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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 March 31, 2023

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 May 3, 2023, there were 68,821,277 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 similar expressions.

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

our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing;
the initiation, cost, timing, progress and results of our research and development activities, clinical trials and preclinical studies;
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
the impact of geo-political actions, including war or the perception that hostilities may be imminent (such as the ongoing war between Russia and Ukraine), adverse global economic conditions, terrorism, public health crises or natural disasters 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.

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 March 31, 2023 and December 31, 2022

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three months ended
March 31, 2023 and 2022

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

 

3

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

4

 

 

 

 

 

Item 2.

 

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

 

12

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

19

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

19

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

20

 

 

 

 

 

Item 1A.

 

Risk Factors

 

20

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

46

 

 

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)

 

 

 

March 31, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,517

 

 

$

74,356

 

Short-term investments

 

 

374,876

 

 

 

401,446

 

Short-term deposits

 

 

5,812

 

 

 

8,595

 

Collaboration receivable, net

 

 

1,393

 

 

 

3,474

 

Prepaid expenses and other current assets

 

 

1,913

 

 

 

1,915

 

Total current assets

 

 

441,511

 

 

 

489,786

 

Long-term investments

 

 

16,561

 

 

 

5,469

 

Property and equipment, net

 

 

17

 

 

 

20

 

Right-of-use asset, net

 

 

929

 

 

 

1,039

 

Restricted cash

 

 

115

 

 

 

115

 

Other assets

 

 

693

 

 

 

807

 

Total assets

 

$

459,826

 

 

$

497,236

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

8,057

 

 

$

4,350

 

Accrued expenses and other current liabilities

 

 

15,205

 

 

 

24,276

 

Current portion of right-of-use liability

 

 

454

 

 

 

434

 

Current portion of capital lease

 

 

5

 

 

 

5

 

Total current liabilities

 

 

23,721

 

 

 

29,065

 

Long-term liabilities:

 

 

 

 

 

 

Right-of-use liability, less current portion

 

 

588

 

 

 

709

 

Capital lease, less current portion

 

 

12

 

 

 

13

 

Total long-term liabilities

 

 

600

 

 

 

722

 

Total liabilities

 

 

24,321

 

 

 

29,787

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares
   outstanding at March 31, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized; 68,495,426
   and
68,111,385 shares issued and outstanding at March 31, 2023 and
   December 31, 2022, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

1,170,000

 

 

 

1,161,288

 

Accumulated other comprehensive (loss)

 

 

(336

)

 

 

(806

)

Accumulated deficit

 

 

(734,166

)

 

 

(693,040

)

Total stockholders’ equity

 

 

435,505

 

 

 

467,449

 

Total liabilities and stockholders’ equity

 

$

459,826

 

 

$

497,236

 

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 March 31,

 

 

 

2023

 

 

2022

 

 

Operating expenses:

 

 

 

 

 

 

Research and development

$

34,054

 

 

$

30,022

 

 

General and administrative

 

11,961

 

 

 

6,836

 

 

Total operating expenses

 

46,015

 

 

 

36,858

 

 

Loss from operations

 

(46,015

)

 

 

(36,858

)

 

Other income (expense), net:

 

 

 

 

 

 

Interest expense

 

(40

)

 

 

(651

)

 

Interest income

 

5,076

 

 

 

224

 

 

Other (expense) income, net

 

(147

)

 

 

116

 

 

Total other income (expense), net

 

4,889

 

 

 

(311

)

 

Net loss

$

(41,126

)

 

$

(37,169

)

 

Other comprehensive loss:

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

470

 

 

 

(685

)

 

Comprehensive loss

$

(40,656

)

 

$

(37,854

)

 

Net loss attributable to common stockholders

$

(41,126

)

 

$

(37,169

)

 

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

$

(0.59

)

 

$

(0.63

)

 

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

 

69,438,890

 

 

 

58,978,615

 

 

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)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(41,126

)

 

$

(37,169

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

3

 

 

 

11

 

Accretion of investments

 

 

(3,967

)

 

 

(53

)

Non-cash operating lease expense

 

 

110

 

 

 

110

 

Non-cash interest expense

 

 

 

 

 

152

 

Changes in fair value of derivative liability

 

 

 

 

 

(187

)

Stock-based compensation

 

 

6,238

 

 

 

3,478

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

2,899

 

 

 

(8,431

)

Collaboration receivable, net

 

 

2,082

 

 

 

(6,260

)

Accounts payable

 

 

3,707

 

 

 

2,562

 

Accrued expenses and other liabilities

 

 

(9,174

)

 

 

3,856

 

Net cash used in operating activities

 

 

(39,228

)

 

 

(41,931

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of short and long-term investments

 

 

(61,585

)

 

 

(42,266

)

Proceeds from sales and maturities of short-term investments

 

 

81,500

 

 

 

50,448

 

Net cash provided by investing activities

 

 

19,915

 

 

 

8,182

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from Employee Stock Purchase Plan

 

 

196

 

 

 

92

 

Proceeds from stock option exercises

 

 

2,278

 

 

 

465

 

Net cash provided by financing activities

 

 

2,474

 

 

 

557

 

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(16,839

)

 

 

(33,192

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—beginning of period

 

 

74,471

 

 

 

222,080

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —end of period

 

$

57,632

 

 

$

188,888

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

470

 

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 March 31, 2023, and the results of operations and comprehensive loss for the three months ended March 31, 2023 and 2022, and cash flows for the three months ended March 31, 2023 and 2022. The results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, 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, 2022, 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 February 28, 2023.

Certain prior amounts reported in the accompanying condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Specifically, the change in collaboration receivable presented within the condensed statement of cash flows for the three month period ended March 31, 2022, of $6.3 million was originally reported within the caption prepaid expense and current assets and has been separately presented in the comparative presentation. Such reclassifications did not affect loss from operations, total assets, cash used in operations or net loss.

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. To date, there have been no material activities for these entities. 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, 2022, and the notes thereto are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on February 28, 2023. 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 condensed consolidated financial statements.

Significant Risks and Uncertainties

We are subject to 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

4


 

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.

Recently Issued and Adopted 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, or the Incyte License, with Incyte covering the worldwide development and commercialization of axatilimab. Also in September 2021, the Company entered into a share purchase agreement with Incyte, or the Incyte Share Purchase Agreement. These agreements are collectively referred to as the Incyte Agreements. Under the terms of the Incyte Agreements, Incyte received exclusive commercialization rights outside of the United States, subject to certain 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 axatilimab with Incyte, subject to the Company’s exercise of its co-promotion option. Incyte will be responsible for leading all aspects of the commercialization of axatilimab in the United States. The Company and Incyte will share equally the profits and losses from 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. Each company will be responsible for funding any of its own independent development activities. Incyte is responsible for 100% of future development costs for trials that are specific to ex-U.S. countries. All development costs related to the collaboration will be subject to a joint development plan.

Under the terms of the Incyte Agreements, in December 2021, Incyte paid the Company a non-refundable cash payment of $117 million and the Company issued 1,421,523 shares of common stock with an aggregate purchase price of $35 million, or $24.62 per share. Additionally, under the terms of the Incyte Agreements, 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.

5


 

As of March 31, 2023, the Company has recorded $3.5 million as a collaboration receivable due from Incyte related to the Company's development and pre-commercialization costs under the Agreement and has recorded approximately $2.1 million as a collaboration payable due to Incyte for development and pre-commercialization costs incurred by Incyte as of March 31, 2023. Both expense and cost offset are recorded as part of research and development expense and general and administrative 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 March 31,

 

 

2023

 

 

2022

 

 

(In thousands, except share and per
share data)

 

Numerator—basic and diluted:

 

 

 

 

 

Net loss

$

(41,126

)

 

$

(37,169

)

Net loss attributable to common
   stockholders—basic and diluted

$

(41,126

)

 

$

(37,169

)

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

$

(0.59

)

 

$

(0.63

)

Denominator—basic and diluted:

 

 

 

 

 

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

 

69,438,890

 

 

 

58,978,615

 

 

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):

 

 

March 31,

 

 

 

2023

 

 

2022

 

Options to purchase common stock

 

 

9,536,312

 

 

 

8,419,541

 

Employee Stock Purchase Plan

 

 

15,331

 

 

 

10,805

 

Non-vested restricted stock units (RSUs)

 

 

392,288

 

 

 

256,583

 

For additional information related to the Company's common stock see Note 10.

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 Menin–KMT2A binding interaction (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 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 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. Since the inception of the Allergan License Agreement, the Company

6


 

achieved certain development and regulatory milestones, resulting in $8.0 million in expense, which includes $2.0 million paid in the first quarter of 2023.

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, sublicensable, exclusive license to UCB6352, which the Company refers to as axatilimab, an 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 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, in the second quarter of 2022 the Company paid UCB $5.8 million, which is recognized as a milestone expense.

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

In March 2007, the Company entered into a license 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.

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.

7


 

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)

 

March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,517

 

 

$

57,517

 

 

$

 

 

$

 

Short-term investments

 

 

374,876

 

 

 

 

 

 

374,876

 

 

 

 

Long-term investments

 

 

16,561

 

 

 

 

 

 

16,561

 

 

 

 

Total assets

 

$

448,954

 

 

$

57,517

 

 

$

391,437

 

 

$

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,356

 

 

$

59,496

 

 

$

14,860

 

 

$

 

Short-term investments

 

 

401,446

 

 

 

 

 

 

401,446

 

 

 

 

Long-term investments

 

 

5,469

 

 

 

 

 

 

5,469

 

 

 

 

Total assets

 

$

481,271

 

 

$

59,496

 

 

$

421,775

 

 

$

 

 

There have been no material impairments of our assets measured and carried at fair value during the period ended March 31, 2023 and 2022. In addition, there have been no changes in valuation techniques during the periods ended March 31, 2023 and 2022. 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 and long–term investments are determined based on quoted prices in active markets, which are either directly or indirectly observable as of the reporting date with fair value being determined using models or other valuation methodologies.

The Company's short and long-term investments are classified as available-for-sale securities. As of March 31, 2023, the remaining contractual maturities of the available-for-sale securities were 1 to 15 months, and the balance in the Company’s accumulated other comprehensive loss 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 months ended March 31, 2023 and 2022. As a result, the Company did not reclassify any amounts out of accumulated other comprehensive loss for the same periods. The Company has a limited number of available-for-sale securities that are not in significant loss positions as of March 31, 2023, which the Company does not intend to sell, and it 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)

 

March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

301,633

 

 

$

 

 

$

(162

)

 

$

301,471

 

US Treasury

 

 

39,626

 

 

 

 

 

 

(210

)

 

 

39,416

 

Federal bonds

 

 

50,514

 

 

 

36

 

 

 

 

 

 

50,550

 

 

 

$

391,773

 

 

$

36

 

 

$

(372

)

 

$

391,437

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

321,630

 

 

$

 

 

$

(205

)

 

$

321,425

 

US Treasury

 

 

64,759

 

 

 

 

 

 

(566

)

 

 

64,193

 

Federal bonds

 

 

36,192

 

 

 

 

 

 

(35

)

 

 

36,157

 

 

 

$

422,581

 

 

$

 

 

$

(806

)

 

$

421,775

 

 

8


 

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

March 31, 2023

 

 

December 31, 2022

 

Prepaid insurance

 

$

405

 

 

$

692

 

Interest receivable on investments

 

 

679

 

 

 

583

 

Prepaid subscription

 

 

659

 

 

 

446

 

Other

 

 

170

 

 

 

194

 

Total prepaid expenses and other current assets

 

$

1,913

 

 

$

1,915

 

 

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

March 31, 2023

 

 

December 31, 2022

 

Accrued clinical study and trial costs

 

$

10,627

 

 

$

14,375

 

Accrued compensation and related costs

 

 

3,052

 

 

 

5,945

 

Accrued professional fees

 

 

823

 

 

 

1,352

 

Accrued milestone costs

 

 

 

 

 

2,000

 

Other

 

 

703

 

 

 

604

 

Total accrued expenses and other current liabilities

 

$

15,205

 

 

$

24,276

 

 

10. Stock-Based Compensation

In January 2023, the number of shares of common stock available for issuance under the Company's 2015 Omnibus Incentive Plan (“2015 Plan”) was increased by 2,724,455 shares due to the automatic annual provision to increase shares available under the 2015 Plan. As of March 31, 2023, the total number of shares of common stock available for issuance under the 2015 Plan was 3,968,714. The Company recognized stock-based compensation expense related to the issuance of stock option awards to employees and non-employees and related to the Company's 2015 Employee Stock Purchase Plan (“ESPP”) in the condensed consolidated statements of comprehensive loss as follows:

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

Research and development

$

2,778

 

 

$

1,353

 

 

General and administrative

 

3,460

 

 

 

2,125

 

 

Total

$

6,238

 

 

$

3,478

 

 

 

Compensation expense by type of award in the three months ended March 31, 2023 and 2022 was as follows:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

Stock options

$

5,393

 

 

$

2,924

 

 

Restricted Stock Units

 

781

 

 

 

516

 

 

Employee Stock Purchase Plan

 

64

 

 

 

38

 

 

Total

$

6,238

 

 

$

3,478

 

 

 

9


 

 

During the three months ended March 31, 2023, the Company granted 1,942,741 stock options to certain executives, consultants and employees having service-based vesting conditions. The grant date fair value of the options granted in the three months ended March 31, 2023, was $37.8 million, or $19.48 per share on a weighted-average basis and will be recognized as compensation expense over the requisite service period of two to four years.

The Company granted to certain employees 140,000 performance-based stock options (“2022 Performance Awards”), in 2022, related to the achievement of certain clinical and regulatory development milestones and market-based conditions. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.

In the first quarter of 2022, management estimated one of the milestones, for the 2022 Performance Awards, was probable of achievement and, as such, the Company recorded approximately $129,000 and $83,000 of stock compensation expense for these awards for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, 140,000 stock options outstanding were unvested, and no options had been canceled.

During the three months ended March 31, 2023, 276,506 options were exercised for cash proceeds of approximately $2.3 million. During the three months ended March 31, 2022, 28,839 options were exercised for cash proceeds of $465,000.

Restricted stock units

RSUs awarded to Board of Directors or employees vest on either i) the one year anniversary date of the related grant or ii) 25% on each anniversary date of the related grant for 4 years. The following table summarizes the Company's RSU activity:

 

 

Number of
Shares

 

 

Weighted
Average
Grant Date Fair Value