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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                     

Commission File Number: 001-37708

 

Syndax Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Delaware

32-0162505

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification No.)

 

 

35 Gatehouse Drive, Building D, Floor 3

Waltham, Massachusetts

02451

(Address of Principal Executive Offices)

(Zip Code)

(781) 419-1400

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

SNDX

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of November 11, 2021, there were 49,392,123 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.

 

 

 

 

 


 

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which are subject to the “safe harbor” created by those sections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “would,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend,” “project” or “continue,” or the negative or plural of these terms or other comparable terminology.

Forward-looking statements include, but are not limited to, statements about:

 

the impact of the COVID-19 pandemic and its effects on our operations, research and development and clinical trials and potential disruption in the operations and business of third-party manufacturers, contract research organizations, or CROs, other service providers, and collaborators with whom we conduct business;

 

our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing;

 

the timing of the progress and receipt of data from the Phase 1/2 clinical trial of SNDX-5613 in patients with relapsed/refractory (R/R) acute leukemia and the potential use of SNDX-5613 to treat acute leukemias;

 

the timing of the progress and receipt of data from the expansion cohort from the Phase 1/2 clinical trial of axatilimab in chronic Graft Versus Host Disease (cGVHD);

 

the timing of the progress and receipt of data from the pivotal Phase 2 trial, AGAVE-201, of axatilimab in cGVHD;

 

our ability to replicate results in future clinical trials;

 

our expectations regarding the potential safety, efficacy or clinical utility of our product candidates as well as the potential use of our product candidates to treat various cancer indications and fibrotic diseases;

 

our ability to obtain and maintain regulatory approval for our product candidates and the timing or likelihood of regulatory filings and approvals for such candidates;

 

our ability to maintain our licenses with Bayer Pharma AG, Eddingpharm Investment Company Limited, UCB Biopharma Sprl, and Vitae Pharmaceuticals, Inc., a subsidiary of Allergan plc, which was acquired by AbbVie Inc.;

 

our ability to close and the success of our collaboration with Incyte Corporation (“Incyte”) to further develop and commercialize axatilimab;

 

the potential milestone and royalty payments under certain of our license agreements;

 

the implementation of our strategic plans for our business and development of our product candidates;

 

the scope of protection we establish and maintain for intellectual property rights covering our product candidates and our technology;

 

the market adoption of our product candidates by physicians and patients;

 

developments relating to our competitors and our industry; and

 

political, social and economic instability, natural disasters or public health crisis, including but not limited to the COVID-19 pandemic, in countries where we or our collaborators do business.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this report in greater detail in the section titled “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

 

ii


 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Unaudited Financial Statements:

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended
September 30, 2021 and 2020

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021
and 2020

 

3

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

4

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

25

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

25

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

56

 

 

 

iii


 

 

Part I:

FINANCIAL INFORMATION

Item 1:

Financial Statements

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

71,433

 

 

$

115,243

 

Restricted cash

 

 

115

 

 

 

115

 

Short-term investments

 

 

158,281

 

 

 

177,822

 

Prepaid expenses and other current assets

 

 

8,423

 

 

 

5,684

 

Total current assets

 

 

238,252

 

 

 

298,864

 

Property and equipment, net

 

 

158

 

 

 

192

 

Right-of-use asset, net

 

 

1,093

 

 

 

290

 

Other assets

 

 

 

 

 

1,267

 

Total assets

 

$

239,503

 

 

$

300,613

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,122

 

 

$

3,508

 

Accrued expenses and other current liabilities

 

 

13,732

 

 

 

11,246

 

Current portion of deferred revenue

 

 

 

 

 

1,517

 

Current portion of right-of-use liability

 

 

369

 

 

 

316

 

Current portion of term loan

 

 

9,489

 

 

 

2,285

 

Total current liabilities

 

 

28,712

 

 

 

18,872

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Deferred revenue, less current portion

 

 

 

 

 

11,617

 

Right-of-use liability, less current portion

 

 

798

 

 

 

101

 

Term loan, less current portion

 

 

10,989

 

 

 

17,834

 

Other long-term liabilities

 

 

 

 

 

1

 

Total long-term liabilities

 

 

11,787

 

 

 

29,553

 

Total liabilities

 

 

40,499

 

 

 

48,425

 

Commitments

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares

   outstanding at September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized; 48,850,539

   and 47,881,223 shares issued and outstanding at September 30, 2021 and

   December 31, 2020, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

838,888

 

 

 

820,815

 

Accumulated other comprehensive income (loss)

 

 

11

 

 

 

(4

)

Accumulated deficit

 

 

(639,900

)

 

 

(568,628

)

Total stockholders’ equity

 

 

199,004

 

 

 

252,188

 

Total liabilities and stockholders’ equity

 

$

239,503

 

 

$

300,613

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share and per share data)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License fees

$

12,375

 

 

$

379

 

 

$

13,133

 

 

$

1,138

 

Total revenues

 

12,375

 

 

 

379

 

 

 

13,133

 

 

 

1,138

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

25,606

 

 

 

14,408

 

 

 

64,348

 

 

 

34,913

 

General and administrative

 

6,801

 

 

 

5,824

 

 

 

18,314

 

 

 

17,787

 

Total operating expenses

 

32,407

 

 

 

20,232

 

 

 

82,662

 

 

 

52,700

 

Loss from operations

 

(20,032

)

 

 

(19,853

)

 

 

(69,529

)

 

 

(51,562

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(649

)

 

 

(635

)

 

 

(1,906

)

 

 

(1,722

)

Interest income

 

83

 

 

 

177

 

 

 

312

 

 

 

735

 

Other expense, net

 

(41

)

 

 

(126

)

 

 

(149

)

 

 

(186

)

Total other (expense) income

 

(607

)

 

 

(584

)

 

 

(1,743

)

 

 

(1,173

)

Net loss

$

(20,639

)

 

$

(20,437

)

 

$

(71,272

)

 

$

(52,735

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

$

(6

)

 

$

(64

)

 

$

15

 

 

$

53

 

Comprehensive loss

$

(20,645

)

 

$

(20,501

)

 

$

(71,257

)

 

$

(52,682

)

Net loss attributable to common stockholders

$

(20,639

)

 

$

(20,437

)

 

$

(71,272

)

 

$

(56,641

)

Net loss per share attributable to common stockholders—basic

   and diluted

$

(0.40

)

 

$

(0.46

)

 

$

(1.38

)

 

$

(1.43

)

Weighted-average number of common shares used to compute

   net loss per share attributable to common stockholders

   —basic and diluted

 

51,962,320

 

 

 

44,156,808

 

 

 

51,690,173

 

 

 

39,714,490

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


 

 

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(71,272

)

 

$

(52,735

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

33

 

 

 

68

 

Amortization and accretion of investments

 

 

473

 

 

 

(195

)

Non-cash operating lease expense

 

 

302

 

 

 

321

 

Non-cash interest expense

 

 

358

 

 

 

276

 

Stock-based compensation

 

 

9,388

 

 

 

7,022

 

Other

 

 

(1

)

 

 

2

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(1,471

)

 

 

(5,789

)

Accounts payable

 

 

1,614

 

 

 

(2,342

)

Deferred revenue

 

 

(13,133

)

 

 

(1,138

)

Accrued expenses and other liabilities

 

 

2,131

 

 

 

(1,119

)

Net cash used in operating activities

 

 

(71,578

)

 

 

(55,629

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(189,492

)

 

 

(150,350

)

Proceeds from sales and maturities of short-term investments

 

 

208,575

 

 

 

71,960

 

Net cash provided by (used) in investing activities

 

 

19,083

 

 

 

(78,390

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in at-the-market stock offering, net

 

 

5,131

 

 

 

 

Proceeds from direct stock offering, net

 

 

 

 

 

142,734

 

Proceeds from debt agreement, net

 

 

 

 

 

19,730

 

Proceeds from Employee Stock Purchase Plan

 

 

242

 

 

 

242

 

Proceeds from stock option exercises

 

 

3,312

 

 

 

3,060

 

Net cash provided by financing activities

 

 

8,685

 

 

 

165,766

 

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED

   CASH

 

 

(43,810

)

 

 

31,747

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—beginning of period

 

 

115,358

 

 

 

24,724

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —end of period

 

$

71,548

 

 

$

56,471

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,499

 

 

$

1,133

 

 

3


 

 

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business

Syndax Pharmaceuticals, Inc. (“we,” “us,” “our” or the “Company”) is a clinical stage biopharmaceutical company developing an innovative pipeline of cancer therapies. We were incorporated in Delaware in 2005. We base our operations in Waltham, Massachusetts and we operate in one segment.

2. Basis of Presentation

The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The interim unaudited condensed financial statements have been prepared on the same basis as the annual audited financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2021, and the results of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 12, 2021.

In 2011, the Company established a wholly owned subsidiary in the United Kingdom. There have been no activities for this entity to date. In 2014, the Company established a wholly owned U.S. subsidiary, Syndax Securities Corporation. In 2021, the Company established a wholly owned subsidiary in the Netherlands.  There have been no activities for this entity to date. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

3. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies, which are disclosed in the audited consolidated financial statements for the year ended December 31, 2020 and the notes thereto are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 12, 2021. Since the date of that filing, there have been no material changes to the Company’s significant accounting policies except as noted below.

Significant Risks and Uncertainties

We have implemented business continuity plans designed to address and mitigate the impact of the ongoing COVID-19 pandemic on our business.  We anticipate that the COVID-19 pandemic could have an impact on the clinical development timelines for one or more of our clinical programs.  The extent to which the COVID-19 pandemic impacts our business, our clinical development, manufacturing of clinical and commercial drug substance and drug product, and regulatory efforts, our corporate development objectives and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Europe and other countries, the slow rollout of mass vaccinations for COVID-19 and any limitations to the efficacy of such vaccines and the effectiveness of other actions taken globally to contain and treat the disease.  The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of our late-stage product candidate; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements.  In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.

4


 

 

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of costs and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions.

We anticipate that the COVID-19 pandemic will have an impact on the clinical and pre-clinical development timelines for our clinical and pre-clinical programs. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.

4. Revenue from Contracts with Customers

Incyte Collaboration

In September 2021, the Company entered into a collaboration and license agreement (the “Incyte Agreement”) with Incyte Corporation (“Incyte”) covering the worldwide development and commercialization of SNDX-6352 (axatilimab). Under the terms of the Incyte Agreement, Incyte will receive exclusive commercialization rights outside of the United States, subject to its royalty payment obligations set forth below. In the United States, Incyte and the Company will co-commercialize axatilimab, with the Company having the right to co-promote the product with Incyte, subject to the Company’s exercise of its co-promotion option.  Incyte will be responsible for leading all other aspects of commercialization, including booking all revenue from sales of axatilimab in the United States. The Company and Incyte will share equally the profits and losses from the co-commercialization efforts in the United States. The Company and Incyte have agreed to co-develop axatilimab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55% of such costs and the Company responsible for 45% of such costs. Incyte is responsible for 100% of future development costs for trials that are specific to ex-U.S. countries. Each company will be responsible for funding any independent development activities. All development costs related to the collaboration will be subject to a joint development plan. Incyte has agreed to pay the Company a non-refundable cash payment of $117 million under the Incyte Agreement, in addition to a $35 million equity investment in connection with a stock purchased agreement entered into simultaneously with the Incyte Agreement. The Company is eligible to receive up to $220 million in future contingent development and regulatory milestones and up to $230 million in commercialization milestones as well as tiered royalties ranging in the mid-teens percentage on net sales of the licensed product comprising axatilimab in Europe and Japan and low double digit percentage in the rest of the world outside of the United States. The Company’s right to receive royalties in any particular country will expire upon the last to occur of (a) the expiration of licensed patent rights covering the licensed product in that particular country, (b) a specified period of time after the first post-marketing authorization sale of a licensed product in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country. The effectiveness of the Incyte Agreement was conditioned on the early termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.  As of September 30, 2021, the Company has not received any cash or other consideration from Incyte and has not issued any shares under the stock repurchase agreement or transferred any licenses or other deliverables under the Incyte Agreement.

KKC Agreement

On December 19, 2014 (the “Effective Date”), the Company entered into a license agreement with Kyowa Kirin, Co., Ltd. (the KKC License Agreement), under which the Company granted KKC an exclusive license to develop and commercialize entinostat in Japan and Korea. Under the terms of the KKC License Agreement, the Company will be responsible for the manufacture and supply of the products during the development activities. In addition to the license and manufacturing obligations, the Company is obligated to provide KKC access to know-how and regulatory information the Company may develop over the life of the entinostat patent. Lastly, to the extent additional intellectual property is developed during the term of the agreement, KKC will receive the right to the intellectual property when and if available. KKC will conduct the development, regulatory approval filings, and commercialization activities of entinostat in Japan and Korea. KKC paid the Company $25.0 million upfront, which included a $7.5 million equity investment and a $17.5 million non-refundable cash payment. In addition, to the extent certain development and commercial milestones are achieved, KKC will be required to pay the Company up to $75.0 million in milestone payments over the term of the license agreement. The term of the agreement commenced on the Effective Date and, unless earlier terminated in accordance with the terms of the agreement, will continue on a country-by-country and product-by-product basis, until the later of: (i) the date all valid

5


 

claims of the last effective patent among the Company’s patents expires or is abandoned, withheld, or is otherwise invalidated in such country; and (ii) 15 years from the date of the first commercial sale of a product in the Japan or Korea.

The equity purchase and the up-front payment of the license fee were accounted for separately. The Company allocated the amount of consideration equal to the fair value of the shares on the Effective Date, which resulted in $7.7 million of proceeds allocated to the equity purchase and the remaining consideration of $17.3 million allocated to the up-front license fee.

In October 2017, the Company announced that KKC enrolled the first Japanese patient into a local pivotal study of entinostat for the treatment of hormone receptor positive, human epidermal growth factor receptor 2 negative breast cancer. In accordance with the terms of the license agreement, KKC paid the Company a $5.0 million milestone payment which the Company received in December 2017.

The Company determined that the performance obligations associated with the KKC License Agreement include (i) the combined license, rights to access and use materials and data, and rights to additional intellectual property, and (ii) the clinical supply obligation. All other goods or services promised to KKC are immaterial in the context of the agreement. Under ASC 606, the identification of the clinical supply obligation as a distinct performance obligation separate and apart from the license performance obligation resulted in a change in the performance period. The start of the performance period under ASC 606 was determined to be the contract inception date, December 19, 2014. The clinical supply was identified as a separate performance obligation under ASC 606 as (i) the Company is not providing a significant service of integration whereby the clinical supply and other promises are inputs into a combined output, (ii) the clinical supply does not significantly modify or customize the other promises nor is it significantly modified or customized by them, and (iii) the clinical supply is not highly interdependent or highly interrelated with the other promises in the agreement as KKC could choose not to purchase the clinical supply from the Company without significantly affecting the other promised goods or services. The Company further concluded that the clinical supply represented an immaterial performance obligation and therefore the entire $17.3 million allocated to the upfront payment was allocated to the combined license and will be recognized ratably over the performance period, representing contract inception though 2029. In 2017, KKC achieved a development milestone, and was required to pay the Company $5.0 million. The Company is recognizing the development milestone consideration over the performance period coinciding with the license to intellectual property. As the Company determined that its performance obligations associated with the KKC Agreement at contract inception were not distinct and represented a single performance obligation, and that the obligations for goods and services provided would be completed over the performance period of the agreement, any payments received by the Company from KKC, including the upfront payment and progress-dependent development and regulatory milestone payments, are recognized as revenue using a time-based proportional performance model over the contract term (December 2014 through 2029) of the collaboration, within license fees. To date no commercial milestone payments or royalties have been achieved.

In September 2021, KKC informed the Company that it is discontinuing its development of entinostat in Japan and Korea and terminating the KKC License Agreement.  As a result, the Company recognized all remaining deferred revenue of $12.4 million, as of September 30, 2021.    

6


 

5. Net Loss per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods. The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands, except share and per

share data)

 

 

(In thousands, except share and per

share data)

 

Numerator—basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(20,639

)

 

$

(20,437

)

 

$

(71,272

)

 

$

(52,735

)

Deemed dividend due to warrant reset

 

 

 

 

 

 

 

 

 

 

(3,906

)

Net loss attributable to common

   stockholders—basic and diluted

$

(20,639

)

 

$

(20,437

)

 

$

(71,272

)

 

$

(56,641

)

Net loss per share attributable to common

   stockholders—basic and diluted

$

(0.40

)

 

$

(0.46

)

 

$

(1.38

)

 

$

(1.43

)

Denominator—basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares

   used to compute net loss per share attributable

   to common stockholders—basic and diluted

 

51,962,320

 

 

 

44,156,808

 

 

 

51,690,173

 

 

 

39,714,490

 

 

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares):

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Options to purchase common stock

 

 

7,340,654

 

 

 

6,770,660

 

Warrants to purchase common stock

 

 

 

 

 

689,242

 

Employee Stock Purchase Plan

 

 

21,063

 

 

 

18,838

 

Non-vested restricted stock units (RSUs)

 

 

132,333

 

 

 

18,500

 

In June 2018, the Company signed an exchange agreement with an investor under which the investor exchanged 2,000,000 shares of common stock for 2,000,000 warrants. Further, as discussed in Note 12, in March 2019, the Company sold 2,095,039 shares of common stock as well as 2,500,000 pre-funded warrants and 4,595,039 Series 1 and Series 2 warrants. The pre-funded warrants are exercisable into shares of common stock for $0.0001 per share. In January 2020, the Company sold 3,036,719 shares of common stock as well as 1,338,287 pre-funded warrants. The warrants are exercisable into shares of common stock for $0.0001 per share. The shares of common stock into which the pre-funded warrants may be exercised are considered outstanding for the purposes of computing earnings per share. All Series 1 and Series 2 warrants were exercised in 2020.

During the first quarter of 2021, 250,000 pre-funded warrants were exchanged for shares of common stock in a cash exercise. As of September 30, 2021, 3,307,952 pre-funded warrants were outstanding.

6. Significant Agreements

Vitae Pharmaceuticals, Inc.

In October 2017, the Company entered into a license agreement (the “AbbVie License Agreement”) with Vitae Pharmaceuticals, Inc., which is now a subsidiary of AbbVie, Inc. (“AbbVie”), under which AbbVie granted the Company an exclusive, sublicensable, worldwide license to a portfolio of preclinical, orally available, small molecule inhibitors of the interaction of Menin with the Mixed Lineage Leukemia (“MLL”) protein (the “Menin Assets”). The Company made a nonrefundable upfront payment of $5.0 million to AbbVie in the fourth quarter of 2017. Additionally, subject to the achievement of certain milestone events, the Company may be required to pay AbbVie up to $99.0 million in one-time development and regulatory milestone payments over the term of the AbbVie License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes the Menin Assets, the Company will also be obligated to pay AbbVie low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $70.0 million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be required to share a percentage of

7


 

non-royalty income from sublicensees, subject to certain deductions, with AbbVie. The Company is solely responsible for the development and commercialization of the Menin Assets. Each party may terminate the AbbVie License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the AbbVie License Agreement at will at any time upon advance written notice to AbbVie. AbbVie may terminate the AbbVie License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the AbbVie License Agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country. As of the date of the AbbVie License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. In June 2019, the Company achieved certain development and regulatory milestones. As a result, in June 2019, the Company recorded $4.0 million as research and development expense. The amount was paid in 2020.

UCB Biopharma Sprl

In 2016, the Company entered into a license agreement (the “UCB License Agreement”) with UCB Biopharma Sprl (“UCB”), under which UCB granted to the Company a worldwide, sublicenseable, exclusive license to UCB6352, which the Company refers to as axatilimab, an investigational new drug (“IND”) ready anti-CSF-1R monoclonal antibody. The Company made a nonrefundable upfront payment of $5.0 million to UCB in 2016. Additionally, subject to the achievement of certain milestone events, the Company may be required to pay UCB up to $119.5 million in one-time development and regulatory milestone payments over the term of the UCB License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes axatilimab, the Company will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250.0 million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with UCB. The Company is solely responsible for the development and commercialization of axatilimab, except that UCB is performing a limited set of transitional chemistry, manufacturing and control tasks related to axatilimab. Each party may terminate the UCB License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the UCB License Agreement at will at any time upon advance written notice to UCB. UCB may terminate the UCB License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the UCB License Agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country.

As of the date of the UCB License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. As a result, in 2016, the upfront payment of $5.0 million was recorded as research and development expense in the consolidated statements of operations. In July 2020, the Company achieved certain development and regulatory milestones and the Company recorded $2.0 million as a research and development expense, which has been fully paid. In March and September 2021, the Company recorded $2.0 million, respectively, as research and development expenses for the achievement of certain development milestones. The Company fully paid the March 2021 milestone in the second quarter of 2021. The September 2021 milestone of $2.0 million is recorded as an accrued expense as of September 30, 2021.

Eastern Cooperative Oncology Group

In March 2014, the Company entered into the ECOG Agreement with Eastern Cooperative Oncology Group, a contracting entity for the Eastern Cooperative Oncology Group—American College of Radiology Imaging Network Cancer Research Group (“ECOG-ACRIN”), that describes the parties’ obligations with respect to the NCI-sponsored pivotal Phase 3 clinical trial of entinostat. Under the terms of the ECOG Agreement, ECOG-ACRIN will perform this clinical trial in accordance with the clinical trial protocol and a mutually agreed scope of work. The Company is providing a fixed level of financial support for the clinical trial through an upfront payment of $0.7 million and a series of payments of up to $1.0 million each that are comprised of milestone payments through the completion of enrollment and time-based payments through the completion of patient monitoring post-enrollment. In addition, the Company is obligated to supply entinostat and placebo to ECOG-ACRIN for use in the clinical trial. From the second quarter of 2016 through the fourth quarter of 2018, the Company has entered into a number of amendments to the agreement to provide for additional study activities resulting in an increase of the contractual obligation of $5.3 million. The Company has agreed to provide this additional financial support to fund the additional activities required to ensure that the E2112 clinical trial will satisfy FDA registration requirements.

In May 2020, the Company announced that the E2112 trial did not achieve the primary endpoint of demonstrating a statistically significant overall survival benefit over hormone therapy alone. As a result, the Company has decided to deprioritize the entinostat

8


 

program to focus resources on advancing the remainder of its pipeline. As of September 30, 2021, the Company’s aggregate payment obligations under this agreement are approximately $24.7 million; and its estimated remaining payment obligations are approximately $3.2 million, which are estimated to be paid over a period of approximately one year. As of September 2021, the Company has accrued $2.7 million related to the ECOG Agreement.

Data and inventions from the Phase 3 clinical trial are owned by ECOG-ACRIN. The Company has access to the data generated in the clinical trial, both directly from ECOG-ACRIN under the ECOG Agreement as well as from the NCI. Additionally, ECOG-ACRIN has granted the Company a non-exclusive royalty-free license to any inventions or discoveries that are derived from entinostat as a result of its use during the clinical trial, along with a first right to negotiate an exclusive license to any of these inventions or discoveries. Either party may terminate the ECOG Agreement in the event of an uncured material breach by the other party or if the U.S. Food and Drug Administration (“FDA”) or National Cancer Institute (“NCI”) withdraws the authorization to perform the clinical trial in the United States. The parties may jointly terminate the ECOG Agreement if the parties agree that safety-related issues support termination of the clinical trial. The Company records the appropriate clinical trial expenses in its financial statements by matching those expenses with the period in which the services and efforts are expended. The Company accounts for these expenses according to the progress of the clinical trial as measured by patient enrollment and the timing of various aspects of the clinical trial. The Company determines accrual estimates through financial models, taking into account discussion with applicable personnel and ECOG-ACRIN as to the progress or state of consummation of the clinical trial or the services completed.

Bayer Pharma AG (formerly known as Bayer Schering Pharma AG)

In March 2007, the Company entered into a license agreement (the “Bayer Agreement”) with Bayer Schering Pharma AG (“Bayer”) for a worldwide, exclusive license to develop and commercialize entinostat and any other products containing the same active ingredient. Under the terms of the Bayer Agreement, the Company paid a nonrefundable upfront license fee of $2.0 million and is responsible for the development and marketing of entinostat. The Company recorded the $2.0 million license fee as research and development expense during the year ended December 31, 2007, as it had no alternative future use. The Company will pay Bayer royalties on a sliding scale based on net sales, if any, and make future milestone payments to Bayer of up to $150.0 million in the event that certain specified development and regulatory goals and sales levels are achieved.

7. Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, accounts payable, and accrued expenses approximated their estimated fair values due to the short-term nature of these financial instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

 

 

Level 1—

Quoted prices (unadjusted) in active markets that are accessible at the market date for identical unrestricted assets or liabilities.

 

Level 2—

Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3—

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy for any of periods presented.

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:

 

9


 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

(unadjusted)

 

 

Other

 

 

Significant

 

 

 

Total

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

Carrying

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

(In thousands)

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

71,433

 

 

$

61,434

 

 

$

9,999

 

 

$

 

Short-term investments

 

 

158,281

 

 

 

 

 

 

158,281

 

 

 

 

Total assets

 

$

229,714

 

 

$

61,434

 

 

$

168,280

 

 

$

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

115,243

 

 

$

110,246

 

 

$

4,997

 

 

$

 

Short-term investments

 

 

177,822

 

 

 

 

 

 

177,822

 

 

 

 

Total assets

 

$

293,065

 

 

$

110,246

 

 

$

182,819

 

 

$

 

 

Cash and cash equivalents of $61.4 million and $110.2 million as of September 30, 2021 and December 31, 2020, respectively, consisted of overnight investments and money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Cash equivalents of $10.0 million and $5.0 million as of September 30, 2021 and December 31, 2020 respectively, consisted of highly rated corporate bonds and commercial paper and are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

Short-term investments of $158.3 million and $177.8 million as of September 30, 2021 and December 31, 2020, respectively, consisted of commercial paper, highly rated corporate bonds and U.S. Treasury and are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

The short-term investments are classified as available-for-sale securities. As of September 30, 2021, the remaining contractual maturities of the available-for-sale securities were less than one year, and the balance in the Company’s accumulated other comprehensive income was comprised solely of activity related to the Company’s available-for-sale securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities during the three and nine months ended September 30, 2021 and 2020. As a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the same periods. The Company has a limited number of available-for-sale securities in insignificant loss positions as of September 30, 2021, which the Company does not intend to sell and has concluded it will not be required to sell before recovery of the amortized cost for the investment at maturity.

The following table summarizes the available-for-sale securities:

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

 

 

(In thousands)

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

126,895

 

 

$

13

 

 

$

 

 

$

126,908

 

Corporate bonds

 

 

27,080

 

 

 

 

 

 

(3

)

 

 

27,077

 

Federal bonds

 

 

14,294

 

 

 

1

 

 

 

 

 

 

14,295

 

 

 

$

168,269

 

 

$

14

 

 

$

(3

)

 

$

168,280

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

154,176

 

 

$

13

 

 

$

(16

)

 

$

154,173

 

Corporate bonds

 

 

22,617

 

 

 

2

 

 

 

(3

)

 

 

22,616

 

U.S. Treasury

 

 

6,030

 

 

 

 

 

 

 

 

 

6,030

 

 

 

$

182,823

 

 

$

15

 

 

$

(19

)

 

$

182,819

 

10


 

 

 

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

(In thousands)

 

Short-term deposits

 

$

6,499

 

 

$

4,683

 

Prepaid insurance

 

 

1,259

 

 

 

427

 

Interest receivable on investments

 

 

182

 

 

 

175

 

Prepaid subscriptions

 

 

242

 

 

 

203

 

Prepaid clinical supplies

 

 

 

 

 

58

 

Reimbursable costs