10-Q
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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 June 30, 2022

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 August 5, 2022, there were 56,565,165 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 ongoing 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 pivotal Phase 2 cohorts of the AUGMENT-101 trial of revumenib in patients with relapsed/refractory, or R/R, acute leukemias;
the timing of the progress and receipt of data from the AUGMENT-102 trial of revumenib in combination with chemotherapy in patients with R/R mutant nucleophosmin, NPM1, or mixed lineage leukemia rearranged, MLLr, acute leukemias, as well as the combination trials as part of the Leukemia & Lymphoma Society’s Beat® AML Master Clinical Trial and as part of the Australian Leukemia and Lymphoma Group (ALLG) INTERCEPT Master Clinical Trial;
the timing of the progress and receipt of data from the pivotal Phase 2 trial, AGAVE-201, of axatilimab in chronic Graft Versus Host Disease, or 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.;
the success of our collaboration with Incyte Corporation, or 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
business interruptions resulting from geo-political actions, including war or the perception that hostilities may be imminent, including the Russia Ukraine war and terrorism, or natural disasters and public health epidemics.

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 June 30, 2022 and December 31, 2021

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended
June 30, 2022 and 202
1

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022
and 202
1

 

3

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

4

 

 

 

 

 

Item 2.

 

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

 

14

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

22

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

51

 

 

 

 

 

Item 3.

 

Defaults upon Senior Securities

 

51

 

 

 

 

 

Item 6.

 

Exhibits

 

52

 

 

iii


 

 

 

iv


 

Part I: FINANCIAL INFORMATION

Item 1: Financial Statements

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

120,239

 

 

$

221,965

 

Restricted cash

 

 

115

 

 

 

115

 

Short-term investments

 

 

246,552

 

 

 

217,971

 

Short-term deposits

 

 

9,887

 

 

 

6,894

 

Collaboration receivable, net

 

 

13,102

 

 

 

-

 

Prepaid expenses and other current assets

 

 

2,392

 

 

 

1,451

 

Total current assets

 

 

392,287

 

 

 

448,396

 

Long-term investments

 

 

12,125

 

 

 

-

 

Property and equipment, net

 

 

256

 

 

 

278

 

Right-of-use asset, net

 

 

774

 

 

 

983

 

Other assets

 

 

995

 

 

 

 

Total assets

 

$

406,437

 

 

$

449,657

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,438

 

 

$

5,669

 

Accrued expenses and other current liabilities

 

 

16,974

 

 

 

14,465

 

Current portion of term loan

 

 

7,212

 

 

 

 

Current portion of right-of-use liability

 

 

299

 

 

 

361

 

Current portion of capital lease

 

 

2

 

 

 

1

 

Derivative liability

 

 

 

 

 

187

 

Total current liabilities

 

 

30,925

 

 

 

20,683

 

Long-term liabilities:

 

 

 

 

 

 

Right-of-use liability, less current portion

 

 

570

 

 

 

711

 

Capital lease, less current portion

 

 

8

 

 

 

 

Term loan, less current portion

 

 

12,994

 

 

 

19,895

 

Total long-term liabilities

 

 

13,572

 

 

 

20,606

 

Total liabilities

 

 

44,497

 

 

 

41,289

 

Commitments

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares
   outstanding at June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized; 56,399,734
   and
54,983,105 shares issued and outstanding at June 30, 2022 and
   December 31, 2021, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

981,712

 

 

 

952,019

 

Accumulated other comprehensive (income) loss

 

 

(1,335

)

 

 

45

 

Accumulated deficit

 

 

(618,443

)

 

 

(543,702

)

Total stockholders’ equity

 

 

361,940

 

 

 

408,368

 

Total liabilities and stockholders’ equity

 

$

406,437

 

 

$

449,657

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

License fees

$

 

 

$

379

 

 

$

 

 

$

758

 

Total revenues

 

 

 

 

379

 

 

 

 

 

 

758

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

29,734

 

 

 

16,871

 

 

 

59,756

 

 

 

38,742

 

General and administrative

 

7,990

 

 

 

5,842

 

 

 

14,827

 

 

 

11,513

 

Total operating expenses

 

37,724

 

 

 

22,713

 

 

 

74,583

 

 

 

50,255

 

Loss from operations

 

(37,724

)

 

 

(22,334

)

 

 

(74,583

)

 

 

(49,497

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(695

)

 

 

(634

)

 

 

(1,346

)

 

 

(1,258

)

Interest income

 

878

 

 

 

108

 

 

 

1,103

 

 

 

229

 

Other (expense) income, net

 

(31

)

 

 

(50

)

 

 

85

 

 

 

(107

)

Total other income (expense)

 

152

 

 

 

(576

)

 

 

(158

)

 

 

(1,136

)

Net loss

$

(37,572

)

 

$

(22,910

)

 

$

(74,741

)

 

$

(50,633

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

$

(695

)

 

$

8

 

 

$

(1,380

)

 

$

21

 

Comprehensive loss

$

(38,267

)

 

$

(22,902

)

 

$

(76,121

)

 

$

(50,612

)

Net loss attributable to common stockholders

$

(37,572

)

 

$

(22,910

)

 

$

(74,741

)

 

$

(50,633

)

Net loss per share attributable to common stockholders—basic
   and diluted

$

(0.62

)

 

$

(0.44

)

 

$

(1.25

)

 

$

(0.98

)

Weighted-average number of common shares used to compute
   net loss per share attributable to common stockholders
   —basic and diluted

 

60,156,653

 

 

 

51,603,286

 

 

 

59,570,888

 

 

 

51,551,844

 

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)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(74,741

)

 

$

(50,633

)

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

 

 

 

 

 

 

Depreciation

 

 

22

 

 

 

25

 

Amortization and accretion of investments

 

 

(320

)

 

 

300

 

Non-cash operating lease expense

 

 

209

 

 

 

197

 

Non-cash interest expense

 

 

311

 

 

 

234

 

Changes in fair value of derivative liability

 

 

(187

)

 

 

 

Stock-based compensation

 

 

7,416

 

 

 

6,007

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(4,930

)

 

 

(2,357

)

Other receivables

 

 

(13,102

)

 

 

 

Accounts payable

 

 

769

 

 

 

116

 

Deferred revenue

 

 

 

 

 

(758

)

Accrued expenses and other liabilities

 

 

2,316

 

 

 

235

 

Net cash used in operating activities

 

 

(82,237

)

 

 

(46,634

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(164,632

)

 

 

(126,548

)

Proceeds from sales and maturities of short-term investments

 

 

122,866

 

 

 

119,000

 

Net cash used in investing activities

 

 

(41,766

)

 

 

(7,548

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

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

 

 

19,427

 

 

 

5,131

 

Proceeds from Employee Stock Purchase Plan

 

 

150

 

 

 

143

 

Proceeds from stock option exercises

 

 

2,700

 

 

 

1,706

 

Net cash provided by financing activities

 

 

22,277

 

 

 

6,980

 

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(101,726

)

 

 

(47,202

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—beginning of period

 

 

222,080

 

 

 

115,358

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —end of period

 

$

120,354

 

 

$

68,156

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

960

 

 

$

996

 

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

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 June 30, 2022, and the results of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, 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, 2021, 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 1, 2022.

In 2011, the Company established a wholly owned subsidiary in the United Kingdom, in 2014 the Company established a wholly owned U.S. subsidiary, and in 2021, the Company established a wholly owned subsidiary in the Netherlands. There have been no material activities for these entities to date. 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, 2021, and the notes thereto are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 1, 2022. Since the date of filing, there have been no material changes to the Company’s significant accounting policies except as noted below.

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.

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.

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 U.S., Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare

4


 

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.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other accounting standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed below, we do not believe that the adoption of recently issued standards have or may have a material impact on our consolidated statements or disclosures.

 

4. Collaborative Research and License Agreements

Incyte Collaboration

In September 2021, the Company entered into the Incyte License and Collaboration Agreement with Incyte covering the worldwide development and commercialization of SNDX-6352 (axatilimab) (the “Incyte License”) and the Company entered into a share purchase agreement with Incyte (the “Incyte Share Purchase Agreement”) and collective with the Incyte License, the “Incyte Agreements”). These agreements are collectively referred to as the Incyte Agreements. Under the terms of the Incyte Agreements, Incyte will receive exclusive commercialization rights outside of the United States, subject to tiered royalty payment obligations. In the United States, Incyte and the Company will co-commercialize axatilimab, with the Company having the right to co-promote axatilimab, subject to the Company’s exercise of its co-promotion option. Incyte will be responsible for leading all aspects of commercialization of axatilimab in the United States. The Company and Incyte have agreed to co-develop axatilimab and to share development costs associated with the 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 of its own independent development of activities. All development costs related to the collaboration will be subject to a joint development plan.

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. In addition, the Company is eligible to receive tiered royalties on potential net sales of the licensed product comprising axatilimab ranging from the low to mid double-digit percentages.

In December 2021, the Company received the upfront cash payment of $117 million and the Company issued 1,421,523 shares of common stock for an aggregate purchase price of $35 million, or $24.62 per share. Additionally, Incyte and the Company entered into a letter agreement which permitted Incyte to terminate the Incyte Agreement under circumstances under which the upfront payment of $117 million would be returned to Incyte and a cash settlement on the sale of the Company's common stock would be made to make the parties whole (the "Letter Agreement"). In connection with the closing of this transaction in December 2021, the Company determined that the cash settlement feature of the Letter Agreement represented an embedded derivative requiring bifurcation and separate accounting recognition at fair value. Accordingly, the Company recorded the common stock issued to Incyte at fair value of $24.8 million, $0.6 million as a derivative liability and $126.6 million as license revenue as of December 31, 2021. The Letter Agreement terminated in March 2022.

5


 

As of June 30, 2022, the Company has recorded $13.5 million as a collaboration receivable due from Incyte related to development costs under the Agreement. Additionally, the Company has recorded approximately $0.4 million as a collaboration payable, due to Incyte for development costs incurred by Incyte. Both expense and cost offset are recorded as part of research and development expense.

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 June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(In thousands, except share and per
share data)

 

 

(In thousands, except share and per
share data)

 

Numerator—basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(37,572

)

 

$

(22,910

)

 

$

(74,741

)

 

$

(50,633

)

Net loss attributable to common
   stockholders—basic and diluted

$

(37,572

)

 

$

(22,910

)

 

$

(74,741

)

 

$

(50,633

)

Net loss per share attributable to common
   stockholders—basic and diluted

$

(0.62

)

 

$

(0.44

)

 

$

(1.25

)

 

$

(0.98

)

Denominator—basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares
   used to compute net loss per share attributable
   to common stockholders—basic and diluted

 

60,156,653

 

 

 

51,603,286

 

 

 

59,570,888

 

 

 

51,551,844

 

 

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):

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Options to purchase common stock

 

 

8,046,741

 

 

 

7,406,760

 

Employee Stock Purchase Plan

 

 

10,805

 

 

 

8,214

 

Non-vested restricted stock units (RSUs)

 

 

259,788

 

 

 

124,083

 

In January 2020, the Company sold 3,036,719 shares of common stock at $8.00 per share and pre-funded warrants to purchase 1,338,287 shares of common stock. In February 2021, 250,000 pre-funded warrants were exchanged for shares of common stock in a cash exercise and in November 2021, 475,784 pre-funded warrants were exchanged for shares of common stock in a cashless exercise. As of June 30, 2022, 3,975,024 pre-funded warrants were considered issued and outstanding.

6. Significant Agreements

Vitae Pharmaceuticals, Inc.

In October 2017, the Company entered into a license agreement (the “Allergan License Agreement”) with Vitae Pharmaceuticals, Inc., a subsidiary of Allergan (“Allergan”), under which Allergan granted the Company an exclusive, sublicensable, worldwide license to a portfolio of preclinical, orally available, small molecule inhibitors of the interaction of menin with Mixed Lineage Leukemia (“MLL”) protein (the “Menin Assets”). Subject to the achievement of certain milestone events, the Company may be required to pay Allergan up to $99.0 million in one-time development and regulatory milestone payments over the term of the Allergan 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 Allergan 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. The Company is solely responsible for the development and commercialization of the Menin Assets. Each party may terminate the Allergan License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the Allergan License Agreement at will at any time upon advance written notice to Allergan. Allergan may terminate the Allergan 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 Allergan License Agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the

6


 

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 Allergan 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 and recorded $4.0 million as research and development expense. In February 2022, the Company achieved certain development and regulatory milestones and recorded $2.0 million as research and development expense.

UCB Biopharma Sprl

In 2016, the Company entered into a license agreement (the “UCB License Agreement”), as amended from time to time, 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. 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. Since the start of the license agreement, the Company achieved certain development and regulatory milestones and has recorded $6.0 million as research and development expense. Additionally, in connection with its most recent amendment of the UCB License Agreement, the Company paid UCB $5.8 million, which it recognized as a milestone expense in the six months ended June 30, 2022.

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. 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.

7


 

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.

The table below presents information about the Company’s assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques the Company utilized to determine such fair values (in thousands):

 

 

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)

 

June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

120,240

 

 

$

68,248

 

 

$

51,992

 

 

$

 

Short-term investments

 

 

246,552

 

 

 

 

 

 

246,552

 

 

 

 

Long-term investments

 

 

12,125

 

 

 

 

 

 

12,125

 

 

 

 

Total assets

 

$

378,917

 

 

$

68,248

 

 

$

310,669

 

 

$

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

221,965

 

 

$

96,816

 

 

$

125,149

 

 

$

 

Short-term investments

 

 

217,971

 

 

 

 

 

 

217,971

 

 

 

 

Total assets

 

$

439,936

 

 

$

96,816

 

 

$

343,120

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

 

187

 

 

 

 

 

 

 

 

 

187

 

Total liabilities

 

$

187

 

 

$

 

 

$

 

 

$

187

 

 

There have been no material impairments of our assets measured and carried at fair value during the period ended June 30, 2022 and 2021. In addition, there have been no changes in valuation techniques during the period ended June 30, 2022 and 2021. The fair value of Level 1 instruments classified as cash equivalents are valued using quoted market prices in active markets. The fair value of Level 2 instruments classified as cash equivalents and short – term investments was determined other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and fair value is determined using models or other valuation methodologies. The fair value of the Level 3 instrument is determined using unobservable inputs and the Company utilized a Black Scholes valuation model as of December 9, 2021 (initial recognition) and December 31, 2021, respectively.

 

The following table summarizes the fair value rollforward (in thousands):

 

 

Fair Value

 

Derivative Liability:

 

 

 

Beginning Balance 12/31/21

 

$

187

 

Change in fair value

 

 

(187

)

Ending Balance 6/30/22

 

$

 

The change in fair value of the Level 3 instrument was directly related to the expiration of the Letter Agreement in March 2022. At the time of the expiration of the Letter Agreement, Incyte no longer had the ability to terminate the contract, as such the probability of payment to Incyte was assessed to be zero. Accordingly, the Company released the remaining $187,000 liability related to the Letter Agreement as of March 31, 2022.

The short-term and long-term investments are classified as available-for-sale securities. As of June 30, 2022, the remaining contractual maturities of the available-for-sale securities were 1 to 13 months, 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 six months ended June 30, 2022 and 2021. 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 June 30, 2022, 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

8


 

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

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

 

 

(In thousands)

 

June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

201,084

 

 

$

 

 

$

(697

)

 

$

200,387

 

Corporate bonds