REPARE THERAPEUTICS INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and related notes, appearing elsewhere in this Quarterly
Report on Form 10-Q and (ii) the audited consolidated financial statements and
related notes and management's discussion and analysis of financial condition
and results of operations for the fiscal year ended
Overview
We are a leading clinical-stage precision oncology company enabled by our
proprietary synthetic lethality approach to the discovery and development of
novel therapeutics. Synthetic lethality, or SL, represents a clinically
validated approach to drug development. We use our proprietary, genome-wide,
CRISPR-enabled SNIPRx platform to systematically discover and develop highly
targeted cancer therapies focused on genomic instability, including DNA damage
repair. SL arises when a deficiency in either of two genes is tolerated in
cells, but simultaneous deficiencies in both genes cause cell death. Cancer
cells that contain a mutation in one gene of an SL pair are susceptible to
therapeutic intervention targeting the other gene pair. Using our SNIPRx
platform, we are developing our pipeline of SL product candidates, including our
initial product candidate, camonsertib (also known as
In
In 2022, we initiated IND-enabling studies for our polymerase theta, or Pol?, inhibitor, now designated as RP-2119, and plan to initiate clinical trials in the summer of 2023. We also expect to initiate IND-enabling studies in the first half of 2023 for an additional small molecule against an undisclosed target.
Since our inception in
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Since inception, we have incurred significant operating losses. Our net losses
were
We do not have any products approved for sale. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates, if ever. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when, needed, could have a negative effect on our business, results of operations and financial condition.
COVID-19 Business Update
In connection with the COVID-19 pandemic, we previously established a cross-functional task force and have implemented business continuity plans designed to address and mitigate the impact of COVID-19 on our employees and our business, including our preclinical studies and ongoing and planned clinical trials. We have taken measures to secure our research and development activities, while work in laboratories and facilities has been re-organized to reduce risk of COVID-19 transmission. While we are experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, and results of operations could be materially adversely affected. We cannot predict the ultimate impact, if any, of the COVID-19 pandemic related to both known and unknown risks, including future quarantines, closures and other restrictions resulting from the pandemic. We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.
As of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic continues to have a modest impact on our business operations. There is the possibility that our current or future clinical trial sites may be affected by the COVID-19 pandemic due to prioritization of hospital resources toward the COVID-19 pandemic, as well as, the inability to access sites for initiation, patient enrollment and monitoring. As a result, patient screening, new patient enrollment, monitoring and data collection may be affected or delayed. We are aware that several clinical sites involved in our clinical trials have in the past temporarily stopped or delayed enrolling new patients, with exemptions if appropriate, and it is possible that these or other clinical sites may be similarly affected in the future. These developments may delay or extend our projected clinical trial timelines. Some of our third-party manufacturers, which we use for the supply of materials for product candidates or other materials necessary to manufacture product to conduct preclinical tests and clinical trials, and contract research organizations may be impacted by the COVID-19 pandemic. Should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing our current or planned clinical trials.
Recent Developments
•
Evaluating
•
We continue to advance Phase 1 clinical trials evaluating
•
Initial Phase 1 clinical data readout for
•
Based on promising preclinical data released at the 34th EORTC-NCI-AACR
Symposium in
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We demonstrated that the PKMYT1 inhibitor
•
Preclinical data from
•
Advancing camonsertib, a potent and selective oral small molecule inhibitor of ATR (Ataxia-Telangiectasia and Rad3-related protein kinase) for the treatment of tumors with specific synthetic-lethal genomic alterations, in partnership with Roche.
•
Under the agreement with Roche, Roche assumed the development of camonsertib with the potential to expand development into additional tumor indications and multiple combination studies.
•
Repare will continue to provide ongoing support for the TRESR and ATTACC trials into 2023.
•
In connection with this agreement, we received a
•
Advancing IND-enabling studies for RP-2119, our Pol? inhibitor, and plan to initiate clinical trials in the summer of 2023.
•
We also expect to initiate IND-enabling studies in the first half of 2023 for an additional small molecule against an undisclosed target.
Components of Results of Operations
Revenue
To date, we have not recognized any revenue 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.
Collaboration and License Agreement with
On
Under the Roche Agreement, we granted Roche a worldwide, perpetual, exclusive,
sublicensable license to develop, manufacture, and commercialize the Licensed
Products. Roche will assume development of camonsertib with the potential to
expand development into additional tumors and multiple combination studies. We
have agreed to complete specified ongoing clinical trials at our expense. We
also retained the right to conduct specified clinical trials of camonsertib in
combination with our PKMYT1 compound (also known as
The Roche Agreement was subsequently amended in
Under the terms of the Roche Agreement, we received an upfront payment of
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The Company determined that the transaction price at the onset of the Roche
Agreement was
Performance obligation Transaction price
(in thousands)
Combined licenses $ 105,327
Completion of Continuing Trials 26,585
Transfer of clinical trial materials 2,714
Total transaction price $ 134,626
The Company recognized
As of
We do not expect the upfront payment made with respect to the Roche Agreement to trigger cash tax obligations due to our accumulated tax losses available.
Collaboration and License Agreement with Bristol-Myers Squibb Company
In
The BMS Agreement was subsequently amended in July, September and
As part of the BMS Agreement, Bristol Myers Squibb paid us an initial upfront
fee of
The
Performance obligation Amount
(in thousands)
Research services $ 6,405
Option to license druggable target lesions 31,148
Option to license undruggable targets 12,447
Total transaction price $ 50,000
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In
As of
In the three months ended
Collaboration Agreement with Ono Pharmaceutical Company Ltd.
In
In
As of
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, partially offset by fully refundable Canadian research and development tax credits. We expense research and development costs as incurred, which include:
•
external research and development expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•
employee-related expenses, including salaries, bonuses, benefits, share-based compensation, and other related costs for those employees involved in research and development efforts;
•
costs related to manufacturing material for our preclinical studies and clinical trials, including fees paid to contract manufacturing organizations, or CMOs;
•
laboratory supplies and research materials;
•
upfront, milestone and maintenance fees incurred under license, acquisition and other third-party agreements;
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•
costs related to compliance with regulatory requirements; and
•
facilities, depreciation, scientific advisory board and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities and equipment, insurance, equipment and software.
Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our studies or other services performed. Significant judgment and estimates are made in determining the accrued expense or prepaid balances at the end of any reporting period.
We characterize research and development costs incurred prior to the identification of a product candidate as discovery costs. We characterize costs incurred once a product candidate has been identified as development costs.
Our direct external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license, acquisition, and option agreements. We track these external research and development costs on a program-by-program basis once we have identified a product candidate.
We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical development, process development, manufacturing, and clinical development activities.
The following table summarizes our research and development costs:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands)
Discovery costs
Direct external costs $ 2,428 $ 2,890 $ 7,763 $ 7,910
Laboratory supplies and research materials 1,134 1,119 3,541 3,580
Personnel related costs 3,664 2,883 12,120 8,171
Facilities related costs 322 367 1,101 1,103
Other costs 1,235 960 3,525 2,629
8,783 8,219 28,050 23,393
Development
Direct external costs
Camonsertib program 6,415 8,069 19,433 17,102
RP-6306 program 6,387 4,805 18,457 10,117
RP-2119 program 2,179 - 3,198 -
Personnel related costs 5,695 3,651 16,533 10,192
Facilities related costs 200 217 606 427
Other costs 1,892 636 3,933 1,707
22,768 17,378 62,160 39,545
R&D tax credits (309 ) (236 ) (1,035 ) (863 )
Total research and development costs
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The successful development of our product candidates is highly uncertain. We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our preclinical programs. We cannot determine with certainty the timing of initiation, the duration, or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments, and our ongoing assessments as to each product candidate's commercial potential. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as we commence clinical trials. We anticipate that our expenses will increase substantially, particularly due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
•
the scope, rate of progress, and expenses of our ongoing research activities as well as any preclinical studies, clinical trials and other research and development activities;
•
establishing an appropriate safety profile;
•
successful enrollment in and completion of clinical trials;
•
whether our product candidates show safety and efficacy in our clinical trials;
•
receipt of marketing approvals from applicable regulatory authorities;
•
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
•
commercializing product candidates, if and when approved, whether alone or in collaboration with others; and
•
continued acceptable safety profile of products following any regulatory approval.
Any changes in the outcome of any of these variables with respect to the
development of our product candidates in preclinical and clinical development
could mean a significant change in the costs and timing associated with the
development of these product candidates. We may never succeed in achieving
regulatory approval for any of our product candidates. We may obtain unexpected
results from our clinical trials. We may elect to discontinue, delay or modify
clinical trials of some product candidates or focus on other product candidates.
For example, if the
General and Administrative Expenses
General and administrative expense consists primarily of employee related costs, including salaries, bonuses, benefits, share-based compensation and other related costs, as well as expenses for outside professional services, including legal, accounting and audit services and other consulting fees, rent expense, D&O insurance expenses, investor and public relations expenses and other general administrative expenses.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and D&O insurance costs as well as investor and public relations expenses associated with operating as a public company.
Other Income (Expense), Net
Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign exchange, interest income earned on our cash and cash equivalents and marketable securities, and other expenses such as interest and bank charges.
Realized and unrealized gains and losses on foreign exchange consist of realized and unrealized gains and losses from holding cash and foreign currency denominated other receivables, accounts payable, accrued expenses and other current liabilities as well as operating lease liabilities.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
September 30,
2022 2021 Change
(in thousands)
Revenue:
Collaboration agreements $ 112,545 $ 278 $ 112,267 Operating expenses: Research and development, net of tax credits 31,242 25,361 5,881 General and administrative
7,904 6,596 1,308
Total operating expenses 39,146 31,957 7,189
Income (loss) from operations 73,399 (31,679 ) 105,078
Other income (expense), net:
Realized and unrealized gain (loss) on foreign
exchange 126 33 93
Interest income 2,027 53 1,974
Other expense (37 ) (7 ) (30 )
Total other income, net 2,116 79 2,037
Income (loss) before income taxes 75,515 (31,600 ) 107,115
Income tax recovery (expense) (54 ) 708 (762 )
Net income (loss) $ 75,461 $ (30,892 ) $ 106,353
Revenue
We recognized revenue of
We also recognized
Research and Development Expenses, Net of Tax Credits
Research and development expenses were
•
a
•
a
•
a
General and Administrative Expenses
General and administrative expenses were
•
a
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•
a
•
a
•
a
Other Income (Expense), Net
Other income, net was
Income Tax Recovery (Expense)
The income tax expense of
The income tax recovery of
Comparison of the Nine Months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended
September 30,
2022 2021 Change
(in thousands)
Revenue:
Collaboration agreements $ 113,632 $ 723 $ 112,909 Operating expenses: Research and development, net of tax credits 89,175 62,075 27,100 General and administrative
24,621 18,574 6,047
Total operating expenses 113,796 80,649 33,147
Income (loss) from operations (164 ) (79,926 ) 79,762
Other income (expense), net:
Realized and unrealized gain (loss) on foreign
exchange 250 (92 ) 342
Interest income 2,700 155 2,545
Other expense (56 ) (21 ) (35 )
Total other income, net 2,894 42 2,852
Income (loss) before income taxes 2,730 (79,884 ) 82,614
Income tax recovery (expense) (119 ) 1,266 (1,385 )
Net income (loss) $ 2,611 $ (78,618 ) $ 81,229
Revenue
We recognized revenue of
We also recognized
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Research and Development Expenses, Net of Tax Credits
Research and development expenses were
•
a
•
a
•
a
General and Administrative Expenses
General and administrative expenses were
•
a
•
a
•
a
•
a
Other Income (Expense), Net
Other income, net was
Income Tax Recovery (Expense)
The income tax expense of
The income tax recovery of
Liquidity and Capital Resources
Since our inception, we have not recognized any revenue from product sales and
have incurred operating losses and negative cash flows from our operations. We
have not yet commercialized any product and we do not expect to generate revenue
from sales of any products for several years, if at all. In
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In
Prior to our IPO, we had funded our operations primarily through equity
financings, having raised an aggregate of approximately
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development, seek regulatory approval and pursue commercialization of any approved product candidates and we will continue to incur additional costs associated with operating as a public company. We expect that our research and development and general and administrative costs will increase in connection with our planned research and development activities.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to
deduct
As of
Because of the numerous risks and uncertainties associated with research, development, and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:
•
the initiation, timing, costs, progress and results of our product candidates,
including our ongoing Phase 1 clinical trials of
•
the progress of preclinical development and possible clinical trials of our current earlier-stage programs;
•
the scope, progress, results and costs of our research programs and preclinical development of any additional product candidates that we may pursue;
•
the development requirements of other product candidates that we may pursue;
•
our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure;
•
the timing and amount of milestone and royalty payments that we are required to make or eligible to receive under our current or future collaboration agreements, including the Roche Agreement;
•
the outcome, timing and cost of meeting regulatory requirements established by the FDA, EMA and other regulatory authorities;
•
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we or our collaborators receive marketing approval;
•
the cost of expanding, maintaining and enforcing our intellectual property portfolio, including filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
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•
the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us or any of our product candidates;
•
the effect of competing technological and market developments;
•
the cost and timing of completion of commercial-scale manufacturing activities;
•
the extent to which we partner our programs, acquire or in-license other product candidates and technologies or enter into additional strategic collaborations;
•
the revenue, if any, received from commercial sales of camonsertib,
•
the costs of operating as a public company.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. 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 collaborations, or other similar 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 and/or may reduce the value of our common shares. 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 or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Cash Flows
Comparison of the Nine Months Ended
The following table summarizes our cash flows for each of the periods presented:
Nine Months Ended
September 30,
2022 2021 Change
(in thousands)
Net cash provided by (used in) operating activities
(209,836 ) (1,278 ) (208,558 )
Net cash provided by financing activities 715 995 (280 )
Effect of exchange rate fluctuations on cash held (74 ) (60 ) (14 )
Net Decrease In Cash And Cash Equivalents $ (179,236 ) $ (65,401 ) $ (113,835 ) Operating Activities
Net cash provided by operating activities was
Net cash used in operating activities was
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The
Investing Activities
Net cash used in investing activities was
Net cash used in investing activities was
Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
Material Cash Requirements
In
In
Other than the changes described above, there were no material changes to our
material cash requirements during the nine months ended
Critical Accounting Estimates
This management's discussion and analysis is based on our unaudited condensed
consolidated financial statements, which have been prepared in accordance with
There have been no significant changes to our critical accounting estimates from those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report.
Recently Adopted Accounting Pronouncements
See Note 2 to our annual consolidated financial statements included in the Annual Report and Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.
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