You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes to those statements included later in this Annual Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Item 1A. "Risk Factors" and "Special Note Regarding Forward-Looking Statements."
Overview
We are a clinical-stage oncology company focused on leveraging a deep scientific understanding of cancer biology and medicinal chemistry to develop and advance novel, orally available therapies for the treatment of solid tumors. Our philosophy is to build a company based upon not only creative science and thoughtful management, but also upon the efficient translation of those ideas into therapies that will improve patient's lives. To this end, we currently are advancing three programs, TPST-1495, TPST-1120 and a third program targeting the three prime repair exonuclease ("TREX-1"). TPST-1495 is a dual antagonist of the EP2 and EP4 prostaglandin E2 receptors, and, to our knowledge, is the only such dual antagonist in clinical development. TPST-1495 is currently in a Phase 1 trial in solid tumors. Our second clinical program, TPST-1120, is a selective antagonist of peroxisome proliferator-activated receptor alpha (" PPAR?"), and is also in a Phase 1 trial in solid tumors. Similar to TPST-1495, we believe TPST-1120 is the only PPAR? antagonist in clinical development. We also have a third program in
69 --------------------------------------------------------------------------------
preclinical studies that could be the first to target TREX-1, a cellular enzyme that regulates the innate immune response in tumors.
We have no products approved for commercial sale and have not generated any
revenue from product sales. From inception to
We have never been profitable and has incurred operating losses in each period
since inception. Our net losses were
We expect to incur significant expenses and increasing operating losses for at least the next several years as we initiate and continue the clinical development of, and seek regulatory approval for, our product candidates and add personnel necessary to advance our pipeline of clinical-stage product candidates. In addition, operating as a publicly traded company will involve the hiring of additional financial and other personnel, upgrading our financial information and other systems, and incurring substantial costs associated with operating as a public company. We expect our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval.
As of
Recent Developments
Oxford Loan and Security Agreement
On
Merger Agreement
On
On
Components of Results of Operations
Research and Development Expense
Research and development expenses represent costs incurred to conduct research and development, such as the development of our product candidates.
70 --------------------------------------------------------------------------------
We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
•Salaries, benefits and stock-based compensation;
•licensing costs; •allocated occupancy; •materials and supplies;
•contracted research and manufacturing;
•consulting arrangements; and
•other expenses incurred to advance our research and development activities.
The largest component of our operating expenses has historically been the investment in research and development activities. We expect research and development expenses will increase in the future as we advance our product candidates into and through clinical trials and pursues regulatory approvals, which will require a significant investment in costs of clinical trials, regulatory support and contract manufacturing and inventory build-up. In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to license fee and/or milestone payments, as well as added clinical development costs.
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist of employee-related expenses,
including salaries, benefits, travel and noncash stock-based compensation, for
our personnel in executive, finance and accounting, and other administrative
functions, as well as fees paid for legal, accounting and tax services,
consulting fees and facilities costs not otherwise included in research and
development expense. Legal costs include general corporate legal fees and patent
costs. We expect to incur additional expenses as a result of becoming a public
company following completion of the merger, including expenses related to
compliance with the rules and regulations of the
Other (Expense) Income , Net
Other (expense) income, net consists primarily of interest expense, interest income, and various income or expense items of a non-recurring nature.
71 --------------------------------------------------------------------------------
Results of Operations
The following table summarizes our operating results for the years endedDecember 31, 2021 and 2020: 2021 2020 Expenses: (in thousands) Research and development$ 17,166 $ 14,389 General and administrative 9,820 4,909 Total expenses 26,986 19,298 Operating loss (26,986) (19,298) Interest expense (1,282) - Interest income and other income (expense), net (34) 90 Provision for income taxes - - Net loss$ (28,302) $ (19,208) Research and Development
Our research and development expenses for the years ended
Research and development expense increased by
2021 2020 (in thousands)
Research and development outside services
2,869 2,070 Stock-based compensation expense 303 389 Consulting and professional services 1,634 1,352 Other expenses 1,005 966
Total research and development expense
The growth in total research and development expense of
General and Administrative
General and administrative expenses increased by
Other (Expense) and Income, Net
72 --------------------------------------------------------------------------------
For the year ended
Liquidity and Capital Resources
Sources of Liquidity
Since inception through
We believe our cash and cash equivalents as of
On
On
Cash Flows
The following table summarizes our cash flows for the years ended
2021 2020 (in thousands) Cash used in operating activities$ (25,957) $ (19,017) Cash used in investing activities (97) (6)
Cash provided by financing activities 59,063 34,599
Net increase in cash and cash equivalents
Cash flows from operating activities
Cash used in operating activities for the year ended
Cash used in operating activities for the year ended
Cash flows from investing activities
Cash used in investing activities for the years ended
73 --------------------------------------------------------------------------------
ended
Cash flows from financing activities
Cash provided by financing activities for the year ended
Material Cash Requirements
We expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seeks regulatory approval for, our product candidates. In addition, subject to obtaining regulatory approval of any of our product candidates, we anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, we expect to finance our future cash needs primarily through the issuance of additional equity, borrowings and strategic alliances with partner companies. To the extent that we raise additional capital through the issuance of additional equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt 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 additional funds through marketing and distribution arrangements or other 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 grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourself.
Critical Accounting Policies and Estimates
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations is based on our financial statements, which have been prepared in
accordance with
Research and Development Expenses
We record accrued expenses for estimated costs of our research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and we include these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the consolidated statements of operations. These costs are a significant component of our research and development expense. We record accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these third parties.
We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period, which includes gathering information from multiple sources. In certain circumstances, the determination of the nature and level of services that have been received during the reporting period requires judgment because the timing and pattern of vendor invoicing did not correspond to the level of services provided and invoicing from clinical study sites and other vendors may not yet be available to us. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from
74 --------------------------------------------------------------------------------
amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled and the rate of patient enrollment may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers.
Stock-Based Compensation
We recognize noncash stock-based compensation expense related to stock-based awards to employees, non-employees and directors, including stock options, based on the fair value on the grant date using the Black-Scholes option pricing model. The related stock-based compensation is recognized as expense on a straight line-basis over the employee's, non-employee's or director's requisite service period (generally the vesting period). Noncash stock compensation expense is based on awards ultimately expected to vest and is reduced by an estimate for future forfeitures.
In determining the fair value of stock options, we use the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.
Fair Value of Common Stock-Up until the merger, the fair value of the shares of common stock underlying stock options had historically been determined by our board of directors. Because there had been no public market for our common stock before the merger, the board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including important developments in our operations, sales of redeemable convertible preferred stock, actual operating results and financial performance, the conditions in the life sciences industry and the economy in general, the stock price performance and volatility of comparable public companies, and the lack of liquidity of our common stock, among other factors.
Expected Term-Our expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) for employee options.
Expected Volatility-The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as we did not have any trading history for our common stock. We will continue to analyze the historical stock price volatility and expected term assumption as more historical data for our common stock becomes available.
Risk-Free Interest Rate-The risk-free interest rate is based on the
Expected Dividend-We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we use an expected dividend yield of zero.
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements for a description of recent accounting pronouncements applicable to our Consolidated Financial Statements.
Smaller Reporting Company Status
We are a smaller reporting company as defined in the Securities Exchange Act of
1934, as amended. We may take advantage of certain of the scaled disclosures
available to smaller reporting companies and will be able to take advantage of
these scaled disclosures for so long as (i) our voting and non-voting common
stock held by nonaffiliates is less than
© Edgar Online, source