PMV PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in "Part I, Item 1A. Risk Factors" and in other parts of this Annual Report on Form 10-K.
A discussion of our financial performance for the year ended
Overview
We are a precision oncology company pioneering the discovery and development of
small molecule, tumor-agnostic therapies targeting p53. p53 is a well-defined
tumor suppressor protein known as the "guardian of the genome," and normal, or
wild-type, p53 has the ability to eliminate cancer cells. However, mutant p53
proteins can be misfolded and lose their wild-type tumor suppressing function.
These p53 mutations are found in approximately half of all cancers. The field of
p53 biology was established by our co-founder Dr.
Since our formation in
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Our ability to generate product revenue will depend on the successful development, regulatory approval, and eventual commercialization of one or more of our product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative, or other arrangements with corporate sources, or through other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.
We plan to continue to use third-party service providers, including clinical research organizations, or CROs, and contract manufacturing organization, or CMOs, to carry out our preclinical and clinical development and to manufacture and supply the materials to be used during the development and commercialization of our product candidates. We do not currently have a sales force.
Revenue
To date, we have not generated any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.
Operating Expenses
Research and Development Expenses
Our research and development expenses consist primarily of costs incurred to conduct research, such as the discovery and development of our product candidates as well as the development of future product candidates. Research and development expenses include personnel costs, including stock-based compensation expense, third-party contractor services, laboratory materials and supplies, and depreciation and maintenance of research equipment. We expense research and development costs as they are incurred.
As we are at a very early stage of development, we do not allocate our costs by
product candidate or development program, as a significant amount of research
and development expenses include compensation costs, materials, supplies,
depreciation on and maintenance of research equipment, and the cost of services
provided by outside contractors, which are not tracked by product candidate or
development program. In particular, with respect to internal costs, several of
our departments support multiple product candidate research and development
programs, and therefore the costs cannot be allocated to a particular product
candidate or development program. Substantially all of our research and
development costs are associated with our lead product candidate, PC14586. We
initiated a Phase 1/2 clinical trial in
We expect our research and development expenses to increase substantially in absolute dollars in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical program, the ability of any future collaborators to successfully develop our licensed product candidates, competition, manufacturing capability, and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects.
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General and Administrative Expenses
General and administrative expenses include personnel costs, expenses for
outside professional services and other allocated expenses. Personnel costs
consist of salaries, bonuses, benefits, and stock-based compensation. Outside
professional services consist of legal, accounting and audit services and other
consulting fees. Allocated expenses consist of rent expense related to our
office and research and development facilities. We have incurred additional
expenses as a public company, including expenses related to compliance with the
rules and regulations of the
Interest Income, Net
Interest income, net primarily consists of interest income from our interest-bearing cash, cash equivalents and marketable securities and interest costs related to amortization of premiums and discounts on marketable securities.
Comparison of the Years Ended
The following table summarizes our results of operations (in thousands):
Year Ended
December 31,
Statement of operations data: 2022 2021 Change
Operating expenses:
Research and development $ 51,988 $ 36,493 $ 15,495
General and administrative 25,052 21,800 3,252
Total operating expenses 77,040 58,293 18,747
Loss from operations (77,040 ) (58,293 ) (18,747 )
Other income (expense):
Interest income, net 3,627 449 3,178
Other income (expense), net 87 21 66
Total other income (expense) 3,714 470 3,244
Loss before (benefit) provision for income taxes (73,326 ) (57,823 ) (15,503 ) (Benefit) provision for income taxes
(9 ) 23 (32 )
Net loss $ (73,317 ) $ (57,846 ) $ (15,471 ) Research and Development Expenses
The following table summarizes our research and development expenses incurred during the periods indicated (in thousands):
Year Ended
December 31,
Statement of operations data: 2022 2021 Change
Research $ 6,712 $ 8,296 $ (1,584 )
Development 32,470 19,436 13,034
Personnel related 9,340 7,321 2,019
Stock-based compensation 3,466 1,440 2,026
Total $ 51,988 $ 36,493 $ 15,495
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Research and development expenses were
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General and Administrative Expenses
General and administrative expenses were
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Interest Income, Net
Interest income, net primarily consists of interest income from our
interest-bearing cash, cash equivalents and marketable securities and interest
costs related to amortization of premiums and discounts on marketable
securities. Interest income, net was
Liquidity and Capital Resources
Our financial condition is summarized as follows:
As of December 31,
2022 2021 Change
Financial assets:
Cash and cash equivalents $ 108,297 $ 172,467 $ (64,170 )
Marketable securities - current 132,757 124,696 8,061
Marketable securities - noncurrent 2,495 16,911 (14,416 )
Total financial assets $ 243,549 $ 314,074 $ (70,525 )
Working capital:
Current assets $ 247,006 $ 301,286 $ (54,280 )
Current liabilities 10,832 12,219 (1,387 )
Total working capital $ 236,174 $ 289,067 $ (52,893 )
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Sources of Liquidity
Since our inception, we have not generated any revenue from any product sales or
any other sources and have incurred significant operating losses and negative
cash flows from our operations. We have not yet commercialized any of our
product candidates and we do not expect to generate revenue from sales of any
product candidates for several years, if at all. As of
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with CROs and other vendors to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.
In
Plan of Operation and Future Funding Requirements
We use our capital resources primarily to fund operating expenses, mainly research and development expenditures. We plan to increase our research and development expenses for the foreseeable future as we continue the preclinical and clinical development of our product candidates. At this time, due to the inherently unpredictable nature of preclinical and clinical development and given the early stage of our product candidates, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval and commercialize our current product candidates or any future product candidates, if at all. For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or whether, or when, if ever, we may achieve profitability. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Due to our significant research and development expenditures, we have generated
substantial operating losses in each period since inception. We have incurred an
accumulated deficit of
Our cash operating expenditures were
We have based this estimate on assumptions that may prove to be wrong, however, and we could use our capital resources sooner than we expect.
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The timing and amount of our operating expenditures will depend largely on:
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the timing and progress of preclinical and clinical development activities;
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the number and scope of preclinical and clinical programs we decide to pursue;
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the timing and amount of milestone payments we may receive under any future collaboration agreements;
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our ability to maintain future licenses and research and development programs and to establish new collaboration and/or in-licensing arrangements;
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the costs involved in prosecuting and enforcing patent and other intellectual property claims;
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the cost and timing of regulatory approvals; and
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our efforts to build out our new office and laboratory headquarters, enhance operational systems and hire additional personnel, including personnel to support development of our product candidates and satisfy our obligations as a public company.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financing. We may also consider entering into collaboration arrangements or selectively partnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely affect our business, financial condition, results of operations and prospects.
Cash Flows
The following table summarizes our cash flows for the period indicated (in
thousands):
Year Ended
December 31,
2022 2021 2020
Cash used in operating activities
(1,368 ) (143,584 ) 27,911
Cash provided by financing activities 958 2,022 292,972
Net (decrease) increase in cash, cash
equivalents, and restricted cash $ (64,170 ) $ (188,133 ) $ 288,144
Operating Activities
Net cash used in operating activities for the year ended
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Net cash used in operating activities for the year ended
Investing Activities
Our investing activities used
Our investing activities used
Financing Activities
Our financing activities provided
Our financing activities provided
Critical Accounting and Estimates
The preparation of our financial statements in conformity with accounting
principles generally accepted in
We believe that the accounting policies described below involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of our operations.
Research and Development Costs,
Research and development costs are expensed as incurred. Research and development expenses consist principally of personnel costs, including salaries, stock-based compensation and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including sourcing of raw materials and manufacturing of our product candidates, allocated facility-related expenses and external costs of outside vendors, and other direct and indirect costs. Non-refundable research and development advance payments are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or services are performed.
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As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our 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 service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:
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vendors, including research laboratories, in connection with preclinical development activities;
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CROs and investigative sites in connection with preclinical studies and clinical trials; and
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CMOs in connection with drug substance and drug product formulation of preclinical studies and clinical trial materials.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that supply, conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation
We measure all stock options and other stock-based awards granted to our employees, directors, consultants, and other non-employee service providers based on the fair value on the date of the grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is typically the vesting term.
We classify stock-based compensation expense in our statement of operations in the same way the award recipient's payroll costs are classified or in which the award recipients' service payments are classified.
We use the Black-Scholes option pricing model to estimate the fair value of stock options on the date of grant. Using the Black-Scholes option pricing model requires management to make significant assumptions and judgments. We determined these assumptions for the Black-Scholes option-pricing model as discussed below.
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Expected Term-The expected term represents the period that the stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, we based our expected term for awards issued to employees and non-employees using the simplified method which is presumed to be the midpoint between the vesting date and the end of the contracted term.
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Risk-Free Interest Rate-The risk-free interest rate is based on the
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Expected Volatility-Since we do not have adequate trading history of our common stock, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that we consider to be comparable to our business over a period equivalent to the expected term of the stock-based awards.
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Dividend Rate-The expected dividend rate is zero as we have not paid and do not anticipate paying any dividends in the foreseeable future.
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Fair Value of Common Stock-Since our IPO, the fair value of shares of our common stock are measured by the stock price on the date of grant.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 of the notes
to our audited financial statements for the year ended
Item 7A. Reserved.
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