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 the related notes and other financial information
included elsewhere in this Quarterly Report. Some of the information contained
in this discussion and analysis or set forth elsewhere in this Quarterly Report,
including information with respect to our plans and strategy for our business,
timing of future events and future financial performance, includes
forward-looking statements that are based upon current beliefs, plans and
expectations and involve risks, uncertainties and assumptions. You should review
the "Risk Factors" section of this Quarterly Report for a discussion of
important factors that could cause our actual results and the timing of selected
events to differ materially from those described in or implied by the
forward-looking statements contained in this Quarterly Report. We undertake no
obligation to update these forward-looking statements to reflect events or
circumstances after the date of this Quarterly Report or to reflect actual
outcomes.
Overview
We are a biopharmaceutical company focused on the development and
commercialization of novel targeted therapeutics for cancer and utilizing our
cost efficient, contract research organization (CRO) independent product
development platform to partner with ex-U.S. companies to develop and
commercialize innovative products in the United States.
In December 2019, we entered into a collaboration and clinical trial agreement
(the Envafolimab Collaboration Agreement) with 3D Medicines Co., Ltd. (3D
Medicines) and Jiangsu Alphamab Biopharmaceuticals Co., Ltd. (Alphamab) for the
development of envafolimab, also known as KN035, an investigational PD-L1
single-domain antibody (sdAb) administered by rapid subcutaneous injection for
the treatment of sarcoma in North America. The ENVASARC Phase 2 pivotal trial
(the ENVASARC trial) began dosing in December 2020 at 300mg of envafolimab every
three weeks in cohort A, and 300mg of envafolimab every three weeks in
combination with Yervoy® at 1mg/kg every three weeks for four doses in cohort B,
in the sarcoma subtypes of undifferentiated pleomorphic sarcoma (UPS) and
myxofibrosarcoma (MFS). In December 2021, the independent data monitoring
committee (IDMC) reviewed interim safety and efficacy data from 18 patients
enrolled into each cohort who completed a minimum of 12 weeks of efficacy
evaluations (two on-treatment scans). The objective response rate (ORR) by
blinded independent central review (BICR) in each cohort satisfied the
prespecified futility rule of having at least one response in each cohort.
Envafolimab was well tolerated, with only a single Grade 3 related adverse event
reported in 36 patients. Based on the tolerability profile and the significantly
higher ORR observed in lower weight patients, the IDMC recommended the trial
continue, using a higher dose of envafolimab of 600mg every three weeks. Given
the activity demonstrated by higher doses of envafolimab in completed trials,
including in the pivotal trial in MSI-H/dMMR cancer that was the basis for
approval of envafolimab in China, we agreed with the IDMC guidance and proposed
a doubling of the envafolimab dose to 600mg every three weeks to the U.S. Food
and Drug Administration (FDA) in an amendment which was cleared without comment.
The ENVASARC trial will now assess up to 80 new patients in a cohort of single
agent envafolimab at 600mg every three weeks and up to 80 new patients in a
cohort of envafolimab at 600mg every three weeks with Yervoy at 1mg/kg every
three weeks for four doses. Nine of 80 responses by BICR in either cohort are
needed to satisfy the primary objective of the trial which is to statistically
exceed the known 4% ORR of Votrient® (pazopanib), the only FDA-approved
treatment for patients with refractory UPS or MFS. Achieving the primary
endpoint of ORR could be the basis for accelerated approval of envafolimab by
the FDA as a single agent and/or in combination with Yervoy. The trial will
provide at least 86% power to demonstrate the lower bound of the 95% confidence
interval is greater than 5% in each cohort, which would be greater than the 4%
ORR of Votrient reported in soft tissue sarcoma in its package insert. Votrient
is the only approved treatment for refractory soft tissue sarcoma, which
includes UPS and MFS.
An initial interim efficacy analysis at the higher 600mg dose is planned
following the 12-week efficacy scan in the 36th enrolled patient, to allow for
determination of the preliminary ORR, which we expect in the second half of
2022. There must be at least one response among the initial 18 patients enrolled
at 600mg into each cohort to continue enrollment in that cohort per the futility
rules of the trial. A second interim efficacy analysis at the 600mg dose is
planned following the 12-week efficacy scan in the 92nd enrolled patient, to
allow for determination of the preliminary ORR, which we expect in 2023. There
must be at least three responses among the initial 46 patients enrolled at 600mg
into each cohort to continue enrollment in that cohort per the futility rules of
the trial.
Assuming sufficient patient responses in line with meeting the ENVASARC trial
endpoint, we intend to apply for fast track designation with the FDA for
envafolimab for the treatment of soft tissue sarcoma subtypes in the United
States in 2022, and for breakthrough designation following the initial efficacy
interim analysis. We expect final response assessment data including duration of
response in all patients from the ENVASARC trial in 2024, and, assuming positive
data, to submit a biologics license application to the FDA seeking accelerated
approval in 2024. At any time that we reach nine responses in each cohort and
meet the endpoint, we expect to discuss the submission process with the FDA.
In June 2021, we received orphan drug designation (ODD) for envafolimab for the
treatment of soft tissue sarcoma. The ODD application included data
demonstrating that two of five patients with alveolar soft parts sarcoma (ASPS)
treated with envafolimab in Phase 1 trials conducted by 3D Medicines and
Alphamab demonstrated partial responses (PR), each with a duration of response
greater than six months. In June and August 2021, the IDMC recommended that the
ENVASARC trial proceed as planned following the review of safety data from the
more than 20 patients enrolled in the trial at that time.
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In November 2021, we announced that our partners 3D Medicines and Alphamab had
received marketing authorization for envafolimab from the Chinese National
Medical Products Association (NMPA) in the indication of microsatellite
instability-high (MSI-H) or mismatch repair deficient (dMMR) cancer.
Our other clinical stage oncology product candidates include YH001, which is a
monospecific investigational CTLA-4 antibody, that we licensed from Eucure
(Beijing) Biopharma Co., Ltd. (Eucure) and Biocytogen Pharmaceuticals (Beijing)
Co., Ltd. (Biocytogen) in October 2021, TRC102, which is a small molecule that
has been studied in Phase 1 and Phase 2 trials for the treatment of
mesothelioma, lung cancer, glioblastoma and solid tumors, and TJ004309, which is
a CD73 antibody in Phase 1 clinical development for the treatment of solid
tumors, that we licensed from I-Mab Biopharma (I-Mab) in November 2018.
YH001 is an investigational humanized CTLA-4 IgG1 monoclonal antibody that is
being developed in two Phase 1 trials by Eucure for the treatment of various
cancer indications. Cytotoxic T-lymphocyte-associated protein 4 (CTLA-4) is a
protein expressed on T-cells and expressed at high levels specifically on
regulatory T-cells (Tregs) and contributes to the suppressor function of Tregs
by acting as a checkpoint to inhibit effector T-cell immune responses to cancer
cells. The CTLA-4 inhibitor Yervoy (ipilimumab) marketed by BMS has been
approved as a single agent in melanoma and approved in combination with other
therapies in multiple indications including non-small cell lung cancer (NSCLC),
renal cell carcinoma (RCC) and MSI-H/dMMR cancer. As of August 9, 2021, YH001
had been dosed in more than 34 patients in China and Australia. The Phase 1 dose
escalation trial in Australia of YH001 in combination with the PD-1 antibody,
toripalimab, and the Phase 1 dose escalation trial in China of YH001 as a single
agent, which are sponsored by Eucure, recently completed enrollment and
determined a recommended Phase 2 dose, and we expect data to be presented later
this year. No CTLA-4 therapy is approved by the FDA for the treatment of soft
tissue sarcoma. We intend to initiate a Phase 1/2 clinical trial of YH001 in
combination with envafolimab and with doxorubicin chemotherapy, an approved
treatment for soft tissue sarcoma, in the second half of 2022. Additionally, we
plan to initiate trials of YH001 as a single agent or in combination with
immunotherapies in other tumor types.
TRC102 is a small molecule in clinical development to reverse resistance to
specific chemotherapeutics by inhibiting DNA base excision repair (BER). In
initial clinical trials of more than 100 patients, TRC102 has shown good
tolerability and we believe, promising anti-tumor activity in combination with
alkylating and antimetabolite chemotherapy for the treatment of cancer patients.
TRC102 has been studied in Phase 1 or Phase 2 trials in mesothelioma patients in
combination with the approved chemotherapeutic Alimta® (pemetrexed), in
glioblastoma, ovarian cancer, lung and colorectal cancer patients in combination
with the approved chemotherapeutic Temodar® (temozolomide) and in lung cancer
patients in combination with the approved chemotherapeutics Alimta and cisplatin
as well as external beam radiation (i.e., chemoradiation). All current TRC102
trials are sponsored and funded by the National Cancer Institute (NCI). We
retain global rights to develop and commercialize TRC102 in all indications. In
October 2020, we received ODD from the FDA for TRC102 for the treatment of
patients with malignant glioma, including glioblastoma. O6-methylguanine DNA
methyltransferase (MGMT) deficiency is observed in about one-third of
glioblastoma patients, and a prior study of Temodar and TRC102 reported at the
Society for Neuro-Oncology in 2018 demonstrated that two MGMT deficient
glioblastoma patients had prolonged survival when treated with Temodar and
TRC102 after progressing previously on Temodar and radiation therapy. A December
2020 publication in Cancer Cell also demonstrated Temodar and TRC102 were active
in MGMT deficient patients with colorectal cancer. Based on these data, we
believe a trial in first line glioblastoma patients of Temodar, radiation
therapy and TRC102 is warranted and are discussing further development with
investigators at this time. In addition, based on data presented at the ASCO
2020 virtual meeting that the combination of chemoradiation and TRC102 produced
objective responses in all 15 evaluable patients with advanced localized lung
cancer treated in a Phase 1 trial, in January 2022, the NCI initiated a
randomized trial of chemoradiation with or without TRC102, followed by
consolidative durvalumab treatment. The primary objective is to improve the 56%
progression free survival (PFS) rate with current standard of care to 75% with
current standard of care plus TRC102. The trial is expected to begin enrollment
in June 2022 and complete in 2024.
TJ004309, also known as TJD5 or uliledlimab, is a novel humanized antibody
against CD73 expressed on stromal cells and tumors that converts extracellular
adenosine monophosphate (AMP) to the immunosuppressive metabolite adenosine. We
are developing TJ004309 in collaboration with I-Mab under a strategic
collaboration and clinical trial agreement that we entered into in November 2018
(the TJ004309 Agreement). In July 2019, we began enrollment in a Phase 1
clinical trial to assess safety and preliminary efficacy of TJ004309 as a single
agent and when combined with the PD-L1 checkpoint inhibitor Tecentriq® in
patients with advanced solid tumors, and in June 2021 we presented data from the
ongoing Phase 1 trial at the ASCO 2021 virtual meeting. In a poster presentation
titled "The safety, pharmacokinetics (PK), pharmacodynamics (PD) and clinical
efficacy of uliledlimab (TJ004309), a differentiated CD73 antibody, in
combination with atezolizumab in patients with advanced cancer," uliledlimab was
found to be well-tolerated up to 20mg/kg every three weeks and 15mg/kg once
weekly as a monotherapy and in combination therapy with atezolizumab 1200mg
every three weeks and no dose limiting toxicity (DLT) was observed and the
maximum tolerated dose (MTD) was not reached. There was one complete response in
a PD-(L)1 naïve patient, two PRs with one PR in a PD-(L)1 naïve patient and one
PR in a PD-(L)1 refractory patient, and three cases of stable disease (SD)
following treatment with uliledlimab and atezolizumab. We expect to complete the
TJ004309 Phase 1 trial in the first half of 2022.
We entered into a separate strategic collaboration and clinical trial agreement
(the Bispecific Agreement) which allows for the development of up to five of
I-Mab's proprietary bispecific antibody (the BsAb) product candidates to be
nominated by I-Mab within a five-year period for development and
commercialization in North America, with the option to opt-in and acquire
product rights outside of Greater China and Korea prior to completing the first
pivotal clinical trial for any bispecific product candidate.
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In March 2020, I-Mab issued a press release announcing a strategic partnership
with Kalbe Genexine Biologics (KG Bio), whereby KG Bio received what the press
release described as a right of first negotiation outside North America for
TJ004309 for up to $340 million in potential payments to I-Mab. In March 2020,
we also learned that I-Mab had entered into two license and collaboration
agreements with ABL Bio in July 2018 (ABL Bio License 1 and ABL Bio License 2).
Under ABL Bio License 1, I-Mab granted to ABL Bio exclusive, worldwide
(excluding Greater China), royalty-bearing rights to develop and commercialize a
BsAb using certain monoclonal antibody sequences. Under ABL License 2, I-Mab and
ABL agreed to collaborate to develop three PD-L1-based bispecific antibodies by
using ABL Bio's proprietary BsAb technology and commercialize them in their
respective territories, which, collectively, include China, Hong Kong, Macau,
Taiwan and South Korea, and other territories throughout the rest of the world
if both parties agree to do so in such other territories during the performance
of the agreement. On April 8, 2020, we issued a notice of dispute regarding
possible breaches of the TJ004309 Agreement and the Bispecific Agreement, which
resulted in a binding arbitration proceeding under the Rules of Arbitration of
the International Chamber of Commerce before an arbitration tribunal seated in
New York City (the Tribunal). The Tribunal held a hearing on the merits in
February 2022. As of the date of this Quarterly Report, the TJ004309 Agreement
and Bispecific Agreement disputes remain under consideration by the Tribunal,
and we expect their decision in 2022. We believe we may be entitled to receive
payments due to I-Mab's strategic partnership with KG Bio under the TJ004309
Agreement, although I-Mab has disputed any payment is due. In 2021, I-Mab sent
us notices purporting to terminate the TJ004309 Agreement, which would result in
I-Mab owing us a prespecified termination fee of $9.0 million. However, I-Mab
does not have an option to terminate the TJ004309 Agreement without cause until
the ongoing Phase 1 clinical trial of TJ004309 is "Complete," as that term is
defined in the TJ004309 Agreement, and we responded by disputing the basis for
I-Mab's termination. In March 2021, I-Mab filed a lawsuit in the Delaware Court
of Chancery seeking an order of specific performance requiring us to comply with
I-Mab's effort to terminate the agreement. We disagreed with I-Mab's position
and in May 2021, the Delaware Court of Chancery stayed the lawsuit filed by
I-Mab and subsequently this matter was remanded and included in the proceeding
before the Tribunal. The claims under the arbitration under the TJ00439 and
Bispecific Agreements are substantial and complex and the result is inherently
uncertain. The dispute with I-Mab has caused and could continue to cause us to
incur significant costs.
The following table summarizes key information regarding ongoing and planned
development of our clinical stage product candidates:
Phase Data Expected
Envafolimab
Soft Tissue Sarcoma (UPS and MFS) Pivotal Phase 2 Interim Data - 2022 and 2023
Final Data - 2024
Envafolimab + YH001
Multiple Soft Tissue Sarcoma Subtypes Phase 1/2 (planned) 2023 and 2024
TRC102
Lung Cancer Randomized Phase 2 2024
We utilize a CRO-independent product development platform that emphasizes
capital efficiency. Our experienced clinical operations, data management,
quality assurance, product development and regulatory affairs groups manage
significant aspects of our clinical trials with internal resources. We use these
internal resources to reduce the costs associated with utilizing CROs to conduct
clinical trials. In our experience, this model has resulted in capital
efficiencies and improved communication with clinical trial sites, which can
expedite patient enrollment and improve the quality of patient data as compared
to a CRO-managed model. We have leveraged this platform in all of our sponsored
clinical trials. We have also leveraged our product development platform to
diversify our product pipeline without payment of upfront license fees through
license agreements with Eucure and Biocytogen, 3D Medicines and Alphamab, I-Mab,
and Janssen. We continue to evaluate ex-U.S. companies that would benefit from a
rapid and capital-efficient U.S. drug development solution that includes U.S.
and European Union (EU) clinical development expertise. We believe we will
continue to be recognized as a preferred U.S. clinical development partner
through a cost- and risk-sharing partnership structure, which may include U.S.
commercialization.
Our goal is to be a leader in the development of targeted therapies for patients
with cancer and other diseases of high unmet medical need.
Since our inception in 2004, we have devoted substantially all of our resources
to research and development efforts relating to our product candidates,
including conducting clinical trials, in-licensing related intellectual
property, providing general and administrative support for these operations, and
protecting our intellectual property. To date, we have not generated any revenue
from product sales and instead, have funded our operations from the sales of
equity securities, payments received in connection with our collaboration
agreements, and commercial bank debt under our credit facility with Silicon
Valley Bank (SVB). At March 31, 2022, we had cash and cash equivalents totaling
$16.6 million.
We do not own or operate, nor do we expect to own or operate, facilities for
product manufacturing, storage, distribution or testing. We contract with third
parties or our collaboration partners for the manufacture of our product
candidates and we intend to continue to do so in the future.
We have incurred losses from operations in each year since our inception. Our
net losses were $9.5 million and $5.1 million for the three months ended March
31, 2022 and 2021, respectively. At March 31, 2022, we had an accumulated
deficit of $217.2 million.
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We expect to continue to incur significant expenses and operating losses for at
least the next several years. Our net losses may fluctuate significantly from
quarter to quarter and year to year. We expect our expenses to remain relatively
constant in 2022 as we:
• continue to enroll the ENVASARC trial and initiate a Phase 1/2 clinical
trial of YH001 in combination with envafolimab in certain sarcoma
subtypes;
• continue our research and development efforts;
• in-license additional product candidates for development and
commercialization;
• seek regulatory approvals for product candidates that successfully
complete clinical trials; and
• incur legal expenses in connection with the arbitration on the TJ004309
Agreement and Bispecific Agreement.
We do not expect to generate any revenues from product sales until we
successfully complete development and obtain regulatory approval for one or more
product candidates, which we expect will take a number of years. If we obtain
regulatory approval for any product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, and
distribution. Accordingly, we will need to raise substantial additional capital.
The amount and timing of our future funding requirements will depend on many
factors, including the pace and results of our preclinical and clinical
development efforts, developments under our collaboration agreements, including
whether and when we receive milestone and other potential payments, the outcome
of our dispute with I-Mab, and the timing and nature of the regulatory approval
process for product candidates. We anticipate that we will seek to fund our
operations through public or private equity or debt financings or other sources.
Debt financing, if available, may involve covenants further restricting our
operations or our ability to incur additional debt. Any debt financing or
additional equity that we raise may contain terms that are not favorable to us
or our stockholders. Further, we may be unable to raise additional funds or
enter into such other arrangements when needed on favorable terms or at all. As
a result of the COVID-19 pandemic and actions taken to slow its spread, as well
as actual and anticipated changes in interest rates or economic inflation, the
global credit and financial markets have experienced extreme volatility and
disruptions, including diminished liquidity and credit availability, declines in
consumer confidence, declines in economic growth, increases in unemployment
rates and uncertainty about economic stability. If the equity and credit markets
deteriorate, it may make any necessary debt or equity financing more difficult,
more costly and more dilutive. Our failure to raise capital or enter into such
other arrangements when needed would have a negative impact on our financial
condition and ability to develop product candidates.
Collaboration and License Agreements
Collaboration Agreement with 3D Medicines and Alphamab
In December 2019, we, 3D Medicines, and Alphamab entered into the Envafolimab
Collaboration Agreement for the development of envafolimab, an investigational
PD-L1 sdAb, or nanobody, administered by rapid subcutaneous injection, for the
treatment of sarcoma in North America.
Pursuant to the Envafolimab Collaboration Agreement, we were granted an
exclusive license to develop and commercialize envafolimab for the treatment of
sarcoma in North America. We are responsible for conducting and will bear the
costs of any Phase 1, Phase 2, and Phase 3 or post-approval clinical trial in
North America for envafolimab in the indications of refractory and first line
treatment of sarcoma. 3D Medicines and Alphamab are responsible for conducting
and will bear the costs of investigational new drug (IND)-enabling studies
(other than those specific to the sarcoma indication) and the preparation of the
chemistry, manufacturing and controls (CMC) activities sections of an IND
application for envafolimab. 3D Medicines and Alphamab have agreed to
manufacture and supply, or to arrange for a third-party manufacturer to
manufacture and supply, envafolimab to us at pre-negotiated prices that vary
based on clinical or commercial use. 3D Medicines and Alphamab retained the
right to develop envafolimab in all territories outside of North America as well
as within North America for all indications other than sarcoma.
We will be responsible for commercializing envafolimab for sarcoma in North
America, including booking of sales revenue, unless (a) envafolimab is first
approved in North America for an indication other than sarcoma and launched in
North America, or (b) envafolimab is first approved in North America for sarcoma
and subsequently approved in North America for an additional non-orphan
indication and sold commercially by 3D Medicines and/or Alphamab, or licensee,
in which case 3D Medicines and Alphamab will be responsible for commercializing
envafolimab for sarcoma in North America, including booking of sales revenue. If
3D Medicines and Alphamab become responsible for commercialization under the
Envafolimab Collaboration Agreement, we have the option to co-market envafolimab
for sarcoma in North America. In the event that envafolimab is first approved in
North America for sarcoma and within three years of the commercial launch of
envafolimab in North America for sarcoma 3D Medicines and Alphamab replace us as
the party responsible for commercialization, and we elect and 3D Medicines and
Alphamab agree for us to not co-market envafolimab for sarcoma in North America,
then 3D Medicines and Alphamab will be required to compensate us for our costs
associated with preparing for and conducting commercial activities.
If we have the responsibility for commercialization under the Envafolimab
Collaboration Agreement, we will owe 3D Medicines and Alphamab tiered double
digit royalties on net sales of envafolimab for sarcoma in North America ranging
from the teens to mid-double digits. If 3D Medicines and Alphamab have
responsibility for commercialization under the Envafolimab Collaboration
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Agreement, we will be entitled to (a) tiered double digit royalties on net sales
of envafolimab for sarcoma in North America ranging from the teens to mid-double
digits if we have elected to not co-market envafolimab in sarcoma or (b) a 50%
royalty on net sales of envafolimab for sarcoma in North America if we have
chosen to co-market envafolimab in sarcoma. Payment obligations under the
Envafolimab Collaboration Agreement continue on a country-by-country basis until
the last to expire licensed patent covering envafolimab expires.
3D Medicines and Alphamab retain the right to reacquire the rights to
envafolimab for sarcoma in North America in connection with an arm's length sale
to a third party of the rights to develop and commercialize envafolimab in North
America for all indications, provided that the sale may not occur prior to
completion of a pivotal trial of envafolimab in sarcoma without our written
consent and the parties must negotiate in good faith and agree to fair
compensation be paid to us for the value of and opportunity represented by the
reacquired rights.
Each party agreed that during the term of the Envafolimab Collaboration
Agreement, it would not develop or license from any third party a monospecific
inhibitor to PD-L1 or PD-1 in sarcoma.
The term of the Envafolimab Collaboration Agreement continues until the later of
the date the parties cease further development and commercialization of
envafolimab for sarcoma in North America or the expiration of all payment
obligations. The Envafolimab Collaboration Agreement may be terminated earlier
by a party in the event of an uncured material breach by the other party or
bankruptcy of the other party, or for safety reasons related to envafolimab. In
the event we elect, or a joint steering committee (JSC) determines, to cease
further development or commercialization of envafolimab, or if we fail to use
commercially reasonable efforts to develop (including progress in clinical
trials) and commercialize envafolimab and do not cure such failure within a
specified time period, then our rights and obligations under the Envafolimab
Collaboration Agreement will revert to 3D Medicines and Alphamab.
Collaboration Agreement with Eucure and Biocytogen
In October 2021, we, Eucure and Biocytogen entered into a collaborative
development and commercialization agreement (the YH001 Collaboration Agreement)
for the development of YH001, a monospecific investigational CTLA-4 antibody.
Pursuant to the YH001 Collaboration Agreement, we were granted an exclusive
(including with respect to Eucure and its affiliates), nontransferable, license
to develop and commercialize YH001 in North America for the treatment, through
administration of YH001 by intravenous or subcutaneous means, of multiple human
indications, including sarcoma, microsatellite stable colorectal cancer, RCC,
and K-ras positive non-small cell lung cancer (collectively, the Initial
Indications) or one or more of bladder cancer, endometrial cancer, and melanoma
as substitute indications, which may be substituted for Initial Indications at
our discretion (each upon such substitution, a Substitute Indication). We are
responsible for, and will bear the costs of, preparing and filing all regulatory
submissions and conducting any Phase 1, Phase 2, Phase 3, or post-approval
clinical trials in North America for YH001 in the Initial Indications and
potentially the Substitute Indications, while Eucure is responsible for
conducting, and will bear the costs of, the preparation of CMC activities for
YH001. Eucure has agreed to manufacture and supply, or to arrange for a
third-party manufacturer to manufacture and supply, YH001 to us for clinical
trials pursuant to the terms of a clinical supply and quality agreement that
will be separately negotiated and agreed in good faith between the parties.
Eucure may pursue clinical trials for YH001 in North America outside of the
Initial Indications or Substitute Indications, and also within the Initial
Indications or Substitute Indications as part of a combination therapy of YH001
and an additional Eucure product. During a specified period, we have the option,
subject to Eucure's prior written approval, to expand the license to include the
development and commercialization of YH001 for the treatment, through
administration by intravenous or subcutaneous means, of all human and veterinary
therapeutic indications in North America for a payment to Eucure in the low
single digit millions (the Company Option).
Pursuant to the YH001 Collaboration Agreement, we granted Eucure an irrevocable,
perpetual, royalty-free, exclusive license, with the right to grant sublicenses
to develop, register, sell, offer to sell, have sold, market and distribute
YH001 in all territories outside of North America as well as within North
America for all indications other than the Initial Indications and the
Substitute Indications.
We will be responsible for commercializing YH001 in North America, including
booking of sales revenue in the Initial and Substitute Indications. We will owe
Eucure escalating double digit royalties on net sales of YH001 in North America
ranging from the mid-twenties to mid-double digits; provided that until the end
of the first full calendar year following the first commercial sale of YH001,
royalties will range from the lower double digits to the mid-double digits. If
sales of YH001 exceed a pre-determined sales threshold in the first full year of
sales following first commercial sale, we will owe a milestone to Eucure in the
high single digit millions. Payment obligations under the YH001 Collaboration
Agreement continue on a country-by-country basis until the latest of (i)
expiration of the last to expire licensed patent covering YH001, (ii) expiration
of marketing or regulatory exclusivity covering YH001 and (iii) 10 years from
the first commercial sale of YH001 in such country in North America. Eucure has
agreed to manufacture and supply, or to arrange for a third-party manufacturer
to manufacture and supply, YH001 to us at cost plus a low double-digit markup
for commercial sales pursuant to the terms of a commercial supply and quality
agreement that will be separately negotiated and agreed in good faith between
the parties within 180 days prior to the anticipated first commercial sale in
North America.
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Pursuant to the YH001 Collaboration Agreement, each party agreed that during the
term of the YH001 Collaboration Agreement, it would not develop, manufacture,
commercialize or license from any third party a monospecific inhibitor to
CTLA-4.
The term of the YH001 Collaboration Agreement continues until the earlier of (i)
the date that the parties cease further development and commercialization of
YH001 in North America or (ii) on a country-by-county basis, the expiration of
the royalty obligations in such country. The YH001 Collaboration Agreement may
be terminated earlier by a party in the event of an uncured material breach by
the other party or bankruptcy of the other party, or for safety reasons related
to YH001. In the event of a termination of the YH001 Collaboration Agreement,
other than by us as a result of Eucure's material uncured breach or bankruptcy,
(i) our license shall terminate and (ii) we would be obligated to grant Eucure
an irrevocable, perpetual, royalty-free, non-exclusive license with the right to
grant sublicenses under its rights in all development data and intellectual
property to develop, register, sell, offer to sell, have sold, market and
distribute YH001 in North America. In the event of a termination of the YH001
Collaboration Agreement by us as a result of Eucure's material uncured breach or
bankruptcy, the license shall continue in the Initial Indications in North
America, provided that (i) such license shall remain exclusive during the
royalty term and non-exclusive thereafter; (ii) we shall have the right to have
YH001 manufactured for its development and commercialization requirements in the
Initial Indications in North America; and (iii) the license shall terminate in
the event of an uncured material breach by us of any provision (including
payment obligations) that survives termination of the YH001 Collaboration
Agreement. In the event the YH001 Collaboration Agreement terminates for safety
reasons related to YH001, by mutual agreement of the parties or by Eucure in the
event of an uncured material breach or bankruptcy by us, then our rights and
obligations under the YH001 Collaboration Agreement will revert to Eucure. In
the event Eucure does not approve the Company Option, we may terminate the YH001
Collaboration Agreement for convenience with a 30-day notice to Eucure, provided
that such termination is given within 12 months of the effective date of the
YH001 Collaboration Agreement (the Company Option Termination). In the event of
a Company Option Termination, Eucure would be obligated to reimburse us for all
costs and expenses that we incurred in performing the development activities.
Collaboration Agreements with I-Mab Biopharma
In November 2018, we entered into two separate strategic collaboration and
clinical trial agreements with I-Mab for the development of multiple
immuno-oncology programs, including I-Mab's proprietary CD73 antibody TJ004309
as well as up to five proprietary bispecific antibodies currently under
development by I-Mab.
In the TJ004309 Agreement, we are collaborating with I-Mab on developing
TJ004309, and will bear the costs of filing an IND application and for Phase 1
clinical trials, share costs equally for Phase 2 clinical trials, and we will
bear 40% and I-Mab 60% of the costs for pivotal clinical trials. I-Mab will also
be responsible for the cost of certain non-clinical activities and the supply of
TJ004309 and any reference drugs used in the development activities. We also
agreed with I-Mab for a specified period of time to not develop or license to or
from a third party any monoclonal antibody targeting CD73 or any other biologic
for certain indications that a JSC, as set up under the TJ004309 Agreement,
selects for TJ004309 development.
In the event that I-Mab licenses rights to TJ004309 to a third party, we would
be entitled to receive escalating portions of royalty and non-royalty
consideration received by I-Mab with respect to territories outside of Greater
China. In the event that I-Mab commercializes TJ004309, we would be entitled to
receive a royalty on net sales by I-Mab in North America ranging from the
mid-single digits to low double digits, and in the EU and Japan in the
mid-single digits. The portions of certain third party royalty and non-royalty
consideration and the royalty from net sales by I-Mab to which we would be
entitled escalate based on the phase of development and relevant clinical trial
obligations we complete under the TJ004309 Agreement, ranging from a high-single
digit to a mid-teen percentage of non-royalty consideration as well as a double
digit percentage of royalty consideration. In March 2020, I-Mab issued a press
release announcing a strategic partnership with KG Bio, whereby KG Bio received
what the press release described as a right of first negotiation outside North
America for TJ004309 for up to $340 million in potential payments to I-Mab. On
April 8, 2020, we issued a notice of dispute regarding possible breach of the
TJ004309 Agreement, which resulted in a binding arbitration proceeding under the
Rules of Arbitration of the International Chamber of Commerce before the
Tribunal. The Tribunal held a hearing on the merits in February 2022. As of the
date of this Quarterly Report, the TJ004309 Agreement dispute remains under
consideration by the Tribunal, and we expect their decision in 2022. We believe
we may be entitled to receive payments due to I-Mab's strategic partnership with
KG Bio under the TJ004309 Agreement, although I-Mab has disputed any payment is
due.
The TJ004309 Agreement may be terminated by either party in the event of an
uncured material breach by the other party or bankruptcy of the other party, or
for safety reasons related to TJ004309. I-Mab may also terminate the TJ004309
Agreement if we cause certain delays in completing a Phase 1 clinical trial. In
addition, I-Mab may terminate the TJ004309 Agreement for any reason within 90
days following the completion of the first Phase 1 clinical trial, in which case
we would be entitled to a minimum termination fee of $9.0 million, or following
the completion of the first Phase 2 clinical trial, in which case we would be
entitled to a pre-specified termination fee of $15.0 million and either a
percentage of non-royalty consideration I-Mab may receive as part of a license
to a third party or an additional payment if TJ004309 is approved for marketing
outside Greater China before a third party license is executed, in addition to a
double digit percentage of royalty consideration. In 2021, I-Mab sent us notices
purporting to terminate the TJ004309 Agreement, which would result in I-Mab
owing us a prespecified termination fee of $9.0 million. However, I-Mab does not
have an option to terminate the TJ004309 Agreement without cause until the
ongoing Phase 1 clinical trial of TJ004309 is "Complete," as that term is
defined in the TJ004309 Agreement, and we responded by disputing the basis for
I-Mab's termination.
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In March 2021, I-Mab filed a lawsuit in the Delaware Court of Chancery seeking
an order of specific performance requiring us to comply with I-Mab's effort to
terminate the agreement. We disagreed with I-Mab's position and in May 2021, the
Delaware Court of Chancery stayed the lawsuit filed by I-Mab and subsequently
this matter was remanded and included in the proceeding before the Tribunal.
The claims under the arbitration under the TJ00439 Agreement are substantial and
complex and the result is inherently uncertain. The dispute with I-Mab has
caused and could continue to cause us to incur significant costs.
Pursuant to the Bispecific Agreement, we and I-Mab may mutually select through a
JSC up to five of I-Mab's BsAb product candidates within a five-year period for
development and commercialization in North America.
For each product candidate selected by the JSC for development under the
Bispecific Agreement, I-Mab will be responsible and bear the costs for
IND-enabling studies and establishing manufacturing for the product candidate,
we will be responsible for and bear the costs of filing an IND and conducting
Phase 1 and Phase 2 clinical trials, and we will be responsible for and will
share equally with I-Mab in the costs of conducting Phase 3 or pivotal clinical
trials, in each case within North America. Subject to I-Mab's right to
co-promote an approved product candidate, we will be responsible for
commercializing any approved product candidates in North America, and we will
share profits and losses equally with I-Mab in North America. We would also be
entitled to receive tiered low single digit royalties on net sales of product
candidates in the EU and Japan.
At any time prior to completing the first pivotal clinical trial for a product
candidate or if I-Mab ceases to support development costs or pay its portion of
Phase 3 clinical trial costs for a product candidate or the JSC decides to cease
development over our objections after initiating Phase 3 clinical trials, we
will have an option to obtain an exclusive license to such product candidate in
all territories except Greater China and Korea and any other territories in
which I-Mab previously licensed rights to a third party subject to our right of
first refusal for any licenses I-Mab may grant to third-parties.
If we exercise our licensing option, we would assume sole responsibility for
developing and commercializing the product candidate in the licensed territory,
and in lieu of profit or loss sharing with I-Mab with respect to such product
candidate, we would owe I-Mab pre-specified upfront and milestone payments and
royalties on net sales, with the payments and royalties escalating depending on
the phase of development the product candidate reached at the time we obtained
the exclusive license as follows: (i) if before IND-enabling studies and the
preparation of the CMC activities of the collaborative product, we would owe
I-Mab a one-time upfront payment of $10.0 million, development and regulatory
based milestone payments totaling up to $90.0 million that begin upon completion
of a pivotal trial, sales milestones totaling up to $250.0 million, and
royalties in the mid-single digits on annual net sales; (ii) if after IND
submission but before completion of a Phase 1a clinical trial of the
collaborative product, we would owe I-Mab a one-time upfront payment of $25.0
million, development and regulatory based milestone payments totaling up to
$125.0 million that begin upon completion of a pivotal trial, sales milestones
totaling up to $250.0 million, and royalties in the high single digits on annual
net sales; (iii) if after completion of a Phase 1a clinical trial but before
completion of a Phase 2 proof of concept clinical trial for the collaborative
product, we would owe I-Mab a one-time upfront payment of $50.0 million,
development and regulatory based milestone payments totaling up to $250.0
million that begin upon completion of a pivotal trial, sales milestones totaling
up to $250.0 million, and royalties in the low double digits on annual net
sales; and (iv) if after completion of a Phase 2 proof of concept clinical trial
and before completion of a pivotal trial for the collaborative product, we would
owe I-Mab a one-time upfront payment of $80.0 million, development and
regulatory based milestone payments totaling up to $420.0 million that begin
upon completion of a pivotal trial, sales milestones totaling up to $250.0
million, and royalties in the high-teens on annual net sales.
Each party agreed that for a specified period of time, it would not develop or
license to or from any third party any bispecific monoclonal antibody targeting
the same two biological targets as those of any selected product candidates
under the Bispecific Agreement.
If development of any selected product candidates is terminated by a decision of
the JSC, all rights to the product candidate will revert to I-Mab, subject to
our rights to obtain an exclusive license in certain circumstances. If
development is terminated after submission of an IND and prior to initiating
Phase 3 clinical studies or after initiating Phase 3 clinical studies and with
our concurrence, we would be entitled to tiered low single digit royalties on
net sales of the product candidate in North America, the EU and Japan.
The Bispecific Agreement may be terminated by either party in the event of an
uncured material breach by the other party or bankruptcy of the other party, or
with respect to any selected product candidate, for safety reasons related to
that product candidate.
In March 2020, we learned that I-Mab had entered into two license and
collaboration agreements with ABL Bio in July 2018. Under ABL Bio License 1,
I-Mab granted to ABL Bio exclusive, worldwide (excluding Greater China),
royalty-bearing rights to develop and commercialize a BsAb using certain
monoclonal antibody sequences. Under ABL License 2, I-Mab and ABL agreed to
collaborate to develop three PD-L1-based bispecific antibodies by using ABL
Bio's proprietary BsAb technology and commercialize them in their respective
territories, which, collectively, include China, Hong Kong, Macau, Taiwan and
South Korea, and other territories throughout the rest of the world if both
parties agree to do so in such other territories during the performance of the
agreement. On April 8, 2020, we issued a notice of dispute regarding possible
breach of the Bispecific Agreement, which resulted in a
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binding arbitration proceeding under the Rules of Arbitration of the
International Chamber of Commerce before the Tribunal. The Tribunal held a
hearing on the merits in February 2022. As of the date of this Quarterly Report,
the Bispecific Agreement dispute remains under consideration by the Tribunal,
and we expect their decision in 2022. The claims under the arbitration under the
Bispecific Agreement are substantial and complex and the result is inherently
uncertain. The dispute with I-Mab has caused and could continue to cause us to
incur significant costs.
Financial Operations Overview
Research and Development Expenses
Research and development expenses consist of costs associated with the
preclinical and clinical development of product candidates. These costs consist
primarily of:
• salaries and employee-related expenses, including stock-based compensation
and benefits for personnel in research and development functions;
• costs incurred under clinical trial agreements with investigative sites;
• costs to acquire preclinical study and clinical trial materials;
• costs associated with conducting our preclinical, development and
regulatory activities, including fees paid to third party professional
consultants, service providers and our scientific advisory board;
• payments related to licensed products and technologies; and
• facilities, depreciation and other expenses, including allocated expenses
for rent and maintenance of facilities.
Research and development costs, including third party costs reimbursed in
connection with our collaboration agreements, are expensed as incurred. We
account for nonrefundable advance payments for goods and services that will be
used in future research and development activities as expenses when the service
has been performed or when the goods have been received.
The following table summarizes our research and development expenses by product
candidate for the periods indicated.
Three Months Ended
March 31,
2022 2021
(in thousands)
Third-party research and development expenses:
Envafolimab $ 1,470 $ 781
YH001 21 -
TRC102 94 10
TJ004309 187 300
Total third-party research and development expenses 1,772 1,091
Unallocated expenses
1,221 1,193
Total research and development expenses $ 2,993 $ 2,284Unallocated expenses consist primarily of our internal personnel and facility
related costs.
We expect our current level of research and development expenses to increase in
the remainder of 2022 due to the continued enrollment of the ENVASARC trial and
initiation of a Phase 1/2 clinical trial of YH001 in combination with
envafolimab in certain sarcoma subtypes.
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We cannot determine with certainty the timing of initiation, the duration or the
completion costs of current or future preclinical studies and clinical trials of
product candidates due to the inherently unpredictable nature of preclinical and
clinical development. Clinical and preclinical development timelines, the
probability of success and development costs can differ materially from
expectations. As a result of the COVID-19 pandemic and actions taken to slow its
spread, many clinical trial sites have temporarily suspended dosing of
previously-enrolled patients and/or enrollment of new patients, and patients in
clinical trials may choose to not enroll, not participate in follow-up clinical
visits or drop out of trials as a precaution against, or as a result of,
contracting COVID-19. These events have impacted our clinical trials and those
of our collaborators and we cannot predict with certainty the extent to which
the COVID-19 pandemic will ultimately delay our clinical trials or those of our
collaborators or increase our expenses in completing clinical trials. We
anticipate that we will make determinations as to which product candidates to
pursue and how much funding to direct to each product candidate on an ongoing
basis in response to the results of ongoing and future preclinical studies and
clinical trials, regulatory developments and our ongoing assessments as to each
product candidate's commercial potential. We will need to raise substantial
additional capital in the future. 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.
The costs of clinical trials to us and the timing of such costs may vary
significantly based on factors such as:
• the extent to which costs for comparator drugs are borne by third parties;
• per patient trial costs;
• the number of sites included in the trials;
• the countries in which the trials are conducted;
• the length of time required to enroll eligible patients;
• the number of patients that participate in the trials;
• the number of doses that patients receive;
• the drop-out or discontinuation rates of patients;
• potential additional safety monitoring or other studies requested by
regulatory agencies;
• the duration of patient participation in the trials and follow-up;
• the duration and scope of impact of the COVID-19 pandemic;
• the phase of development of the product candidate;
• the efficacy and safety profile of the product candidate; and
• the extent to which costs are borne by third parties such as the NCI.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
costs for employees in executive, finance and administration, corporate
development and administrative support functions, including stock-based
compensation expenses and benefits. Other significant general and administrative
expenses include legal services, including those associated with the TJ004309
Agreement and BsAb Agreement arbitration, insurance, occupancy costs, accounting
services, and the cost of various consultants.
We anticipate that our general and administrative expenses for the remainder of
2022 will decrease with the conclusion of the hearing on the TJ004309 Agreement
and Bispecific Agreement.
Other Income (Expense)
Other income (expense) primarily consists of interest related to our loan
agreement with SVB offset in part by interest income from our short-term
investments and cash equivalents.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States (GAAP). The preparation of these
unaudited condensed consolidated financial statements requires us to make
estimates
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and assumptions that affect the reported amounts of assets and liabilities, as
well as the reported revenues and expenses during the reporting periods. These
items are monitored and analyzed by us for changes in facts and circumstances,
and material changes in these estimates could occur in the future. We base our
estimates on our historical experience and on various other factors that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Changes in estimates are
reflected in reported results for the period in which they become known. Actual
results may differ materially from these estimates under different assumptions
or conditions. There have been no material changes to our critical accounting
policies and estimates from the information provided in Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Policies Involving Management Estimates and
Assumptions," included in our Annual Report on Form 10-K for the year ended
December 31, 2021.
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes our results of operations for the three months
ended March 31, 2022 and 2021:
Three Months Ended
March 31,
2022 2021 Change
(in thousands)
Research and development expenses $ 2,993 $ 2,284 $ 709
General and administrative expenses 6,453 2,671 3,782
Other expense
(27 ) (109 ) 82
Research and development expenses. Research and development expenses were $3.0
million and $2.3 million for the three months ended March 31, 2022 and 2021,
respectively. The increase of $0.7 million was primarily due to the continued
enrollment of the ENVASARC trial.
General and administrative expenses. General and administrative expenses were
$6.5 million and $2.7 million for the three months ended March 31, 2022 and
2021, respectively. The increase of $3.8 million was primarily due to legal
expenses incurred in connection with the arbitration of disputes related to the
TJ004309 Agreement and Bispecific Agreement.
Other expense. Other expense was $27,000 and $0.1 million for the three months
ended March 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
Our sources of cash liquidity include our cash and cash equivalents. We believe
that our cash and cash equivalents as of March 31, 2022 will be sufficient to
fund the current requirements of working capital and other financial
commitments, including our long-term debt and operating lease obligations, into
2023. Based on our current business plan, we believe that there is substantial
doubt as to whether our existing cash and cash equivalents will be sufficient to
meet our obligations as they become due within one year from the date the
unaudited condensed consolidated financial statements are issued.
We may fund our future liquidity needs by selling shares of our common stock
under existing common stock purchase agreements, including our common stock
purchase agreement with Aspire Capital and our Capital on DemandTM sales
agreement with JonesTrading Institutional Services LLC (JonesTrading). In
addition to our existing common stock purchase agreements, we periodically
consider various other financing alternatives and may, from time to time, seek
to take advantage of favorable interest rate environments, if any, or other
market conditions.
We have incurred losses and negative cash flows from operations since our
inception. As of March 31, 2022, we had an accumulated deficit of
$217.2 million, and we expect to continue to incur net losses for the
foreseeable future. We expect our current level of research and development
expenses to increase in the remainder of 2022 due to the continued enrollment of
the ENVASARC trial and the initiation of a Phase 1/2 clinical trial of YH001 in
combination with envafolimab in certain sarcoma subtypes. Given we do not
anticipate any revenues from product sales in the foreseeable future, we will
need additional capital to fund our operations, which we may seek to obtain
through one or more equity offerings, debt financings, government or other
third-party funding, and licensing or collaboration arrangements.
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Common Stock Purchase Agreement with Aspire Capital
In October 2019, as amended in April 2020, we entered into the 2019 Purchase
Agreement with Aspire Capital which provides that, upon the terms and subject to
the conditions and limitations of the 2019 Purchase Agreement, Aspire Capital is
committed to purchase up to an aggregate of $15.0 million of shares of our
common stock at our request from time to time during the 30 month term of the
2019 Purchase Agreement and at prices based on the market price of our common
stock at the time of each sale. In consideration for entering into the 2019
Purchase Agreement and concurrently with the execution of the 2019 Purchase
Agreement, we issued to Aspire Capital 142,658 shares of our common stock. As of
March 31, 2022, we had sold an aggregate of approximately 4.8 million shares of
common stock under the 2019 Purchase Agreement with Aspire Capital for net
proceeds of $9.6 million.
ATM Facility
In December 2020, as amended in March 2022, we entered into a Capital on
DemandTM Sales Agreement (the Sales Agreement) with JonesTrading pursuant to
which we could sell from time to time, at our option, up to an aggregate of
$50.0 million of shares of our common stock through JonesTrading, as sales agent
or principal, $50.0 million of which remains available for sale as of March 31,
2022. Sales of our common stock made pursuant to the Sales Agreement, if any,
will be made on the Nasdaq Capital Market under our effective registration
statement on Form S-3 subject to limitations on the amount of securities the
Company may sell pursuant to its effective registration statement on Form S-3
within any 12 month period, by means of ordinary brokers' transactions at market
prices. Additionally, under the terms of the Sales Agreement, we may also sell
shares of our common stock through JonesTrading, on the Nasdaq Capital Market or
otherwise, at negotiated prices or at prices related to the prevailing market
price. JonesTrading will use its commercially reasonable efforts to sell our
common stock from time to time, based upon our instructions (including any
price, time or size limits or other customary parameters or conditions we may
impose). We are required to pay JonesTrading 2.5% of gross proceeds from the
common stock sold through the Sales Agreement.
Credit Facility with SVB
In May 2018, we entered into a third amendment to our Amended and Restated Loan
and Security Agreement with SVB (the 2018 Amended SVB Loan) under which we
borrowed $7.0 million, all of which was used to refinance previously outstanding
amounts under the loan and security agreement. In connection with the 2018
Amended SVB Loan, we issued warrants to purchase up to 5,363 shares of common
stock at an exercise price of $26.10 per share. The warrants are fully
exercisable and expire on May 3, 2025.
The 2018 Amended SVB Loan provides for interest to be paid at a rate of 9.0% per
annum, with interest-only payments due monthly through June 30, 2019.
Thereafter, in addition to interest accrued during such period, the monthly
payments include an amount equal to the outstanding principal at June 30, 2019
divided by 30 months. At maturity (or earlier prepayment), we are also required
to make a final payment equal to 4.0% of the original principal amount of the
amounts borrowed. In April 2020, we entered into an agreement with SVB (Deferral
Agreement) which granted us an interest-only payment period for six months, with
a corresponding six-month extension to the maturity date which is now June 2022.
All other material terms and conditions of the 2018 Amended SVB Loan remained
unchanged.
The 2018 Amended SVB Loan is collateralized by substantially all of our assets,
other than our intellectual property, and contains customary conditions of
borrowing, events of default and covenants, including covenants that restrict
our ability to dispose of assets, merge with or acquire other entities, incur
indebtedness and make distributions to holders of our capital stock. Should an
event of default occur, including the occurrence of a material adverse change,
we could be required to immediately repay all obligations under the 2018 Amended
SVB Loan. As of March 31, 2022, we were in compliance with all covenants and
conditions of the 2018 Amended SVB Loan.
As of March 31, 2022, the total outstanding balance owed under the 2018 Amended
SVB Loan amounted to $0.7 million and future minimum principal and interest
payments under the 2018 Amended SVB Loan, including the final payment, were $1.0
million, and the loan will be paid in full on June 1, 2022.
Operating Lease Obligations
Our operating lease obligations relate to our corporate headquarters in San
Diego, California, which expires in April 2027. As of March 31, 2022, future
minimum lease payments under this lease were $0.2 million and $0.6 million for
each of the next 12 and 24 months, respectively.
Other Obligations
We enter into contracts in the normal course of business with clinical trial
sites and clinical supply manufacturing organizations and with vendors for
preclinical safety and research studies, research supplies and other services
and products for operating purposes. These contracts generally provide for
termination on notice, and therefore are cancelable contracts.
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Cash Flows
The following table summarizes our net cash flow activity for each of the
periods set forth below:
Three Months Ended
March 31,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (6,742 ) $ (4,859 )
Investing activities (4 ) (4 )
Financing activities (686 ) (860 )
Change in cash and cash equivalents $ (7,432 ) $ (5,723 )
Operating activities. Net cash used in operating activities was $6.7 million and
$4.9 million for the three months ended March 31, 2022 and 2021, respectively,
and was primarily due to our net loss and changes in our working capital,
partially offset by non-cash charges including stock-based compensation.
Investing activities. Net cash used in investing activities was $4,000 for the
three months ended March 31, 2022 and 2021.
Financing activities. Net cash used in financing activities was $0.7 million and
$0.9 million for the three months ended March 31, 2022 and 2021, respectively,
and primarily resulted from $0.7 million in repayments on borrowings under our
SVB loan agreement.
Funding Requirements
At March 31, 2022, we had cash and cash equivalents totaling $16.6 million. We
believe that our cash and cash equivalents as of March 31, 2022, will be
sufficient to fund our obligations into 2023. We will need additional funding to
complete the development and commercialization of our product candidates or
those of our partners. In addition, we may evaluate in-licensing and acquisition
opportunities to gain access to new product candidates that fit with our
strategy. Any such transaction will likely increase our future funding
requirements. These uncertainties raise substantial doubt about our ability to
continue as a going concern for a period of 12 months following the date that
the accompanying unaudited condensed consolidated financial statements were
issued.
Our forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary materially. Our future
capital requirements are difficult to forecast and will depend on many factors,
including:
• our ability to initiate, and the progress and results of, our ongoing and
planned clinical trials;
• the ability and willingness of our collaboration partners and licensees to
continue clinical development of product candidates;
• our ability to enter into and maintain our collaborations, including our
collaborations with Eucure, Biocytogen, 3D Medicines, Alphamab, and I-Mab;
• our ability to achieve, and our obligations to make, milestone payments
under our collaboration and license agreements;
• the outcome of our disputes with I-Mab with respect to the TJ004309 and
Bispecific Agreements and the timing of any termination of the TJ004309
Agreement;
• the costs and timing of procuring supplies of product candidates for
clinical trials and regulatory submissions;
• the scope, progress, results and costs of preclinical development, and
clinical trials of our product candidates;
• the extent to which the COVID-19 pandemic delays our clinical development
activities or those of our collaborators;
• the costs, timing and outcome of regulatory review of product candidates;
• the revenue, if any, received from commercial sales of our product
candidates for which we or any of our partners, including Eucure and
Biocytogen, 3D Medicines and Alphamab, and I-Mab, may receive marketing
approval;
• the costs and timing of preparing, filing and prosecuting patent
applications, maintaining and enforcing our intellectual property rights
and defending any intellectual property-related claims;
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• the costs and timing of future commercialization activities, including
product manufacturing, marketing, sales and distribution, for any product
candidates for which we receive marketing approval and do not partner for
commercialization; and
• the extent to which we acquire or in-license other products and technologies.
Until we can generate substantial product revenues, if ever, we expect to
finance our cash needs through a combination of equity offerings, debt
financings, collaborations, and licensing arrangements. There can be no
assurance that additional funds will be available when needed from any source
or, if available, will be available on terms that are acceptable to us. As a
result of the COVID-19 pandemic and actions taken to slow its spread, as well as
actual or anticipated changes in interest rates and economic inflation, the
global credit and financial markets have experienced extreme volatility and
disruptions, including diminished liquidity and credit availability, declines in
consumer confidence, declines in economic growth, increases in unemployment
rates and uncertainty about economic stability. If the equity and credit markets
deteriorate, it may make any necessary debt or equity financing more difficult,
more costly and more dilutive. Even if we raise additional capital, we may also
be required to modify, delay or abandon some of our plans or programs which
could have a material adverse effect on our business, operating results and
financial condition and our ability to achieve our intended business objectives.
Any of these actions could materially harm our business, results of operations
and future prospects.
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