RAIN ONCOLOGY INC. You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. 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 in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . You should carefully read the sections titled "Note Regarding Forward-Looking Statements" and "Risk Factors" to gain an understanding of the important factors that could cause actual results to differ materially from the results described below.
Overview
We are a late-stage precision oncology company developing therapies that target oncogenic drivers to genetically select patients we believe will most likely to 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 MDM2-p53 complex that reactivates p53. We in-licensed milademetan from Daiichi Sankyo inSeptember 2020 based on the results of a Phase 1 clinical trial, which demonstrated meaningful antitumor activity in an MDM2-amplified subtype of liposarcoma (LPS) and other solid tumors. Data from well-differentiated/de-differentiated (WD/DD) LPS patients in the Phase 1 clinical trial of milademetan demonstrated median progression-free survival (mPFS) of approximately seven to eight months. Importantly, this result was accomplished with a rationally designed dosing schedule designed to mitigate safety concerns and widen the therapeutic window of MDM2 inhibition unlocking the potential for milademetan in a broad range of MDM2-dependent cancers. Based on these data, we commenced a pivotal Phase 3 trial in LPS (MANTRA) inJuly 2021 . We also commenced a Phase 2 tumor-agnostic basket trial in certain solid tumors (MANTRA-2) inNovember 2021 . We anticipate commencing a Phase 1/2 clinical trial to evaluate the safety, tolerability and efficacy of milademetan in combination with atezolizumab in patients with loss of cyclin-dependent kinase inhibitor 2A (CDKN2A) and wildtype p53 advanced solid tumors (MANTRA-4) in the first quarter of 2023. In addition to milademetan, we are also developing a preclinical program that is focused on inducing synthetic lethality in cancer cells by inhibiting RAD52. 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 ofSeptember 30, 2022 , we had an accumulated deficit of$143.0 million and we incurred net losses of approximately$18.0 million and$53.0 million for the three and nine months endedSeptember 30, 2022 , respectively. Our operations to date have been funded primarily through the issuance of convertible promissory notes, the issuance of convertible preferred stock, as well as issuance and sale of common stock through our initial public offering ("IPO"). From our inception throughSeptember 30, 2022 , we have raised aggregate gross proceeds of$9.9 million from the issuance of convertible promissory notes and$81.9 million from the issuance of convertible preferred stock. OnApril 27, 2021 , we completed our IPO in which we issued and sold 7,352,941 shares of common stock at a public offering price of$17.00 per share. OnMay 11, 2021 , we issued an additional 492,070 shares of common stock in connection with the exercise of the underwriters' option to purchase additional shares at the public offering price. Our net proceeds from the sale of shares in the IPO, including the sale of shares pursuant to the exercise of the underwriters' option to purchase additional shares, was$121.5 million , net of underwriting discounts and commissions, and other offering fees. As ofSeptember 30, 2022 , we had cash, cash equivalents and short-term investments of$90.7 million . InNovember 2022 , we entered into an underwriting agreement (as amended, the "Underwriting Agreement") withGuggenheim Securities, LLC , as the representative of the underwriters named therein (the "Underwriters") relating to the offering, issuance and sale (the "Offering") of 5,961,080 shares of our common stock and 2,615,250 shares of our non-voting common stock. The offering price per share was$5.83 , for gross proceeds to us from the Offering of approximately$50 million , before deducting customary underwriting discounts and offering expenses. In addition, we granted the Underwriters a 30-day option to purchase up to an additional 1,286,449 shares of our common stock on the same terms and conditions as the common stock sold in the Offering. Although we believe, based on our current business plans, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and 24
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development of our drug candidates. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products, seek to expand our product pipeline, invest in our organization, as well as incur expenses associated with operating as a public company. 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 of global economic conditions and disruptions to and volatility in the credit and financial markets inthe United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise. Because of the numerous risks and uncertainties associated with our product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. Based upon our current operating plan, we estimate that our cash, cash equivalents and short-term investments as ofSeptember 30, 2022 will be sufficient to fund our milademetan program. 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.
COVID-19
The ongoing COVID-19 pandemic continues to rapidly evolve, and we will continue
to monitor the COVID-19 situation closely. The extent of the impact of the
COVID-19 pandemic on our business, operations and clinical development timelines
and plans remains uncertain, and will depend on certain developments, including
the duration and spread of the outbreak and its impact on our clinical trial
enrollment, clinical trial sites, contract research organizations ("CROs"),
third-party manufacturers and other third parties with whom we do business, as
well as its impact on regulatory authorities and our key scientific and
management personnel. Our ability to raise additional capital may be adversely
impacted by potential worsening global economic conditions and the recent
disruptions to and volatility in the credit and financial markets in the United
States and worldwide resulting from the ongoing COVID-19 pandemic. To the extent
possible, we are conducting business as usual, with necessary or advisable
modifications, and most of our employees are working remotely. The increased
reliance on our personnel working from home has not negatively impacted
productivity, or disrupted, delayed or otherwise seriously harmed our business.
The collection and integrity of subject data and clinical trial endpoints have
not been negatively impacted by the COVID-19 pandemic. We will continue to
monitor the evolving situation related to the COVID-19 pandemic and may take
further actions that alter our operations, including those that may be required
by federal, state or local authorities, including the ability of the FDA and
other regulatory authorities to perform routine functions or that we determine
are in the best interests of our employees and other third parties with whom we
do business. If global health concerns prevent the FDA or other regulatory
authorities from conducting their regular inspections, reviews or other
regulatory activities, it could significantly impact the ability of the FDA or
other regulatory authorities to timely review and process our regulatory
submissions, which could have a material adverse effect on our business. At this
point, the extent to which the COVID-19 pandemic may affect our business,
operations and clinical development timelines and plans, including the resulting
impact on our expenditures and capital needs, remains uncertain and is subject
to change.
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Recent Developments
In August 2022 , we announced the completion of enrollment into our MANTRA Phase
3 randomized, global, registrational trial of our lead product candidate,
milademetan, an oral, small molecule inhibitor of the MDM2-p53 complex that
reactivates p53. We anticipate topline data from our MANTRA Phase 3 trial in the
first quarter of 2023.
MANTRA-2 Preliminary Data
On November 4, 2022 , we announced preliminary data in the multicenter, single
arm, open-label, Phase 2 basket trial evaluating milademetan, an MDM2 inhibitor,
for the treatment of MDM2-amplified advanced solid tumors (MANTRA-2). The
MANTRA-2 trial is designed to evaluate the safety and efficacy of milademetan
monotherapy in patients with advanced or metastatic solid tumors refractory or
intolerant to standard-of-care therapy and that exhibit wild-type p53 and a
prespecified minimum MDM2 gene copy number. Approximately 65 patients are
anticipated to be enrolled to receive milademetan. As of the latest data cutoff
on October 26, 2022 , 17 patients have been enrolled. The primary endpoint of the
trial is objective response rate as measured by RECIST criteria. Secondary
endpoints include duration of response, disease control rate progression-free
survival by investigator assessment, overall survival and growth modulation
index.
Preliminary Interim Data
? As of the latest data cutoff on
enrolled, 15 of whom have been dosed with milademetan.
? Ten patients were efficacy-evaluable with CN ?8 by central testing.
o A diverse set of tumor histologies were enrolled amongst the evaluable
patients.
o Most tumors had co-alterations in oncogenes or tumor suppressors, including
KRAS, EGFR, and PIK3CA amongst others.
? Two unconfirmed partial responses were observed with tumor regression of 34%
and 30% (pancreatic and lung cancer, respectively).
o The patient with pancreatic cancer is pending response confirmation and ongoing
treatment.
o The patient with lung cancer is deceased due to COVID-19.
Two patients exhibited promising activity with tumor regression of 29% and 27%
? (biliary tract and breast cancer, respectively) and the patients are continuing
with the investigational therapy.
? Observed anti-tumor effect of milademetan in heavily pretreated, refractory
patients, with a median of four prior therapies.
? Safety profile to date is preliminarily consistent with prior Phase 1 trial of
milademetan.
Other Key Development Updates
With respect to our other ongoing and planned clinical trials, we now expect to
report topline data from our Phase 3 MANTRA registrational trial evaluating
milademetan for the treatment of DD LPS in the first quarter of 2023. We also
expect to commence a Phase 1/2 MANTRA-4 clinical trial to evaluate the safety,
tolerability and efficacy of milademetan in combination with atezolizumab in
patients with loss of CDKN2A and wildtype p53 advanced solid tumors in the first
quarter of 2023. We are deprioritizing the Phase 2 MANTRA-3 trial in Merkel cell
carcinoma as an area of focus due to our continued effort to rationalize use of
capital in the current market environment. We are now focusing our development
efforts on our MANTRA, MANTRA-2 and MANTRA-4 clinical trials within our
milademetan program.
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Our Development Pipeline
Our development pipeline is unified by a strategy to target oncogenic drivers
through differentiated therapies for which we are able to genetically select the
patients we believe will be most likely to benefit from treatment. We currently
retain global development and commercialization rights to all of our product
candidates.
[[Image Removed: Graphic]]
Milademetan Overview
Our lead product candidate, milademetan, is a small molecule, oral inhibitor of
MDM2 and is being developed in patients with MDM2-dependent cancers.
Historically, MDM2 inhibition has presented treatment challenges due to
dose-limiting, on-target hematologic toxicities. We believe an MDM2-targeted
therapy must possess certain pharmacological characteristics related to potency
and pharmacokinetics to allow for the design of an optimized dosing schedule. An
optimized dosing schedule is intended to improve peak drug exposure leading to
apoptosis and cell cycle arrest during the dosing period, while permitting
hematopoietic precursor cell recovery during the dosing break, thereby
minimizing hematologic toxicity. Milademetan's differentiated profile, as a
potent MDM2 inhibitor has enabled a rationally designed dosing schedule that we
believe has the potential to reduce toxicities while preserving activity. We
anticipate that this dosing schedule may also be applicable to other
MDM2-dependent cancer populations across solid and hematologic tumor types.
In September 2020 , we in-licensed milademetan from Daiichi Sankyo. Daiichi
Sankyo previously conducted a Phase 1 clinical trial in WD/DD LPS patients.
Liposarcomas are the most common sarcomas in adults. WD and DD LPS represent
subtypes of LPS. The DD subtype often develops within WD tumor mass at disease
progression or recurrence of resected WD LPS. WD/DD LPS tumors have nearly
universal MDM2 amplification and wild type (WT) p53, and hence we believe WD/DD
LPS patients represent an appropriate population for MDM2 inhibition therapy.
Data from a WD/DD LPS patients in the Phase 1 clinical trial of milademetan
demonstrated mPFS of approximately seven to eight months. Importantly, this
result was accomplished with a rationally designed dosing schedule designed to
mitigate safety concerns and widen the therapeutic window of MDM2 inhibition,
establishing potential for a differentiated profile. In July 2021 , we announced
that the first patient has been randomized in the multicenter Phase 3
registrational trial (MANTRA) evaluating milademetan for the treatment of DD
LPS. Accordingly, pursuant to the Daiichi Sankyo License Agreement, $2.5 million
in milestone fees was paid in the third quarter of 2021 and $2.0 million is
accrued as of September 30, 2022 , which is payable in the second quarter of
2023.
The MANTRA trial is designed to evaluate the safety and efficacy of milademetan
compared to trabectedin, a current standard of care, in patients with
unresectable or metastatic DD LPS with or without a WD LPS component that has
progressed on one or more prior systemic therapies, including at least one
anthracycline-based therapy. One hundred seventy-five patients were enrolled and
randomized in a 1:1 ratio to receive milademetan or trabectedin. The primary
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objective of the trial is to compare progression-free survival (PFS) by blinded
independent review between the milademetan treatment arm and the trabectedin
control arm. Secondary endpoints include overall survival, PFS by investigator
assessment, objective response rate, duration of response, disease control rate,
safety and patient reported outcomes. We anticipate top-line data from this
trial in the first quarter of 2023. Our commencement of a Phase 3 trial
following the Phase 1 trial referenced above is based on the data observed in
the Phase 1 trial and FDA feedback with respect to our development plan.
In July 2021 , we provided an update on patients who received milademetan
monotherapy from the concluded Phase 1 dose escalation and expansion study. As
of July 1, 2021 , three WD/DD LPS patients received therapy with milademetan
monotherapy for greater than 51 months. Two of these patients received therapy
with durations of 51 and 57 months without disease progression, and an
additional patient received therapy for greater than 59 months before
discontinuation in the second quarter of 2021. We believe this highlights the
potential for milademetan to have a favorable long-term tolerability and safety
profile.
In November 2021 , we commenced a multicenter, single arm open-label, Phase 2
basket trial evaluating milademetan, for the treatment of MDM2-amplified
advanced solid tumors (MANTRA-2). The MANTRA-2 trial is designed to evaluate the
safety and efficacy of milademetan in patients with advanced or metastatic solid
tumors refractory or intolerant to standard-of-care therapy and that exhibit
wild-type p53 and a prespecified minimum MDM2 gene copy number. Approximately 65
patients are expected to be enrolled to receive milademetan. The primary
endpoint of the trial is objective response rate as measured by RECIST criteria.
Secondary endpoints include duration of response, disease control rate
progression-free survival by investigator assessment, overall survival, and
growth modulation index. As discussed under the Recent Development section
above, on November 4, 2022 , we announced preliminary interim data in our
MANTRA-2 clinical trial.
In January 2022 , we announced a clinical supply agreement with Roche for the
supply of the anti-Programmed Death Ligand-1 (PD-L1) monoclonal antibody,
atezolizumab. Clinical trials are planned to evaluate milademetan in combination
with atezolizumab for the treatment of patients in genetically selected
populations. Under this agreement, we are the sponsor of the anticipated
clinical trial, and Roche will supply atezolizumab. An initial Phase 1/2
clinical trial is planned to evaluate the safety, tolerability and efficacy of
milademetan in combination with atezolizumab in patients with loss of CDKN2A and
wildtype p53 advanced solid tumors who have previously progressed on ICI. We
anticipate the start of the Phase 1/2 clinical trial in the first quarter of
2023. Subsequent Phase 2 clinical trials evaluating the combination of
milademetan and atezolizumab may span various additional tumor types.
In
Milademetan and p53 Overview
Milademetan reactivates p53, known as the "guardian of the genome," by inhibiting MDM2. p53 is present in every cell and acts as a key regulator of a variety of cellular processes including cell cycle, DNA repair and apoptosis. In a normal cell, the activity of p53 is controlled and regulated by the inhibitory protein MDM2. MDM2 binds to p53, thereby inducing degradation and allowing normal cells to function properly. In response to cell damage and other stress conditions, p53 is activated and prevents the formation of cancerous cells by inducing apoptosis. In contrast to normal cells, in tumor cells, the two primary mechanisms by which p53 can be inactivated in tumor cells are mutations in p53 and activation or overexpression of MDM2. Approximately half of all tumors are characterized by mutations of the p53 gene. The remaining cancer patients have a p53 gene that is not mutated, and is otherwise known as WT p53, but can be functionally suppressed through the activation or overexpression of MDM2. We have identified MDM2 dependence in several solid tumors. This dependence is caused by overexpression of MDM2 through gene amplification or other mechanisms, loss of a negative regulator of MDM2 or other causes. Overexpression of MDM2 promotes the degradation of p53 and also eliminates p53's ability to activate transcription. Milademetan, by binding MDM2 at the p53 interaction site, prevents the formation of the MDM2-p53 complex, allowing p53 reactivation and subsequent transcription of genes, such as MIC1, that trigger cancer cell cycle arrest or apoptosis,
among others.
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RAD52 Overview
We are also developing a preclinical program focused on targeting RAD52 in the DNA damage repair pathway. While our RAD52 program is in an early stage of development, we expect to develop this program for patients with a molecularly diagnosed HRD+, such as mutations and loss-of-function in BRCA1/2 or others that utilize RAD52 as an alternative DNA repair pathway, as well as for patients that may have relapsed to poly (ADP ribose) polymerase (PARP) inhibitor therapy. There are currently no approved therapies or clinical programs in development targeting RAD52. Targeting RAD52 represents a novel strategy for tumors exhibiting tumor HRD+ or a loss of function, of several pathway constituents, including BRCA1/2 or others in tumor types frequently characterized by these deficiencies. These tumors include breast, prostate, pancreatic, ovarian and possibly other cancers. Developmental paths for RAD52 inhibitors include as a monotherapy in HRD+ patients relapsing on PARP inhibitor therapy, or in front-line combinations with PARP inhibitors in HRD+ tumors. Our RAD52 program is currently in lead optimization stage. We anticipate evaluating identified RAD52 inhibitor candidates in animal models of patient tumors with HRD+ that have relapsed on PARP inhibitors and in HRD+ tumors with a loss-of-function mutation of BRCA1/2 in combination with PARP inhibitors.
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 the Condensed Consolidated Financial Statements.
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;
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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.
The following table summarizes our research and development expenses by product candidate or development program:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands) (in thousands)
Milademetan $ 7,639 $ 10,366 $ 23,766 $ 16,603
Other research and 158 209 569 1,546
clinical candidates
Unallocated internal
research and 6,713 4,709 17,987 7,952
development costs
Total research and $ 14,510 $ 15,284 $ 42,322 $ 26,101
development expenses
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" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
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 andSEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company. 30 Table of Contents Interest Income
For the three and nine months ended
Results of Operations
Comparison of Three and Nine Months Ended
The following table summarizes our results of operations for the three and nine months endedSeptember 30, 2022 and 2021, together with the changes in those items in dollars: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 Change 2022 2021 Change (in thousands) (in thousands) Operating expenses: Research and development$ 14,510 $ 15,284 $ (774) $ 42,322 $ 26,101 $ 16,221 General and administrative 3,901 3,154 747 11,257 7,334 3,923 Total operating expenses 18,411 18,438 (27) 53,579 33,435 20,144 Loss from operations (18,411) (18,438) 27 (53,579) (33,435) (20,144) Other income: Interest income 370 11 359 533 25 508 Other income - 1 (1) - 1 (1)
Total other income, net 370 12 358
533 26 507 Net loss$ (18,041) $ (18,426) $ 385 $ (53,046) $ (33,409) $ (19,637)
Research and Development Expenses
Research and development (R&D) expenses were$14.5 million and$15.3 million for the three months endedSeptember 30, 2022 and 2021, respectively. The decrease in R&D expenses was primarily due to the milestone fees to Daiichi Sankyo of$5.5 million incurred during the three months endedSeptember 30, 2021 , partially offset by higher payroll-related costs for our R&D personnel, clinical trial costs, and various other R&D costs for milademetan. Non-cash stock-based compensation expenses, included as part of personnel costs, were$0.7 million for each of the three months endedSeptember 30, 2022 and 2021. R&D expenses were$42.3 million and$26.1 million for the nine months endedSeptember 30, 2022 and 2021, respectively. The increase in R&D expenses was primarily related to clinical trial costs, higher payroll-related costs for our R&D personnel, and various other R&D costs for milademetan. Non-cash stock-based compensation expenses, included as part of personnel costs, were$2.8 million and$1.4 million for the nine months endedSeptember 30, 2022 and 2021, respectively. We expect our R&D costs to continue to increase for the remainder of 2022 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$3.9 million and$3.2 million for the three months endedSeptember 30, 2022 and 2021, respectively. The increase in G&A expenses was primarily due to payroll-related costs of$0.3 million , professional services costs of$0.3 million , and legal costs of$0.1 million . Non-cash stock-based compensation expense included in G&A expenses was approximately$0.2 million for each of the three months endedSeptember 30, 2022 and 2021. We have incurred and expect to continue incur additional expenses as a result of being a public company following the completion of our IPO inApril 2021 , including costs associated with maintaining compliance with exchange listing andSEC requirements. G&A expenses were$11.3 million and$7.3 million for the nine months endedSeptember 30, 2022 and 2021, respectively. The increase in G&A expenses was primarily due to payroll-related costs of$1.5 million , professional services costs of$0.6 million , legal costs of$0.3 million , directors and officers' insurance of$0.2 million , and various third-party G&A costs of$0.2 million . Non-cash stock-based compensation expense included in G&A expenses was approximately$0.8 31 Table of Contents million and$0.4 million for the nine months endedSeptember 30, 2022 and 2021, respectively. We expect our general and administrative expenses to continue to increase for the remainder of 2022 as we continue to build out systems and infrastructure to support our operations.
Other Income
Other income for the three and nine months 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 throughSeptember 30, 2022 , we have raised aggregate gross proceeds of$9.9 million from the issuance of convertible promissory notes and$81.9 million from the issuance of convertible preferred stock. InNovember 2022 , we entered into the Underwriting Agreement withGuggenheim Securities, LLC , as representative of the Underwriters, relating to the Offering of 5,961,080 shares of our common stock and 2,615,250 shares of our non-voting common stock. The offering price per share was$5.83 , for gross proceeds from the Offering of approximately$50 million , before deducting customary underwriting discounts and offering expenses. In addition, we granted the Underwriters a 30-day option to purchase up to an additional 1,286,449 shares of our common stock on the same terms and conditions as the common stock sold in the Offering. InMay 2022 , we entered into a sales agreement (the "Sales Agreement") withOppenheimer & Co. Inc. (the "Sales Agent") pursuant to which we may offer and sell up to$50.0 million of shares of our common stock, from time to time, in "at-the-market" offerings (the "ATM Facility"). The Sales Agent is entitled to compensation at a commission equal to 3.0% of the aggregate gross sales price per share sold under the Sales Agreement. For the three months endedSeptember 30, 2022 , there were no sales pursuant to the ATM Facility. OnApril 27, 2021 , we completed our IPO in which we issued and sold 7,352,941 shares of common stock at a public offering price of$17.00 per share. OnMay 11, 2021 , we issued an additional 492,070 shares of common stock in connection with the exercise of the underwriters' option to purchase additional shares at the public offering price. Our net proceeds from the sale of shares in the IPO, including the sale of shares pursuant to the exercise of the underwriters' option to purchase additional shares, was$121.5 million , net of underwriting discounts and commissions, and other offering fees. As ofSeptember 30, 2022 , we had cash, cash equivalents and short-term investments of$90.7 million . Although we believe, based on our current business plans, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
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
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expect 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, initiate new clinical trials for our
? milademetan program and incur additional preclinical research costs for our
RAD52 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, and any future
commercialization efforts; and
potentially experience the effects of the recent disruptions to and volatility
? in the credit and financial markets in
ongoing COVID-19 pandemic and the geopolitical environment.
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 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 RAD52 and 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;
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? 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 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 economic conditions and disruptions to and volatility in the credit and financial markets inthe United States and worldwide resulting from the ongoing COVID-19 pandemic and geopolitical events or otherwise. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Cash Flows
The following table summarizes our sources and uses of cash and cash
equivalents:
Nine Months Ended
September 30,
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (49,905) $ (27,704)
Investing activities 64,386 (139,480)
Financing activities 573 121,579
Net increase (decrease) in cash and cash equivalents $ 15,054 $ (45,605)
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Operating Activities
We have incurred losses since inception. Net cash used in operating activities
for the nine months ended September 30, 2022 was $49.9 million , consisting
primarily of net loss of $53.0 million resulting from expenses associated with
research and development activities for our lead product candidate and general
and administrative expenses. A net decrease in changes in operating assets and
liabilities of $0.5 million also contributed to the use of cash. Partially
offsetting the cash use was non-cash adjustments of $2.6 million .
Net cash used in operating activities for the nine months ended September 30,
2021 was $27.7 million , consisting primarily of net loss of $33.4 million ,
resulting from expenses associated with research and development activities for
our lead product candidate and general and administrative expenses, partially
offset by changes in operating assets and liabilities of $1.7 million and
non-cash adjustments of $7.4 million .
Investing Activities
Net cash provided by investing activities for the nine months endedSeptember 30, 2022 was$64.4 million , which related to$99.2 million of proceeds received from available for sale securities maturities, offset by purchases of available for sale securities of$34.8 million . Net cash used in investing activities for the nine months endedSeptember 30, 2021 was$139.5 million , which primarily related to purchases of available for sale securities of$136.9 million and payment of$2.5 million to Daiichi Sankyo for in-process research and development expense.
Financing Activities
Net cash provided by financing activities in the nine months ended
Net cash provided by financing activities in the nine months endedSeptember 30, 2021 was$121.6 million , which primarily related to the net proceeds from the IPO, after deducting underwriting discounts and commissions, and other offering fees.
Obligations and other Commitments
As discussed in Note 8 to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, 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
There were no material changes outside of the ordinary course of business to our
specific contractual obligations during the three and nine months ended
Critical Accounting Policies and Use of Estimates
There have been no significant changes to our critical accounting policies and use of estimate from our disclosure reported in "Critical Accounting Estimates" in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K for the year endedDecember 31, 2021 , except as described in 35
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Note 2 to the interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Accrued Liabilities
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 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$4.4 million and$4.3 million as ofSeptember 30, 2022 andDecember 31, 2021 , respectively. The other accrued liabilities balances were$4.4 million and$5.7 million as ofSeptember 30, 2022 andDecember 31, 2021 , respectively. 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 estimates to be used in calculating the fair value of stock options. The use of the model requires us to make estimates of assumptions, such as expected stock price volatility and the estimated expected term of each award. The fair value of RSUs granted is based on the Company's 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 as determined on the date of grant by our board of directors. For each of the three months endedSeptember 30, 2022 and 2021, stock-based compensation expense was$0.9 million . The following table summarizes unvested equity compensation costs not yet recognized as ofSeptember 30, 2022 andDecember 31, 2021 . As ofSeptember 30 ,
As of
2022 2021
Unvested equity compensation costs not yet $ 12.5 $ 9.8 recognized (in millions) Weighted average period over which the unvested awards are expected to be recognized 2.8 3.1
(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 unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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