10-Q 1 cue-20220630.htm 10-Q 10-Q
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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 JUNE 30, 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: 001-38327

 

Cue Biopharma, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-3324577

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

40 Guest Street

Boston, Massachusetts

 

 

02135

(Address of principal executive offices)

 

(Zip Code)

 

(617) 949-2680

(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

CUE

Nasdaq Capital Market

 

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 (§232.405 of this chapter) 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 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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of August 1, 2022, the registrant had 35,381,743 shares of Common Stock ($0.001 par value) outstanding.

 

 

 


 

CUE BIOPHARMA, INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

6

 

Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (Unaudited)

6

 

Consolidated Statements of Operations and Other Comprehensive Loss for the three and six months ended June 30, 2022 and 2021 (Unaudited)

7

 

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021 (Unaudited)

8

 

Consolidated Statements of Cash Flows for the three and six months ended June 30, 2022 and 2021 (Unaudited)

9

 

Notes to the Consolidated Financial Statements (Unaudited)

10

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

40

 

Item 4. Controls and Procedures

40

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

41

 

Item 1A. Risk Factors

41

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

41

 

Item 3. Defaults Upon Senior Securities

41

 

Item 4. Mine Safety Disclosures

41

 

Item 5. Other Information

41

 

Item 6. Exhibits

42

 

 

2


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or other comparable terms. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

 

our estimates regarding expenses, future revenue, capital requirements and need for additional financing;

 

our expectations regarding our ability to fund our projected operating requirements with our existing cash resources and the period in which we expect that such cash resources will enable us to fund such operating requirements;

 

our plans to develop our drug product candidates;

 

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for our drug product candidates;

 

the potential advantages of our drug product candidates;

 

the rate and degree of market acceptance and clinical utility of our drug product candidates, if approved;

 

our estimates regarding the potential market opportunity for our drug product candidates;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position;

 

our ability to identify additional products, drug product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

 

the impact of government laws and regulations;

 

our competitive position;

 

developments relating to our competitors and our industry;

 

our ability to maintain and establish collaborations or obtain additional funding; and

 

the impacts of the COVID-19 pandemic.

 

3


 

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include the factors discussed below under the heading “Risk Factor Summary,” and the risk factors detailed further in Item 1A., “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.

This report includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our drug product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

RISK FACTOR SUMMARY

Investment in our securities involves risk. You should carefully consider the following summary of what we believe to be the principal risks facing our business, in addition to the risks described more fully in Item 1A, “Risk Factors” of Part I of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2022 and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks occurs, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.

We are a clinical-stage biopharmaceutical company, have no history of generating commercial revenue, have a history of operating losses, and we may never achieve or maintain profitability.
We currently do not have, and may never develop, any FDA-approved or commercialized products.
We are substantially dependent on the success of our drug product candidates, only one of which is currently being tested in a clinical trial, and significant additional research and development and clinical testing will be required before we can potentially seek regulatory approval for or commercialize any of our drug product candidates.
We have limited experience in conducting clinical trials and no history of commercializing biologic products, which may make it difficult to evaluate the prospects for our future viability.
The continuing COVID-19 pandemic has adversely impacted, and may continue to adversely impact our business, including our clinical trials and preclinical studies.
We plan to seek collaborations or strategic alliances. However, we may not be able to establish such relationships, and relationships we have established may not provide the expected benefits. Our collaboration agreements with Merck and LG Chem contain exclusivity provisions that restrict our research and development activities.
We may not be successful in our efforts to identify additional drug product candidates. Due to our limited resources and access to capital, we must prioritize development of certain drug product candidates; these decisions may prove to be wrong and may adversely affect our business.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

4


 

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug product candidates and our business could be substantially harmed.
We rely completely on third parties to manufacture our preclinical and clinical drug supplies for our drug product candidates.
If we or our licensor is unable to protect our or its intellectual property, then our financial condition, results of operations and the value of our technology and potential products could be adversely affected.
We will be subject to stringent domestic and foreign regulation in respect of any potential products. The regulatory approval processes of the FDA and other comparable regulatory authorities outside the United States are lengthy, time-consuming and inherently unpredictable. Any unfavorable regulatory action may materially and adversely affect our future financial condition and business operations.
Even if a potential therapeutic is ultimately approved by the various regulatory authorities, it may be approved only for narrow indications which may render it commercially less viable.
Even if we receive regulatory approval of our drug product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drug product candidates.
We are a party to a loan agreement that requires us to meet certain operating covenants and places restrictions on our operating and financial flexibility.

 

5


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Cue Biopharma, Inc.

Consolidated Balance Sheets

(Unaudited in thousands, except share amounts)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,126

 

 

$

64,371

 

Accounts receivable

 

 

736

 

 

 

3,142

 

Prepaid expenses and other current assets

 

 

2,142

 

 

 

955

 

Total current assets

 

 

69,004

 

 

 

68,468

 

Property and equipment, net

 

 

1,765

 

 

 

2,112

 

Operating lease right-of-use

 

 

9,899

 

 

 

9,810

 

Deposits

 

 

3,797

 

 

 

2,721

 

Restricted cash

 

 

150

 

 

 

150

 

Other long-term assets

 

 

134

 

 

 

140

 

Total assets

 

$

84,749

 

 

$

83,401

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,568

 

 

$

2,591

 

Accrued expenses

 

 

3,559

 

 

 

4,620

 

Research and development contract liability, current portion

 

 

 

 

 

645

 

Operating lease liability, current portion

 

 

3,196

 

 

 

4,932

 

Total current liabilities

 

 

8,323

 

 

 

12,788

 

Operating lease liability, net of current portion

 

 

6,757

 

 

 

5,121

 

Long-term debt, net

 

 

9,913

 

 

 

 

Total liabilities

 

$

24,993

 

 

$

17,909

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized and 0 shares issued and
outstanding at June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 35,381,743 and 32,202,496 shares issued and outstanding, at June 30, 2022 and December 31, 2021, respectively

 

 

35

 

 

 

32

 

Additional paid in capital

 

 

284,630

 

 

 

262,906

 

Accumulated deficit

 

 

(224,909

)

 

 

(197,446

)

Total stockholders’ equity

 

 

59,756

 

 

 

65,492

 

Total liabilities and stockholders’ equity

 

$

84,749

 

 

$

83,401

 

 

The accompanying notes are an integral part of these consolidated financial statements.

6


 

Cue Biopharma, Inc.

Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited in thousands, except share and per share amounts)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

26

 

 

$

2,739

 

 

$

1,026

 

 

$

4,291

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

3,782

 

 

 

4,280

 

 

 

8,938

 

 

 

8,535

 

Research and development

 

 

9,592

 

 

 

8,762

 

 

 

19,675

 

 

 

18,577

 

Gain on right-of-use asset termination

 

 

(258

)

 

 

 

 

 

(258

)

 

 

 

Total operating expenses

 

 

13,116

 

 

 

13,042

 

 

 

28,355

 

 

 

27,112

 

Loss from operations

 

 

(13,090

)

 

 

(10,303

)

 

 

(27,329

)

 

 

(22,821

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

88

 

 

 

24

 

 

 

96

 

 

 

37

 

Interest expense, net

 

 

(206

)

 

 

 

 

 

(230

)

 

 

 

Total other (expense) income

 

 

(118

)

 

 

24

 

 

 

(134

)

 

 

37

 

Net loss

 

$

(13,208

)

 

$

(10,279

)

 

$

(27,463

)

 

$

(22,784

)

Unrealized loss from available-for-sale
   securities

 

 

 

 

 

 

 

 

 

 

 

(7

)

Comprehensive loss

 

$

(13,208

)

 

$

(10,279

)

 

$

(27,463

)

 

$

(22,791

)

Net loss per common share – basic and diluted

 

$

(0.37

)

 

$

(0.33

)

 

$

(0.81

)

 

$

(0.74

)

Weighted average common shares outstanding –
   basic and diluted

 

 

35,357,343

 

 

 

31,233,794

 

 

 

34,005,410

 

 

 

30,834,522

 

 

The accompanying notes are an integral part of these consolidated financial statements.

7


 

Cue Biopharma, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited in thousands, except share and per share amounts)

 

For the three months ended June 30, 2022 and 2021:

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par
Value

 

 

Paid-in
Capital

 

 

Comprehensive
Income (Loss)

 

 

Accumulated
Deficit

 

 

Stockholders’
Equity

 

Balance, March 31, 2021

 

 

30,499,803

 

 

$

31

 

 

$

235,428

 

 

$

 

 

$

(165,790

)

 

$

69,669

 

Issuance of common stock from ATM offering, net of
   sales agent commission and fees

 

 

907,700

 

 

 

 

 

 

10,356

 

 

 

 

 

 

 

 

 

10,356

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,854

 

 

 

 

 

 

 

 

 

2,854

 

Exercise of stock options

 

 

62,713

 

 

 

 

 

 

310

 

 

 

 

 

 

 

 

 

310

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,279

)

 

 

(10,279

)

Balance, June 30, 2021

 

 

31,470,216

 

 

$

31

 

 

$

248,948

 

 

$

 

 

$

(176,069

)

 

$

72,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2022

 

 

34,174,800

 

 

$

34

 

 

$

276,340

 

 

$

 

 

$

(211,701

)

 

$

64,673

 

Issuance of common stock from ATM offering, net of
   sales agent commission and fees

 

 

1,197,394

 

 

 

1

 

 

 

5,981

 

 

 

 

 

 

 

 

 

5,982

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,309

 

 

 

 

 

 

 

 

 

2,309

 

Issuance of common stock upon exercise of warrants, net

 

 

9,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,208

)

 

 

(13,208

)

Balance, June 30, 2022

 

 

35,381,743

 

 

$

35

 

 

$

284,630

 

 

$

 

 

$

(224,909

)

 

$

59,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended June 30, 2022 and 2021:

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par
Value

 

 

Paid-in
Capital

 

 

Comprehensive
Income (Loss)

 

 

Accumulated
Deficit

 

 

Stockholders’
Equity

 

Balance, December 31, 2020

 

 

30,351,366

 

 

$

30

 

 

$

232,159

 

 

$

7

 

 

$

(153,285

)

 

$

78,911

 

Issuance of common stock from ATM offering, net of
   sales agent commission and fees

 

 

907,700

 

 

 

1

 

 

 

10,356

 

 

 

 

 

 

 

 

 

10,357

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,290

 

 

 

 

 

 

 

 

 

5,290

 

Exercise of stock options

 

 

193,355

 

 

 

 

 

 

1,228

 

 

 

 

 

 

 

 

 

1,228

 

Issuance of common stock upon exercise of warrants, net

 

 

8,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards

 

 

16,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of restricted stock awards

 

 

(6,919

)

 

 

 

 

 

(85

)

 

 

 

 

 

 

 

 

(85

)

Unrealized losses from available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,784

)

 

 

(22,784

)

Balance, June 30, 2021

 

 

31,470,216

 

 

$

31

 

 

$

248,948

 

 

$

 

 

$

(176,069

)

 

$

72,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2021

 

 

32,202,496

 

 

$

32

 

 

$

262,906

 

 

$

 

 

$

(197,446

)

 

$

65,492

 

Issuance of common stock from ATM offering, net of
   sales agent commission and fees

 

 

3,117,220

 

 

 

3

 

 

 

16,595

 

 

 

 

 

 

 

 

 

16,598

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,320

 

 

 

 

 

 

 

 

 

5,320

 

Issuance of common stock upon exercise of warrants, net

 

 

9,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards released

 

 

91,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards withheld at vesting to cover taxes

 

 

(39,190

)

 

 

 

 

 

(191

)

 

 

 

 

 

 

 

 

(191

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,463

)

 

 

(27,463

)

Balance, June 30, 2022

 

 

35,381,743

 

 

$

35

 

 

$

284,630

 

 

$

 

 

$

(224,909

)

 

$

59,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

8


 

Cue Biopharma, Inc.

Consolidated Statements of Cash Flows

(Unaudited in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(27,463

)

 

$

(22,784

)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

518

 

 

 

632

 

Stock-based compensation

 

 

5,320

 

 

 

5,290

 

Amortization of operating lease right-of-use asset

 

 

169

 

 

 

2,252

 

Gain on right-of-use asset termination

 

 

(258

)

 

 

 

Loss (gain) on disposal of fixed assets

 

 

4

 

 

 

(19

)

Amortization of premium/discount on purchased securities

 

 

 

 

 

(5

)

Amortization of debt issuance costs

 

 

12

 

 

 

 

Accretion of final payment on term loan

 

 

43

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

2,407

 

 

 

(487

)

Prepaid expenses and other current assets

 

 

(1,268

)

 

 

(2,787

)

Other assets

 

 

 

 

 

250

 

Deposits

 

 

(1,075

)

 

 

(47

)

Accounts payable

 

 

(1,023

)

 

 

922

 

Accrued expenses

 

 

(1,062

)

 

 

(784

)

Research and development contract liability

 

 

(645

)

 

 

(1,726

)

Operating lease liability

 

 

(100

)

 

 

(2,272

)

Net cash used in operating activities

 

 

(24,421

)

 

 

(21,565

)

Cash flows from investing activities