UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
|
(Address of Principal Executive Offices) |
(Zip Code) |
(
(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 |
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.
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). ☒
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.
☒ |
|
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
The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 29, 2022 was
CHEMOCENTRYX, INC.
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended March 31, 2022
Table of Contents
Page |
||
|
|
|
Item 1. |
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 |
|
|
|
|
6 |
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021 |
7 |
|
|
|
|
8 |
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
|
|
|
Item 3. |
26 |
|
|
|
|
Item 4. |
27 |
|
|
|
|
PART II. OTHER INFORMATION |
|
|
|
|
|
Item 1. |
28 |
|
|
|
|
Item 1A. |
28 |
|
|
|
|
Item 2. |
29 |
|
|
|
|
Item 3. |
29 |
|
|
|
|
Item 4. |
29 |
|
|
|
|
Item 5. |
29 |
|
|
|
|
Item 6. |
29 |
|
|
|
|
30 |
||
|
|
|
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 |
|
$ |
|
|
$ |
|
||
Short-term investments |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Accounts receivable from related party |
|
|
|
|
|
|
||
Inventory |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Long-term investments |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued and other current liabilities |
|
|
|
|
|
|
||
Long-term debt, current |
|
|
|
|
|
|
||
Deferred revenue from related party |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term debt, net |
|
|
|
|
|
|
||
Non-current deferred revenue from related party |
|
|
|
|
|
|
||
Non-current lease liabilities |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
) |
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Note receivable |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
See accompanying notes.
3
CHEMOCENTRYX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
|
|
Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Revenue: |
|
|
|
|
|
|
||
Product sales, net |
|
$ |
|
|
$ |
|
||
Collaboration and license revenue from related party |
|
|
|
|
|
|
||
Grant revenue |
|
|
|
|
|
|
||
Total revenue |
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
||
Cost of sales |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
||
Selling, general and administrative |
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
Other expense: |
|
|
|
|
|
|
||
Interest income |
|
|
|
|
|
|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
Total other expense, net |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per common share |
|
|
|
|
|
|
||
Basic and diluted net loss per common share |
|
$ |
( |
) |
|
$ |
( |
) |
Shares used to compute basic and diluted net loss per common share |
|
|
|
|
|
|
||
See accompanying notes.
4
CHEMOCENTRYX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
|
|
Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Unrealized loss on available-for-sale securities |
|
|
( |
) |
|
|
( |
) |
Comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
See accompanying notes.
5
CHEMOCENTRYX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
|
|
Common Stock |
|
|
Additional |
|
|
Note |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
|
Amount |
|
|
Capital |
|
|
Receivable |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Equity |
|
|||||||
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Unrealized loss on investments |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of common stock upon net exercise of warrant |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock under |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Repurchased shares upon vesting of |
|
|
( |
) |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Employee stock-based compensation |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Compensation expense related to |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance as of March 31, 2022 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
Common Stock |
|
|
Additional |
|
|
Note |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
|
Amount |
|
|
Capital |
|
|
Receivable |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Equity |
|
|||||||
Balance as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Unrealized loss on investments |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Issuance of common stock under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Repurchased shares upon vesting of |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Employee stock-based compensation |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation expense related to |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance as of March 31, 2021 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
See accompanying notes.
6
CHEMOCENTRYX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Depreciation of property and equipment |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Non-cash interest expense, net |
|
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
|
|
Accounts receivable from related party |
|
|
|
|
|
( |
) |
|
Inventory |
|
|
( |
) |
|
|
|
|
Prepaids and other current assets |
|
|
( |
) |
|
|
|
|
Other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
|
|
Other liabilities |
|
|
( |
) |
|
|
|
|
Deferred revenue from related party |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment, net |
|
|
( |
) |
|
|
( |
) |
Purchases of investments |
|
|
( |
) |
|
|
( |
) |
Maturities of investments |
|
|
|
|
|
|
||
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
Financing activities |
|
|
|
|
|
|
||
Proceeds from exercise of stock options and employee stock purchase plan |
|
|
|
|
|
|
||
Employees' tax withheld and paid for restricted stock units |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for lease obligations |
|
$ |
|
|
$ |
|
||
Purchases of property and equipment, net recorded in |
|
$ |
|
|
$ |
|
||
See accompanying notes.
7
CHEMOCENTRYX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(unaudited)
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
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.
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
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 |
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
||
Restricted stock awards |
|
|
|
|
|
||
Warrant to purchase common stock(1) |
|
|
|
|
|
||
|
|
|
|
|
|
||
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
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.
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 |
|
$ |
|
|
$ |
|
||
Restricted cash included in Other assets |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Non-U.S. government securities |
|
|
|
|||||||||||||