THESEUS PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes, included in our Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report includes forward-looking statements that involve risks and uncertainties, such as statements of our plans, strategies, objectives, expectations, and intentions. See "Special Note Regarding Forward-Looking Statements" and "Risk Factors" for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by these forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company focused on improving the lives of cancer patients through the discovery, development and commercialization of transformative targeted therapies. Our development
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programs are designed to address drug resistance mutations in key driver oncogenes, which are mutated genes that cause cancer. Resistance mutations limit the efficacy of existing targeted therapies by rendering tumor cells unresponsive to drugs, and therefore present a critical challenge in cancer treatment today. Our initial focus is on developing the next generation of tyrosine kinase inhibitors, or TKIs, and is rooted in the critical role that tyrosine kinases play in the development of cancer. Despite the commercial success of approved TKIs, the development of drug resistance is a persistent limitation, narrowing the number of effective treatment options available to patients as they progress through subsequent lines of therapy.
Our goal is to develop "pan-variant" kinase inhibitors-inhibitors that target all major cancer causing and drug resistance mutations in clinically significant protein kinases. We believe that truly pan-variant inhibitors are required to effectively inhibit the heterogeneous mix of resistance mutations found in patients, and may also suppress the emergence of new mutations when used in earlier lines of therapy. To develop such inhibitors, we deploy our novel predictive resistance assay, or PRA, a highly differentiated cell-based method for testing TKIs that we believe is predictive for "pan-ness."
Our lead product candidate, THE-630, is a pan-variant inhibitor of all major
classes of activating and resistance mutations of the KIT kinase, or a pan-KIT
inhibitor, for the treatment of gastrointestinal stromal tumors, or GIST, a type
of cancer most often characterized by oncogenic activation of KIT. In
Our second program is a fourth-generation inhibitor of epidermal growth factor receptor, or EGFR, that is active against C797S, the most common EGFR mutation that causes resistance to first- or later-line osimertinib treatment in patients with non-small cell lung cancer, or NSCLC. We have developed a series of fourth-generation EGFR inhibitors designed to inhibit the full range of single-, double- and triple-mutant variants found in the tumors of patients with EGFR-mutant NSCLC that have developed resistance to osimertinib in first- or later-line therapy, including the C797S mutation. We intend to nominate the development candidate from our EGFR inhibitor program in the third quarter of 2022, and thereafter initiate Investigational New Drug, or IND-enabling studies, and expect to file an IND application for this program in 2023.
We are evaluating several additional targets and intend to select one as our next program by the end of 2022.
Since our inception in
We have incurred significant operating losses since inception. Our ability to
generate product revenue sufficient to achieve profitability will depend heavily
on the successful development and eventual commercialization of one or more
product candidates. Our net losses were
? advance the clinical development of THE-630;
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advance our fourth-generation EGFR inhibitor program and other compounds we may
? develop in the future from discovery through preclinical development and
clinical trials;
? seek marketing approvals for any product candidates that successfully complete
clinical trials;
? obtain, expand, maintain, defend and enforce our intellectual property
portfolio;
? hire additional clinical, regulatory and scientific personnel;
? ultimately establish a sales, marketing and distribution infrastructure to
commercialize any products for which we may obtain marketing approval;
? establish agreements with contract research organizations, or CROs, and
contract manufacturing organizations, or CMOs; and
add operational, legal, compliance, financial and management information
? systems and personnel to support our research, product development and future
commercialization efforts, as well as to support our operations as a public
company.
Our net losses may fluctuate significantly from period to period, depending on the timing of expenditures related to our research and development activities.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate. In addition, if we obtain regulatory approval for a product candidate and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings or other capital sources, which could include collaborations, strategic alliances or licensing arrangements. We may be unable to raise additional funds or enter into such arrangements when needed, on favorable terms, or at all. Our failure to raise capital or enter into such agreements as, and when, needed, could have a material adverse effect on our business, results of operations, and financial condition, including requiring us to have to delay, reduce or eliminate product development or future commercialization efforts.
Because of the numerous risks and uncertainties associated with development of targeted oncology therapies, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. We will need to generate significant revenue to achieve profitability, and we may never do so. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of
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Impact of COVID-19 on Our Business
The COVID-19 pandemic continues to evolve, and we will continue to monitor the COVID-19 situation, including the resurgence of cases relating to the spread of new variants. The extent of the impact of the COVID-19 pandemic on our business, operations and 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 CMOs, CROs, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual. We will continue to actively monitor the rapidly evolving situation related to COVID-19 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 development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain and is subject to change.
Initial Public Offering
On
Components of Our Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products or from other sources in the near future, if at all. If our development efforts for our lead product candidate, THE-630, or additional product candidates that we may develop in the future are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Operating Expenses
Research and Development Expenses
Research and development expenses account for a significant portion of our operating expenses and consist primarily of costs incurred in connection with the discovery and preclinical development of our potential development candidates, and include:
? salaries, benefits, stock-based compensation and other related costs for
individuals involved in research and development activities;
external research and development expenses incurred under agreements with CROs
? and consultants that conduct our preclinical studies and other scientific
development services;
? costs incurred under agreements with CMOs for manufacturing material for our
preclinical studies and planned clinical trials; and
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? costs related to compliance with regulatory requirements.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors or our estimate of the level of service that has been performed at each reporting date. Payments for these external development activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated financial statements as prepaid expenses or accrued expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
A significant portion of our research and development costs have been external costs, which we track after a clinical product candidate has been identified. We utilize third party contractors for our research and development activities and CMOs for our manufacturing activities and we do not have our own laboratory or manufacturing facilities. Therefore, we have no material facilities expenses attributed to research and development. Our internal research and development costs are primarily personnel-related costs and other indirect costs.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we advance clinical development of our lead product candidate, THE-630, and continue to discover and develop additional product candidates, expand our headcount and maintain, expand and enforce our intellectual property portfolio. If any product candidates enter into later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. There are numerous factors associated with the successful development and commercialization of any product candidates we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans.
The successful development of our current lead product candidate, THE-630, or any product candidates we may develop in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of THE-630 and any other product candidates we may develop. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of any current or future product candidate, if approved. This is due to the numerous risks and uncertainties associated with product development, including the uncertainty of:
? the timing and progress of preclinical and clinical development activities;
? the number and scope of preclinical and clinical programs we decide to pursue;
? our ability to maintain our current research and development programs and to
establish new programs;
? successful patient enrollment in, and the initiation and completion of,
clinical trials;
the successful completion of clinical trials with safety, tolerability and
? efficacy profiles that are satisfactory to the FDA or any comparable foreign
regulatory authority;
? the timing, receipt and terms of any marketing approvals from applicable
regulatory authorities;
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? our ability to establish new licensing or collaboration arrangements;
? the performance of our future collaborators, if any;
our ability to establish arrangements with third-party manufacturers for the
? clinical supply of our product candidates and commercial supply of products
that receive marketing approval, if any;
? development and timely delivery of commercial-grade drug formulations that can
be used in our planned clinical trials and for commercialization;
? obtaining, maintaining, defending and enforcing patent claims and other
intellectual property rights;
? commercializing product candidates, if approved, whether alone or in
collaboration with others; and
? maintaining a continued acceptable safety profile of the product candidates
following approval.
Any changes in the outcome of any of these variables with respect to the
development of THE-630 or any future product candidates in preclinical and
clinical development could mean a significant change in the costs and timing
associated with the development of these product candidates. For example, if the
FDA or another regulatory authority were to delay our planned start of clinical
trials or require us to conduct clinical trials or other testing beyond those
that we currently expect, or if we experience significant delays in enrollment
in any clinical trials following the
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits, and stock-based compensation expenses for personnel in executive, finance, accounting, human resources and other administrative functions. Other significant general and administrative expenses include legal fees relating to patent, intellectual property and corporate matters, and fees paid for accounting, consulting and other professional services, and expenses for rent, insurance and other operating costs.
We anticipate that our general and administrative expenses will increase in the
future as our business expands to support our continued research and development
activities, including any future clinical trials. These increases will likely
include increased costs related to the hiring of additional personnel and fees
to outside consultants, among other expenses. We also anticipate increased
expenses associated with being a public company, including costs for audit,
legal, regulatory and tax-related services related to compliance with the
rules and regulations of the
Other Income, Net
Other income, net primarily consists of interest income, which is earned on cash equivalents that generate interest on a monthly basis, and short-term and long-term investments.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
THREE MONTHS ENDED
JUNE 30,
2022 2021 CHANGE
Operating expenses:
Research and development
431 7 424
Total other income, net 431 7 424
Net loss $ (11,649) $ (6,807) $ (4,842) Research and Development Expenses
The following table summarizes our research and development expenses for the
three months ended
THREE MONTHS ENDED
JUNE 30,
2022 2021 CHANGE
Pan-KIT inhibitor program (THE-630)
2,113 396 1,717
$ 7,344 $ 4,485 $ 2,859 The increase in research and development expenses was primarily attributable to the following:
a
decrease in preclinical costs of
? in clinical costs, including CRO and other clinical trial services costs of
million and other allocated expenses of
a
? inhibitor program, including an increase in CRO expenses of
increase in stock-based compensation expense of
in allocated salary and benefit related expenses of
a
? an increase in CRO expenses of
compensation expense of
related expense of
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General and Administrative Expenses
The following table summarizes our general and administrative expenses for the
three months ended
THREE MONTHS ENDED
JUNE 30,
2022 2021 CHANGE
Personnel-related expenses (including
stock-based compensation) $ 2,702 $ 1,103 $ 1,599
Facilities and supplies 186 33 153
Legal and professional fees 1,573 1,058 515
Other expenses 275 135 140
$ 4,736 $ 2,329 $ 2,407 The increase in general and administrative expenses was primarily attributable to the following:
a
? stock-based compensation expense of
benefit related expense of
recruiting expense of
? a
expenses. Total Other Income, Net
Total other income, net was
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
SIX MONTHS ENDED
JUNE 30,
2022 2021 CHANGE
Operating expenses:
Research and development $ 13,892 $ 8,310 $ 5,582
General and administrative 8,767 2,993 5,774
Total operating expenses 22,659 11,303 11,356
Loss from operations (22,659) (11,303) (11,356)
Other income, net 513 23 490
Total other income (expense), net 513 23 490
Net loss $ (22,146) $ (11,280) $ (10,866)
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Research and Development Expenses
The following table summarizes our research and development expenses for the six
months ended
SIX MONTHS ENDED
JUNE 30,
2022 2021 CHANGE
Pan-KIT inhibitor program (THE-630)
3,821 638 3,183
$ 13,892 $ 8,310 $ 5,582 The increase in research and development expenses was primarily attributable to the following:
a
decrease in preclinical costs of
? in clinical costs, including CRO and other clinical trial services costs of
million and other allocated expenses of
a
? inhibitor program, including an increase in CRO expenses of
increase in stock-based compensation expense of
in allocated salary and benefit related expenses of
a
? an increase in CRO expenses of
compensation expense of
related expense of
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the
six months ended
SIX MONTHS ENDED
JUNE 30,
2022 2021 CHANGE
Personnel-related expenses (including
stock-based compensation) $ 4,984 $ 1,327 $ 3,657
Facilities and supplies 290 36 254
Legal and professional fees 2,983 1,408 1,575
Other expenses 510 222 288
$ 8,767 $ 2,993 $ 5,774 The increase in general and administrative expenses was primarily attributable to the following:
a
? stock-based compensation expense of
benefit related expense of
recruiting expense of
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? a
expenses. Total Other Income, Net
Total other income, net was
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant losses in each period and on
an aggregate basis. We have not yet commercialized any product candidates, and
we do not expect to generate revenue from sales of any product candidates or
from other sources for several years, if at all. As of
We have funded our operations primarily with aggregate net proceeds of
approximately
Cash Flows
The following table provides information regarding our cash flows for each of the periods presented (in thousands):
SIX MONTHS ENDED
JUNE 30,
2022 2021
Net cash used in operating activities
(93,858) -
Net cash provided by financing activities 70 101,087
Net (decrease) increase in cash $ (109,570) $ 89,129
During the six months ended
During the six months ended
During the six months ended
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equipment of
Net Cash Provided by Financing Activities
During the six months ended
During the six months ended
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing
research and development activities, particularly as we continue research and
development and advance our THE-630 clinical trial and advance the preclinical
development of our other programs. Furthermore, we expect to continue to incur
additional costs associated with operating as a public company including
increased costs of accounting, audit, legal, regulatory and tax-related services
associated with maintaining compliance with exchange listing and
Based on our current operating plan, we believe that our cash, cash equivalents,
and investments of
Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on, and could increase significantly as a result of, many factors, including:
the scope, rate of progress, success and costs of our drug discovery,
? preclinical development activities, laboratory testing and clinical trials for
product candidates;
? the number and scope of clinical programs we decide to pursue;
? the scope and costs of manufacturing development and commercial manufacturing
activities for product candidates, if approved;
? the extent to which we acquire or in-license other product candidates and
technologies;
? the timing and amount of any payments required to be made under the agreements
governing acquired or in-licensed product candidates or technologies;
? the cost, timing and outcome of regulatory review of product candidates;
? the cost and timing of establishing sales and marketing capabilities, if any
product candidate receives marketing approval;
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the costs of preparing, filing and prosecuting patent applications, maintaining
? and enforcing our intellectual property rights and defending intellectual
property-related claims;
? our ability to establish and maintain collaborations on favorable terms, if at
all;
? the impact of the COVID-19 pandemic or other external disruptions on our
business, results of operations and financial position;
our efforts to enhance operational systems and our ability to attract, hire and
? retain qualified personnel, including personnel to support the development of
product candidates;
? the costs associated with being a public company; and
? the cost associated with commercializing product candidates, if they receive
marketing approval.
A change in the outcome of any of these or other variables with respect to the development of our pan-KIT or EGFR inhibitor programs or any product or development candidate we may develop in the future could significantly change the costs and timing associated with our development plans. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, which could include collaborations, strategic alliances or licensing arrangements. We currently have no credit facility or committed sources of capital. Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of such stockholders. Debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research program 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 future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
There have been no significant changes in our contractual obligations and outstanding indebtedness as disclosed in our Annual Report. Refer to Note 8 in our condensed consolidated financial statements included elsewhere in this Quarterly Report for further details.
Critical Accounting Policies and Significant Judgments and Estimates
This management's discussion and analysis is based on our condensed consolidated
financial statements, which have been prepared in accordance with
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estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of change in estimates. There have been no significant changes to our critical accounting policies from those described in our Annual Report.
Emerging Growth Company Status
In
We will remain an emerging growth company until the earliest to occur of: (1)
the last day of the fiscal year in which we have more than
We are also a "smaller reporting company" as defined in the Securities Exchange
Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller
reporting company even after we are no longer an emerging growth company. We may
take advantage of certain of the scaled disclosures available to smaller
reporting companies until the fiscal year following the determination that our
common stock held by non-affiliates is more than
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report.
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