview
We are a late-stage precision oncology company developing therapies that target oncogenic drivers for which we are able to genetically select patients we believe will be most likely to benefit. This approach includes using a tumor-agnostic strategy to select patients based on their tumors' underlying genetics rather than histology. We have in-licensed product candidates, each with a differentiated profile relative to available therapies, and we intend to continue strengthening our pipeline through focused business development and internal research efforts.
Our lead product candidate, milademetan (also known as RAIN-32) is a small
molecule, oral inhibitor of mouse double minute 2 (MDM2), which may be oncogenic
in numerous cancers. We in-licensed milademetan from Daiichi Sankyo in
Since our inception in 2017, we have incurred significant operating losses and
have utilized substantially all of our resources to date in-licensing and
developing our product candidates, organizing and staffing our Company and
providing other general and administrative support for our operations. As of
We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates, which will not be for many years, if ever. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we
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expect to finance our cash needs through public or private equity offerings,
debt financings or other capital sources which may include strategic
collaborations, licensing arrangements or other arrangements with third parties.
We may be unable to raise additional funds or enter into such other agreements
or arrangements when needed on favorable terms or at all. If we raise funds
through strategic collaborations or other similar arrangements with third
parties, we may have to relinquish valuable rights to our platform technology,
future revenue streams, research programs or product candidates or we may have
to grant licenses on terms that may not be favorable to us and/or may reduce the
value of our common stock. If we are unable to raise additional funds through
equity or debt financings when needed, we may be required to delay, limit,
reduce or terminate our product development or future commercialization efforts.
Our ability to raise additional funds may be adversely impacted by potential
worsening of global economic conditions and disruptions to and volatility in the
credit and financial markets in
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely and expect to continue to rely for the foreseeable future, on third parties for the manufacture of our drug candidates for preclinical and clinical testing, as well as for commercial manufacture of any drugs that we may commercialize. We expect to continue to develop drug candidates that can be produced cost-effectively at contract manufacturing facilities. For the milademetan program, we have transferred Daiichi Sankyo Company, Limited (Daiichi Sankyo) processes to suitable contract manufacturing organizations to supply active pharmaceutical ingredients and clinical drug product for our clinical trials and in preparation for submission of marketing applications and potential future commercial supplies.
COVID-19
The ongoing COVID-19 pandemic continues to rapidly evolve, and we will continue
to monitor the COVID-19 situation closely. The extent of the impact of the
COVID-19 pandemic on our business, operations and clinical development timelines
and plans remains uncertain, and will depend on certain developments, including
the duration and spread of the outbreak and its impact on our clinical trial
enrollment, clinical trial sites, contract research organizations ("CROs"),
third-party manufacturers and other third parties with whom we do business, as
well as its impact on regulatory authorities and our key scientific and
management personnel. Our ability to raise additional capital may be adversely
impacted by potential worsening global economic conditions and the recent
disruptions to and volatility in the credit and financial markets in
Recent Developments
In
Our Development Pipeline
Our development pipeline is unified by a strategy to target oncogenic drivers through differentiated therapies for which we are able to genetically select the patients we believe will be most likely to benefit from treatment. We currently retain global development and commercialization rights to all of our product candidates.
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[[Image Removed]] Milademetan Overview
Our lead product candidate, milademetan, is a small molecule, oral inhibitor of MDM2 and is being developed in patients with MDM2-dependent cancers. Historically, MDM2 inhibition has presented treatment challenges due to dose-limiting, on-target hematologic toxicities. We believe an MDM2-targeted therapy must possess certain pharmacological characteristics related to potency and pharmacokinetics to allow for the design of an optimized dosing schedule. An optimized dosing schedule is intended to improve peak drug exposure leading to apoptosis and cell cycle arrest during the dosing period, while permitting hematopoietic precursor cell recovery during the dosing break, thereby minimizing hematologic toxicity. Milademetan's differentiated profile, as a potent MDM2 inhibitor has enabled a rationally designed dosing schedule that we believe has the potential to reduce toxicities while preserving activity. We anticipate that this dosing schedule may also be applicable to other MDM2-dependent cancer populations across solid and hematologic tumor types.
In
The MANTRA trial is designed to evaluate the safety and efficacy of milademetan compared to trabectedin, a current standard of care, in patients with unresectable or metastatic DD LPS with or without a WD LPS component that has progressed on one or more prior systemic therapies, including at least one anthracycline-based therapy. Approximately 160 patients are expected to be randomized in a 1:1 ratio to receive milademetan or trabectedin. The primary objective of the trial is to compare progression-free survival (PFS) by blinded independent review between the milademetan treatment arm and the trabectedin control arm. Secondary endpoints include overall survival, PFS by investigator assessment, objective response rate, duration of response, disease control rate, safety and patient reported outcomes. We anticipate top-line data from this trial in the first half of 2023. Our commencement of a Phase 3 trial following the Phase 1 trial referenced above is based on the data observed in the Phase 1 trial and FDA feedback with respect to our development plan.
In
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months without disease progression, and an additional patient received therapy for greater than 59 months before discontinuation in the second quarter of 2021. We believe this highlights the potential for milademetan to have a favorable long-term tolerability and safety profile.
In
In
In
RAD52 and p53 Overview
We are also developing a preclinical program focused on targeting RAD52 in the DNA damage repair pathway. While our RAD52 program is in an early stage of development, we expect to develop this program for patients with a molecularly diagnosed HRD+, such as mutations and loss-of-function in BRCA1/2 or others that utilize RAD52 as an alternative DNA repair pathway, as well as for patients that may have relapsed to poly (ADP ribose) polymerase (PARP) inhibitor therapy. There are currently no approved therapies or clinical programs in development targeting RAD52.
Targeting RAD52 represents a novel strategy for tumors exhibiting tumor HRD+ or a loss of function, of several pathway constituents, including BRCA1/2 or others in tumor types frequently characterized by these deficiencies. These tumors include breast, prostate, pancreatic, ovarian and possibly other cancers. Developmental paths for RAD52 inhibitors include as a monotherapy in HRD+ patients relapsing on PARP inhibitor therapy, or in front-line combinations with PARP inhibitors in HRD+ tumors.
Our RAD52 program is currently in lead optimization stage. We anticipate evaluating identified RAD52 inhibitor candidates in animal models of patient tumors with HRD+ that have relapsed on PARP inhibitors and in HRD+ tumors with a loss-of-function mutation of BRCA1/2 in combination with PARP inhibitors.
Milademetan reactivates p53, known as the "guardian of the genome," by inhibiting MDM2. p53 is present in every cell and acts as a key regulator of a variety of cellular processes including cell cycle, DNA repair and apoptosis. In a normal cell, the activity of p53 is controlled and regulated by the inhibitory protein MDM2. MDM2 binds to p53, thereby inducing degradation and allowing normal cells to function properly. In response to cell damage and other stress conditions, p53 is activated and prevents the formation of cancerous cells by inducing apoptosis.
In contrast to normal cells, in tumor cells, the two primary mechanisms by which p53 can be inactivated in tumor cells are mutations in p53 and activation or overexpression of MDM2. Approximately half of all tumors are characterized by mutations of the p53 gene. The remaining cancer patients have a p53 gene that is not mutated, and is otherwise known as WT p53, but can be functionally suppressed through the activation or overexpression of MDM2. We have identified MDM2 dependence in several solid tumors. This dependence is caused by overexpression of MDM2 through gene amplification or other mechanisms, loss of a negative regulator of MDM2 or other causes. Overexpression of MDM2 promotes the degradation of p53 and also eliminates p53's ability to activate transcription. Milademetan, by binding MDM2
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at the p53 interaction site, prevents the formation of the MDM2- p53 complex, allowing p53 reactivation and subsequent transcription of genes, such as MIC-1, that trigger cancer cell cycle arrest or apoptosis, among others.
Collaboration and License Agreements
We are party to a number of license agreements for the in-license of our product candidates and development programs. See Note 7 to the Condensed Financial Statements.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales, licenses or collaborations and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue from future product sales. If we enter into license or collaboration agreements for any of our product candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates or from license or collaboration agreements. We may never succeed in obtaining regulatory approval for any of our product candidates.
Operating Expenses
Our operating expenses since inception have consisted solely of research and development costs, including acquisition of in-process research and development, and general and administrative costs.
Research and Development Expenses
To date, our research and development expenses have related to the discovery and clinical development of our product candidates, including acquisition of in-process research and development. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include:
• salaries, payroll taxes, employee benefits and stock-based compensation
charges for those individuals involved in research and development
efforts;
• expenses incurred in connection with research, laboratory consumables and
preclinical studies;
• external research and development expenses incurred under agreements with
CROs and consultants to conduct and support our planned clinical trials
of our product candidates;
• the cost of consultants engaged in research and development-related
services and the cost to manufacture drug product for use in our
preclinical studies and clinical trials;
• costs related to regulatory compliance;
• the cost of annual license fees and the cost of
acquiring in-process research and development, including upfront license
payments; and
• any development milestone payments that we may make under our license
agreements.
We track external development costs by product candidate or development program, but we do not allocate personnel costs or other internal costs to specific development programs or product candidates as our personnel works across multiple development programs and product candidates. These costs are included in unallocated research and development expenses in the table below.
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The following table summarizes our research and development expenses by product candidate or development program:
Three Months Ended
March 31,
2022 2021
(in thousands)
Milademetan $ 8,551 $ 2,404
Other research and clinical candidates 250 1,078
Unallocated internal research and development costs 4,754 1,846 Total research and development expenses
$ 13,555 $ 5,328
We plan to substantially increase our research and development expenses for the foreseeable future as we continue to expand the development of our product candidates. We cannot predict with certainty the timing for initiation or completion of, the duration of, or the costs of current or future clinical trials and nonclinical studies of any of our product candidates due to the inherently unpredictable nature of clinical and preclinical development. The clinical development timeline, probability of success of clinical trials and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly. See the section
titled "Risk Factors-Risks Related to Product Development-Preclinical and
clinical development involves a lengthy and expensive process with uncertain
outcomes, and results of earlier studies and trials may not be predictive of
future clinical trial results. If our preclinical studies and clinical trials
are not sufficient to support regulatory approval of any of our product
candidates, we may incur additional costs or experience delays in completing, or
ultimately be unable to complete, the development of such product candidates" in
Part I, Item 1A of our Annual Report on Form 10-K for the year ended
General and Administrative Expenses
General and administrative expenses consist of salaries and employee-related
costs, including stock-based compensation, for personnel in executive, finance
and other administrative functions, legal fees relating to intellectual property
and corporate matters, professional fees for accounting and consulting services
and facility-related costs. We anticipate that our general and administrative
expenses will continue to increase in the future to support our continued
research and development activities, pre-commercial preparation activities for
our product candidates and, if any product candidate receives marketing
approval, commercialization activities. We also anticipate increased expenses
related to audit, legal, regulatory and tax-related services associated with
maintaining compliance with exchange listing and
Interest Income
For the three months ended
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Results of Operations
Comparison of Three Months Ended
The following table summarizes our results of operations for the three months endedMarch 31, 2022 and 2021, together with the changes in those items in dollars: Three Months Ended March 31, 2022 2021 Change (in thousands) Operating expenses: Research and development$ 13,555 $ 5,328 $ 8,227 General and administrative 3,895 1,480 2,415 Total operating expenses 17,450 6,808 10,642 Loss from operations (17,450 ) (6,808 ) (10,642 ) Other income: Interest income 56 8 48 Net loss$ (17,394 ) $ (6,800 ) $ 10,594
Research and Development Expenses
Research and development (R&D) expenses were
General and Administrative Expenses
General and administrative (G&A) expenses were
Other (Income) Expense
Other income for the three months ended
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our research programs and product candidates. We expect that our research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials, expanding our intellectual property portfolio and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
We do not currently have any approved products and have not generated any
revenue from product sales since inception. To date, we have financed our
operations through the issuance of convertible promissory notes and the issuance
of convertible preferred stock and common stock. From our inception through
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shares of common stock in connection with the exercise of the underwriters'
option to purchase additional shares at the public offering price. Our net
proceeds from the sale of shares in the IPO, including the sale of shares
pursuant to the exercise of the underwriters' option to purchase additional
shares, was
Future Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing development activities related to milademetan and other product candidates and programs, which are still in the early stages of development. In addition, we expect to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:
• continue our on-going clinical trials, initiate new clinical trials
for our milademetan program and incur additional preclinical research
costs for our RAD52 program;
• initiate and continue research and preclinical and clinical development
of our product candidates;
• seek to identify and develop additional product candidates;
• seek marketing approvals for any of our product candidates that
successfully complete clinical trials, if any;
• establish a sales, marketing, manufacturing and distribution
infrastructure to commercialize any products for which we may obtain
marketing approval;
• require the manufacture of larger quantities of our product
candidates for clinical development and potentially
commercialization;
• maintain, expand, protect and enforce our intellectual property portfolio;
• acquire or in-license other drugs and technologies;
• defend against any claims of infringement, misappropriation or other
violation of third-party intellectual property;
• hire and retain additional clinical, quality control and scientific
personnel;
• build out new facilities or expand existing facilities to support our
ongoing development activity;
• add operational, financial and management information systems and
personnel, including personnel to support our drug development, and
any future commercialization efforts; and
• potentially experience the effects of the recent disruptions to and
volatility in the credit and financial markets in the United States and
worldwide from the ongoing COVID-19 pandemic and the geopolitical
environment.
Because of the numerous risks and uncertainties associated with the development of milademetan and other product candidates and programs and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates and programs. Our future capital requirements will depend on many factors, including:
• the scope, progress, results and costs of our current and future
clinical trials of milademetan for our current targeted indications;
• the scope, progress, results and costs of drug discovery, preclinical
research and clinical trials for RAD52 and other product candidates;
• the number of future product candidates that we pursue and their
development requirements;
• the costs, timing and outcome of regulatory review of our product candidates;
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• the extent to which we acquire or invest in businesses, products and
technologies, including entering into or maintaining licensing or
collaboration arrangements for product candidates on favorable terms,
although we currently have no commitments or agreements to complete
any such transactions;
• the costs of preparing, filing and prosecuting patent applications,
maintaining, protecting and enforcing our intellectual property
rights and defending intellectual property-related claims;
• our headcount growth and associated costs as we expand our business
operations and our research and development activities;
• our ability to successfully acquire or in-license other drugs and
technologies;
• the costs and timing of future commercialization activities, including
drug sales, marketing, manufacturing and distribution, for any of our
product candidates for which we receive marketing approval, to the
extent that such sales, marketing, manufacturing and distribution are
not the responsibility of any collaborator that we may have at such
time;
• the amount of revenue, if any, received from commercial sales of
our product candidates, should any of our product candidates
receive marketing approval; and
Developing drug products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Until such time, if ever, as we can generate product revenues to support our
cost structure, we expect to finance our cash needs through public or private
equity offerings, debt financings or other capital sources which may include
strategic collaborations, licensing arrangements or other arrangements with
third parties. To the extent that we raise additional capital through the sale
of equity or convertible debt securities, the ownership interest of our
stockholders could be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect the rights of our
stockholders. Debt financing and equity financing, if available, may involve
agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends. If we raise funds through strategic collaborations or
other similar arrangements with third parties, we may have to relinquish
valuable rights to our technology, future revenue streams, research programs or
product candidates or may have to grant licenses on terms that may not be
favorable to us and/or may reduce the value of our common stock. If we are
unable to raise additional funds through equity or debt financings when needed,
we may be required to delay, limit, reduce or terminate our product development
or future commercialization efforts. Our ability to raise additional funds may
be adversely impacted by potential worsening global economic conditions and
disruptions to and volatility in the credit and financial markets in
Cash Flows
The following table summarizes our sources and uses of cash and cash
equivalents:
Three Months Ended
March 31,
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (17,110 ) $ (4,866 )
Investing activities 13,436 (29 )
Financing activities 399 (858 )
Net decrease in cash and cash equivalents
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Operating Activities
We have incurred losses since inception. Net cash used in operating activities
for the three months ended
Net cash used in operating activities for the three months ended
Investing Activities
Net cash provided by investing activities for the three months ended
Net cash used in investing activities for the three months ended
Financing Activities
Net cash provided by financing activities in the three months ended
Net cash used in financing activities in the three months ended
Obligations and other Commitments
As discussed in Note 8 to the condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we are party to agreements to license intellectual property. The license agreements may require us to pay future milestones if certain developmental, regulatory and commercial milestones are achieved, as well as to pay royalties on net sales of products applicable to the license agreements. We cannot estimate if milestone and/or royalty payments will occur in future periods and the agreements are cancelable by us at any time upon prior written notice to the licensor.
In the normal course of business, we enter into contracts with CROs and other vendors for preclinical studies and clinical trials, research and development supplies and other testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancelable by either party at any time upon prior written notice.
Our incurred and accrued research and development obligations as of
There were no material changes outside of the ordinary course of business to our
specific contractual obligations during the three months ended
Critical Accounting Policies and Use of Estimates
There have been no significant changes to our critical accounting policies and
use of estimate from our disclosure reported in "Critical Accounting Estimates"
in the section titled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Form 10-K for the year ended
Accrued Liabilities
We are required to estimate our expenses resulting from our obligations under contracts with vendors, consultants, CROs and clinical site agreements in connection with conducting preclinical activities and clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. However, some payments are made in arrears and expenditures are accrued for the time periods which services are performed on a pre-determined schedule or when contractual milestones are met. Payments
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under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.
This process involves reviewing open contracts and purchase orders,
communicating with our applicable personnel to identify services that have been
performed on our behalf and estimating the level of service performed and the
associated cost incurred when we have not yet been invoiced or otherwise
notified of actual costs. During the course of a preclinical study or clinical
trial, we adjust our prepaid and expense recognition if actual results differ
from our estimates. To date, we have not experienced any material differences
between accrued costs and actual costs incurred. The accrued research and
development balances were
Stock-Based Compensation
We follow the provision of the
We estimate the fair value of our stock options using the Black-Scholes option pricing model, which requires us to develop estimates to be used in calculating the fair value of stock options. The use of the model requires us to make estimates of assumptions, such as expected stock price volatility and the estimated expected term of each award.
Stock-based compensation expense based on the fair value estimated is recognized
over the requisite service period of the awards (generally the vesting period)
on a straight-line basis. Prior to the IPO, the estimated fair value of the
underlying common stock as determined on the date of grant by our Board of
Directors. For the three months ended
As of March 31, As of December 31,
2022 2021
Unvested equity compensation costs not yet
recognized (in millions) $ 14.2 $ 9.8
Weighted average period over which the unvested
awards are expected to be recognized (in years) 3.2 3.1
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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