10-Q 1 nuvl-20240331.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, 2024

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: 001-40671

 

img240553393_0.jpg 

NUVALENT, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-5112298

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One Broadway, 14th Floor

Cambridge, MA

02142

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (857) 357-7000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

 

NUVL

 

The Nasdaq Global Select 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 the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

As of April 30, 2024, the registrant had 59,120,876 shares of Class A common stock, $0.0001 par value per share, outstanding and 5,435,254 shares of Class B common stock, $0.0001 par value per share outstanding.

 

 


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q (Quarterly Report) of Nuvalent, Inc. contains express or implied forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that are based on our management’s beliefs and assumptions and on information currently available to our management. These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report include, among other things, statements about:

the initiation, timing, progress, results, and cost of our zidesamtinib (NVL-520), NVL-655 and NVL-330 programs, as well as our discovery programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, and when the results of the studies or trials will become available;
the ability of our preclinical studies and clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of our product candidates;
the timing, scope and likelihood of regulatory filings and approvals, including timing of Investigational New Drug applications (INDs) and final U.S. Food and Drug Administration (FDA) approval of our current product candidates or any future product candidates;
the timing, scope or likelihood of foreign regulatory filings and approvals;
our ability to identify research priorities and apply a risk-mitigated strategy to efficiently discover and develop product candidates, including by applying learnings from one program to other programs and from one indication to other indications;
our estimates of the number of patients that we will enroll and our ability to initiate, recruit, and enroll patients in and conduct and successfully complete our clinical trials at the pace that we project;
our ability to scale-up our manufacturing and processing approaches to appropriately address our anticipated commercial needs, which will require significant resources;
our ability to maintain and further develop the specific shipping, storage, handling and administration of zidesamtinib and NVL-655 at the clinical sites;
our ability to obtain funding for our operations necessary to complete further development and commercialization of our product candidates;
our ability to take advantage of accelerated regulatory pathways for our product candidates;
our ability to obtain and maintain regulatory approval of our product candidates;
our ability to commercialize our product candidates, if approved, including the geographic areas of focus and sales strategy;
the pricing and reimbursement of our product candidates, if approved;
the implementation of our business model, and strategic plans for our business, product candidates, and technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;
the period over which we estimate our existing cash, cash equivalents and marketable securities will be sufficient to fund our future operating expenses and capital expenditure requirements;
future agreements with third parties in connection with the development and commercialization of our product candidates;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
our financial performance;

i


the rate and degree of market acceptance of our product candidates, if approved;
regulatory developments in the United States (the U.S.) and foreign countries;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
our ability to produce our product candidates with advantages in turnaround times or manufacturing cost;
our competitive position and the success of competing therapies that are or may become available;
our need for and ability to attract and retain key scientific, management and other personnel;
the impact of laws and regulations;
developments relating to our competitors and our industry;
the effect of public health emergencies, natural disasters or geopolitical events, including civil or political unrest or military conflicts, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and future clinical trials; and
other risks and uncertainties, including those listed under the section titled “Risk Factors.”

In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “expect,” “estimate,” “seek,” “predict,” “future,” “project,” “potential,” “continue,” “target,” “aim” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Quarterly Report. If one or more of these risks or uncertainties were to occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the Securities and Exchange Commission (SEC) completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this Quarterly Report represent our views as of the date of this Quarterly Report. We do not undertake any obligation to publicly update any forward-looking statement except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.

This Quarterly Report also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. All of the market data used in this Quarterly 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 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.

Except where the context otherwise requires or where otherwise indicated, the terms “Nuvalent,” “we,” “us,” “our,” “our company,” “the company,” and “our business” in this Quarterly Report refer to Nuvalent, Inc. and its consolidated subsidiary.

ii


SUMMARY OF RISK FACTORS

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the section titled “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report and our other filings with the SEC before making investment decisions regarding our common stock.

We have a limited operating history, have not completed any later-stage clinical trials, have no products approved for commercial sale and have not generated any revenue, which may make it difficult for investors to evaluate our current business and likelihood of success and viability;
We have incurred significant net losses in each period since our inception, and we expect to continue to incur significant net losses for the foreseeable future;
Our future prospects are substantially dependent on zidesamtinib (NVL-520), NVL-655 and NVL-330. If we are unable to advance these product candidates through development, obtain regulatory approval and ultimately commercialize such product candidates, or experience significant delays in doing so, our business will be materially harmed;
Our preclinical studies and clinical trials may fail to adequately demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay development, regulatory approval and commercialization;
Our discovery and development activities are focused on the development of targeted therapeutics for patients with cancer-associated genomic alterations, which is a rapidly evolving area of science, and the approach we are taking to discover and develop drugs may never lead to approved or marketable products;
The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, European Medicines Agency (EMA) or other comparable foreign regulatory authorities;
In addition to zidesamtinib, NVL-655 and NVL-330, our prospects depend in part upon discovering, developing and commercializing additional product candidates from our discovery programs, which may fail in development or suffer delays that adversely affect their commercial viability;
Our approach to the discovery and development of product candidates is unproven, and we may not be successful in our efforts to use and expand our approach to build a pipeline of product candidates with commercial value;
We may not be able to submit INDs, clinical trial applications (CTAs) or comparable applications to commence clinical trials on the timelines we expect, and even if we are able to, the FDA, EMA or any comparable foreign regulatory authority may not permit us to proceed;
Our product candidates may cause significant adverse events, toxicities or other undesirable adverse events when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could prevent regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences;
Interim, preliminary and topline data from our preclinical studies and clinical trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data;
If we experience delays or difficulties in the enrollment or maintenance of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented;
We have never commercialized a product candidate as a company before and currently lack all of the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators;
We face substantial competition which may result in others discovering, developing or commercializing products before or more successfully than we do;
The manufacture of drugs is complex, and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented;
The market opportunities for any product candidates we develop, if approved, may be limited to certain smaller patient subsets and may be smaller than we estimate them to be;

iii


We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our product candidates;
Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight;
Where appropriate, we plan to pursue approval from the FDA, EMA or comparable foreign regulatory authorities through the use of accelerated registration pathways. If we are unable to obtain such approval, we may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals. Even if we receive accelerated approval from the FDA, EMA or comparable regulatory authorities, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA, EMA or such other regulatory authorities may seek to withdraw accelerated approval;
If our product candidates are licensed for marketing and receive federal healthcare reimbursement, any relationships we may have with healthcare providers will be subject to applicable healthcare fraud and abuse laws and regulations, which could expose us to criminal and civil penalties and exclusion from participation in government healthcare programs;
Our reliance on a limited number of employees who provide various administrative, research and development, and other services across our organization presents operational challenges that may adversely affect our business;
If we are unable to establish sales or marketing capabilities or enter into agreements with third parties to sell or market our product candidates, we may not be able to successfully sell or market our product candidates that obtain regulatory approval;
If we are unable to obtain, maintain and enforce patent protection for our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected;
We may become involved in lawsuits to protect or enforce our patent or other intellectual property rights, which could be expensive, time-consuming and unsuccessful;
Third parties may allege that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business;
If we are unable to protect the confidentiality of our trade secrets and other proprietary information, our business and competitive position would be adversely affected;
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected;
We rely on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research and studies;
If we decide to establish collaborations, but are not able to establish those collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans;
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance;
Our principal stockholders own a significant percentage of our stock and can exert significant control over matters subject to stockholder approval. Two of our directors are affiliated with one of our principal stockholders; and
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

iv


Nuvalent, Inc.

Table of Contents

 

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

1

Condensed Consolidated Balance Sheets

 

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

 

2

Condensed Consolidated Statements of Stockholders’ Equity

 

3

Condensed Consolidated Statements of Cash Flows

 

4

Notes to Condensed Consolidated Financial Statements

 

5

Item 2.

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

 

10

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

18

Item 4.

Controls and Procedures

 

18

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

20

Item 1A.

Risk Factors

 

20

Item 5.

Other Information

 

78

Item 6.

Exhibits

 

79

Signatures

 

80

 

v


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

NUVALENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

98,515

 

 

$

335,387

 

Marketable securities

 

 

593,322

 

 

 

384,518

 

Prepaid expenses and other current assets

 

 

7,657

 

 

 

6,583

 

Total current assets

 

 

699,494

 

 

 

726,488

 

Other assets

 

 

8,972

 

 

 

5,896

 

Total assets

 

$

708,466

 

 

$

732,384

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

13,396

 

 

$

9,274

 

Accrued expenses

 

 

20,031

 

 

 

22,549

 

Total current liabilities

 

 

33,427

 

 

 

31,823

 

Total liabilities

 

 

33,427

 

 

 

31,823

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized;
   
no shares issued or outstanding

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 140,000,000 shares authorized;
  
59,055,633 shares and 58,629,896 shares issued and outstanding at
   March 31, 2024 and December 31, 2023, respectively

 

 

6

 

 

 

6

 

Class B common stock, $0.0001 par value; 10,000,000 shares authorized;
   
5,435,254 shares issued and outstanding at March 31, 2024 and
   December 31, 2023

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

1,007,128

 

 

 

986,819

 

Accumulated other comprehensive income (loss)

 

 

(1,318

)

 

 

31

 

Accumulated deficit

 

 

(330,778

)

 

 

(286,296

)

Total stockholders’ equity

 

 

675,039

 

 

 

700,561

 

Total liabilities and stockholders’ equity

 

$

708,466

 

 

$

732,384

 

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

1


NUVALENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses

 

 

 

 

 

 

Research and development

 

$

38,634

 

 

$

22,125

 

General and administrative

 

 

13,954

 

 

 

8,085

 

Total operating expenses

 

 

52,588

 

 

 

30,210

 

Loss from operations

 

 

(52,588

)

 

 

(30,210

)

Other income (expense)

 

 

 

 

 

 

Interest income and other income (expense), net

 

 

8,489

 

 

 

5,018

 

Total other income (expense), net

 

 

8,489

 

 

 

5,018

 

Loss before income taxes

 

 

(44,099

)

 

 

(25,192

)

Income tax provision

 

 

383

 

 

 

 

Net loss

 

$

(44,482

)

 

$

(25,192

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.69

)

 

$

(0.44

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

64,150,588

 

 

 

56,703,873

 

Comprehensive loss

 

 

 

 

 

 

Net loss

 

$

(44,482

)

 

$

(25,192

)

Other comprehensive income (loss)

 

 

 

 

 

 

Unrealized gains (losses) on marketable securities

 

 

(1,349

)

 

 

192

 

Comprehensive loss

 

$

(45,831

)

 

$

(25,000

)

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

2


NUVALENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Class A

 

 

Class B

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2023

 

58,629,896

 

 

$

6

 

 

 

5,435,254

 

 

$

1

 

 

$

986,819

 

 

$

31

 

 

$

(286,296

)

 

$

700,561

 

Issuance of common stock upon exercise
   of stock options

 

425,737

 

 

 

 

 

 

 

 

 

 

 

 

6,452

 

 

 

 

 

 

 

 

 

6,452

 

Unrealized losses on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,349

)

 

 

 

 

 

(1,349

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

13,857

 

 

 

 

 

 

 

 

 

13,857

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,482

)

 

 

(44,482

)

Balances at March 31, 2024

 

59,055,633

 

 

$

6

 

 

 

5,435,254

 

 

$

1

 

 

$

1,007,128

 

 

$

(1,318

)

 

$

(330,778

)

 

$

675,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Class A

 

 

Class B

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2022

 

51,233,701

 

 

$

5

 

 

 

5,435,254

 

 

$

1

 

 

$

623,543

 

 

$

(494

)

 

$

(160,077

)

 

$

462,978

 

Issuance of common stock upon exercise
   of stock options

 

82,989

 

 

 

 

 

 

 

 

 

 

 

 

619

 

 

 

 

 

 

 

 

 

619

 

Unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

192

 

 

 

 

 

 

192

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

5,371

 

 

 

 

 

 

 

 

 

5,371

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,192

)

 

 

(25,192

)

Balances at March 31, 2023

 

51,316,690

 

 

$

5

 

 

 

5,435,254

 

 

$

1

 

 

$

629,533

 

 

$

(302

)

 

$

(185,269

)

 

$

443,968

 

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

3


NUVALENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(44,482

)

 

$

(25,192

)

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

 

 

 

 

 

 

Stock-based compensation expense

 

 

13,857

 

 

 

5,371

 

Net accretion on marketable securities

 

 

(3,382

)

 

 

(2,538

)

Changes in operating assets and liabilities

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,074

)

 

 

(3

)

Other assets

 

 

(3,076

)

 

 

(228

)

Accounts payable

 

 

4,122

 

 

 

(672

)

Accrued expenses

 

 

(2,052

)

 

 

(1,152

)

Net cash used in operating activities

 

 

(36,087

)

 

 

(24,414

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of marketable securities

 

 

(283,019

)

 

 

(187,948

)

Proceeds from maturities of marketable securities

 

 

76,248

 

 

 

60,688

 

Net cash used in investing activities

 

 

(206,771

)

 

 

(127,260

)

Cash flows from financing activities

 

 

 

 

 

 

Payments of insurance costs financed by a third-party

 

 

(466

)

 

 

(546

)

Proceeds from issuance of common stock

 

 

6,452

 

 

 

619

 

Payments of public offering costs

 

 

 

 

 

(90

)

Net cash provided by (used in) financing activities

 

 

5,986

 

 

 

(17

)

Net decrease in cash and cash equivalents

 

 

(236,872

)

 

 

(151,691

)

Cash and cash equivalents at beginning of period

 

 

335,387

 

 

 

241,806

 

Cash and cash equivalents at end of period

 

$

98,515

 

 

$

90,115

 

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

4


NUVALENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business

Nuvalent, Inc. (the “Company”) is a clinical-stage biopharmaceutical company focused on creating precisely targeted therapies for patients with cancer. The Company was founded in January 2017 as a Delaware corporation. The Company is headquartered in Cambridge, Massachusetts, and manages its business as one operating segment. All of the Company’s operations are in the United States.

The Company is subject to risks similar to those of other pre-commercial stage companies in the biopharmaceutical industry, including dependence on key individuals, the need to develop commercially viable products, competition from other companies, many of which are larger and better capitalized, the need to obtain adequate additional financing to fund the development of its product candidates, the need to obtain and maintain adequate protection for the Company’s intellectual property, and the impact of public health emergencies, natural disasters and geopolitical events on the Company’s business. There can be no assurance that the Company’s research and development will be successful, that adequate protection for the Company’s intellectual property will be obtained and maintained, that any product candidates will receive required regulatory approval or that approved products, if any, will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from the sale of its products.

The Company has incurred recurring losses since inception, including net losses of $44.5 million for the three months ended March 31, 2024, and $126.2 million for the year ended December 31, 2023. As of March 31, 2024, the Company had an accumulated deficit of $330.8 million. The Company expects to continue to generate operating losses for the foreseeable future. The Company believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the date of issuance of these condensed consolidated financial statements.

The Company will need to obtain additional funding through public or private equity offerings, debt financings or strategic alliances. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Arrangements with collaborators or others may require the Company to relinquish rights to certain of its technologies or programs. If the Company is unable to obtain funding, the Company will be required to delay, reduce or eliminate some or all of its research and development programs or the Company may be unable to continue operations. Although management will continue to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations when needed or at all.

2. Basis of Presentation and Summary of Significant Accounting Policies

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and under the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), on file with the SEC.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Nuvalent Securities Corporation. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the Company’s financial position, results of operations, and cash flows. The results for the period are not necessarily indicative of the results that may occur for future interim periods or the full fiscal year.

The accounting policies the Company used in preparing these condensed consolidated financial statements are substantially consistent with those applied in the Company’s Annual Report.

5


Recently issued accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in Accounting Standards Codification 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect the impact of the adoption of this guidance to be material to its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in their tax rate reconciliations, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect the impact of the adoption of this guidance to be material to its consolidated financial statements.

3. Marketable Securities

The following tables provide the amortized cost and fair value of the Company’s available-for-sale securities by security type (in thousands):

 

 

March 31, 2024

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

Commercial paper

 

$

124,401

 

 

$

4

 

 

$

(167

)

 

$

124,238

 

Corporate bonds

 

 

309,086

 

 

 

53

 

 

 

(976

)

 

 

308,163

 

Government and agency securities

 

 

118,942

 

 

 

12

 

 

 

(224

)

 

 

118,730

 

U.S. treasury bills

 

 

42,211

 

 

 

 

 

 

(20

)

 

 

42,191

 

 

$

594,640

 

 

$

69

 

 

$

(1,387

)

 

$

593,322

 

 

 

 

December 31, 2023

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

Commercial paper

 

$

67,098

 

 

$

26

 

 

$

(44

)

 

$

67,080

 

Corporate bonds

 

 

193,876

 

 

 

328

 

 

 

(255

)

 

 

193,949

 

Government and agency securities

 

 

89,044

 

 

 

58

 

 

 

(75

)

 

 

89,027

 

U.S. treasury bills

 

 

34,469

 

 

 

7

 

 

 

(14

)

 

 

34,462

 

 

$

384,487

 

 

$

419

 

 

$

(388

)

 

$

384,518

 

The following table summarizes the amortized cost and fair value of the Company’s available-for-sale securities by contractual maturity (in thousands):

 

March 31, 2024

 

 

 

Amortized Cost

 

 

Fair Value

 

Due within one year

 

$

402,473

 

 

$

401,824

 

Due after one year through three years

 

 

192,167

 

 

 

191,498

 

 

$

594,640

 

 

$

593,322

 

The Company’s available-for-sale securities are classified as current assets as they are readily available to be converted to cash and for use in the Company’s current operations. There were no credit losses recorded during the three months ended March 31, 2024 and 2023. Interest income for the three months ended March 31, 2024 and 2023 was $8.5 million and $5.0 million, respectively.

6


 

4. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets, which are measured at fair value on a recurring basis (in thousands):

 

 

Fair Value Measurements at March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

80,181

 

 

$

 

 

$

 

 

$

80,181

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

124,238

 

 

 

 

 

 

124,238

 

Corporate bonds

 

 

 

 

 

308,163

 

 

 

 

 

 

308,163

 

Government and agency securities

 

 

 

 

 

118,730

 

 

 

 

 

 

118,730

 

U.S. treasury bills

 

 

 

 

 

42,191

 

 

 

 

 

 

42,191

 

 

$

80,181

 

 

$

593,322

 

 

$

 

 

$

673,503

 

 

 

 

Fair Value Measurements at December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

327,055

 

 

$

 

 

$

 

 

$

327,055

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

67,080

 

 

 

 

 

 

67,080

 

Corporate bonds

 

 

 

 

 

193,949

 

 

 

 

 

 

193,949

 

Government and agency securities

 

 

 

 

 

89,027

 

 

 

 

 

 

89,027

 

U.S. treasury bills

 

 

 

 

 

34,462

 

 

 

 

 

 

34,462

 

 

$

327,055

 

 

$

384,518

 

 

$

 

 

$

711,573

 

Money market funds were valued by the Company based on quoted market prices for identical securities, which represent a Level 1 measurement within the fair value hierarchy. Commercial paper, corporate bonds, government and agency securities and U.S. treasury bills were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. During the three months ended March 31, 2024 and 2023, there were no transfers in or out of Level 3. The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

March 31, 2024

 

 

December 31, 2023

 

Accrued external research and development expenses

 

$

15,945

 

 

$

13,599

 

Accrued employee compensation and benefits

 

 

2,943

 

 

 

7,326

 

Other

 

 

1,143

 

 

 

1,624

 

 

 

$

20,031

 

$

22,549

 

 

6. Stock-Based Compensation

The Company recorded stock-based compensation expense within its condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Research and development expenses

 

$

6,663

 

 

$

2,513

 

General and administrative expenses

 

 

7,194

 

 

 

2,858

 

 

$

13,857

 

 

$

5,371

 

 

7


As of March 31, 2024, total unrecognized compensation cost related to equity-based awards was $158.8 million, which is expected to be recognized over a weighted average period of 3.0 years.

2021 equity incentive plan

In July 2021, the Company adopted the 2021 Stock Option and Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock awards, cash-based awards and dividend equivalent rights. Stock awards granted under the 2021 Plan with service-based vesting conditions generally vest over three- or four-year service periods, and stock options expire after ten years. As of March 31, 2024, 7,181,284 shares of Class A common stock remained available for future issuance under the 2021 Plan.

2021 employee stock purchase plan

In July 2021, the Company adopted the 2021 Employee Stock Purchase Plan, as amended and restated (the “ESPP”). The ESPP permits eligible employees to purchase shares of Class A common stock at a discount in accordance with the terms of the offering and consists of consecutive, overlapping 12-month offering periods, each consisting of two six-month purchase periods beginning in December and June of each year. As of March 31, 2024, 1,879,069 shares of Class A common stock remained available for issuance under the ESPP.

Stock options

The following table summarizes the Company’s option activity since December 31, 2023:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

Aggregate

 

 

 

 

 

 

Average

 

 

Contractual

 

 

Intrinsic

 

 

 

Number

 

 

Exercise

 

 

Term

 

 

Value

 

 

 

of Shares

 

 

Price

 

 

(in years)

 

 

(in thousands)

 

Outstanding as of December 31, 2023

 

 

8,034,755

 

 

$

17.66

 

 

 

8.06

 

 

$

449,403

 

Granted

 

 

1,100,300

 

 

 

75.25

 

 

 

 

 

 

 

Exercised

 

 

(425,737

)

 

 

15.15

 

 

 

 

 

 

 

Forfeited

 

 

(5,400

)

 

 

49.04

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

8,703,918

 

 

$

25.04

 

 

 

8.07

 

 

$

437,972

 

Exercisable as of March 31, 2024

 

 

3,597,983

 

 

$

11.01

 

 

 

7.29

 

 

$

230,575

 

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2024 and 2023 was $28.0 million and $1.8 million, respectively. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock on the date of exercise.

The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $51.92 per share and $19.55 per share, respectively.

RSUs

The following table summarizes the Company’s RSU activity since December 31, 2023:

 

Number of Shares

 

 

Weighted Average Grant-Date Fair Value

 

Outstanding as of December 31, 2023

 

 

 

 

$

 

Granted

 

 

618,990

 

 

 

73.76

 

Vested

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

618,990

 

 

$

73.76

 

 

8


7. Net Loss Per Share

The Company has two classes of common stock outstanding: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are substantially identical, except with respect to voting and conversion. Class B common stock is nonvoting, and each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder at any time, subject to the ownership limitations provided for in the Company’s amended and restated certificate of incorporation. The Company allocates undistributed earnings attributable to common stock between the common stock classes on a one-to-one basis when computing net loss per share. As a result, basic and diluted net loss per share of Class A common stock and share of Class B common stock are equivalent.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

 

As of March 31,

 

 

2024

 

 

2023

 

Options to purchase common stock

 

8,703,918

 

 

 

8,505,182

 

RSUs

 

618,990

 

 

 

 

 

 

9,322,908

 

 

 

8,505,182

 

 

8. Commitments and Contingencies

Revenue share

The Company has revenue sharing agreements with Deerfield Healthcare Innovations Fund, L.P. and Deerfield Private Design Fund, IV, L.P. (collectively, “Deerfield”), each an investor in the Company, and the Company’s scientific founder to pay each of Deerfield and the scientific founder a low single digit percentage rate of net sales of certain commercial products. The payment obligation expires on the later of 12 years from the first commercial sale in a country or the expiration of the last-to-expire patent in that country for both Deerfield and the Company’s scientific founder. The Company accounts for the liability with Deerfield at fair value with changes recognized in the consolidated statements of operations and comprehensive loss. The Company accounts for the obligation to the scientific founder as a contingent liability. Given the early-stage nature of the underlying technology and inherent risks associated with obtaining regulatory approval and achieving commercialization, the Company ascribed no value to the revenue sharing agreement with Deerfield at inception or at March 31, 2024 or December 31, 2023. The Company currently does not have any net sales and, as a result, has not paid any amounts under these agreements and has not accrued any liability as of March 31, 2024 and December 31, 2023 under these agreements.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

9


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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 27, 2024 (2023 Form 10-K). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Item 1.A. Risk Factors” section of this Quarterly Report and our other filings with the SEC, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company focused on creating precisely targeted therapies for patients with cancer. We leverage our team’s deep expertise in chemistry and structure-based drug design to develop innovative small molecules that are designed with the aim to overcome the limitations of existing therapies for clinically proven kinase targets.

Limitations faced by currently available kinase inhibitors can include (i) kinase resistance, or the emergence of new mutations in the kinase target that can enable resistance to existing therapies, (ii) kinase selectivity, or the potential for existing therapies to inhibit other structurally similar kinase targets and lead to off-target adverse events, and (iii) limited brain penetrance, or the ability for the therapy to treat disease that has spread or metastasized to the brain. By prioritizing target selectivity, we believe our drug candidates have the potential to overcome resistance, avoid dose-limiting off-target adverse events, address brain metastases, and drive more durable responses. This may result in the potential to drive deeper, more durable responses with minimal adverse events, and we believe these potential benefits may support opportunities for clinical utility earlier in the treatment paradigm.

Candidate Overview

Zidesamtinib (NVL-520)

Our first lead product candidate, zidesamtinib (NVL-520), is being developed for patients with ROS proto-oncogene 1 (ROS1)-positive non-small cell lung cancer (NSCLC). Zidesamtinib is a novel ROS1-selective inhibitor designed with the aim to address the clinical challenges of emergent treatment resistance, central nervous system (CNS)-related adverse events, and brain metastases that may limit the use of currently available ROS1 tyrosine kinase inhibitors (TKIs). Zidesamtinib has received FDA Breakthrough Therapy designation for the treatment of patients with ROS1-positive NSCLC who have previously been treated with two or more ROS1 TKIs, and orphan drug designation for ROS1-positive NSCLC.

Our ARROS-1 clinical trial is a first-in-human Phase 1/2, multicenter, open-label, dose-escalation and expansion study evaluating zidesamtinib as an oral monotherapy in patients with advanced ROS1-positive NSCLC and other solid tumors. Dosing was initiated in the Phase 1 portion of the ARROS-1 clinical trial in January 2022.

At the EORTC-NCI-AACR symposium in October 2022, we presented preliminary data from the Phase 1 dose-escalation portion of the ARROS-1 clinical trial based on an enrollment cut-off date of September 1, 2022, and a data cut-off date of September 13, 2022. That data demonstrated that zidesamtinib had been well-tolerated with no observed dose limiting toxicities, treatment-related serious adverse events, treatment-related dizziness, or adverse events leading to dose reduction or discontinuation. Favorable pharmacokinetics (PK) were also observed with low intra-cohort patient variability and increasing exposure with dose level. Objective responses (RECIST 1.1) were observed across all dose levels evaluated in a heavily pre-treated population, including in patients who received two or more prior TKIs and one or more prior lines of chemotherapy, and in patients previously treated with lorlatinib or repotrectinib. Responses were also observed in patients with ROS1 G2032R mutation and in patients with CNS metastases.

In September 2023, we announced the initiation of the Phase 2 portion of the ARROS-1 clinical trial, following alignment with the FDA on a recommended Phase 2 dose (RP2D) of 100 mg once daily (QD). The Phase 2 portion of the ARROS-1 clinical trial is designed to evaluate the overall activity of zidesamtinib in patients with advanced ROS1-positive NSCLC and other solid tumors, examining several specific cohorts of patients based on the prior anti-cancer therapies that such patients have received. Phase 2 cohorts have been designed to support potential registration in kinase inhibitor naïve or previously treated ROS1-positive NSCLC patients.

We expect to share an update from the ARROS-1 trial at a medical meeting in the second half of 2024.

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NVL-655

Our second lead product candidate, NVL-655, is being developed for patients with anaplastic lymphoma kinase (ALK)-positive NSCLC. NVL-655 is a brain-penetrant ALK-selective inhibitor designed with the aim to address the clinical challenges of emergent treatment resistance, CNS-related adverse events, and brain metastases that may limit the use of first-generation (1G; crizotinib), second-generation (2G; ceritinib, alectinib, or brigatinib), and third-generation (3G; lorlatinib) ALK inhibitors. NVL-655 has received orphan drug designation for ALK-positive NSCLC.

Our ALKOVE-1 clinical trial is a first-in-human Phase 1/2, multicenter, open-label, dose-escalation and expansion study evaluating NVL-655 as an oral monotherapy in patients with advanced ALK-positive NSCLC and other solid tumors. Dosing was initiated in the Phase 1 portion of the ALKOVE-1 clinical trial in June 2022.

On October 13, 2023, we presented preliminary data from the Phase 1 dose-escalation portion of the ALKOVE-1 clinical trial at the AACR-NCI-EORTC symposium based on an enrollment and data cut-off date of August 8, 2023. In these data, 93 patients were enrolled, of which 91 patients had ALK-positive NSCLC. Patients were treated in six NVL-655 dose cohorts of 15 mg, 25 mg, 50 mg, 100 mg, 150 mg, and 200 mg QD. These data demonstrated that NVL-655 had a favorable preliminary safety profile consistent with an ALK-selective, tropomyosin receptor kinase (TRK)-sparing design. The observed favorable preliminary safety profile allowed for achievement of NVL-655 exposure levels above target CNS efficacy thresholds for ALK, ALK single and compound G1202R mutations, and other recalcitrant ALK single mutations such as I1171N. Favorable PK and low intra-cohort patient PK variability were observed with dose-proportional exposure. Preliminary PK data suggested that dose levels of 50 mg QD or greater may provide increased coverage of single and compound ALK mutations in the CNS. Objective responses (RECIST 1.1) were observed in a heavily pre-treated population, including in patients who had likely exhausted all available treatment options (≥3 prior ALK TKIs including a 2G ALK TKI and lorlatinib), in patients with ALK single or compound resistance mutations, and in patients with a history of CNS metastasis. Responses were also observed in lorlatinib-naïve patients.

As of the cut-off date for the preliminary data, 67% (34/51) of response-evaluable patients remained on treatment with NVL-655 with duration of treatment up to 12 months (median duration of treatment of 3.4 months). All patients with tumor response continued on treatment without disease progression.

In February 2024, we announced the initiation of the Phase 2 portion of the ALKOVE-1 clinical trial, following alignment with the FDA on a RP2D of 150 mg QD. The Phase 2 portion of the ALKOVE-1 clinical trial is designed to evaluate the safety and activity of NVL-655 in several expansion cohorts of patients defined based on the number and type of prior anti-cancer therapies they have received. The Phase 2 cohorts are designed with registrational intent for TKI pre-treated patients with ALK-positive NSCLC and to enable preliminary evaluation for patients with ALK-positive NSCLC who are TKI naïve.

We expect to share an update from the ALKOVE-1 trial at a medical meeting in the second half of 2024. We also plan to share more detail on our broader front-line clinical development strategy for ALK-positive NSCLC in 2024.

Other Candidates and Discovery Programs

Our newest product candidate, NVL-330, is a brain-penetrant human epidermal growth factor receptor 2 (HER2)-selective inhibitor designed with the aim to address the combined medical need of treating tumors driven by HER2 mutations occurring through deletions, insertions, or duplications (collectively, known as HER2 Exon 20 Insertions, or HER2ex20), treating brain metastases, and avoiding treatment-limiting adverse events including due to off-target inhibition of wild-type epidermal growth factor (EGFR). Preclinical data, including those recently presented at the AACR Annual Meeting on April 8, 2024, have shown that NVL-330 inhibited HER2ex20 in cell-based assays, was brain penetrant, and was selective for HER2ex20 over the structurally related wild-type EGFR. We are currently in the process of transitioning from preclinical to clinical development of NVL-330, and we expect to initiate a Phase 1 clinical trial of NVL-330 in 2024.

We have prioritized a number of additional small molecule research programs following an assessment of medical need. Research for these programs is ongoing.

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Financial Overview

Since commencing significant operations in 2018, we have focused substantially all of our efforts and financial resources on research and development activities for our programs, including zidesamtinib, NVL-655 and NVL-330, establishing and maintaining our intellectual property portfolio, organizing and staffing our company, business planning, raising capital, and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated revenue from product sales or any other source.

We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates. We reported net losses of $44.5 million for the three months ended March 31, 2024, and $126.2 million for the year ended December 31, 2023. As of March 31, 2024, we had an accumulated deficit of $330.8 million. We expect to incur significant expenses at an increasing rate and increasing operating losses for the foreseeable future. We expect our expenses and capital requirements will increase substantially in connection with ongoing activities, particularly if and as we:

continue to advance our parallel lead programs, zidesamtinib and NVL-655, in clinical development;
advance our third program, NVL-330, from preclinical development into clinical development;
advance the development of our discovery programs;
expand our pipeline of product candidates through our product discovery and development efforts;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates and incur related additional commercial manufacturing costs;
implement operational, financial and management systems;
attract, hire and retain additional clinical, scientific, management and administrative personnel;
maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know how;
acquire or in-license other product candidates and technologies; and
operate as a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capabilities to support product sales, marketing and distribution. Further, we expect to continue to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. Our ability to raise additional funds may be adversely impacted by general economic conditions, both inside and outside the U.S., including disruptions to, and instability and volatility in, the credit and financial markets in the U.S. and worldwide, including heightened inflation, interest rate and currency rate fluctuations, and economic slowdown or recession as well as concerns related to public health emergencies, natural disasters or geopolitical events, including civil or political unrest or military conflicts. In addition, market instability and volatility, high levels of inflation and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to have to delay, reduce or eliminate our product development or future commercialization efforts. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts.

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Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. Our existing cash, cash equivalents and marketable securities will not be sufficient to fund all of our product candidates through regulatory approval, and we will need to raise additional capital to complete the development and commercialization of our product candidates. See “—Liquidity and Capital Resources.”

Components of Our Results of Operations

Operating expenses

Our operating expenses are comprised of research and development expenses and general and administrative expenses.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:

personnel-related costs, including salaries, benefits and stock-based compensation expense, for employees engaged in research and development functions;
expenses incurred in connection with our research programs, including under agreements with third parties, such as consultants, contractors and contract research organizations (CROs); and
the cost of developing and scaling our manufacturing process and manufacturing drug substance and drug product for use in our research and preclinical and clinical studies, including under agreements with third parties, such as consultants, contractors and contract manufacturing organizations (CMOs).

We track our direct external research and development expenses on a program-by-program basis. These consist of costs that include fees, reimbursed materials, and other costs paid to consultants, contractors, CMOs, and CROs in connection with our preclinical, clinical and manufacturing activities. Costs incurred prior to nominating a development candidate are included in discovery programs. We do not allocate employee costs, costs associated with our discovery efforts, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and, as such, are not separately classified.

We expect that our research and development expenses will increase substantially as we continue to advance zidesamtinib and NVL-655 in clinical development, advance NVL-330 from preclinical development into clinical development, and expand our discovery, research and preclinical activities in the near term and in the future. Although we are currently enrolling patients in the Phase 2 portions of our ARROS-1 and ALKOVE-1 clinical trials, respectively, at this time, and expect to initiate a Phase 1 clinical trial of NVL-330 in 2024, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any product candidates we may develop. A change in the outcome of any number of variables with respect to product candidates we may develop could significantly change the costs and timing associated with the development of that product candidate. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

the timing and progress of development activities relating to zidesamtinib, NVL-655, NVL-330 and any future product candidates from our discovery programs, including any additional costs that may result from delays in enrollment or other factors;
the number and scope of preclinical and clinical programs we decide to pursue;
our ability to maintain our current research and development programs and to establish new ones;
successful patient enrollment in, and the initiation and completion of, clinical trials;
the number of trials required for regulatory approval;
the countries in which the trials are conducted;

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the length of time required to enroll eligible subjects and initiate clinical trials;
the number of subjects that participate in the trials and per subject trial costs;
potential additional safety monitoring requested by regulatory authorities;
the duration of subject participation in the trials and follow-up;
the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to applicable regulatory authorities;
the receipt of approvals from applicable regulatory authorities;
the timing, receipt and terms of any marketing approvals and post-marketing approval commitments from applicable regulatory authorities;
the extent to which we establish collaborations, strategic partnerships or other strategic arrangements with third parties, if any, and the performance of any such third party;
establishing commercial manufacturing capabilities or making arrangements with CMOs;
development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch; and
obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights.

Any changes in the outcome of any of these factors could significantly impact the costs, timing and viability associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, patent, consulting, investor and public relations and accounting and audit services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount and continue to incur increased accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

Other income (expense)

Interest income and other income (expense), net

Interest income and other income (expense), net consists of interest income and other income (expense) unrelated to our core operations.

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Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

Three Months Ended March 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

Operating expenses

 

 

 

 

 

 

 

 

 

Research and development

 

$

38,634

 

 

$

22,125

 

 

$

16,509

 

General and administrative

 

 

13,954

 

 

 

8,085

 

 

 

5,869

 

Total operating expenses

 

 

52,588

 

 

 

30,210

 

 

 

22,378

 

Loss from operations

 

 

(52,588

)

 

 

(30,210

)

 

 

(22,378

)

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income and other income (expense), net

 

 

8,489

 

 

 

5,018

 

 

 

3,471

 

Total other income (expense), net

 

 

8,489

 

 

 

5,018

 

 

 

3,471

 

Loss before income taxes

 

 

(44,099

)

 

 

(25,192

)

 

 

(18,907

)

Income tax provision

 

 

383

 

 

 

 

 

 

383

 

Net loss

 

$

(44,482

)

 

$

(25,192

)

 

$

(19,290

)

Research and development expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

Three Months Ended March 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

Direct research and development expenses by program:

 

 

 

 

 

 

 

 

 

Zidesamtinib

 

$

10,366

 

 

$

5,743

 

 

$

4,623

 

NVL-655

 

 

9,731

 

 

 

4,282

 

 

 

5,449

 

NVL-330

 

 

1,972

 

 

 

2,626

 

 

 

(654

)

Discovery programs

 

 

2,100

 

 

 

2,088

 

 

 

12

 

Unallocated research and development expenses:

 

 

 

 

 

 

 

 

 

Personnel-related (including stock-based compensation)

 

 

13,166

 

 

 

6,690

 

 

 

6,476

 

Other

 

 

1,299

 

 

 

696

 

 

 

603

 

Total research and development expenses

 

$

38,634

 

 

$

22,125

 

 

$

16,509

 

Research and development expenses were $38.6 million for the three months ended March 31, 2024, compared to $22.1 million for the three months ended March 31, 2023. The increase in direct research and development expenses related to zidesamtinib of $4.6 million was primarily due to increased manufacturing and clinical costs related to the Phase 2 portion of the ARROS-1 clinical trial, partially offset by a decrease in translational development costs. The increase in direct research and development expenses related to NVL-655 of $5.4 million was primarily due to an increase in clinical and manufacturing costs incurred related to the Phase 2 portion of the ALKOVE-1 clinical trial, partially offset by a decrease in translational development costs. The decrease in direct research and development expenses related to NVL-330 of $0.7 million was primarily due to a decrease in manufacturing costs, partially offset by increased clinical costs as we prepare to initiate a Phase 1 clinical trial. The increase in personnel-related expenses of $6.5 million was primarily due to an increase of $4.2 million in stock-based compensation expense and an increase in headcount. For the three months ended March 31, 2024 and 2023, stock-based compensation expense was $6.7 million and $2.5 million, respectively.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

Three Months Ended March 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

Personnel-related (including stock-based compensation)

 

$

10,162

 

 

$

4,873

 

 

$

5,289

 

Professional and consultant fees

 

 

2,025

 

 

 

1,283

 

 

 

742

 

Insurance and other

 

 

1,767

 

 

 

1,929

 

 

 

(162

)

Total general and administrative expenses

 

$

13,954

 

 

$

8,085

 

 

$

5,869

 

 

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General and administrative expenses for the three months ended March 31, 2024, were $14.0 million compared to $8.1 million for the three months ended March 31, 2023. The increase in personnel-related expenses of $5.3 million was primarily due to an increase of $4.3 million in stock-based compensation expense and an increase in headcount. For the three months ended March 31, 2024 and 2023, stock-based compensation expense was $7.2 million and $2.9 million, respectively. The increase in professional and consultant fees of $0.7 million was primarily due to increased accounting and legal fees.

Other income (expense)

Interest income and other income (expense), net

Interest income and other income (expense), net for the three months ended March 31, 2024 and 2023, consisted primarily of interest income of $8.5 million and $5.0 million, respectively. The increase in interest income was primarily due to an increase in cash, cash equivalents and marketable securities.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for the foreseeable future, if at all. Through March 31, 2024, we have funded our operations primarily with proceeds from the sales of convertible preferred stock, the issuance of convertible notes (which converted to convertible preferred stock in 2018), debt financing from stockholders (which was settled with convertible preferred stock in February 2021) and proceeds from the sale of common stock in our public offerings. As of March 31, 2024, we had cash, cash equivalents and marketable securities of $691.8 million and accounts payable and accrued expenses of $33.4 million.

On August 10, 2022, we entered into a Sales Agreement (the Sales Agreement) with Cowen and Company, LLC (Cowen) under which we may issue and sell shares of our Class A common stock, from time to time, having an aggregate offering price of up to $150.0 million through Cowen as our Sales Agent (the ATM Facility). We will pay Cowen a commission of up to 3% of the gross proceeds of any shares of Class A common stock sold pursuant to the Sales Agreement. On October 31, 2022, we entered into an Amendment No. 1 to the Sales Agreement with Cowen (the Sales Agreement Amendment). The Sales Agreement Amendment was effective immediately and reduced the maximum aggregate offering price of the Class A common stock that we may sell under the ATM Facility to $135.0 million. As of March 31, 2024, we have not sold any shares of our Class A common stock pursuant to the Sales Agreement.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2024

 

2023

 

Net cash used in operating activities

 

$

(36,087

)

 

$

(24,414

)

Net cash used in investing activities

 

 

(206,771

)

 

 

(127,260

)

Net cash provided by (used in) financing activities

 

 

5,986

 

 

 

(17

)

Net decrease in cash and cash equivalents

 

$

(236,872

)

 

$

(151,691

)

Operating activities

During the three months ended March 31, 2024, operating activities used $36.1 million of cash, resulting from our net loss of $44.5 million and net cash used by changes in our operating assets and liabilities of $2.1 million, partially offset by net non-cash charges of $10.5 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2024, consisted of an increase in other assets of $3.1 million and an increase in prepaid expenses and other current assets of $1.1 million, partially offset by a net increase in accounts payable and accrued expenses of $2.1 million.

During the three months ended March 31, 2023, operating activities used $24.4 million of cash, resulting from our net loss of $25.2 million and net cash used by changes in our operating assets and liabilities of $2.1 million, partially offset by net non-cash charges of $2.8 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2023, consisted primarily of a decrease in accounts payable and accrued expenses of $1.8 million and an increase in other assets of $0.2 million.

Changes in accounts payable, accrued expenses, prepaid expenses and other current assets and other assets were generally due to growth in our business, the advancement of our research and development programs and the timing of vendor invoicing and payments.

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Investing activities

During the three months ended March 31, 2024, net cash used in investing activities was $206.8 million, due to purchases of marketable securities of $283.0 million, partially offset by proceeds fr