The following discussion and analysis of our financial condition and results of
operations should be read together with the unaudited condensed consolidated
financial statements and related notes included in Item 1 of Part I of this
Quarterly Report on Form 10-Q and with the audited consolidated financial
statements and the related notes included in our Annual Report on Form 10-K for
the year ended
Overview
We are a clinical-stage immunology-based biopharmaceutical company focused on discovering, developing and commercializing oral small molecule therapies for patients with significant unmet needs in inflammatory diseases and oncology. Utilizing our proprietary drug discovery and development engine, we are developing highly selective small molecules designed to modulate the critical immune responses underlying these diseases. Our two lead drug candidates each target C-C motif chemokine receptor 4 ("CCR4"), a drug target that potentially has broad applicability in inflammatory diseases and oncology.
In
In
Financial Overview
Since commencing operations in 2015, we have devoted substantially all of our
efforts and financial resources to building our research and development
capabilities and establishing our corporate infrastructure. As a result, we have
incurred net losses since inception. As of
Since inception, we have financed our operations primarily through the sale of
equity securities. In
We expect to incur substantial expenditures in the foreseeable future as we expand our pipeline and advance our drug candidates through clinical development, undergo the regulatory approval process and, if our drug candidates are approved, launch commercial activities. Specifically, in the near term, we expect to incur substantial expenses relating to our ongoing and planned clinical trials, the development and validation of our manufacturing processes and other development activities.
We will need substantial additional funding to support our continuing operations and pursue our development strategy. Until we can generate significant revenue from sales of our drug candidates, if ever, we expect to finance our operations through equity or debt financings or other capital sources, including potential collaborations with other companies, or other strategic transactions. Adequate funding may not be available to us on acceptable terms or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our drug candidates or delay our efforts to expand our product pipeline. We may also be required to sell or license to other parties rights to develop or commercialize our drug candidates that we would prefer to retain.
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Impact of COVID-19 Pandemic
We have been impacted and may continue to be impacted by the ongoing global
pandemic of the disease referred to as COVID-19 and the responses by government
entities to combat the pandemic. We continue to monitor the impact of the
COVID19 pandemic on all aspects of our business and operations. Both the
outbreak of the disease and the actions to slow its spread have had an adverse
impact on our operations by, among other things, slowing recruitment in our
clinical trials, limiting some of our employees from coming to work at our
facility and delaying services from third-party service providers. We have
instituted flexible work hours and protocols to protect the health of our
employees, which has limited some of our operations. Depending on how long the
pandemic continues or if it intensifies, it is possible that these or other
challenges may have a larger impact on our operations. Additionally, concerns
over the economic impact of the COVID-19 pandemic (along with the effects of the
war in
Components of Operating Results
Revenue
Revenue recognized during the periods presented relate to our Collaboration and
License Agreement (the "Hanmi Agreement") with
Research and Development Expenses
We expense both internal and external research and development costs as such expenses are incurred. We track the external research and development costs incurred for each of our drug candidates. However, we do not track our internal research and development costs by drug candidate as the related efforts and their costs are typically spread across multiple drug candidates.
We account for non-refundable advance payments for goods or services that will be used in future research and development activities as expenses when the goods have been received or when the services have been performed rather than when the payment is made.
Clinical trial costs are a component of research and development expenses. We expense costs for our clinical trial activities performed by third parties, including clinical research organizations ("CROs") and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with the associated agreements. We use information received from internal personnel and outside service providers to estimate the clinical trial costs incurred.
External research and development expenses consist primarily of costs incurred for the development of our drug candidates and include:
•
costs incurred under agreements with CROs, investigative sites and consultants to conduct our clinical trials and preclinical and non-clinical studies;
•
costs to acquire, develop and manufacture supplies for clinical trials and other studies, including fees paid to contract manufacturing organizations ("CMOs"); and
•
costs related to compliance with drug development regulatory requirements.
Internal research and development expenses include:
•
salaries and related costs, including stock-based compensation and travel expenses, for personnel in our research and development functions; and
•
depreciation and other allocated facility-related and overhead expenses.
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We expect our research and development expenses to increase substantially over the next few years as we seek to complete existing and initiate additional clinical trials, pursue regulatory approval of RPT193 and FLX475 and advance other programs into clinical development. Over the next few years, we expect our preclinical, clinical and contract manufacturing expenses to increase significantly relative to what we have incurred to date. Predicting the time or the final cost to complete our clinical programs or validation of our manufacturing and supply processes is difficult and delays may occur because of many factors.
General and Administrative Expenses
General and administrative expenses consist principally of personnel-related costs, including payroll and stockbased compensation for personnel in executive, finance, human resources, business and corporate development and other administrative functions; professional fees for legal, consulting and accounting services; allocated rent and facilities costs, depreciation and other general operating expenses not otherwise classified as research and development expenses.
We anticipate that our general and administrative expenses will increase substantially over the next few years as a result of staff expansion and additional occupancy costs, as well as costs associated with being a public company, including higher professional fees for legal, consulting and accounting services, higher investor relations costs, higher insurance premiums and other compliance costs.
Other Income, Net
Our cash and cash equivalents and marketable securities are invested in money
market funds, corporate debt securities, commercial paper and
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our condensed consolidated financial statements have been prepared in accordance
with
Except for the change to our accounting policy for leases as a result of
adopting ASC Topic 842, there have been no significant changes in our critical
accounting policies and estimates during the three and six months ended
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods indicated (in thousands):
Three Months Ended June 30, 2022 2021 $ Change % Change Revenue$ 886 $ 869 $ 17 2 % Operating expenses: Research and development 14,359 13,190 1,169 9 % General and administrative 5,436 3,760 1,676 45 % Total operating expenses 19,795 16,950 2,845 17 % Loss from operations (18,909 ) (16,081 ) (2,828 ) 18 % Other expense, net (275 ) (29 ) (246 ) 848 % Net loss$ (19,184 ) $ (16,110 ) $ (3,074 ) 19 % Revenue
Revenue for the three months ended
Research and Development Expenses
Research and development expenses increased
The following is a comparison of research and development expenses for the three
months ended
Three Months Ended June 30, 2022 2021 External development expenses: RPT193$ 2,430 $ 998 FLX475 2,924 3,870 Other programs 547 502
Internal research and development expenses 8,457 7,820
Total research and development expenses
As previously noted, we do not track our internal research and development expenses by drug candidate, as the related efforts and their costs are typically spread across multiple drug candidates.
General and Administrative Expenses
General and administrative expenses increased
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Other Expense, Net
Other expense, net increased to
Comparison of the Six Months Ended
The following table summarizes our results of operations for the periods indicated (in thousands):
Six Months June 30, 2022 2021 $ Change % Change Revenue$ 1,527 $ 2,091 $ (564 ) (27 )% Operating expenses: Research and development 31,029 26,961 4,068 15 % General and administrative 10,184 7,772 2,412 31 % Total operating expenses 41,213 34,733 6,480 19 % Loss from operations (39,686 ) (32,642 ) (7,044 ) 22 % Other income, net 34 18 16 89 % Net loss$ (39,652 ) $ (32,624 ) $ (7,028 ) 22 % Revenue
Revenue for the six months ended
Research and Development Expenses
Research and development expenses increased
The following is a comparison of research and development expenses for the six
months ended
Six Months June 30, 2022 2021 External development expenses: RPT193$ 7,034 $ 3,213 FLX475 6,457 7,200 Other Programs 1,187 936
Internal research and development expenses 16,351 15,612
Total research and development expenses
As previously noted, we do not track our internal research and development expenses by drug candidate, as the related efforts and their costs are typically spread across multiple drug candidates.
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General and Administrative Expenses
General and administrative expenses increased
Liquidity and Capital Resources; Plan of Operations
In
We will continue to require additional capital to develop our drug candidates and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with other companies or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:
•
the scope, rate of progress and costs of our drug discovery, preclinical development activities, laboratory testing and clinical trials for our drug candidates;
•
the number and scope of clinical programs we decide to pursue;
•
the scope and costs of manufacturing development and commercial manufacturing activities;
•
the extent to which we acquire or in-license other drug candidates and technologies;
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the costs, timing and outcome of regulatory review of our drug candidates;
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the costs and timing of establishing sales and marketing capabilities, if any of our drug candidates receive marketing approval;
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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our ability to establish and maintain collaborations on favorable terms, if at all;
•
our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our drug candidates;
•
the costs associated with being a public company; and
•
the cost associated with commercializing our drug candidates, if they receive marketing approval.
See "Risk Factors" for additional risks associated with our substantial capital requirements.
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If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any equity or debt financing may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to other parties rights to develop or commercialize our drug candidates that we would prefer to retain.
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