RAIN ONCOLOGY INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our audited consolidated financial
statements and the related notes and other financial information included
elsewhere in this Annual Report on Form 10-K. This discussion and analysis
contain forward-looking statements based upon our current plans and expectations
that involve risks, uncertainties and assumptions, such as statements regarding
our plans, objectives, expectations, intentions and beliefs. Our actual results
and the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth under the section titled "Risk Factors" and included elsewhere in this
Annual Report on Form 10-
Overview
We are a late-stage precision oncology company developing therapies that target oncogenic drivers to genetically select patients we believe will most likely benefit. This approach includes using a tumor-agnostic strategy to select patients based on their tumors' underlying genetics rather than histology. We have in-licensed product candidates, each with a differentiated profile relative to available therapies, and we intend to continue strengthening our pipeline through focused business development and internal research efforts.
Our lead product candidate, milademetan (also known as RAIN-32) is an oral,
small molecule inhibitor of the mouse double minute 2 (MDM2-p53) complex that
reactivates p53. We in-licensed milademetan from Daiichi Sankyo Company, Limited
(Daiichi Sankyo) in
Since our inception in 2017, we have incurred significant operating losses and
have utilized substantially all of our resources to date in-licensing and
developing our product candidates, organizing and staffing our company and
providing other general and administrative support for our operations. As of
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offering fees. In
We do not expect to generate any revenue from product sales unless and until we
successfully complete development and obtain regulatory approval for one or more
product candidates, which will not be for many years, if ever. Accordingly,
until such time as we can generate significant revenue from sales of our product
candidates, if ever, we expect to finance our cash needs through public or
private equity offerings, debt financings or other capital sources which may
include strategic collaborations, licensing arrangements or other arrangements
with third parties. We may be unable to raise additional funds or enter into
such other agreements or arrangements when needed on favorable terms or at all.
If we raise funds through strategic collaborations or other similar arrangements
with third parties, we may have to relinquish valuable rights to our platform
technology, future revenue streams, research programs or product candidates or
we may have to grant licenses on terms that may not be favorable to us and/or
may reduce the value of our common stock. If we are unable to raise additional
funds through equity or debt financings when needed, we may be required to
delay, limit, reduce or terminate our product development or future
commercialization efforts. Our ability to raise additional funds may be
adversely impacted by potential worsening global macroeconomic conditions and
the disruptions to and volatility in the credit and financial markets in
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely and expect to continue to rely for the foreseeable future, on third parties for the manufacture of our drug candidates for preclinical and clinical testing, as well as for commercial manufacture of any drugs that we may commercialize. We expect to continue to develop drug candidates that can be produced cost-effectively at contract manufacturing facilities. For the milademetan program, we have transferred Daiichi Sankyo Company, Limited (Daiichi Sankyo) processes to suitable third-party contract manufacturing organizations to supply active pharmaceutical ingredients and clinical drug product for our clinical trials and in preparation for submission of marketing applications and potential future commercial supplies.
Collaboration and License Agreements
We are party to a number of license agreements for the in-license of our product candidates and development programs. See Note 7 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales, licenses or collaborations and 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, we may generate revenue from future product sales. If we enter into license or collaboration agreements for any of our product candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates or from license or collaboration agreements. We may never succeed in obtaining regulatory approval for any of our product candidates.
Operating Expenses
Our operating expenses since inception have consisted solely of research and development costs, including acquisition of in-process research and development, and general and administrative costs.
Research and Development Expenses
To date, our research and development expenses have related to the discovery and clinical development of our product candidates, including acquisition of in-process research and development. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include:
? salaries, payroll taxes, employee benefits and stock-based compensation charges
for those individuals involved in research and development efforts;
? expenses incurred in connection with research, laboratory consumables and
preclinical studies;
external research and development expenses incurred under agreements with CROs
? and consultants to conduct and support our planned clinical trials of our
product candidates;
the cost of consultants engaged in research and development-related services
? and the cost to manufacture drug product for use in our preclinical studies and
clinical trials;
? costs related to regulatory compliance;
? the cost of annual license fees and the cost of acquiring in-process research
and development, including upfront license payments; and
? any development milestone payments that we may make under our license
agreements.
We track external development costs by product candidate or development program, but we do not allocate personnel costs or other internal costs to specific development programs or product candidates as our personnel works across multiple development programs and product candidates. These costs are included in unallocated research and development expenses in the table below.
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The following table summarizes our research and development expenses by product candidate or development program:
Year Ended December 31,
2022 2021
(in thousands)
Milademetan $ 35,174 $ 23,261
Other research and clinical candidates 680 1,761
Unallocated internal research and development costs 25,546 15,751
Total research and development expenses $ 61,400 $ 40,773 We plan to substantially increase our research and development expenses for the foreseeable future as we continue to expand the development of our product candidates. We cannot predict with certainty the timing for initiation or completion of, the duration of, or the costs of current or future clinical trials and nonclinical studies of any of our product candidates due to the inherently unpredictable nature of clinical and preclinical development. The clinical development timeline, probability of success of clinical trials 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.
Our future clinical development costs may vary significantly. See the section titled "Risk Factors-Risks Related to Product Development- Preclinical and clinical development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidates."
General and Administrative Expenses
General and administrative expenses consist of salaries and employee-related
costs, including stock-based compensation, for personnel in executive, finance
and other administrative functions, legal fees relating to intellectual property
and corporate matters, professional fees for accounting and consulting services
and facility-related costs. We anticipate that our general and administrative
expenses will continue to increase in the future to support our continued
research and development activities, pre-commercial preparation activities for
our product candidates and, if any product candidate receives marketing
approval, commercialization activities. We also anticipate increased expenses
related to audit, legal, regulatory and tax-related services associated with
maintaining compliance with exchange listing and
Interest Income
Interest income consists of interest on our available-for-sale (AFS) securities.
Income Taxes
We are subject to corporate
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federal research tax credit will begin to expire in 2039. The
Utilization of the net operating loss carryforwards and other tax attributes may be subject to a substantial annual limitation due to the ownership change limitations provided by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), and similar state provisions. Specifically, under Sections 382 and 383 of the Code, if a corporation undergoes an "ownership change" (generally defined as a greater than 50% change (by value) in its equity ownership by 5% stockholders over a three-year period), our ability to use such pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income may be limited. As a result of our most recent private placements and other transactions that have occurred over the past three years, we may have experienced, and, upon the closing of this offering, may experience, an "ownership change." We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership.
We estimate our income tax provision, including deferred tax assets and liabilities, based on management's judgment. We record a valuation allowance to reduce our deferred tax assets to the amounts that are more likely than not to be realized. We consider future taxable income, ongoing tax planning strategies and our historical financial performance in assessing the need for a valuation allowance. If we expect to realize deferred tax assets for which we have previously recorded a valuation allowance, we will reduce the valuation allowance in the period in which such determination is first made.
We record liabilities related to uncertain tax positions in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Results of Operations
Comparison of Years Ended
The following table summarizes our results of operations for the years ended
Year Ended December 31,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 61,400 $ 40,773 $ 20,627
General and administrative 15,736 10,739 4,997
Total operating expenses 77,136 51,512 25,624
Loss from operations (77,136) (51,512) (25,624)
Other income:
Interest and other income 1,415 120 1,295
Total other income 1,415 120 1,295
Net loss before income tax expense
Research and Development Expenses
Research and development (R&D) expenses were
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R&D costs to continue to increase in 2023 as we continue our Phase 3 trial in LPS and our Phase 2 tumor-agnostic basket trial for milademetan.
General and Administrative Expenses
General and administrative (G&A) expenses were
Other Income
Other income for the years ended
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our research programs and product candidates. We expect that our research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials, expanding our intellectual property portfolio and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
We do not currently have any approved products and have not generated any
revenue from product sales since inception. To date, we have financed our
operations through the issuance of convertible promissory notes and the issuance
of convertible preferred stock and common stock. From our inception through
On
In
In
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As of
Future Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing development activities related to milademetan and other product candidates and programs, which are still in the early stages of development. In addition, we expect to continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:
? continue our on-going clinical trials and initiate new clinical trials for our
milademetan program;
? initiate and continue research and preclinical and clinical development of our
product candidates;
? seek to identify and develop additional product candidates;
? seek marketing approvals for any of our product candidates that successfully
complete clinical trials, if any;
? establish a sales, marketing, manufacturing and distribution infrastructure to
commercialize any products for which we may obtain marketing approval;
? require the manufacture of larger quantities of our product candidates for
clinical development and potentially commercialization;
? maintain, expand, protect and enforce our intellectual property portfolio;
? acquire or in-license other drugs and technologies;
? defend against any claims of infringement, misappropriation or other violation
of third-party intellectual property;
? hire and retain additional clinical, quality control and scientific personnel;
? build out new facilities or expand existing facilities to support our ongoing
development activity;
add operational, financial and management information systems and personnel,
? including personnel to support our drug development, any future
commercialization efforts and our transition to a public company;
potentially experience the effects of the recent disruptions to and volatility
? in the credit and financial markets in
ongoing macroeconomic conditions and the geopolitical environment; and
? operate as a public company.
Because of the numerous risks and uncertainties associated with the development of milademetan and other product candidates and programs and because the extent to which we may enter into
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collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates and programs. Our future capital requirements will depend on many factors, including:
? the scope, progress, results and costs of our current and future clinical
trials of milademetan for our current targeted indications;
? the scope, progress, results and costs of drug discovery, preclinical research
and clinical trials for other product candidates;
? the number of future product candidates that we pursue and their development
requirements;
? the costs, timing and outcome of regulatory review of our product candidates;
the extent to which we acquire or invest in businesses, products and
? technologies, including entering into or maintaining licensing or collaboration
arrangements for product candidates on favorable terms, although we currently
have no commitments or agreements to complete any such transactions;
the costs of preparing, filing and prosecuting patent applications,
? maintaining, protecting and enforcing our intellectual property rights and
defending intellectual property-related claims;
? our headcount growth and associated costs as we expand our business operations
and our research and development activities;
? our ability to successfully acquire or in-license other drugs and technologies;
the costs and timing of future commercialization activities, including drug
sales, marketing, manufacturing and distribution, for any of our product
? candidates for which we receive marketing approval, to the extent that such
sales, marketing, manufacturing and distribution are not the responsibility of
any collaborator that we may have at such time;
the amount of revenue, if any, received from commercial sales of our product
? candidates, should any of our product candidates receive marketing approval;
and
? the costs of operating as a public company.
Developing drug products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Until such time, if ever, as we can generate product revenues to support our cost structure, we expect to finance our cash needs through public or private equity offerings, including our ATM Facility, debt financings or other capital sources which may include strategic collaborations, licensing arrangements or other arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and equity financing, if available, may involve agreements that include
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covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through strategic collaborations or other similar arrangements
with third parties, we may have to relinquish valuable rights to our technology,
future revenue streams, research programs or product candidates or may have to
grant licenses on terms that may not be favorable to us and/or may reduce the
value of our common stock. If we are unable to raise additional funds through
equity or debt financings when needed, we may be required to delay, limit,
reduce or terminate our product development or future commercialization efforts.
Our ability to raise additional funds may be adversely impacted by potential
worsening global macroeconomic conditions and the disruptions to and volatility
in the credit and financial markets in
Cash Flows
The following table summarizes our sources and uses of cash and cash equivalents
for the years ended
Year Ended December 31,
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (63,199) $ (37,463)
Investing activities 47,194 (118,235)
Financing activities 53,180 121,615
Net increase (decrease) in cash and cash equivalents
Operating Activities
We have incurred losses since inception. Net cash used in operating activities
for the year ended
Net cash used in operating activities for the year ended
Investing Activities
Net cash provided by investing activities for the year ended
Net cash used in investing activities for the year ended
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Financing Activities
Net cash provided by financing activities for the year ended
Net cash provided by financing activities for the year ended
Obligations and other Commitments
As discussed in Note 7 to the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we are party to agreements to license intellectual property. The license agreements may require us to pay future milestones if certain developmental, regulatory and commercial milestones are achieved, as well as to pay royalties on net sales of products applicable to the license agreements. We cannot estimate if milestone and/or royalty payments will occur in future periods and the agreements are cancelable by us at any time upon prior written notice to the licensor.
In the normal course of business, we enter into contracts with CROs and other vendors for preclinical studies and clinical trials, research and development supplies and other testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancelable by either party at any time upon prior written notice.
Our incurred and accrued research and development obligations as of
We pay the office operating lease obligation at the beginning of each month.
Under our office operating leases as noted in Note 8 to the audited consolidated
financial statements appearing elsewhere in this Annual Report on Form 10-K, our
obligation as of
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations
is based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in
We are required to estimate our expenses resulting from our obligations under contracts with vendors, consultants, CROs and clinical site agreements in connection with conducting preclinical activities and clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. 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. However, some payments
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are made in arrears and expenditures are accrued for the time periods which services are performed on a pre-determined schedule or when contractual milestones are met. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.
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 when we have not yet been invoiced or otherwise
notified of actual costs. During the course of a preclinical study or clinical
trial, we adjust our prepaid and expense recognition if actual results differ
from our estimates. To date, we have not experienced any material differences
between accrued costs and actual costs incurred. The accrued research and
development balances were
Stock-Based Compensation
We follow the provision of the
We estimate the fair value of our stock options using the Black-Scholes option pricing model, which requires us to develop subjective estimates to be used in calculating the fair value of stock options. The use of the model requires us to make estimates of subjective assumptions, such as expected stock price volatility and the estimated expected term of each award. The fair value of restricted stock units (RSUs) granted is based on our closing stock price on the date of grant.
Stock-based compensation expense based on the fair value estimated is recognized
over the requisite service period of the awards (generally the vesting period)
on a straight-line basis. Prior to the IPO, the estimated fair value of the
underlying common stock was determined on the date of grant by our board of
directors. For the years ended
As of December 31,
2022 2021
Unvested equity compensation costs not yet recognized (in $ 10.8 $ 9.8 millions)
Weighted average period over which the unvested awards are 2.5 3.1
expected to be recognized (in years)
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact
our financial position, results of operations or cash flows is disclosed in
Note 2 to our audited consolidated financial statements for the year ended
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