☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94-3103561 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
7601 Dumbarton Circle Fremont , CA | 94555 | |
(Address of principal executive offices) | (Zip Code) | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Common stock, $0.0001 par value per share | CBAY | Nasdaq Global Select Market |
| Large accelerated filer | Accelerated filer | ☐ | ||||
Non-accelerated filer | ||||||
| Smaller reporting company | ☒ | |||||
| Emerging Growth Company | ☐ | |||||
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ANNUAL REPORT ON FORM
For the Year Ended December 31, 2021
TABLE OF CONTENTS
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CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form10-Kcontains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “projected,” “potential,” “seek,” “target,” “goal,” “intend,” and similar expressions intended to identify forward-looking statements. These statements reflect the current views of CymaBay Therapeutics, Inc. (“CymaBay”, the “Company”, “we” or “us”) with respect to future events and are based on assumptions and subject to risks and uncertainties, involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, without limitation, statements regarding our proposed transaction with Gilead Sciences, Inc. (“Gilead”) and Pacific Merger Sub, Inc., a wholly owned subsidiary of Gilead (“Purchaser”), consisting of a tender offer and subsequent merger of Purchaser with and into the Company, and other related matters. We discuss many of these risks, uncertainties and other factors in this Annual Report on Form
In addition, statements that “we believe” or “we expect” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and readers are cautioned not to unduly rely on these statements.
RISK FACTOR SUMMARY
We are subject to a number of risks that if realized could materially harm our business, prospects, operating results, financial condition, and financial condition.proposed transaction with Gilead. Some of the more significant risks and uncertainties we face include those summarized below. The summary below is not exhaustive and is qualified by reference to the full set of risk factors set forth in Item 1A of this Form
Risks Related to the Proposed Transaction with Gilead
There are uncertainties as to the timing of the tender offer and subsequent merger, including the risk that the tender offer or subsequent merger may not be completed in a timely manner or at all.
Our ability to complete the merger is subject to certain closing conditions that could adversely affect us or cause the merger to be abandoned.
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The occurrence of certain events, changes or other circumstances could give rise to the termination of the merger agreement, including in circumstances which would require us to pay a termination fee or other expenses.
The announcement or pendency of the proposed transaction may result in disruptions to our business, may be adversely affecteddivert management’s attention and/or disrupt our relationships with third parties and employees, any of which could negatively impact our operating results and ongoing business.
Stockholder litigation in connection with the transactions contemplated by the effectsMerger Agreement may result in significant costs of the
Risks Related to Our Financial Condition and Capital Requirements
We have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. We may need to raise additional equity and/or debt capital to fund our continued operations, including clinical trials, commercialization activities and other product development. In the event we do not successfully raise sufficient funds to finance our product development activities,operations, we will curtail our product development activities commensurate with the magnitude of the shortfall or our product development activitiesoperations may cease altogether.
Failure to remain in compliance with our obligations under the development financing agreementDevelopment Financing Agreement with Abingworth could lead to reduced funding under the agreement and/or the acceleration of potentially significant payments to Abingworth.
Our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain regulatory approval for, and commercialize product candidates, including most importantly, seladelpar.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Risks Related to Clinical Development and Regulatory Approval
Drug development and obtaining and maintaining regulatory approval for drug products is costly, time-consuming, and highly uncertain.
Serious complications or side effects in connection with the use or development of our product candidates could lead to delay or discontinuation of development of our product candidates.
Risks Related to Our Reliance on Third Parties
Our manufacturing partners and other service providers, including CROs managing our clinical trials,contract research organizations and contract manufacturers, may fail to perform adequately in their efforts to support the development, manufacture, and commercialization of our drug candidates and future products.
Risks Related to Commercialization of Our Product Candidates
We have never successfully commercialized a product. If any of our product candidates receive marketing approval, they may nonetheless be unable to gain sufficient market acceptance by physicians, patients, health care payors and others in the medical community.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates,products, we may be unable to generate any revenue.
The commercial success of our products is subject to significant competition from products or product candidates that may be superior to, or more cost effective than, or have been available in the market longer than, our products or product candidates.products.
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Risks Related to Our Intellectual Property
We may not be able to protect the confidentiality of our trade secrets, and our patents or other means of defending our intellectual property may be insufficient to protect our proprietary rights.
Patents or proprietary rights of others may restrict our development, manufacturing, and/or commercialization efforts and subject us to litigation and other proceedings that could find us liable for damages.
Other Risks Factors – Risks Related to Employees, Information Technology, and Owning Our Common Stock
Our business is dependent on our key personnel and will be harmed if we cannot recruit and retain leaders in our development, administrative, and commercial organizations.
Significant disruptions of information technology systems or breaches of data security could adversely affect our business.
Changes in and failures to comply with United States and foreign privacy and data protection laws, regulations and standards may adversely affect our business, operations and consolidated financial performance.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
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PART I
Item 1. Business
Overview
We are a clinical-stage biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need.
Our lead product candidate, seladelpar, is a potent and selective agonist of peroxisome proliferator activated receptor delta (PPAR
We reported net losses of approximately $90.0$105.4 million, $106.0 million, and $51.0$90.0 million for the years ended December 31, 20212023, 2022, and 2020,2021, respectively. As of December 31, 2021,2023, we had cash, cash equivalents and marketable securities totaling $194.6 million, which$416.2 million.
Pending Acquisition by Gilead
On February 11, 2024, we believe is sufficient,entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gilead and Purchaser. The Merger Agreement provides for the acquisition of the Company by Gilead in a two-step all cash transaction, consisting of a tender offer (the “Offer”), followed by a subsequent merger of Purchaser with and into the Company (the “Merger” and, together with committed capital,the Offer and the other transactions contemplated by the Merger Agreement, the “Transactions”), with the Company continuing as the surviving corporation.
On February 23, 2024, Purchaser commenced the Offer for all of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share (“Shares”), other than any Shares owned by the Company (including those held in the Company’s treasury), Gilead or Purchaser (“Excluded Shares”), at a purchase price of $32.50 per Share (the “Offer Price”), net to fund our current operating plan through 2023.the seller in cash, without interest and subject to any required withholding of taxes. The Offer will initially remain open until March 21, 2024 (unless otherwise agreed to in writing by Gilead and us), which period may be extended for additional periods of up to 10 business days per extension (or such other duration as may be agreed to in writing by the Company and Gilead) to permit the conditions to the Offer to be satisfied.
The obligation of Purchaser to accept for payment Shares validly tendered pursuant to the Offer is subject to customary closing conditions, including: (i) Shares having been validly tendered and not validly withdrawn that, considered together with all other Shares (if any) beneficially owned by Gilead and its affiliates, represent one more Share than 50% of the total number of Shares outstanding at the time of the expiration of the Offer (including, for the avoidance of doubt, all Shares that become outstanding as a result of the “cashless exercise” of the outstanding pre-funded warrants of the Company, as described below); (ii) the accuracy of the Company’s representations and warranties contained in the Merger Agreement (subject to any applicable Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers); (iii) the absence of a willful and material breach by the Company of the “no-shop” restrictions described in the Merger Agreement and the Company’s performance of its other obligations, covenants and agreements under the Merger Agreement in all material respects; (iv) the absence, since the date of the Merger Agreement, of any Material Adverse Effect; (v) the expiration or early termination of the waiting period applicable to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and if Gilead and the Company have entered into an agreement with any governmental body regarding the timing of the consummation of the Offer, such consummation being permitted under such agreement and (vi) the absence of any judgment, temporary restraining order, preliminary or permanent injunction or other order, decree or ruling restraining, enjoining or otherwise preventing the acquisition of or payment for Shares pursuant to the Offer or the consummation of the Offer or the Merger or subsequent integration.
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As soon as practicable following the acceptance of the Shares validly tendered and not validly withdrawn pursuant to the Offer (the time of such acceptance, the “Offer Acceptance Time”) and the consummation of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, the Merger will be effected under Section 251(h) of the Delaware General Corporation Law, as amended (“DGCL”), without a meeting or vote of the Company’s stockholders.
At the effective time of the Merger (the “Effective Time”), each issued and outstanding Share, other than any Excluded Shares, any Shares irrevocably accepted for purchase pursuant to the Offer (“Tendered Shares”) or any Dissenting Shares (as defined in the Merger Agreement), will be converted into the right to receive the Offer Price (the “Merger Consideration”), in cash, without interest and subject to any required withholding of taxes.
At the Effective Time, each stock option to purchase Shares that is then outstanding and unexercised, whether or not vested and which has a per-share exercise price that is less than the Merger Consideration, will be automatically canceled and converted into the right to receive a lump-sum cash payment equal to (i) the excess of (a) the Merger Consideration over (b) the exercise price payable per Share under such stock option, multiplied by (ii) the total number of Shares subject to such stock option immediately prior to the Effective Time.
At the Effective Time, each restricted stock unit award with respect to Shares that is then outstanding will be automatically canceled and converted into the right to receive a lump-sum cash payment equal to the product, rounded to the nearest cent, of (i) the number of Shares subject to such restricted stock unit award as of the Effective Time and (ii) the Merger Consideration.
At the Offer Acceptance Time, each pre-funded warrant of the Company to purchase Shares that is outstanding immediately prior to the Effective Time will automatically be deemed to be exercised in full in a “cashless exercise” pursuant to the warrant agreement to which such warrant is subject. At the Effective Time, holders of Shares issued pursuant to such “cashless exercise” of the Company Warrants in accordance with the applicable warrant agreements and the Merger Agreement shall become entitled to the Merger Consideration as described above in respect of Shares other than the Excluded Shares, the Tendered Shares and any Dissenting Shares.
The Merger Agreement contains certain termination rights for the Company and Gilead. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Gilead a termination fee in the amount of $151.6 million.
For additional information related to the Merger Agreement, please refer to the relevant materials (including the Solicitation/Recommendation Statement on Schedule 14D-9) that we have filed and will file with the SEC and that will contain important information about the Company and the Transactions.
Strategy
Our goal is to become a leading biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need. Key elements of our strategy are to:
Advance clinical development of seladelpar for patients with PBC,
Obtain regulatory approval and commercialize seladelpar for patients with PBC,
Strengthen our patent portfolio and other means of protecting exclusivity, and
Acquire or develop other products or product candidates.
Seladelpar in PBC
In December 2023, we submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for seladelpar, our investigational treatment for the management of PBC, including
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pruritus in adults without cirrhosis or with compensated cirrhosis (Child Pugh A) who are inadequate responders or intolerant to ursodeoxycholic acid (UDCA). In February 2024, we announced that (i) the FDA accepted our NDA for seladelpar and granted a priority review and set a Prescription Drug User Fee Act (PDUFA) target action date of August 14, 2024 and notified us that it is not currently planning to hold an advisory committee meeting to discuss the application, (ii) the U.K. Medicines and Healthcare products Regulatory Agency accepted for filing the application of the Company for approval of seladelpar for treatment of PBC, including pruritus, in early February 2024 and (iii) the Company submitted a similar application for the approval of seladelpar for the treatment of PBC, including pruritus, with the European Medicines Agency, in early February 2024. Previously, seladelpar was granted Breakthrough Therapy Designation by the FDA in 2019 and in October 2023, the FDA revised the Breakthrough Therapy Designation in recognition of clinical data that indicated seladelpar may provide meaningful improvement over existing therapy based on a reduction in alkaline phosphatase (ALP) and improvement in pruritus in patients without cirrhosis or with compensated cirrhosis.
Phase 3 Trials
In September 2023, we announced top line results from our Phase 3 registrationRESPONSE study. RESPONSE was a double-blind, placebo-controlled, global study (RESPONSE)of one-year duration that randomized 193 PBC patients in a 2:1 ratio to evaluate seladelpar in patients10 mg or placebo, once daily. The study evaluated the safety and efficacy of seladelpar for the treatment of PBC. RESPONSE met its primary and two key secondary endpoints with PBC and currently anticipate completing enrollment in RESPONSE during the first half of 2022. high statistical significance.
We are also continuing the enrollment of aour global long-term safetyextension study (ASSURE) to evaluate seladelpar in patients with PBC that is intended to collect additional long-term safety and efficacy data to support registration. We have enrolled over 300 patients in ASSURE.
In August 2023, we announced the initiation of the IDEAL study, a 52-week, placebo-controlled, randomized, Phase 3 study. The IDEAL study aims to enroll 150 patients globally with PBC who have an incomplete response or intolerance to ursodeoxycholic acid (UDCA), in each case with ALP greater than the upper limit of normal (ULN) but less than 1.67xULN, and total bilirubin less than or equal to 2xULN. Patients will be randomly assigned using a 2:1 ratio to oral, once daily seladelpar 10 mg or placebo. The primary outcome measure is the normalization greater than or equal to a 15% decrease in ALP at 52 weeks and a key secondary endpoint evaluating the change in pruritus Numerical Rating Scale (NRS) at six months in subjects with moderate to severe pruritus at baseline.
In September 2023, we announced the initiation of the AFFIRM study, a randomized, placebo-controlled confirmatory study to evaluate the effect of seladelpar on clinical outcomes in patients with compensated cirrhosis due to PBC. The AFFIRM study is planned to enroll approximately 192 patients with PBC who have compensated cirrhosis (Child-Pugh A or Child-Pugh B) based on prespecified clinical criteria. Patients will be randomly assigned using a 2:1 ratio to oral, once daily seladelpar or placebo for a fixed duration of three years. The primary outcome measure is the time from start of treatment to the first occurrence of clinical events (all-cause death, liver transplant, hospitalization for other serious liver-related events, and progression to Child-Pugh C decompensated cirrhosis). Additional key outcomes include overall survival, liver transplant-free survival, and time to hospitalization for serious liver-related events.
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CymaBay PipelineProduct Overview
We are primarily focused on developing our lead product candidates:candidate, seladelpar (a PPAR
Product Candidate | Disease/condition | Status | ||||
Seladelpar (MBX-8025, a PPAR d agonist) | Primary Biliary Cholangitis (PBC) | NDA accepted in February 2024 with PDUFA target action date of August 14, 2024; U.K. MHRA application accepted for filing in February 2024; Submitted application to EMA in February 2024; Ongoing | ||||
Seladelpar
Summary
Seladelpar is a selective agonist for the peroxisome proliferator-activated receptor delta (PPAR
Seladelpar was initially developed for treatment of mixed dyslipidemia, which is characterized by elevated
| • | Reductions in LDL-C and total cholesterol, and increases in high-density-lipoprotein (HDL-C), |
Reductions in triglycerides and free fatty acids,
| • | Reductions in high-sensitivity C-reactive protein (hs-CRP), a marker of inflammation, and |
Reductions in alkaline phosphatase (ALP) and gamma-glutamyl transferase (GGT).
In February 2024, we announced that (i) the FDA accepted our NDA for seladelpar and granted a priority review and set a Prescription Drug User Fee Act (PDUFA) target action date of August 14, 2024 and notified us that it is not currently planning to hold an advisory committee meeting to discuss the application, (ii) the U.K. Medicines and Healthcare products Regulatory Agency accepted for filing the application of the Company for approval of seladelpar for treatment of PBC, including pruritus, in early February 2024 and (iii) the Company submitted a similar application for the approval of seladelpar for the treatment of PBC, including pruritus, with the European Medicines Agency, in early February 2024. We submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) in December 2023 for seladelpar for the management of PBC, including pruritus in adults without cirrhosis or with compensated cirrhosis (Child Pugh A) who are inadequate responders or intolerant to ursodeoxycholic acid (UDCA). In February 2019, the United States Food and Drug Administration (FDA) granted seladelpar Breakthrough Therapy Designation for the treatment of early stage PBC and in October 2016,2023, the Breakthrough Therapy Designation was revised to the recognition of clinical data that indicated seladelpar received the European Medicines Agency (EMA) PRIority MEdicines (PRIME) designation for the treatment of PBC.may provide meaningful improvement over existing therapy based on a reduction in alkaline phosphatase (ALP) and improvement in pruritus in patients without cirrhosis or with compensated cirrhosis. In November 2016, the FDA granted orphan drug designation to seladelpar for the treatment of PBC. In October 2016, seladelpar received the European Medicines Agency (EMA) PRIority Medicines (PRIME) designation for the treatment of PBC. In September 2017, EMA’s Committee for Orphan Medicinal Products (COMP) granted orphan drug designation to seladelpar for the treatment of PBC.
To date, we have completed
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multiple Phase 1 clinical studies, three Phase 2 and onetwo Phase 3 clinical study (ENHANCE)studies (ENHANCE and RESPONSE) of seladelpar in PBC. In addition, we are in the process of conducting a secondtwo additional Phase 3 study (RESPONSE)studies (AFFIRM and IDEAL) with seladelpar in PBC.PBC and a Phase 3 long-term extension study (ASSURE) of seladelpar in PBC patients. We believe that the data from the Phase 2 studies and the ENHANCE Phase 3 studystudies established seladelpar’s anti-cholestatic and anti-inflammatory effects and identified a dose (10 mg/day) that has the potential to offer patients improved efficacy and better tolerability over the only approved second-line treatment available today. Those studies showed reductions in markers of cholestasis including ALP and GGT and showed improved inflammatory and metabolic markers with patients experiencing decreases in levels of transaminases,
Target IndicationsIndication for Seladelpar
We are actively pursuing PBC as our initial launch indication for seladelpar.seladelpar, if approved. We may look to develop seladelpar in other indications in the future. Following is a review of PBC and NASH and our clinical development progress for seladelpar in each indication.
Primary Biliary Cholangitis (PBC)
Summary
PBC is a rare, chronic, progressive, autoimmune liver disease that predominantly affects middle-aged women. A
PBC primarily affects an estimated one in 1,000 women over the age of 40. Due to its low prevalence, PBC has been recognized as an orphan disease in the U.S. and E.U., meeting their respective FDA and EMA orphan designation criteria. Diagnosis of PBC is confirmed by elevated serum ALP presence and/or the magnitude of antimitochondrial antibody (AMA presence), and liver biopsies, although biopsies are not required for diagnosis in most patients.
The most common clinical symptoms of PBC include fatigue and pruritus or(or itching (up to 70% occurrence)), which adversely affects many patients’ quality of life. PBC patients are also frequently affected by conditions including jaundice, hyperlipidemia (notably hypercholesterolemia), hypothyroidism, osteopenia and osteoporosis, and coexisting autoimmune diseases. Late complications of PBC include portal hypertension, malabsorption, deficiencies of
Retrospective analyses of PBC clinical outcomes data have shown that elevated levels of ALP and bilirubin are associated with worsened clinical outcomes including liver transplantation and death associated with PBC. These analyses supported the use of ALP and bilirubin as elements of a clinical surrogate reasonably likely to predict outcomes that was used for the approval of obeticholic acid as a second line therapy for PBC. The current first line therapy for PBC is ursodeoxycholic acid (UDCA), a secondary bile acid.
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Studies of Seladelpar in PBC
RESPONSE (Phase 3)
In July 2022, we completed enrollment of our global, Phase 3 registration study (RESPONSE) to evaluate seladelpar in patients with PBC. The Phase 3 study iswas a
In September 2023, we announced top line results from RESPONSE. The trial achieved the primary outcome measure will beand all key secondary endpoints. A total of 61.7% of patients on seladelpar 10 mg (n=128) met the primary composite biochemical responder rateendpoint related to serum alkaline phosphatase and bilirubin at 52 weeks. A responder is defined as12 months versus 20.0% on placebo (n=65; p<0.0001). Alkaline phosphatase at 12 months (key secondary endpoint) normalized in 25.0% of patients on seladelpar vs. zero on placebo (p<0.0001). The least-squares mean percent reduction in alkaline phosphatase at 12 months was 42.4% in the seladelpar group vs. 4.3% in the placebo group (p<0.0001). Seladelpar treatment compared to placebo also demonstrated a patient who achieves an ALP level less than 1.67 times the upper limit of normal with at least a 15% decrease from baseline and has a normal level of total bilirubin. Additional key outcomes of efficacy will compare the rate of normalization of ALP at 52 weeks and the change from baselinestatistically significant reduction in level of pruritus, ator itch (key secondary endpoint), after six months of treatment. Seladelpar-treated patients with a baseline Numerical Rating Scale (NRS)>4 (moderate to severe pruritus) had a least-square mean reduction of 3.2 points in pruritus NRS (n=49) compared to 1.7 points for patients in the placebo group (n=23; p<0.005). Overall, the safety profile was comparable between placebo and seladelpar groups and was consistent with moderate to severe pruritus at baseline assessed by a numerical rating scale (NRS) recordedprevious studies. Treatment-emergent adverse events, serious adverse events, and patient discontinuations were generally balanced across the treatment and placebo arms. There were no treatment-related serious adverse events in the study. Seladelpar’s tolerability profile appeared favorable and consistent with an electronic diary.
ENHANCE (Phase 3)
In October 2018 we commenced a global, Phase 3 registration study (ENHANCE) to evaluate seladelpar in patients with PBC. The Phase 3 studyENHANCE was a double-blind, randomized, placebo-controlled
Approximately 265 patients were randomized to receive placebo, 5 mg of seladelpar, or 10 mg of seladelpar. Patients on 5 mg could potentially increase their dose, in a double-blinded manner, to 10 mg after 6 months if they had not yet met the composite biochemical response criteria. The primary endpoint was a composite response, defined as a patient achieving an ALP level below 1.67 times the upper limit of normal, with at least a 15% reduction from baseline, and a normal total bilirubin at 52 weeks. The primary efficacy analysis was to compare response rates of treatment groups to those of the placebo group. Key secondary endpoints were the ALP normalization rate and changes from baseline in pruritus, as measured by NRS in patients with
In December 2019 we terminated ENHANCE early, based on initial histological observations obtained in our Phase 2b study of seladelpar in NASH.nonalcoholic steatohepatitis (NASH). In May 2020, we announced completion of an independent expert panel review into the NASH findings that concluded the data, in aggregate, did not support liver injury related to seladelpar. In June 2020, we discussed the data, the panel’s conclusions, and other matters with the FDA. In July 2020, the FDA lifted the clinical hold on the program and we made the decision to reinstatereinstated clinical development of seladelpar in PBC.
In August 2020 we announced positive results from ENHANCE, which we believe support seladelpar as a safe, well-tolerated, and efficacious treatment for patients with PBC. Although the study was terminated prior to the completion of
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(p<0.0001). In addition, the study revealed statistically significant improvement in change from baseline in pruritus at 3 months (p<0.05) for patients
ASSURE (Phase 3)
We are continuing our global long-term extension study (ASSURE) to evaluate seladelpar in patients with PBC. ASSURE is intended to collect additional long-term safety and efficacy data to support registration. ASSURE is open to patients from our prior Phase 2 open label study, our Phase 3 ENHANCE and RESPONSE studies, as well as certain Phase 1 studies. The ASSURE trial is ongoing and we have enrolled over 300 patients.
IDEAL (Phase 3)
In August 2023, we announced the initiation of the IDEAL study, a Phase 3, 52-week, placebo-controlled, randomized study that aims to enroll 150 patients globally with PBC who have an incomplete response or intolerance to ursodeoxycholic acid (UDCA), in each case with ALP greater than the upper limit of normal (ULN) but less than 1.67xULN, and total bilirubin less than or equal to 2xULN. Patients will be randomly assigned using a 2:1 ratio to oral, once daily seladelpar 10 mg or placebo. The primary outcome measure is the normalization greater than or equal to a 15% decrease in ALP at 52 weeks and a key secondary endpoint evaluating the change in pruritus Numerical Rating Scale (NRS) at six months in subjects with moderate to severe pruritus at baseline.
AFFIRM (Phase 3)
In September 2023, we announced the initiation of the AFFIRM study, a randomized, placebo-controlled confirmatory study to evaluate the effect of seladelpar on clinical outcomes in patients with compensated cirrhosis due to PBC. The AFFIRM study plans to enroll approximately 192 patients with PBC who have compensated cirrhosis (Child-Pugh A or Child-Pugh B) based on prespecified clinical criteria. Patients will be randomly assigned using a 2:1 ratio to oral, once daily seladelpar or placebo for a fixed duration of three years. The primary outcome measure is the time from start of treatment to the first occurrence of clinical events (all-cause death, liver transplant, hospitalization for other serious liver-related events, and progression to Child-Pugh C decompensated cirrhosis). Additional key outcomes include overall survival, liver transplant-free survival, and time to hospitalization for serious liver-related events.
Safety Studies
Prior to the decision to terminate the ENHANCE study in December 2019, we were conducting a long-term safety study of seladelpar, which was open to patients who had participated in other company-sponsored PBC studies. Patients completing the Phase 2 open label study discussed immediately below, as well as ENHANCE, were able to transfer into the long-term safety study. As of the time of termination, 106 patients had received seladelpar for at least 12 months and 51 patients had received seladelpar for at least 24 months. The safety study was discontinued due to the histological observations in the Phase 2b NASH study.
Phase 2 Open Label Study
In December 2016, we initiated a Phase 2 study of seladelpar in patients with PBC. The study was an open label, randomized, dose-ranging study evaluating 2 mg, 5 mg and 10mg doses of seladelpar and the primary efficacy endpoint was percent change in ALP from baseline. The study had an initial twelve-week period in which starting doses were maintained, but after which doses could be increased to as high as 10 mg for those patients in which a greater biochemical response was deemed appropriate, these being described as titration groups. Secondary outcomes were to evaluateincluded the evaluation of other markers of cholestasis, inflammation, and lipid parameters, as well as clinical symptoms such as pruritus and quality of life.
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In November 2018 we announced data from the study that we believe showed that seladelpar treatment led to sustained anti-cholestatic and anti-inflammatory effects with no worsening of pruritus through 52 weeks. Specifically, at 52 weeks the mean decreases in ALP were
We subsequently reported on a
MBX-2982
MBX-2982
Significant Agreements and Intellectual Property
General
We actively seek to obtain, where appropriate, patent protection and regulatory exclusivity for the proprietary technology that we consider important to our business, including compounds, compositions and formulations, their methods of use and processes for their manufacture both in the United States and other countries. We also rely on trade secrets,
We also depend upon the skills, knowledge, experience and
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Significant Agreements
Our current significant finance and licensing arrangements are summarized below:
Merger Agreement with Gilead and Purchaser: On February 11, 2024, we entered into the Merger Agreement with Gilead and Purchaser, which provides for the acquisition of the Company by Gilead in a two-step all cash transaction, consisting of the Offer, followed by the Merger, with the Company continuing as the surviving corporation.
On February 23, 2024, Purchaser commenced the Offer for all of the Company’s Shares, other than any Excluded Shares, at the Offer Price, net to the seller in cash, without interest and subject to any required withholding of taxes. The Offer will initially remain open until March 21, 2024 (unless otherwise agreed to in writing by Gilead and us), which period may be extended for additional periods of up to 10 business days per extension (or such other duration as may be agreed to in writing by the Company and Gilead) to permit the conditions to the Offer to be satisfied.
The obligation of Gilead to accept for payment Shares validly tendered pursuant to the Offer is subject to customary closing conditions, including: (i) Shares having been validly tendered and not validly withdrawn that, considered together with all other Shares (if any) beneficially owned by Gilead and its affiliates, represent one more Share than 50% of the total number of Shares outstanding at the time of the expiration of the Offer (including, for the avoidance of doubt, all Shares that become outstanding as a result of the “cashless exercise” of the outstanding pre-funded warrants of the Company, as described below); (ii) the accuracy of the Company’s representations and warranties contained in the Merger Agreement (subject to any applicable Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers); (iii) the absence of a willful and material breach by the Company of the “no-shop” restrictions described in the Merger Agreement and the Company’s performance of its other obligations, covenants and agreements under the Merger Agreement in all material respects; (iv) the absence, since the date of the Merger Agreement, of any Material Adverse Effect; (v) the expiration or early termination of the waiting period applicable to the Offer under the HSR Act and if Gilead and the Company have entered into an agreement with any governmental body regarding the timing of the consummation of the Offer, such consummation being permitted under such agreement and (vi) the absence of any judgment, temporary restraining order, preliminary or permanent injunction or other order, decree or ruling restraining, enjoining or otherwise preventing the acquisition of or payment for Shares pursuant to the Offer or the consummation of the Offer or the Merger or subsequent integration.
As soon as practicable following the acceptance of the Shares validly tendered and not validly withdrawn pursuant to the Offer and the consummation of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, the Merger will be effected under Section 251(h) of the DGCL without a meeting or vote of the Company’s stockholders.
At the Effective Time, each issued and outstanding Share, other than any Excluded Shares, any Tendered Shares or any Dissenting Shares (as defined in the Merger Agreement), will be converted into the right to receive the Merger Consideration, in cash, without interest and subject to any required withholding of taxes.
At the Effective Time, each stock option to purchase Shares that is then outstanding and unexercised, whether or not vested and which has a per-share exercise price that is less than the Merger Consideration, will be automatically canceled and converted into the right to receive a lump-sum cash payment equal to (i) the excess of (a) the Merger Consideration over (b) the exercise price payable per Share under such stock option, multiplied by (ii) the total number of Shares subject to such stock option immediately prior to the Effective Time.
At the Effective Time, each restricted stock unit award with respect to Shares that is then outstanding will be automatically canceled and converted into the right to receive a lump-sum cash payment equal to the product, rounded to the nearest cent, of (i) the number of Shares subject to such restricted stock unit award as of the Effective Time and (ii) the Merger Consideration.
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At the Offer Acceptance Time, each pre-funded warrant of the Company to purchase Shares that is outstanding immediately prior to the Effective Time will automatically be deemed to be exercised in full in a “cashless exercise” pursuant to the warrant agreement to which such warrant is subject. At the Effective Time, holders of Shares issued pursuant to such “cashless exercise” of the pre-funded warrants of the Company in accordance with the applicable warrant agreements and the Merger Agreement shall become entitled to the Merger Consideration as described above in respect of Shares other than the Excluded Shares, the Tendered Shares and any Dissenting Shares.
The Merger Agreement contains certain termination rights for the Company and Gilead. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Gilead a termination fee in the amount of $151.6 million.
Kaken Pharmaceutical: In January 2023, we entered into a Collaboration and License Agreement (the License Agreement) with Kaken Pharmaceutical Co., Ltd. (Kaken). Pursuant to the License Agreement, we granted Kaken an exclusive license to commercialize seladelpar (the Licensed Product) for the prevention or treatment of PBC in Japan.
Pursuant to the terms of the License Agreement, Kaken will bear the cost of, and be responsible for, among other things, conducting the clinical studies and other developmental activities for the Licensed Product in PBC in Japan as well as preparing and filing applications for regulatory approval in Japan and commercializing the Licensed Product in Japan. Kaken is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize, the Licensed Product in Japan, including obtaining pricing approval for the Licensed Product in Japan. We are obligated to supply to Kaken, its requirements of Licensed Product for clinical and commercial use in Japan, which obligation may be terminated upon specified circumstances and technology transfer.
In consideration of the license and other rights granted by us, Kaken made an upfront cash payment to us of $34.2 million and is obligated to pay potential milestone payments to us totaling up to ¥17.0 billion (approximately $128.0 million at contract inception date) for the achievement of certain regulatory and sales milestones. In addition, during the Royalty Term (as defined below), while we supply Licensed Product to Kaken, Kaken will make payments to us for each unit of Licensed Product that we supply at a percentage of the Japanese National Health Insurance price of the Licensed Product that equates to 20+% royalties. If we are not supplying product to Kaken during the Royalty Term, a lower royalty payment will be payable to us by Kaken based on Kaken net sales of Licensed Product in Japan. After the Royalty Term, if we are supplying Licensed Product to Kaken, we will receive payments for each unit of Licensed Product based on a percentage of the Japanese National Health Insurance price of the Licensed Product that is lower than during the Royalty Term.
The Royalty Term means the period ending on the latest to occur of (a) the expiration of the last valid claim of the royalty patents covering such Licensed Product in Japan, (b) the expiration of regulatory exclusivity for such Licensed Product in Japan, and (c) 10 years after the first commercial sale of such Licensed Product in Japan.
The License Agreement is effective until the date upon which (a) the Royalty Term has expired in Japan for the final Licensed Product, or (b) the License Agreement is earlier terminated (the Initial Term). After the Initial Term (except in the case of early termination), the License Agreement will be automatically renewed for 2-year periods, unless either party has given the other party a written notice not to renew the License Agreement no later than 12 months prior to the expiration of the Initial Term or any subsequent renewal term, in which case the License Agreement shall expire (and thus terminate) at the end of the then-existing term or, if applicable, shall earlier terminate upon an early termination.
The License Agreement may be early terminated by either party for material breach, upon a party’s insolvency or bankruptcy or upon a challenge by one party of any patents of the other party, and Kaken may
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terminate in specified situations, including for a safety concern, clinical failure or termination of an underlying in-license to us from Janssen Pharmaceutica NV (see below), or at its convenience with specified prior notice. Upon an intentional or willful material breach of the License Agreement by us, Kaken also has an alternative remedy for material breach of the License Agreement that results in a reduction in the payments otherwise payable to us under the License Agreement. Upon early termination, (i) license rights granted under the License Agreement terminate, (ii) to the extent permitted by applicable law, Kaken is obligated to transfer to us copies of, and its entire right, title and interest in, all regulatory materials in Japan (subject to a royalty if such termination is by Kaken for our uncured material breach) and (iii) Kaken will automatically grant to us, with immediate effect, a non-exclusive, fully paid, royalty-free license under the Kaken program intellectual property solely for the exploitation of Licensed Products.
Pursuant to the License Agreement, we and Kaken agreed to establish a joint steering committee to provide strategic oversight of both our and Kaken’s activities under the License Agreement. The License Agreement also contains customary representations, warranties and covenants by both us and Kaken, as well as customary provisions relating to indemnification, confidentiality, intellectual property and other matters.
Johnson & Johnson:
Abingworth:In June 2010, we entered into two development and license agreements with Janssen Pharmaceuticals, Inc. (Janssen), an affiliate of Johnson & Johnson, under which Janssen obtained the right to further develop undisclosed metabolic disease target agonists for the treatment of Type 2 diabetes and other disorders, and we received a
Promptly following receipt of Regulatory Approval, we are required to execute and deliver a promissory note to Abingworth to convert the fixed and variable success payments into a note payable. At the time that Abingworth receives, collectively, an aggregate of 3.1x of the funding provided (approximately $232.5 million (or $310 million if the Optional Funding is provided))million), our payment obligations under the Financing Agreement will be fully satisfied. We have the option to satisfy our payment obligations to Abingworth upon Regulatory Approval, or a change of control of us, by paying an amount equal to the remaining payments payable to Abingworth subject to
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Pursuant to the Financing Agreement, we are required to use commercially reasonable efforts to develop seladelpar and complete our development program in accordance with the Financing Agreement and an agreed timeline. In addition, an executive review committee was established between Abingworth and us to discuss our development of seladelpar.
Pursuant to the Financing Agreement, we granted Abingworth a security interest in all of our assets (other than intellectual property not related to seladelpar), provided that we are permitted to incur certain indebtedness. The security interest will terminate when we have paid Abingworth 2.0x of the funding provided or upon certain terminations of the Financing Agreement. The Financing Agreement also provides for negative, affirmative and additional covenants, with which we have agreed to comply.
The Financing Agreement terminates upon the payment of all payments owing to Abingworth, unless earlier terminated. The Financing Agreement may be earlier terminated by Abingworth if (i) we fail to use commercially reasonable efforts to develop seladelpar as set forth in the Financing Agreement or fail to make required payments (Fundamental Breach), (ii) we suffer a material adverse event, (iii) there is a material adverse patent impact on our intellectual property covering seladelpar, (iv) there are certain irresolvable disagreements within the executive review committee, (v) the security interests of Abingworth are invalidated or terminated other than as set forth in the Financing Agreement or (vi) the RESPONSE clinical trial is completed or terminated and (1) the primary endpoint is not met or (2) Abingworth reasonably determines that the results of the RESPONSE clinical trial do not support regulatory approval. The Financing Agreement may be earlier terminated by us if (i) Abingworth fails to fund as provided in the Financing Agreement, (ii) Abingworth fails to release its security interests as provided in the Financing Agreement or (iii) the RESPONSE clinical trial is completed or terminated and the primary endpoint is not met. The Financing Agreement may be terminated by either party (i) if the other party materially breaches the Financing Agreement (Material Breach), (ii) if seladelpar fails to receive regulatory approval in the U.S., U.K. or E.U., (iii) upon the bankruptcy of the other party, (iv) if a serious safety concern arises in a seladelpar clinical trial or (v) upon a change of control of us.
In certain instances, upon the termination of the Financing Agreement, we will be obligated to pay Abingworth a multiple of the amounts paid to us under the Financing Agreement, including specifically,
(i) 310% of such amounts in the event that Abingworth terminates the Financing Agreement due to (x) a Fundamental Breach, (y) our bankruptcy, or (z) a safety concern resulting from gross negligence on our part or due to a safety concern that was material on the effective date of the Financing Agreement and the material data showing such safety concern was not publicly known, disclosed to Abingworth, or in the diligence room made available to Abingworth,
(ii) 200% of such amounts in the event the Financing Agreement is terminated due to (x) our Material Breach or (y) the security interests of Abingworth being invalidated or terminated other than as set forth in the Financing Agreement, and
(iii) 100% of such amounts in the event of certain irresolvable disagreements within the executive review committee.
In addition, if, following certain terminations, we continue to develop seladelpar for the treatment of PBC and obtain Regulatory Approval, we will make the payments to Abingworth as if the Financing Agreement had not been terminated, less any payments made upon termination. We are not obligated to make any payments to Abingworth under certain instances of technical or regulatory failure of the development program.
Research and Development
We do not currently own or operate research and development facilities. We rely on contract service providers (CSPs), including clinical research organizations, clinical trial sites, central laboratories and other service providers to ensure the proper and timely conduct of our clinical trials. While we have agreements
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governing their activities, we have limited influence over their actual performance. We have relied and plan to continue to rely upon CSPs to monitor and manage data for our ongoing clinical programs for our product candidates, as well as the execution of nonclinical studies. We control only certain aspects of our CSPs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CSPs does not relieve us of our regulatory responsibilities. We also rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us, which could also adversely affect the progress of our research, development and commercialization objectives.
Intellectual Property
We own or
Manufacturing
We do not currently own or operate manufacturing facilities for the production or testing of seladelpar or other product candidates, that we develop, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We presently depend on third party contract manufacturers to obtain all of our required raw materials, active pharmaceutical ingredients (APIs) and finished products for our clinical studies for seladelpar. We also expect to usehave contracted with third party contract manufacturers to obtain our clinical and commercial supplies of
Competition
The biopharmaceutical industry is highly competitive and subject to rapid and significant innovation. Although we believe that our development expertise and scientific knowledge provide us with advantages over our competitors, particularly in the therapeutic areas in which we are focused, other biopharmaceutical companies in the industry may be able to develop, or have developed, therapeutics that are able to achieve better results.results or have had a more successful or earlier market entry. Our competitors include pharmaceutical companies, biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors have significantly greater financial, technical and human resources than we have.
We have been developing seladelpar for the treatment of patients with PBC and NASH;a description of the competition in these indicationsthis indication is discussed further below.
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PBC Competition
Currently, the only
Ursodiol decreases serum levels of ALP, bilirubin, alanine aminotransferase, aspartate aminotransferase, cholesterol, and immunoglobulin M, all of which are elevated in patients with PBC and can serve as biochemical markers of the disease. In a study that combined data from three controlled trials with a total of 548 patients, ursodiol significantly reduced the likelihood of liver transplantation or death after four years. Ursodiol also delayed the progression of hepatic fibrosis in early-stage PBC, but was not effective in advanced disease. It has been reported that up to 50% of PBC patients fail to respond adequately to ursodiol therapy. Ursodiol is available as a generic, is approved for other indications, and is priced at a discount to typical branded therapies used in rare populations.
Ocaliva was approved by the FDA and European Medicines Agency in 2016 for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA, or as monotherapy in adults unable to tolerate UDCA. Ocaliva also received orphan designations in the U.S. and the E.U. A Phase 3 study was completed with a primary composite endpoint defined as a responder rate comprised of the percentage of patients with ALP < 1.67 times upper limit of the normal range with a decrease in ALP of at least 15% and total bilirubin less than or equal to upper limit of normal.the normal range. This study met its goals and Ocaliva was granted accelerated approval based on meeting this primary composite endpoint. In February 2018, Intercept announced that the Ocaliva label in the United States was updated by the FDA to include a boxed warning and a dosing table that reinforced the then-existing dosing schedule for patients with Child-Pugh Class B or C or decompensated cirrhosis. In addition, the FDA issued an updated drug safety communication to accompany the revised label. In 2021, following the conclusion of the FDA’s evaluation of a newly identified safety signal, Ocaliva became contraindicated for patients with PBC and decompensated cirrhosis, a prior decompensation event, or compensated cirrhosis with evidence of portal hypertension, in addition to the existing contraindication for complete biliary obstruction.
Elafibranor (Genfit S.A./Ipsen, S.A.) is a mixed PPARα/d agonist in development for patients with PBC. In December 2023, Ipsen announced that (i) the FDA granted Priority Review for New Drug Application for elafibranor in PBC with a FDA PDUFA date of June 10, 2024, (ii) the EMA validated Ipsen’s Marketing Authorization Application (MAA) for elafibranor, and (iii) a regulatory filing of elafibranor was validated for review by the U.K. Medicines and Healthcare products Regulatory Agency. In November 2023, Genfit announced the full results from its Phase 3 study of elafibranor in patients with PBC who had an inadequate response or intolerance to UDCA, reporting a 47% placebo-adjusted difference (P<0.001) between patients on elafibranor 80mg (51%) compared with patients on placebo (4%) achieving a biochemical response. In the trial, a biochemical response is defined as alkaline phosphatase (ALP) <1.67 x upper limit of normal (ULN), an ALP decrease ≥ 15 percent and total bilirubin (TB) ≤ ULN at 52 weeks. Only patients receiving elafibranor achieved normalization of ALP (upper limit of normal 104 U/L in females and 129 U/L in males) at Week 52 (15% vs 0% placebo, P=0.002), a key secondary endpoint of the trial. The significant biochemical effect of elafibranor measured by ALP reduction was further supported by data demonstrating reductions from baseline in ALP levels were seen at Week 4 in the elafibranor group, and were sustained through Week 52, with a decrease in ALP of 41% on elafibranor compared with placebo. Genfit also announced that on another key secondary endpoint using the PBC Worst Itch NRS, the reduction of pruritus observed for elafibranor versus placebo was not statistically significant. A long-term placebo-controlled study of elafibranor has been initiated in which patients with PBC will be followed up for up to seven years of treatment to examine the effects on liver-related clinical outcomes, including death.
Another potential therapy in clinical development for PBC is the dual PPARα/g agonist saroglitazar (Zydus Lifesciences Limited, formerly known as Cadila Healthcare Limited). In November 2020, Phase 2 results were
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presented at the Liver Meeting hosted by the American Association for the Study of Liver Disease. In December 2020, Zydus announced saroglitizar had been granted Fast Track Designation for PBC and in January 2021 it received Orphan Drug Designation for PBC by the FDA. In December 2021, Zydus announced it had initiated a Phase 2(b)/3 study of saroglitazar in patients with PBC. Calliditas Therapeutics AB’s selective NOX inhibitor setanaxib has also reported Phase 2 study data for PBC and in August 2021, Calliditas announced setanaxib had been granted Fast Track Designation for PBC by the FDA and that setanaxib has previously been granted orphan drug designation for PBC in the U.S. and Europe. In February 2022, Calliditas announced it had initiated a Phase 2b/3 study in PBC. In cholestatic pruritus, GSK2330672 (GSK plc) is an inhibitor of the Intestinal Bile Acid Transporter (IBAT), which is undergoing evaluation for decreasing symptoms of pruritus, including in PBC. The disclosed planned completion data for the study is October 2024.
Although not approved for use in PBC,
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. The pharmaceutical drug product candidates that we develop must be approved by the Food and Drug Administration (FDA) before they may be legally marketed in the United States.
United States Pharmaceutical Product Development Process
In the United States, the FDA regulates pharmaceutical products under the Federal Food, Drug and Cosmetic Act, and implements regulations. Pharmaceutical products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The
Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices (GLP) or other applicable regulations;
Submission to the FDA of an Investigational New Drug (IND) application, which must become effective before human clinical studies may begin;
Performance of adequate and well-controlled human clinical studies according to the FDA’s current Good Clinical Practices (GCP), to establish the safety and efficacy of the proposed pharmaceutical product for its intended use;
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Submission to the FDA of a New Drug Application (NDA) for a new pharmaceutical product;
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the pharmaceutical product is produced to assess compliance with the FDA’s current Good Manufacturing Practice standards (cGMP), to assure that the facilities, methods and controls are adequate to preserve the pharmaceutical product’s identity, strength, quality and purity;
Potential FDA audit of selected preclinical and clinical study sites that generated the data in support of the NDA; and
FDA review and approval of the NDA.
The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources and approvals are inherently uncertain.
Before testing any compounds with potential therapeutic value in humans, the pharmaceutical product candidate enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the pharmaceutical product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA has concerns and notifies the sponsor by way of a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a pharmaceutical product candidate at any time before or during clinical studies due to safety concerns or
Clinical studies involve the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, who are generally physicians not employed by or under the clinical study sponsor’s control. Clinical studies are conducted under protocols detailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, how the results will be analyzed and presented and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted in accordance with GCP. Further, each clinical study must be reviewed and approved by an independent Institutional Review Board (IRB) at, or servicing, each institution at which the clinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating in the clinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical study subject or his or her legal representative and must monitor the clinical study until completed.
Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:
Phase 1. The pharmaceutical product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion.
Phase 2. The pharmaceutical product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases, to determine dosage tolerance, optimal dosage and dosing schedule and to identify patient populations with specific characteristics where the pharmaceutical product may be more effective.
Phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. The studies must be well-controlled and usually include a control arm for comparison. One or two Phase 3 studies are required by the FDA for an NDA approval, depending on the disease severity and other available treatment options.
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product labeling. The studies must be well-controlled and usually include a control arm for comparison. One or two Phase 3 studies are required by the FDA for an NDA approval, depending on the disease severity and other available treatment options. |
Post-approval studies, or Phase 4 clinical studies, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time on various grounds, including, but not limited to, a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the drug candidate has been associated with unexpected serious harm to patients.
Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final pharmaceutical product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
United States Review and Approval Processes
Pre-Approval
The results of product development, preclinical studies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the pharmaceutical product, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric Research Equity Act (PREA), an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the pharmaceutical product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any pharmaceutical product for an indication for which orphan designation has been granted.
The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins
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After the NDA submission is accepted for filing, the FDA reviews the NDA application to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the pharmaceutical product approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (REMS) is necessary to assure the safe use of the pharmaceutical product. If the FDA concludes that a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without a REMS, if required.
Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. In addition, the FDA will require the review and approval of product labeling.
The NDA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA. The complete response letter describes the specific deficiencies in the NDA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical studies designed to further assess pharmaceutical product safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. A product intended to treat a serious or life-threatening disease or condition may be eligible for breakthrough
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Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusive approval (or exclusivity), which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective. A comparable orphan drug program is provided under EU law.
Post-Approval Requirements
Any pharmaceutical products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for
Manufacturers of our products are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Pharmaceutical product manufacturers and other entities involved in the manufacture and distribution of approved pharmaceutical products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including
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withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits certain individuals and entities, including us, from promising, paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, directly or indirectly, to obtain or retain business or an improper advantage. The U.S. Department of Justice and the U.S. Securities and Exchange Commission, or SEC, have increased their enforcement efforts with respect to the FCPA. Violations of the FCPA may result in large civil and criminal penalties and could result in an adverse effect on a company’s reputation, operations, and financial condition. A company may also face collateral consequences such as debarment and the loss of export privileges.
Federal and State HealthCare Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws have been applied to restrict certain business practices in the biopharmaceutical industry in recent years. These laws include anti-kickback statutes, false claims statutes, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at less than its fair market value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and our practices may not in all cases meet all of the criteria for statutory exemptions or safe harbor protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The intent standard of the Anti-Kickback Statute was
The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus
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against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payerspayors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The federal Physician Payments Sunshine Act, created under the PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physicians assistants and nurse practitioners), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually certain ownership and investment interests held by physicians and their immediate family members.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates”. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
The majority of states also have statutes or regulations similar to the aforementioned federal fraud and abuse laws, some of which are broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments or other transfers of value provided to physicians and
These federal and state laws may impact, among other things, our proposed sales, marketing and education programs. If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, criminal and civil monetary penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate its business and our results of operations. To the extent that any of our product candidates are ultimately sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
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Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of the use of our pharmaceutical product candidates, some of our patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally
Market exclusivity provisions under the U.S. Food, Drug, and Cosmetic Act can also delay the submission or the approval of certain applications of other companies seeking to reference another company’s NDA. Currently seven years of reference product exclusivity are available to pharmaceutical products designated as orphan drugs, during which the FDA may not approve generic products relying upon the reference product’s data. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part upon the availability of coverage and adequate reimbursement from third-party payors. Third-party payors include government payors such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. While commercial payors often follow Medicare coverage policy and payment limitations, coverage and reimbursement for products can differ significantly from payor to payor. The process for determining whether a payor will provide coverage for a pharmaceutical product may be separate from the
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of its products, in addition to the costs required to obtain the FDA approvals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a pharmaceutical product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, in the United States there is a growing emphasis on comparative effectiveness research, both by private payors and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our products and/or reimburse our products at a lower rate.
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Different pricing and reimbursement schemes exist in other countries. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from
The marketability of any pharmaceutical product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. For example, in March 2010 the PPACA was enacted, which includes measures to significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the PPACA of importance to the pharmaceutical and biotechnology industry are the following:
Since its enactment there have been executive, judicial and Congressional challenges to certain aspects of the PPACA. For example, President Trump signed several Executive Orders and other directives designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the PPACA and it is unclear how these laws and other efforts to repeal and replace the PPACA will impact the PPACA. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care ActPPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021,August 16, 2022, President Biden issued an executive order to initiate a special enrollment periodsigned the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for purposes of obtainingindividuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the PPACA marketplace. The executive order also instructs certain governmental agencieswill be subject to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaidjudicial or Congressional challenges in the PPACA.future. It is unclear how any such challenges, and the healthcare reform measures of the Biden administration will impact the PPACA and our business.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. In August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction, or joint committee, to recommend proposals in spending reductions to Congress. The joint committee did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering automatic reductions to several government programs. These reductions include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013 and, due to subsequent legislative amendments, will remain in effect through 2031until 2032 unless additional
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congressional action is taken. However,
In addition, there have been several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. Forfor example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA also released a final rule and guidance in September 2020, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the
International Regulation
In addition to regulations in the United States, there are a variety of foreign regulations governing clinical studies and commercial sales and distribution of our future product candidates. Whether or not FDA approval is obtained for a product, approval of a product must be obtained by the comparable regulatory authorities of foreign countries before clinical studies or marketing of the product can commence in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical studies, product licensing, pricing and reimbursement vary greatly from country to country. In addition, certain regulatory authorities in select countries may require us to repeat previously conducted preclinical and/or clinical studies under specific criteria for approval in their respective country which may delay and/or greatly increase the cost of approval in certain markets targeted for approval by us.
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Environment, Health and Safety
Various laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. For example, the California Air Resources Board is in the process of drafting regulations to meet state emissions targets. Based on current information and subject to the
We are also subject to other federal, state and local regulations regarding workplace safety and protection of the environment. WeOur service providers use hazardous materials, chemicals, and various compounds in the furtherance of our research and development activities and we cannot eliminate the risk of accidental contamination or injury from these materials. Certain misuse or accidents involving these materials could lead to significant litigation, fines and penalties. We have implemented proactive programs to reduce and minimize the risk of hazardous materials incidents.
Corporate Information
CymaBay Therapeutics, Inc., formerly Metabolex, Inc., was incorporated under the laws of the State of Delaware on October 5, 1988, originally under the name Transtech Corporation. Our executive offices are located at 7575 Gateway Blvd., Suite 110, Newark,7601 Dumbarton Circle, Fremont, CA 94560.94555. The telephone number at our executive office is
Employees
As of December 31, 2021,2023, and February 28, 2022,January 31, 2024, we had 59101 and 60108 full-time employees, respectively.
Information about our Executive Officers
As of February 28, 2022,January 31, 2024, our executive officers were as follows:
Name | Age | Position Held With CymaBay | |||
Sujal Shah | President & Chief Executive Officer | ||||
Charles A. McWherter, Ph.D. | President of Research and Development and Chief Scientific Officer | ||||
Paul T. Quinlan | |||||
| General Counsel and Chief Compliance Officer | |||||
Harish Shantharam | |||||
Klara Dickinson | 57 | Chief Regulatory and Quality Assurance Officer |
Biographical Information
Sujal Shah
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Mr. Shah served as Director, Health Care Investment Banking for Citigroup Inc., where he was responsible for managing client relationships and executing strategic and financing related transactions for clients focused in life sciences. From 2004 to 2010 Mr. Shah was employed with Credit-Suisse, last serving in the capacity as Vice President, Health Care Investment Banking Group. Mr. Shah currently serves on the Board of Directors of Tvardi Therapeutics, Inc. and the Executive Advisory Board of the Chemistry of Life Processes Institute at Northwestern University. Mr. Shah received an M.B.A. from Carnegie Mellon University—Tepper School of Business and M.S. and B.S. degrees in Biomedical Engineering from Northwestern University.
Charles A. McWherter, Ph.D.
Paul T. Quinlan
Harish Shantharam has served as our Chief Financial Officer since May 2023. Previously, he served as senior finance advisor at Eikon Therapeutics from August 2022. From October 2011 until May 2022, Mr. Shantharam held various positions in the finance department at Gilead Sciences, Inc., a pharmaceutical company, most recently Vice President Finance since April 2017,of Global Commercial Finance. Before joining Gilead, Mr. Shantharam served in various roles of increasing responsibility supporting forecasting, commercial analytics, and previouslybusiness development at Amgen. Mr. Shantharam holds an MBA in finance from UCLA Anderson School of Management and a graduate degree in Industrial Engineering from the University of Texas, Arlington and is also a CFA charter holder.
Klara Dickinson has served as our Corporate ControllerChief Regulatory and Quality Assurance Officer since October 2020. Prior to that she was our Chief Regulatory and Compliance Officer since January 2014. Prior to joining CymaBay, Mr. Menold2019, and our Senior Vice President, Regulatory Affairs and Compliance since June 2017. Previously, she served as Corporate Controller for technology firm Zoosk,Senior Vice President, Chief Regulatory Officer of Anthera Pharmaceuticals, Inc., from 2011a biopharmaceutical company. From 2007 to 2013,2014, she was Senior Vice President of Regulatory Affairs and Compliance at Hyperion Therapeutics Inc, where heshe was responsible for the accountinggeneral supervision of the company’s regulatory affairs and financial reporting functionsquality assurance. Ms. Dickinson also spent three years at CoTherix, Inc. as Vice President, Regulatory Affairs and Healthcare Compliance Officer, and held various positions at biopharmaceutical companies such as ControllerScios, Inc. and DirectorDEY Laboratories (a subsidiary of Accounting at Affymetrix,Mylan, Inc. from 2005 to 2010. Prior to 2005, he also held accounting and finance positions of increasing responsibility at public and private life sciences and high technology companies in the Silicon Valley. Earlier in his career, Mr. Menold was at Ernst & Young LLP where he was an audit manager and served on audits of life sciences and high technology companies. Mr. Menold received). Ms. Dickinson holds a M.S. in accounting and B.S. in financeBiology from The Universitythe College of Virginia McIntire School of Commerce.
Item 1A. Risk Factors
In addition to the factors discussed elsewhere in this report, the following are important factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by us or on our behalf. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we deem immaterial also may impair our business operations. If any of the following risks or such other risks actually occur, our business could be harmed.
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Risks Related to the
There are uncertainties as to the timing of the Offer and the Merger, including the risk that the Offer or the Merger may not be completed in a timely manner or at all.
As described above, on February 23, 2024, Gilead and Purchaser commenced the Offer, which is scheduled to expire at one minute after 11:59 p.m., Eastern Time, on March 21, 2024, unless extended to permit satisfaction of the conditions to the Offer in accordance with the terms of the Offer and the Merger Agreement and the applicable rules and regulations of the SEC. There can be no assurance that the Offer and the Merger will be completed in the currently contemplated timeframe, or at all. While it is currently expected that the Offer and the Merger will close during the first quarter of 2024, there can be no assurance that all required approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, if all required approvals are obtained and all closing conditions are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such approvals or that the Offer and the Merger will be completed in a timely manner or at all.
The Merger Agreement contains customary mutual termination rights for us and Gilead, as well as customary termination rights for the benefit of each party, in each case which could prevent the consummation of the Offer and the Merger.
If the Offer and the Merger are not completed within the expected timeframe or at all, we may be subject to a number of material risks, including: the trading price of our Shares may significantly decline to the extent that the market price of the Shares reflect positive market assumptions that the Offer and the Merger will be completed, and the related benefits will be realized; if the Merger Agreement is terminated under certain specified circumstances, we will be required to pay Gilead a termination fee of $151.6 million; the obligation to pay significant transaction costs, such as legal, accounting and financial advisory costs that are not contingent on closing of the Offer and the Merger; the diversion of management’s attention from our ongoing business operations towards the Offer and the Merger, for which we will have received little or no benefit if completion of the Offer and the Merger does not occur; and reputational harm including relationships with customers and business partners due to the adverse perception of any failure to successfully complete the Offer and the Merger.
Our ability to complete the Merger is subject to certain closing conditions that could adversely affectedaffect us or cause the Merger to be abandoned.
The obligation of Purchaser to accept for payment Shares validly tendered pursuant to the Offer is subject to customary closing conditions, including: (i) Shares having been validly tendered and not validly withdrawn that, considered together with all other Shares (if any) beneficially owned by Gilead and its affiliates, represent one more Share than 50% of the total number of Shares outstanding at the time of the expiration of the Offer (including, for the avoidance of doubt, all Shares that become outstanding as a result of the “cashless exercise” of the outstanding pre-funded warrants of the Company, as described above); (ii) the accuracy of the Company’s representations and warranties contained in the Merger Agreement (subject to any applicable Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers); (iii) the absence of a willful and material breach by the ongoing
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waived, if applicable), we can provide no assurance as to the
The Merger Agreement contains provisions that could discourage a potential competing acquirer of the Company or could result in a competing acquisition proposal being at a lower price than it might otherwise be.
The Merger Agreement contains provisions that, subject to certain exceptions, restrict our ability to solicit or negotiate any alternative acquisition proposal. The Merger Agreement contains certain termination rights for the Company and Gilead, including, among others, the right of (i) the Company to terminate the Merger Agreement in order to enter into a binding written definitive acquisition agreement providing for the consummation of a transaction for a Superior Offer (as defined in the Merger Agreement) and (ii) Gilead to terminate the Merger Agreement as a result of our Board of Directors changing its recommendation with respect to the Offer. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Gilead a termination fee in the amount of $151.6 million. These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of our business from considering or making a competing acquisition proposal, even if the potential competing acquirer was prepared to pay consideration with a higher per share cash value than the market value proposed to be received or realized in the Offer and the Merger, or might cause a potential competing acquirer to propose to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee and other costs that may become payable in certain circumstances under the Merger Agreement.
The announcement or pendency of the Transactions may result in disruptions to our business, divert management’s attention and/or disrupt our relationships with third parties and employees, any of which could negatively impact our operating results and ongoing business.
The Merger Agreement generally requires us to conduct our business in the ordinary course, subject to certain exceptions, including as required by applicable law, pending consummation of the Transactions, and subjects us to customary interim operating covenants that restrict us, without Gilead’s approval (such approval not to be unreasonably withheld, delayed or conditioned), from taking certain specified actions until the Transactions are consummated or the Merger Agreement is terminated in accordance with its terms. These restrictions could prevent us from pursuing certain business opportunities that may arise prior to the consummation of the Transactions and may affect our ability to execute our business strategies and attain financial and other goals and may impact our financial condition, results of operations and cash flows.
Our current and prospective employees may experience uncertainty about their future roles with us following the consummation of the Transactions, which may materially adversely affect our ability to retain and hire key personnel and other employees while the Transactions are pending. The pending Transactions could cause disruptions to our business operations inor business relationships with our existing and potential suppliers and others with whom we do business, and this could have an adverse impact on our operating results and business generally. Parties with which we have business relationships may experience uncertainty as to the years ended December 31, 2021future of such relationships and 2020, economic and health conditions in the United States and across mostmay delay or defer certain business decisions, seek alternative relationships with third parties, or seek to negotiate changes or alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.
The pursuit of the globeTransactions may place a significant burden on management and internal resources, which may have continueda negative impact on our ongoing business operations. It may also divert management’s time and attention from the day-to-day operation of our businesses and the execution of our other strategic initiatives. This could adversely affect our financial results.
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Stockholder litigation in connection with the Transactions may result in significant costs of defense, indemnification and liability.
The Company may be subject to change during 2021stockholder lawsuits challenging the Transactions. No assurance can be made as to the outcome of these and thereafter. The emergence of
Risks Related to Our Financial Condition and Capital Requirements
We will need additional capital in the future to sufficiently fund our operations and research.
We have incurred significant net losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability. As of December 31, 2021,2023, we had cash, cash equivalents and marketable securities totaling $416.2 million. To date, we have raised capital primarily through equity financings, licensing transactions and a structured finance arrangement. For example, in January 2023, we entered into a Collaboration and License Agreement with Kaken Pharmaceutical Co., Ltd. (Kaken), granting Kaken an exclusive license to commercialize and market seladelpar for the treatment of primary biliary cholangitis (PBC) in Japan in consideration for an upfront payment to us of $34.2 million that was paid in January 2023, potential milestone payments to us totaling up to ¥17.0 billion (approximately $128.0 million at contract inception date) for the achievement of certain regulatory and sales milestones in Japan and additional payments to us for the supply of seladelpar to Kaken. In September 2023, we sold 14,521,307 shares of common stock at $17.13 per share and a pre-funded warrant to purchase 583,771 shares of common stock in a public equity offering for total gross offering proceeds of approximately $194.6$258.7 million. OnIn January 2023, we sold 11,821,428 shares of common stock at $7.00 per share and a pre-funded warrant to purchase 2,142,857 shares of common stock at $6.9999 per share in a public equity offering for total gross offering proceeds of $97.7 million. In July 30, 2021, we entered into a Development Financing Agreement with an affiliate of Abingworth LLP (“Abingworth”) pursuant to which Abingworth has committed to provide us up to $100.0provided $75 million in funding of which we have already received $75 million. In November 2021, we sold 15,625,000 shares of common stock at $4.00 per share and
In the event we do not successfully raise sufficient funds to finance our product development activities,operations, we will curtail our product development activities and other activities commensurate with the magnitude of the shortfall orand our product development activities may cease altogether. To the extent that the costs of ongoing developmentour activities exceed our current estimates and we are unable to raise sufficient additional capital to cover such additional costs, we will
Our future funding requirements and sources will depend on many factors, including but not limited to the following:
the rate of progress and cost of our clinical studies;
the need for additional or expanded clinical studies;
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the rate of progress and cost of our Chemistry, Manufacturing and Control development, registration, validation and commercial programs;
the timing, economic and other terms of any licensing, collaboration or other similar arrangement into which we may enter;
the costs and timing of seeking and obtaining FDA and other regulatory approvals;
the extent of our other development activities;
| • | the costs and scope of our pre-commercialization activities; |
the costs of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
macroeconomic conditions that may impact our operations and financial condition; and
the effect of competing products and market developments.
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we willmay be prevented from pursuing development and commercialization efforts, which would have a material adverse effect on our business, operating results, prospects, and on our ability to develop and commercialize our product candidates.
Failure to remain in compliance with our obligations under the development financing agreementDevelopment Financing Agreement (the Financing Agreement) with Abingworth could lead to reduced funding under the agreement and/or the acceleration of potentially significant payments to Abingworth.
In July 30, 2021, we entered into a Development Financing Agreement (the Financing Agreement) with Abingworth, pursuant to which Abingworth agreed to providehas provided $75 million in funding to us to support our development of seladelpar for the treatment of PBC. Pursuant to the Financing Agreement, Abingworth has committed to provide us up to $100.0 million in funding, of which we have received $75 million through March 2022. Pursuant to the Financing Agreement, we will beare required to use commercially reasonable efforts to develop seladelpar and complete our development program in accordance with the Financing Agreement and an agreed timeline. In return, we willare obligated to pay to Abingworth (1) upon the first to occur of regulatory approval of seladelpar for the treatment of PBC in the U.S., U.K., Germany, Spain, Italy or France (Regulatory Approval), fixed success payments equal to 2.0x of the funding provided and (2) variable success payments equal to 1.1x of the funding provided upon first reaching certain U.S. product sales milestones. At the time that Abingworth receives, collectively, an aggregate of 3.1x of the funding provided, our payment obligations under the Financing Agreement will be fully satisfied.
The Financing Agreement terminates upon the payment of all payments owing to Abingworth, unless earlier terminated. The Agreement may be earlier terminated in a number of circumstances including (i) by Abingworth if we fail to use commercially reasonable efforts to develop seladelpar as set forth in the Financing Agreement or if we fail to make required payments (Fundamental Breach) or (ii) by either party if the other party materially breaches the Agreement (Material Breach). In certain instances, upon the termination of the Financing Agreement, we will be obligated to pay Abingworth a multiple of the amounts paid to us under the Agreement, including specifically,
| (i) | 310% of such amounts in the event that Abingworth terminates the agreement due to (x) a Fundamental Breach, (y) our bankruptcy, or (z) a safety concern resulting from gross negligence on our part or due to a safety concern that was material on the Effective Date and the material data showing such safety concern was not publicly known, disclosed to Abingworth, or in the diligence room made available to Abingworth, |
| (ii) | 200% of such amounts in the event the Agreement is terminated due to (x) our Material Breach or (y) the security interests of Abingworth being invalidated or terminated other than as set forth in the Financing Agreement, and |
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| (iii) | 100% of such amounts in the event of certain irresolvable disagreements within the executive review committee overseeing our development of seladelpar. |
In addition, if, following certain terminations, we continue to develop seladelpar for the treatment of PBC and obtain Regulatory Approval, we will make the payments to Abingworth as if the Financing Agreement had not been terminated, less any payments made upon termination.
The payments required under the Financing Agreement are significant. Failure to raise sufficient capital or generate sufficient revenue to make such payments if and as they become due, or failure to otherwise finance such payments would have a material adverse effect on our business. In addition, if we are unable to comply with our obligations under the Financing Agreement and/or one of the termination events described above occurs Abingworth may be relieved of their obligation to provide further funding under the Financing Agreement and our payments obligations thereunder may be accelerated. The acceleration of payments under the Financing Agreement would have a material impact on our business and we may not be able to make such payments at such time.
Our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain regulatory approval for, and commercialize product candidates.
Our ability to generate revenue and achieve profitability depends on our ability, alone or with collaborators, to successfully complete the development of, obtain the necessary regulatory approvals for, and commercialize, product candidates. We do not anticipate generating revenues from sales of our product candidates in the nearimmediate future, if ever.
Conducting preclinical testing and clinical trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data required to obtain regulatory approval and achieve product sales. Our anticipated development costs would likely increase if we do not obtain favorable results or if development of our product candidates is delayed. In particular, we would likely incur higher costs than we currently anticipate if development of our product candidates is delayed because we are required by a regulatory authority such as the FDA to perform studies or trials in addition to those that we currently anticipate.our current trials. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of any increase in our anticipated development costs.
In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs in connection with commercialization. As a result, we cannot assure you that we will be able to generate revenues from sales of any approved products, or that we will achieve or maintain profitability even if we do generate sales.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. We do not have any committed external source of funds other than the Financing Agreement.funds. If appropriate opportunities become available, we may seek to raise additional equity and/or debt capital to fund our continued operations, including clinical trials and other product development.
To raise additional funds to support our operations, we may sell additional equity or debt securities, enter into collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership
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making capital expenditures, and declaring dividends, and may impose limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.
If we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts, or grant others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions could adversely affect our current financial condition and projected business operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (SVB), where we currently hold a portion of our cash and cash equivalents, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC), as receiver. On March 12, 2023, the Department of the Treasury, the Federal Reserve and the FDIC jointly released a statement that depositors at SVB would have access to their funds, even those funds in excess of FDIC insurance limits, under a systemic risk exception. As of March 13, 2023, we had access to our cash and cash equivalents at SVB; however, there is uncertainty in the markets regarding the stability of regional banks and the safety of deposits in excess of the FDIC insured deposit limits. The ultimate outcome of these events cannot be predicted, but these events could have a material adverse effect on our business operations if our ability to access funds at SVB or any other banks we use is compromised.
Risks Related to Clinical Development and Regulatory Approval
After the completion of our clinical trials, we cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates and we cannot, therefore, predict the timing of any future revenue from our product candidates. Regulatory approval of a product candidate is not guaranteed, and the approval process is expensive, uncertain and lengthy.
We cannot commercialize our product candidates until the appropriate regulatory authorities, such as the FDA, have reviewed and approved the product candidate. The regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval for our product candidates. Additional delays may result if a product candidate is brought before an FDA advisory committee, which could recommend restrictions on approval or recommend
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substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons, including the following:
we may be unable to demonstrate to the satisfaction of regulatory authorities that a product candidate is safe and effective for any indication;
regulatory authorities may not find the data from nonclinical studies and clinical studies sufficient or may differ in the interpretation of the data;
regulatory authorities may require additional nonclinical or clinical studies;
regulatory authorities might not approve our third partythird-party manufacturers’ processes or facilities for clinical or commercial product;
regulatory authorities may change their approval policies or adopt new regulations;
regulatory authorities may disagree with the design or implementation of our clinical studies;
regulatory authorities may not accept clinical data from studies that are conducted in countries where the standard of care is potentially different from the jurisdiction of that regulatory authority;
the results of clinical studies may not meet the level of statistical significance required by regulatory authorities for approval;
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; andor
the data collection from clinical studies of our product candidates may not be sufficient to support the submission of a new drug application (NDA), marketing authorization or other equivalent submission, or to obtain regulatory approval in the United States or elsewhere.
In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased caution by the FDA and other regulatory authorities in reviewing new pharmaceuticals based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals.
Even if we obtain regulatory approval for our product candidates, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties.
Even if we obtain regulatory approval in the United States, the FDA may still impose significant restrictions on the indicated uses or marketing of our products or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Our products would be subject to additional ongoing FDA requirements governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. The holder of an approved NDA is obligated to monitor and report AEsadverse events (AEs) and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws. Furthermore, promotional materials must be approved by the FDA prior to use for any drug receiving accelerated approval.
In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practices (cGMP), and adherence to commitments made in the NDA. If we, or a regulatory agency, discover previously unknown problems with a product, such as quality issues or AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requesting recall or withdrawal of the product from the market or suspension of manufacturing.
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If we, or our third-party contractors, fail to comply with applicable regulatory requirements following approval of our product candidate, a regulatory agency may:
issue an untitled or warning letter asserting violation of the law;
seek an injunction or impose civil or criminal penalties up to and including imprisonment or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve a pending NDA or supplements to an NDA; or
request recall and/or seize product.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and inhibit our ability to generate revenues.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. If we are found to have improperly promoted our products, foroff-labeluses, we may become subject to significant fines and other liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. The FDA and other regulatory agencies also regulate the pre-approval promotion of an unapproved drug. If we receive marketing approval for our product candidates, physicians may nevertheless prescribe such products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such
Even if we obtain FDA approval for our product candidates in the United States, we may never obtain approval for or commercialize our product candidates outside of the United States, which would limit our ability to realize their full market potential.
In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements on a
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Coverage and adequate reimbursement may not be available for our future products, which could make it difficult for us to sell profitably, if approved.
Market acceptance and sales of any products that we commercialize will depend in part on the extent to which coverage and adequate reimbursement will be available from third-party payers,payors, including government health administration authorities, managed care organizations and private health insurers. Third-party payerspayors decide which therapies they will pay for and establish reimbursement levels. Third-party payerspayors in the United States often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any products that we develop will be made on a
Our relationships with health care professionals, customers and payors may be subject to applicable anti-kickback, fraud and abuse and other health care laws and regulations, which could expose us to significant penalties, including criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Health care professionals and third-party payors will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, third-party payors and customers may expose us to broadly applicable fraud and abuse and other health care laws and regulations that may constrain the business or financial arrangements and relationships through which we research, as well as market, sell and distribute our products. Restrictions under applicable federal and state health care laws and regulations, include the federal Anti-Kickback Statute, the federal False Claims Act, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, the federal false statements statute, the federal transparency requirements under the Patient Protection and Affordable Care Act,PPACA, as amended by the Health Care and Education Reconciliation Act, or PPACA, commonly referred to as the Physician Payments Sunshine Act, and analogous state laws and regulations, such as state anti-kickback and false claims laws.
Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, exclusion from government funded health care programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded health care programs.
Current laws and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the health care system that could prevent or delay marketing approval
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of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products for which we obtain marketing approval.
For example, the PPACA was enacted to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Since its enactment there have been judicial and Congressional challenges to certain aspects of the PPACA as well as efforts to repeal or replace certain aspects of the PPACA. For example, Congress considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the PPACA. It is unclear how litigation and the healthcare reform measures of the Biden administration will impact the PPACA and our business.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. In addition, there have been several recent congressional inquiries, proposed bills and other proposals designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products including instituting reference pricing. At the federal level, for example, in July 2021, the TrumpBiden administration used several meansreleased an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to propose or implementBiden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing
We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates and our business, if any, may be. Further, it
We depend on the success of our product candidates and we may not obtain regulatory approval or successfully commercialize our product candidates.
We have not marketed, distributed or sold any products. The success of our business depends upon our ability to develop and commercialize our product candidates. A concentration of risk and reliance on one product candidate may develop if we are unsuccessful, or less successful, in developing a product pipeline. The success of any product candidate will depend on many factors, including the following:
successful enrollment and completion of clinical trials, including, in the case of RESPONSE, sufficient subjects that received liver biopsies;
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the successful and timely collection and analysis of trial data;
receipt of marketing approvals from the FDA and regulatory authorities outside the United States for the product candidate;
establishing commercial manufacturing capabilities by making arrangements with third-party manufacturers;
launching commercial sales of the product, whether alone or in collaboration with others;
acceptance of the product by patients, the medical community and third-party payors;
effectively competing with other therapies;
a continued acceptable safety profile of the product following marketing approval; and
obtaining, maintaining, enforcing and defending intellectual property rights and claims.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.
We depend on the successful completion of clinical trials for our product candidates.
Clinical testing is possibleexpensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
We may experience a number of unforeseen events during clinical trials for our product candidates that could delay or prevent the commencement and/or completion of our clinical trials, including the following:
regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
the clinical study protocol may require one or more amendments delaying study completion;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional governmentalclinical trials or abandon product development programs;
the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, we may have to compete with other clinical trials to enroll eligible subjects, or subjects may drop out of these clinical trials at a higher rate than we anticipate;
the number of patients in our RESPONSE clinical trial that received biopsies may be insufficient to satisfy regulatory requirements;
clinical investigators or study subjects may fail to comply with clinical study protocols;
trial conduct and data analysis issues may occur, including, but not limited to, failure to collect and analyze data in a timely manner, data entry and/or labeling errors or data analysis errors;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
we might have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the subjects are being exposed to unacceptable health risks;
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| • | geo-political actions may interfere with our clinical trials; |
regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;
the cost of clinical trials of our product candidates may be greater than we anticipate;
reports of initial clinical results or topline data may change as additional source validation is undertaken;
the supply or quality of our clinical trial materials or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators to suspend or terminate the trials.
Because successful development of product candidates is uncertain, we are unable to estimate the actual funds required to complete research and development and commercialize our products under development.
Negative or inconclusive results of our future clinical trials of product candidates could cause the FDA or other regulatory authorities to require that we repeat or conduct additional clinical studies. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for our product candidates may be adversely impacted. For example, we recently filed an NDA seeking approval from the FDA for seladelpar for the second line treatment of PBC. The combined data from our trials may not be sufficient to gain approval from the FDA.
Geo-political turmoil between Russia and Ukraine have caused us to wind down clinical trial activity in Russia.
We had a small number of clinical sites in Russia in our RESPONSE clinical trial. Ongoing geo-political turmoil and continuing military action in the region, together with widening sanctions imposed on Russia, caused us to wind down clinical trial activity in Russia. Clinical trial activity in Russia concluded in the end of the fourth quarter of 2023.
Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales.
Clinical testing is takenexpensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. We may experience delays in responseclinical trials at any stage of the development and testing of our product candidates, and any delay could result in increased costs to us. Any clinical trial we undertake may not begin on time, have an effective design, enroll a sufficient number of subjects, or be completed on schedule, if at all.
Events that may result in delays or unsuccessful completion of clinical trials include the following:
competition for eligible patients from competing clinical trials;
delays in obtaining regulatory approval to commence a trial;
delays in reaching agreement with the FDA or other regulatory authorities on final trial design;
imposition of a clinical hold following a reported safety event;
an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities;
delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites;
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delays in obtaining required institutional review board (IRB) approval at each site;
delays in recruiting suitable patients to participate in a trial;
| • | delays in having subjects complete participation in a trial or return for post-treatment follow-up; |
delays caused by subjects dropping out of a trial due to side effects or otherwise;
changes to treatment guidelines or the introduction of a new standard of care;
delays caused by clinical sites dropping out of a trial;
time required to add new clinical sites;
delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials; and
delays in importing clinical trial materials into foreign countries where our clinical trials are being conducted.
If initiation or completion of any clinical trials we may undertake for our product candidates is delayed for any of the above reasons, our development costs may increase, the approval process could be delayed, any periods during which we may have the exclusive right to commercialize our product candidates may be reduced and our competitors may bring products to market before us. Any of these events could impair our ability to generate revenues from product sales, which would have a material adverse effect on our business.
Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.
In May 2016, we announced results of a High Dose Phase 2 clinical study of seladelpar in patients with PBC. During the course of this trial three cases of asymptomatic, reversible transaminase elevations occurred, and we made the decision to discontinue the study early after review of safety and efficacy data demonstrated a need for further dose reduction to optimize clinical safety and efficacy. The emergence of AEs and histological observations in subsequent seladelpar clinical trials could prevent us from further developing seladelpar or could result in the denial of regulatory approval.
Furthermore, if any of our approved products cause serious or unexpected side effects after receiving market approval, a number of potentially significant negative consequences could result, including the following:
regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution in a form of a risk evaluation and mitigation strategy (REMS) plan;
regulatory authorities may require the addition of labeling statements, such as black box or other warnings or contraindications that could diminish the usage of the product or otherwise limit the commercial success of the affected product;
we may be required to change the way the product is administered or to conduct additional clinical studies;
we may choose to discontinue sale of the product;
patients and the medical community may decide to use a competing drug;
we could be sued and held liable for harm caused to patients; or
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our product candidates.
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Potential conflicts of interest arising from relationships with principal investigators for our clinical studies and any related compensation with respect to clinical studies could adversely affect the drug approval process.
Principal investigators for our clinical studies may serve as scientific advisors or consultants to us or may be affiliated with our other service providers, including clinical research organizations or site management organizations, and from time to time receive cash compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical study site or in the applicable study may be questioned or jeopardized.
We may be subject to costly claims related to our clinical studies and may not be able to obtain adequate insurance.
Because we conduct clinical studies in humans, we face the risk that the use of seladelpar or other product candidates will result in adverse side effects. We cannot predict the possible harms or side effects that may result from our clinical studies. Although we have clinical study liability insurance, our insurance may be insufficient to cover any such events. There is also a risk that we may not be able to continue to obtain clinical study coverage on acceptable terms. In addition, we may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limit of, our insurance coverage. There is also a risk that third parties that we have agreed to indemnify could incur liability. Any litigation arising from our clinical studies, even if we are ultimately successful, would consume substantial amounts of our financial and managerial resources and may create adverse publicity.
Risks Related to Our Reliance on Third Parties
We rely on third-party manufacturers to produce our preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercial supplies of any approved products.
We do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage and distribution, or testing. We currently rely on third-party manufacturers for supply of our preclinical and clinical drug supplies. We expect that in the future we will continue to rely on such manufacturers for drug supplies that will be used in clinical trials of our product candidates, and for commercializationthe commercial sale of any of our product candidates that receive regulatory approval.
The facilities used by our contract manufacturers to manufacture the approved product must be approved by the FDA pursuant to inspections that will be conducted only after we submit an NDA to the FDA, if at all.FDA. A representative from the EMAEuropean Medicines Agency (EMA) or another regulatory authority may also require inspection and approval of such contract manufacturing facilities. We are completely dependent on our contract manufacturing partners for compliance with the FDA’s requirements for the manufacture of finished pharmaceutical products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the FDA’s strict regulatory requirements of safety, purity and potency, we will not be able to secure and/or maintain FDA approval for our product candidates. In addition, we have no direct control over the ability of the contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If our contract manufacturers cannot meet FDA standards, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our products. No assurance can be given that our manufacturers can continue to make clinical and commercial supplies of product candidates, at an appropriate scale and cost to make it commercially feasible.
In addition, we do not have the capability to package and distribute finished products to pharmacies and other customers. If we receive marketing approval from the FDA, we intend to sell pharmaceutical product packaged and distributed by one or more pharmaceutical product packagers/distributors. Although we have entered into agreements with our current contract manufacturers and packager/distributor for clinical trial material, we will need to enter into commercial agreements with contract manufacturers and with one or more pharmaceutical product packagers/distributors to ensure proper supply chain management once we are authorized to make commercial sales of our product candidates. However, weWe may be unable to maintain agreements or negotiate commercial supply agreements on commercially reasonable terms with contract manufacturers and pharmaceutical product packagers/distributors, which could delay our ability to launch commercial sales and/or have a material adverse impact upon our business.
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We rely on limited sources of supply for our product candidates, and any disruption in the chain of supply may cause delay in developing and commercializing for each product candidate.
If supply from an approved vendor is interrupted or suspended, there could be a significant disruption in commercial supply of our products. An alternative vendor would need to be qualified through a supplemental registration,
Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization of our products.
As the manufacturing processes are scaled up they may reveal manufacturing challenges or previously unknown impurities that could require resolution in order to proceed with our planned clinical trials and obtain regulatory approval for the commercial marketing of our products. In the future, we may identify manufacturing issues or impurities that could result in delays in the clinical program and regulatory approval for our products, increases in our operating expenses, or failure to obtain or maintain approval for our products.
Our reliance on third-party manufacturers entails risks, including the following:
the inability to meet our product specifications, including product formulation, and quality requirements consistently;
a delay or inability to procure or expand sufficient manufacturing capacity;
| • | manufacturing and product quality issues, including those related to scale-up of manufacturing; |
| • | costs and validation of new equipment and facilities required for scale-up; |
a failure to comply with cGMP and similar quality standards;
the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;
the reliance on a limited number of sources, and in some cases, single sources for key materials, such that if we are unable to secure a sufficient supply of these key materials, we will be unable to manufacture and sell our products in a timely fashion, in sufficient quantities or under acceptable terms;
the lack of qualified backup suppliers for those materials that are currently purchased from a sole or single source supplier;
operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier;
carrier disruptions or increased costs that are beyond our control; and
the failure to deliver our products under specified storage conditions and in a timely manner.
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Any of these events could lead to delays in any clinical study we may undertake, failure to obtain regulatory approval or impact our ability to successfully commercialize our products. Some of these events could be the basis for FDA or other regulatory authorities’ action, including injunction, recall, seizure, or total or partial suspension of production.
We rely on third parties to conduct, supervise and monitor our clinical studies, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We rely on contract service providers (CSPs), including clinical research organizations, clinical trial sites, central laboratories and other service providers to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities, we have limited influence over their actual performance. We have relied and plan to continue to rely upon CSPs to monitor and manage data for clinical programs for our product candidates, as well as the execution of nonclinical studies. We control only certain aspects of our CSPs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CSPs does not relieve us of our regulatory responsibilities.
We and our CSPs are required to comply with the FDA’s guidance, which follows the International Counsel for HarmonizationCouncil on Harmonisation Good Clinical Practice (ICH GCP), which are regulations and guidelines enforced by the FDA for all of our product candidates in clinical development. The FDA enforces the ICH GCP through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CSPs fail to comply with the ICH GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. Our CSPs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and nonclinical programs. These CSPs may also have relationships with other entities, including our competitors, for whom they may also be conducting clinical studies, or other drug development activities that could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our confidential information, including our intellectual property, by CSPs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology, among other things. If our CSPs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates that we develop would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
Risks Related to Commercialization of Our Product Candidates
The commercial success of any product will depend upon the acceptance of these products by the medical community, including physicians, patients and health care payors.
If any of our product candidates receive marketing approval, they may nonetheless be unable to gain sufficient market acceptance by physicians, patients, health care payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of any of our products will depend on a number of factors, including the following:
demonstration of clinical safety and efficacy in our clinical trials;
the risk/benefit profile of our products;
the relative convenience, ease of administration and acceptance by physicians, patients and health care payors;
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the prevalence and severity of any side effects;
the safety of products seen in a broader patient group, including its use outside the approvedin unapproved indications;
limitations or warnings contained in the FDA and other regulatory authorities approved label for the relevant product;
acceptance of the product by physicians, other health care providers and patients as a safe and effective treatment;
the potential and perceived advantages of products over alternative treatments;
the timing of market introduction of competitive products;
pricing and cost-effectiveness;
the effectiveness of our or any future collaborators’ sales and marketing strategies;
manufacturing or product quality;
our ability to obtain formulary approval;
our ability to obtain and maintain sufficient third-party coverage or reimbursement, which may vary from country to country; and
the effectiveness of our or any future collaborators’ sales, marketing and distribution efforts.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product, we may be unable to generate any revenue.
We are currently do not havebuilding an organization for the sales, marketing and distribution of pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved we must build our sales, marketing, operations, managerial and other
If we are unable to buildsuccessfully manage pre-commercialization activities, including but not limited to building our own sales force (or negotiate one or negotiate amore strategic partnershippartnership(s) for the commercialization of our products,products) and establish marketing and distribution channels, we may be forced to delay the potential commercialization of the product, or reduce the scope of our sales or marketing activities. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring the product to market or generate product revenue.
If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and may not become profitable. We will be competing with companies that currently have extensive and well-funded marketing and sales operations.operations and more experience establishing distribution channels. Without an internal team or the support of a third party to perform sales and marketing functions, we may be unable to compete successfully against these more established companies.
In addition, there are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
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If we obtain approval to commercialize any products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.
If our product candidates are approved for commercialization outside the United States, we expect that we will be subject to additional risks related to international operations, including the following:
different regulatory requirements for drug approvals in foreign countries;
compliance with local healthcare and pricing regulations;
reduced protection for intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
| • | differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls; |
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign taxes, including withholding of payroll taxes;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
workforce uncertainty in countries where labor unrest is more common than in the United States;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;abroad
ensuring patient access through supply and packaging infrastructure requirements; and
business interruptions resulting from geopolitical actions, including war and terrorism, pandemics, or natural disasters including earthquakes, typhoons, volcanic eruptions, floods and fires.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we would need to comply. Many U.S.-based biopharmaceutical companies have found the process of marketing their own products in Europe to be very challenging.
If our competitors develop and market products that are more effective, safer or less expensive than our own, our commercial opportunities will be negatively impacted.
The life sciences industry is highly competitive, and we face significant competition from other pharmaceutical, biopharmaceutical and biotechnology companies and possibly from academic institutions, government agencies and private and public research institutions that are researching, developing and marketing products designed to address diseases that we are seeking to treat. Our competitors generally have significantly greater financial, manufacturing, marketing and drug development resources. Large pharmaceutical companies, in particular, have extensive experience in the clinical testing of, obtaining regulatory approvals for, and marketing of, drugs. New developments, including the development of other pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace.
These developments may render our product candidates obsolete or noncompetitive. Compared to us, potential competitors may have substantially greater:
research and development resources, including personnel and technology;
regulatory experience;
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experience in pharmaceutical development and commercialization;
ability to negotiate competitive pricing and reimbursement with third-party payors;
experience and expertise in the exploitation of intellectual property rights; and
capital resources.
As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we do or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. The competitors may also develop products that are more effective, better tolerated, more useful and less costly than our products and they may also be more successful in manufacturing and marketing their products.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical studies, and will face an even greater risk if we sell our products commercially. An individual or a group of individuals may bring a liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in the following:
decreased demand for our products;
impairment to our business reputation;
withdrawal of clinical study participants;
distraction of management’s attention from our primary business;
substantial monetary awards to patients or other claimants;
the inability to commercialize our products; and
loss of revenues.
We carry product liability insurance for our clinical studies. Further, we intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for any of our product candidates. However, we may be unable to obtain this product liability insurance on commercially reasonable terms and with insurance coverage that will be adequate to satisfy any liability that may arise. On occasion, large judgments have been awarded in class action or individual lawsuits relating to marketed pharmaceuticals. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates. Because we have limited financial and managerial resources, we focus on specific product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. We may focus our efforts and resources on product candidates that ultimately prove to be unsuccessful.
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If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights.
Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our market.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our products and product candidates. The strength of patents in the biotechnology
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary
Further, the laws of some foreign countries do not protect patents and other proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems
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in protecting and defending our intellectual property abroad. We may also fail to pursue or obtain patents and other intellectual property protection relating to our products and product candidates in all foreign countries.
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts or otherwise affect our business.
Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter party
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist that might be enforced against our products or product candidates, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
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We license certain key intellectual property from third parties, and the loss of our license rights could have a materially adverse effect on our business.
We are a party to a number of technology licenses that are important to our business and may enter into additional licenses in the future. For example, we rely on an exclusive license to certain patents and
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is invalid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter-claims against us.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in a litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated fornon-compliancewith these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
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abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits,
Risks Related to Our Business Operations and Industry
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are dependent on principal members of our executive team. While we have entered into employment offer letters with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not maintain “key person” insurance for any of our executives or other employees. Recruiting and retaining other qualified employees for our business, including clinical, scientific, technical and sales and marketing personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry, which is likely to continue. We also experience competition from universities, competitors and research institutions for the hiring of scientific and clinical personnel. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. In addition, failure of any of our clinical studies may make it more challenging to recruit and retain qualified personnel. If we are unable to successfully recruit key employees or replace key executives or key employees, it may adversely affect the progress of our research, development and commercialization objectives.
In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategies. Our consultants and advisors may be engaged by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us, which could also adversely affect the progress of our research, development and commercialization objectives.
As we continue to build our clinical and drug development and commercial operations, we will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
As we continue to build our clinical and drug development programs, we are expanding our employee base to increase our managerial, clinical, scientific, sales and marketing and other operational teams. Such growth imposes additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a greater amount of attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among current employees. Our expected growth could require greater capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to create value and/or generate revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to develop and commercialize seladelpar and other potential product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.
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Our business could be negatively affected as a result of the actions of activist or hostile stockholders.
Our business could be negatively affected as a result of stockholder activism, which could cause us to incur significant expense, hinder execution of our business strategy, and impact the trading value of our securities. For
Significant disruptions of information technology systems or breaches of data security, affecting our systems or those of third parties upon which we rely, could materially adversely affect our business, results of operations and financial condition.
We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business, particularly in view of the ongoing
The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. During times of war and other major conflicts, we, the third parties upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. The
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costs to us to mitigate network security problems and security vulnerabilities could be significant, and our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position. If such an event is to occur and cause interruptions in our operations or our vendors, it may result in a material disruption of our product development programs and our reputation could be materially damaged. We could also be exposed to a risk of loss or litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition.
While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may cause stakeholders (including investors and potential customers) to stop supporting our platform, deter new customers from products, and negatively impact our ability to grow and operate our business.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
Changes in and failures to comply with United States and foreign privacy and data protection laws, regulations and standards may adversely affect our business, operations and consolidated financial performance. The actual or perceived failure to comply with such obligations could lead to government enforcement actions (which could include civil or criminal penalties), fines and sanctions, private litigation and/or adverse publicity and could negatively affect our operating results and business.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data collected about trial participants in connection with clinical trials, and other sensitive third-party data. These
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activities result in our being subject to or affected by numerous federal, state and foreign laws and regulations, as well as regulatory guidance, governing the collection, use, disclosure, retention, and security of personal data, such as information that we collect about patients and healthcare providers in connection with clinical trials in the United States and abroad.
The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, affect our or our vendors’ ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, diversion of management time and effort and proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising.
In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.information (see “Federal and State HealthCare Laws” above). Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020—collectively, CCPA—applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents.
Additionally, in the past few years, numerous U.S. states in addition to California—including Virginia, Colorado, Connecticut, and Utah—have also
Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities. Many countries in these regions have established or are in the process of establishing privacy and data security legal frameworks with which we, our customers, or our vendors must comply. For example, the EU has adopted the General Data Protection Regulation (EU) 2016/679, or GDPR, which went into effect in May 2018 and introducesincludes strict requirements for processing the personal information of EU subjects, including clinical trial data. The GDPR has increased compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process information about them. The processing of sensitive personal data, such as physical health condition, has imposed heightened compliance burdens under the GDPR and is a topic of active interest among foreign regulators. In addition, the GDPR provides for robust regulatory enforcement and fines for a noncompliant company. Under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
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Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, diversion of management time and effort and proceedings against us by governmental entities, litigation by private plaintiffs or others, additional reporting requirements and/or oversight, bans on processing personal data, orders to destroy or not use personal data, and imprisonment of company officials. Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including, as relevant, clinical trials); inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Risks Relating to Owning Our Common Stock
An active trading market for our common stock may not continue and the market price for our common stock may decline in value.
Our common stock has historically beenwas formerly listed on the Nasdaq Capital Market under the symbol “CBAY” and insince the second quarter of 2018 it beganhas been trading on the Nasdaq Global Select Market. Historically, trading volume for our common stock has been limited.Market under the symbol “CBAY”. The historical trading prices of our common stock on the Nasdaq Capital Market and the Nasdaq Global Select Market may not be indicative of the price levels at which our common stock will trade in the future, and we cannot predict the extent to which investor interest in us generally will continue to support an active public trading market for our common stock or how liquid will be that public market.
Our stock price is volatile, and our stockholders’ investment in our stock could decline in value.
The historical trading price of our common stock has been volatile. Our stock price may continue to be subject to wide fluctuations in response to a variety of factors, including:
announcements of significant acquisitions, strategic partnerships, joint ventures or completing the RESPONSE clinical trialcapital commitments by us or our other clinical trials;competitors;
inability to obtain additional funding;
any delay in filing an Investigational New Drug (IND) application or NDA for any of our future product candidates and any adverse development or perceived adverse development with respect to the FDA’s review of an IND or NDA;
failure to enter into new collaborations;
failure by us or our licensors to prosecute, maintain or enforce our intellectual property rights;
failure to successfully develop and commercialize our future product candidates;
changes in laws or regulations applicable to future products;
changes in the structure of health care payment systems;
inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;
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adverse regulatory decisions;
introduction of new products, services or technologies by our competitors;
failure to meet or exceed financial projections we may provide to the public;
failure to meet or exceed the estimates and projections of the investment community;
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
announcements of significant or potential equity or debt sales by us;
delays in completing our clinical trials;
adverse, delayed or inconclusive results in our clinical trials;
adverse or inconclusive results or delays in preclinical testing;
announcements of clinical trial plans or results by us or our competitors;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
additions or departures of key scientific or management personnel;
significant lawsuits, including patent or stockholder litigation;
changes in the market valuations of similar companies;
sales of our common stock by us or our stockholders in the future; and
trading volume of our common stock.
In addition, companies trading in the stock market in general have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. BroadMacroeconomic conditions and broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
Significant additional capital may be needed in the future to continue our product development efforts in current and future clinical trials and operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If in the future we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. These sales may also result in new investors gaining rights superior to our existing stockholders. Pursuant to our equity incentive plans, we are authorized to grant stock options and other equity-based awards to our employees, directors and consultants. The number of shares available for future grant under our equity incentive plans as of December 31, 20212023 was 1,588,6139,189,960 shares.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our certificate of incorporation and our bylaws may delay or prevent an acquisition of us. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our
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current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management team. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. Finally, our charter documents establish advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings. Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders.
We may be unable to utilize our federal and state net operating loss carryforwards to reduce our income taxes.
As of December 31, 2023, we had net operating loss (“NOL”) carryforwards of $365.6 million and $214.9 million available to reduce future taxable income, if any, for U.S. federal income tax and state income tax purposes, respectively. If not utilized, $78.4 million of our federal NOL carryforwards will begin to expire in 2034 and our state NOL carryforwards will begin to expire in 2028. Portions of these NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under legislation enacted in 2017, as modified by legislation enacted in 2020, unused U.S. federal NOLs generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of taxable income. At the state level, there may be periods during which the use of NOLs is suspended or otherwise limited. In addition, under Section 382 of the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which generally occurs if the percentage of the corporation’s stock owned by 5% stockholders increases by more than 50% over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Our existing NOLs may be subject to limitations arising from previous ownership changes. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change. The Section 382 analysis was rolled forward through December 31, 2023 with no further restrictions on use of net operating loss or credit carryforwards.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.
New tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted differently, changed, repealed or modified at any time. Any such enactment, interpretation, change, repeal or modification could adversely affect us, possibly with retroactive effect. For instance, the Inflation Reduction Act of 2022 imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases. In addition, for certain research and experimental expenses incurred in tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act (the Tax Act) requires the capitalization and amortization of such expenses over five years if incurred in the United States and fifteen years if incurred outside the United States, rather than deducting such expenses currently. Although there have been legislative proposals to repeal or defer the capitalization requirement, there can be no assurance that such requirement will be repealed, deferred, or otherwise modified. Changes in corporate tax rates, the realization of our net deferred tax assets, the taxation of foreign earnings and the deductibility of expenses under the Tax Act, as amended by the CARES Act or any future tax reform legislation, could have a material impact on the value of our deferred tax assets, result in significant one-time charges and increase our future tax expenses.
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General Risks
We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.
We do not anticipate paying cash dividends in the future. As a result, only appreciation of the price of our common stock, which may never occur, will provide a return to stockholders. Investors seeking cash dividends should not invest in our common stock.
We may be subject to securities litigation, which is expensive and could divert management attention.
Our share price is volatile, and in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
Risk management and strategy
We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, and data amassed from our clinical trials (“Information Systems and Data”).
Our information technology department, with the support of our senior management, assesses and manages the Company’s cybersecurity threats and risks. Our information technology department leverages third-party service providers to identify cybersecurity threats by monitoring and evaluating our threat environment, and then assesses these risks. We, and/or our third-party service providers, use various methods in identifying and assessing these risks, including, for example, manual and automated tools to identify and combat cybersecurity threats, analyzing reports of threats, conducting scans and assessments of the threat environment and to identify vulnerabilities, the use of detection and response services (including behavioral analytics and machine learning to identify security threats) and conducting reviews of third-party service providers, among other things. We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including for example penetration testing, threat intelligence, dark web reporting, cybersecurity consulting and software, and professional services for implementation and security architecture.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example, physical security and access controls, asset management, systems monitoring, incident detection and response, risk assessment, the implementation of security standards and certifications, encryption of data, network security controls, and a disaster recovery/business continuity plan, among other mitigation tactics.
Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall risk management processes. For example, our information technology department works with its management and with legal and compliance to evaluate material risks from cybersecurity threats against our overall business objectives, working with other individuals from senior management as needed. Certain cybersecurity issues may then be reported to the board of directors.
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Moreover, we use third-party service providers to perform a variety of functions throughout our business, such as application providers, hosting companies, contract research organizations and contract manufacturing organizations. Depending on the nature of the services provided, our information technology department may review certain third-party service providers that include the assessment of the service provider’s cybersecurity systems and controls. Depending on the nature of the services provided and the identity of the provider, we may impose contractual obligations related to cybersecurity on the provider.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K, including in Risks Related to Our Business Operations and Industry.
Governance
Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function and is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including the management functions of information technology and legal and compliance, who have combined decades of experience in compliance and managing cybersecurity risks.
Our information technology department is responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the Company’s overall risk management strategy, communicating key priorities to relevant personnel, and is responsible for approving budgets related to cybersecurity. A wider group of personnel, including the management functions of information technology and legal and compliance, help prepare for cybersecurity incidents, work in conjunction with others to approve cybersecurity processes, and review security assessments and other security-related reports.
Our cybersecurity incident response process is designed to escalate certain cybersecurity incidents to members of senior management, depending on the circumstances. Members of senior management may work with the Company’s incident response team to help the Company mitigate and remediate cybersecurity incidents of which they are notified. In addition, the Company’s incident response process includes reporting to the board of directors for certain cybersecurity incidents.
The board receives periodic reports concerning the Company’s significant cybersecurity threats and risk and the processes the Company has implemented to address them. The board also receives periodic reports, summaries or presentations related to cybersecurity threats, risk and mitigation.
Item 2. Properties
Our corporate office is located in Newark,Fremont, California. Our office lease for that facility terminates on January 15, 2024 and has an option to extend the lease for an additional five years.May 31, 2032. We believe that our current facilities are sufficient for our needs for the foreseeable future.
Item 3. Legal Proceedings
From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could reasonably be expected to have a material adverse effect on our results of operations, financial condition or cash flows. Apart from such incidental matters, the following demand letters and draft complaints relating to the Transactions have been submitted to the Company.
Between February 26 and 27, 2024, the Company received three demand letters from purported holders of Shares, one of which enclosed a draft complaint. The Company also separately received a draft complaint from a
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purported holder of Shares that was unaccompanied by a demand letter. Each demand letter alleges disclosure deficiencies in the U.S. District Court forSchedule 14D-9 and demands an issuance of corrective disclosures. Both of the Northern Districtdraft complaints identify as prospective defendants the Company and members of California, alleging misappropriationthe Company Board. The draft complaints allege that the defendants caused to be filed with the SEC a materially incomplete and misleading Schedule 14D-9 in violation of trade secretsSections 14(d)(4), 14(e) and 20(a) of the Exchange Act and Rule 14D 9 promulgated thereunder. Among other remedies, the draft complaints threaten to seek an order enjoining the defendants from proceeding with or consummating the Offer, unless and until the defendants disclose certain allegedly material information that was allegedly omitted from the Schedule 14D-9; granting rescissory damages; awarding the plaintiff costs and disbursements of its action, including reasonable attorneys’ and expert fees and expenses; and granting such other and further relief as the court may deem just and proper. The Company believes that the allegations contained in the demand letters and draft complaints are without merit.
On February 26, 2024, the Company received a demand letter from a purported holder of Shares that requests access to certain books and records of the Company to investigate purported breaches of fiduciary duty, director independence and disinterestedness, corporate wrongdoing and/or inadequate disclosures in connection with the Transactions and related causesto the transaction documents. The Company is preparing a response.
Additional demand letters and draft complaints may be submitted to the Company and lawsuits may be filed against the Company and its Board of action basedDirectors, in each case, challenging the Transactions and/or alleging deficiencies with respect to the Solicitation/Recommendation Statement on our receipt of a Genfit protocol synopsis for Genfit’s Phase 3 clinical trial of its drug candidate elafibranor in patients with primary biliary cholangitis. An Amended Complaint was filed on April 16, 2021 with substantially the same allegations. Genfit seeks damages in an unspecified amount as well as injunctive relief. We have stated in pleadings that we did not request or take any steps to obtain Genfit’s protocol synopsis, have taken diligent steps to remove and quarantine it, and are not using any Genfit trade secrets in our clinical trials. On March 12, 2021, the court granted a Temporary Restraining Order (later converted to a Preliminary Injunction), prohibiting us from accessing or disseminating the protocol synopsis, using any Genfit trade secrets contained therein or destroying any evidence related thereto. We filed a Motion to Dismiss the Amended Complaint that was granted on September 9, 2021, with leave to amend. Genfit filed a Second Amended Complaint on October 15, 2021 with
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Common Equity
Our common stock is listed on the Nasdaq Global Select Market under the symbol “CBAY”. As of February 28, 2022,January 31, 2024, there were approximately 221172 holders of record of our common stock, although there are a substantially greater number of “beneficial holders,” whose shares are held of record by banks, brokers and other financial institutions in “street name.”
Dividend Policy
We have never declared or paid any cash dividends to our stockholders. Our board of directors will make any future decisions regarding dividends. We currently intend to retain and use any future earnings, if any, for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Under our Development Financing Agreement with Abingworth we are not permitted to pay dividends without the consent of Abingworth. Except for the restrictions under our agreement with Abingworth, our board of directors has complete discretion on whether to pay dividends. Even if our board of directors is able to and decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
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Performance Graph
The following graph assumes an initial investment of $100 in our common stock on January 1, 2019, as well as the stocks comprising the Nasdaq Composite Index (^IXIC), and the stocks comprising the Nasdaq Biotechnology Index (^NBI). All results assume the reinvestment of dividends, if any, and are calculated as of each month end. Historical stockholder return is not necessarily indicative of the performance to be expected for any future periods.
Item 6. [Reserved]
Item 7
Forward-Looking Statements
Some of the statements under in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “Cautionary Language Regarding Forward Looking Statements” at the beginning of this Annual Report for cautionary information regarding forward-looking statements. These statements reflect the Company’s current views with respect to future events and are based on assumptions and subject to risks and uncertainties and appear throughout this Annual Report onForm 10-Kand are statements regarding our current expectation, belief, or intent, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding our expectations with respect to the following: the Offer, the Merger and other related matters; our business and scientific strategies; the progress of our product development programs, and the timing of results thereof;results; regulatory submissions and approvals; the impact of theCOVID-19pandemic, including the emergence ofCOVID-19variants such as the Delta and Omicron variants, on our company and operations; the anticipated benefits of our development financing agreement with Abingworth; our drug discovery technologies; our research and development expenses; protection of our intellectual property; sufficiency of our cash and capital resources and the need for additional capital; and our operations and legal risks. You should not place undue reliance on these forward-looking statements. Our actual
Overview
CymaBay Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need.
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Our lead product candidate, seladelpar, is a potent and selective agonist of peroxisome proliferator activated receptor delta (PPAR
On February 11, 2024, we terminated our ongoing PBC studiesentered into the Merger Agreement with Gilead and Purchaser, which provides for the acquisition of the Company by Gilead in a two-step all cash transaction, consisting of the Offer, followed by the Merger, with the Company continuing as the surviving corporation.
On February 23, 2024, Purchaser commenced the Offer for all of the Company’s Shares, other seladelpar-related studiesthan any Excluded Shares, at the Offer Price, net to the seller in cash, without interest and subject to any required withholding of taxes. The Offer will initially remain open until March 21, 2024 (unless otherwise agreed to in writing by Gilead and us), which period may be extended for additional periods of up to 10 business days per extension (or such other duration as may be agreed to in writing by the Company and Gilead) to permit the conditions to the Offer to be satisfied.
The obligation of Purchaser to accept for payment Shares validly tendered pursuant to the Offer is subject to customary closing conditions, including: (i) Shares having been validly tendered and not validly withdrawn that, were ongoingconsidered together with all other Shares (if any) beneficially owned by Gilead and its affiliates, represent one more Share than 50% of the total number of Shares outstanding at the time of the expiration of the Offer (including, for the avoidance of doubt, all Shares that time. Specifically,become outstanding as a result of the decision to halt development“cashless exercise” of seladelpar was based on initial histological observations seen in our Phase 2b studythe outstanding pre-funded warrants of seladelpar in patients with NASH that were observedthe Company, as described above); (ii) the accuracy of the Company’s representations and warranties contained in the first blinded trancheMerger Agreement (subject to any applicable Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers); (iii) the absence of
As soon as practicable following the acceptance of the Shares validly tendered and not validly withdrawn pursuant to the Offer and the consummation of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger Agreement, the Merger will be effected under Section 251(h) of the DGCL without a meeting or vote of the Company’s stockholders.
At the Effective Time, each issued and outstanding Share, other than any Excluded Shares, any Tendered Shares or any Dissenting Shares (as defined in the Merger Agreement), will be converted into the right to receive the Merger Consideration, in cash, without interest and subject to any required withholding of taxes.
At the Effective Time, each stock option to purchase Shares that is then outstanding and unexercised, whether or not vested and which has a per-share exercise price that is less than the dataMerger Consideration, will be automatically canceled and converted into the right to receive a lump-sum cash payment equal to (i) the excess of (a) the Merger Consideration over (b) the exercise price payable per Share under such stock option, multiplied by (ii) the total number of Shares subject to such stock option immediately prior to the Effective Time.
At the Effective Time, each restricted stock unit award with respect to Shares that is then outstanding will be automatically canceled and converted into the right to receive a lump-sum cash payment equal to the product,
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rounded to the nearest cent, of (i) the number of Shares subject to such restricted stock unit award as of the Effective Time and (ii) the Merger Consideration.
At the Offer Acceptance Time, each pre-funded warrant of the Company to purchase Shares that is outstanding immediately prior to the Effective Time will automatically be deemed to be exercised in aggregate did not support liver injury relatedfull in a “cashless exercise” pursuant to seladelpar. We subsequently discussed the data,warrant agreement to which such warrant is subject. At the panel’s conclusions, and other mattersEffective Time, holders of Shares issued pursuant to such “cashless exercise” of the pre-funded warrants of the Company in accordance with the FDAapplicable warrant agreements and the Merger Agreement shall become entitled to the Merger Consideration as described above in July 2020,respect of Shares other than the FDA liftedExcluded Shares, the clinical hold, thereby permitting usTendered Shares and any Dissenting Shares.
The Merger Agreement contains certain termination rights for the Company and Gilead. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to reinstate clinical developmentpay Gilead a termination fee in the amount of seladelpar. Specifically, we made the strategic decision to refocus our strategy primarily on clinical development of seladelpar in PBC.
Seladelpar—Primary Biliary Cholangitis (PBC)
In December 2023, we submitted a New Drug Application (NDA) to the decisionU.S. Food and Drug Administration (FDA) for seladelpar, our investigational treatment for the management of PBC, including pruritus in adults without cirrhosis or with compensated cirrhosis (Child Pugh A) who are inadequate responders or intolerant to reinstate clinical developmentursodeoxycholic acid (UDCA). In February 2024, we announced that (i) the FDA accepted our NDA for seladelpar and granted a priority review and set a Prescription Drug User Fee Act (PDUFA) target action date of August 14, 2024 and notified us that it is not currently planning to hold an advisory committee meeting to discuss the application, (ii) the U.K. Medicines and Healthcare products Regulatory Agency accepted for filing the application of the Company for approval of seladelpar for treatment of PBC, including pruritus, in late 2020,early February 2024 and (iii) the Company submitted a similar application for the approval of seladelpar for the treatment of PBC, including pruritus, with the European Medicines Agency, in early February 2024. Previously, seladelpar was granted Breakthrough Therapy Designation by the FDA in 2019 and in October 2023, the FDA revised the Breakthrough Therapy Designation in recognition of clinical data that indicated seladelpar may provide meaningful improvement over existing therapy based on a reduction in alkaline phosphatase (ALP) and improvement in pruritus in patients without cirrhosis or with compensated cirrhosis.
In September 2023, we commenced startup and site feasibility activities for RESPONSE, a new globalannounced topline results from our Phase 3 registrationRESPONSE study. The study evaluated the safety and efficacy of seladelpar for the treatment of PBC. The trial achieved the primary and all key secondary endpoints of the trial. A total of 61.7% of patients on seladelpar 10 mg (n=128) met the primary composite endpoint related to serum alkaline phosphatase and bilirubin at 12 months versus 20.0% on placebo (n=65; p<0.0001). Alkaline phosphatase at 12 months (key secondary endpoint) normalized in 25.0% of patients on seladelpar vs. zero on placebo (p<0.0001). The least-squares mean percent reduction in alkaline phosphatase at 12 months was 42.4% in the seladelpar group vs. 4.3% in the placebo group (p<0.0001). Seladelpar treatment compared to placebo also demonstrated a statistically significant reduction in pruritus, or itch (key secondary endpoint), after 6 months of treatment. Seladelpar-treated patients with a baseline Numerical Rating Scale (NRS)>4 (moderate to severe pruritus) had a least-square mean reduction of 3.2 points in pruritus NRS (n=49) compared to 1.7 points for patients in the placebo group (n=23; p<0.005). Overall, the safety profile was comparable between placebo and seladelpar groups and was consistent with previous studies. Treatment-emergent adverse events, serious adverse events, and patient discontinuations were generally balanced across the treatment and placebo arms. There were no treatment-related serious adverse events in the study. Seladelpar’s tolerability profile appeared favorable and consistent with previous studies.
In August 2023, we announced the initiation of a 52-week, placebo-controlled, randomized, Phase 3 study — “Intended to Determine the Effects of seladelpar on normalization of Alkaline phosphatase (ALP) Levels in subjects with Primary Biliary Cholangitis (PBC)” (IDEAL). The IDEAL study aims to enroll 150 patients globally with PBC who have an incomplete response or intolerance to ursodeoxycholic acid (UDCA), in each
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case with ALP greater than the upper limit of normal (ULN) but less than 1.67xULN, and total bilirubin less than or equal to 2xULN. Patients will be randomly assigned using a 2:1 ratio to oral, once daily seladelpar 10 mg or placebo. The primary outcome measure is the normalization greater than or equal to a 15% decrease in ALP at 52 weeks and a key secondary endpoint evaluating the change in pruritus Numerical Rating Scale (NRS) at six months in subjects with moderate to severe pruritus at baseline.
In September 2023, we announced the initiation of the AFFIRM study, a randomized, placebo-controlled confirmatory study to evaluate the effect of seladelpar on clinical outcomes in patients with compensated cirrhosis due to PBC. The RESPONSE trialAFFIRM study is actively recruitingplanned to enroll approximately 192 patients with PBC who have compensated cirrhosis (Child-Pugh A or Child-Pugh B) based on prespecified clinical criteria. Patients will be randomly assigned using a 2:1 ratio to oral, once daily seladelpar or placebo for a fixed duration of three years. The primary outcome measure is the time from start of treatment to the first occurrence of clinical events (all-cause death, liver transplant, hospitalization for other serious liver-related events, and enrolling patients.
In addition, we are continuing our ASSURE trial, an open-label, long-term study intended to RESPONSE we also commenced startup activities in late 2020 for ASSURE, a newcollect additional long-term safety study, whichand efficacy data to support registration. ASSURE is open to patients who were eligible for our previous long-term extension study that was terminated early in late 2019, including those patients from our previously completed Phase 2 open label study and our Phase 3 ENHANCE study, as well aspatients who completed treatment in RESPONSE, and patients who complete treatment in RESPONSE incertain Phase 1 studies. As of December 31, 2023, the future. The ASSURE trial is actively enrollinghas enrolled over 300 patients.
MBX-2982
In November 2020, we announced a Phase 2a proof-of-pharmacologystudy led by AdventHealth Translational Research Institute and funded by the Leona M. and Harry B. Helmsley Charitable Trust to evaluate the potential for
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other factors that we believe to be materially reasonable under the circumstances, the results of which form our basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources and evaluate our estimates on an ongoing basis. Actual results may materially differ from those estimates under different assumptions or conditions.
While we describe our significant accounting policies in more detail in
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Collaboration Revenues
We enter into collaboration arrangements with third parties, under which we license certain rights to our intellectual property and provide certain services to the party to enable local development of the product, and account for the arrangements as collaboration services revenue when the counterparty is a customer under ASC 606. The terms of these arrangements typically include payment to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; product supply services; development cost reimbursements; profit sharing arrangements; and royalties on net sales of licensed products.
As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We use assumptions to determine the standalone selling price, which may include forecasts of revenues and costs, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. At the end of each subsequent reporting period, we re-evaluate the probability of earning of such development milestones and related constraints, if any, and if necessary, adjust our estimate of the overall transaction price. For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sale occurs or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Development milestone adjustments are recorded on a cumulative catch-up basis, which would affect collaboration services revenues in the period of adjustment.
Research and Development Expenses and Related Prepayments and Accruals
Research and development expenses consist of costs incurred in identifying, developing, and testing product candidates. These expenses consist primarily of costs for research and development personnel, including related stock-based compensation; contract research organizations (CRO) and other third parties that assist in managing, monitoring, and analyzing clinical trials; investigator and site fees; laboratory services; consultants; contract manufacturing services;
As part of the process of preparing our consolidated financial statements, we are required to estimate certain research and development expenses. This process involves reviewing contracts, reviewing the terms of our license agreements, communicating with our vendors and applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service either when we have prepaid or when we have not yet been invoiced or otherwise notified of actual cost. Although certain of our vendors require us to prepay in advance of services rendered, the majority of our service providers invoice us monthly in arrears for services performed. We make estimates of prepayments to amortizeconsume or expenses to be accrued as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Such payments are evaluated for current or noncurrent classification based on when they will be realized. Additionally, if expectations change such that we do not expect goods to be
contract research organizations and other service providers in connection with clinical studies;
contract manufacturers in connection with the production of clinical trial materials; and
vendors in connection with preclinical development activities.
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We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition. Payments under some of these contracts depend on factors such as the successful screening and enrollment of patients and the completion of clinical trial milestones. In either amortizing or accruingexpensing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the related prepayment or accrual accordingly. Our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates in any particular period. Adjustments to prior period estimates have not been material for the years ended December 31, 20212023, 2022, and 2020.
Development Financing Agreement
We account for theour Development Financing Agreement (see Note 6)with Abingworth (the Financing Agreement) as a debt instrument. Accordingly, we have recorded payments received under the Financing Agreement as part of a development financing liability in our consolidated balance sheet. The liability is recorded at amortized cost and accreted to the contractual success fee amounts based on the estimated timing of regulatory approval and attainment of certain sales milestones using an imputed interest rate. Certain transaction fees incurred specifically to complete the Financing Agreement were capitalized and recorded as a reduction to the carrying amount of the development financing liability and are being amortized to interest expense using the effective interest rate method.
There are several factors that could affect the estimated timing of regulatory approval and attainment of sales milestones, some of which are not entirely within our control. Therefore, we periodically reassess the estimated timing of regulatory approval and attainment of sales milestones, and the expected contractual success fee payments due therefrom. If the timing and/or amount of such expected payments is materially different than original estimates, we will prospectively adjust the accretion of the development financing liability and the imputed interest rate.
We identified certain contingent repayment features in the Financing Agreement that are required to be bifurcated from the debt host instrument as embedded derivative liabilities; however, we determined the fair
Stock-Based Compensation
We measure stock-based compensation cost at the grant date, based on the estimated fair-value of the awards, and we recognize the portion that we ultimately expect to vest as an expense over the related vesting periods, net of forfeitures.actual forfeitures as they occur. We estimate the grant-date fair value based of stock options using the Black-Scholes option pricing model and recognize compensation expense over the service period using the straight-line attribution method and forfeitures are accountaccounted for as they occur.
The Black-Scholes option-pricing model requires the input of certain assumptions. These variables include, but are not limited to, our stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. We determine our stock price volatility based on the sufficiency of our historical stock price data. Due to insufficient historical data of exercise behavior, we have used the “simplified method” to determine the expected life of stock options granted with a service condition. Management continually assesses
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the assumptions and methodologies used to calculate the estimated fair value of stock-based compensation and evaluates the need to make changes when and if necessary. Any such changes to our valuation assumptions and methodologies could materially impact our fair value determination and the resulting stock-based compensation expense.
Results of Operations
General
To date, we have not generated any income from operations. As of December 31, 2021,2023, we have an accumulated deficit of $766.9$978.2 million, primarily as a result of expenditures for research and development, and general and administrative expenses and net interest expenses from inception to that date. All ofCurrently, our lead product candidates are at various
Operating Results
This discussion and analysis addresses 2023 and 2022 items and year-over-year comparisons between 2023 and 2022. Discussions of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Reporton Form 10-K can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 23, 2023.
Our results of operations for the years ended December 31, 20212023 and 20202022 are presented below (in thousands):
| Year Ended | ||||||||||||
| December 31, | Change | |||||||||||
| 2023 | 2022 | 2023 vs. 2022 | ||||||||||
($ in thousands) | ||||||||||||
Collaboration revenue | $ | 31,073 | $ | — | $ | 31,073 | ||||||
Operating expenses: | ||||||||||||
Research and development | 80,799 | 67,995 | 12,804 | |||||||||
General and administrative | 51,953 | 25,116 | 26,837 | |||||||||
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Total operating expenses | 132,752 | 93,111 | 39,641 | |||||||||
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Loss from operations | (101,679 | ) | (93,111 | ) | (8,568 | ) | ||||||
Other income (expense), net: | ||||||||||||
Interest income | 13,490 | 2,017 | 11,473 | |||||||||
Interest expense | (18,945 | ) | (14,907 | ) | (4,038 | ) | ||||||
Other income | 1,764 | — | 1,764 | |||||||||
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Total other income (expense), net | (3,691 | ) | (12,890 | ) | 9,199 | |||||||
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Net loss | $ | (105,370 | ) | $ | (106,001 | ) | $ | 631 | ||||
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Collaboration Revenue
On January 6, 2023, we entered into a Collaboration and License Agreement (the License Agreement) with Kaken Pharmaceuticals Co., Ltd (Kaken). Pursuant to this agreement, we granted Kaken an exclusive license to
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Year Ended | ||||||||||||
December 31, | Change | |||||||||||
2021 | 2020 | 2021 vs 2020 | ||||||||||
($ in thousands) | ||||||||||||
Operating expenses: | ||||||||||||
Research and development | $ | 64,542 | $ | 35,882 | $ | 28,660 | ||||||
General and administrative | 23,040 | 16,720 | 6,320 | |||||||||
Total operating expenses | $ | 87,582 | $ | 52,602 | $ | 34,980 | ||||||
Year Ended | ||||||||||||
December 31, | Change | |||||||||||
2021 | 2020 | 2021 vs 2020 | ||||||||||
Loss from operations | $ | (87,582 | ) | $ | (52,602 | ) | $ | (34,980 | ) | |||
Other income (expense), net: | ||||||||||||
Interest income | 167 | 1,616 | (1,449 | ) | ||||||||
Interest expense | (2,583 | ) | — | (2,583 | ) | |||||||
Total other income (expense), net | (2,416 | ) | 1,616 | (4,032 | ) | |||||||
Net loss | $ | (89,998 | ) | $ | (50,986 | ) | $ | (39,012 | ) | |||
Of the $33.7 million, we recognized $31.1 million as collaboration revenue during the year ended December 31, 2023. This collaboration revenue principally relates to the license transfer and the delivery of certain underlying technology and know-how associated with the license. The remaining $2.8 million portion of the upfront consideration was deferred, as it relates to our data delivery performance obligation and our CMC development performance obligation which were not delivered as of December 31, 2023.
Research & Development Expenses
Conducting research and development is central to our business model. Research and development expenses increased $28.7$12.8 million to $64.5$80.8 million from $35.9$68.0 million for the years ended December 31, 20212023 and 2020,2022, respectively. This increase was largely due to activities associated with the development of seladelpar focusing primarily onWe expect that our late-stage PBC program. In 2020, expenses included costs associated with shutdown of certain clinical trials after the seladelpar program was placed on clinical hold in late 2019 pending further investigation. This investigation was concluded in the second quarter of 2020, the clinical hold was subsequently lifted in July 2020, and we made the decision to restart the seladelpar development program in July 2020. As we continue to progress late-stage development of seladelpar in PBC as well as development activities associated with other product candidates, we expect research and development costs to continueexpenses to increase in the future.
Research and development expenses are detailed further in the table below (in thousands):
Year Ended December 31, | Change | |||||||||||
2021 | 2020 | 2021 vs 2020 | ||||||||||
Project costs: | ||||||||||||
Seladelpar PBC clinical studies | $ | 35,007 | $ | 15,747 | $ | 19,260 | ||||||
Seladelpar drug manufacturing & development | 5,531 | 1,332 | 4,199 | |||||||||
Seladelpar other studies | 549 | 2,440 | (1,891 | ) | ||||||||
Non-seladelpar studies | 2,647 | 3,374 | (727 | ) | ||||||||
Total project costs | 43,734 | 22,893 | 20,841 | |||||||||
Internal research and development costs | 20,808 | 12,989 | 7,819 | |||||||||
Total research and development | $ | 64,542 | $ | 35,882 | $ | 28,660 | ||||||
| Year Ended | ||||||||||||
| December 31, | Change | |||||||||||
| 2023 | 2022 | 2023 vs. 2022 | ||||||||||
Project costs: | ||||||||||||
Seladelpar PBC clinical studies | $ | 35,697 | $ | 34,143 | $ | 1,554 | ||||||
Seladelpar drug manufacturing & development | 3,689 | 6,585 | (2,896 | ) | ||||||||
Preclinical | 1,388 | 886 | 502 | |||||||||
Seladelpar and non-seladelpar other studies | 14 | 21 | (7 | ) | ||||||||
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Total project costs | 40,788 | 41,635 | (847 | ) | ||||||||
Internal research and development costs | 40,011 | 26,360 | 13,651 | |||||||||
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Total research and development | $ | 80,799 | $ | 67,995 | $ | 12,804 | ||||||
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Our project costs consist primarily of:
expenses incurred under agreements with contract research organizations, and investigative sites and service providers that conduct our clinical trials and a substantial portion of our preclinical activities;
the cost of acquiring materials and manufacturing drug products for use in clinical trial and other research activities; and
other costs associated with development activities, including additional studies.
Internal research and development costs consist primarily of salaries and related fringe benefits costs for our employees (such as workers’ compensation and health insurance premiums), stock-based compensation charges, travel costs, consulting, other outside services and overhead expenses. Internal costs generally benefit multiple projects and are not separately tracked per project.
Comparison of Years Ended December 31, 2023 and 2022
Total project costs, increasedwhich primarily consisted of clinical trial expenses for seladelpar in PBC, decreased by $20.8$0.8 million to $43.7$40.8 million from $22.9$41.6 million for the years ended December 31, 20212023 and 2020,2022, respectively. Project costs for the yearyears ended December 31, 20212023 and 2022 primarily consisted of seladelpar-related clinical trial expenses for PBC. These cost increases wereThe decrease was primarily driven primarily by anlower contract research expenses for our RESPONSE
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clinical trial activities following our decision to restart developmentcompletion of the seladelpar program in July 2020 aftertrial as well as lower drug manufacturing expenses during the FDA lifted the clinical hold on seladelpar.year ended December 31, 2023. Internal research and development costs increased by $7.8$13.7 million to $20.8$40.0 million from $13.0$26.4 million for the years ended December 31, 20212023 and 2020,2022, respectively, primarily due to higheran increase in employee compensation, contractor costs, and consultant expenses incurred in the year ended December 31, 2021 as2023 compared to the year ended December 31, 2020,2022 as we hiredcontinued to engage additional research and development personnel to startup our AFFIRM and IDEAL clinical trials and to support the restart of our drugother ongoing clinical development activities.
General and Administrative Expenses
General and administrative expenses consist principally of personnel-related costs, professional fees for legal, consulting, and accounting services, overhead expenses,rent, and other general operating expenses not otherwise included in research and development.
Comparison of Years Ended December 31, 2023 and 2022
General and administrative expenses increased by $6.3$26.8 million to $23.0$52.0 million from $16.7$25.1 million for the years ended December 31, 20212023 and 2020,2022, respectively. The increase was driven primarily by the hiringgrowth in employee headcount and incremental expenditures related to our pre-commercial planning activities for seladelpar and our continued expansion of additional general and administrative personnel, consultant and other expenses in the second half of 2020 after we made the decision to restart our development activities.operations. We expect these types of general and administrative expenses to continue to increase in the future as we continue to add administrative personnelfurther expand support for our ongoing drug development activities and expand our infrastructureon initiatives to plan and prepare for potential commercialization of seladelpar in support of our drug development activities.
Other Income (Expense), Net
Other income consists of(expense), net includes interest income from our marketable securities. Interest income decreased to $0.2 million from $1.6 million for the years ended December 31, 2021 and 2020, respectively. The decrease of $1.4 million was due to lower prevailing interest rates and a reduced investment portfolio balance, on average, compared to prior year.
Comparison of Years Ended December 31, 2023 and 2022
Other income (expense), net, decreased $9.2 million to $3.7 million from $12.9 million for the years ended December 31, 2023 and 2022, respectively.
Interest income increased $11.5 million to $13.5 million from $2.0 million for the years ended December 31, 2023 and 2022, respectively, due to higher prevailing interest rates and an increase in investments held in our portfolio.
Interest expense increased $4.0 million to $18.9 million from $14.9 million for the years ended December 31, 2023 and 2022, respectively, primarily due to interest expense from the Abingworth Development Financing Arrangement.
Other income was $1.8 million for the year ended December 31, 2021. No interest expense was incurred2023, primarily due to the recognition of $1.3 million related to certain refundable Employee Retention Tax Credits for the year ended December 31, 2020.
Income Taxes
As of December 31, 2021,2023, we had federal net operating loss carryforwards of $522.7$365.6 million and state net operating loss carryforwards of $288.3$214.9 million to offset future taxable income, if any. In addition, we had federal
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research and development tax credit carryforwards of $10.2$4.5 million, federal orphan drug tax credit carryforwards of $24.8$38.4 million, and state research and development tax credit carryforwards of $6.2$11.0 million. If not utilized, the federal net operating losses for the years beginning before January 1, 2018 of $255.7$78.4 million will expire beginning in 20242034 through 2037, and the federal net operating losses for the tax years beginning after January 1, 2018 of $267.0$287.2 million will be carried forward indefinitely (subject to certain utilization limitations). The state net operating loss carryforwards will expire beginning in 2028 through 2041.2043. The federal research and development and federal orphan drug tax credit carryforwards expire 20212033 through 2041,2043, and the state tax credit will carry forward indefinitely. Interest and penalties for the years ended December 31, 2021 and 2020 were not material. Current federal and state tax laws include substantial restrictions on the utilization of net operating losses and tax credits in the event of an ownership change. Even ifDuring 2022, we completed a study and determined historical ownership changes occurred through December 31, 2022 and accordingly, we have reduced our carryforwards to incorporate the carryforwards areeffects of these federal and state restrictions. Carryforwards that remain available they may be subject to annual limitations, lack of future taxable income, or future ownership changes that could result in the expiration of the carryforwards before they are utilized. AtThe Section 382 analysis was updated through December 31, 2021,2023 with no incremental restrictions on use of net operating loss or credit carryforwards.
As of December 31, 2023, we recorded a 100%full valuation allowance against our deferred tax assets of approximately $173.9$169.5 million, as our management believes it is more likely than not that they will not be fully realized.
Liquidity and Capital Resources
We have financed our operations primarily through the sale of equity securities, licensing fees, issuance of debt and collaborations with third parties. As of December 31, 2021,2023, cash, cash equivalents and marketable securities totaled $194.6$416.2 million, compared to $146.3$135.5 million atas of December 31, 2020.
Collaboration and License Agreement
As noted above, on January 6, 2023, we entered into a Development Financingthe License Agreement (the Financing Agreement) with AbingworthKaken. Pursuant to obtain fundingthe License Agreement, we granted Kaken an exclusive license to support our development ofdevelop and commercialize seladelpar for the treatment of PBC. The Financing Agreement providesPBC in Japan. In exchange for the license and other rights granted by us, Kaken paid us ¥4.5 billion in January 2023 (or $34.2 million, comprised of $33.7 million of contract consideration and a $0.5 million foreign exchange gain recorded in Other income (expense), net during the year ended December 31, 2023) and is also obligated to make aggregate potential future milestone payments to us totaling up to $100.0¥17.0 billion ($128.0 million at exchange rates in funding,effect at contract inception date) upon Kaken’s achievement of which $25 million was receivedcertain regulatory and sales milestones. We agreed to manufacture and supply seladelpar to Kaken for use in August 2021, $25 million was receivedthe territory in November 2021exchange for payments from Kaken as set forth in the License Agreement with specific terms defined or to be defined in supply agreements. We will deliver to Kaken data from our clinical trials, nonclinical studies and $25 million was subsequently receivedother pre-clinical data, chemistry manufacturing and controls (CMC) data, and other information (when such data and information becomes available), and know-how that is controlled by us that is reasonably necessary for Kaken to seek regulatory approval in January 2022.Japan. We may also have an optionbe requested by Kaken to draw an additional $25 million (the Optional Funding) within approximately two monthsconduct CMC activities specific to commercialization in Japan and provide other assistance.
Pursuant to the License Agreement, we and Kaken also agreed to establish a joint steering committee to provide strategic oversight of both parties’ activities under the License Agreement.
The License Agreement may be early terminated by either party for material breach, upon a party’s insolvency or bankruptcy or upon a challenge by one party of any patents of the completionother party, and Kaken may terminate in specified situations, including for a safety concern, clinical failure or termination of enrollment of our Phase 3 RESPONSE clinical trial. an underlying in-license to us from Janssen Pharmaceutica NV. Kaken may also terminate the License Agreement at its convenience with specified prior notice.
The Optional FundingLicense Agreement is subjecteffective until the date upon which (a) the royalty term has expired in Japan for the final licensed product, or (b) the License Agreement is earlier terminated (the Initial Term). After the Initial
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Term, the License Agreement will be automatically renewed for 2-year periods, unless either party has given the other party a written notice not to certain customary funding conditions. In return, we will pay to Abingworth fixed and variable success payments, as further described in
Sale of Common Stock and Pre-funded Warrants
On November 22, 2021,September 11, 2023, we sold 15,625,00014,521,307 shares of common stock, at $4.00$17.13 per share and a pre-funded warrants warrant to purchase 3,125,000583,771 shares of common stock at $3.9999$17.1299 per share in a public equity offering (September 2023 public offering), for total grossnet proceeds of $242.8 million, after deducting underwriting discounts and commissions and other offering expenses.
On January 23, 2023, we sold 11,821,428 shares of common stock at $7.00 per share and a pre-funded warrant to purchase 2,142,857 shares of common stock at $6.9999 per share in a public equity offering (January 2023 public equity offering), for total net proceeds of approximately $75$92.4 million beforeafter deducting the underwriting commissionsdiscount and other estimated offering expenses. We also granted the underwriters of the offering a 30-day option to purchase up to an additional 2,812,500 shares of its common stock at the public offering price per share less underwriting commissions, which expired unexercised on December 22, 2021. The proceeds of the offering, net of offering expenses, were $70.5 million. We anticipate using the net proceeds from the offering to fund ongoing development of seladelpar and for working capital and general corporate purposes.
At-the-Market (ATM) Facility
In July 2020,March 2023, we filed a $200.0 million registration statement on Form S-3 with the SEC and entered into an at-the-market facility (ATM) to sell up to $75.0$100.0 million of common stock under the registration statement.statement pursuant to the Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co., dated July 2, 2020. To date, we have not sold any shares of common stock under the ATM.
Cash Flows
The following table sets forth a summary of the net cash flow activity for each of the periods indicated below (in thousands):
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Net cash used in operating activities | $ | (69,431 | ) | $ | (44,725 | ) | ||
Net cash provided by investing activities | 48,589 | 47,957 | ||||||
Net cash provided by financing activities | 118,455 | 92 | ||||||
Net increase in cash and cash equivalents | $ | 97,613 | $ | 3,324 | ||||
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
Net cash used in operating activities | $ | (72,531 | ) | $ | (84,080 | ) | ||
Net cash used in investing activities | (86,569 | ) | (45,985 | ) | ||||
Net cash provided by financing activities | 345,772 | 24,550 | ||||||
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Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 186,672 | $ | (105,515 | ) | |||
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Cash Flows from Operating Activities
Net cash used in operating activities primarily consists of net loss, adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, stock-based compensation expense, accretion of development financing liability, write-off of deferred financing costs, net (accretion) amortization of investments in marketable securities, and the effect of changes in working capital and other activities.
Comparison of the Years Ended December 31, 2023 and 2022
Net cash used in operating activities for the year ended December 31, 2021 increased2023 decreased by $24.7$11.5 million to $69.4$72.5 million as compared to $44.7$84.1 million for the same period in the prior year. The increase in cash used wasyear, primarily due to a
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Cash Flows from Investing Activities
Our investing activities primarily consist of purchases and redemption of marketable securities and purchases of property and equipment.
Comparison of the Years Ended December 31, 2023 and 2022
Net cash used in investing activities was $48.6$86.6 million for the year ended December 31, 20212023 compared to $48.0$46.0 million of cash used in investing activities in the prior year, primarily due to the timing of our purchases of investments inand maturities of marketable securities.
Cash Flows from Financing Activities
Comparison of the Years Ended December 31, 2023 and 2022
Net cash provided by financing activities was $118.5$345.8 million for the year ended December 31, 20212023 compared to $0.1$24.6 million in the prior year. The increase was primarily due toDuring the year ended December 31, 2023, we received net proceeds of $70.5approximately $242.8 million from the September 2023 public offering and approximately $92.4 million from the January 2023 public offering. In addition, proceeds of $10.6 million were received from the November 2021 publicissuance of common stock pursuant to our equity offering and net proceeds of $47.7 million fromaward plans during the Financing Agreement with Abingworth.
Capital Requirements
We have incurred operating losses since inception and had an accumulated deficit of $766.9$978.2 million atas of December 31, 2021.2023. As of December 31, 2021,2023, we had cash, cash equivalents and marketable securities of approximately $194.6 million, which we believe is sufficient, together with committed capital, to fund our current operating plan through 2023.
We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we continue product development for seladelpar. Since product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, we expect that our research and development expenses will increase in the future. We also expect that our overall operating expenses will thereforeincrease in the future as we continue to plan and prepare for potential commercialization of seladelpar in PBC. We believe we will continue to require additional financing to develop our products and fund future operating losses, as well as to pay our obligations to Abingworth under our Financing Agreement with Abingworth, and will seek funds through equity financings, debt, collaborative or other arrangements with corporate sources, or through other sources of financing. It is unclear if or when any such financing transactions will occur, on satisfactory terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If adequate funds are not available to us, it could have a material adverse effect on our business, results of operations, and financial condition.
Contractual Obligations and Other Cash Requirements
Our long-termnon-current contractual obligations as of December 31, 20212023 include primarily $1.3 millionminimum lease payments for our current corporate office facility located in Newark, California, and the operating and finance subleases for the new corporate headquarters in Fremont, California, which we entered into in December 2023. Under our current corporate office space lease, which includes monthly rental payments that are payable through January 2024, the lease termination date. Wewe are also obligated to reimburse the lessor for a prorated portion of monthly facility operating expenses during the lease term.
In addition, we rely on contract research organizations and other research support providers to perform clinical and preclinical studies for us and we contract with firms to supply our drug compounds for use in our development
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activities. Under the terms of our agreements with these organizations, we are obligated to make future payments as services are provided. However, these agreements are terminable by us upon written notice and we are generally only liable for actual effort expended or cost incurred by the organizations through the termination notice period.
We have entered into commercial supply agreements with our contract manufacturers, where we are contractually committed to minimum purchase amounts and are also subject to payment associated with binding purchase orders in the event of cancellation. In the normal course of business, we are also party to various contracts with our other vendors, which are generally cancellable within ninety days or less.
We have significant potential payment obligations under the Financing Agreement that are contingently payable by us to Abingworth upon regulatory approval of seladelpar in PBC and achievement of certain sales for seladelpar.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to cash flow and earnings fluctuations as a result of certain market risks. These market risks primarily relate to credit risk and changes in interest rates. Our investment portfolio is used to preserve our capital until it is required to fund operations, including our research and development activities. None of these market risk-sensitive instruments are held for trading purposes. We do not have derivative financial instruments in our investment portfolio.
Credit Risk
We manage credit risk associated with our investment portfolio through our investment policy, which limits purchases to high-quality issuers and limits the amount of our portfolio that can be invested in a single issuer.
Interest Rate Risk
We invest our cash in a variety of financial instruments, principally securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds. These investments are denominated in U.S. dollars. All of our interest-bearing securities are subject to interest rate risk and could decline in value if interest rates fluctuate. Substantially all of our investment portfolio consists of marketable securities with active secondary or resale markets to help ensure portfolio liquidity, and we have implemented guidelines limiting the term-to-maturity of our investment instruments. Due to the conservative and short-term nature of these instruments, we do not believe that we have a material exposure to interest rate risk. If market interest rates were to increase or decrease by one percentage point, the fair value of our investment portfolio would increase or decrease by an immaterial amount.
Item 8. Financial Statements and Supplementary Data
The disclosure required in this Item is included in Item 15, which information is incorporated by reference here.
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Item 9.
None.
Item 9A.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures (as defined in Rules
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and our Vice President, FinanceChief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our President and Chief Executive Officer and Vice President, Finance,Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal
The independent registered public accounting firm Ernst & Young, LLP has issued an opinion of our independent auditors with respect toaudit report on our internal controls over financial reporting, for the period ended December 31, 2021.
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Changes in Internal Controls
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of Independent Registered Public Accounting Firm
Our independent registered public accounting firm, Ernst & Young LLP, has audited our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K and have issued a report on our internal control over financial reporting as of December 31, 2023. Their report on the audit of internal control over financial reporting appears below.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of CymaBay Therapeutics, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited CymaBay Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CymaBay Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
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Aggregate number of | ||||||||||||||
Expiration Date or | securities to be | |||||||||||||
Name | Title | Trading Arrangement | Action | Date Adopted | Termination Date | purchased or sold | ||||||||
Paul Quinlan | General Counsel | Rule 10b5-1 Trading Arrangement | Adopted | December 21, 2023 | August 30, 2024 | 95,000 | ||||||||
Lewis Stuart | Chief Commercial Officer | Rule 10b5-1 Trading Arrangement | Termination | August 30, 2024 | December 7, 2023 | 300,000 | ||||||||
| (a) | Documents filed as part of this report |
Page | ||||
Incorporation By Reference | ||||||||||
Exhibit Number | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | |||||
3.1 | 10/A | 000-55021 | 3.1 | 10/17/2013 | ||||||
3.2 | 8-K | 001-36500 | 3.1 | 6/26/2020 | ||||||
3.3 | 10/A | 000-55021 | 3.2 | 10/17/2013 | ||||||
4.1 | ||||||||||
4.2 | 10-K | 001-36500 | 4.2 | 3/25/2021 | ||||||
4.3 | 8-K | 001-36500 | 4.1 | 11/18/2021 | ||||||
4.4 | 8-K | 001-36500 | 4.1 | 1/25/2023 | ||||||
4.5 | 8-K | 001-36500 | 4.1 | 9/12/2023 | ||||||
10.1* | 10 | 000-55021 | 10.1 | 8/12/2013 | ||||||
Incorporation By Reference | ||||||||||
Exhibit Number | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | |||||
10.2* | 10 | 000-55021 | 10.2 | 8/12/2013 | ||||||
10.3* | 10 | 000-55021 | 10.3 | 8/12/2013 | ||||||
10.4* | 8-K | 001-36500 | 10.1 | 6/7/2018 | ||||||
10.5* | 10/A | 000-55021 | 10.26 | 10/17/2013 | ||||||
1 0. 6* | 10-K | 000-55021 | 10.22 | 3/31/2014 | ||||||
| 10.7* | 2020 New Hire Plan. | 10-Q | 001-36500 | 10.4 | 8/10/2023 | |||||
10.8* | 10-K | 001-36500 | 10.8 | 3/25/2021 | ||||||
10.9 | S-8 | 333-272895 | 99.1 | 6/23/2023 | ||||||
10.10 | S-8 | 333-272895 | 99.2 | 6/23/2023 | ||||||
10.11+ | ||||||||||
10.12 | 10-K | 001-36500 | 10.7 | 3/15/2018 | ||||||
10.13# | 10-Q | 001-36500 | 10.1 | 11/14/2022 | ||||||
10.14# | 10-Q | 001-36500 | 10.1 | 11/10/2021 | ||||||
10.15#+ | 10-K | 001-36500 | 10.12 | 3/23/2023 | ||||||
10.16 | 10-Q | 000-55021 | 10.27 | 11/25/2013 | ||||||
10.17 | 10-Q | 001-36500 | 10.1 | 5/8/2018 | ||||||
10.18+ | ||||||||||
10.19+# | ||||||||||
Incorporation By Reference | ||||||||||
Exhibit Number | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | |||||
10.20* | 10-K | 000-55021 | 10.24 | 3/31/2014 | ||||||
10.21* | 10-K | 000-55021 | 10.26 | 3/31/2014 | ||||||
10.22* | 10-Q | 001-36500 | 10.4 | 8/10/2017 | ||||||
10.23* | 10-K | 001-36500 | 10.16 | 2/28/2019 | ||||||
10.24* | 10-K | 001-36500 | 10.18 | 3/25/2021 | ||||||
10.25* | 10-Q | 001-36500 | 10.1 | 8/12/2021 | ||||||
10.26* | 8-K | 001-36500 | 10.1 | 5/9/2023 | ||||||
10.27* | 8-K | 001-35600 | 10.1 | 2/23/2023 | ||||||
10.28* | 8-K | 001-36500 | 10.1 | 1/26/2024 | ||||||
10.29 | S-3 | 333-239670 | 1.2 | 7/2/2020 | ||||||
21.1+ | ||||||||||
23.1+ | ||||||||||
24.1+ | ||||||||||
31.1+ | ||||||||||
31.2+ | ||||||||||
32.1++ | ||||||||||
97.1+ | ||||||||||
Incorporation By Reference | ||||||||||
Exhibit Number | Exhibit Description | Form | SEC File No. | |||||||
| Inline XBRL Instance Document | ||||||||||
101.SCH+ | Inline XBRL Taxonomy Extension Schema Document | |||||||||
101.CAL+ | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||
101.DEF+ | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||
101.LAB+ | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||
101.PRE+ | Inline XBRL Taxonomy Extension Presentation Document | |||||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in exhibit 101) | |||||||||
| + | Filed herewith. |
| ++ | Furnished herewith. |
| * | Indicates management contract or compensatory plan. |
| # |
Certain portions of this exhibit have been omitted because the omitted portions are both not material and is the type of information that CymaBay treats as private or confidential. |
Page | ||||
86 | ||||
88 | ||||
89 | ||||
90 | ||||
92 | ||||
93 | ||||
Description of the Matter | As described in Note 2 to the consolidated financial statements, the Company enters into licensing and collaboration arrangements that include multiple performance obligations. Determining the completeness of distinct performance obligations under each arrangement requires significant judgment. | |
| Auditing the Company’s licensing and collaboration arrangement was complex due to the effort involved in assessing the promises in the arrangement and whether such promises were distinct performance obligations. | ||
How We Addressed the Matter in Our Audit | We obtained an understanding of and evaluated the design and operating effectiveness of controls over the terms of the arrangement and the appropriate identification of performance obligations. | |
| Our audit procedures included evaluating management’s revenue recognition policy which involved the application of management’s judgment in the identification of performance obligations. Among other procedures to evaluate management’s identification and determination of distinct performance obligations, we examined the executed agreement and assessed the key terms under the relevant authoritative accounting guidance and evaluated management’s conclusion that the agreement contains three distinct performance obligations. We evaluated the accuracy of the Company’s contract summary documentation, specifically related to the identification and determination of distinct performance obligations, and the related revenue recognition. We confirmed the terms and conditions of the arrangement with the counterparty to ensure all promises were accounted for in the analysis. Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements. | ||
/s/ Ernst & Young LLP |
We have served as the Company’s auditor since 1994. |
San Mateo, California |
February 2 8 , 2024 |
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 125,806 | $ | 28,193 | $ | 206,535 | $ | 20,291 | ||||||||
Marketable securities | 60,729 | 118,130 | 187,720 | 115,194 | ||||||||||||
Prepaid research and development expenses | 2,371 | 2,221 | ||||||||||||||
Other prepaid expenses and current assets | 2,193 | 3,041 | ||||||||||||||
Prepaid expenses and other current assets | 9,547 | 2,588 | ||||||||||||||
Total current assets | 191,099 | 151,585 | 403,802 | 138,073 | ||||||||||||
Non-current marketable securities | 21,932 | — | ||||||||||||||
Property and equipment, net | 1,178 | 1,761 | 465 | 701 | ||||||||||||
Non-current marketable securities | 8,067 | 0 — | ||||||||||||||
Operating lease right-of-use asset | 254 | 272 | ||||||||||||||
Right-of-use | 5,260 | 169 | ||||||||||||||
Other assets | 1,720 | 207 | 3,227 | 2,909 | ||||||||||||
Total assets | $ | 202,318 | $ | 153,825 | $ | 434,686 | $ | 141,852 | ||||||||
Liabilities and stockholders’ equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 2,728 | $ | 231 | $ | 3,828 | $ | 1,096 | ||||||||
Accrued research and development expenses | 9,752 | 4,698 | 5,633 | 6,530 | ||||||||||||
| Development financing liability - current portion | 10,000 | — | ||||||||||||||
| Deferred collaboration revenue - current portion | 1,689 | — | ||||||||||||||
Other accrued liabilities | 5,886 | 4,928 | 15,693 | 7,815 | ||||||||||||
Total current liabilities | 18,366 | 9,857 | 36,843 | 15,441 | ||||||||||||
Development financing liability | 50,320 | 0 — | ||||||||||||||
Long-term portion of operating lease liability | 695 | 1,262 | ||||||||||||||
Development financing liability - non-current portion | 99,172 | 90,227 | ||||||||||||||
Deferred collaboration revenue - non-current portion | 1,100 | — | ||||||||||||||
| Lease liabilities - non-current portion | 5,315 | 30 | ||||||||||||||
Total liabilities | 69,381 | 11,119 | 142,430 | 105,698 | ||||||||||||
Commitments and contingencies | 0 | 0 | ||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Preferred stock, $0.0001 par value: 10,000,000 shares authorized; 0 shares issued and outstanding | 0— | 0— | ||||||||||||||
Common stock, $0.0001 par value: 200,000,000 shares authorized; 84,677,939 and 68,946,092 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | 8 | 7 | ||||||||||||||
Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||||||||||
Common stock, $0.0001 par value: 200,000,000 shares authorized; 113,864,976 and 84,681,063 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively | 11 | 8 | ||||||||||||||
Additional paid-in capital | 899,798 | 819,549 | 1,270,328 | 909,329 | ||||||||||||
Accumulated other comprehensive (loss) income | (13 | ) | 8 | |||||||||||||
Accumulated other comprehensive income (loss) | 144 | (326 | ) | |||||||||||||
Accumulated deficit | (766,856 | ) | (676,858 | ) | (978,227 | ) | (872,857 | ) | ||||||||
Total stockholders’ equity | 132,937 | 142,706 | 292,256 | 36,154 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 202,318 | $ | 153,825 | $ | 434,686 | $ | 141,852 | ||||||||
Year Ended December 31, | Year Ended | |||||||||||||||||||
2021 | 2020 | December 31, | ||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||
Collaboration revenue | $ | 31,073 | $ | — | $ | — | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | $ | 64,542 | $ | 35,882 | 80,799 | 67,995 | 64,542 | |||||||||||||
General and administrative | 23,040 | 16,720 | 51,953 | 25,116 | 23,040 | |||||||||||||||
Total operating expenses | 87,582 | 52,602 | 132,752 | 93,111 | 87,582 | |||||||||||||||
Loss from operations | (87,582 | ) | (52,602 | ) | (101,679 | ) | (93,111 | ) | (87,582 | ) | ||||||||||
Other income (expense), net: | ||||||||||||||||||||
Interest income | 167 | 1,616 | 13,490 | 2,017 | 167 | |||||||||||||||
Interest expense | (2,583 | ) | 0— | (18,945 | ) | (14,907 | ) | (2,583 | ) | |||||||||||
Other income | 1,764 | — | — | |||||||||||||||||
Total other income (expense), net | (2,416 | ) | 1,616 | (3,691 | ) | (12,890 | ) | (2,416 | ) | |||||||||||
Net loss | $ | (89,998 | ) | $ | (50,986 | ) | $ | (105,370 | ) | $ | (106,001 | ) | $ | (89,998 | ) | |||||
Other comprehensive loss: | ||||||||||||||||||||
Unrealized loss on marketable securities | (21 | ) | (72 | ) | ||||||||||||||||
Other comprehensive (loss) income: | ||||||||||||||||||||
Unrealized gain (loss) on marketable securities, net of tax | 470 | (313 | ) | (21 | ) | |||||||||||||||
Total other comprehensive loss | (21 | ) | (72 | ) | ||||||||||||||||
Total other comprehensive income (loss) | 470 | (313 | ) | (21 | ) | |||||||||||||||
Comprehensive loss | $ | (90,019 | ) | $ | (51,058 | ) | $ | (104,900 | ) | $ | (106,314 | ) | $ | (90,019 | ) | |||||
Basic and diluted net loss per common share | $ | (1.27 | ) | $ | (0.74 | ) | $ | (0.99 | ) | $ | (1.21 | ) | $ | (1.27 | ) | |||||
Weighted average common shares outstanding used to calculate basic and diluted net loss per common share | 71,055,331 | 68,893,127 | 106,204,273 | 87,804,063 | 71,055,331 | |||||||||||||||
Common Stock | Additional Paid-in Capital | Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balances as of December 31, 2020 | 68,946,092 | $ | 7 | $ | 819,549 | $ | 8 | $ | (676,858 | ) | $ | 142,706 | ||||||||||||
| Issuance of common stock upon exercise of stock options | 106,847 | — | 219 | — | — | 219 | ||||||||||||||||||
Issuance of common stock and pre-funded warrant, net$4,965 issuance costs | 15,625,000 | 1 | 70,034 | — | — | 70,035 | ||||||||||||||||||
Stock-based compensation expense | — | — | 9,996 | — | — | 9,996 | ||||||||||||||||||
Net loss | — | — | — | — | (89,998 | ) | (89,998 | ) | ||||||||||||||||
Net unrealized loss on marketable securities | — | — | — | (21 | ) | — | (21 | ) | ||||||||||||||||
Balances as of December 31, 2021 | 84,677,939 | $ | 8 | $ | 899,798 | $ | (13 | ) | $ | (766,856 | ) | $ | 132,937 | |||||||||||
| Issuance of common stock upon exercise of stock options | 3,124 | — | 9 | — | — | 9 | ||||||||||||||||||
Issuance costs related to issuance of common stock and pre-funded warrants | — | — | 5 | — | — | 5 | ||||||||||||||||||
Stock-based compensation expense | — | — | 9,517 | — | — | 9,517 | ||||||||||||||||||
Net loss | — | — | — | — | (106,001 | ) | (106,001 | ) | ||||||||||||||||
Net unrealized loss on marketable securities | — | — | — | (313 | ) | — | (313 | ) | ||||||||||||||||
Balances as of December 31, 2022 | 84,681,063 | $ | 8 | $ | 909,329 | $ | (326 | ) | $ | (872,857 | ) | $ | 36,154 | |||||||||||
| Issuance of common stock upon exercise of stock options | 2,216,186 | — | 10,632 | — | — | 10,632 | ||||||||||||||||||
Issuance of common stock upon exercise of pre-funded warrants | 624,992 | — | — | — | — | — | ||||||||||||||||||
Issuance of common stock and pre-funded warrants, netof $21,359 issuance costs | 26,342,735 | 3 | 335,137 | — | — | 335,140 | ||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balances as of December 31, 2019 | 68,882,459 | $ | 7 | $ | 812,133 | $ | 80 | $ | (625,872 | ) | $ | 186,348 | ||||||||||||
Issuance of common stock upon exercise of stock options | 63,633 | — | 92 | — | — | 92 | ||||||||||||||||||
Stock-based compensation expense | — | — | 7,324 | — | — | 7,324 | ||||||||||||||||||
Net Loss | — | — | — | — | (50,986 | ) | (50,986 | ) | ||||||||||||||||
Net unrealized loss on marketable securities | — | — | — | (72 | ) | — | (72 | ) | ||||||||||||||||
Balances as of December 31, 2020 | 68,946,092 | $ | 7 | $ | 819,549 | $ | 8 | $ | (676,858 | ) | $ | 142,706 | ||||||||||||
Issuance of common stock upon exercise of stock options | 106,847 | — | 219 | — | — | 219 | ||||||||||||||||||
Stock-based compensation expense | — | — | 9,996 | — | — | 9,996 | ||||||||||||||||||
Issuance of common stock and pre-funded warrants, net of $4,965 issuance costs | 15,625,000 | 1 | 70,034 | — | — | 70,035 | ||||||||||||||||||
Net loss | — | — | — | — | (89,998 | ) | (89,998 | ) | ||||||||||||||||
Net unrealized loss on marketable securities | — | — | — | (21 | ) | — | (21 | ) | ||||||||||||||||
Balances as of December 31, 2021 | 84,677,939 | $ | 8 | $ | 899,798 | $ | (13 | ) | $ | (766,856 | ) | $ | 132,937 | |||||||||||
Common Stock | Additional Paid-in Capital | Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Stock-based compensation expense | — | — | 15,230 | — | — | 15,230 | ||||||||||||||||||
Net loss | — | — | — | — | (105,370 | ) | (105,370 | ) | ||||||||||||||||
Net unrealized gain on marketable securities | — | — | — | 470 | — | 470 | ||||||||||||||||||
Balances as of December 31, 2023 | 113,864,976 | $ | 11 | $ | 1,270,328 | $ | 144 | $ | (978,227 | ) | $ | 292,256 | ||||||||||||
Year Ended | ||||||||||||||||||||
Year Ended December 31, | December 31, | |||||||||||||||||||
2021 | 2020 | 2023 | 2022 | 2021 | ||||||||||||||||
Operating activities | ||||||||||||||||||||
Net loss | $ | (89,998 | ) | $ | (50,986 | ) | $ | (105,370 | ) | $ | (106,001 | ) | $ | (89,998 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
Depreciation and amortization | 688 | 632 | 681 | 625 | 669 | |||||||||||||||
Non-cash lease expense | 215 | 85 | 19 | |||||||||||||||||
Stock-based compensation expense | 9,996 | 7,324 | 15,230 | 9,517 | 9,996 | |||||||||||||||
Accretion of development financing liability | 2,583 | 0 — | 18,945 | 14,907 | 2,583 | |||||||||||||||
Write-off of deferred financing costs | 312 | 0 — | — | — | 312 | |||||||||||||||
Net accretion and amortization of investments in marketable securities | 637 | (104 | ) | |||||||||||||||||
Net (accretion) amortization of investments in marketable securities | (7,864 | ) | (874 | ) | 637 | |||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||||||
Other prepaid expenses and current assets | 386 | 6,716 | ||||||||||||||||||
Prepaid expenses and other current assets | (6,959 | ) | 1,976 | 386 | ||||||||||||||||
Other assets | (1,513 | ) | (47 | ) | 110 | (1,189 | ) | (1,513 | ) | |||||||||||
Accounts payable | 2,309 | (2,272 | ) | 2,732 | (1,444 | ) | 2,309 | |||||||||||||
Deferred collaboration revenue | 2,789 | — | — | |||||||||||||||||
Accrued research and development expenses | 5,054 | (4,520 | ) | (897 | ) | (3,222 | ) | 5,054 | ||||||||||||
Other accrued liabilities | 115 | (1,468 | ) | 7,857 | 1,540 | 115 | ||||||||||||||
Net cash used in operating activities | (69,431 | ) | (44,725 | ) | (72,531 | ) | (84,080 | ) | (69,431 | ) | ||||||||||
Investing activities | ||||||||||||||||||||
Purchases of property and equipment | (87 | ) | (21 | ) | (445 | ) | (148 | ) | (87 | ) | ||||||||||
Purchases of marketable securities | (78,084 | ) | (176,300 | ) | (305,674 | ) | (174,977 | ) | (78,084 | ) | ||||||||||
Proceeds from maturities of marketable securities | 126,760 | 224,278 | 219,550 | 129,140 | 126,760 | |||||||||||||||
Net cash provided by investing activities | 48,589 | 47,957 | ||||||||||||||||||
Net cash (used in) provided by investing activities | (86,569 | ) | (45,985 | ) | 48,589 | |||||||||||||||
Financing activities | ||||||||||||||||||||
Proceeds from issuance of common stock pursuant to equity award plans | 10,632 | 9 | 219 | |||||||||||||||||
| Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs | 70,499 | 0 — | 335,140 | (459 | ) | 70,499 | ||||||||||||||
Proceeds from development financing, net of transaction costs | 47,737 | 0 — | — | 25,000 | 47,737 | |||||||||||||||
Proceeds from issuance of common stock pursuant to equity award plans | 219 | 92 | ||||||||||||||||||
Net cash provided by financing activities | 118,455 | 92 | 345,772 | 24,550 | 118,455 | |||||||||||||||
Net increase in cash and cash equivalents | 97,613 | 3,324 | ||||||||||||||||||
Cash and cash equivalents at beginning of period | 28,193 | 24,869 | ||||||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 186,672 | (105,515 | ) | 97,613 | ||||||||||||||||
Cash, cash equivalents, and restricted cash at beginning of period | 20,291 | 125,806 | 28,193 | |||||||||||||||||
Cash and cash equivalents at end of period | $ | 125,806 | $ | 28,193 | ||||||||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 206,963 | $ | 20,291 | $ | 125,806 | ||||||||||||||
Supplemental disclosure | ||||||||||||||||||||
Supplemental disclosures: | ||||||||||||||||||||
Supplemental operating activities | ||||||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 666 | $ | 647 | $ | 762 | $ | 686 | $ | 666 | ||||||||||
Supplemental non-cash investing and financing activities | ||||||||||||||||||||
Unpaid financing costs | $ | 464 | $ | 0 — | ||||||||||||||||
| Right-of-use assets acquired in exchange for operating lease liabilities | $ | 4,833 | $ | — | $ | — | ||||||||||||||
| Right-of-use assets acquired in exchange for finance lease liabilities | $ | 466 | $ | — | $ | — | ||||||||||||||
Accrued financing costs | $ | — | $ | — | $ | 464 | ||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
As of December 31, 2021 | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||||||||
Money market funds | $ | 85,638 | $ | — | $ | — | $ | 85,638 | $ | 127,231 | $ | — | $ | — | $ | 127,231 | ||||||||||||||||
| U.S. treasury securities | — | 15,181 | — | 15,181 | ||||||||||||||||||||||||||||
| U.S and foreign commercial paper | — | 19,916 | — | 19,916 | ||||||||||||||||||||||||||||
| U.S. agency securities | — | 33,207 | — | 33,207 | ||||||||||||||||||||||||||||
Total cash equivalents | 85,638 | — | — | 85,638 | 127,231 | 68,304 | — | 195,535 | ||||||||||||||||||||||||
Marketable securities: | ||||||||||||||||||||||||||||||||
U.S. and foreign commercial paper | — | 28,760 | — | 28,760 | — | 66,317 | — | 66,317 | ||||||||||||||||||||||||
U.S. and foreign corporate debt securities | — | 23,535 | — | 23,535 | — | 5,536 | — | 5,536 | ||||||||||||||||||||||||
Asset-backed securities | — | 8,522 | — | 8,522 | ||||||||||||||||||||||||||||
| U.S. agency securities | — | 40,914 | — | 40,914 | ||||||||||||||||||||||||||||
U.S. treasury securities | — | 7,979 | — | 7,979 | — | 96,885 | — | 96,885 | ||||||||||||||||||||||||
Total marketable securities | — | 68,796 | — | 68,796 | — | 209,652 | — | 209,652 | ||||||||||||||||||||||||
Total assets measured at fair value | $ | 85,638 | $ | 68,796 | $ | — | $ | 154,434 | $ | 127,231 | $ | 277,956 | $ | — | $ | 405,187 | ||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||||||||
Money market funds | $ | 22,415 | $ | — | $ | — | $ | 22,415 | ||||||||||||||||||||||||
Total cash equivalents | 22,415 | — | — | 22,415 | ||||||||||||||||||||||||||||
Marketable securities: | ||||||||||||||||||||||||||||||||
U.S. treasury securities | — | 15,499 | — | 15,499 | ||||||||||||||||||||||||||||
U.S. and foreign commercial paper | — | 38,561 | — | 38,561 | ||||||||||||||||||||||||||||
U.S. and foreign corporate debt securities | — | 29,189 | — | 29,189 | ||||||||||||||||||||||||||||
U.S. agency securities | — | 23,994 | — | 23,994 | ||||||||||||||||||||||||||||
Asset-backed securities | — | 7,885 | — | 7,885 | ||||||||||||||||||||||||||||
Supranational debt securities | — | 3,002 | — | 3,002 | ||||||||||||||||||||||||||||
Total marketable securities | — | 118,130 | — | 118,130 | ||||||||||||||||||||||||||||
Total assets measured at fair value | $ | 22,415 | $ | 118,130 | $ | — | $ | 140,545 | ||||||||||||||||||||||||
As of December 31, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 9,770 | $ | — | $ | — | $ | 9,770 | ||||||||
Total cash equivalents | 9,770 | — | — | 9,770 | ||||||||||||
Marketable securities: | ||||||||||||||||
U.S. and foreign commercial paper | — | 46,121 | — | 46,121 | ||||||||||||
U.S. and foreign corporate debt securities | — | 24,807 | — | 24,807 | ||||||||||||
Supranational debt securities | — | 12,890 | — | 12,890 | ||||||||||||
U.S. agency securities | — | 7,759 | — | 7,759 | ||||||||||||
U.S. treasury securities | — | 23,617 | — | 23,617 | ||||||||||||
Total marketable securities | — | 115,194 | — | 115,194 | ||||||||||||
Total assets measured at fair value | $ | 9,770 | $ | 115,194 | $ | — | $ | 124,964 | ||||||||
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Numerator: | ||||||||
Net loss | $ | (89,998 | ) | $ | (50,986 | ) | ||
Denominator: | ||||||||
Weighted average number of common stock shares outstanding | 71,055,331 | 68,893,127 | ||||||
Net loss per share | $ | (1.27 | ) | $ | (0.74 | ) | ||
Year Ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Numerator: | ||||||||||||
Net loss | $ | (105,370 | ) | $ | (106,001 | ) | $ | (89,998 | ) | |||
Denominator: | ||||||||||||
Weighted average number of: | ||||||||||||
Common stock shares outstanding | 101,479,061 | 84,679,063 | 70,712,865 | |||||||||
Pre-funded warrants outstanding | 4,725,212 | 3,125,000 | 342,466 | |||||||||
Total | 106,204,273 | 87,804,063 | 71,055,331 | |||||||||
Net loss per share | $ | (0.99 | ) | $ | (1.21 | ) | $ | (1.27 | ) | |||
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Common stock options | 10,791 | 8,812 | ||||||
Incentive awards | 101 | 101 | ||||||
Total | 10,892 | 8,913 | ||||||
Year Ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Common stock options | 16,539,905 | 13,930,195 | 10,791,431 | |||||||||
Incentive awards | — | 101,182 | 101,182 | |||||||||
Total | 16,539,905 | 14,031,377 | 10,892,613 | |||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
As of December 31, 2021: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 85,638 | $ | — | $ | — | $ | 85,638 | ||||||||
Total cash equivalents | 85,638 | — | — | 85,638 | ||||||||||||
| Current marketable securities: | ||||||||||||||||
U.S. and foreign commercial paper | 28,760 | — | — | 28,760 | ||||||||||||
U.S. and foreign corporate debt securities | 15,476 | — | (8 | ) | 15,468 | |||||||||||
Asset-backed securities | 8,524 | 1 | (3 | ) | 8,522 | |||||||||||
U.S. treasury securities | 7,982 | — | (3 | ) | 7,979 | |||||||||||
| Total current marketable securities | 60,742 | 1 | (14 | ) | 60,729 | |||||||||||
Non-current marketable securities: | ||||||||||||||||
| U.S. corporate debt securities | 8,067 | 2 | (2 | ) | 8,067 | |||||||||||
| Total marketable securities | $ | 154,447 | $ | 3 | $ | (16 | ) | $ | 154,434 | |||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
As of December 31, 2023: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 127,231 | $ | — | $ | — | $ | 127,231 | ||||||||
U.S. treasury securities | 15,179 | 2 | — | 15,181 | ||||||||||||
U.S and foreign commercial paper | 19,924 | — | (8 | ) | 19,916 | |||||||||||
U.S. agency securities | 33,219 | — | (12 | ) | 33,207 | |||||||||||
Total cash equivalents | 195,553 | 2 | (20 | ) | 195,535 | |||||||||||
Current marketable securities: | ||||||||||||||||
U.S. and foreign commercial paper | 66,354 | 3 | (40 | ) | 66,317 | |||||||||||
U.S. and foreign corporate debt securities | 5,538 | — | (2 | ) | 5,536 | |||||||||||
U.S. agency securities | 30,595 | 23 | (12 | ) | 30,606 | |||||||||||
U.S. treasury securities | 85,210 | 54 | (3 | ) | 85,261 | |||||||||||
Total current marketable securities | 187,697 | 80 | (57 | ) | 187,720 | |||||||||||
Non-current marketable securities: | ||||||||||||||||
U.S. agency securities | 10,241 | 67 | — | 10,308 | ||||||||||||
U.S. treasury securities | 11,552 | 72 | — | 11,624 | ||||||||||||
Total non-current marketable securities | 21,793 | 139 | — | 21,932 | ||||||||||||
Total marketable securities | $ | 405,043 | $ | 221 | $ | (77 | ) | $ | 405,187 | |||||||
As of December 31, 2022: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 9,770 | $ | — | $ | — | $ | 9,770 | ||||||||
Total cash equivalents | 9,770 | — | — | 9,770 | ||||||||||||
Current marketable securities: | ||||||||||||||||
U.S. and foreign commercial paper | 46,121 | — | — | 46,121 | ||||||||||||
U.S. and foreign corporate debt securities | 24,964 | — | (157 | ) | 24,807 | |||||||||||
Supranational debt securities | 12,946 | — | (56 | ) | 12,890 | |||||||||||
U.S. agency securities | 7,782 | 16 | (39 | ) | 7,759 | |||||||||||
U.S. treasury securities | 23,707 | 2 | (92 | ) | 23,617 | |||||||||||
Total current marketable securities | 115,520 | 18 | (344 | ) | 115,194 | |||||||||||
Total marketable securities | $ | 125,290 | $ | 18 | $ | (344 | ) | $ | 124,964 | |||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
As of December 31, 2020: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 22,415 | $ | — | $ | — | $ | 22,415 | ||||||||
Total cash equivalents | 22,415 | — | — | 22,415 | ||||||||||||
| Current marketable securities: | ||||||||||||||||
U.S. and foreign commercial paper | 38,561 | — | — | 38,561 | ||||||||||||
U.S. and foreign corporate debt securities | 29,186 | 7 | (4 | ) | 29,189 | |||||||||||
Asset-backed securities | 7,883 | 2 | — | 7,885 | ||||||||||||
U.S. treasury securities | 23,991 | 3 | — | 23,994 | ||||||||||||
U.S. agency securities | 15,498 | 1 | — | 15,499 | ||||||||||||
Supranational debt securities | 3,003 | — | (1 | ) | 3,002 | |||||||||||
| Total current marketable securities | 118,122 | 13 | (5 | ) | 118,130 | |||||||||||
Total marketable securities | $ | 140,537 | $ | 13 | $ | (5 | ) | $ | 140,545 | |||||||
Due less than 1 year | $ | 146,367 | ||
Due between 1 and 2 years | 8,067 | |||
Total fair value | $ | 154,434 | ||
Due less than 1 year | $ | 187,720 | ||
Due between 1 and 2 years | 21,932 | |||
Total fair value | $ | 209,652 | ||
December 31, | ||||||||
2023 | 2022 | |||||||
Cash and cash equivalents | $ | 206,535 | $ | 20,291 | ||||
Restricted cash (included in Other assets) | 428 | — | ||||||
Total cash, cash equivalents, and restricted cash | $ | 206,963 | $ | 20,291 | ||||
December 31, | ||||||||
2021 | 2020 | |||||||
Leasehold improvements | $ | 2,429 | $ | 2,430 | ||||
Office and computer equipment | 290 | 290 | ||||||
Purchased software | 44 | 44 | ||||||
Furniture and fixtures | 539 | 451 | ||||||
Total | 3,302 | 3,215 | ||||||
Less: Accumulated depreciation and amortization | (2,124 | ) | (1,454 | ) | ||||
Property and equipment, net | $ | 1,178 | $ | 1,761 | ||||
December 31, | ||||||||
2023 | 2022 | |||||||
Leasehold improvements | $ | 2,429 | $ | 2,429 | ||||
Office and computer equipment | 958 | 290 | ||||||
Purchased software | 44 | 44 | ||||||
Furniture and fixtures | 464 | 687 | ||||||
Total | 3,895 | 3,450 | ||||||
Less: Accumulated depreciation and amortization | (3,430 | ) | (2,749 | ) | ||||
Property and equipment, net | $ | 465 | $ | 701 | ||||
December 31, | ||||||||
2021 | 2020 | |||||||
Accrued compensation | $ | 3,986 | $ | 3,769 | ||||
Accrued professional fees and other | 1,333 | 677 | ||||||
Current portion of operating lease liability | 567 | 482 | ||||||
Total other accrued liabilities | $ | 5,886 | $ | 4,928 | ||||
December 31, | ||||||||
2023 | 2022 | |||||||
Accrued compensation | $ | 8,980 | $ | 5,779 | ||||
Accrued professional fees and other | 6,706 | 1,372 | ||||||
Current portion of operating lease liabilities | 7 | 664 | ||||||
Total other accrued liabilities | $ | 15,693 | $ | 7,815 | ||||
| (1) | the exclusive license to develop and commercialize seladelpar in Japan, including the initial transfer of the underlying technology and know-how, |
| (2) | delivery of data gathered through the execution of the Company’s ongoing development activities for PBC to support Kaken’s regulatory filings in Japan which will occur at specific points in time when such information is available, and |
| (3) | completing the Company’s global CMC development activities and the reporting of such activities for the manufacture and supply of the Licensed Product to Kaken. |
Balance at December 31, 2020 | $ | 0 | ||
Cash received | 50,000 | |||
Debt discount | (2,263 | ) | ||
Accretion of development financing liability | 2,583 | |||
Balance at December 31, 2021 | $ | 50,320 | ||
Balance at December 31, 2020 | $ | — | ||
Cash received | 50,000 | |||
Debt discount | (2,263 | ) | ||
Accretion of development financing liability | 2,583 | |||
Balance at December 31, 2021 | $ | 50,320 | ||
Cash received | 25,000 | |||
Accretion of development financing liability | 14,907 | |||
Balance at December 31, 2022 | $ | 90,227 | ||
Accretion of development financing liability | 18,945 | |||
Balance at December 31, 2023 | $ | 109,172 | ||
Operating leases | Finance lease | Total leases | ||||||||||
Assets: | ||||||||||||
Right-of-use | $ | 4,802 | $ | 458 | $ | 5,260 | ||||||
Liabilities: | ||||||||||||
Current portion included in other accrued liabilities | 7 | — | 7 | |||||||||
Non-current portion oflease liabilities | 4,848 | 467 | 5,315 | |||||||||
Total lease liabilities | $ | 4,855 | $ | 467 | $ | 5,322 | ||||||
Operating leases | Finance lease | Total leases | ||||||||||
Lease commitments: | ||||||||||||
Year ending December 31, | ||||||||||||
| 2024 | $ | 30 | $ | — | $ | 30 | ||||||
| 2025 | 527 | 51 | 578 | |||||||||
| 2026 | 867 | 84 | 951 | |||||||||
| 2027 | 894 | 86 | 980 | |||||||||
| 2028 | 961 | 93 | 1,054 | |||||||||
| Thereafter | 5,085 | 491 | 5,576 | |||||||||
Total undiscounted future minimum lease payments | 8,364 | 805 | 9,169 | |||||||||
Less imputed interest | (3,509 | ) | (338 | ) | (3,847 | ) | ||||||
Total lease liabilities | 4,855 | 467 | 5,322 | |||||||||
Less: current portion of lease liabilities | (7 | ) | — | (7 | ) | |||||||
Non-current portion of lease liabilities | $ | 4,848 | $ | 467 | $ | 5,315 | ||||||
Year ending December 31, | ||||
2022 | $ | 686 | ||
2023 | 707 | |||
2024 | 30 | |||
Total undiscounted future minimum lease payments | 1,423 | |||
Less imputed interest | 161 | |||
Total operating lease liability | 1,262 | |||
Less: current portion of operating lease liability | 567 | |||
Long-term portion of lease liability | $ | 695 | ||
December 31, | ||||||||
2021 | 2020 | |||||||
Prefunded warrants to purchase common stock | 3,125,000 | 0 | ||||||
Equity award plans: | ||||||||
Options and incentive awards outstanding, all equity plans | 10,892,613 | 8,913,071 | ||||||
Equity awards available for future grant—2013 Plan | 1,588,613 | 167,159 | ||||||
Equity awards available for future grant—2020 Plan | 0 | 750,000 | ||||||
Total shares of common stock reserved for future issuance | 15,606,226 | 9,830,230 | ||||||
December 31, | ||||||||
2023 | 2022 | |||||||
Pre-funded warrants to purchase common stock | 5,226,628 | 3,125,000 | ||||||
Equity award plans: | ||||||||
Options and incentive awards outstanding, all equity plans | 16,539,905 | 14,031,377 | ||||||
| Equity awards available for future grant - 2023 Plan | 8,637,460 | — | ||||||
Equity awards available for future grant - 2013 Plan | — | 2,680,621 | ||||||
Equity awards available for future grant - 2020 Plan | 552,500 | — | ||||||
Total shares of common stock reserved for future issuance | 30,956,493 | 19,836,998 | ||||||
Shares Subject to Outstanding Options | Weighted- Average Exercise Price of Options | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding as of December 31, 2020 | 8,811,630 | $ | 6.35 | |||||||||||||
Options granted | 2,660,965 | 4.84 | ||||||||||||||
Options exercised | (106,847 | ) | 2.05 | |||||||||||||
Options forfeited | (307,018 | ) | 5.89 | |||||||||||||
Options expired | (267,299 | ) | 7.60 | |||||||||||||
Outstanding as of December 31, 2021 | 10,791,431 | $ | 6.01 | 7.28 | $ | 1,514 | ||||||||||
Vested and expected to vest as of December 31, 2021 | 10,791,431 | $ | 6.01 | 7.28 | $ | 1,514 | ||||||||||
Exercisable as of December 31, 2021 | 6,327,680 | $ | 6.62 | 6.22 | $ | 1,510 | ||||||||||
Shares Subject to Outstanding Options | Weighted Average Exercise Price of Options | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding as of December 31, 2022 | 13,930,195 | $ | 5.26 | |||||||||||||
Options granted | 5,685,135 | 9.46 | ||||||||||||||
Options exercised | (2,115,004 | ) | 4.79 | |||||||||||||
Options forfeited | (930,421 | ) | 5.91 | |||||||||||||
Options expired | (30,000 | ) | 12.72 | |||||||||||||
Outstanding as of December 31, 2023 | 16,539,905 | $ | 6.71 | 6.87 | $ | 279,610 | ||||||||||
| Vested and expected to vest as of December 31, 2023 | 16,539,905 | $ | 6.71 | 6.87 | $ | 279,610 | ||||||||||
Exercisable as of December 31, 2023 | 10,096,612 | $ | 5.97 | 5.64 | $ | 178,177 | ||||||||||
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Research and development | $ | 4,470 | $ | 2,739 | ||||
General and administrative | 5,526 | 4,585 | ||||||
Total stock-based compensation expense | $ | 9,996 | $ | 7,324 | ||||
Year Ended | ||||||||||||
December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Research and development | $ | 5,758 | $ | 4,274 | $ | 4,470 | ||||||
General and administrative | 9,472 | 5,243 | 5,526 | |||||||||
Total stock-based compensation expense | $ | 15,230 | $ | 9,517 | $ | 9,996 | ||||||
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Expected term (years) | 6.1 | 6.1 | ||||||
Expected volatility | 104 | % | 105 | % | ||||
Risk-free interest rate | 0.9 | % | 0.4 | % | ||||
Expected dividend yield | 0 | 0 | ||||||
Weighted-average grant date fair value per share | $ | 3.91 | $ | 3.91 | ||||
Year Ended | ||||||||||||
December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Expected term (years) | 6.1 | 6.0 | 6.1 | |||||||||
Expected volatility | 96 | % | 101 | % | 104 | % | ||||||
Risk-free interest rate | 3.8 | % | 1.8 | % | 0.9 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Weighted-average grant date fair value per share | $ | 7.50 | $ | 2.33 | $ | 3.91 | ||||||
December 31, | ||||||||
2021 | 2020 | |||||||
Deferred tax assets: | ||||||||
Federal and state net operating loss carryforwards | $ | 129,898 | $ | 123,144 | ||||
State and federal research and development tax credit carryforwards | 31,951 | 28,861 | ||||||
Capitalized research and development | 5,670 | 2,363 | ||||||
Stock-based compensation | 5,329 | 3,822 | ||||||
Other | 1,222 | 1,256 | ||||||
Total deferred tax assets | 174,070 | 159,446 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | (158 | ) | (269 | ) | ||||
Other | (53 | ) | (57 | ) | ||||
Total deferred tax liabilities | (211 | ) | (326 | ) | ||||
Valuation allowance | (173,859 | ) | (159,120 | ) | ||||
Net deferred tax assets | $ | 0 | $ | 0 | ||||
December 31, | ||||||||
2023 | 2022 | |||||||
Deferred tax assets: | ||||||||
Federal and state net operating loss carryforwards | $ | 91,783 | $ | 87,681 | ||||
Federal and state research and development tax credit carryforwards | 41,714 | 32,016 | ||||||
Intangibles | 4,365 | 5,040 | ||||||
Capitalized research and development | 26,101 | 11,872 | ||||||
Stock-based compensation | 3,358 | 6,624 | ||||||
Other | 3,329 | 1,574 | ||||||
Total deferred tax assets | 170,650 | 144,807 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | — | (79 | ) | |||||
Other | (1,135 | ) | (36 | ) | ||||
Total deferred tax liabilities | (1,135 | ) | (115 | ) | ||||
Valuation allowance | $ | (169,515 | ) | $ | (144,692 | ) | ||
Net deferred tax assets | $ | — | $ | — | ||||
Year Ended December 31, | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Income tax benefit at federal statutory tax rate | $ | (22,128 | ) | $ | (22,260 | ) | $ | (18,900 | ) | |||
Change in valuation allowance | 24,852 | (29,165 | ) | 14,739 | ||||||||
Impairment of tax attributes | 4,905 | 38,398 | — | |||||||||
Research credits | (8,622 | ) | (2,640 | ) | (2,802 | ) | ||||||
Development financing liability | 3,978 | 12,301 | 6,654 | |||||||||
Permanent differences | (2,230 | ) | 511 | 429 | ||||||||
State income taxes, net of federal benefit | (1,132 | ) | 2,806 | (267 | ) | |||||||
Other, net | 377 | 49 | 147 | |||||||||
Income tax (benefit) expense | $ | — | $ | — | $ | — | ||||||
December 31, | ||||||||
2021 | 2020 | |||||||
Income tax benefit at federal statutory tax rate | $ | (18,900 | ) | $ | (10,707 | ) | ||
Change in valuation allowance | 14,739 | 17,181 | ||||||
State income taxes, net of federal benefit | (267 | ) | (4,768 | ) | ||||
Research credits | (2,802 | ) | (2,911 | ) | ||||
Cancelled options | 141 | 982 | ||||||
Development financing liability | 6,654 | 0 | ||||||
Permanent differences | 429 | 152 | ||||||
Other, net | 6 | 71 | ||||||
Income tax (benefit) expense | $ | 0 | $ | 0 | ||||
Total | ||||||||
Balances as of December 31, 2019 | 6,386 | |||||||
Decreases related to prior year tax positions | (58 | ) | ||||||
Increases related to 2020 tax positions | 877 | |||||||
Balances as of December 31, 2020 | $ | 7,205 | $ | 7,205 | ||||
In creases related to prior year tax positions | 9 | |||||||
Increases related to prior year tax positions | 9 | |||||||
Increases related to 2021 tax positions | 783 | 783 | ||||||
Balances as of December 31, 2021 | $ | 7,997 | 7,997 | |||||
Decreases related to prior year tax positions | (1,223 | ) | ||||||
Increases related to 2022 tax positions | 730 | |||||||
Balances as of December 31, 2022 | 7,504 | |||||||
Decreases related to prior year tax positions | (14 | ) | ||||||
Increases related to 2023 tax positions | 2,514 | |||||||
Balances as of December 31, 2023 | $ | 10,004 | ||||||
| CymaBay Therapeutics, Inc. | ||||||
| Registrant | ||||||
February 2 8 , 2024 | ||||||
/s/ Sujal Shah | ||||||
| Date | Sujal Shah President and Chief Executive Officer | |||||
Name and Signature | Title | Date | ||
/s/ Sujal Shah Sujal Shah | President, Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ Harish Shantharam | Chief Financial Officer (Principal Financial and Accounting Officer) | |||
/s/ Robert J. Wills Robert J. Wills | Director | |||
/s/ Kurt von Emster Kurt von Emster | Director | |||
/s/ Caroline Loewy Caroline Loewy | Director | |||
/s/ Thomas G. Wiggans Thomas G. Wiggans | Director | |||
/s/ Janet Dorling Janet Dorling | Director | |||
/s/ Éric Lefebvre Éric Lefebvre | Director | February 28, 2024 | ||