RAIN ONCOLOGY INC. This Quarterly Report on Form 10-Q includes forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the "safe harbor" created by those sections, that involve a number of risks, uncertainties and assumptions. These forward-looking statements can generally be identified as such because the context of the statement will include words such as "may," "will," "intend," "plan," "believe," "anticipate," "expect," "estimate," "predict," "potential," "continue," "likely," "forecast," "target," or "opportunity," the negative of these words or other similar words. Similarly, statements that describe our plans, strategies, intentions, expectations, objectives, goals or prospects and other statements that are not historical facts are also forward-looking statements. For such statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Readers of this Quarterly Report are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the time this Quarterly Report was filed with theSecurities and Exchange Commission (SEC). These forward-looking statements are based largely on our expectations and projections about future events and future trends affecting our business, and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. These risks and uncertainties include, without limitation, the risk factors identified in ourSEC reports, including our Quarterly Report on Form 10Q for the quarter endedMarch 31, 2021 . In addition, past financial or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. Except as required by law, we undertake no obligation to update publicly or revise our forward-looking statements.
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 most likely 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 is a small molecule, oral inhibitor of mouse double minute 2 (MDM2), which is oncogenic in numerous cancers. We in-licensed milademetan inSeptember 2020 based on the results of a Phase 1 clinical trial, which demonstrated meaningful antitumor activity in an MDM2-amplified subtype of LPS and other solid tumors. Data from well-differentiated/de-differentiated (WD/DD) liposarcoma (LPS) patients in the Phase 1 clinical trial of milademetan demonstrated median progression-free survival (mPFS) of approximately seven to eight months. Importantly, this result was accomplished with a rationally designed dosing schedule designed to mitigate safety concerns and widen the therapeutic window of MDM2 inhibition unlocking the potential for milademetan in a broad range of MDM2-dependent cancers. Based on these data, we commenced a pivotal Phase 3 trial in LPS inJuly 2021 . We anticipate commencement of a Phase 2 tumor-agnostic basket trial in certain solid tumors (MANTRA-2) in the fourth quarter of 2021. We also anticipate commencement of a Phase 2 clinical trial in Merkel cell carcinoma (MCC) (MANTRA-3) in mid-2022. In addition to milademetan, we are also developing a preclinical program that is focused on inducing synthetic lethality in cancer cells by inhibiting RAD52. 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 ofSeptember 30, 2021 , we had an accumulated deficit of$72.0 million and we incurred net losses of approximately$18.4 million and$33.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively. Our operations to date have been funded primarily through the issuance of convertible promissory notes, the issuance of convertible preferred stock, as well as issuance and sale of common stock through our initial public offering (IPO). From our inception throughSeptember 30, 2021 , we have raised aggregate gross proceeds of$9.9 million from the issuance of convertible promissory notes and$81.9 million from the issuance of convertible preferred stock. OnApril 27, 2021 , we completed our IPO in which we issued and sold 7,352,941 shares of common stock at a public offering price of$17.00 per share. OnMay 11, 2021 , we issued an additional 492,070 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$121.5 million , net of underwriting discounts and commissions, and other offering fees. As ofSeptember 30, 2021 , we had cash, cash equivalents and short-term investments of$150.1 million . Although we believe, based on our current business plans, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our obligations for at least the next twelve months, we 18
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anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products, seek to expand our product pipeline, invest in our organization, as well as incur expenses associated with operating as a public company. 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 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 inthe United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise. Because of the numerous risks and uncertainties associated with our product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. Based upon our current operating plan, we estimate that our cash, cash equivalents and short-term investments as ofSeptember 30, 2021 will be sufficient to fund our pivotal Phase 3 trial in LPS, Phase 2 tumor-agnostic basket trial in certain solid tumors, and Phase 2 trial in MCC, including continuing to advance our pipeline through additional preclinical studies and clinical trials. 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 are transferring 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. To the extent possible, we are conducting business as usual, with necessary or advisable modifications, and most of our employees are working remotely. We will continue to monitor the evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain and is subject to change.
Recent Developments
InNovember 2021 , we announced our plan to commence a Phase 2 clinical trial, named MANTRA-3, evaluating the efficacy of milademetan, an oral MDM2 inhibitor, as a monotherapy for the treatment of patients with MCC refractory to immune checkpoint inhibition (ICI) in mid-2022. 19
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Rain hosted an R&D day webinar onNovember 9, 2021 , which featuring several key opinion leaders in oncology, along with members of Rain's management team, who discussed the Company's R&D program, as well as select clinical and preclinical data. Rain, in collaboration with certain research partners, presented non-clinical data on milademetan at the IASLC 2021World Conference of Lung Cancer hosted by theInternational Association for the Study of Lung Cancer (Sept. 8-14, 2021 ) and at the AACR-NCI-EORTC (Triple Cancer Conference ) 2021 on Molecular Targets and Cancer Therapeutics virtual conference (Oct. 7-10, 2021 ), highlighting non-clinical data in MDM2-amplified tumors, MCC, GATA3-mutant ER+ breast cancer, and mesothelioma models. On the strength of recent non-clinical data fromDana-Farber Cancer Institute presented at theTriple Cancer Conference , we are now prioritizing our financial resources towards a Phase 2 clinical trial of milademetan as monotherapy in MCC patients failing first-line checkpoint inhibitors, with a clinical trial commencement expected in mid-2022. The Phase 2 clinical trial of milademetan in MCC will replace the previously planned Phase 2 clinical trial of miladementan in intimal sarcoma. We do not expect the new planned MCC trial to have significant net impact on the company's financial condition, cash flow or results of operations.
In
InJune 2021 , we announced a patient referral partnership withCaris Life Sciences (Caris). Under the terms of the partnership, Caris will provide patient referral services using their molecular intelligence trials platform for our planned Phase 2 MDM2-amplified tumor-agnostic basket trial for milademetan. Also inJune 2021 , we announced a master program and a genomic analysis platform agreement for comprehensive genomic profiling tests utilizing the genomic analysis platform ofTempus , an artificial intelligence and precision medicine company. Under the terms of the agreement,Tempus will provide both centralized tumor testing and patient matching services using their Connect & TIME Trial® Network for the planned Phase 2 MDM2-amplified tumor-agnostic basket trial for milademetan. 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. Overview of Milademetan 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, pharmacokinetics and drug accumulation 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. Residual drug concentration, due to poor drug clearance or tissue accumulation during the dosing break may otherwise prevent recovery from thrombocytopenia. Milademetan's differentiated profile, as a potent MDM2 inhibitor with rapid plasma clearance and lack of drug accumulation in tissues, 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. InSeptember 2020 , we in-licensed milademetan from Daiichi Sankyo. Daiichi Sankyo previously conducted a Phase 1 clinical trial in WD/DD LPS patients. Liposarcomas are the most common sarcomas in adults. WD and DD LPS represent subtypes of LPS. The DD subtype often develops within WD tumor mass at disease progression or recurrence of resected WD LPS. WD/DD LPS tumors have nearly universal MDM2 amplification and wild type (WT) p53, and hence we believe WD/DD LPS patients represent an appropriate population for MDM2 inhibition therapy. Data from a WD/DD LPS patients in the Phase 1 clinical trial of milademetan demonstrated mPFS of approximately seven to eight months. Importantly, this result was accomplished with a rationally designed dosing schedule designed to mitigate safety concerns 20
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and widen the therapeutic window of MDM2 inhibition, establishing potential for a differentiated profile. InJuly 2021 , we announced that the first patient has been randomized in the multicenter, open-label, Phase 3 registrational trial (MANTRA) evaluating milademetan for the treatment of DD LPS. Accordingly, pursuant to the Daiichi Sankyo License Agreement, the Company recorded$5.5 million in milestone fees as research and development expense in the condensed statement of operations. Of the$5.5 million milestone fees,$2.5 million was paid in the third quarter of 2021 and$3.0 million was accrued as part of accrued research and development in the condensed balance sheet as ofSeptember 30, 2021 . 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 2023. Further information about the clinical program is available on clinicaltrials.gov. 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. InJuly 2021 , we provided an update on patients continuing to receive milademetan monotherapy from the previously concluded Phase 1 dose escalation and expansion study. As ofJuly 1, 2021 , three WD/DD LPS patients received therapy with milademetan monotherapy for greater than 51 months. Two of these patients received therapy with durations of 51 and 57 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. InNovember 2021 , we announced a plan to commence a Phase 2 clinical trial, named MANTRA-3, evaluating the efficacy of milademetan, an oral MDM2 inhibitor, as a monotherapy for the treatment of patients with MCC refractory to ICI in mid-2022. The MANTRA-3 trial is designed to evaluate the efficacy of milademetan, as a monotherapy in patients with MCC that have progressed on immune checkpoint inhibitors. Approximately 34 patients are expected to be enrolled to receive milademetan. The primary endpoint of the trial is objective response rate as measured by RECIST criteria. Secondary endpoints include duration of response, disease control rate, progression free survival by investigator assessment, growth modulation index, overall survival and safety. Rain will prioritize its financial resources towards a Phase 2 clinical trial of milademetan in MCC and replace the previously planned Phase 2 clinical trial of milademetan in intimal sarcoma. In the fourth quarter of 2021, we anticipate the commencement of a multicenter, single arm open-label, Phase 2 basket trial evaluating milademetan, an oral MDM2 inhibitor, for the treatment of MDM2-amplified advanced solid tumors (MANTRA-2). The MANTRA-2 trial is designed to evaluate the safety and efficacy of milademetan in patients with advanced or metastatic solid tumors refractory or intolerant to standard-of-care therapy and that exhibit wild-type p53 and a prespecified minimum MDM2 gene copy number. Approximately 65 patients are expected to be enrolled to receive milademetan. The primary endpoint of the trial is objective response rate as measured by RECIST criteria. Secondary endpoints include duration of response, disease control rate progression-free survival by investigator assessment, overall survival, and growth modulation index. An interim analysis from MANTRA-2 is anticipated in the second half of 2022. Overview of RAD52 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 21
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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. Lead candidate selection is expected in 2022.
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
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across multiple development programs and product candidates. These costs are included in unallocated research and development expenses in the table below.
The following table summarizes our research and development expenses by product candidate or development program:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(in thousands) (in thousands)
Milademetan $ 10,366 $ 5,493 $ 16,603 $ 5,493
Other clinical candidate 209 2,129 1,546 5,364
Unallocated internal
research and development
costs 4,709 271 7,952 338
Total research and
development expenses $ 15,284 $ 7,893 $ 26,101 $ 11,195
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. 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"
disclosed in Item Part II, 1A of our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2021 .
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 andSEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.
Interest Income
Interest income consists of interest on our AFS securities.
Interest Expense
We did not have interest expense for the nine months endedSeptember 30, 2021 . Interest expense for nine months endedSeptember 30, 2020 consisted of interest on the outstanding convertible promissory notes. 23
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Comparison of Three and Nine Months Ended
The following table summarizes our results of operations for the three and nine months endedSeptember 30, 2021 and 2020, together with the changes in those items in dollars: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Change 2021 2020 Change (in thousands) (in thousands) Operating expenses: Research and development$ 15,284 $ 7,893 $ 7,391 $ 26,101 $ 11,195 $ 14,906 General and administrative 3,154 591 2,563 7,334 2,311 5,023 Total operating expenses 18,438 8,484 9,954 33,435 13,506 19,929 Loss from operations (18,438 ) (8,484 ) (9,954 ) (33,435 ) (13,506 ) (19,929 ) Other income (expense): Interest income 11 - 11 25 23 2 Interest expense, related party - (71 ) 71 - (135 ) 135 Change in fair value of convertible promissory notes, related party - (1,891 ) 1,891 - (2,024 ) 2,024 Other income 1 - 1 1 2 (1 ) Total other income (expense), net 12 (1,962 ) 1,974 26 (2,134 ) 2,160 Net loss$ (18,426 ) $ (10,446 ) $ 7,980 $ (33,409 ) $ (15,640 ) $ 17,769
Research and Development Expenses
Research and development (R&D) expenses were$15.3 million and$7.9 million for the three months endedSeptember 30, 2021 and 2020, respectively. The increase in R&D expenses was primarily due to the milestone fees to Daiichi Sankyo of$5.5 million , increases in R&D costs for our lead product candidate, milademetan, as we launched our Phase 3 pivotal study in LPS inJuly 2021 , as well as personnel costs. Non-cash stock-based compensation expenses, included as part of personnel costs, were$0.7 million and$0.2 million for the three months endedSeptember 30, 2021 and 2020, respectively. R&D expenses were$26.1 million and$11.2 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The increase in R&D expenses was primarily related to milademetan and other research costs, including the milestone fees to Daiichi Sankyo of$5.5 million . Non-cash stock-based compensation expenses, included as part of personnel costs, were$1.4 million and$0.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively. We expect our R&D costs to continue to increase in the remainder of 2021 as we continue our Phase 3 trial in LPS and initiate our Phase 2 tumor-agnostic basket trial for milademetan.
General and Administrative Expenses
General and administrative (G&A) expenses were$3.2 million and$0.6 million for the three months endedSeptember 30, 2021 and 2020, respectively. The increase in G&A expenses was primarily due to increases in various third-party G&A costs, including legal costs, outside consulting fees, and accounting and audit fees associated with maintaining compliance with exchange listing andSEC requirements as a public company, and personnel costs as a result of continued growth in headcount. Non-cash stock-based compensation expense included in G&A expenses was approximately$0.1 million for the three months endedSeptember 30, 2021 and 2020, respectively. G&A expenses were$7.3 million and$2.3 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The increase in G&A expenses was primarily due to increases in various third-party G&A costs as well as personnel costs. Non-cash stock-based compensation expense included in G&A expenses was$0.4 million and$0.2 million the nine months endedSeptember 30, 2021 and 2020, respectively. We have incurred and expect to continue 24
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incur additional expenses as a result of being a public company following the completion of our IPO inApril 2021 , including costs associated with maintaining compliance with exchange listing andSEC requirements as a public company. In addition, we expect our general and administrative expenses to continue to increase in the remainder of 2021 as we continue to add personnel and build out systems and infrastructure to support our operations as a public company.
Other (Income) Expense
Other (income) expense, net with nominal amounts for the three and nine months endedSeptember 30, 2021 and 2020 represents interest income, interest expense on the outstanding convertible promissory notes and change in the fair value of our convertible promissory notes recorded in 2020.
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 throughSeptember 30, 2021 , we have raised aggregate gross proceeds of$9.9 million from the issuance of convertible promissory notes and$81.9 million from the issuance of convertible preferred stock. OnApril 27, 2021 , we completed our IPO in which we issued and sold 7,352,941 shares of common stock at a public offering price of$17.00 per share. OnMay 11, 2021 , we issued an additional 492,070 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$121.5 million , net of underwriting discounts and commissions, and other offering fees. As ofSeptember 30, 2021 , we had cash, cash equivalents and short-term investments of$150.1 million . Although we believe, based on our current business plans, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
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, following the IPO, 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;
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• 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, any
future commercialization efforts and our transition to a public company;
• potentially experience the effects of the recent disruptions to and
volatility in the credit and financial markets in
worldwide from the ongoing COVID-19 pandemic; and
• operate as a public company.
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;
• 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
• the costs of operating as a public company.
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
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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 inthe United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. Cash Flows
The following table summarizes our sources and uses of cash for the nine months
ended
Nine Months Ended
September 30,
2021 2020
(in thousands)
Net cash provided by (used in):
Operating activities $ (27,704 ) $ (6,775 )
Investing activities (139,480 ) (5,156 )
Financing activities 121,579 69,518
Net (decrease) increase in cash and cash equivalents
Operating Activities We have incurred losses since inception. Net cash used in operating activities for the nine months endedSeptember 30, 2021 was$27.7 million , consisting primarily of net loss of$33.4 million resulting from expenses associated with research and development activities for our lead product candidate and general and administrative expenses, partially offset by a net of decrease in changes in operating assets and liabilities of$1.7 million and non-cash adjustments of$7.4 million . Net cash used in operating activities for the nine months endedSeptember 30, 2020 was$6.8 million , consisting primarily of net loss of$15.6 million offset by a net of increase changes in operating assets and liabilities of$0.9 million and non-cash adjustments of$7.9 million .
Investing Activities
Net cash used in investing activities for the nine months endedSeptember 30, 2021 was$139.5 million primarily related to net purchases of available for sale securities of$136.9 million , and payment of$2.5 million to Daiichi Sankyo for in-process research and development expense. Net cash used in investing activities for the nine months endedSeptember 30, 2020 was$5.2 million primarily for payment to Daiichi Sankyo for in-process research and development expense. 27
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Table of Contents Financing Activities Net cash provided by financing activities in the nine months endedSeptember 30, 2021 of$121.5 million primarily relates to the net proceeds from IPO, after deducting underwriting discounts and commissions, and other offering fees.
Net cash provided by financing activities in the nine months ended
Contractual Obligations and other Commitments
During the period endedSeptember 30, 2021 , there were no material changes to our principal contractual obligations and commitments as reported in our final prospectus for our IPO, filed pursuant to Rule 424(b) under the Securities Exchange Act of 1933, as amended, with theSEC onApril 23, 2021 (the Prospectus).
Critical Accounting Policies and Use of Estimates
There have been no significant changes to our critical accounting policies from our disclosure reported in "Critical Accounting Policies and Estimates" in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Prospectus, except as described in Note 2 to the interim unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Emerging Growth Company Status
We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards; and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. The JOBS Act also exempts us from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b). We will remain an "emerging growth company" until the earliest to occur of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, orDecember 31, 2026 , (b) in which we have total annual gross revenues of$1.07 billion or more, or (c) in which we are deemed to be a large accelerated filer under the rules of theSEC , which means the market value of our outstanding common stock held by non-affiliates exceeds$700 million as of last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than$1.0 billion in nonconvertible debt during the previous three years.
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.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have,
any off-balance sheet arrangements, as defined in the rules and regulations of
the
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