UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period Ended
or
For the Transition Period from to .
Commission File Number
(Exact name of registrant as specified in its charter)
| ||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ |
| |||
☒ | 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 Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
|
|
|
Class of Common Stock |
| Outstanding Shares as of August 02, 2024 |
Common Stock, $0.00001 par value |
|
1
NUVECTIS PHARMA, INC.
FORM 10-Q
FOR THE QUARTER ENDED June 30, 2024
TABLE OF CONTENTS
2
SUMMARY OF RISK FACTORS
An investment in our common stock is subject to a broad range of risks and should only be made after a careful consideration of such risks. For a discussion of some of the risks you should consider before purchasing our common stock, you are urged to carefully review and consider the section entitled “Item 1A. Risk Factors.”
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects that you should consider before making a decision to invest in our common stock. These risks are discussed more fully in the section titled “Risk factors” beginning on page 26 of this report, and include the following:
Risks Related to our Financial Condition and Capital Requirements
| ● | We have a limited operating history, have only initiated a limited number of clinical trials, and have only a limited number of patients currently enrolled in our ongoing trials and have not completed any clinical trials to date. We do not have any 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 losses since our inception and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability. |
| ● | Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve several objectives relating to the discovery or identification, preclinical and clinical development, regulatory approval and commercialization of our current or future product candidates. |
| ● | We will require substantial additional capital to finance our operations and achieve our goals. If we are unable to raise capital when needed or on terms acceptable to us, we may be forced to delay, reduce or eliminate our research or product development programs, any future commercialization efforts or other operations. |
| ● | The COVID-19 pandemic could adversely impact our business, including our preclinical development, clinical trials and clinical trial operations. |
Risks Related to the Development of our Product Candidates
| ● | We are substantially dependent on the success of our product candidates, NXP800, and NXP900. |
| ● | Clinical trials are very expensive, time consuming and difficult to design and implement, and involve uncertain safety, tolerability and efficacy outcomes. Furthermore, results of earlier preclinical studies and clinical trials may not be predictive of results of future preclinical studies or clinical trials. Our current or future product candidates may not have favorable results in early or later clinical trials, if any, or receive regulatory approval. |
| ● | If we fail to demonstrate safety and/or efficacy for any or all of our product candidates, we may need to terminate development programs, which may harm our reputation and the business. |
| ● | The development and commercialization of pharmaceutical products are subject to extensive regulation, and we may not obtain regulatory approvals for NXP800, NXP900, or any future product candidate. |
| ● | If we are unable to obtain or maintain regulatory approval for our product candidates and ultimately cannot commercialize one or more of them, or experience significant delays in doing so, our business will be materially harmed. |
Risks Related to our Reliance on Third Parties
| ● | The manufacture of our current and potentially of our future product candidates is complex. Our third-party manufacturers may encounter difficulties or interruptions for various reasons, which could delay or entirely halt |
3
| their ability to make any of our current or future product candidates for clinical trials or, if approved, for commercial sale. |
Risks Related to Managing Growth and Employee Matters
| ● | Our future success depends on our ability to retain our executive officers and key employees and to attract, retain and motivate qualified personnel and manage our human capital. |
| ● | We currently have 13 full-time employees and will need to grow the size and capabilities of our organization. We may experience difficulties in managing this growth. |
Risks Related to our Intellectual Property
| ● | If we are unable to obtain and maintain patent protection or other necessary rights for our products and technology, or if the scope of the patent protection obtained is not sufficiently broad or our rights under licensed patents are not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adversely affected. |
4
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
NUVECTIS PHARMA, INC.
CONDENSED BALANCE SHEETS
(USD in thousands, except per share and share amounts)
(unaudited)
| June 30, |
| December 31, | ||||
2024 | 2023 |
| |||||
Assets |
|
|
|
| |||
CURRENT ASSETS |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | |
| $ | |
|
Other current assets |
| |
| |
| ||
TOTAL CURRENT ASSETS |
| |
| |
| ||
TOTAL ASSETS |
| $ | |
| $ | |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
CURRENT LIABILITIES | |||||||
Accounts payables |
| $ | |
| $ | |
|
Accrued liabilities |
| |
| |
| ||
Employee compensation and benefits |
| |
| |
| ||
TOTAL CURRENT LIABILITIES |
| |
| |
| ||
TOTAL LIABILITIES |
| |
| |
| ||
COMMITMENTS AND CONTINGENCIES, see Note 3 |
|
|
|
|
| ||
STOCKHOLDERS’ EQUITY, see Note 4 |
|
|
|
|
| ||
Common Shares, $ |
| ||||||
Additional paid in capital |
| |
| |
| ||
Accumulated deficit |
| ( |
| ( |
| ||
TOTAL STOCKHOLDERS’ EQUITY |
| |
| |
| ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | |
| $ | |
|
* |
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
NUVECTIS PHARMA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(USD in thousands, except per share and share amounts)
(unaudited)
| |||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
OPERATING EXPENSES |
|
|
| ||||||||||
Research and development |
| $ | |
| $ | |
| $ | |
| $ | |
|
General and administrative | |
| | |
| |
| ||||||
|
| ||||||||||||
OPERATING LOSS |
| ( |
| ( |
| ( |
| ( |
| ||||
Finance income | |
| | |
| |
| ||||||
|
| ||||||||||||
NET LOSS |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
|
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | ( |
| $ | ( | $ | ( |
| $ | ( |
| ||
BASIC AND DILUTED NET LOSS PER COMMON SHARE OUTSTANDING, see Note 6 | $ | ( |
| $ | ( | $ | ( |
| $ | ( |
| ||
Basic and diluted weighted average number of common shares outstanding | |
| | |
| |
| ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
6
NUVECTIS PHARMA, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(USD in thousands, except share amounts)
(unaudited)
|
|
| ||||||||||
Common shares | Additional | Total | ||||||||||
$0.00001 Par Value | Paid-In | Accumulated | Stockholders’ | |||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||
BALANCES AT DECEMBER 31, 2022 |
| |
| * |
| $ |
| $ | ( |
| $ | |
Share-based payments | — |
| * |
| |
| — | | ||||
Issuance of restricted share awards | | * | — | — | — | |||||||
Exercise of preferred investment options | | * | | | ||||||||
Exercise of warrants | | * | | | ||||||||
Net loss for the period |
| — |
| — |
| — |
| ( |
| ( | ||
BALANCES AT MARCH 31, 2023 |
| |
| * |
| $ |
| $ | ( |
| $ | |
Share-based payments | — | * | | — |
| | ||||||
Issuance of restricted share awards | | — | — | — | — | |||||||
Exercise of preferred investment options, net of offering costs of $ | | * | | — | | |||||||
Exercise of warrants | | * | | — | | |||||||
Issuance of common share, net of offering costs of $ | | * | | — | | |||||||
Exercise of share options | | * | | — | | |||||||
Net loss for the period |
| — |
| — |
| — |
| ( |
| ( | ||
BALANCES AT JUNE 30, 2023 |
| |
| * |
| $ |
| $ | ( |
| $ | |
* | Represents an amount lower than $1,000 USD. |
The accompanying notes are an integral part of these unaudited condensed financial statements.
7
NUVECTIS PHARMA, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(USD in thousands, except share amounts)
(unaudited)
|
|
|
| ||||||||||
Common Stock | Additional | Total | |||||||||||
$0.00001 Par Value | Paid-In | Accumulated | Stockholders’ | ||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||
BALANCES AT DECEMBER 31, 2023 |
| |
| * |
| $ | |
| $ | ( |
| $ | |
Share-based payments |
| — |
| — |
| |
| — |
| | |||
Issuance of restricted share awards | | — | — | — | — | ||||||||
Issuance of common shares, net of offering costs of $ | | * | | — | | ||||||||
Net loss for the period |
| — |
| — |
| — |
| ( |
| ( | |||
BALANCES AT MARCH 31, 2024 |
| |
| * |
| $ | |
| $ | ( |
| $ | |
Share-based payments |
| — |
| * |
| |
| — |
| | |||
Issuance of restricted share awards | | * | — | — | — | ||||||||
Issuance of common shares, net of offering costs of $ | | * | | — | | ||||||||
Net loss for the period |
| — |
| — |
| — |
| ( |
| ( | |||
BALANCES AT JUNE 30, 2024 |
| |
| * |
| $ | |
| $ | ( |
| $ | |
* | Represents an amount lower than $1,000 USD. |
The accompanying notes are an integral part of these unaudited condensed financial statements.
8
NUVECTIS PHARMA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(USD in thousands, except per share and share amounts)
(unaudited)
Six Months Ended June 30, | |||||||
| 2024 |
| 2023 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||
Net loss |
| $ | ( |
| $ | ( |
|
Adjustments to reconcile loss to net cash used in operating activities: |
| |
| |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
(Increase)/decrease in other current assets |
| ( |
| |
| ||
Decrease in accounts payable | ( | ( | |||||
(Decrease)/increase in accrued liabilities | ( | | |||||
Decrease in accrued compensation and benefits |
| ( |
| ( |
| ||
Net cash used in operating activities |
| $ | ( |
| $ | ( |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||
Net cash provided by (used in) investing activities |
|
|
| ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||
Proceeds from issuance of common shares - At-the market offering |
| $ | |
| $ | |
|
Issuance costs related to At-the-market offering | ( | ( | |||||
Issuance costs related to initial public offering | — | ( | |||||
Proceeds from exercise of warrants, options, and preferred investment options | — | | |||||
Issuance costs related to the exercise of warrants, and preferred investment options | — | ( | |||||
Issuance costs related to private placement | — | ( | |||||
Net cash provided by financing activities |
| $ | |
| $ | |
|
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS |
| $ | ( |
| $ | |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
| $ | |
| $ | |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | |
| $ | |
|
Supplemental noncash disclosure of investing and financing activities: |
|
|
|
|
| ||
Unpaid issuance costs related to the private placement |
| — |
| | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
9
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements
NOTE 1 – GENERAL:
| a. | Nuvectis Pharma, Inc. (hereafter – the “Company”) was incorporated under the laws of the State of Delaware on July 27, 2020 and commenced its principal operations in May 2021. The Company’s principal executive offices are located at Fort Lee New Jersey. |
The Company is a biopharmaceutical company focused on the development of innovative precision medicines for the treatment of serious conditions of unmet medical need in oncology.
| b. | In May 2021, the Company entered into a worldwide, exclusive license agreement with the CRT Pioneer Fund (“CRT”) (see Note 3a). In August 2021, the Company entered into a worldwide, exclusive license agreement with the University of Edinburgh, Scotland for the Company’s second drug candidate (see Note 3a). |
| c. | In February 2022, the Company’s shares began trading on the NASDAQ under the symbol “NVCT”. |
| d. | Liquidity and Capital Resources |
The Company has incurred net operating losses since its inception and had an accumulated deficit of $
During the three months ended June 30, 2024, the Company sold a total of
During the six months ended June 30, 2024, the Company sold a total of
Management believes that its existing cash and cash equivalents as of June 30, 2024 enable the Company to fund planned operations for at least 12 months following the issuance date of these condensed financial statements.
The Company will need to raise additional capital in order to complete the clinical trials aimed at developing the product candidates until obtaining its regulatory and marketing approvals. There can be no assurances that the Company will be able to secure such additional financing, or at terms that are satisfactory to the Company, and that it will be sufficient to meet its needs. In the event the Company is not successful in obtaining sufficient funding, this could force the Company to delay, limit, or reduce its products’ development, clinical trials, commercialization efforts or other operations, or even close down or liquidate.
10
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements (continued)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES:
| a. | Basis of Presentation |
The accompanying condensed financial statements are unaudited. The unaudited condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), are stated in U.S. dollars and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements. The unaudited condensed financial statements include the accounts of the Company. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the unaudited condensed financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods. The results for the period ended June 30, 2024 are not necessarily indicative of those expected for the year ending December 31, 2024 or for any future period. The condensed balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date but does not include all disclosures required by U.S. GAAP. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and the related notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 5, 2024.
The significant accounting policies adopted and used in the preparation of the financial statements are consistent with those of the previous financial year.
| b. | Use of Estimates in the Preparation of Financial Statements |
The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses, valuation of equity awards, and valuation allowances for deferred tax assets. These estimates and assumptions are based on current facts, future expectations, and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.
c. | Fair Value Measurement |
The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (at exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three levels of inputs that may be used to measure fair value include:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. The Company’s Level 1 assets consist of money market funds.
11
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements (continued)
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.
The money market accounts included in cash and cash equivalents are considered Level 1.
During the three and six months ended June 30, 2024 and 2023, there were no transfers between fair value measure levels. Other financial instruments consist mainly of cash and cash equivalents, other current assets, accounts payable and accrued liabilities. The fair value of these financial instruments approximates their carrying values.
d. | Recently Issued Accounting Pronouncements Not Yet Adopted |
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial position or results of operations. No new accounting standards were adopted during the period.
NOTE 3 – COMMITMENTS AND CONTINGENCIES:
| a. | License Agreements |
CRT Pioneer Fund License Agreement
There have been no material changes to the CRT Pioneer Fund License Agreement, as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 5, 2024 (see Note 5a in the Notes to the Financial Statements in our Annual Report).
Any potential milestone or royalty payment amounts have not been accrued as of June 30, 2024 and December 31, 2023 due to the uncertainty related to the achievement of these events or milestones.
University of Edinburgh License Agreement
There have been no material changes to the University of Edinburgh (“UoE”) License Agreement as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 5, 2024 (see Note 5a in the Notes to the Financial Statements in our Annual Report).
Any potential future research support, milestone or royalty payment amounts have not been accrued as of June 30, 2024 and December 31, 2023 due to the uncertainty related to the achievement of these events, milestones or commitments to additional research. As of June 30, 2024, the Company has paid UoE $
12
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements (continued)
| b. | Related Party Transactions |
There have been no related party transactions as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 5, 2024 (see Note 10 in the Notes to the Financial Statements).
| c. | Contingencies |
As of June 30, 2024, and December 31, 2023, there are
NOTE 4 – STOCKHOLDERS’ EQUITY:
| a. | Private Placement in Public Entity |
On July 29, 2022, the Company closed a private placement offering (the “July 2022 Private Placement”), pursuant to the terms and conditions of a Securities Purchase Agreement (the “Agreement”), dated July 27, 2022. In connection with the July 2022 Private Placement, the Company issued
| b. | At-the-Market Program |
During the six months ended June 30, 2024, the Company sold a total of
During the three months ended June 30, 2024, the Company sold a total of
As of June 30, 2024, approximately $
13
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements (continued)
NOTE 5 – SHARE-BASED PAYMENTS:
| a. | 2021 Global Equity Incentive Plan (“Incentive Plan”) |
The following table summarizes the Company’s stock option activity in the Incentive Plan for the six months ended June 30, 2024:
|
|
| Weighted |
| ||||||
Number of | Weighted average | average | Aggregated | |||||||
shares under | exercise price per | remaining | intrinsic value | |||||||
option | option | life | (in thousands) | |||||||
Balance, December 31, 2023 | |
| $ | |
|
| $ | | ||
Granted |
| — |
| - |
|
|
|
| ||
Exercised |
| — |
| - |
|
|
|
| ||
Forfeited |
| — |
| - |
|
|
|
| ||
Outstanding – June 30, 2024 |
| |
| $ | |
|
| $ | | |
Exercisable – June 30, 2024 |
| |
| $ | |
|
|
| ||
Expected to vest – June 30, 2024 |
| |
| $ | |
|
| $ | | |
As of June 30, 2024, there was $
Restricted Stock Awards
Restricted stock awards (“RSAs”) have been granted to employees. The value of an RSA award is based on the Company’s share price on the date of grant. The Company granted RSAs pursuant to the Incentive Plan.
The following table summarizes the Company’s RSA activity for the six months ended June 30, 2024, as described above from the Incentive Plan:
|
| Weighted |
| Weighted average |
| Aggregated | ||||
Number of | average grant | contractual term | intrinsic value | |||||||
shares | date fair value | (in years) | (in thousands) | |||||||
Balance, December 31, 2023 | |
| $ | |
|
| $ | | ||
Granted |
| |
| |
|
|
|
| ||
Forfeited | ( | | ||||||||
Vested |
| ( |
| |
|
|
|
| ||
Outstanding – June 30, 2024 |
| |
| $ | |
|
| $ | | |
Expected to vest – June 30, 2024 |
| |
| $ | |
|
| $ | | |
There were
As of June 30, 2024, there was $
For the six months ended June 30, 2024, the Company issued
On January 12, 2023, the Company issued
14
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements (continued)
January 2023 Grants were extended to July 15, 2024. On July 12, 2024, the vesting of the first one-third of the January 2023 Grants were extended to January 3, 2025.
On April 1, 2022, the Company issued
On July 27, 2021, Mr. Bentsur, Dr. Poradosu, and Mr. Shemesh were granted
Share Compensation Expense
For the three months ended June 30, 2024, the Company recognized expenses of $
For the six months ended June 30, 2024, the Company recognized expenses of $
NOTE 6 – NET LOSS PER SHARE:
| a. | Basic |
Basic net loss per share is calculated by dividing the net loss attributable to the Company’s stockholders by the weighted average number of common share outstanding.
| |||||||||||||
For the three months | For the three months | For the six months | For the six months | ||||||||||
ended June 30, 2024 |
| ended June 30, 2023 | ended June 30, 2024 |
| ended June 30, 2023 | ||||||||
in thousand U.S. dollars except per share and share amounts | |||||||||||||
Loss attributable to common stockholders | $ | ( |
| $ | ( | $ | ( |
| $ | ( |
| ||
Basic and diluted net loss per common share | ( |
| ( | ( |
| ( |
| ||||||
Weighted average of common shares outstanding | |
| | |
| |
| ||||||
Basic loss per share is calculated by dividing the result attributable to equity holders of the Company by the weighted average number of shares of common stock in issue during the period.
For the three months ended | For the six months ended June 30, | ||||||
June 30, 2024 |
| June 30, 2024 | |||||
Weighted average of common shares | |
| |
| |||
Weighted unvested RSAs | ( |
| ( |
| |||
Weighted average of common shares outstanding | |
| |
| |||
15
NUVECTIS PHARMA, INC.
Notes to the Unaudited Condensed Financial Statements (continued)
| b. | Diluted |
The following potentially dilutive securities were excluded from the calculation of diluted net loss per common share because their effect would have been anti-dilutive for the periods presented:
June 30, | ||||
| 2024 |
| 2023 | |
Common shares issuable in relation to: |
|
|
|
|
Warrants |
| |
| |
Options |
| |
| |
Unvested RSAs * |
| |
| |
| * | Includes |
NOTE 7 – RELATED PARTY TRANSACTIONS:
| a. | No related party transactions except for normal course of business. |
NOTE 8 – SUBSEQUENT EVENTS:
| a. | See Note 5 regarding the extension of the vesting periods for Mr. Bentsur, Dr. Poradosu, and Mr. Shemesh. |
16
Item 2.Management’s Discussion and Analysis of the Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this report. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” “may,” “plan,” “seek” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof and we assume no obligation to update any such forward-looking statements. For such forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2023. As used below, the words “we,” “us” and “our” may refer to Nuvectis Pharma, Inc.
Overview
We are a biopharmaceutical company focused on the development of innovative precision medicines for the treatment of serious conditions of unmet medical need in oncology.
NXP800 (GCN2 Kinase Activator)
We have licensed exclusive world-wide development and commercial rights to NXP800, an oral, small molecule discovered at the Institute of Cancer Research (“ICR”) in London, England. In a panel of human carcinoma cell lines NXP800 induced the expression of genes associated with activation of the general control non-derepressible 2 ("GCN2”) kinase, including activating transcription factor 4 (“ATF4”), ChaC glutathione specific gamma-glutamylcyclotransferase 1 (“CHAC1”) and C/EBP homologous protein (“CHOP”) both in human ovarian cells in vitro and corresponding tumor xenograft models in vivo.
In preclinical studies, treatment with NXP800 inhibited tumor growth in xenograft models of human ovarian, endometrial and gastric cancers, in which, a genetic mutation in the AT-rich interactive domain-containing protein 1A (“ARID1a”) gene was present, potentially rendering ARID1a as a biomarker for treatment sensitivity, thereby offering a potential strategy for patient enrichment. Based on this work, we have begun to clinically investigate NXP800 in platinum-resistant ARID1a-mutated ovarian carcinoma, a type of cancer which is primarily comprised of two histologies, ovarian clear cell carcinoma (“OCCC”) and ovarian endometrioid carcinoma (“OEC”), and to investigate the utility of ARID1a deficiency as a patient selection marker in additional tumor types. The genetic screening for the mutations in ARID1a can be detected using a commercially available next generation sequencing-based in vitro diagnostic tests, which is routinely utilized in the clinic for cancer patients.
In December 2021, the Phase 1 study was initiated in the United Kingdom and is comprised of two parts: dose-escalation (Phase 1a), followed by an expansion phase (Phase 1b). In the Phase 1a, the safety, tolerability and pharmacokinetic properties of NXP800 were evaluated in patients with advanced solid tumors to identify a dose and dosing schedule for Phase 1b. The Phase 1b portion of the study, which was initiated in the second quarter of 2023, is evaluating the safety and preliminary anti-tumor activity of NXP800 in patients with platinum-resistant, ARID1a-mutated ovarian carcinoma. Additional studies to evaluate the safety and preliminary anti-tumor activity of NXP800 in additional tumor types are planned.
In June 2022, the Investigational New Drug (“IND”) application for NXP800 was cleared by the U.S. Food and Drug Administration (“FDA”), including the Phase 1 clinical trial protocol. In December 2022, we announced that the FDA granted Fast Track Designation status to the development program of NXP800 for the treatment of platinum-resistant, ARID1a-mutated ovarian carcinoma.
In August 2023, we announced that the FDA granted Orphan Drug Designation to NXP800 for the treatment of patients with cholangiocarcinoma. In December 2023, we announced a collaboration with Mayo Clinic to conduct an investigator-sponsored clinical trial in patients with cholangiocarcinoma.
NXP900 (SRC/YES1 Kinase Inhibitor)
We have licensed exclusive world-wide development and commercial rights to NXP900, a SRC Family Kinase (“SFK”) inhibitor that potently inhibits the proto-oncogenes c-Src (“SRC”) and YES1 kinases. NXP900 was discovered at the University of Edinburgh,
17
Scotland. SRC is aberrantly activated in many cancer types, including solid tumors such as breast, colon, prostate, pancreatic and ovarian, while remaining predominantly inactive in non-cancerous cells. Increased SRC activity is generally associated with late-stage cancers, metastatic potential and resistance to therapy, and correlates with poor clinical prognosis. YES1 gene amplification has been reported to be implicated in several tumors including lung, head and neck, bladder and esophageal cancers. In addition, YES1 directly phosphorylates and activates the Yes-associated protein (“YAP1”), the main effector of the Hippo pathway, which has been identified as a promoter of drug resistance, cancer progression, and metastasis in several cancer types, including squamous cell, mesothelioma and papillary kidney cancers.
In vivo, treatment with NXP900 inhibited primary and metastatic tumor growth in xenograft models of breast, cervical, esophageal, head and neck and medulloblastoma cancers, and demonstrated on-target pharmacodynamic effects. Furthermore, it has been found that YES1 gene amplification is a key mechanism of resistance to Epidermal Growth Factor Receptor (“EGFR”), Human Epidermal Growth Factor Receptor 2 (“HER2”) and Anaplastic Lymphoma Kinase (“ALK”). A peer reviewed study published in Nature Communications (not sponsored by the Company) in April 2022 demonstrated that NXP900 was able to re-sensitize resistant non-small cell lung cancer (“NSCLC”) cells to osimertinib (the active ingredient in Tagrisso®), the leading EFGR inhibitor used for the treatment of EGFR mutation-positive NSCLC, when used in combination with osimertinib. These findings were reproduced and expanded by us in cell line models, demonstrating statistically significant synergies in combination with osimertinib and, separately, with the ALK inhibitor alectinib, (the active ingredient in Alecensa®).
In May 2023, the FDA cleared our IND for NXP900, which includes the Phase 1 clinical trial protocol.
The Phase 1 study was initiated in September 2023 and is comprised of two parts: dose-escalation (Phase 1a), to be followed by an expansion phase (Phase 1b). In the ongoing Phase 1a, the safety, tolerability and pharmacokinetic properties of NXP900 in patients with advanced solid tumors will be assessed to identify a dose and dosing schedule for Phase 1b.
Results of Operations
From our inception on July 27, 2020, through June 30, 2024, we did not generate any revenue. Our main activities through June 30, 2024, have been organizational and capital-raising activities and the completion of the in-license agreements for our two drug candidates, NXP800 and NXP900. For NXP800, we conducted IND-enabling studies, which were followed by our Clinical Trial Application and acceptance by the Medicines and Healthcare Regulatory Agency in the UK, IND application and acceptance by the FDA, and Clinical Trial Application and acceptance by the Spanish Agency of Medicines and Medical Devices in Spain. The Phase 1a and Phase 1b clinical trials for NXP800 commenced in December 2021 and April 2023, respectively. For NXP900, we conducted IND-enabling studies, which were followed by our IND application and acceptance by the FDA, as well as preparations for the Phase 1a clinical trial, which commenced in September 2023.
Research and Development Expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including licensing fees, cost of salaries, share-based compensation expenses, payroll taxes, and other employee benefits, subcontractors, and materials and services used for research and development activities, including clinical trials, manufacturing costs, and professional services. All costs associated with research and development are expensed as incurred.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our ongoing and planned preclinical and clinical development activities in the near term and in the future. The successful development of our product candidates is highly uncertain. At this time, 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 of our product candidates and we may never succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, finance and accounting, and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees paid for accounting, auditing, consulting, and tax services; insurance costs; investor relations activities; travel expenses; and facility costs not otherwise included in research and development expenses.
18
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development activities.
The following table summarizes our results of operations expenses for the three months ended June 30, 2024 and 2023: (in thousands)
Three Months Ended June 30, | |||||||||
| 2024 |
| 2023 |
| Change | ||||
OPERATING EXPENSES: |
|
|
|
|
|
| |||
Research and development |
| $ | 2,943 |
| $ | 4,262 |
| $ | (1,319) |
General and administrative |
| 1,700 |
| 1,510 |
| 190 | |||
OPERATING LOSS |
| (4,643) |
| (5,772) |
| 1,129 | |||
Finance income |
| 215 |
| 64 |
| 151 | |||
NET LOSS |
| $ | (4,428) |
| $ | (5,708) |
| $ | 1,280 |
Research and Development Expenses
The following table summarizes our research and development expenses for the three months ended June 30, 2024 and 2023: (in thousands)
| For the three months ended June 30, |
| Increase/ | ||||||
| 2024 |
| 2023 |
| (Decrease) | ||||
Clinical expenses | $ | 891 |
| $ | 1,249 | $ | (359) | ||
Employee compensation and benefits | 1,417 |
| 1,243 | 174 | |||||
Manufacturing | 635 |
| 1,246 | (611) | |||||
License fee | — |
| 501 | (501) | |||||
Professional services and other | 0 |
| 23 | (23) | |||||
Total research and development expenses | $ | 2,943 |
| $ | 4,262 | $ | (1,319) | ||
Research and development expenses decreased by $1.3 million, or 31% during the three months ended June 30, 2024, compared to the same period in 2023. The decrease in research and development expense during the three months ended June 30, 2024, was primarily driven by a $0.6 million decrease in manufacturing related costs, $0.5 million decrease in one-time licensing fees for NXP900, and $0.4 million decrease in clinical trial expenses, partially offset by a $0.2 million increase in employee compensation including $0.1 million increase related to employee stock compensation.
The following table summarizes our general and administrative expenses for the three months ended June 30, 2024 and 2023: (in thousands)
For the three months ended June 30, |
| Increase/ | |||||||
| 2024 | 2023 |
| (Decrease) | |||||
Professional and consulting services |
| $ | 960 |
| $ | 591 | $ | 369 | |
Employee compensation and benefits |
| 390 |
| 487 | (97) | ||||
Insurance and other |
| 350 |
| 432 | (82) | ||||
Total general and administrative expenses |
| $ | 1,700 |
| $ | 1,510 | $ | 190 | |
General and administrative expenses increase by $0.2 million, or 13%, during the three months ended June 30, 2024, compared to the same period in 2023. The increase in general and administrative expense during the three months ended June 30, 2024, was primarily driven by the $0.4 million increase in professional and consulting services related to public company related expenses, partially offset by $0.1 million decrease related to employee compensation and benefits along with $0.1 million decrease in other expenses.
As a result of the foregoing, our loss from operations for the three months ended June 30, 2024, decreased $1.3 million or 22%, compared to the same period in 2023 including a $0.2 million increase in finance income due to an increase in interest rates.
19
The following table summarizes our results of operations expenses for the six months ended June 30, 2024 and 2023:
(in thousands)
Six Months Ended June 30, | |||||||||
| 2024 |
| 2023 |
| Change | ||||
OPERATING EXPENSES: |
|
|
|
|
|
| |||
Research and development |
| $ | 5,603 |
| $ | 6,629 |
| $ | (1,026) |
General and administrative |
| 3,436 |
| 3,244 |
| 192 | |||
OPERATING LOSS |
| (9,039) |
| (9,873) |
| 834 | |||
Finance income |
| 440 |
| 116 |
| 324 | |||
NET LOSS |
| $ | (8,599) |
| $ | (9,757) |
| $ | 1,158 |
Research and Development Expenses
The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023:
(in thousands)
| For the six months ended June 30, |
| Increase/ | ||||||
| 2024 |
| 2023 |
| (Decrease) | ||||
Employee compensation and benefits | $ | 2,944 |
| $ | 2,586 | 358 | |||
Clinical expenses | 1,593 | 1,876 | (284) | ||||||
Manufacturing | 1,049 |
| 1,600 | (551) | |||||
License fee | — |
| 501 | (501) | |||||
Professional services and other | 17 |
| 66 | (49) | |||||
Total research and development expenses | $ | 5,603 |
| $ | 6,629 | $ | (1,026) | ||
Research and development expenses decreased by $1.0 million during the six months ended June 30, 2024 compared to the same period in 2023. The decrease in research and development expenses during the six months ended June 30, 2024 was primarily driven by a $0.6 million decrease in manufacturing related costs, $0.5 million decrease in one-time licensing fees for NXP900, and $0.3 million decrease in clinical trial expenses, partially offset by a $0.4 million increase in employee compensation including $0.3 million increase related to employee stock compensation.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the six months ended June 30, 2024 and 2023: (in thousands)
For the six months ended June 30, |
| Increase/ | |||||||
| 2024 | 2023 |
| (Decrease) | |||||
Professional and consulting services |
| $ | 1,845 |
| $ | 1,441 | $ | 404 | |
Employee compensation and benefits |
| 886 |
| 995 | (109) | ||||
Insurance and other |
| 705 |
| 808 | (103) | ||||
Total general and administrative expenses |
| $ | 3,436 |
| $ | 3,244 | $ | 192 | |
General and administrative expenses increased $0.2 million during the six months ended June 30, 2024 compared to the same period in 2023. The increase in general and administrative expense during the six months ended June 30, 2024, was primarily driven by the $0.4 million increase in professional and consulting services related to public company related expenses, partially offset by a $0.1 million decrease related to employee compensation and benefits along with a $0.1 million decrease in other expenses.
As a result of the foregoing, our loss from operations for the six months ended June 30, 2024, decreased $1.2 million, compared to the same period in 2023, which was primarily driven by employee compensation and benefits, clinical trial expenses, manufacturing expenses, and an increase in finance income of $0.3 million.
20
Liquidity and Capital Resources
As of June 30, 2024, we had $18.1 million of cash and cash equivalents. For the three months ended June 30, 2024 and 2023, we reported net losses of $4.4 million and $5.7 million, respectively. For the six months ended June 30, 2024 and 2023, our net losses were $8.6 million and $9.8 million, respectively.
On February 4, 2022, we announced the pricing of our initial public offering of common stock (the “IPO”) of 3,200,000 shares of common stock for a price of $5.00 per share, less certain underwriting discounts and commissions. Under the UoE license agreement, we are required to pay UoE 2.5% of the gross amount of each of our future fund raisings up to a cumulative total of $3.0 million. Pursuant to the IPO, we paid UoE $0.4 million associated with this fundraising.
The IPO closed on February 8, 2022, with gross proceeds of $16.0 million, before deducting underwriting discounts and expenses (for net proceeds of $12.6 million).
In addition, on July 29, 2022, we completed the July 2022 Private Placement in which we received gross proceeds of $15.9 million before deducting fees and expenses (for net proceeds of $14.2 million) excluding payments required by our license agreements. As part of this transaction, we issued Preferred Investment Options which became exercisable on January 23, 2023, and are exercisable through January 29, 2026, at an exercise price of $9.65 per share, subject to certain adjustments as defined in the securities purchase agreement. As of December 31, 2023, 1,001,091 Preferred Investment Options were exercised for $8.9 million, net of fees. For the three months and six months ended June 30, 2024, zero Preferred Investment Options were exercised, and $0.0 million, net of fees, was received. In addition, as part of the July 2022 Private Placement, we issued warrants to the placement agent to purchase up to 115,481 shares of common stock. The placement agent warrants are in substantially the same form as the Preferred Investment Options, except that the exercise price is $10.31. As of June 30, 2024, 79,104 placement agent warrants were exercised, and $0.8 million, net of fees, was received.
On March 17, 2023, we filed a shelf registration statement on Form S-3 (the “Registration Statement”). Pursuant to the Registration Statement, we may offer and sell securities having an aggregate public offering price of up to $150.0 million. In connection with the filing of the Registration Statement, we also entered into a sales agreement with H. C. Wainwright & Co. (the “Sales Agent”), pursuant to which we may issue and sell shares of our common stock for an aggregate offering price of up to $40.0 million under an at-the-market offering program (the “ATM”), which is included in the $150.0 million of securities that may be offered pursuant to the Registration Statement. Pursuant to the ATM, we will pay the Sales Agent a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of our common stock. We are not obligated to make any sales of shares under the ATM. As of June 30, 2024, we have sold 1,121,081 shares of our common stock and received $11.5 million in net proceeds under the ATM.
We believe that the proceeds from our IPO, private placement and ATM will enable us to fund our operating expenses and capital expenditures through at least the next 12 months from the issuance of our financial statements. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Our future viability in the long term is dependent on our ability to raise additional capital to finance our operations.
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the clinical trials of our current or future product candidates, including payments of milestones and sponsored research commitments associated with our license agreements for NXP800 and NXP900. In addition, we expect to incur increasing costs associated with operating as a public company as we continue to grow, including increased legal, accounting, investor relations, and other expenses. The timing and amount of our operating expenditures will depend largely on our ability to:
| ● | advance development of our clinical and preclinical programs; |
| ● | manufacture, or procure the manufacturing of, our preclinical and clinical drug material and develop processes for late stage and commercial manufacturing; |
| ● | seek regulatory approvals for any current or future product candidates that successfully complete clinical trials; |
| ● | achieve milestones in accordance with our license agreements; |
| ● | establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any current or future product candidates for which we may obtain marketing approval; |
21
| ● | hire additional clinical, quality control and scientific personnel; |
| ● | expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; |
| ● | obtain, maintain, expand and protect our intellectual property portfolio; and |
| ● | acquire additional product candidates. |
We anticipate that we will require additional capital as we seek regulatory approval of our product candidates and if we choose to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for our current or future product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:
| ● | the scope, progress and costs of researching and developing our current or future product candidates, including the timing and safety, tolerability and efficacy results from our preclinical and clinical trials; |
| ● | the costs, timing and outcome of regulatory review of our current or future product candidates; |
| ● | the costs, timing and ability to manufacture our current or future product candidates to supply our preclinical development efforts and our clinical trials; |
| ● | the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our current or future product candidates for which we receive marketing approval; |
| ● | the costs of manufacturing commercial-grade products and necessary inventory to support commercial launch; |
| ● | the ability to receive additional non-dilutive funding, including grants from organizations and foundations; |
| ● | the revenue, if any, received from commercial sale of our products, should any of our current or future product candidates receive marketing approval; |
| ● | the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing our intellectual property rights and defending intellectual property-related claims; |
| ● | our ability to establish and maintain collaborations on favorable terms, if at all; and |
| ● | the extent to which we acquire or in-license other product candidates and technologies. |
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, debt financings, governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.
If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional
22
funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table provides information regarding our cash flows for the periods presented: (in thousands)
For the six months ended June 30, | ||||||
| 2024 |
| 2023 | |||
Net cash used in operating activities |
| $ | (7,378) |
| $ | (8,860) |
Net cash used in investing activities |
| — |
| — | ||
Net cash provided by financing activities |
| $ | 6,368 |
| $ | 13,467 |
Operating Activities
During the six months ended June 30, 2024, $7.4 million of cash was used in operating activities. This was primarily attributable to our net loss of $8.6 million, partially offset by non-cash charges of $2.6 million. The change in our operating assets and liabilities was primarily due to $1.2 million payments to vendors, $0.2 million payment of employee compensation and benefits, and $0.1 million payment for our director and officer insurance.
During the six months ended June 30, 2023, $8.9 million of cash was used in operating activities. This was primarily attributable to our net loss of $9.8 million, partially offset by non-cash charges of $2.4 million. The change in our operating assets and liabilities was primarily due to $1.0 million in payments to vendors, and $0.6 million of payments for employee compensation and benefits.
Financing activities
During the six months ended June 30, 2024, net cash provided by financing activities was $6.4 million, consisting primarily of net proceeds from the sale of common stock through the ATM.
During the six months ended June 30, 2023, net cash provided by financing activities was $13.5 million, consisting primarily of $10.7 million in net proceeds from the exercise of warrants associated with our private placement along with $3.1 million of net proceeds from the sale of common stock through the ATM, offset by $0.4 million of deferred offering costs paid.
Contractual Obligations and Other Commitments
We enter into contracts in the normal course of business with clinical research organizations, contract manufacturing organizations, and other third parties for clinical trials, preclinical research studies, and testing and manufacturing services. These contracts are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. The amount and timing of such payments are not known.
We have also entered into license and collaboration agreements with third parties, which are in the normal course of business. We have not included future payments under these agreements since obligations under these agreements are contingent upon future events such as our achievement of specified development, regulatory, and commercial milestones, or royalties on net product sales.
Pursuant to the NXP800 License Agreement, we are required to make payments to the ICR for certain development and regulatory milestones, including up to $22.0 million related to pre-approval milestones, up to $178 million (in addition to the $22.0 million) in regulatory and commercial sales milestones, and mid-single digit to 10% royalties on a tiered basis on net sales, unless development ceases. Additionally, we originally agreed to provide the ICR with up to an additional $0.5 million in research and development. On March 31, 2022, we agreed to provide the ICR with $0.4 million of additional research and development support ($0.9 million total).
Pursuant to the NXP900 License Agreement, we are required to make payments to the UoE for certain development and regulatory milestones, including up to $45.0 million related to pre-approval milestones, up to $279.6 million in regulatory and commercial sales milestones, mid-single digit to 8% royalties on a tiered basis on net sales and 2.5% of the gross amount of each of our future fund raising
23
up to a cumulative total of $3.0 million, unless development ceases. Additionally, we will provide UoE with up to an additional $754,000 in research and development support.
We do not currently have any long-term leases. We rent our office space in Fort Lee, New Jersey, based on a one-year agreement signed on May 1, 2024.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with U.S. generally accepted accounting principles. The preparation of condensed financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
There have been no significant changes to our critical accounting policies and estimates as compared to those described in “Note 2 – Summary of Significant Accounting Policies” to our audited financial statements set forth in our Annual Report on Form 10-K filed with the SEC on March 5, 2024.
Recently Issued Accounting Pronouncements
See Note 2 to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Emerging Growth Company and Smaller Reporting Company Status
The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of our initial public offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We will continue to be a smaller reporting company for as long as either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Under SEC rules and regulations, because we are considered to be a “smaller reporting company,” we are not required to provide the information required by this item in this report.
24
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
As of June 30, 2024, management carried out, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2024, our disclosure controls and procedures were effective.
Changes in and Management’s Report on Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the six months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Vice President of Finance, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
25
PART II – OTHER INFORMATION
Item 1.Legal Proceedings.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. However, there is no certainty that any such future litigation that may arise would not have a material financial impact on our business. As of the date of this report, we were not a party to any material legal matters or claims.
Item 1A. Risk Factors.
The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should carefully consider the risks described below, in addition to the other information contained in this report and our other public filings, before making an investment decision. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.
Risks Related to Our Finances and Capital Requirements
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We are a clinical stage biopharmaceutical company with a limited operating history. We were incorporated in Delaware in July 2020, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, identifying, investigating, licensing and evaluating potential product candidates, and establishing arrangements with third parties for the manufacture of initial quantities of our lead product candidate and component materials. Both of our product candidates are in early clinical development. We have not yet demonstrated our ability to successfully conduct or complete any clinical development program for our drug candidates, obtain marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate.
We may need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities related to the full product life cycle. We may not be successful in such a transition.
We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We may never achieve or maintain profitability.
Investment in biopharmaceutical product development is a highly speculative undertaking and entails substantial upfront capital expenditures and significant risk that our current or potential future product candidates will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. We are still in the early stages of development of our product candidates and initiated our first clinical trial in December 2021. We have no products approved for commercial sale and have not generated any revenue from product sales to date. We continue to incur significant research and development and other expenses related to our ongoing operations. In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors, such as the COVID-19 pandemic.
We have incurred losses in each period since we commenced operations. Since inception through the end of June 30, 2024, we had an accumulated deficit of $62.8 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we continue our research and development efforts for our lead product candidate; conduct preclinical studies and clinical trials for our current and future product candidates; seek marketing approvals for any current or future product candidate that successfully completes clinical trials; experience any delays or encounter any issues with any of the above; establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any current or future product candidates for which we may obtain regulatory approval; obtain, expand, maintain, enforce and protect our intellectual property portfolio; hire additional clinical, regulatory and scientific personnel; and operate as a public company.
26
Our pipeline product candidates, NXP800 and NXP900, are both in clinical development. Both product candidates will require additional preclinical and clinical studies, regulatory review and approval, substantial investment, access to sufficient clinical and commercial manufacturing capacity and significant marketing efforts before we can potentially generate any revenue from product sales. The Phase 1 study for NXP800 started in December 2021 and NXP900 started in September 2023. To date, we have not generated any revenue from our product candidates. Our ability to generate revenue will depend on a number of factors, including, but not limited to:
| ● | Our ability to timely and successfully complete of our preclinical studies and clinical trials, which may be significantly slower or more costly than anticipated and will depend upon several factors including the performance of third-party contractors, our ability to enroll patients into the clinical trials and the safety, tolerability and efficacy results generated in clinical trials; |
| ● | successful submissions of IND applications to the FDA and any additional comparable applications; |
| ● | completion of nonclinical studies necessary for the IND or comparable submission, as appropriate; |
| ● | whether we are required by the FDA or similar foreign regulatory authorities to conduct additional clinical trials or other studies to support the approval and commercialization of our current or future product candidates; |
| ● | the FDA’s and similar foreign regulatory authorities’ acceptance of the safety, potency, purity, efficacy and risk to benefit profile of our current or future product candidates; |
| ● | the prevalence, duration and severity of side effects or other safety issues experienced with our current or future product candidates, if any; |
| ● | the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities; |
| ● | the actual and perceived availability, cost, risk profile and safety and efficacy of our current or future product candidates, if approved, relative to existing and future alternative cancer therapies and competitive product candidates and technologies; |
| ● | our ability and the ability of third parties with whom we contract to manufacture adequate clinical and commercial supplies of our current or future product candidates, to remain in good standing with regulatory authorities and to develop, validate and maintain commercially viable manufacturing processes that are compliant with cGMP; |
| ● | our ability to successfully develop a commercial strategy and to commercialize any current or future product candidate in the United States and internationally, if approved for marketing, reimbursement, sale and distribution in such countries and territories, whether alone or in collaboration with others; |
| ● | patient demand for our current or future product candidates, if approved; and |
| ● | our ability to establish and enforce intellectual property rights in and to our current or future product candidates. |
Many of the factors listed above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or commercializing our current and future product candidates. Even if we can commercialize any current or future product candidates, we may not achieve profitability soon after generating product sales, if ever.
We will require substantial additional funding. Raising additional capital may cause dilution to our existing stockholders, or require us to relinquish proprietary rights. If we are unable to raise capital as needed, we may be compelled to delay, reduce or eliminate our product development programs or commercialization efforts.
We expect our expenses to increase in parallel with our ongoing activities, particularly as we continue our activities to identify new product candidates and initiate clinical trials of, and seek marketing approval for, any of our current or future product candidates. In addition, if we obtain marketing approval for any of our current or future product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we expect to incur significant additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional
27
funding in connection with our continuing operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, ATM facility, debt financings, governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our discovery and preclinical development programs or any future commercialization efforts.
Major public health issues, and specifically the pandemic caused by the coronavirus COVID-19 outbreak, could have an adverse effect on our clinical trials, financial condition, results of operations, and other aspects of our business.
In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. During 2021, there was a wide distribution of several vaccinations and medicines to overcome the pandemic. We have shifted our operations to co-exist along with the pandemic.
The uncertainty to which the COVID-19 pandemic impacts the Company’s business, affects management’s judgment and assumptions relating to accounting estimates in a variety of areas that depend on these estimates and assumptions. COVID-19 did not have a material influence on these estimates and judgements since the Company began operations in 2021.
The Company continues to face relative uncertainty as to the remaining intensity and duration of and the nature and timeline for recovery from the COVID-19 pandemic going forward and how all of that impacts the Company, including the extent to which potentially permanent changes clinical trial operations have been caused by the pandemic. The Company has taken the approach of managing the pandemic (to the extent that it continues to remain a significant factor) via strengthening its balance sheet and cash assets and avoiding debt while focusing on cost controls. Some factors from the COVID-19 outbreak or any outbreak caused by any variant of COVID-19 that may delay or otherwise adversely affect our clinical trial programs, as well as adversely impact our business generally, include:
| ● | delays or difficulties in clinical site initiation, including difficulties in recruiting clinical sites, and delays enrolling patients in our clinical trials or increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19, being forced to quarantine, or not otherwise being able to complete study assessments, particularly for older patients or others with a higher risk of contracting COVID-19; |
| ● | diversion of healthcare resources, including clinical trial investigators and staff, away from the conduct of clinical trials to focus on pandemic concerns which could result in delays to our partner companies’ clinical trials; |
| ● | limitations on travel, including limitations on domestic and international travel, and government-imposed quarantines or restrictions imposed by key third parties that could interrupt key trial activities, such as clinical trial site initiations and monitoring; |
| ● | interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, or production slowdowns or stoppages; |
| ● | disruptions and delays caused by potential workplace, laboratory and office closures and an increased reliance on employees working from home across the healthcare system; and |
| ● | disruptions in or delays to regulatory approvals, inspections, reviews or other regulatory activities as a result of the spread of COVID-19 affecting the operations of the FDA or other regulatory authorities. |
28
We currently rely on third parties for certain functions or services in support of our clinical trials and key areas of our operations. If these third parties themselves are adversely impacted by restrictions resulting from the COVID-19 outbreak, we will likely experience delays and/or realize additional costs. As a result, our ability to commence and complete clinical trials in a timely fashion, obtain regulatory approvals for, and to commercialize, our current and future product candidates may be delayed or disrupted.
Risks Related to the Development of our Product Candidates
Our development approach may never lead to marketable products.
The patient populations for our product candidates and potential future product candidates may be limited to those with specific target mutations and may not be completely defined but are substantially smaller than the general treated cancer population and we will need to actively screen and identify these patients. Successful identification of patients is dependent on several factors, including achieving certainty as to how diseases with specific genetic alterations respond to our current product candidates or any future product candidates and, if necessary, developing companion diagnostics to identify such genetic alterations. Furthermore, even if we are successful in identifying patients, we cannot be certain that the resulting patient populations for our target indications will be large enough to achieve profitability. In addition, even if our approach is successful, we may never successfully identify additional diseases in which our product candidates may be effective. We do not know if our approach of treating patients with genetically defined cancers will be successful; and if our approach is unsuccessful, our business will suffer.
We are early in our development efforts and are substantially dependent on our ability to advance NXP800, NXP900 or any of our other future product candidates through preclinical and clinical development, identify safe and effective doses and dosing schedules for our drug candidates, obtain regulatory approval and ultimately commercialize NXP800, NXP900 or any of our other future product candidates; if we experience delays in doing so, our business will be materially harmed.
Our ability to generate product revenues from NXP800, NXP900 or any of our other future product candidates depends heavily on the successful clinical development and eventual commercialization. In addition, our drug development programs may contemplate the development of companion diagnostics, which are assays or tests to identify an appropriate patient population based on genetic mutations and other alterations. Companion diagnostics are subject to regulation as medical devices and must themselves receive marketing authorization from the FDA or certain other foreign regulatory agencies before they may be marketed. If a companion diagnostic is essential to the safe and effective use of any of our current and future product candidates, the FDA must conclude that the companion diagnostic meets the applicable standard for safety and effectiveness or for substantial equivalence for use with our product candidates before either the product candidates or companion diagnostic may be marketed in the United States.
Negative preclinical or clinical results in the development of our product candidates may prevent or delay our ability to continue or conduct clinical programs or receive regulatory approvals. For example, although we believe, based on preclinical studies of ARID1a-muted ovarian carcinoma models that demonstrated tumor growth inhibition, that this cancer type might be particularly sensitive to treatment with NXP800, this may not prove true in clinical testing, due to safety and tolerability issues and/or insufficient efficacy, and this holds true for any or all of the potential target indications. Moreover, anti-tumor activity may be different in each tumor type that we plan to evaluate in clinical trials. As a result, we may be required to discontinue development of our drug candidates or invest significant additional resources and delay our clinical trials and ultimately the approval, if any, of any of our other future product candidates.
Our current or future product candidates may not have favorable results in early clinical trials due to safety, tolerability and/or insufficient efficacy findings. In addition, positive results of early clinical trials are not necessarily predictive of future results, and any product candidate that we advance may not have favorable results in later clinical trials or receive regulatory approval.
We may experience setbacks that could delay or prevent regulatory approval of, or our ability to commercialize, our current or future product candidates, including:
| ● | negative or inconclusive efficacy results or adverse safety findings from our preclinical studies or clinical trials or positive results from the clinical trials of others for product candidates similar to ours leading to their approval, and evolving to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program; |
| ● | product-related side effects experienced by patients or subjects in our clinical trials or by individuals using drugs or therapeutics that we, the FDA, other regulators or others view as relevant to the development of our current or future product candidates; |
29
| ● | delays in submitting IND applications or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced; |
| ● | conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials, including our clinical endpoints; |
| ● | delays in enrolling subjects in clinical trials, including identifying appropriate patients, or due to health related emergencies, such as the COVID-19 pandemic, and timely completion of clinical trials, including under GCP or good laboratory practice (“GLP”) requirements; |
| ● | inability to maintain compliance with regulatory requirements, including cGMPs, and complying effectively with other requirements pertaining to the quality of our current or future product candidates; |
| ● | high drop-out rates of subjects from clinical trials due to safety and tolerability issues and/or insufficient efficacy; |
| ● | inadequate supply or quality of our current or future product candidates or other materials necessary for the conduct of our clinical trials; |
| ● | greater than anticipated clinical trial costs; |
| ● | inability to compete with other therapies; |
| ● | poor efficacy of or safety and/or tolerability issues observed with our current or future product candidates or the need for different doses or dosing schedules during clinical trials; |
| ● | trial results taking longer than anticipated; |
| ● | trials being subjected to fraud or data capture failure or other technical mishaps leading to the invalidation of our trials; |
| ● | the results of our trials not supporting application for conditional approval in the European Union; |
| ● | unfavorable FDA or other regulatory agency inspection and review of a clinical trial site; |
| ● | failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all; |
| ● | delays related to the impact of the spread of the COVID-19 pandemic, including the impact of COVID-19 on the FDA’s ability to continue its normal operations; |
| ● | delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinical development generally or with respect to our technology in particular; or |
| ● | varying interpretations of data by the FDA and similar foreign regulatory agencies. |
In addition, because we have limited financial and personnel resources and are focusing primarily on developing NXP800 and NXP900, we may forgo or delay pursuit of other future product candidates that may prove to have greater commercial potential and may fail to capitalize on viable commercial products or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a future product candidate, we may relinquish valuable rights to those future product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such future product candidates.
30
Clinical drug development involves a lengthy and expensive process with uncertain outcomes, clinical trials are difficult to design and implement, and any of our clinical trials could produce unsuccessful results or fail at any stage in the process.
Clinical trials are conducted on humans, are expensive, and can take many years to complete, and outcomes are inherently uncertain. Failure can occur at any time during the process. Additionally, any positive results of preclinical studies and early clinical data of a drug candidate may not be predictive of the final results of the early clinical trial or of later-stage clinical trials, such that drug candidates may not reach later-stages clinical trials based on results from an early-stage clinical trial or reach later stages of clinical trials and fail to show the desired safety and efficacy traits despite having shown indications of those traits in preclinical studies and early-stage clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in early and advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in preclinical studies or preliminary clinical findings. Therefore, the results of any existing and future clinical trials we conduct may not be successful. Clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for a variety of reasons, such as:
| ● | delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design that we are able to execute; |
| ● | delay or failure in obtaining authorization to commence a trial, including approval from the appropriate independent review board (“IRB”) to conduct testing of a candidate on human subjects, or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial; |
| ● | delay in reaching, or failure to reach, agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
| ● | inability, delay or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs; |
| ● | delay or failure in recruiting and enrolling suitable volunteers or patients to participate in a trial; |
| ● | delay or failure in developing and validating companion diagnostics, if they are deemed necessary, on a timely basis; |
| ● | failure of patients to complete a trial or return for post-treatment follow-up; |
| ● | inability to monitor patients adequately during or after treatment; |
| ● | clinical sites and investigators deviating from trial protocols, failing to conduct the trial in accordance with regulatory requirements or dropping out of a trial; |
| ● | failure to initiate or delay of or inability to complete a clinical trial as a result of a clinical hold imposed by the FDA or comparable foreign regulatory authority due to observed safety findings or other reasons; |
| ● | negative or inconclusive results in our clinical trials, and our decision to or regulators’ requirement that we conduct additional preclinical studies, clinical trials or that we abandon one or more of our product development programs; or |
| ● | inability to manufacture sufficient quantities of a drug candidate of acceptable quality for use in clinical trials. |
We rely and plan to continue to rely on CROs, contract manufacturing organizations (“CMOs”) and clinical trial sites to ensure the proper and timely conduct of our clinical trials. Although we have and expect that we will have agreements in place with CROs and CMOs governing their contracted activities and conduct, we will have limited influence over their actual performance. As a result, we ultimately do not and will not have control over a CRO’s or CMO’s compliance with the terms of any agreement it may have with us, its compliance with applicable regulatory requirements, or its adherence to agreed-upon time schedules and deadlines, and a future CRO’s or CMO’s failure to perform those obligations could subject any of our clinical trials to delays or failure.
Further, we may also encounter delays if a clinical trial is suspended, is put on clinical hold or terminated by us, by any IRB or ethics committee, by a Data Safety Monitoring Board, or by the FDA or European Medicines Agency (“EMA”), or other regulatory authority. A suspension or termination may be due to a number of factors, including failure to conduct the clinical trial in accordance with
31
regulatory requirements, inspection of the clinical trial operations or trial site by the FDA, EMA or other regulatory authorities, exposing participants to health risks caused by unforeseen safety issues or adverse side effects, development of previously unseen safety issues, failure to demonstrate a benefit from using a drug candidate, or changes in governmental regulations or administrative actions. Therefore, we cannot predict with any certainty the schedule for commencement or completion of any currently ongoing, planned or future clinical trials.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval for our current or future product candidates.
If we experience delays in the commencement or completion of, or suspension, hold or termination of, any clinical trial for our drug candidates, the commercial prospects of the drug candidate could be harmed, and our ability to generate product revenues from the drug candidate may be delayed or eliminated. In addition, any delays in completing our clinical trials will increase our costs, slow down our drug candidate development and approval process and jeopardize regulatory approval of our drug candidates and our ability to commence sales and generate revenues. The occurrence of any of these events could harm our business, financial condition, results of operations and prospects significantly.
Difficulty in enrolling patients could delay or prevent clinical trials of our current or future product candidates.
Identifying and qualifying patients to participate in clinical studies of our current or future product candidates is critical to our success. The timing of completion of our clinical studies depends in part on the speed at which we can recruit patients to participate in testing our current or future product candidates and we may experience delays in our clinical trials if we encounter difficulties in enrollment. Further, because we are currently focused on patients with specific and rare diseases, our ability to enroll eligible patients may be limited and may result in slower enrollment than we anticipate. Our clinical trials will compete with other clinical trials for current or future product candidates that are in the same therapeutic areas as our current or future product candidates, which may reduce the number and types of patients available to us.
Clinical trials may be subject to delays as a result of patient enrollment taking longer than anticipated or greater than anticipated subject withdrawal. We may not be able to initiate or continue clinical trials for our current or future product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or foreign regulatory authorities. We cannot predict how successful we will be at enrolling subjects in future clinical trials. The enrollment of patients depends on many factors, including:
| ● | patient identification and eligibility and inclusion/exclusion criteria defined in the protocol; |
| ● | the size of the patient population required for analysis of the clinical trial’s primary endpoints and the process for identifying patients; |
| ● | potential disruptions caused by the COVID-19 pandemic, including difficulties in initiating clinical sites, enrolling and retaining participants, diversion of health care resources away from clinical trials, travel or quarantine policies that may be implemented, and other factors; |
| ● | the proximity of patients to clinical trial sites; |
| ● | the design of the trial; |
| ● | our ability to recruit clinical trial investigators with the appropriate competencies and expertise; |
| ● | clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating; |
| ● | the availability of competing commercially available therapies and other competing product candidates’ clinical trials; |
| ● | our ability to obtain and maintain clinical trial subject informed consents; and |
32
| ● | the risk that subjects enrolled in clinical trials will drop out of the trials before completion. |
If we are unable to locate and enroll sufficient eligible patients to participate, as required by the FDA or similar regulatory authorities, we may be unable to initiate or continue clinical trials for our current or future product candidates. If necessary, we intend to engage third parties to develop companion diagnostics for use in our clinical trials. If such third parties are unsuccessful, our difficulty in identifying patients with the targeted genetic mutations for our clinical trials would be increased. If we are unable to include patients with the targeted genetic mutations or patients with well-defined serious unmet medical needs, we may be unable to participate in the FDA’s expedited review and development programs, including breakthrough therapy designation and fast track designation, or otherwise seek to accelerate clinical development and regulatory timelines.
Our studies may fail to adequately demonstrate the safety, potency, purity, efficacy or any other necessary pharmacological properties of any of our current or future product candidates, which would prevent or delay development, regulatory approval and commercialization.
Before obtaining regulatory approvals for the commercial sale of our current or future product candidates, including NXP800 and NXP900, we must demonstrate through lengthy, complex and expensive studies that our current or future product candidates are both safe and effective for use in each target indication. Preclinical and clinical testing are expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the preclinical study and clinical trial processes, and, because our current product candidates are in an early stage of development, there is a high risk of failure.
The results of preclinical studies and early clinical trials of a drug candidate may not be predictive of the final results of later-stage clinical trials. Results of our trials could reveal a high and unacceptable severity and prevalence of adverse safety issues which may result in suspension or termination, and the FDA or comparable foreign regulatory authorities could, through a clinical hold or otherwise, order us to halt or cease further development of or deny approval. Drug-related side effects could also affect patient recruitment into the study or patient willingness to remain in the study and therefore affect our ability to complete clinical trials. Drug-related side effects could also result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
Moreover, our product or product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or impact their availability and commercial potential after approval.
The FDA and comparable foreign regulatory authorities may not accept data from any preclinical or clinical trials we may conduct in foreign countries.
The FDA’s acceptance of data generated for patients recruited outside the United States from clinical trials conducted in whole or in part outside the United States may be subject to certain conditions, if accepted at all.
Although the FDA has the authority to accept foreign data as part or even the sole basis for marketing approval, the FDA generally does not approve an application on the basis of foreign data alone unless (i) the data is applicable to the U.S. population and U.S. medical practice, (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations, and (iii) the FDA’s clinical trial requirements were met. Many foreign regulatory authorities have similar approval requirements. In addition, any clinical study conducted in whole or in part outside of the United States would be subject to the applicable local laws of the jurisdiction where the trial was conducted. We cannot guarantee that the FDA or comparable foreign regulatory authority will accept data from trials conducted in whole or in part outside of the United States, which may result in the need for additional trials.
We may not be able to submit IND applications to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed.
Our CTAs and INDs for NXP800 and NXP900, have been approved. However, we may be unable to submit additional CTAs, IND applications or other clinical research on our expected timelines. Moreover, while we have obtained CTA and IND approvals, we cannot be sure that issues will not arise that may lead to the delay, suspension or termination of such clinical trials. Any failure to file CTAs, IND applications or other clinical research authorizations will adversely impact our expected timelines to obtain regulatory acceptance for the commencement of our trials and may prevent us from completing our clinical trials or commercializing our products on a timely basis, if at all.
33
We currently have no marketing and sales organization and have limited experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell any approved product candidates, we may not be able to generate product revenue.
We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. If we are unable or decide not to establish internal sales, marketing, and distribution capabilities, we may pursue arrangements with third-party sales, marketing, and distribution collaborators regarding the sales and marketing of our products, if approved.
There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the United States or overseas.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
While we believe that our scientific knowledge, technology, and development expertise provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceuticals, specialty pharmaceuticals and biotechnology companies, academic institutions and government agencies, and public and private research institutes that conduct research, development, manufacturing, and commercialization. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, regulatory approvals, and product marketing than we do. Our competitors may compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient recruitment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. As a result, our competitors may discover, develop, license, or commercialize products earlier or more successfully than we do.
If our product candidates, NXP800 and NXP900, are approved, they will likely compete with competitor drugs and other drugs that are currently in development. The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we do, which could result in our competitors establishing a strong market position before we are able to enter the market.
Risks Related to Government Regulation
Denial of or delay in our receipt of required regulatory approvals may prevent or delay commercialization of our current or future product candidates and our ability to generate revenue may be materially impaired.
The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are, and will remain, subject to extensive regulation by the FDA in the United States and by the respective regulatory authorities in other countries where regulations differ. We will not be permitted to market our current or future product candidates in the United States until we receive the respective approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from the respective regulatory authorities in such countries. The time required to obtain regulatory approval, if any, by the FDA, EMA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities and the type, complexity and novelty of the product candidates involved. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional nonclinical studies or clinical trials.
Obtaining regulatory approval requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the regulatory authorities. Our current or future product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in cGMP compliance by us or by our CMOs that could result in the candidate not being approved. Moreover, we have not obtained regulatory approval for any drug candidate in any jurisdiction and it is possible that none of our existing drug candidates or any drug candidates we may seek to develop in the future will ever obtain regulatory approval.
34
Our drug candidates could fail to receive, or could be delayed in receiving, regulatory approval for many reasons, including any one or more of the following:
| ● | the FDA, EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; |
| ● | we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication; |
| ● | the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory authorities for approval; |
| ● | we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks; |
| ● | the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; |
| ● | the data collected from clinical trials of our drug candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere; |
| ● | upon review of our clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find our record keeping or the record keeping of our clinical trial sites to be inadequate; |
| ● | the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies may fail to meet the requirements of the FDA, EMA or comparable foreign regulatory authorities; |
| ● | the FDA, EMA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developing internally or with partners; and |
| ● | the change of the medical standard of care or the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner that renders our clinical data insufficient for approval. |
The time and expense of the approval process, as well as the unpredictability of future clinical trial results and other contributing factors, may result in our failure to obtain regulatory approval to market NXP800, NXP900 or any other drug candidates we may seek to develop in the future, which would significantly harm our business, results of operations and prospects. In such case, we may also not have the resources to conduct new clinical trials and/or we may determine that further clinical development of any such drug candidate is not justified and may discontinue any such programs.
In addition, even if we were to obtain regulatory approval in one or more jurisdictions, regulatory authorities may approve any of our drug candidates for fewer or more limited indications than we request, may not approve prices we may propose to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials (referred to as “conditional” or “accelerated” approval depending on the jurisdiction), or may approve a drug candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that drug candidate. Any of the foregoing circumstances could materially harm the commercial prospects for our drug candidates.
Obtaining and maintaining regulatory approval of our current or future product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our current or future product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of any of our current or future product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions. For example, even if the FDA grants regulatory approval of a product candidate, similar foreign regulatory authorities must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Drug product approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities
35
in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining similar foreign regulatory approvals and compliance with similar foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our current or future product candidates will be harmed.
Even if we receive regulatory approval of our current or future 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 current or future product candidates.
If any of our current or future product candidates are approved, activities such as the manufacturing, labeling, packaging, storage, advertising, promotion, sampling, and record keeping for the products will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as ongoing compliance with cGMP regulations. Drug manufacturers and any CMOs responsible for any product manufacturing processes are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations and any applicable foreign equivalents. As such, we and our CMOs will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA, other marketing application, and previous responses to inspection observations. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
The FDA or a comparable foreign regulatory authority may also impose requirements for costly post-marketing nonclinical studies or clinical trials (often called “Phase 4 trials”) and post-marketing surveillance to monitor the safety or efficacy of the product. If we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, production problems or issues with the facility where the product is manufactured or processed, such as product contamination or significant not-compliance with applicable cGMP regulations, a regulator may impose restrictions on that product, the manufacturing facility or us. If we or our third-party providers, including our CMOs, fail to comply fully with applicable regulations, then we may be required to initiate a recall or withdrawal of our products.
Later discovery of previously unknown problems with our current or future product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in the following, among other things:
| ● | restrictions on the manufacturing of the product, the approved manufacturers or the manufacturing process; |