UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20172021
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission File Number:001-37708
Syndax Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 32-0162505 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |
35 Gatehouse Drive, Building D, Floor 3 Waltham, Massachusetts | 02451 | |
(Address of Principal Executive Offices) | (Zip Code) |
(781)419-1400
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | SNDX | The Nasdaq Stock Market, LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” orand “emerging growth company” inRule 12b-2 of the Exchange Act.:
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes☐No☒
As of NovemberAugust 6, 2017,2021, there were 24,389,92948,627,611 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which are subject to the “safe harbor” created by those sections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “would,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend,” “project” or “continue,” or the negative or plural of these terms or other comparable terminology.
Forward-looking statements include, but are not limited to, statements about:
• | the impact of the COVID-19 pandemic and its effects on our operations, research and development and clinical trials and potential disruption in the operations and business of third-party manufacturers, contract research organizations, or CROs, other service providers, and collaborators with whom we conduct business; |
• | our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing; |
• | the timing of the progress and receipt of data from the Phase 1/2 clinical trial of SNDX-5613 in patients with relapsed/refractory (R/R) acute leukemia and the potential use of SNDX-5613 to treat acute leukemias; |
• | the timing of the progress and receipt of data from the expansion cohort from the Phase 1/2 clinical trial of axatilimab in chronic Graft Versus Host Disease (cGVHD); |
• | the timing of the progress and receipt of data from the pivotal Phase 2 trial, AGAVE-201, of axatilimab in cGVHD; |
• | our ability to replicate results in future clinical trials; |
• | our expectations regarding the potential safety, efficacy or clinical utility of our product candidates as well as the potential use of our product candidates to treat various cancer indications and fibrotic diseases; |
• | our ability to obtain and maintain regulatory approval for our product candidates and the timing or likelihood of regulatory filings and approvals for such candidates; |
• | our ability to maintain our licenses with Bayer Pharma AG, Eddingpharm Investment Company Limited, Kyowa Kirin Co., Ltd., UCB Biopharma Sprl, and Vitae Pharmaceuticals, Inc., a subsidiary of Allergan plc, which was acquired by AbbVie Inc.; |
• | the potential milestone and royalty payments under certain of our license agreements; |
• | the implementation of our strategic plans for our business and development of our product candidates; |
• | the scope of protection we establish and maintain for intellectual property rights covering our product candidates and our technology; |
• | the market adoption of our product candidates by physicians and patients; |
• | developments relating to our competitors and our industry; and |
• | political, social and economic instability, natural disasters or public health crisis, including but not limited to the COVID-19 pandemic, in countries where we or our collaborators do business. |
These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this report in greater detail in the section titled “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.
ii
SUMMARY OF SELECTED RISKS
Our business is subject to numerous risks and uncertainties, including those discussed at length in the section titled “Risk Factors.” These risks include, among others, the following:
• | COVID-19 could adversely impact our business, including our clinical trials. |
• | We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any of our product candidates. |
• | We are currently developing several product candidates. If we are unable to successfully complete clinical development of, obtain regulatory approval for and commercialize our product candidates, our business prospects will be significantly harmed. |
• | Our strategy for developing SNDX-5613 has undergone limited clinical testing and we may fail to show that the drug is well tolerated and provides sufficient clinical benefit for patients. |
• | Our strategy for developing axatilimab has undergone limited clinical testing and we may fail to show that this drug is well tolerated and provides a sufficient clinical benefit for patients. |
• | Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. |
• | If we are or our collaborators are unable to enroll patients in clinical trials, these clinical trials may not be completed on a timely basis or at all. |
• | The regulatory approval processes of the FDA and foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates could harm our business. |
• | We rely on third-party suppliers to manufacture and distribute our clinical drug supplies for our product candidates, we intend to rely on third parties for commercial manufacturing and distribution of our product candidates and we expect to rely on third parties for manufacturing and distribution of preclinical, clinical and commercial supplies of any future product candidates. |
• | Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties. |
• | Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial scope of their approved use, or result in significant negative consequences following any marketing approval. |
• | We have incurred net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future. |
• | We currently have no source of product revenue and may never achieve or maintain profitability. |
• | We will require additional capital to finance our planned operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development and commercialization of, or obtain regulatory approval for our existing product candidates or develop new product candidates. |
• | If we are unable to obtain or protect intellectual property rights, we may not be able to compete effectively in our market. |
• | We may not be able to protect our intellectual property rights throughout the world. |
• | The market price of our stock may be volatile and you could lose all or part of your investment. |
• | We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business. |
iii
ii
Page | ||||||
Item 1. | ||||||
Condensed Consolidated Balance Sheets as of | 1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||||
Item 3. | 25 | |||||
Item 4. | 25 | |||||
Item 1. | 27 | |||||
Item 1A. | 27 | |||||
Item 2. | 54 | |||||
Item 3. | 54 | |||||
Item 6. | 55 |
iii
iv
(unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30, 2017 | December 31, 2016 |
| June 30, 2021 |
|
| December 31, 2020 |
| |||||||||
ASSETS |
|
|
|
|
|
|
|
| ||||||||
Current assets: |
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents | $ | 20,732 | $ | 23,844 |
| $ | 68,041 |
|
| $ | 115,243 |
| ||||
Restricted cash | 100 | 151 |
|
| 115 |
|
|
| 115 |
| ||||||
Short-term investments | 99,862 | 81,486 |
|
| 185,091 |
|
|
| 177,822 |
| ||||||
Prepaid expenses and other current assets | 3,277 | 3,029 |
|
| 9,308 |
|
|
| 5,684 |
| ||||||
|
| |||||||||||||||
Total current assets | 123,971 | 108,510 |
|
| 262,555 |
|
|
| 298,864 |
| ||||||
Property and equipment, net | 286 | 260 |
|
| 166 |
|
|
| 192 |
| ||||||
Right-of-use asset, net |
|
| 338 |
|
|
| 290 |
| ||||||||
Other assets | 236 | 243 |
|
| — |
|
|
| 1,267 |
| ||||||
|
| |||||||||||||||
Total assets | $ | 124,493 | $ | 109,013 |
| $ | 263,059 |
|
| $ | 300,613 |
| ||||
|
| |||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
| ||||||||
Current liabilities: |
|
|
|
|
|
|
|
| ||||||||
Accounts payable | $ | 2,246 | $ | 2,375 |
| $ | 3,624 |
|
| $ | 3,508 |
| ||||
Accrued expenses and other current liabilities | 10,741 | 6,771 |
|
| 11,724 |
|
|
| 11,246 |
| ||||||
Current portion of deferred revenue | 1,220 | 1,220 |
|
| 1,517 |
|
|
| 1,517 |
| ||||||
|
| |||||||||||||||
Current portion of right-of-use liability |
|
| 397 |
|
|
| 316 |
| ||||||||
Current portion of term loan |
|
| 7,030 |
|
|
| 2,285 |
| ||||||||
Total current liabilities | 14,207 | 10,366 |
|
| 24,292 |
|
|
| 18,872 |
| ||||||
|
| |||||||||||||||
Long-term liabilities: |
|
|
|
|
|
|
|
| ||||||||
Deferred revenue, less current portion | 13,305 | 14,220 |
|
| 10,859 |
|
|
| 11,617 |
| ||||||
Right-of-use liability, less current portion |
|
| 22 |
|
|
| 101 |
| ||||||||
Term loan, less current portion |
|
| 13,323 |
|
|
| 17,834 |
| ||||||||
Other long-term liabilities | 267 | 288 |
|
| — |
|
|
| 1 |
| ||||||
|
| |||||||||||||||
Total long-term liabilities | 13,572 | 14,508 |
|
| 24,204 |
|
|
| 29,553 |
| ||||||
|
| |||||||||||||||
Total liabilities | 27,779 | 24,874 |
|
| 48,496 |
|
|
| 48,425 |
| ||||||
|
| |||||||||||||||
Commitments |
|
|
|
|
|
|
|
| ||||||||
Stockholders’ equity: |
|
|
|
|
|
|
|
| ||||||||
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares outstanding at September 30, 2017 and December 31, 2016 | — | — | ||||||||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized; 22,313,001 and 18,215,181 shares outstanding at September 30, 2017 and December 31, 2016, respectively | 2 | 2 | ||||||||||||||
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares outstanding at June 30, 2021 and December 31, 2020 |
|
| — |
|
|
| — |
| ||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized; 48,616,628 and 47,881,223 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively |
|
| 5 |
|
|
| 5 |
| ||||||||
Additionalpaid-in capital | 443,692 | 389,374 |
|
| 833,802 |
|
|
| 820,815 |
| ||||||
Accumulated other comprehensive income | 28 | 56 | ||||||||||||||
Accumulated other comprehensive income (loss) |
|
| 17 |
|
|
| (4 | ) | ||||||||
Accumulated deficit | (347,008 | ) | (305,293 | ) |
|
| (619,261 | ) |
|
| (568,628 | ) | ||||
|
| |||||||||||||||
Total stockholders’ equity | 96,714 | 84,139 |
|
| 214,563 |
|
|
| 252,188 |
| ||||||
|
| |||||||||||||||
Total liabilities and stockholders’ equity | $ | 124,493 | $ | 109,013 |
| $ | 263,059 |
|
| $ | 300,613 |
| ||||
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except share and per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
License fees | $ | 305 | $ | 305 | $ | 915 | $ | 915 | $ | 379 |
|
| $ | 379 |
|
| $ | 758 |
|
| $ | 758 |
| ||||||||
|
|
|
| ||||||||||||||||||||||||||||
Total revenues | 305 | 305 | 915 | 915 |
| 379 |
|
|
| 379 |
|
|
| 758 |
|
|
| 758 |
| ||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Research and development | 12,188 | 12,274 | 31,603 | 23,191 |
| 16,871 |
|
|
| 10,943 |
|
|
| 38,742 |
|
|
| 20,505 |
| ||||||||||||
General and administrative | 3,563 | 3,269 | 11,777 | 10,349 |
| 5,842 |
|
|
| 6,046 |
|
|
| 11,513 |
|
|
| 11,963 |
| ||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Total operating expenses | 15,751 | 15,543 | 43,380 | 33,540 |
| 22,713 |
|
|
| 16,989 |
|
|
| 50,255 |
|
|
| 32,468 |
| ||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Loss from operations | (15,446 | ) | (15,238 | ) | (42,465 | ) | (32,625 | ) |
| (22,334 | ) |
|
| (16,610 | ) |
|
| (49,497 | ) |
|
| (31,710 | ) | ||||||||
Other income (expense): | |||||||||||||||||||||||||||||||
Interest income, net | 411 | 268 | 959 | 688 | |||||||||||||||||||||||||||
Change in fair value of common stock warrant liability | — | — | — | (1,703 | ) | ||||||||||||||||||||||||||
Other income (expense) | (53 | ) | 1 | (193 | ) | (17 | ) | ||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Total other income (expense) | 358 | 269 | 766 | (1,032 | ) | ||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Interest expense |
| (634 | ) |
|
| (638 | ) |
|
| (1,258 | ) |
|
| (1,087 | ) | ||||||||||||||||
Interest income |
| 108 |
|
|
| 225 |
|
|
| 229 |
|
|
| 558 |
| ||||||||||||||||
Other (expense) income, net |
| (50 | ) |
|
| (39 | ) |
|
| (107 | ) |
|
| (59 | ) | ||||||||||||||||
Total other (expense) income |
| (576 | ) |
|
| (452 | ) |
|
| (1,136 | ) |
|
| (588 | ) | ||||||||||||||||
Net loss | $ | (15,088 | ) | $ | (14,969 | ) | $ | (41,699 | ) | $ | (33,657 | ) | $ | (22,910 | ) |
| $ | (17,062 | ) |
| $ | (50,633 | ) |
| $ | (32,298 | ) | ||||
|
|
|
| ||||||||||||||||||||||||||||
Other comprehensive (loss) income: | |||||||||||||||||||||||||||||||
Unrealized (losses) gains on marketable securities | $ | (8 | ) | $ | (92 | ) | $ | (28 | ) | $ | 72 | ||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Unrealized gain on marketable securities | $ | 8 |
|
| $ | 69 |
|
| $ | 21 |
|
| $ | 117 |
| ||||||||||||||||
Comprehensive loss | $ | (15,096 | ) | $ | (15,061 | ) | $ | (41,727 | ) | $ | (33,585 | ) | $ | (22,902 | ) |
| $ | (16,993 | ) |
| $ | (50,612 | ) |
| $ | (32,181 | ) | ||||
|
|
|
| ||||||||||||||||||||||||||||
Net loss attributable to common stockholders | $ | (15,088 | ) | $ | (14,969 | ) | $ | (41,699 | ) | $ | (36,255 | ) | $ | (22,910 | ) |
| $ | (17,062 | ) |
| $ | (50,633 | ) |
| $ | (36,204 | ) | ||||
|
|
|
| ||||||||||||||||||||||||||||
Net loss per share attributable to common stockholders—basic and diluted | $ | (0.68 | ) | $ | (0.84 | ) | $ | (2.08 | ) | $ | (2.70 | ) | $ | (0.44 | ) |
| $ | (0.42 | ) |
| $ | (0.98 | ) |
| $ | (0.97 | ) | ||||
|
|
|
| ||||||||||||||||||||||||||||
Weighted-average number of common shares used to compute net loss per share attributable to common stockholders—basic and diluted | 22,239,996 | 17,899,481 | 20,004,409 | 13,419,919 | |||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Weighted-average number of common shares used to compute net loss per share attributable to common stockholders —basic and diluted |
| 51,603,286 |
|
|
| 40,609,205 |
|
|
| 51,551,844 |
|
|
| 37,468,922 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30, |
| Six Months Ended June 30, |
| |||||||||||||
2017 | 2016 |
| 2021 |
|
| 2020 |
| |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
| ||||||||
Net loss | $ | (41,699 | ) | $ | (33,657 | ) |
| $ | (50,633 | ) |
| $ | (32,298 | ) | ||
Adjustments to reconcile net loss to net cash from operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation, amortization and accretion | 233 | (12 | ) | |||||||||||||
Depreciation |
|
| 25 |
|
|
| 45 |
| ||||||||
Amortization and accretion of investments |
|
| 300 |
|
|
| (193 | ) | ||||||||
Non-cash operating lease expense |
|
| 197 |
|
|
| 214 |
| ||||||||
Non-cash interest expense |
|
| 234 |
|
|
| 166 |
| ||||||||
Stock-based compensation | 4,170 | 3,761 |
|
| 6,007 |
|
|
| 3,959 |
| ||||||
Change in fair value of warrants and derivative | — | 1,720 | ||||||||||||||
Other | 8 | — |
|
| — |
|
|
| (1 | ) | ||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
| ||||||||
Prepaid expenses and other assets | (248 | ) | (80 | ) |
|
| (2,357 | ) |
|
| (2,384 | ) | ||||
Accounts payable | (206 | ) | 558 |
|
| 116 |
|
|
| (4,346 | ) | |||||
Deferred revenue | (915 | ) | (915 | ) |
|
| (758 | ) |
|
| (758 | ) | ||||
Accrued expenses and other liabilities | 4,008 | 3,884 |
|
| 235 |
|
|
| (1,736 | ) | ||||||
|
| |||||||||||||||
Net cash (used in) provided by operating activities | (34,649 | ) | (24,741 | ) | ||||||||||||
|
| |||||||||||||||
Net cash used in operating activities |
|
| (46,634 | ) |
|
| (37,332 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
| ||||||||
Purchases of property and equipment | (42 | ) | (261 | ) | ||||||||||||
Changes in restricted cash | 51 | (100 | ) | |||||||||||||
Purchases of short-term investments | (113,012 | ) | (131,752 | ) |
|
| (126,548 | ) |
|
| (131,125 | ) | ||||
Proceeds from sales and maturities of short-term investments | 94,432 | 92,402 |
|
| 119,000 |
|
|
| 33,460 |
| ||||||
|
| |||||||||||||||
Net cash used in investing activities | (18,571 | ) | (39,711 | ) |
|
| (7,548 | ) |
|
| (97,665 | ) | ||||
|
| |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
| ||||||||
Proceeds from issuance of common stock in initial public stock offering, net | — | 52,177 | ||||||||||||||
Proceeds from issuance of common stock in follow on public stock offering, net | 48,674 | — | ||||||||||||||
Proceeds from issuance of common stock inat-the-market stock offering, net | 1,121 |
|
| 5,131 |
|
|
| — |
| |||||||
Proceeds from direct stock offering, net |
|
| — |
|
|
| 142,767 |
| ||||||||
Proceeds from debt agreement, net |
|
| — |
|
|
| 19,730 |
| ||||||||
Proceeds from Employee Stock Purchase Plan |
|
| 143 |
|
|
| 149 |
| ||||||||
Proceeds from stock option exercises | 276 | 1,852 |
|
| 1,706 |
|
|
| 1,353 |
| ||||||
Proceeds from Employee Stock Purchase Plan | 39 | — | ||||||||||||||
Other | (2 | ) | (3 | ) | ||||||||||||
|
| |||||||||||||||
Net cash provided by financing activities | 50,108 | 54,026 |
|
| 6,980 |
|
|
| 163,999 |
| ||||||
|
| |||||||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (3,112 | ) | (10,426 | ) | ||||||||||||
CASH AND CASH EQUIVALENTS—beginning of period | 23,844 | 23,179 | ||||||||||||||
|
| |||||||||||||||
CASH AND CASH EQUIVALENTS—end of period | $ | 20,732 | $ | 12,753 | ||||||||||||
|
| |||||||||||||||
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
| (47,202 | ) |
|
| 29,002 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—beginning of period |
|
| 115,358 |
|
|
| 24,724 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —end of period |
| $ | 68,156 |
|
| $ | 53,726 |
| ||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
| ||||||||
Interest paid | $ | — | $ | 2 | ||||||||||||
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
Property and equipment purchases included in accounts payable and accrued expenses | $ | 42 | $ | — | ||||||||||||
Accretion of dividends on convertible preferred stock | $ | — | $ | 2,598 | ||||||||||||
Issuance costs included in accounts payable and accrued expenses | $ | — | $ | 29 | ||||||||||||
Vesting of restricted stock | $ | 59 | $ | 31 | ||||||||||||
Reclassification of common stock warrant liability to additionalpaid-in capital | $ | — | $ | 4,551 | ||||||||||||
Conversion of preferred stock to common stock upon closing of initial public offering | $ | — | $ | 328,941 | ||||||||||||
Cash paid for interest |
| $ | 996 |
|
| $ | 629 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Syndax Pharmaceuticals, Inc. (the(“we,” “us,” “our” or the “Company”) is a clinical stage biopharmaceutical company developing an innovative pipeline of combination therapiescancer therapies. We were incorporated in multiple cancer indications. The Company’s lead product candidate, entinostat, is currently being evaluatedDelaware in a Phase 3 clinical trial for advanced hormone receptor positive, human epidermal growth factor receptor 2 negative breast cancer. The U.S. Food2005. We base our operations in Waltham, Massachusetts and Drug Administration granted Breakthrough Therapy designation to entinostat when givenwe operate in combination with exemestane following positive results from the Company’s ENCORE 301 Phase 2b clinical trial. Given its potential ability to block the function of immune suppressive cells in the tumor microenvironment, the Company is evaluating entinostat as a combination therapeutic in Phase 1b/2 clinical trials with Merck & Co., Inc. fornon-small cell lung cancer, melanoma and microsatellite stable colorectal cancer; with Genentech, Inc. for triple negative breast cancer; and with Merck KGaA, Darmstadt, Germany, and Pfizer Inc. for ovarian cancer. The Company’s second product candidate, SNDX-6352, is a monoclonal antibody that targets the colony stimulatingfactor-1 receptor to enhance the body’s immune response against tumors that have shown sensitivity to immunotherapy. The Company is evaluating SNDX-6352 in a multiple ascending dose Phase 1 clinical trial in cancer patients. The Company plans to continue to leverage the technical and business expertise of our management team and scientific collaborators to license, acquire and develop additional cancer therapies to expand our pipeline.
On October 13, 2017, the Company entered into a license agreement with Vitae Pharmaceuticals, Inc., a subsidiary of Allergan plc (“Allergan”), under which Allergan granted to the Company a worldwide, sublicenseable, exclusive license to a portfolio of preclinical, orally-available, small molecule inhibitors of the interaction of Menin with the Mixed Lineage Leukemia (“MLL”) protein (the “Menin Assets”). Concurrent with the development of entinostat and SNDX-6352, the Company is also developing the Menin Assets to potentially treat MLL-r driven malignancies. The Company believes that the Menin Assets have the potential to be used to treat a genetically-defined subset of acute leukemias with chromosomal rearrangements in the MLL gene (“MLL-r”). The Company expects to begin preclinical studies of the Menin Assets during the fourth quarter of 2017.
On October 17, 2017, the Company entered into a purchase agreement with Biotech Value Fund, L.P. (“BVF”) and certain entities affiliated with BVF (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company issued directly to BVF in a registered direct offering (the “Offering”), 2,021,018 shares of the Company’s common stock at a price of $12.37 per share, representing the closing price of the Company’s shares on the Nasdaq Global Select Market on Friday, October 13, 2017. The net proceeds from the Offering, after deducting estimated expenses, are expected to be approximately $24.8 million.
In March 2016, the Company completed its initial public offering (“IPO”) whereby it sold 4,809,475 shares of common stock at the initial public offering price of $12.00 per share, which included 409,475 shares issued pursuant to the underwriters’ partial exercise of their over-allotment option to purchase additional shares of common stock. The aggregate net proceeds received by the Company from the offering were $50.5 million, net of underwriting discounts and commissions of $4.0 million and offering expenses of $3.1 million. Upon the closing of the IPO, all outstanding shares of the Company’s outstanding convertible preferred stock converted into 12,872,551 shares of common stock; and the Company’s outstanding warrant liability to purchase 357,840 shares of the Company’s common stock valued at $4.6 million was reclassified to additionalpaid-in capital. In connection with the closing of the Company’s IPO, the Company filed an amended and restated certificate of incorporation and adopted amended and restated bylaws, both of which were approved by the Company’s board of directors and stockholders on September 28, 2015 and February 24, 2016, respectively. Pursuant to the amended and restated certificate of incorporation, the Company is now authorized to issue 100,000,000 shares of common stock and 10,000,000 shares of preferred stock.
In May 2017, the Company completed afollow-on public offering whereby the Company sold 3,950,190 shares of common stock at a price of $13.25 per share, which included 200,190 shares issued pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock. The aggregate net proceeds received by the Company from the offering were approximately $48.7 million, net of underwriting discounts and commissions and estimated offering expenses payable by the Company.
In April 2017, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) under which the Company may issue and sell shares of our common stock having aggregate sales proceeds of up to $50.0 million from time to time through Cowen, acting as agent, in a series of one or moreat-the-market (“ATM”) equity offerings. Cowen is not required to sell any specific amount, but acts as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices. Shares sold pursuant to the sales agreement will be sold pursuant to a shelf registration statement, which became effective on April 20, 2017. Our common stock will be sold at prevailing market prices at the time of the sale; and as a result, prices may vary.
We will pay Cowen up to 3% of the gross proceeds from any common stock sold through the sales agreement. During the three months ended September 30, 2017, the Company sold 92,511 shares of Common Stock pursuant to the ATM program, at an average price of $12.49 per share for gross proceeds of $1.2 million, resulting in net proceeds of $1.1 million after deducting sales commissions and offering expenses. As of September 30, 2017, $48.8 million of Common Stock remained available for sale under the ATM program.
Since its inception, the Company has devoted its efforts principally to research and development and raising capital. The Company is subject to risks common to companies in the development stage, including, but not limited to, successful development of therapeutics, obtaining additional funding, protection of proprietary therapeutics, compliance with government regulations, fluctuations in operating results, dependence on key personnel and collaborative partners, and risks associated with industry changes. The Company’s long-term success is dependent upon its ability to successfully develop and market its product candidates, expand its oncology drug pipeline, earn revenue, obtain additional capital when needed, and ultimately, achieve profitable operations. The Company anticipates that it may be two or more years before any of our product candidates are approved, if ever, and the Company begins to generate revenue from sales of any of our product candidates. Accordingly, management expects to incur substantial losses on the ongoing development of our product candidates and does not expect to achieve positive cash flow from operations for the foreseeable future, if ever. As a result, the Company will continue to require additional capital to move forward with its business plan. While certain amounts of this additional capital were raised in the past, there can be no assurance that funds necessary beyond these amounts will be available in amounts or on terms sufficient to ensure ongoing operations.
The Company’s management believes that the cash, cash equivalents and short-term investments balances as of September 30, 2017 should enable the Company to maintain its planned operations for at least the next 12 months. The Company’s ability to fund all of its planned operations internally beyond that date, including the completion of its ongoing and planned clinical trial activities, may be substantially dependent upon whether the Company can obtain sufficient funding on terms acceptable to the Company. Proceeds from additional capital transactions would allow the Company to accelerate and/or expand its planned research and development activities. In the event that sufficient funds were not available, the Company may be required to delay or reduce expenditures to conserve cash, which could involve scaling back or curtailing development and general and administrative activities.segment.
2. Basis of Presentation
The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The interim unaudited condensed financial statements have been prepared on the same basis as the annual audited financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of SeptemberJune 30, 2017,2021, and the results of operations and comprehensive loss for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, and cash flows for the ninesix months ended SeptemberJune 30, 20172021 and 2016.2020. The results for the three and ninesix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results to be expected for the year ending December 31, 2017,2021, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2016,2020, and the notes thereto, which are included in the Company’s Annual Report onForm 10-K that was as filed with the Securities and Exchange Commission (“SEC”) on March 14, 2017.12, 2021.
In 2011, the Company established a wholly owned subsidiary in the United Kingdom. There have been no activities for this entity to date. In 2014, the Company established a wholly owned U.S. subsidiary, Syndax Securities Corporation. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
3. Summary of Significant Accounting Policies
Significant Accounting Policies
The Company’s significant accounting policies, which are disclosed in the audited consolidated financial statements for the year ended December 31, 20162020 and the notes thereto which are included in the Company’s Annual Report onForm 10-K that was filed with the SEC on March 14, 2017,12, 2021. Since the date of that filing, there have hadbeen no material changes duringto the nine months ended September 30, 2017.
Significant Risks and Uncertainties
We have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our business. We anticipate that the COVID-19 pandemic could have an impact on the clinical development timelines for one or more of our clinical programs. The extent to which the COVID-19 pandemic impacts our business, our clinical development, manufacturing of clinical and commercial drug substance and drug product, and regulatory efforts, our corporate development objectives and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe and other countries, the slow rollout of mass vaccinations for COVID-19 and any limitations to the efficacy of such vaccines and the effectiveness of other actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of our late-stage product candidate; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of costs and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions.
Other Assets
OtherWe anticipate that the COVID-19 pandemic will have an impact on the clinical and pre-clinical development timelines for our clinical and pre-clinical programs. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets consist of deferred issuance costs, long-term security depositsor liabilities. These estimates may change as new events occur and noncurrent restricted cash. Deferred issuance costs consist primarily of direct incremental legaladditional information is obtained and accounting fees relatingare recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the IPOCompany’s financial statements.
4. Revenue from Contracts with Customers
On December 19, 2014 (the “Effective Date”), the Company entered into a license agreement with Kyowa Kirin, Co., Ltd. (the KKC License Agreement), under which the Company granted KKC an exclusive license to develop and other public offerings, which are deferred until completioncommercialize entinostat in Japan and Korea. Under the terms of the offering, at which time they are reclassified to additionalpaid-in capital as a reductionKKC License Agreement, the Company will be responsible for the manufacture and supply of the offering proceeds.products during the development activities. In addition to the event that the offering is terminated, all costs deferred will be expensed immediately. As of September 30, 2017,license and 2016,manufacturing obligations, the Company had no capitalized deferred issuance costs.
Researchis obligated to provide KKC access to know-how and Development
In instances whereregulatory information the Company has entered into cost-sharing arrangements, all researchmay develop over the life of the entinostat patent. Lastly, to the extent additional intellectual property is developed during the term of the agreement, KKC will receive the right to the intellectual property when and if available. KKC will conduct the development, costs reimbursed by the collaborators are accounted for as reductions to researchregulatory approval filings, and development expense. For the nine months ended September 30, 2017,commercialization activities of entinostat in Japan and Korea. KKC paid the Company incurred $1.6$25.0 million in external costs related to cost-sharing collaborations, ofupfront, which $0.8included a $7.5 million has been recorded asequity investment and a reduction to research and development expense. No external costs related to cost-sharing collaborations were incurred for the nine months ended September 30, 2016.
Recently Issued and Adopted Accounting Pronouncements
$17.5 million non-refundable cash payment. In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2017-09,Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting(“ASU2017-09”). ASU2017-09 provides guidance about which changesaddition, to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the followingextent certain development and commercial milestones are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. ASU2017-09 will be effective for the Company on January 1, 2018. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In November 2016, the FASB issued ASU2016-18,“Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU2016-18”). ASU2016-18 requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the statement of cash flows. The statement of cash flows must also explain the change during the period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. ASU2016-18 will be effective for the Company on January 1, 2018. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU2016-09,Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”). ASU2016-09 simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification on the statement of cash flows. The Company adopted ASU2016-09 on January 1, 2017, and it did not have a material impact on its condensed consolidated balance sheet, condensed consolidated statement of comprehensive loss and condensed statement of cash flows. As part of the adoption of this guidance, the Company adopted a policy to account for forfeitures as they occur.
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842).” Under ASU2016-02, lesseesachieved, KKC will be required to recognize,pay the Company up to $75.0 million in milestone payments over the term of the license agreement. The term of the agreement commenced on the Effective Date and, unless earlier terminated in accordance with the terms of the agreement, will continue on a country-by-country and product-by-product basis, until the later of: (i) the date all valid claims of the last effective patent among the Company’s patents expires or is abandoned, withheld, or is otherwise invalidated in such country; and (ii) 15 years from the date of the first commercial sale of a product in the Japan or Korea.
The equity purchase and the up-front payment of the license fee were accounted for all leasesseparately. The Company allocated the amount of 12 months or more,consideration equal to the fair value of the shares on the Effective Date, which resulted in $7.7 million of proceeds allocated to the equity purchase and the remaining consideration of $17.3 million allocated to the up-front license fee.
In October 2017, the Company announced that KKC enrolled the first Japanese patient into a liability to make lease payments and aright-of-use asset representing the right to use the underlying assetlocal pivotal study of entinostat for the lease term. Additionally,treatment of hormone receptor positive, human epidermal growth factor receptor 2 negative breast cancer. In accordance with the guidance requires improved disclosuresterms of the license agreement, KKC paid the Company a $5.0 million milestone payment which the Company received in December 2017.
The Company determined that the performance obligations associated with the KKC License Agreement include (i) the combined license, rights to help usersaccess and use materials and data, and rights to additional intellectual property, and (ii) the clinical supply obligation. All other goods or services promised to KKC are immaterial in the context of financial statements better understand the natureagreement. Under ASC 606, the identification of the clinical supply obligation as a distinct performance obligation separate and apart from the license performance obligation resulted in a change in the performance period. The start of the performance period under ASC 606 was determined to be the contract inception date, December 19, 2014. The clinical supply was identified as a separate performance obligation under ASC 606 as (i) the Company is not providing a significant service of integration whereby the clinical supply and other promises are inputs into a combined output, (ii) the clinical supply does not significantly modify or customize the other promises nor is it significantly modified or customized by them, and (iii) the clinical supply is not highly interdependent or highly interrelated with the other promises in the agreement as KKC could choose not to purchase the clinical supply from the Company without significantly affecting the other promised goods or services. The Company further concluded that the clinical supply represented an entity’s leasing activities. This ASU is effective for public reporting companies for interimimmaterial performance obligation and annual periods beginning after December 15, 2018, with early adoption permitted,therefore the entire $17.3 million allocated to the upfront payment was allocated to the combined license and must be adopted using a modified retrospective approach. The standard will be effective forrecognized ratably over the performance period, representing contract inception though 2029. In 2017, KKC achieved a development milestone, and was required to pay the Company on January 1, 2019.$5.0 million. The Company is inrecognizing the process of evaluatingdevelopment milestone consideration over the effectperformance period coinciding with the license to intellectual property. As the Company determined that its performance obligations associated with the KKC Agreement at contract inception were not distinct and represented a single performance obligation, and that the obligations for goods and services provided would be completed over the performance period of the new guidanceagreement, any payments received by the Company from KKC, including the upfront payment and progress-dependent development
and regulatory milestone payments, are recognized as revenue using a time-based proportional performance model over the contract term (December 2014 through 2029) of the collaboration, within license fees. To date no commercial milestone payments or royalties have been achieved.
Contract liabilities consisted of deferred revenue, as presented on the Company’s consolidated financial statementsbalance sheet, as of June 30, 2021. Deferred revenue related to the KKC License Agreement was $12.4 million as of June 30, 2021 and related disclosures.
In May 2014, the FASB issued ASU2014-09,Revenue from Contracts with Customers(“ASU2014-09”). ASU2014-09 supersedes the revenue recognition requirements of FASB Accounting Standards Codification (“ASC”) Topic 605,Revenue Recognitionand most industry-specific guidance throughout the Accounting Standards Codification, resulting in the creation of FASB ASC Topic 606,Revenue from Contracts with Customers. ASU2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Adoption will be permitted using either a retrospective or modified retrospective approach. In July 2015, FASB voted to delayrecognized over the effective dateremainder of the standard by one year to the first quarter of 2018 to provide companies sufficient time to implement the standard. Early adoption will be permitted.contract term. The Company planswill continue to adopt ASU2014-09 on January 1, 2018. We currently have one revenue arrangement. In preparation for adoption of ASC 606, we have formed a project team and engaged a third-party professional services firm to assist us with our preliminary evaluation. We have completedmonitor the assessment phase and are working through the final phasesimpact of the adoption project. We are continuing to evaluate which transition approach to use and assessing the effect the adoption of ASC 606 will have on our results of operations, financial positionE2112 on the KKC License Agreement. For the three and related disclosures. Although substantial work has been completed, our analysis of the impact upon adoption is not finalized as we continue to analyze certain aspects of the arrangement, such as the recently attained development milestone under the KHK agreement discussed in Note 5 to these condensed consolidated financial statements. Therefore, at this time it is too early to make a final determination of the transition methodsix months ended June 30, 2021 and the effect of adoption given the many facets of this adoption that need to be considered. In addition, during 20172020, the Company is underway with identifyingrecognized $0.4 million and implementing appropriate changes to controls to support recognition and disclosure under the new standard. We expect to finalize our assessment in the fourth quarter of 2017.$0.8 million, respectively, as revenue.
4.5. Net Loss per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods. The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
Numerator—basic and diluted: | ||||||||||||||||
Net loss | $ | (15,088 | ) | $ | (14,969 | ) | $ | (41,699 | ) | $ | (33,657 | ) | ||||
Accretion of convertible preferred stock dividends | — | — | (2,598 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss attributable to common stockholders—basic and diluted | $ | (15,088 | ) | $ | (14,969 | ) | $ | (41,699 | ) | $ | (36,255 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Net loss per share attributable to common stockholders—basic and diluted | $ | (0.68 | ) | $ | (0.84 | ) | $ | (2.08 | ) | $ | (2.70 | ) | ||||
|
|
|
|
|
|
|
| �� | ||||||||
Denominator—basic and diluted: | ||||||||||||||||
Weighted-average common shares used to compute net loss per share—basic and diluted | 22,239,996 | 17,899,481 | 20,004,409 | 13,419,919 | ||||||||||||
|
|
|
|
|
|
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
| (In thousands, except share and per share data) |
|
| (In thousands, except share and per share data) |
| ||||||||||
Numerator—basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | (22,910 | ) |
| $ | (17,062 | ) |
| $ | (50,633 | ) |
| $ | (32,298 | ) |
Deemed dividend due to warrant reset |
| — |
|
|
| — |
|
|
| — |
|
|
| (3,906 | ) |
Net loss attributable to common stockholders—basic and diluted | $ | (22,910 | ) |
| $ | (17,062 | ) |
| $ | (50,633 | ) |
| $ | (36,204 | ) |
Net loss per share attributable to common stockholders—basic and diluted | $ | (0.44 | ) |
| $ | (0.42 | ) |
| $ | (0.98 | ) |
| $ | (0.97 | ) |
Denominator—basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares used to compute net loss per share attributable to common stockholders—basic and diluted |
| 51,603,286 |
|
|
| 40,609,205 |
|
|
| 51,551,844 |
|
|
| 37,468,922 |
|
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares):
September 30, |
| June 30, |
| |||||||||||||
2017 | 2016 |
| 2021 |
|
| 2020 |
| |||||||||
Options to purchase common stock | 3,286,936 | 2,508,083 |
|
| 7,406,760 |
|
|
| 6,857,741 |
| ||||||
Common stock warrant | 357,840 | 357,840 | ||||||||||||||
Restricted stock subject to future vesting | — | 10,077 | ||||||||||||||
Warrants to purchase common stock |
|
| — |
|
|
| 1,105,908 |
| ||||||||
Employee Stock Purchase Plan | 11,321 | — |
|
| 8,214 |
|
|
| 24,214 |
| ||||||
Non-vested restricted stock units (RSUs) |
|
| 124,083 |
|
|
| 15,000 |
|
5.
In June 2018, the Company signed an exchange agreement with an investor under which the investor exchanged 2,000,000 shares of common stock for 2,000,000 warrants. Further, as discussed in Note 12, in March 2019, the Company sold 2,095,039 shares of common stock as well as 2,500,000 pre-funded warrants and 4,595,039 Series 1 and Series 2 warrants. The pre-funded warrants are exercisable into shares of common stock for $0.0001 per share.In January 2020, the Company sold 3,036,719 shares of common stock as well as 1,338,287 pre-funded warrants. The warrants are exercisable into shares of common stock for $0.0001 per share. The shares of common stock into which the pre-funded warrants may be exercised are considered outstanding for the purposes of computing earnings per share. All Series 1 and Series 2 warrants were exercised in 2020.
During the first quarter of 2021, 250,000 pre-funded warrants were exchanged for shares of common stock in a cash exercise. As of June 30, 2021, 3,307,952 pre-funded warrants were outstanding.
6. Significant Agreements
Vitae Pharmaceuticals, Inc.
In October 2017, the Company entered into a license agreement (the “AbbVie License Agreement”) with Vitae Pharmaceuticals, Inc., which is now a subsidiary of Allergan (the “Allergan License Agreement”AbbVie, Inc. (“AbbVie”), under which AllerganAbbVie granted the Company an exclusive, sublicenseable,sublicensable, worldwide license to a portfolio of preclinical, orally available, small molecule inhibitors of the interaction of Menin Assets.with the Mixed Lineage Leukemia (“MLL”) protein (the “Menin Assets”). The Company made a nonrefundable upfront payment of $5.0 million to AllerganAbbVie in the fourth quarter of 2017. Additionally, subject to the achievement of certain milestone events, the Company may be required to pay AllerganAbbVie up to $99$99.0 million inone-time development and regulatory milestone payments over the term of the AllerganAbbVie License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes the Menin Assets, the Company will also be obligated to pay AllerganAbbVie low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $70.0 million in potentialone-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be required to share a percentage ofnon-royalty income from sublicensees, subject to certain deductions, with Allergan.AbbVie. The Company is solely responsible for the development and commercialization of the Menin Assets. Each party may terminate the AllerganAbbVie License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the AllerganAbbVie License Agreement at will at any time upon advance written notice to Allergan. AllerganAbbVie. AbbVie may terminate the AllerganAbbVie License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the AllerganAbbVie License Agreement will continue on acountry-by-country andproduct-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country. As of the date of the AbbVie License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. In June 2019, the Company achieved certain development and regulatory milestones. As a result, in June 2019, the Company recorded $4.0 million as research and development expense. The amount was paid in 2020.
UCB Biopharma Sprl
In July 2016, the Company entered into a license agreement (the “UCB License Agreement”) with UCB Biopharma Sprl (“UCB”), under which UCB granted to the Company a worldwide, sublicenseable, exclusive license to UCB6352, which the Company refers to as SNDX-6352,axatilimab, anIND-ready investigational new drug (“IND”) ready anti-CSF-1R monoclonal antibody. The Company made a nonrefundable upfront payment of $5.0 million to UCB in the third quarter of 2016. Additionally, subject to the achievement of certain milestone events, the Company may be required to pay UCB up to $119.5 million inone-time development and regulatory milestone payments over the term of the UCB License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes SNDX-6352,axatilimab, the Company will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250.0 million in potentialone-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be required to share a percentage ofnon-royalty income from sublicensees, subject to certain deductions, with UCB. The Company is solely responsible for the development and commercialization of SNDX-6352,axatilimab, except that UCB is performing a limited set of transitional chemistry, manufacturing and control tasks related to SNDX-6352.axatilimab. Each party may terminate the UCB License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the UCB License Agreement at will at any time upon advance written notice to UCB. UCB may terminate the UCB License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the UCB License Agreement will continue on acountry-by-country andproduct-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country.
As of the date of the UCB License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. As a result, of these findings, in the second quarter of 2016, the upfront payment of $5.0 million has beenwas recorded as research and development expense in the condensed consolidated statementstatements of comprehensive loss.
Kyowa Hakko Kirin Co., Ltd.
On December 19, 2014 (the “Effective Date”),operations. In July 2020, the Company entered into a license agreement (the “KHK License Agreement”) with Kyowa Hakko Kirin Co., Ltd. (“KHK”), under which the Company granted KHK an exclusive license to develop and commercialize entinostat in Japan and Korea. Under the terms of the KHK License Agreement, the Company will be responsible for the manufacture and supply of the products during the development activities. In addition to the license and manufacturing obligations, the Company is obligated to provide KHK access toknow-how and regulatory information the Company may develop over the life of the entinostat patent. Lastly, to the extent additional intellectual property is developed during the term of the agreement, KHK will receive the right to the intellectual property when and if available. KHK will conduct the development, regulatory approval filings, and commercialization activities of entinostat in Japan and Korea. KHK paid the Company $25.0 million upfront, which included a $7.5 million equity investment of 536,049 shares of SeriesB-1 convertible preferred stock and a $17.5 millionnon-refundable cash payment. In addition, to the extentachieved certain development and commercial milestones are achieved, KHK will be required to pay the Company up to $75.0 millionregulatory milestones. As a result, in milestone payments over the term of the license agreement. The term of the agreement commenced on the Effective Date and, unless earlier terminated in accordance with the terms of the agreement, will continue on acountry-by-country andproduct-by-product basis, until the later of: (i) the date all valid claims of the last effective patent among the Company’s patents expires or is abandoned, withheld, or is otherwise invalidated in such country; and (ii) 15 years from the date of the first commercial sale of a product in the Japan or Korea.
The purchase of the SeriesB-1 and theup-front payment of the license fee were accounted for separately. The Company allocated the amount of consideration related to SeriesB-1 equal to the fair value of the SeriesB-1 shares on the Effective Date based on a share price of $14.39 per share, which resulted in $7.7 million of proceeds allocated to the SeriesB-1 and the remaining consideration of $17.3 million allocated to theup-front license fee. The fair value of the SeriesB-1 of $14.39 per share was based on a contemporaneous valuation. The Company received $7.5 million and issued the SeriesB-1 in January 2015 and received the remaining $17.5 million in February 2015. On the date of issuance,July 2020, the Company recorded accretion of $5.4$2.0 million to record the SeriesB-1 at its redemption value.
The Companyas research and development expense, which has concluded that this agreement is within the scope of ASC605-25,Revenue Recognition, Multiple-Element Arrangements. Pursuant to this guidance,been fully paid. In March 2021, the Company identifiedrecorded $2.0 million as research and development expense for the following deliverables: (i) licenses, (ii) clinical supply and manufacturing obligations, (iii) rights to access and use materials and data, and (iv) rights to additional intellectual property. All other potential deliverables includedachievement of a certain development milestone. This amount was fully paid in the arrangement have been deemed either contingent or inconsequential or perfunctory, individually and in the aggregate. Moreover, the Company has evaluated all deliverables included in the KHK License Agreement and determined that there are two units of accounting in connection with its obligations at inception under the KHK License Agreement: (i) license unit of accounting and (ii) rights to additional intellectual property. The first three deliverables identified above comprise the license unit of accounting. The Company concluded that the stand-alone selling price for the rights to additional intellectual property unit of account is immaterial. As such, the entire $17.3 million allocated to the upfront payment was allocated to the license unit of accounting.
The arrangement consideration allocated to the license unit of accounting will be recognized as revenue ratably over the Company’s expected services period (currently expected to be through 2029) commencing on the date of the first delivery of the clinical trial materials. In June 2015, the Company began delivering clinical materials to KHK and commenced recognizing revenue from the upfront consideration of $17.3 million. During the ninesix months ended SeptemberJune 30, 2017 and 2016, the Company recognized $0.9 million of revenue associated with the KHK License Agreement. As of September 30, 2017, there was $14.5 million of deferred revenue related to the KHK License Agreement, which is classified as current or long-term in the condensed consolidated balance sheets.
In October 2016, the Company entered into a clinical trialco-funding agreement with KHK under which the Company will expand its clinical trial agreement with Eastern Cooperative Oncology Group (the “ECOG Agreement”) to include enrollments from sites in Korea.
In October 2017, the Company announced that its partner KHK enrolled the first Japanese patient into a local pivotal study of entinostat for the treatment of hormone receptor positive, human epidermal growth factor receptor 2 negative breast cancer. In accordance with the terms of the license agreement, KHK is obligated to pay the Company a $5 million milestone payment within 30 days of enrollment of the first patient.2021.
Eastern Cooperative Oncology Group
In March 2014, the Company entered into the ECOG Agreement with Eastern Cooperative Oncology Group, a contracting entity for the Eastern Cooperative Oncology Group—American College of Radiology Imaging Network Cancer Research Group
(“ECOG-ACRIN”), that describes the parties’ obligations with respect to theNCI-sponsored pivotal Phase 3 clinical trial of entinostat. Under the terms of the ECOG Agreement, ECOG-ACRIN will perform this clinical trial in accordance with the clinical trial protocol and a mutually agreed scope of work. The Company will provideis providing a fixed level of financial support for the clinical trial through an upfront payment of $695,000$0.7 million and a series of payments of up to $1.0 million each that are comprised of milestone payments through the completion of enrollment and time-based payments through the completion of patient monitoring post-enrollment. In addition, the Company is obligated to supply entinostat and placebo to ECOG-ACRIN for use in the clinical trial. DuringFrom the second quarter of 2016 through the ECOG Agreement was amendedfourth quarter of 2018, the Company has entered into a number of amendments to the agreement to provide for additional study activities andresulting in an increase of the contractual obligation increased by $0.8of $5.3 million. During the first quarter of 2017, the ECOG Agreement was amended to expand the study to include enrollments from sites in Korea andThe Company has agreed to provide this additional studyfinancial support to fund the additional activities andrequired to ensure that the contractual obligation increased by $2.0 million.E2112 clinical trial will satisfy FDA registration requirements.
In May 2020, the Company announced that the E2112 trial did not achieve the primary endpoint of demonstrating a statistically significant overall survival benefit over hormone therapy alone. As a result, the Company has decided to deprioritize the entinostat program to focus resources on advancing the remainder of its pipeline. As of SeptemberJune 30, 2017,2021, the Company’s aggregate payment obligations under this agreement wereare approximately $23.4$24.7 million; and its estimated remaining payment obligations are approximately $12.3$3.2 million, which are estimated to be paid over an estimateda period of approximately four years.one year. As of June 30, 2021, the Company has accrued $2.5 million related to the ECOG Agreement.
Data and inventions from the Phase 3 clinical trial are owned by ECOG-ACRIN. The Company has access to the data generated in the clinical trial, both directly from ECOG-ACRIN under the ECOG Agreement as well as from the NCI. Additionally, ECOG-ACRIN has granted the Company anon-exclusive royalty-free license to any inventions or discoveries that are derived from entinostat as a result of its use during the clinical trial, along with a first right to negotiate an exclusive license to any of these inventions or discoveries. Either party may terminate the ECOG Agreement in the event of an uncured material breach by the other party or if the U.S. Food and Drug Administration (“FDA”) or National Cancer Institute (“NCI”) withdraws the authorization to perform the clinical trial in the United States. The parties may jointly terminate the ECOG Agreement if the parties agree that safety-related issues support termination of the clinical trial. The Company records the appropriate clinical trial expenses in its financial statements by matching those expenses with the period in which the services and efforts are expended. The Company accounts for these expenses according to the progress of the clinical trial as measured by patient enrollment and the timing of various aspects of the clinical trial. The Company determines accrual estimates through financial models, taking into account discussion with applicable personnel and ECOG-ACRIN as to the progress or state of consummation of the clinical trial or the services completed.
Bayer Pharma AG (formerly known as Bayer Schering Pharma AG)
In March 2007, the Company entered into a license agreement (the “Bayer Agreement”) with Bayer Schering Pharma AG (“Bayer”) for a worldwide, exclusive license to develop and commercialize entinostat and any other products containing the same active ingredient. Under the terms of the Bayer Agreement, the Company paid a nonrefundable upfront license fee of $2.0 million and is responsible for the development and marketing of entinostat. The Company recorded the $2.0 million license fee as research and development expense during the year ended December 31, 2007, as it had no alternative future use. The Company will pay Bayer royalties on a sliding scale based on net sales, if any, and make future milestone payments to Bayer of up to $150.0 million in the event that certain specified development and regulatory goals and sales levels are achieved. In June 2014, a development milestone was achieved, and the Company recorded $2.0 million of research and development expense, which has been fully paid.
In connection with the Bayer Agreement, the Company issued to Bayer a warrant to purchase the number of shares of the Company’s common stock equal to 1.75% of the shares of common stock outstanding on a fully diluted basis as of the earlier of the date the warrant is exercised or the closing of the IPO. The warrant contains anti-dilution protection to maintain Bayer’s potential ownership at 1.75% of the shares of common stock outstanding on a fully diluted basis, which requires that the actual number of shares of common stock issuable pursuant to the warrant be increased or decreased for any changes in the fully diluted shares of common stock outstanding. The warrant is exercisable at an exercise price of $1.54 per share and expires upon the earlier of the10-year anniversary of the closing of the IPO or the date of the consummation of a disposition transaction. The warrant was classified as a long-term liability and recorded at fair value with the changes in the fair value recorded in other expense. The Company used the Black-Scholes option-pricing model to determine the fair value of the warrant. Upon the closing of the IPO, the anti-dilution protection for the warrant expired, resulting in the reclassification of the warrant liability to additionalpaid-in capital. The warrant wasre-measured using current assumptions just prior to the reclassification.
6.7. Fair Value Measurements
The carrying amounts of cash and cash equivalents, restricted cash, accounts payable, and accrued expenses approximated their estimated fair values due to the short-term nature of these financial instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
Level 1— | Quoted prices (unadjusted) in active markets that are accessible at the market date for identical unrestricted assets or liabilities. | |
Level 2— | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||
Level 3— | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy for any of periods presented.
A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:
| Fair Value Measurements Using |
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Fair Value Measurements Using |
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Quoted | Significant |
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Prices | Other | Significant |
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| (unadjusted) |
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| Other |
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| Significant |
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Total | in Active | Observable | Unobservable |
| Total |
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| in Active |
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| Observable |
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| Unobservable |
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Carrying | Markets | Inputs | Inputs |
| Carrying |
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| Markets |
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| Inputs |
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| Inputs |
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Value | (Level 1) | (Level 2) | (Level 3) |
| Value |
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| (Level 2) |
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| (Level 3) |
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(In thousands) |
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September 30, 2017 | ||||||||||||||||||||||||||||||||
June 30, 2021 |
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Assets: |
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Cash and cash equivalents | $ | 20,732 | $ | 20,732 | $ | — | $ | — |
| $ | 68,041 |
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| $ | 68,041 |
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| $ | — |
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| $ | — |
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Short-term investments | 99,862 | — | 99,862 | — |
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| 185,091 |
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| — |
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| 185,091 |
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| — |
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Total assets | $ | 120,594 | $ | 20,732 | $ | 99,862 | $ | — |
| $ | 253,132 |
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| $ | 68,041 |
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| $ | 185,091 |
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| $ | — |
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December 31, 2016 | ||||||||||||||||||||||||||||||||
December 31, 2020 |
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Assets: |
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Cash and cash equivalents | $ | 23,844 | $ | 17,089 | $ | 6,755 | $ | — |
| $ | 115,243 |
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| $ | 110,246 |
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| $ | 4,997 |
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| $ | — |
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Short-term investments | 81,486 | — | 81,486 | — |
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| 177,822 |
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| — |
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| 177,822 |
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| — |
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Total assets | $ | 105,330 | $ | 17,089 | $ | 88,241 | $ | — |
| $ | 293,065 |
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| $ | 110,246 |
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| $ | 182,819 |
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| $ | — |
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Cash and cash equivalents of $20.7$68.0 million and $110.2 million as of SeptemberJune 30, 20172021 and $17.1 million as of December 31, 20162020, respectively, consisted of overnight investments and money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Cash equivalents of $6.8$5.0 million as of December 31, 20162020, consisted of highly rated corporate bonds and commercial paper and are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.
Short-term investments of $99.9$185.1 million and $177.8 million as of SeptemberJune 30, 20172021 and $81.5 million as of December 31, 20162020, respectively, consisted of commercial paper, and highly rated corporate bonds and U.S. Treasury and are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.
The short-term investments are classified asavailable-for-sale securities. As of SeptemberJune 30, 2017,2021, the remaining contractual maturities of theavailable-for-sale securities were less than one year, and the balance in the Company’s accumulated other comprehensive income was comprised solely of activity related to the Company’savailable-for-sale securities. There were no0 realized gains or losses recognized on the sale or maturity ofavailable-for-sale securities during the ninethree and six months ended SeptemberJune 30, 20172021 and 2016.2020. As a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the same periods. The Company has a limited number ofavailable-for-sale securities in insignificant loss positions as of SeptemberJune 30, 2017,2021, which the Company does not intend to sell and has concluded it will not be required to sell before recovery of the amortized cost for the investment at maturity.
The following table summarizes theavailable-for-sale securities:
Amortized | Unrealized | Unrealized | ||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
September 30, 2017 | ||||||||||||||||
Commercial paper | $ | 30,555 | $ | 45 | $ | — | $ | 30,600 | ||||||||
Corporate bonds | 69,279 | — | (17 | ) | 69,262 | |||||||||||
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$ | 99,834 | $ | 45 | $ | (17 | ) | $ | 99,862 | ||||||||
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December 31, 2016 | ||||||||||||||||
Commercial paper | $ | 30,125 | $ | 61 | $ | — | $ | 30,186 | ||||||||
Corporate bonds | 51,305 | 6 | (11 | ) | 51,300 | |||||||||||
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$ | 81,430 | $ | 67 | $ | (11 | ) | $ | 81,486 | ||||||||
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A roll-forward of the recurring fair value measurements of the common stock warrant liability and the derivative liability categorized with Level 3 inputs is as follows:
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June 30, 2021 |
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Commercial paper |
| $ | 143,465 |
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| $ | 21 |
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| $ | (1 | ) |
| $ | 143,485 |
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Corporate bonds |
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| 27,234 |
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| 2 |
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| (6 | ) |
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| 27,230 |
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Federal bonds |
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| 14,375 |
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| 1 |
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| — |
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| 14,376 |
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| $ | 185,074 |
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| $ | 24 |
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| $ | (7 | ) |
| $ | 185,091 |
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December 31, 2020 |
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Commercial paper |
| $ | 154,176 |
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| $ | 13 |
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| $ | (16 | ) |
| $ | 154,173 |
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Corporate bonds |
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| 22,617 |
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| 2 |
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| (3 | ) |
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| 22,616 |
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U.S. Treasury |
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| 6,030 |
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| — |
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| — |
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| 6,030 |
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| $ | 182,823 |
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| $ | 15 |
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| $ | (19 | ) |
| $ | 182,819 |
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Common Stock Warrant Liability | Derivative Liability | |||||||
(In thousands) | ||||||||
Balance — December 31, 2015 | $ | 2,848 | $ | 133 | ||||
Change in fair value | 1,703 | 17 | ||||||
Reclassification | (4,551 | ) | (150 | ) | ||||
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Balance — December 31, 2016 | $ | — | $ | — | ||||
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The common stock warrant liability was recorded at fair value determined by using the Black-Scholes option-pricing model. This method of valuation involves using inputs such as the fair value of the Company’s common stock, stock price volatility, the contractual term of the warrant, risk-free interest rates, and dividend yields. Due to the nature of these inputs, the valuation of the warrants was considered a Level 3 measurement. Upon the closing of the IPO, the warrant was reclassified to additionalpaid-in capital. See Note 5 for further discussion of the accounting for the Bayer common stock warrant as well as for a summary of the significant inputs and assumptions used to determine the fair value of the warrant. The derivative liability related to the contingent success fee owed under the term loans. Upon the completion of an IPO or upon the occurrence of certain change of control or liquidation events, the Company was required to pay a $0.2 million success fee. The Company had recorded the success fee as a derivative financial liability. The initial fair value of the derivative of $0.1 million had been recorded as a debt discount. The term loans were paid in full in October 2015; however, the liability for the success fee survived the repayment of the term loans. Upon completion of the IPO this is no longer accounted for as a derivative, and the success fee of $0.2 million that was payable in June 2018 was included in other long-term liabilities. The success fee was paid in full in March 2017.
7.8. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
September 30, 2017 | December 31, 2016 |
| June 30, 2021 |
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| December 31, 2020 |
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(In thousands) |
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Short-term deposits | $ | 893 | $ | 1,630 | �� |
| $ | 6,917 |
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| $ | 4,683 |
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Prepaid insurance | 385 | 168 |
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| 1,531 |
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| 427 |
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Interest receivable on short-term investments | 572 | 306 | ||||||||||||||
Interest receivable on investments |
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| 433 |
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| 175 |
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Prepaid subscriptions |
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| 232 |
|
|
| 203 |
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Prepaid clinical supplies |
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| 22 |
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|
| 58 |
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Reimbursable costs |
|
| 2 |
|
|
| 24 |
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Other |
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| 171 |
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| 114 |
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Total prepaid expenses and other current assets |
| $ | 9,308 |
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| $ | 5,684 |
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Reimbursable costs Prepaid clinical supplies Other Total prepaid expenses and other current assets September 30, 2017 December 31, 2016 (In thousands) 741 262 316 461 370 202 $ 3,277 $ 3,029
8.9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| June 30, 2021 |
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| December 31, 2020 |
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September 30, 2017 | December 31, 2016 |
| (In thousands) |
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(In thousands) | ||||||||||||||||
Accrued clinical costs |
| $ | 8,339 |
|
| $ | 7,132 |
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Accrued compensation and related costs |
|
| 2,535 |
|
|
| 3,213 |
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Accrued professional fees | $ | 354 | $ | 247 |
|
| 394 |
|
|
| 373 |
| ||||
Accrued compensation and related costs | 1,802 | 1,641 | ||||||||||||||
Accrued clinical costs | 8,428 | 4,493 | ||||||||||||||
Accrued interest payable |
|
| 164 |
|
|
| 170 |
| ||||||||
Other | 157 | 390 |
|
| 292 |
|
|
| 358 |
| ||||||
|
| |||||||||||||||
Total prepaid expenses and other current assets | $ | 10,741 | $ | 6,771 | ||||||||||||
|
| |||||||||||||||
Total accrued expenses and other current liabilities |
| $ | 11,724 |
|
| $ | 11,246 |
|
9.
10. Stock-Based Compensation
In January 2017,2021, the number of shares of common stock available for issuance under the 2015 Omnibus Incentive Plan (“2015 Plan”), was increased by 728,9481,915,248 shares due to the automatic annual provision to increase provision ofshares available under the 2015 Plan. As of SeptemberJune 30, 2017,2021, the total number of shares of common stock available for issuance under the 2015 Plan was 1,421,401.1,167,029. The Company recognized stock-based compensation expense related to the issuance of stock option awards to employees andnon-employees and related to the 2015 Employee Stock Purchase Plan (“ESPP”) in the condensed consolidated statements of comprehensive loss as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||||||||||
(In thousands) |
|
|
|
|
|
|
|
| (In thousands) |
| |||||||||||||||||||||
Research and development | $ | 355 | $ | 208 | $ | 985 | $ | 687 | $ | 1,093 |
|
| $ | 561 |
|
| $ | 1,996 |
|
| $ | 1,093 |
| ||||||||
General and administrative | 991 | 584 | 3,185 | 3,074 |
| 2,147 |
|
|
| 1,568 |
|
|
| 4,011 |
|
|
| 2,866 |
| ||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Total | $ | 1,346 | $ | 792 | $ | 4,170 | $ | 3,761 | $ | 3,240 |
|
| $ | 2,129 |
|
| $ | 6,007 |
|
| $ | 3,959 |
| ||||||||
|
|
|
|
Compensation expense by type of award in the three and ninesix months ended SeptemberJune 30, 20172021 and 2020 was as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||||||||||
(In thousands) |
|
|
|
|
|
|
|
| (In thousands) |
| |||||||||||||||||||||
Stock options | $ | 1,329 | $ | 792 | $ | 4,153 | $ | 3,761 | $ | 2,615 |
|
| $ | 2,086 |
|
| $ | 4,961 |
|
| $ | 3,880 |
| ||||||||
Restricted Stock Units |
| 597 |
|
|
| — |
|
|
| 977 |
|
|
| — |
| ||||||||||||||||
Employee Stock Purchase Plan | 17 | — | 17 | — |
| 28 |
|
|
| 43 |
|
|
| 69 |
|
|
| 79 |
| ||||||||||||
|
|
|
| ||||||||||||||||||||||||||||
Total | $ | 1,346 | $ | 792 | $ | 4,170 | $ | 3,761 | $ | 3,240 |
|
| $ | 2,129 |
|
| $ | 6,007 |
|
| $ | 3,959 |
| ||||||||
|
|
|
|
During the ninesix months ended SeptemberJune 30, 2017,2021, the Company granted 860,4901,339,000 stock options to certain executives, consultants and employees.employees having service-based vesting conditions. The grant date fair value of thesethe options granted in the six months ended June 30, 2021, was $5.6$20.0 million, or $6.54$14.96 per share on a weighted-average basis and will be recognized as compensation expense over the requisite service period of three to four years.
There were 46,577In 2019, the Company granted 583,000 stock options exercised duringto certain employees to purchase shares of common stock that contain certain performance-based vesting criteria, primarily related to the nineachievement of certain clinical and regulatory development milestones related to product candidates. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.
In the fourth quarter of 2020 one of the performance milestones was achieved and of the associated 194,331 stock options, 64,777 stock options vested. The remaining options will vest in the fourth quarter of 2021 and 2022. The Company recorded approximately $0.1 million of stock compensation expense associated with these awards for the six months ended SeptemberJune 30, 2017, resulting2021, and 2020, respectively. For the remaining milestones, the performance conditions were not met. Therefore, 0 expense has been recognized related to these awards, and 388,669 options were cancelled in total2020.
During the six months ended June 30, 2021, 191,394 options were exercised for cash proceeds of $0.3$1.7 million. The intrinsic valueDuring the six months ended June 30, 2020, 141,490 options were exercised for cash proceeds of the options exercised was $0.2$1.4 million. In accordance with the Company’s policy, the shares were issued from a pool of shares reserved for issuance under the 2007 and 2015 Plans.
As of SeptemberJune 30, 2017,2021, there was $9.3$28.2 million of unrecognized compensation cost related to employee andnon-employee unvested stock options and unvested restricted stock share-based compensation arrangementsRSUs granted under the 2015 and 2007 Plans, which is expected to be recognized over a weighted-average remaining service period of 2.53.0 years. Stock compensation costs have not been capitalized by the Company.
Restricted stock units
UponDuring the closing ofsix months ended June 30, 2021, the IPO on March 8, 2016, the vesting of certain optionsCompany granted to two109,333 shares of the Company’s executives immediately vested, in accordance with their employment agreements.restricted stock units. The Company recorded $0.7shares are scheduled to vest on the one-year anniversary date of the related grant. The fair value of these shares totaled $2.3 million at the grant date, representing a weighted-average grant date fair value per share of additional stock compensation expense related to this accelerated vesting in March 2016.$21.36.
10. Employee Stock Purchase Plan11. Loan Payable
In January 2017,February 2020, the numberCompany entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), which provided for aggregate maximum borrowings of sharesup to $30.0 million, consisting of common stock(i) a term loan of up to $20.0 million, which was funded on February 7, 2020 (the “Initial Advance”), and (ii) subject to Hercules’ investment committee approval,
an additional term loan of up to $10.0 million, available for issuanceborrowing from February 7, 2020 to December 15, 2020 (the “Tranche 2 Advance”). Borrowings under the 2015 Employee Stock Purchase Plan (“ESPP”),Loan Agreement bear interest at an annual rate equal to the greater of (i) 9.85% or (ii) 5.10% plus the Wall Street Journal prime rate. As of June 30, 2020, the Company’s interest rate under the Loan Agreement was increased by 182,237 shares as a result9.85%.
Borrowings under the Loan Agreement are repayable in monthly interest-only payments through October 1, 2021. After the interest-only payment period, borrowings under the Loan Agreement are repayable in equal monthly payments of principal and accrued interest until the maturity date of the automatic increase provisionloan, which is September 1, 2023. At the Company’s option, the Company may prepay all, but not less than all, of the ESPP. Asoutstanding borrowings, subject to a prepayment premium equal to (i) 2.0% of September 30, 2017, the total number of shares of common stock available for issuance underprincipal amount outstanding if the ESPP was 432,237. The first offering period commenced on August 1, 2017 andprepayment occurs during the first purchase will take place on January 31, 2018.
The ESPPyear following the applicable loan being funded, (ii) 1.5% of the principal amount outstanding if the prepayment occurs during the second year following the applicable loan being funded, and (iii) 1.0% of the principal amount outstanding at any time thereafter but prior to the Maturity Date. In addition, the Company paid a $100,000 facility charge upon closing, which is considered a compensatory plan with the related compensation costbeing expensed over thesix-month offering period. term of the debt. The Loan Agreement also provides for a final payment, payable upon maturity or the repayment in full of all obligations under the agreement, of up to 4.99% of the aggregate principal amount of the Term Loan Advances (as defined in the Loan Agreement). The final payment will be accrued over the term of the debt.
Borrowings under the Loan Agreement are collateralized by substantially all of the Company’s and its subsidiaries personal property and other assets, other than its intellectual property. The Loan Agreement includes a minimum cash covenant of $12.5 million that applies commencing on October 1, 2020, subject to reduction upon satisfaction of certain conditions as set forth in the Loan Agreement. As of SeptemberJune 30, 2017, approximately $39,000 of employee payroll deductions which have been withheld since August 1, 2017 and are included in additional paid in capital2021, the conditions set forth in the accompanying condensed consolidatedLoan Agreement were met. The cash covenant of $12.5 million was deferred. In addition, the Loan Agreement includes customary affirmative and restrictive covenants and representations and warranties, including a covenant against the occurrence of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts. The Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants following any applicable cure period, the occurrence of certain events that could reasonably be expected to have a “material adverse effect” as set forth in the Loan Agreement, cross acceleration to third-party indebtedness and certain events relating to bankruptcy or insolvency. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to the outstanding principal balance, sheet. The compensationand Hercules may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement.
In connection with the Loan Agreement, the Company was required to enter into separate deposit account control agreements with the lender in order to perfect the lender’s security interest in the cash collateral in the Company’s operating accounts. In the event of a default under the Loan Agreement, the lender would have the right to take control of the operating accounts and restrict the Company’s access to the operating accounts and the funds therein.
During the six months ended June 30, 2021 and 2020, the Company recognized $1.2 million and $1.0 million, respectively, of interest expense related to the ESPP forInitial Advance pursuant to the three and nine months ended SeptemberLoan Agreement.
As of June 30, 2017 was approximately $17,000.2021, the Company’s maturities of principal obligations under its long-term debt are as follows:
| Amount |
| |
Remainder of 2021 | $ | 2,285 |
|
2022 |
| 9,727 |
|
2023 |
| 7,988 |
|
Total principal outstanding |
| 20,000 |
|
Amortized final fee |
| 490 |
|
Unamortized debt issuance costs |
| (137 | ) |
Total |
| 20,353 |
|
Term loan, current portion |
| 7,030 |
|
Term loan, less current portion | $ | 13,323 |
|
11.12. Stockholders’ Equity
The following table presents the changes in stockholders’ equity for the ninethree and six months ended SeptemberJune 30, 2017:2021:
(In thousands, except share data) |
| Common Stock $0.0001 Par Value |
|
| Additional Paid-In Capital |
|
| Accumulated Other Comprehensive Income / (Loss) |
|
| Accumulated Deficit |
|
| Total Stockholders’ Equity |
| |||||||||
|
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance as of December 31, 2020 |
|
| 47,881,223 |
|
| $ | 5 |
|
| $ | 820,815 |
|
| $ | (4 | ) |
| $ | (568,628 | ) |
| $ | 252,188 |
|
Stock purchase under ESPP |
|
| 16,382 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,767 |
|
|
| — |
|
|
| — |
|
|
| 2,767 |
|
Unrealized gains on short-term investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 13 |
|
Pre-funded warrant exchange |
|
| 250,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Employee withholdings ESPP |
|
| — |
|
|
| — |
|
|
| 79 |
|
|
| — |
|
|
| — |
|
|
| 79 |
|
Proceeds from exercise stock options |
|
| 100,954 |
|
|
| — |
|
|
| 881 |
|
|
| — |
|
|
| — |
|
|
| 881 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,723 | ) |
|
| (27,723 | ) |
Balance as of March 31, 2021 |
|
| 48,248,559 |
|
| $ | 5 |
|
| $ | 824,542 |
|
| $ | 9 |
|
| $ | (596,351 | ) |
| $ | 228,205 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 3,240 |
|
|
| — |
|
|
| — |
|
|
| 3,240 |
|
Unrealized gains on short-term investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| 8 |
|
Employee withholdings ESPP |
|
| — |
|
|
| — |
|
|
| 64 |
|
|
| — |
|
|
| — |
|
|
| 64 |
|
Proceeds from ATM Offering, net of $200 offering expenses |
|
| 277,629 |
|
|
| — |
|
|
| 5,131 |
|
|
| — |
|
|
| — |
|
|
| 5,131 |
|
Proceeds from exercise stock options |
|
| 90,440 |
|
|
| — |
|
|
| 825 |
|
|
| — |
|
|
| — |
|
|
| 825 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22,910 | ) |
|
| (22,910 | ) |
Balance as of June 30, 2021 |
|
| 48,616,628 |
|
| $ | 5 |
|
| $ | 833,802 |
|
| $ | 17 |
|
| $ | (619,261 | ) |
| $ | 214,563 |
|
Common Stock $0.0001 Par Value | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balance as of December 31, 2016 | 18,215,181 | $ | 2 | $ | 389,374 | $ | 56 | $ | (305,293 | ) | $ | 84,139 | ||||||||||||
Proceeds from follow on offering, net of offering cost of $3,665 | 3,950,190 | — | 48,675 | — | — | 48,675 | ||||||||||||||||||
Proceeds from exercise of stock options | 46,576 | — | 276 | — | — | 276 | ||||||||||||||||||
Vesting of restricted stock | 8,543 | — | 59 | — | — | 59 | ||||||||||||||||||
Stock-based compensation expense | — | — | 4,170 | — | — | 4,170 | ||||||||||||||||||
Proceeds from“At-the-market” offering, net | 92,511 | — | 1,083 | — | — | 1,083 | ||||||||||||||||||
Unrealized losses on short-term investments | — | — | — | (28 | ) | — | (28 | ) | ||||||||||||||||
Employee withholdings ESPP | — | — | 39 | — | — | 39 | ||||||||||||||||||
Cumulative effect adjustment of adoption ASU2016-09 | — | — | 16 | — | (16 | ) | — | |||||||||||||||||
Net loss | — | — | — | — | (41,699 | ) | (41,699 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance as of September 30, 2017 | 22,313,001 | $ | 2 | $ | 443,692 | $ | 28 | $ | (347,008 | ) | $ | 96,714 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
12. Income TaxesThe following table presents the changes in stockholders’ equity for the three and six months ended June 30, 2020:
(In thousands, except share data) |
| Common Stock $0.0001 Par Value |
|
| Additional Paid-In Capital |
|
| Accumulated Other Comprehensive Income / (Loss) |
|
| Accumulated Deficit |
|
| Total Stockholders’ Equity |
| |||||||||
|
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance as of December 31, 2019 |
|
| 27,140,484 |
|
| $ | 3 |
|
| $ | 527,067 |
|
| $ | — |
|
| $ | (495,470 | ) |
| $ | 31,600 |
|
Stock purchase under ESPP |
|
| 12,601 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,829 |
|
|
| — |
|
|
| — |
|
|
| 1,829 |
|
Proceeds from direct offering, net of $93 offering expenses |
|
| 3,036,719 |
|
|
| — |
|
|
| 24,201 |
|
|
| — |
|
|
| — |
|
|
| 24,201 |
|
Proceeds from pre-funded common stock warrant from direct offering, net of $41 offering expenses |
|
| — |
|
|
| — |
|
|
| 10,665 |
|
|
| — |
|
|
| — |
|
|
| 10,665 |
|
Deemed dividend from repricing Series 1 and 2 warrants |
|
| — |
|
|
| — |
|
|
| 3,906 |
|
|
| — |
|
|
| — |
|
|
| 3,906 |
|
Repricing Series 1 and 2 warrants |
|
| — |
|
|
| — |
|
|
| (3,906 | ) |
|
| — |
|
|
| — |
|
|
| (3,906 | ) |
Proceeds from exercise of stock options |
|
| 51,034 |
|
|
| — |
|
|
| 338 |
|
|
| — |
|
|
| — |
|
|
| 338 |
|
Unrealized gains on short-term investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 48 |
|
|
| — |
|
|
| 48 |
|
Employee withholdings ESPP |
|
| — |
|
|
| — |
|
|
| 64 |
|
|
| — |
|
|
| — |
|
|
| 64 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,236 | ) |
|
| (15,236 | ) |
Balance as of March 31, 2020 |
|
| 30,240,838 |
|
| $ | 3 |
|
| $ | 564,164 |
|
| $ | 48 |
|
| $ | (510,706 | ) |
| $ | 53,509 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,130 |
|
|
| — |
|
|
| — |
|
|
| 2,130 |
|
Issuance of common stock in exchange for pre-funded warrants |
|
| 280,332 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Exercise Series 1 and Series 2 warrants |
|
| 1,512,229 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Proceeds from direct offering, net of $7,099 of offering expenses |
|
| 6,388,889 |
|
|
| 1 |
|
|
| 107,900 |
|
|
| — |
|
|
| — |
|
|
| 107,901 |
|
Proceeds from exercise of stock options |
|
| 90,456 |
|
|
| — |
|
|
| 1,015 |
|
|
| — |
|
|
| — |
|
|
| 1,015 |
|
Unrealized gains on short-term investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 69 |
|
Employee withholdings ESPP |
|
| — |
|
|
| — |
|
|
| 85 |
|
|
| — |
|
|
| — |
|
|
| 85 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,062 | ) |
|
| (17,062 | ) |
Balance as of June 30, 2020 |
|
| 38,512,744 |
|
| $ | 4 |
|
| $ | 675,294 |
|
| $ | 117 |
|
| $ | (527,768 | ) |
| $ | 147,647 |
|
In March 2021, the Company entered into a new sales agreement with Cowen and Company, LLC (“Cowen”) under which the Company may issue and sell shares of its common stock having aggregate sales proceeds of up to $75.0 million from time to time through Cowen, acting as agent, in a series of one or more ATM equity offerings (the “2021 ATM Program”). Cowen is not required to sell any specific amount, but acts as the Company’s sales agent using commercially reasonable efforts consistent with its normal trading and sales practices. Shares sold pursuant to the sales agreement will be sold pursuant to a shelf registration statement on Form S-3ASR (Registration No. 333-254661), which became automatically effective upon filing on March 24, 2021. The Company’s common stock will be sold at prevailing market prices at the time of the sale; and as a result, prices may vary. In the six months ended June 30, 2021, the Company sold 277,629 shares of common stock under the 2021 ATM Program, with net proceeds of approximately $5.1 million.
In March 2019, the Company issued 2,095,039 shares of its common stock and pre-funded warrants to purchase 2,500,000 shares of common stock to certain investors in a registered direct offering. The pre-funded warrants are exercisable immediately upon issuance at an exercise price of $0.0001 per share and have a term of 20 years. The Company sold the shares of common stock and pre-funded warrants together with 2 series of warrants, Series 1 Warrants and Series 2 Warrants, to purchase an aggregate of 4,595,039 shares of the Company’s common stock (collectively, the “Series Warrants”). The offering price for the securities was $6.00 per share (or $5.9999 for each Pre-Funded Warrant). The aggregate gross proceeds to the Company from this offering were $27.6 million, excluding any proceeds the Company may receive upon exercise of the pre-funded warrants and Series Warrants and offering costs of $0.2 million. No underwriter or placement agent participated in the offering.
The Series Warrants were immediately exercisable. Each Series 1 Warrant had an initial exercise price of $12.00 per share of common stock and each Series 2 Warrant had an initial exercise price of $18.00 per share of common stock, in each case subject to certain adjustments. All Series 1 and Series 2 warrants were exercised in 2020.
The Pre-Funded Warrants may not be exercised by the holder to the extent that the holder, together with its affiliates, would beneficially own, after such exercise more than 9.99% of the shares of the Company’s common stock then outstanding (subject to the right of the holder to increase or decrease such beneficial ownership limitation upon notice to the Company, provided that such limitation cannot exceed 19.99%) and provided that any increase in the beneficial ownership limitation shall not be effective until 61 days after such notice is delivered.
The Series Warrants were classified as a component of permanent equity and were recorded at the issuance date using a relative fair value allocation method. The Series Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, such warrants do not provide any guarantee of value or return. The Company valued the Series Warrants at issuance in March 2019 using the Black Scholes option pricing model and determined the fair value of the 4,595,039 Series Warrants at $3.4 million. The key inputs to the valuation model included the weighted average volatility of 89.1% and the weighted-average expected term of 1.4 years.
In January 2020, the Company sold 3,036,719 shares of common stock and pre-funded warrants to purchase 1,338,287 shares of common stock. The offering price for the securities was $8.00 per share of common stock or $7.9999 for each pre-funded warrant. As a result of this offering, the exercise price of Series 1 Warrants and Series 2 Warrants outstanding reset from $12.00 per share to $10.00 per share and from $18.00 per share to $13.00, respectively. The Company recorded $3.9 million as a deemed dividend which represents the value transferred to the warrant holders due to the Series Warrant adjustment mechanism being triggered. The deemed dividend was recorded as both an increase and a decrease in Additional Paid-in-Capital and reduced net income available to common stockholders by the same amount. The key inputs to the valuation model included the weighted average volatility of 96.74% and the weighted average expected term of 0.4 years.
The Company has not recorded any net tax provisionreserved for future issuance the periods presented duefollowing shares of common stock related to the losses incurredpotential warrant exercise, exercise of stock options and the need for a full valuation allowance on net deferred tax assets. The difference between the income tax expense at the U.S. federal statutory rate and the recorded provision is primarily due to the valuation allowance provided on all deferred tax assets.employee stock purchase plan:
June 30, 2021 | |||
Common stock issuable under pre-funded warrants | 3,307,952 | ||
Options to purchase common stock | 1,167,029 | ||
Employee Stock Purchase Plan | 1,306,906 |
13. Related-Party Transactions
The Company’s chief executive officer and member of the board of directors is also a managing director at MPM Asset Management, LLC, which holds an investment in the Company’s common stock.
14. Subsequent Event
The Company considers events and transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Company has completed an evaluation all subsequent events through the date of this filing of this Quarterly Report on Form10-Q.
The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form10-Q and the audited financial information and the notes thereto included in our Annual Report onForm 10-K that was filed with the Securities and Exchange Commission, or SEC, on March 14, 2017.12, 2021.
Company Overview
We are a clinical stageclinical-stage biopharmaceutical company developing an innovative pipeline of combination therapies in multiple cancer indications.therapies. Our two lead product candidate, entinostat, is currently being evaluated in a Phase 3 clinical trialcandidates are, SNDX-5613 and SNDX-6352, or axatilimab. We are developing SNDX-5613, targeting the binding interaction of menin with the mixed lineage leukemia 1 (MLL1) protein for advanced hormone receptor positive, human epidermal growth factor receptor 2 negative breast cancer. The U.S. Foodthe treatment of MLL-rearranged, or MLLr, acute leukemias and Drug Administration,nucleophosmin 1, or FDA, granted Breakthrough Therapy designation to entinostat when given in combination with exemestane following positive results from the Company’s ENCORE 301 Phase 2b clinical trial. Given its potential ability to block the function of immune suppressive cells in the tumor microenvironment, we are evaluating entinostatNPM1, mutant acute myeloid leukemia (AML), as a combination therapeutic in Phase 1b/2 clinical trials with Merck & Co., Inc., or Merck, fornon-small cell lung cancer, or NSCLC, melanoma and microsatellite stable colorectal cancer; with Genentech, Inc., or Genentech, for triple negative breast cancer, or TNBC; and with Merck KGaA, Darmstadt, Germany, or Merck KGaA, and Pfizer Inc., or Pfizer, for ovarian cancer. Our second product candidate, SNDX-6352, iswell as axatilimab, a monoclonal antibody that targetsblocks the colony stimulatingfactor-1 receptor factor 1, or CSF-1 receptor. We have deprioritized the development of entinostat, our once-weekly, oral, small molecule, Class I HDAC inhibitor, to enhancefocus resources on advancing the body’s immune response against tumors that have shown sensitivity to immunotherapy. We are evaluating SNDX-6352 in a multiple ascending dose Phase 1 clinical trial in cancer patients.remainder of our pipeline. We plan to continue to leverage the technical and business expertise of our management team and scientific collaborators to license, acquire and develop additional cancer therapiestherapeutics to expand our pipeline.
On October 13, 2017, the Company entered into a license agreement with Vitae Pharmaceuticals, Inc., a subsidiary of Allergan plc, or Allergan License Agreement, under which Allergan granted to the Company a worldwide, sublicenseable, exclusive license to a portfolio of preclinical, orally-available, small molecule inhibitors of the interaction of Menin with the Mixed Lineage Leukemia, or MLL, protein, or the Menin Assets. Concurrent with the development of entinostat and SNDX-6352, the Company is also developing the Menin Assets to potentially treat MLL-r driven malignancies. The Company believes that the Menin Assets have the potential to be used to treat a genetically-defined subset of acute leukemias with chromosomal rearrangements in the MLL gene, or MLL-r. We expect to begin preclinical studies of the Menin Assets during the fourth quarter of 2017.
During the three months ended September 30, 2017, the Company sold an aggregate of 92,511 shares of common stock in a series of one or moreat-the-market equity offerings with Cowen and Company, LLC (“Cowen”) acting as the agent (the “ATM Program”), at an average price of $12.49 per share. We received net proceeds of approximately $1.1 million after deducting sales commissions and offering expenses. As of September 30, 2017, $48.8 million of common stock remained available for sale under the ATM Program.
On February 24, 2016, we effected a1-for-1.25 reverse stock split of our outstanding common stock and convertible preferred stock. Stockholders entitled to fractional shares as a result of the reverse stock splits received a cash payment in lieu of receiving fractional shares. All of our historical share and per share information shown in the accompanying financial statements and related notes have been retroactively adjusted to give effect to the reverse stock splits.
We have no products approved for commercial sale and have not generated any product revenues from product sales to date. We continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not and have never been profitable and have incurred losses in each period since our inception in 2005. For the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, we reported a net loss of $41.7$50.6 million and $33.7$32.3 million, respectively. We reported a net loss attributable to stockholders of $50.6 million and $36.2 million for the six months ended June 30, 2021 and 2020, respectively. As of SeptemberJune 30, 2017,2021, we had an accumulated deficit of $347.0$619.3 million, which includednon-cash charges for stock-based compensation, preferred stock accretion and extinguishment charges. As of SeptemberJune 30, 2017,2021, we had cash, cash equivalents and short-term investments of $120.6$253.1 million.
We continue to monitor our daily operations and program timelines during the evolving coronavirus 2019 (COVID-19) pandemic. The health and safety of our employees as well as the patients and people participating in and operating our clinical trials are of paramount importance. COVID-19, including its variants, has not impacted our financial guidance or changed our timelines for clinical data in 2021, to date.
Clinical Developments
SNDX-5613
Axatilimab
COVID-19 Business Update We have implemented business continuity plans designed to address and mitigate the impact of Supply Chain We are working closely our third-party manufacturers, distributors and other partners to manage our supply chain activities and mitigate potential disruptions to our product supplies as a result of the COVID-19 pandemic. We currently expect to have adequate supplies of SNDX-5613 and axatilimab. If the COVID-19 pandemic continues to persist for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery or if it results in facility closures for cleaning and/or insufficient staff, we could experience disruptions to our supply chain and operations, and associated delays in the Clinical Development With respect to clinical development, we have taken measures to implement remote and virtual approaches, including remote patient monitoring where possible, to maintain patient safety and trial continuity and to preserve study integrity. We have, and may continue to experience, disruptions and/or delays in our Corporate Development With our strong cash balance, we anticipate having sufficient liquidity to make planned investments in our business this year in support of our long-term growth strategy. We believe that our cash, cash equivalents and marketable securities as of June 30, 2021 will fund our current operating plans through at least the Other Financial and Corporate Impacts While we continue to evaluate whether the COVID-19 pandemic will adversely affect our business operations and financial results, our clinical development and regulatory efforts, our corporate development objectives and the value of common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of Financial Overview Revenue To date, we have not generated any product revenues. Our ability to generate revenue and become profitable depends upon our ability to obtain marketing approval of and successfully commercialize our product candidates. Our revenues for the three and In October 2017, KKC enrolled the first Japanese patient into a local pivotal study of entinostat for the treatment of hormone receptor positive, human epidermal growth factor 2 negative breast cancer. In accordance with the terms of the KKC License Agreement, in December 2017 we received a $5.0 million milestone payment from KKC for achievement of the development milestone. Research and Development Since our inception, we have primarily focused on our clinical development programs. Research and development expenses consist primarily of costs incurred for the development of our product candidates and include:
Internal and external research and development costs are expensed as they are incurred. Cost-sharing amounts received by us are recorded as reductions to research and development expense. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors. Research and development activities are central to our business model. Drug candidates in late 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 late-stage clinical trials. We plan to It is difficult to determine, with certainty, the duration and completion costs of our current or future preclinical programs, clinical studies and clinical trials of our product candidates. The duration, costs and timing of clinical studies and clinical trials of our product candidates will depend on a variety of factors that include, but are not limited to, the following:
In addition, the probability of success for each drug product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of our product candidates for the period, if any, in which material net cash inflows from these potential product candidates may commence. Clinical development timelines, the probability of success and development costs can differ materially from expectations. General and Administrative General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits,non-cash stock-based compensation and travel expenses, for our employees in executive, finance, business development and support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses and accounting, tax, legal and consulting services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates. Interest expense Interest expense consists primarily of interest expense on our term loan, operational and capital leases. Interest Income Interest income consists of
Critical Accounting Policies and Use of Estimates Our management’s discussion and analysis of financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements.
Results of Operations Comparison of the three months ended
License Fees For the three months ended Research and Development For the three months ended Research and development expenses consisted of the following:
General and Administrative For the three months Interest expense
For the three months ended Interest income For the three months ended June 30, 2021, interest income increased Comparison of the
License Fees For the Research and Development For the Research and development expenses
General and Administrative For the Interest Expense Interest expense consists primarily of Interest Income For the
Liquidity and Capital Resources Overview As of
Loan and Security Agreement On February 7, 2020, we entered into a At-the-Market Offering In
Future Funding Requirements Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses and general overhead costs. We have based our estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect. Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain. We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our drug candidates or whether, or when, we may achieve profitability. Our future capital requirements will depend on many factors, including:
We have no products approved for commercial sale and date. 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 and additional funding from license and collaboration arrangements. Except for any obligations of our collaborators to reimburse us for research and development expenses or to make milestone payments under our agreements with them, we will not have any committed external source of liquidity. We have incurred losses and cumulative negative cash flows from operations since our inception; and as of Cash Flows The following is a summary of cash flows:
Net Cash Used in Operating Activities Net cash used in operating activities for the Net cash used in operating activities for the Net Cash Used in Investing Activities Net cash used in investing activities for the Net cash used in investing activities for the Net Cash Provided by Financing Activities Net cash provided by financing activities for the Net cash provided by financing activities for the
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, anyoff-balance sheet arrangements, as defined in the rules and regulations of the SEC.
As of June 30, 2021, we no longer qualify as a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended. We have historically taken, and may continue through the filing of our Annual Report on Form 10-K for the year ending December 31, 2021 to take, advantage of certain scaled disclosures available to smaller reporting companies. The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of We also have exposure to market risk on our Loan Agreement with Hercules. Our Loan Agreement accrues interest from its date of issue at a variable interest rate equal to greater of (i) 9.85% and (ii) 5.10% plus the Wall Street Journal prime rate. As of June 30, 2021, $20.0 million in loan principal was outstanding under the Loan Agreement. The effect of a 100 basis points adverse change in market interest rates on our 2020 Loan Payable, in excess of applicable minimum floors, on our interest expense would be approximately $0.5 million. We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein. Management’s Evaluation of Our Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. As of concluded based upon the evaluation described above that, as of Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness. In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, as of An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report on Form10-Q, including our financial statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could decline; and you may lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur.
Risks Related to Our Business and Industry COVID-19 could adversely impact our business, including our clinical trials. The ongoing COVID-19 pandemic has resulted in travel and other restrictions in order to reduce the spread of the disease, including state and local orders across the United States and other countries worldwide, which, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. In response to these public health directives and orders, we have implemented work-from-home policies for our employees. The effects of executive orders may disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. While COVID-19 has not yet had a material impact on our business operations, quarantines and various government orders related to COVID-19, including its variants, may adversely impact our business operations and the business operations of our contract research organizations conducting our clinical trials and our third-party manufacturing facilities in the United States and other countries. In particular, if the COVID-19 pandemic continues to persist for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery or if it results in facility closures facility closures for cleaning and/or insufficient staff, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our products, which would adversely impact our ability to continue our clinical trial operations. In addition, our clinical trials may be affected by the COVID-19 pandemic. For example, we have experienced delays in clinical site initiation and patient enrollment due to prioritization of hospital resources toward the COVID-19 pandemic. Patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, could be limited, which in turn could adversely impact our clinical trial operations. As a result, we may face delays in meeting our anticipated timelines for our ongoing and planned clinical trials. The spread of COVID-19, including its variants, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. COVID-19 continues to evolve rapidly, and multiple variants of the virus that causes COVID-19 are circulating globally. The extent to which the COVID-19 pandemic impacts our business, our clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions, quarantines, social distancing requirements, business closures in the United States and other countries, the rollout of mass vaccinations for COVID-19 and any limitations to the efficacy of such vaccines and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the global economy as a whole. However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section. We are currently developing several product candidates. If we are unable to successfully complete clinical development of, obtain regulatory approval for and commercialize our product candidates, our business prospects will be significantly harmed.
If we fail to obtain regulatory approval for our product candidates, we will not be able to generate product sales, which will have a material adverse effect on our business and our prospects. Our strategy Research suggests that certain acute leukemias, such as mixed lineage leukemia-rearranged, or MLLr, leukemias and nucleophosmin 1, or NPM1, mutant acute myeloid leukemia, or AML, are driven by the interaction of menin, a nuclear protein involved in transcription, with the N-terminus of MLL1 protein, a histone methyl transferase. In NPM1 mutant AML the interaction with menin occurs via the wild type MLL1 protein, and in MLLr acute leukemias, the interaction occurs via a mutant form of MLL1, a fusion protein known as MLLr. MLLr results from a rare, spontaneous fusion between the Our strategy for developing axatilimab has undergone limited clinical testing and we may fail to show that this drug is well tolerated and provides a clinical benefit for patients. Preclinical studies Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the From time to time, we may
Before obtaining marketing approval from regulatory authorities for the sale of
Clinical testing is expensive and difficult to design and implement, can take many years to complete and is inherently uncertain as to the outcome. A failure of one or more trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not accurately predict the success of later trials, and interim results of a trial do not necessarily predict final results. For example,
If we are or our collaborators are unable to enroll patients in clinical trials, these clinical trials may not be completed on a timely basis or at all. The timely completion of clinical trials largely depends on patient enrollment. Many factors affect patient enrollment, including:
As a result of the above factors, there is a risk that our or our collaborators’ clinical trials may not be completed on a timely basis or at all.
We may be required to relinquish important rights to and control over the development and commercialization of our product candidates to our current or future collaborators. Our collaborations, including any future strategic collaborations we enter into, could subject us to a number of risks, including:
We may explore strategic collaborations that may never materialize or may fail. We may periodically explore a variety of possible strategic collaborations in an effort to gain access to additional product candidates or resources. At the current time, we cannot predict what form such a strategic collaboration might take. We are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document. We may enter into strategic collaborations that we subsequently no longer wish to pursue, and we may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any additional strategic collaborations because of the numerous risks and uncertainties associated with establishing them. The regulatory approval processes of the FDA and foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates could harm our business. The time required to obtain approval by the FDA and foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any of our product candidates, and it is possible that we will never obtain regulatory approval for our existing product candidates or any future product candidates.
The FDA or foreign regulatory authorities may require more information, including additional preclinical or clinical data, to support approval, which may delay or prevent approval and our commercialization plans, or may cause us to decide to abandon our development program. Even if we were to obtain approval, regulatory authorities may approve one or more of our product candidates for a more limited patient population than we request, may grant approval contingent on the performance of costly post-marketing trials, may impose a risk evaluation and mitigation strategy, or REMS, or foreign regulatory authorities may require the establishment or modification of a similar strategy that may, for instance, restrict distribution of
Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community to be commercially Even if our product candidates receive regulatory approval, they may not gain sufficient market acceptance among physicians, patients, healthcare payors and others in the medical community. Our commercial success also depends on coverage and adequate reimbursement by third-party payors, including government payors, which may be difficult or time-consuming to obtain, may be limited in scope and may not be obtained in all jurisdictions in which we may seek to market our product candidates. The degree of market acceptance will depend on a number of factors, including:
If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate sufficient revenue to become or remain profitable. We rely on third-party suppliers to manufacture and distribute our clinical drug supplies for our product candidates, we intend to rely on third parties for commercial manufacturing and distribution of our product candidates and we expect to rely on third parties for manufacturing and distribution of preclinical, clinical and commercial supplies of any future product candidates. We do not currently have, nor do we plan to acquire, the infrastructure or capability to manufacture or distribute preclinical, clinical or commercial quantities of drug substance or drug product, including our existing product candidates. While we expect to continue to depend on third-party manufacturers for the foreseeable future, we do not have direct control over the ability of these manufacturers to maintain adequate manufacturing capacity and capabilities to serve our needs, including quality control, quality assurance and qualified personnel. In additional, public health epidemics, such as the worldwide COVID-19 pandemic, may impact the ability of our existing or future manufacturers to perform their obligations to us. We are dependent on our third-party manufacturers for compliance with cGMPs and for manufacture of both active drug substances and finished drug products. Facilities used by our third-party manufacturers to manufacture drug substance and drug product for commercial sale must be approved by the FDA or other relevant foreign regulatory agencies pursuant to inspections that will be conducted after we submit our NDA or relevant foreign regulatory submission to the applicable regulatory agency. If our third-party manufacturers cannot successfully manufacture materials that conform to our specifications and/or the strict regulatory requirements of the FDA or foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. Furthermore, these third-party manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which also exposes our third-party manufacturers to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a third-party manufacturers’ facility. If the FDA or a foreign regulatory agency does not approve these facilities for the manufacture of our product candidates, or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would impede or delay our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties. Even if we obtain regulatory approval for our product candidates, they would be subject to ongoing requirements by the FDA and foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The FDA and foreign regulatory authorities will continue to monitor closely In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including withdrawal of the product from the market or suspension of manufacturing, or we may recall the product from distribution. If we, or our third-party manufacturers, fail to comply with applicable regulatory requirements, a regulatory agency may:
The occurrence of any event or penalty described above may inhibit our ability to commercialize and generate revenue from the sale of our product candidates. Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department of Justice, the Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, other government agencies and the public. While physicians may prescribe products for off-label uses as the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. Companies may only share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. Violations, including promotion of our products for unapproved (oroff-label) uses, may be subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the government. Additionally, foreign regulatory authorities will heavily scrutinize advertising and promotion of any product candidate that obtains approval in their respective jurisdictions. In the United States, engaging in the impermissible promotion of our products foroff-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to administrative, civil and criminal penalties, damages, monetary fines, disgorgement, individual imprisonment, exclusion from participation in Medicare, Medicaid and other federal healthcare programs, curtailment or restructuring of our operations and agreements that materially restrict the manner in which a company promotes or distributes drug products. These false claims statutes include, but are not limited to, the federal civil False Claims Act, which allows any individual to bring a lawsuit against an individual or entity, including a pharmaceutical or biopharmaceutical company on behalf of the federal government alleging the knowing submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment or approval by a federal program such as Medicare or Medicaid. These False Claims Act lawsuits against pharmaceutical and biopharmaceutical companies have increased significantly in number and breadth, leading to several substantial civil and criminal settlements regarding certain sales practices, including promotingoff-label drug uses involving fines in excess of $1.0 billion. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from participation in Medicare, Medicaid and other federal and state healthcare programs. If we, or any partner that we may engage, do not lawfully promote our approved products, we may become subject to such litigation, which may have a material adverse effect on our business, financial condition and results of operations. Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial scope of their approved use, or result in significant negative consequences following any marketing approval. Undesirable side effects caused by our product candidates could cause the interruption, delay or halting of the trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other foreign regulatory authorities. Additionally, if our product candidates receive marketing approval, and we or others later identify undesirable side effects, a number of potentially significant negative consequences could result, including:
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates for use in targeted indications or otherwise materially harm its commercial prospects, if approved, and could harm our business, results of operations and prospects. Our failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates outside the United States. In order to market and sell our product candidates in other jurisdictions, we must obtain separate marketing approvals for those jurisdictions and comply with their numerous and varying regulatory requirements. We may not obtain foreign regulatory approvals on a timely basis, or at all. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, product reimbursement approvals must be secured before regulatory authorities will approve the product for sale in that country. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries. Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries and regulatory approval in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
SNDX-5613 is being developed Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Our competitors may be more successful than us in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective or more effectively marketed and sold than any drug we may commercialize and may render our product candidates obsolete ornon-competitive before we can recover the expenses of developing and commercializing any of our product candidates. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. We believe that our ability to successfully compete will depend on, among other things:
Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment, or if physicians switch to other new drug or biologic products or choose to reserve our drugs for use in limited circumstances.
We are dependent on UCB Biopharma Sprl, or UCB, to comply with the terms of our license agreement for axatilimab. Our commercial success also depends upon our ability to develop, manufacture, market and sell axatilimab. In July 2016, we entered into the UCB license agreement pursuant to which we obtained a worldwide, sublicenseable, exclusive license to axatilimab, an IND-ready anti-CSF-1R monoclonal antibody. Certain of the rights licensed to us under the UCB license agreement are in-licensed by UCB from third parties. We are dependent on UCB maintaining the applicable third-party license agreements in full force and effect, which may include activities and performance obligations that are not within our control. If any of these third-party license agreements terminate, certain of our rights to develop, manufacture, commercialize or sell axatilimab may Our employees, consultants and collaborators may engage in misconduct or other improper activities, including insider trading and non-compliance with regulatory standards and requirements. We are exposed to the risk that our employees, consultants, distributors, and collaborators may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates the regulations of the FDA and non-U.S. regulators, including those laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws and regulations in the rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting obligations and oversight if we become subject to a
We must attract and retain additional highly skilled employees in order to succeed. To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and management personnel and we face significant competition for experienced personnel. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability to execute our business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be detrimental to us if we cannot recruit suitable replacements in a timely manner. The competition for qualified personnel in the pharmaceutical industry is intense and as a result, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover and develop product candidates and our business will be limited. Even if we commercialize our product candidates, they or any other product candidates that we develop, may become subject to unfavorable pricing regulations or third-party coverage or reimbursement practices, which could harm our business. Our ability to successfully commercialize our existing product candidates, or any other product candidates that we develop, will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, including government healthcare programs, private health insurers, managed care plans and other organizations. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Limitation on coverage and reimbursement may impact the demand for, or the price of, and our ability to successfully commercialize There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Private payors often follow decisions by the Centers for Medicare The regulations that govern marketing approvals, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we may obtain marketing approval for our product candidates in a particular country, but be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we generate from the sale of the product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment even if our product candidates obtain marketing approval. There can be no assurance that our product candidates, if they are approved for sale in the United States or in other countries, will be considered medically reasonable and necessary for a specific indication, that it will be considered cost effective by third-party payors, that coverage and an adequate level of reimbursement will be available, or that third-party payors’ reimbursement policies will not adversely affect our ability to sell our product candidates profitably.
Current and future legislation may increase the difficulty and cost for us to commercialize our product candidates and affect the prices we may obtain. The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidate for which we obtain marketing approval. For example, then President Obama signed into law the Affordable Care Act. Among other cost containment measures, the Affordable Care Act established an annual, nondeductible fee on any entity that manufactures or imports branded prescription drugs and biologic agents, a Medicare Part D coverage gap discount program, and a formula that increased the rebates a manufacturer must pay under the Medicaid Drug Rebate Program. There have been executive, judicial and Congressional challenges to certain aspects of the Affordable Care Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, then President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not agree upon a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed by the Biden administration until January 1, 2023. On November 20, 2020, the Centers for Medicare & Medicaid Services, or CMS, issued an interim final rule implementing the Trump administration’s Most Favored Nation, or MFN, executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. The MFN regulations mandate participation by identified Medicare Part B providers and will apply in all U.S. states and territories for a seven-year period beginning January 1, 2021 and ending December 31, 2027. On December 28, 2020, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction against implementation of the interim final rule. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District Court of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the MFN model interim final rule shall not commence earlier than sixty (60) days after publication of that regulation in the Federal Register. Additionally, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic. We cannot predict the likelihood, nature or extent of government regulations that may arise from future legislation, administrative or executive action. We expect that the Affordable Care Act, as well as other current or future healthcare reform measures may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. This could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products. We do not currently have any sales, marketing or distribution experience or infrastructure. In order to market any approved product candidate in the future, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, as we do not presently have all of these capabilities. To develop our internal sales, distribution and marketing capabilities, we would have to invest significant amounts of financial and management resources in the future. For drugs where we decide to perform sales, marketing and distribution functions ourselves, we could face a number of challenges, including that:
Alternatively, we may rely on third parties to launch and market our product candidates, if approved. We may have limited or no control over the sales, marketing and distribution activities of these third parties and our future revenue may depend on the success of these third parties. Additionally, if these third parties fail to comply with all applicable legal or regulatory requirements, the FDA or another governmental agency could take enforcement action that could jeopardize their ability and our ability to market our product candidates. Product liability lawsuits against us could cause us to incur substantial liabilities and 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 trials and will face an even greater risk if we commercially sell any products that we may develop. Product liability claims may be brought against us by subjects enrolled in our trials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or other products that we may develop caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
While we currently hold trial liability insurance coverage consistent with industry standards, this may not adequately cover all liabilities that we may incur. We also may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise in the future. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain marketing approval for our product candidates, but we may be unable to obtain commercially reasonable product liability insurance. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business and financial condition. Our relationships with healthcare providers, customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations as well as privacy and data security laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, fines, exclusion from participation in government healthcare programs, curtailments or restrictions of our operations, administrative burdens and diminished profits and future earnings. Healthcare providers, including physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with
Efforts to ensure that our business arrangements with third parties and our business generally, will comply with applicable healthcare 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 interpreting applicable fraud and abuse or other healthcare 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, Significant disruptions of our information technology systems or data security incidents could result in significant financial, legal, regulatory, business and reputational harm to us. We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. In the ordinary course of our business, we collect, store, process and transmit large amounts of sensitive information, including intellectual property, proprietary business information, personal information and other confidential information. It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such sensitive information. We have also outsourced elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may or could have access to our computer networks, our confidential information or the confidential information of third parties that is in our possession. In addition, those third-party vendors may in turn subcontract or outsource some of their responsibilities to other parties. While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the accessibility and distributed nature of our information technology systems, and the sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment. In addition, due to the COVID-19 pandemic, we have enabled substantially all our employees to work remotely, which may make us more vulnerable to cyberattacks. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. In addition to the extraction of sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. The prevalent use of mobile devices further increases the risk of data security incidents. Significant disruptions of our, our third-party vendors’ and/or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive information, which could result in financial, legal, regulatory, business and reputational harm to us. In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war and telecommunication and electrical failures, could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered. While we have no reason to believe this to be the case, attackers have become very sophisticated in the ways that they conceal access to systems. Many companies that have been attacked are not aware that they have been attacked. Any event that leads to unauthorized access, use or disclosure of personal information, including but not limited to personal information regarding employees or clinical trial patients, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us, and result in significant legal and financial exposure and/or reputational harm. Any failure or perceived failure by us or our vendors or business partners to comply with our privacy, confidentiality or data security-related legal or other obligations to third parties, or any further security incidents or other inappropriate access events resulting in the unauthorized access, release or transfer of sensitive information, which could include personally identifiable information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others, and could cause third parties, including clinical sites, regulators or current and potential partners, to lose trust in us or we could be subject to claims by third parties that we have breached our privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects. Moreover, data security incidents and other inappropriate access can be difficult to detect. Any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or security incidents. Further, because of the work-from-home policies we implemented due to COVID-19, information that is normally protected, including company confidential information, may be less secure. Risks Related to Our Financial Position and Capital Needs We have incurred net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval or be commercially viable. We are a clinical stage biopharmaceutical company with limited operating history. We have no products approved for commercial sale and have not generated any product revenues to date, and we continue to incur significant research and development and other expenses related to our ongoing operations and clinical development of our product candidates. As a result, we are not and have never been profitable and have incurred losses in each period since our inception in 2005. For the six ended June 30, 2021, we reported a net loss attributable to stockholders of $50.6 million. As of June 30, 2021, we had an accumulated deficit of $619.3 million, which included non-cash charges for stock-based compensation, preferred stock accretion and extinguishment charges. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our pre-commercialization activities for, and our research and development of, and seek regulatory approvals for, our product candidates. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues, if any. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We currently have no source of product revenue and may never achieve or maintain profitability. Our ability to generate product revenue and become profitable depends upon our ability to successfully commercialize our product candidates. We do not anticipate generating revenue from the sale of our product candidates for the foreseeable future. Our ability to generate future product revenue also depends on a number of additional factors, including, but not limited to, our ability to:
In addition, because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased expenses, and if or when we will achieve or maintain profitability. In addition, our expenses could increase beyond expectations if we decide to or are required by the FDA or foreign regulatory authorities to perform studies or trials in addition to those that we currently anticipate. Even if we complete the development and regulatory processes described above, we anticipate incurring significant costs associated with launching and commercializing our current product candidates and any other product candidates we may develop. Even if we generate revenues from the sale of our product candidates, we may not become profitable and may need to obtain additional funding to continue operations or acquire additional products that will require additional funding to develop them. If we fail to become profitable or do not sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations or even shut down. We will require additional capital to finance our planned operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development and commercialization of, or obtain regulatory approval for our existing product candidates or develop new product candidates. Our operations have consumed substantial amounts of cash since our inception, primarily due to our research and development efforts. We expect our research and development expenses to increase substantially in connection with our ongoing and planned activities. We believe that our existing cash, cash equivalents and short-term investments will fund our projected operating expenses and capital expenditure requirements for at least the next 12 months. Unexpected circumstances may cause us to consume capital more rapidly than we currently anticipate, including as a result of the COVID-19 pandemic. For example, we may discover that we need to conduct additional activities that exceed our current budget to achieve appropriate rates of patient enrollment, which would increase our development costs. In any event, we will require additional capital to continue the development of, obtain regulatory approval for, and to commercialize our existing product candidates and any future product candidates. Any efforts to secure additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. The COVID-19 pandemic has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we do not raise additional capital when required or on acceptable terms, we may need to:
If we need to conduct additional fundraising activities and we do not raise additional capital in sufficient amounts or on terms acceptable to us, we may be unable to pursue development and commercialization efforts, which will harm our business, operating results and prospects. Our future funding requirements, both short- and long-term, will depend on many factors, including:
If we cannot expand our operations or otherwise capitalize on our business opportunities because we cannot secure sufficient capital, our business, financial condition and results of operations could be materially adversely affected. The terms of our loan and security agreements place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business. Our loan and security agreement, or the Loan Agreement, with Hercules Capital, Inc., or Hercules, for aggregate maximum borrowings of up to $30.0 million, or the Credit Facility, is collateralized by substantially all of our and our subsidiaries personal property and other assets, other than our intellectual property. As of June 30, 2021, the outstanding principal balance under the Credit Facility was $20.0 million. The Credit Facility contains customary representations, warranties, affirmative and negative covenants and events of default applicable to us and our subsidiaries. If we default under the Credit Facility, Hercules may accelerate all of our repayment obligations and exercise all of their rights and remedies under the Credit Facility and applicable law, potentially requiring us to renegotiate our agreement on terms less favorable to us. Further, if we are liquidated, the lenders’ right to repayment would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation. Hercules could declare a default upon the occurrence of any event, among others, that they interpret as a material adverse effect or a change of control as delineated under the Credit Facility, payment defaults, or breaches of covenants thereby requiring us to repay the loan immediately or to attempt to reverse the declaration of default through negotiation or litigation. Any declaration by the lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility. Changes in tax laws or regulations could materially adversely affect our company. New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in a manner that is adverse to us, which could adversely affect our business and financial condition. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, or the Tax Act, enacted many significant changes to the U.S. tax laws, including changes in corporate tax rates, the utilization of our NOLs and other deferred tax assets, the deductibility of expenses, and the taxation of foreign earnings. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. For example, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, modified certain provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax legislation. The impact of changes under the Tax Act, the CARES Act, or future reform legislation could increase our future U.S. tax expense and could have a material adverse impact on our business and financial condition. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. We have incurred substantial losses during our history. We do not expect to become profitable in the near future, and we may never achieve profitability. Unused losses generally are available to be carried forward to offset future taxable income, if any. Under Sections 382 and 383 of the Code if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income or taxes may be limited. We completed an analysis through December 31, 2020 and determined that on March 30, 2007, August 21, 2015, and May 4, 2020, ownership changes had occurred. We may also experience ownership changes in the future as a result of shifts in our stock ownership, some of which may be outside of our control. As a result, our ability to use our pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. Risks Related to Intellectual Property If we are unable to obtain or protect intellectual property rights, we may not be able to compete effectively in our market. Our success depends in significant part on our and our licensors’ and licensees’ ability to establish, maintain and protect patents and other intellectual property rights and operate without infringing the intellectual property rights of others. We have filed patent applications both in the United States and in foreign jurisdictions to obtain patent rights to inventions we have discovered. We have also licensed from third parties rights to patent portfolios. Some of these licenses give us the right to prepare, file and prosecute patent applications and maintain and enforce patents we have licensed, and other licenses may not give us such rights. The patent prosecution process is expensive and time-consuming, and we and our current or future licensors and licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors or licensees will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from or license to third parties and are reliant on our licensors or licensees. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our current or future licensors or licensees fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors or licensees are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’ or licensees’ patent rights are highly uncertain. Our and our licensors’ or licensees’ pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. The patent examination process may require us or our licensors or licensees to narrow the scope of the claims of our or our licensors’ or licensees’ pending and future patent applications, which may limit the scope of patent protection that may be obtained. It is possible that third parties with products that are very similar to ours will circumvent our or our licensors’ or licensees’ patents by means of alternate designs or processes. We cannot be certain that we are the first to invent the inventions covered by pending patent applications and, if we are not, we may be subject to priority disputes. We may be required to disclaim part or all of the term of certain patents or all of the term of certain patent applications. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. No assurance can be given that if challenged, our patents would be declared by a court to be valid or enforceable or that even if found valid and enforceable, a competitor’s technology or product would be found by a court to infringe our patents. We may analyze patents or patent applications of our competitors that we believe are relevant to our activities, and consider that we are free to operate in relation to our product candidate, but our competitors may achieve issued claims, including in patents we consider to be unrelated, which block our efforts or may potentially result in our product candidate or our activities infringing such claims. The possibility exists that others will develop products which have the same effect as our products on an independent basis which do not infringe our patents or other intellectual property rights, or will design around the claims of patents that we have had issued that cover our products. Our and our licensors’ or licensees’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology. Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Entinostat composition of matter U.S. Patent RE39,754, which we licensed from Bayer, covers the chemical entity of entinostat and any crystalline ornon-crystalline form of entinostat and expired in September 2017. The portfolio we licensed from Bayer also includes U.S. Patent 7,973,166, or the ‘166 patent, which covers a crystalline polymorph of entinostat which is referred to as crystalline polymorph B, the crystalline polymorph used in the clinical development of entinostat. Many compounds can exist in different crystalline forms. A compound which in the solid state may exhibit multiple different crystalline forms is called polymorphic, and each crystalline form of the same chemical compound is termed a polymorph. A new crystalline form of a compound may arise, for example, due to a change in the chemical process or the introduction of an impurity. Such new crystalline forms may be patented. The ‘166 patent expires in 2029. On March 7, 2014, our licensor Bayer applied for reissue of the ‘166 patent. The reissue application seeks to add three inventors not originally listed on the ‘166 patent. The reissue application does not seek to amend the claims issued in the ‘166 patent. On April 28, 2015, the USPTOre-issued the ‘166 patent as U.S. patent RE45,499. RE45,499 reissued with the same claims originally issued in the ‘166 patent and the list of inventors on RE45,499 now lists the additional three inventors that were not included on the ‘166 patent. The ‘166 patent has now been surrendered in favor of RE45,499. RE45,499 has the same term as the initial term of the ‘166 patent, which expires in August 2029. After expiry of RE39,754, which occurred in September 2017, a competitor may develop a competing polymorphic form other than based on polymorph B, which could compete with polymorph B. In spite of our efforts and efforts of our licensor, we may not be successful in defending the validity of the claims of the RE45,499 reissue patent or any of its foreign counterparts. If the claims of the ‘166 patent or any of its counterparts are found to be invalid by a competent court, we may not be able to effectively block entry of generic versions of our entinostat crystalline polymorph B candidate products into markets where the crystalline polymorph B patent claims are found to be invalid. Additionally, even if we submit an NDA before the expiration of U.S. Patent RE45,499 and are successful in obtaining an extension of the term of U.S. Patent RE45,499 based on FDA regulatory delays, such extension will only extend the term of RE45,499 for a few additional years (up to a maximum of five additional years for patent claims covering a new chemical entity). The portfolio that we licensed from UCB includes The portfolio that we licensed from Vitae Pharmaceuticals, which is now a subsidiary of AbbVie Inc. (“AbbVie”), includes granted patents and applications with pending claims directed to inhibitors of the interaction of menin with MLL and MLL fusion proteins, pharmaceutical compositions containing the same, and their use in the treatment of cancer and other diseases mediated by the menin-MLL interaction. There is no guarantee that any additional patents will be granted based on the pending applications that we licensed from AbbVie or even if one or more patents are granted that the claims issued in those patents would cover the desired lead compounds, compositions, and methods of use thereof. Based on the priority date and filing date of the applications in the portfolio that we licensed from AbbVie, we expect that a patent, if any, granted based on the currently pending applications would expire in 2037. The actual term of any patents granted based on the pending applications that we licensed from AbbVie can only be determined after such patents are actually granted. We may not be able to protect our intellectual property rights throughout the world. Filing, prosecuting, enforcing and defending patents on product candidates in all countries throughout the world is prohibitively expensive, and our or our licensors’ intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we and our licensors may not be able to prevent third parties from practicing our and our licensors’ inventions in countries outside the United States, or from selling or importing products made using our and our licensors’ inventions in and into the United States or other jurisdictions. Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent protection to develop their own products and may export otherwise infringing products to territories where we and our licensors have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates and our and our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us and our licensors to stop the infringement of our and our licensors’ patents or marketing of competing products in violation of our and our licensors’ proprietary rights generally. Proceedings to enforce our and our licensors’ patent rights in foreign jurisdictions could result in substantial costs and divert our attention from other aspects of our business, could put our and our licensors’ patents at risk of being invalidated or interpreted narrowly and our and our licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors. We or our licensors may not prevail in any lawsuits that we or our licensors initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. In India, unlike the United States, there is no link between regulatory approval of a drug and its patent status. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. In addition to India, certain countries in Europe and developing countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors’ efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license. If we breach the UCB license agreement related to axatilimab or if the UCB license agreement is otherwise terminated, we could lose the ability to continue the development and commercialization of axatilimab. Our commercial success depends upon our ability to develop, manufacture, market and sell axatilimab. Subject to the achievement of certain milestone events, we may be required to pay UCB up to $119.5 million in one-time development and regulatory milestone payments over the term of the UCB license agreement. If we or any of our affiliates or sublicensees commercializes axatilimab, we will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250 million in potential one-time sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, we may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with UCB. Either party may terminate the UCB license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the other party. Either party may terminate the UCB license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party, if the other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the other party. UCB may terminate the UCB license agreement if we seek to revoke or challenge the validity of any patent licensed to us by UCB under the UCB license agreement or if we procure or assist a third party to take any such action. Unless terminated earlier in accordance with its terms, the UCB license agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country. We cannot determine the date on which our royalty payment obligations to UCB would expire because no commercial sales of axatilimab have occurred and the last-to-expire relevant patent covering axatilimab in a given country may change in the future. If the UCB license agreement is terminated, we would not be able to develop, manufacture, market or sell axatilimab and would need to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all. If we breach the license agreement related to SNDX-5613 or if the license agreement is otherwise terminated, we could lose the ability to continue the development and commercialization of SNDX-5613. Our commercial success depends upon our ability to develop, manufacture, market and sell SNDX-5613. Subject to the achievement of certain milestone events, we may be required to pay Vitae, which is now a subsidiary of AbbVie, up to $99 million in one-time development and regulatory milestone payments over the term of the AbbVie license agreement. In the event that we or any of our affiliates or sublicensees commercializes SNDX-5613, we will also be obligated to pay AbbVie low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $70 million in potential one-time sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, we may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with AbbVie. In June 2019, we achieved certain development and regulatory milestones. As a result, in June 2019, we recorded $4.0 million as research and development expense. The amount was paid in 2020. Either party may terminate the license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the other party. Either party may terminate the license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party, if the other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the other party. AbbVie may terminate the license agreement if we seek to revoke or challenge the validity of any patent licensed to us by AbbVie under the license agreement or if we procure or assist a third party to take any such action. Unless terminated earlier in accordance with its terms, the license agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country. We cannot determine the date on which our royalty payment obligations to AbbVie would expire because no commercial sales of SNDX-5613 have occurred and the last-to-expire relevant patent covering SNDX-5613 in a given country may change in the future. If the license agreement is terminated, we would not be able to develop, manufacture, market or sell SNDX-5613 and would need to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all. If we breach our license agreement with Bayer related to entinostat or if the license agreement is otherwise terminated, we could lose the ability to continue the development and commercialization of entinostat.
We are obligated to pay Bayer up to approximately The Bayer license agreement will remain in effect until the expiration of our royalty obligations under the agreement in all countries. Either party may terminate the Bayer license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the other party. Either party may terminate the Bayer license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party, if the other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the other party. Bayer may terminate the Bayer license agreement if we seek to revoke or challenge the validity of any patent licensed to us by Bayer under the Bayer license agreement or if we procure or assist a third party to take any such action. If the Bayer license agreement is terminated, we would not be able to develop, manufacture, market or sell entinostat and would need to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates. As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time-consuming, and inherently uncertain. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and our licensors’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO, the laws and regulations governing patents could change in unpredictable ways that may weaken our and our licensors’ ability to obtain new patents or to enforce existing patents and patents we and our licensors or collaborators may obtain in the future. In view of recent developments in U.S. patent laws, in spite of our efforts and the efforts of our licensors, we may face difficulties in obtaining allowance of our biomarker based patient selection patent claims or if we are successful in obtaining allowance of our biomarker based patient selection claims, we or our licensor may be unsuccessful in defending the validity of such claims if challenged before a competent court. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the America Invents Act, was signed into law. The America Invents Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of the American Invents Act, and many of the substantive changes to patent law associated with the America Invents Act and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the operation of our business. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents, all of which could harm our business and financial condition. 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-compliance with these requirements. Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO 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.Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits,non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would harm our business. We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and have an adverse effect on the success of our business and on our stock price. Third parties may infringe our or our licensors’ patents or misappropriate or otherwise violate our or our licensors’ intellectual property rights. In the future, we or our licensors may initiate legal proceedings to enforce or defend our or our licensors’ intellectual property rights, to protect our or our licensors’ trade secrets or to determine the validity or scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings against us or our licensors to challenge the validity or scope of intellectual property rights we own or control. The proceedings can be expensive and time-consuming and many of our or our licensors’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors can. Accordingly, despite our or our licensors’ efforts, we or our licensors may not be able to prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect our rights as fully as in the United States. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our or our licensors’ patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our or our licensors’ patents at risk of being invalidated, held unenforceable or interpreted narrowly. Third-party preissuance submission of prior art to the USPTO, or opposition, derivation, reexamination,inter partes review or interference proceedings, or other preissuance or post-grant proceedings in the United States or other jurisdictions provoked by third parties or brought by us or our licensors or collaborators may be necessary to determine the priority of inventions with respect to our or our licensors’ patents or patent applications. An unfavorable outcome could require us or our licensors to cease using the related technology and commercializing our product candidates, or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors a license on commercially reasonable terms or at all. Even if we or our licensors obtain a license, it may benon-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors. In addition, if the breadth or strength of protection provided by our or our licensors’ patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Even if we successfully defend such litigation or proceeding, we may incur substantial costs and it may distract our management and other employees. We could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. 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 this process. 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 downward effect on the price of shares of our common stock. Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property rights or we may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, the outcome of which would be uncertain and could have an adverse effect on the success of our business. Third parties may initiate legal proceedings against us or our licensors or collaborators alleging that we or our licensors or collaborators infringe their intellectual property rights or we or our licensors or collaborators may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, including in oppositions, interferences, reexaminations,inter partes reviews or derivation proceedings before the United States or other jurisdictions. These proceedings can be expensive and time-consuming and many of our or our licensors’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can. An unfavorable outcome could require us or our licensors or collaborators to cease using the related technology or developing or commercializing our product candidates, or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors or collaborators a license on commercially reasonable terms or at all. Even if we or our licensors or collaborators obtain a license, it may benon-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaborators. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property. Many of our employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees executed proprietary rights,non-disclosure andnon-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information orknow-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims. In addition, for some of ourin-licensed patents and patent applications, we do not have access to If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management. Our inability to protect our confidential information and trade secrets would harm our business and competitive position. In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatentedknow-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering intonon-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, third-party manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts both within and outside the United States may be less willing or unwilling to protect trade secrets. If a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.
Risks Related to Ownership of Our Common Stock and Other General Matters The market price of our stock may be volatile and you could lose all or part of your investment. The trading price of our common stock is highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:
In addition, the stock market in general, and the We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business. Until we can generate a sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through public or private equity or debt offerings. We may also seek additional funding through government or other third-party funding and other collaborations, strategic alliances and licensing arrangements. These financing activities may have an adverse impact on our stockholders’ rights as well as on our operations, and such additional funding may not be available on reasonable terms, if at all. Additionally, if we seek funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us. Any of these events could significantly harm our business, financial condition and prospects. If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline. The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If no or few securities or industry analysts Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant influence control over matters subject to stockholder approval. As of We are an “emerging growth company” as defined in the JOBS Act and For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements applicable to public companies that are not “emerging growth companies” including:
We may take advantage of these exemptions until we are no longer an “emerging growth company.” We We currently As of June 30, 2021, we no qualify as a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have historically taken, and may continue through the filing of our Annual Report on Form 10-K for the year ending December 31, 2021 to take, advantage of certain scaled disclosures available to smaller reporting companies. Effective as of December 31, 2021, we will As a result of As a large accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies that did not previously apply to us due to our status as an emerging growth company. These requirements include, but are not limited to:
We expect that compliance with the additional requirements of being a large accelerated filer will increase our legal and financial compliance costs and may cause management and other personnel to divert attention from operational and other business matters to devote increased time to public company reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our common stock could decline, and
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall. Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
We may be subject to securities litigation, which is expensive and could divert management attention. The market price of our common stock may be 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. If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. Commencing after the filing of our initial annual report onForm 10-K, we While we from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. Our compliance with Section 404 Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management. These provisions approval. These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our 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. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change of control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
None.
None.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date:
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