10-Q 1 ccxi-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 

Commission File Number: 001-35420

ChemoCentryx, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

94-3254365

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

835 Industrial Road, Suite 600

San Carlos, California

94070

(Address of Principal Executive Offices)

(Zip Code)

 

(650) 210-2900

(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, par value $0.001 per share

CCXI

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 29, 2022 was 71,193,352.

 

 

 


 

CHEMOCENTRYX, INC.

 

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended March 31, 2022

Table of Contents

 

PART I. FINANCIAL INFORMATION

Page

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2022 and December 31, 2021

3

 

 

 

 

Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2022 and 2021

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss – Three Months Ended March 31, 2022 and 2021

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2022 and 2021

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

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

20

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

 

 

Item 4.

Controls and Procedures

27

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

28

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

Item 3.

Defaults Upon Senior Securities

29

 

 

 

Item 4.

Mine Safety Disclosures

29

 

 

 

Item 5.

Other Information

29

 

 

 

Item 6.

Exhibits

29

 

 

EXHIBIT INDEX

30

 

 

SIGNATURES

31

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CHEMOCENTRYX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,577

 

 

$

49,978

 

Short-term investments

 

 

300,024

 

 

 

214,514

 

Accounts receivable, net

 

 

2,781

 

 

 

411

 

Accounts receivable from related party

 

 

29

 

 

 

43

 

Inventory

 

 

2,897

 

 

 

851

 

Prepaid expenses and other current assets

 

 

5,324

 

 

 

3,380

 

Total current assets

 

 

351,632

 

 

 

269,177

 

Property and equipment, net

 

 

31,482

 

 

 

32,269

 

Long-term investments

 

 

31,235

 

 

 

97,856

 

Operating lease right-of-use assets

 

 

24,592

 

 

 

24,806

 

Other assets

 

 

1,512

 

 

 

1,544

 

Total assets

 

$

440,453

 

 

$

425,652

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,423

 

 

$

6,746

 

Accrued and other current liabilities

 

 

25,547

 

 

 

26,358

 

Long-term debt, current

 

 

19,128

 

 

 

18,920

 

Deferred revenue from related party

 

 

18,709

 

 

 

10,993

 

Total current liabilities

 

 

68,807

 

 

 

63,017

 

Long-term debt, net

 

 

4,554

 

 

 

4,715

 

Non-current deferred revenue from related party

 

 

62,094

 

 

 

24,772

 

Non-current lease liabilities

 

 

46,062

 

 

 

46,830

 

Other non-current liabilities

 

 

217

 

 

 

198

 

Total liabilities

 

 

181,734

 

 

 

139,532

 

Commitments (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized;
   
no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value, 200,000,000 shares authorized;
  
71,142,102 and 70,357,557 shares issued and outstanding at
   March 31, 2022 and December 31, 2021, respectively

 

 

71

 

 

 

70

 

Additional paid-in capital

 

 

916,224

 

 

 

903,646

 

Note receivable

 

 

(16

)

 

 

(16

)

Accumulated other comprehensive loss

 

 

(1,855

)

 

 

(483

)

Accumulated deficit

 

 

(655,705

)

 

 

(617,097

)

Total stockholders’ equity

 

 

258,719

 

 

 

286,120

 

Total liabilities and stockholders’ equity

 

$

440,453

 

 

$

425,652

 

 

See accompanying notes.

3


 

CHEMOCENTRYX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

Product sales, net

 

$

5,353

 

 

$

 

Collaboration and license revenue from related party

 

 

106

 

 

 

10,223

 

Grant revenue

 

 

 

 

 

130

 

Total revenue

 

 

5,459

 

 

 

10,353

 

Operating expenses:

 

 

 

 

 

 

Cost of sales

 

 

205

 

 

 

 

Research and development

 

 

17,476

 

 

 

23,418

 

Selling, general and administrative

 

 

26,011

 

 

 

16,262

 

Total operating expenses

 

 

43,692

 

 

 

39,680

 

Loss from operations

 

 

(38,233

)

 

 

(29,327

)

Other expense:

 

 

 

 

 

 

Interest income

 

 

222

 

 

 

305

 

Interest expense

 

 

(597

)

 

 

(689

)

Total other expense, net

 

 

(375

)

 

 

(384

)

Net loss

 

$

(38,608

)

 

$

(29,711

)

Net loss per common share

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(0.55

)

 

$

(0.43

)

Shares used to compute basic and diluted net loss per common share

 

 

70,835

 

 

 

69,608

 

 

See accompanying notes.

4


 

CHEMOCENTRYX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(38,608

)

 

$

(29,711

)

Unrealized loss on available-for-sale securities

 

 

(1,372

)

 

 

(128

)

Comprehensive loss

 

$

(39,980

)

 

$

(29,839

)

 

See accompanying notes.

5


 

CHEMOCENTRYX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

(in thousands, except share data)

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Note

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

 

Amount

 

 

Capital

 

 

Receivable

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

70,357,557

 

 

 

$

70

 

 

$

903,646

 

 

$

(16

)

 

$

(483

)

 

$

(617,097

)

 

$

286,120

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,608

)

 

 

(38,608

)

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,372

)

 

 

 

 

 

(1,372

)

Issuance of common stock upon net exercise of warrant

 

 

66,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under
   equity incentive and employee
   stock purchase plans

 

 

803,567

 

 

 

 

1

 

 

 

6,278

 

 

 

 

 

 

 

 

 

 

 

 

6,279

 

Repurchased shares upon vesting of
    restricted stock units for tax
    withholdings

 

 

(85,855

)

 

 

 

 

 

 

(3,126

)

 

 

 

 

 

 

 

 

 

 

 

(3,126

)

Employee stock-based compensation

 

 

 

 

 

 

 

 

 

9,182

 

 

 

 

 

 

 

 

 

 

 

 

9,182

 

Compensation expense related to
    options granted to consultants

 

 

 

 

 

 

 

 

 

244

 

 

 

 

 

 

 

 

 

 

 

 

244

 

Balance as of March 31, 2022

 

 

71,142,102

 

 

 

$

71

 

 

$

916,224

 

 

$

(16

)

 

$

(1,855

)

 

$

(655,705

)

 

$

258,719

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Note

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

 

Amount

 

 

Capital

 

 

Receivable

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

69,452,466

 

 

 

$

69

 

 

$

870,788

 

 

$

(16

)

 

$

114

 

 

$

(485,342

)

 

$

385,613

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,711

)

 

 

(29,711

)

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(128

)

 

 

 

 

 

(128

)

Issuance of common stock under
   equity incentive and employee
   stock purchase plans

 

 

370,987

 

 

 

 

1

 

 

 

2,162

 

 

 

 

 

 

 

 

 

 

 

 

2,163

 

Repurchased shares upon vesting of
    restricted stock units for tax
    withholdings

 

 

(80,960

)

 

 

 

 

 

 

(5,013

)

 

 

 

 

 

 

 

 

 

 

 

(5,013

)

Employee stock-based compensation

 

 

 

 

 

 

 

 

 

7,840

 

 

 

 

 

 

 

 

 

 

 

 

7,840

 

Compensation expense related to
    options granted to consultants

 

 

 

 

 

 

 

 

 

240

 

 

 

 

 

 

 

 

 

 

 

 

240

 

Balance as of March 31, 2021

 

 

69,742,493

 

 

 

$

70

 

 

$

876,017

 

 

$

(16

)

 

$

(14

)

 

$

(515,053

)

 

$

361,004

 

 

See accompanying notes.

 

 

6


 

CHEMOCENTRYX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(38,608

)

 

$

(29,711

)

Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

9,426

 

 

 

8,080

 

Depreciation of property and equipment

 

 

1,017

 

 

 

117

 

Non-cash lease expense

 

 

215

 

 

 

594

 

Non-cash interest expense, net

 

 

1,228

 

 

 

997

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(2,370

)

 

 

7

 

Accounts receivable from related party

 

 

14

 

 

 

(9,980

)

Inventory

 

 

(2,046

)

 

 

 

Prepaids and other current assets

 

 

(2,162

)

 

 

583

 

Other assets

 

 

32

 

 

 

(4

)

Accounts payable

 

 

(1,329

)

 

 

1,201

 

Operating lease liabilities

 

 

(664

)

 

 

6,342

 

Other liabilities

 

 

(960

)

 

 

418

 

Deferred revenue from related party

 

 

45,038

 

 

 

(211

)

Net cash provided by (used in) operating activities

 

 

8,831

 

 

 

(21,567

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment, net

 

 

(224

)

 

 

(10,880

)

Purchases of investments

 

 

(91,498

)

 

 

(95,278

)

Maturities of investments

 

 

70,385

 

 

 

166,826

 

Net cash (used in) provided by investing activities

 

 

(21,337

)

 

 

60,668

 

Financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options and employee stock purchase plan

 

 

6,231

 

 

 

2,163

 

Employees' tax withheld and paid for restricted stock units

 

 

(3,126

)

 

 

(5,013

)

Net cash provided by (used in) financing activities

 

 

3,105

 

 

 

(2,850

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(9,401

)

 

 

36,251

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

51,058

 

 

 

33,377

 

Cash, cash equivalents and restricted cash at end of period

 

$

41,657

 

 

$

69,628

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

488

 

 

$

509

 

Right-of-use assets obtained in exchange for lease obligations

 

$

1

 

 

$

300

 

Purchases of property and equipment, net recorded in
   accounts payable and accrued liabilities

 

$

6

 

 

$

2,807

 

 

See accompanying notes.

7


 

CHEMOCENTRYX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(unaudited)

1.
Description of Business

ChemoCentryx, Inc. (the Company) commenced operations in 1997. The Company is a fully integrated United States biopharmaceutical company focused on the development and commercialization of new medications targeting inflammatory disorders, autoimmune diseases and cancer. The Company discovered, developed and is now commercializing TAVNEOSÒ (avacopan) in the U.S. as an adjunctive treatment for adult patients with severe active anti-neutrophil cytoplasmic autoantibody-associated vasculitis (ANCA-associated vasculitis), specifically granulomatosis with polyangiitis (GPA) and microscopic polyangiitis (MPA), the two main forms of ANCA-associated vasculitis, in combination with standard therapy including glucocorticoids, and not for the elimination of glucocorticoids use. The Company’s principal operations are in the U.S. and it operates in one segment.

Unaudited Interim Financial Information

The financial information filed is unaudited. The Condensed Consolidated Financial Statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for the fair statement of the results of operations for the interim periods covered and of the financial condition of the Company at the date of the interim balance sheet. The December 31, 2021 Condensed Consolidated Balance Sheet was derived from audited financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The Condensed Consolidated Financial Statements should be read in conjunction with the Company’s financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on March 1, 2022.

 

2.
Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

Concentration of Credit Risk

The Company invests in a variety of financial instruments and, by its policy, limits the amount of credit exposure with any one issuer, industry or geographic area.

For the three months ended March 31, 2022 and 2021, total revenue derived from the Company’s collaboration with Vifor (International) Ltd., and/or its affiliates, or collectively, Vifor, was 1.9% and 98.7%, respectively. Accounts receivable are typically unsecured and are concentrated within a few customers in the pharmaceutical industry and government sector. Accordingly, the Company may be exposed to credit risk generally associated with pharmaceutical companies and government funded entities. The Company has not historically experienced any significant losses due to concentration of credit risk.

 

Net Loss Per Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.

Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number of common shares outstanding and dilutive common stock equivalent shares outstanding for the period. The Company’s potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants, (ii) vesting of restricted stock units (RSUs) and restricted stock awards (RSAs), and (iii) the purchase from contributions to the amended and restated 2012 Employee Stock Purchase Plan (the Restated ESPP) (calculated based on the treasury stock method), are only included in the calculation of diluted net loss per share when their effect is dilutive.

8


 

For the three months ended March 31, 2022 and 2021, the following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

 

2021

 

Options to purchase common stock, including
    purchases from contributions to ESPP

 

7,123

 

 

 

7,483

 

Restricted stock units

 

560

 

 

 

425

 

Restricted stock awards

 

15

 

 

 

14

 

Warrant to purchase common stock(1)

 

 

 

 

150

 

 

 

7,698

 

 

 

8,072

 

 

(1)
In 2012, the Company issued a warrant with a ten-year term to purchase 150,000 shares of its common stock at an exercise price of $20.00 per share. The warrant was exercised in January 2022.

Product Sales, net

The Company sells TAVNEOS to a limited number of specialty pharmacies and a specialty distributor. These customers subsequently dispense TAVNEOS directly to patients or resell it to hospitals and certain pharmacies. The Company recognizes product sales when the customer obtains control of the Company’s product, which occurs typically upon delivery to the customer. Product sales to these customers are recorded net of reserves established for distributor service fees and prompt payment discounts as stated in agreements, estimates for product returns, government rebates, chargebacks and the Company’s co-pay assistance program for patients. The Company estimates these reserves using the expected value approach. The Company believes its estimated reserves require significant judgment and may adjust these estimates as it accumulates historical data and assesses other quantitative and qualitative factors. Differences from actual results and changes to these estimates will be reported in the period that the differences become known.

Cost of Sales

Cost of sales for product sales and product supply consists primarily of direct and indirect costs related to the manufacturing of TAVNEOS products sold, including third-party manufacturing costs, packaging services, freight, storage costs, allocation of overhead costs of employees involved with production and net sales-based royalties expense. The Company began capitalizing costs related to inventory in October 2021 upon the U.S. Food and Drug Administration (FDA) approval of TAVNEOS. Manufacturing costs associated with campaigns initiated prior to FDA approval were recorded as research and development expense. Accordingly, cost of sales in the near term will likely be lower than in later periods given the sales of pre-approval inventory will carry little to no manufacturing costs given such costs were previously expensed to research and development expense.

Inventory

The Company values its inventories at the lower-of-cost or net realizable value on a first-in, first-out (FIFO) basis. Inventories include the cost for raw materials, third party contract manufacturing and packaging services, and indirect personnel and overhead associated with production. The Company performs an assessment of the recoverability of inventory during each reporting period, and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified. If they occur, such impairment charges are recorded as a component of cost of sales in the consolidated statements of operations. The Company capitalizes inventory costs associated with products when future commercialization is considered probable and the future economic benefit is expected to be realized, which is typically when regulatory approval is obtained for a drug candidate. As such, the Company begins capitalizing costs as inventory when a drug candidate receives regulatory approval. Prior to regulatory approval, the Company recorded inventory costs related to drug candidates as research and development expense.

Comprehensive Loss

Comprehensive loss comprises net loss and other comprehensive loss. For the periods presented, other comprehensive loss consists of unrealized losses on the Company’s available-for-sale securities. For the three months ended March 31, 2022 and 2021, there were no sales of investments and therefore there were no reclassifications of comprehensive loss.

9


 

Recent Accounting Pronouncements

The Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business or that no material effect is expected on the consolidated financial statements as a result of future adoption.

 

3.
Cash Equivalents, Restricted Cash and Investments

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

40,577

 

 

$

49,978

 

Restricted cash included in Other assets

 

 

1,080

 

 

 

1,080

 

Total cash, cash equivalents and restricted cash

 

$

41,657

 

 

$

51,058

 

 

Restricted cash as of March 31, 2022 and December 31, 2021 was held as collateral for stand-by letters of credit issued by the Company to its landlord in connection with the lease of the Company’s facility in San Carlos, California. See “Note 7. Commitments” for additional information on this lease.

Cash Equivalents and Investments

The amortized cost and fair value of cash equivalents and investments at March 31, 2022 and December 31, 2021 were as follows (in thousands):

 

 

 

March 31, 2022

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Money market fund

 

$

37,331

 

 

$

 

 

$

 

 

$

37,331

 

U.S. treasury securities

 

 

115,369

 

 

 

1

 

 

 

(708

)

 

 

114,662

 

Non-U.S. government securities

 

 

16,743