VIRACTA THERAPEUTICS, INC. The following discussion and analysis of financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and accompanying notes included in this Quarterly Report on Form 10-Q
and the consolidated financial statements and accompanying notes thereto for the
fiscal year ended
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange" Act) that are based on management's beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statement. Forward-looking statements include, but are not limited to, statements concerning the following:
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the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
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the timing, progress and results of preclinical studies and clinical trials for our current product candidates and other product candidates we may develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the studies or trials will become available, and our research and development programs;
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our future results of operations and financial position, including the period over which we estimate our existing cash, cash equivalents and short-term investments will be sufficient to fund our future operating expenses and capital expenditure requirements;
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the timing, scope and likelihood of regulatory filings and approvals in
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our business strategy, including our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;
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our manufacturing, commercialization, and marketing capabilities and strategy;
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our ability to successfully identify and develop prospective product candidates;
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the timing and likelihood of success of our current and planned future research and development activities;
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our ability to successfully assess personnel requirements and hire and retain such personnel;
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our expectations regarding the impact of the COVID-19 pandemic on our business and our current and planned clinical trials;
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the size of the market opportunity for our product candidates, including our
estimates of the number of patients
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our competitive position and the success of competing therapies that are or may become available;
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the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
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our expectations regarding the approval and use of our product candidates in combination with other drugs and any potential requirements related to a companion diagnostic;
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plans relating to the further development of our product candidates, including additional indications we may pursue;
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our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our current product candidates and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
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our reliance on third parties to conduct clinical trials of our product candidates and for the manufacture of our product candidates for preclinical studies and clinical trials;
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our expectations regarding research and development costs;
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•
our ability to obtain the anticipated benefits of our existing collaboration agreement and to obtain, and negotiate favorable terms of, any additional collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
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the pricing and reimbursement of our current or future product candidates, if approved;
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the rate and degree of market acceptance and clinical utility of our current of future product candidates, if approved;
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our estimates regarding expense, future revenue, capital requirements and needs for additional financing and our ability to obtain any such financing, on acceptable terms or at all; and
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plans and objectives of our management for future operations.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "expect," "plan," "anticipate," "could," "intend,"
"target," "project," "contemplates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other similar
expressions. Although we believe the expectations reflected in these
forward-looking statements are reasonable, such statements are inherently
subject to risk and we can give no assurances that our expectations will prove
to be correct. Given these risks, uncertainties and other factors, you should
not place undue reliance on these forward-looking statements, which speak only
as of the date of this Quarterly Report on Form 10-
Unless the context requires otherwise, references in this Quarterly Report on
Form 10-Q to "Viracta," "we," "us" and "our" refer to
Overview
Viracta is a clinical-stage, precision oncology company focused on advancing new medicines for the treatment of virus-associated malignancies. The association of viruses and cancer has been well characterized, and Viracta's lead program is focused on cancers associated with the Epstein-Barr virus ("EBV"). Viracta's lead product candidate is an all-oral combination therapy of its proprietary investigational drug, nanatinostat and the antiviral agent valganciclovir (collectively referred to as "Nana-val"). Nana-val is currently being investigated in multiple ongoing clinical trials, including NAVAL-1, a pivotal, global, multicenter, open-label Phase 2 basket trial for the treatment of multiple subtypes of relapsed/refractory ("R/R") Epstein-Barr virus-positive ("EBV+") lymphoma, as well as a multinational, open-label Phase 1b/2 trial for the treatment of EBV+ recurrent or metastatic nasopharyngeal carcinoma ("R/M NPC") and other EBV+ solid tumors. Viracta's development pipeline also includes vecabrutinib, a clinical-stage non-covalent ITK/BTK inhibitor and VRx-510 (formerly SNS-510), a preclinical-stage PDK-1 inhibitor. Viracta is evaluating future development and collaboration opportunities for vecabrutinib in combination with chimeric antigen receptor ("CAR") T-cell therapies and VRx-510 in multiple oncology and other indications.
EBV+ Lymphoma
In
Viracta is concluding a Phase 1b/2 trial of Nana-val for the treatment of EBV+
R/R lymphoma and final results from this trial were presented in an oral
presentation at the 63rd
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("T/NK-NHL"), and immunodeficiency-associated lymphoproliferative disorders ("IA-LPD"). The median duration of response was 10.4 months.
Viracta has received Fast Track Designation by the FDA for the treatment of R/R EBV+ lymphoid malignancies, in addition to orphan drug designations for the treatment of EBV+ diffuse large B-cell lymphoma, not otherwise specified ("EBV+ DLBCL, NOS"), post-transplant lymphoproliferative disorders ("PTLD"), plasmablastic lymphoma, and T-cell lymphoma.
EBV+ Solid Tumors
In
Impact of COVID-19
In
Financial Operations Overview
Research and Development Expenses
We expense all research and development expenses as they are incurred. Research and development expenses primarily include:
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clinical and regulatory-related costs;
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expenses incurred under agreements with contract research organizations ("CROs");
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manufacturing and stability testing costs and related supplies and materials; and
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employee-related expenses, including salaries, benefits, travel, and share-based compensation expense.
The majority of our research and development expenses to date have been incurred in connection with the development of Nana-val. The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. The successful development and commercialization of Nana-val is still highly uncertain. We are unable to estimate with any certainty the costs we will incur in the continued development and regulatory review of Nana-val, though such costs may be significant. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We may never succeed in achieving marketing approval for our product candidate.
The costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following:
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per patient trial costs;
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the number of sites included in the trials and the timing of clinical site initiations;
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the countries in which the trials are conducted*;
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the length of time required to enroll eligible subjects;
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the number of subjects that participate in the trials;
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the number of doses that subjects receive;
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the cost of comparative agents used in trials;
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the drop-out or discontinuation rates of subjects;
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potential additional safety monitoring or other studies requested by regulatory agencies;
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the duration of patient follow-up; and
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the efficacy and safety profile of the product candidate.
We do not yet know when Nana-val may be commercially available, if at all.
*The Company does not have any clinical trial sites or other clinical trial
activities in
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
benefits, including share-based compensation. Other general and administrative
expenses include professional fees for accounting, tax, patent costs, legal
services, insurance, facility costs and costs associated with being a publicly
traded company, including fees associated with investor relations and directors'
and officers' liability insurance premiums. We expect that general and
administrative expenses will increase in the future as we expand our operating
activities, prepare for the growth needs associated with potential
commercialization of Nana-val and continue to incur additional costs associated
with being a publicly traded company and maintaining compliance with exchange
listing and
Other income (expense)
Other income (expense) consists of interest income and expense as well as various income or expense items of a non-recurring nature. We earn interest income from interest-bearing accounts and money market accounts for cash and cash equivalents. Interest expense is primarily attributable to interest charges associated with borrowings under our loan and security agreements.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which we have
prepared in accordance with generally accepted accounting principles in
There have been no new or significant changes to our critical accounting
policies and estimates discussed in Management's Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for year ended
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Research and Development Expenses
We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. This process involves reviewing contract and purchase orders, reviewing the terms of vendor agreements, communicating with applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the services when it has not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice monthly in arrears for services performed.
Clinical Trial Costs and Accruals
We accrue clinical trial costs based on work performed. In determining the amount to accrue, we rely on estimates of total costs incurred based on enrollment, the completion of clinical trials and other events. We follow this method because we believe reasonably dependable estimates of the costs applicable to various stages of a clinical trial can be made. However, the actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending on a number of factors. Differences between the actual clinical trial costs and the estimated clinical trial costs that we have accrued in any prior period are recognized in the subsequent period in which the actual costs become known. Historically, our estimated accrued expenses have approximated actual expenses incurred; however, material differences could occur in the future.
Other Information None. Results of Operations
Comparison of Three Months Ended
The following table summarizes the results of our operations for the three
months ended
Three Months Ended June 30,
2022 2021 Change
Research and development expenses
3,871 310
Research and development expenses. Research and development expenses for the
three months ended
General and administrative expenses. General and administrative expenses for the
three months ended
Comparison of Six Months Ended
The following table summarizes the results of our operations for the six months
ended
Six Months Ended June 30,
2022 2021 Change
Research and development expenses $ 12,420 $ 9,470 $ 2,950 Acquired in-process research and development - 84,478 (84,478 ) General and administrative expenses
8,517 7,711 806
Gain on Royalty Purchase Agreement - 13,500 (13,500 )
Research and development expenses. Research and development expenses for the six
months ended
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Acquired in-process research and development. The acquired in-process research
and development for the six months ended
General and administrative expenses. General and administrative expenses for the
six months ended
Gain on royalty purchase agreement. The gain on royalty purchase agreement for
the six months ended
Liquidity and Capital Resources
As of
In
On
Based on the Company's current financial position and business plan, management believes that its existing cash, cash equivalents and short-term investments will be sufficient to fund the Company's planned operations for at least twelve months from the issuance date of these condensed consolidated financial statements.
We expect to continue to incur expenses and increase operating losses for at least the next several years. In the near-term, we anticipate incurring costs as we:
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conduct ongoing and planned development activities;
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initiate pre-approval and pre-commercialization activities for our lead product candidate;
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continue the preparation of the commercial manufacturing process;
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maintain, expand, and protect our intellectual property portfolio; and
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continue to fund the additional accounting, legal, insurance and other costs associated with being a public company.
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The following table summarizes our cash flows for the six months ended
Six Months Ended June 30,
2022 2021
Net cash used in operating activities $ (20,397 ) $ (4,042 )
Net cash (used in) provided by investing activities (1,606 ) 17,138
Net cash provided by financing activities 32 62,536
Net (decrease) increase in cash and cash equivalents
Operating Activities. Net cash used in operating activities was
Investing Activities. Cash used in investing activities was
Financing Activities. Net cash provided by financing activities was
The amount and timing of our future funding requirements will depend on many factors, including but not limited to:
•
we may not have sufficient financial and other resources to complete clinical development and commercialization for Nana-val;
•
we may not be able to provide acceptable evidence of safety and efficacy for Nana-val;
•
we may be required to undertake additional clinical trials and other studies of Nana-val;
•
FDA may disagree with the design of our future clinical trials if any are necessary;
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we may experience variability in subjects, adjustments to clinical trial procedures and inclusion of additional clinical trial sites;
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FDA may not agree with the analysis of our clinical trial results;
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the results of our clinical trials may not meet the level of statistical or clinical significance or other bioequivalence parameters required by FDA for marketing approval;
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subjects in our clinical trials may die or suffer other adverse effects for reasons that may or may not be related to our products;
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contract manufacturers, suppliers, and/or consultants may not meet appropriate timelines;
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we may not be able to obtain, maintain and enforce our patents and other intellectual property rights;
•
we may not be able to establish commercial-scale manufacturing capabilities; and
•
we may not be able to establish commercialization capabilities.
If we raise additional funds by issuing equity securities, our stockholders may
experience dilution. Any future debt financing may impose upon us covenants that
restrict our operations, including limitations on our ability to incur liens or
additional debt, pay dividends, repurchase our common stock, make certain
investments and engage in certain merger, consolidation, or asset sale
transactions. Any equity or debt financing may contain terms that are not
favorable to us or our stockholders. In addition, our ability to raise
additional funds may be adversely impacted by potential worsening global
economic conditions and the recent disruptions to, and volatility in, the credit
and financial markets in
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reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to other parties' rights to develop or commercialize our drug candidates that we would prefer to retain.
Contractual Obligations and Commitments
We enter into short-term and cancellable agreements in the normal course of operations with clinical sites and contract research organizations, or CROs, for clinical research studies, professional consultants and various third parties for preclinical research studies, clinical supply manufacturing and other services through purchase orders or other documentation, or that are undocumented except for an invoice. Such short-term agreements are generally outstanding for periods less than one year and are settled by cash payments upon delivery of goods and services. The nature of the work being conducted under these agreements is such that, in most cases, the services may be cancelled upon prior notice of 90 days or less. Payments due upon cancellation generally consist only of payments for services provided and expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.
On
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