UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 2, 2024, there were
RAPT THERAPEUTICS, INC.
TABLE OF CONTENTS
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Page No. |
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Item 1. |
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3 |
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Condensed Balance Sheets as of June 30, 2024 and December 31, 2023 |
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Condensed Statements of Stockholders’ Equity for the Six-Months Ended June 30, 2024 and 2023 |
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Condensed Statements of Cash Flows for the Six-Months Ended June 30, 2024 and 2023 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
RAPT THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Operating lease liabilities, current |
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Other current liabilities |
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Total current liabilities |
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Operating lease liabilities, non-current |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock |
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Common stock |
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Additional paid-in capital |
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Accumulated other comprehensive gain (loss) |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying notes to condensed financial statements.
3
RAPT THERAPEUTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income, net |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation loss |
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Unrealized gain (loss) on marketable securities |
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Total comprehensive loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares used in computing net loss |
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See accompanying notes to condensed financial statements.
4
RAPT THERAPEUTICS, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuances of common stock under employee stock plans |
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— |
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— |
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— |
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Issuances of common stock in “at-the-market” offerings, net of issuance costs |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Unrealized loss on marketable securities |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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Balance at March 31, 2024 |
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( |
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Issuances of common stock under employee stock plans |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Unrealized loss on marketable securities |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuances of common stock under employee stock plans |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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Balance at March 31, 2023 |
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Issuances of common stock under employee stock plans |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to condensed financial statements.
5
RAPT THERAPEUTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Six Months Ended |
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June 30, |
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2024 |
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2023 |
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Operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Accretion of discounts on marketable securities |
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Depreciation and amortization |
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Stock-based compensation expense |
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Loss on foreign currency translation |
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Non-cash operating lease expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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Accounts payable, accrued expenses and other current liabilities |
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Operating lease liabilities |
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Net cash used in operating activities |
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Investing activities |
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Purchase of marketable securities |
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Proceeds from maturities of marketable securities |
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Purchase of property and equipment |
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Net cash provided by investing activities |
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Financing activities |
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Proceeds from issuances of common stock in “at-the-market” offerings, net of issuance costs |
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Proceeds from issuance of common stock under employee stock plans |
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Net cash provided by financing activities |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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See accompanying notes to condensed financial statements.
6
RAPT THERAPEUTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Organization
Description of the Business
RAPT Therapeutics, Inc. (“RAPT” or the “Company”) is a clinical stage, immunology-based therapeutics company focused on discovering, developing and commercializing oral small molecule therapies for patients with significant unmet needs in inflammatory diseases and oncology. Utilizing its proprietary drug discovery and development engine, the Company develops highly selective small molecules that are designed to modulate the critical immune responses underlying these diseases. The Company is located in South San Francisco, California.
Liquidity and Management Plans
The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. Since inception, the Company has incurred net losses and negative cash flows from operations. During the six months ended June 30, 2024, the Company incurred a net loss of $
The Company plans to continue to incur substantial costs in order to conduct research and development activities, and additional capital will be needed to undertake these activities. The Company intends to raise such capital through the issuance of additional equity, borrowings or strategic alliances with other companies. However, if such arrangements are not available at adequate levels or on acceptable terms, the Company would be required to significantly reduce operating expenses and delay or reduce the scope of or eliminate some of its development programs. The Company believes that its current cash and cash equivalents and marketable securities will provide sufficient funds to enable it to meet its obligations for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.
The Company’s evaluation was based on the facts known as of the date of filing of this Quarterly Report on Form 10-Q, including the impacts of the clinical holds that the U.S. Food and Drug Administration (“FDA”) has placed on the Phase 2b trial of zelnecirnon in atopic dermatitis (“AD”) and the Phase 2a trial of zelnecirnon in asthma and the Company's decision to close and unblind both trials to support its discussions with the FDA.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S‑X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The condensed balance sheet as of December 31, 2023 has been derived from the audited financial statements as of that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 filed on March 7, 2024 with the Securities and Exchange Commission (“SEC”).
The accompanying condensed financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiary, RAPT Therapeutics Australia Pty Ltd., which was established in 2018 and deregistered during the quarter ended June 30, 2023. All intercompany balances and transactions have been eliminated in consolidation.
7
Stock-Based Compensation
The Company determines employee, nonemployee and director stock-based compensation expense for all stock-based awards based on their grant date fair value using the Black-Scholes option-pricing model. For stock-based awards with service conditions only, stock-based compensation expense is recognized over the requisite service period using the straight-line method. Forfeitures are recognized as they occur.
The fair value of restricted stock awards granted is determined based on the stock price on the date of grant. The estimated fair value is amortized as compensation expense over the service period of the award.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per common share is computed by dividing the net loss by the sum of the weighted average number of common shares outstanding during the period plus the number of potential dilutive securities outstanding during the period calculated in accordance with the treasury stock method. Diluted net loss per share is the same as basic net loss per share since the effect of potentially dilutive securities is anti-dilutive.
Marketable Securities
Marketable securities primarily consist of commercial paper, corporate debt securities and U.S. government agency securities. The Company has classified its marketable securities as available-for-sale and may sell these securities prior to their stated maturities. The Company views these marketable securities as available to support current operations and classifies marketable securities with maturities beyond 12 months as current assets. The Company’s marketable securities are carried at estimated fair value, which is derived from independent pricing sources based on quoted prices in active markets for similar securities. Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss). The cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in other income, net on the condensed statements of operations.
All of the Company's available-for-sale investments are subject to a periodic impairment review. For each available-for-sale investment whose fair value is below its amortized cost, the Company determines if the impairment is a result of a credit-related loss or other factors using both quantitative and qualitative factors, including the length of time and extent to which the market value has been less than amortized cost, the financial condition and near-term prospects of the issuer and the Company’s intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. If the impairment is a result of a credit-related loss, the Company recognizes an allowance for credit losses. If the impairment is not a result of a credit loss, the Company recognizes the loss in other comprehensive loss.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. To date, there have been no such impairment losses.
Leases
At inception of a contract, the Company determines whether an arrangement is or contains a lease. For all leases, the Company determines the classification as either operating leases or financing leases. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s condensed balance sheets.
8
Lease recognition occurs at the commencement date and lease liability amounts are based on the present value of lease payments over the lease term. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses an implicit rate when readily available, or its incremental borrowing rate based on the information available at lease commencement date, in determining the present value of lease payments. ROU assets represent our right to use underlying assets for the lease term and operating lease liabilities represent our obligation to make lease payments under the lease. ROU assets also include any lease payments made prior to the commencement date and exclude lease incentives received. Operating lease expense is recognized on a straight-line basis over the lease term. Lease agreements with both lease and nonlease components are generally accounted for together as a single lease component.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.
In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU No. 2023-07”), which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied retrospectively. The Company believes the adoption of this standard will not have a material impact on its financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the income tax disclosures within the financial statements.
3. Fair Value Measurements
Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Financial instruments include cash and cash equivalents, marketable securities, accounts payable and accrued expenses that approximate fair value due to their relatively short maturities.
Assets and liabilities recorded at fair value on a recurring basis in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
The Company estimates the fair values of investments in corporate debt securities, commercial paper and U.S. government agency securities using valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.
9
Cash equivalents and marketable securities, all of which are classified as available-for-sale securities and measured at fair value on a recurring basis, consisted of the following (in thousands):
|
|
|
|
As of June 30, 2024 |
|
|||||||||||||
|
|
Fair Value |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
Level 1 |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Corporate debt |
|
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
Level 2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Commercial paper |
|
Level 2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
U.S. government agency securities |
|
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Subtotal |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Less: Cash equivalents |
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Marketable securities |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
As of December 31, 2023 |
|
|||||||||||||
|
|
Fair Value |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
Level 1 |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Corporate debt |
|
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Commercial paper |
|
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S. government agency securities |
|
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Subtotal |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Less: Cash equivalents |
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Marketable securities |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of June 30, 2024, the unrealized losses on the Company’s securities that were in an unrealized loss position were caused by interest rate changes and were not attributable to credit losses. As of June 30, 2024, the Company held debt securities with an aggregate unrealized loss position of $
The following table presents the remaining contractual maturities of the Company’s marketable securities as of June 30, 2024 (in thousands):
|
|
June 30, 2024 |
|
|
Maturing in one year or less |
|
$ |
|
|
Maturing after one year through five years |
|
|
|
|
Total |
|
$ |
|
|
10
4. Property and Equipment
Property and equipment consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Laboratory equipment |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation and amortization expense was $
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Accrued research and development expenses |
|
$ |
|
|
$ |
|
||
Accrued compensation |
|
|
|
|
|
|
||
Accrued professional and consulting services |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
6. Common Stock
As of June 30, 2024, the Company had reserved the following shares of common stock for future issuance:
Options issued and outstanding under the 2019 Equity Incentive Plan and |
|
|
|
|
Shares available for future grants under the 2019 Equity Incentive Plan |
|
|
|
|
Pre-funded warrants issued and outstanding |
|
|
|
|
Shares reserved under the 2019 Employee Stock Purchase Plan |
|
|
|
|
Total |
|
|
|
On August 11, 2023, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on August 17, 2023, related to the sale and issuance of up to $
11
7. Stock-Based Compensation
Stock option activity under the 2019 Equity Incentive Plan (the “2019 Plan”) is set forth below for the six months ended June 30, 2024:
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
||||
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
||||
|
|
Shares |
|
|
Price Per |
|
|
Term |
|
|
Value |
|
||||
|
|
Outstanding |
|
|
Share |
|
|
(Years) |
|
|
(in thousands) |
|
||||
Balances at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Stock options forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balances at June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of June 30, 2024,
Restricted stock unit (“RSU”) activity under the 2019 Plan is set forth below for the six months ended June 30, 2024:
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
|
|
Outstanding |
|
|
Per Share |
|
||
Balances at December 31, 2023 |
|
|
|
|
$ |
|
||
RSUs granted |
|
|
— |
|
|
|
— |
|
RSUs vested and settled |
|
|
( |
) |
|
|
|
|
RSUs forfeited |
|
|
— |
|
|
|
— |
|
Balances at June 30, 2024 |
|
|
— |
|
|
$ |
— |
|
Stock-based compensation expense
Total stock-based compensation expense recognized for options and RSUs granted to both employees and non-employees and for the 2019 Employee Stock Purchase Plan (the “2019 ESPP”) was as follows (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of June 30, 2024, unrecognized stock-based compensation expense related to outstanding unvested stock options and RSUs that are expected to vest was $
The Company recorded stock-based compensation expense related to the 2019 ESPP of $
12
8. Net Loss Per Share
Net loss per share
The following table sets forth the computation of the basic and diluted net loss per share for the three and six months ended June 30, 2024 and 2023 (in thousands, except share and per share data):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares used to compute net loss per share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
For the three and six months ended June 30, 2024 and 2023,
Potential dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:
|
|
As of June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options issued and outstanding under the 2019 Plan and 2015 Stock Plan |
|
|
|
|
|
|
||
Estimated shares issuable under the 2019 ESPP |
|
|
|
|
|
|
||
RSUs subject to future vesting |
|
|
— |
|
|
|
|
|
Total |
|
|
|
|
|
|
||
9. Subsequent Events
On July 16, 2024, the Company's board of directors approved a reduction of the Company's workforce to conserve cash resources. The workforce reduction impacted
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2024. This discussion includes forward-looking statements based upon current beliefs, plans and expectations that involve risk, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results may differ materially from management’s expectations as a result of various factors, including, but not limited to, those discussed in the section titled “Risk Factors” in this report. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “may,” “plans,” “potential” “predicts,” “projects,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise any forward-looking statements to reflect new information or future events, even if new information comes available in the future. You should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.
Overview
We are a clinical stage immunology-based therapeutics company focused on discovering, developing and commercializing oral small molecule therapies for patients with significant unmet needs in inflammatory diseases and oncology. Utilizing our proprietary drug discovery and development engine, we are developing highly selective small molecules designed to modulate the critical immune responses underlying these diseases. Our two lead drug candidates, zelnecirnon (RPT193) and tivumecirnon (FLX475), each target C-C motif chemokine receptor 4 (“CCR4”), a drug target that potentially has broad applicability in inflammatory diseases and oncology.
In February 2024, the U.S. Food and Drug Administration (“FDA”) placed clinical holds on both our Phase 2b trial of zelnecirnon in atopic dermatitis (“AD”) and our Phase 2a trial of zelnecirnon in asthma. The clinical hold determination was based on a serious adverse event of liver failure requiring transplant in one patient in the AD trial. Dosing of zelnecirnon and enrollment of new trial participants were halted immediately in both clinical trials. In May 2024, we announced our decision to close and unblind both the Phase 2b trial in AD and the Phase 2a trial in asthma to inform our path forward and support our discussions with the FDA. Prior to the imposition of the clinical hold, a total of 229 patients had been enrolled in the Phase 2b AD trial, of which approximately 110 had completed the 16-week dosing period.
In April 2024, we announced safety and efficacy data from our ongoing Phase 2 trial of tivumecirnon in combination with the anti-PD-1 checkpoint inhibitor (“CPI”) pembrolizumab in the cohort of patients with advanced head and neck squamous cell carcinoma (“HNSCC”) whose disease progressed despite previous treatment with CPI therapy (“CPI-experienced”). The 32-patient CPI-experienced HNSCC cohort had heavily pretreated disease, with 69% of patients having received three or more (up to six) prior lines of treatment. In the entire cohort, confirmed responses were observed in 5/32 patients (15.6%) regardless of PD-L1 or HPV status. In the 23 patients known to have PD-L1+ disease (CPS ≥1), an ORR of 17.4% (4/23) was observed, and in the 18 patients known to have HPV+ disease, an ORR of 22.2% (4/18) was observed.
Financial Overview
Since commencing operations in 2015, we have devoted substantially all of our efforts and financial resources to building our research and development capabilities and establishing our corporate infrastructure. As a result, we have incurred net losses since inception. As of June 30, 2024, we had an accumulated deficit of $542.9 million. We have incurred net losses of $58.2 million and $54.6 million for the six months ended June 30, 2024 and 2023, respectively. We do not expect to generate product revenue unless and until we obtain approval for the commercialization of a drug candidate and we cannot assure you that we will ever generate significant product revenue or profits.
14
Since inception, we have financed our operations primarily through the sale of equity securities. As of June 30, 2024, we had cash and cash equivalents and marketable securities of $114.8 million and working capital of $105.7 million. On August 11, 2023, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on August 17, 2023, related to the sale and issuance of up to $450 million of the Company’s securities, including up to $150 million of shares of common stock that may be offered and sold from time to time in one or more “at-the-market” offerings pursuant to a Controlled Equity OfferingSM Sales Agreement (the “ATM Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) and Leerink Partners LLC. The ATM Sales Agreement replaced the Controlled Equity OfferingSM Sales Agreement, dated November 4, 2020, by and among the Company, Cantor and Stifel, Nicolaus & Company, Incorporated. During the three and six months ended June 30, 2024, the Company sold 365,316 shares of common stock in “at-the-market” offerings pursuant to the ATM Sales Agreement, for net proceeds of $9.0 million, after deducting commissions and other offering related costs. As of June 30, 2024, there were up to $140.6 million of shares of common stock available for future issuance under the ATM Sales Agreement.
On July 16, 2024, our board of directors approved a reduction of our workforce to conserve cash resources. The workforce reduction impacted 47 people, or approximately 40% of our headcount. All employees affected by the workforce reduction are or will be eligible to receive, among other things, severance payments and paid COBRA premiums for a specified time period post-termination. We estimate that we will incur approximately $0.9 million in restructuring charges in connection with the workforce reduction, consisting of cash-based expenses related to employee severance payments, benefits and related costs. We expect that the execution of the workforce reduction and the majority of the cash payments related to the restructuring will be substantially completed by the end of the third quarter of 2024.We believe our current cash and cash equivalents and marketable securities will be sufficient to fund our planned operations for a period of at least 12 months following the filing date of this Quarterly Report on Form 10-Q.
We expect to incur substantial expenditures in the foreseeable future as we expand our pipeline and advance our drug candidates through clinical development, undergo the regulatory approval process and, if our drug candidates are approved, launch commercial activities. Specifically, in the near term, we expect to continue to incur expenses relating to our ongoing and planned clinical trials, including efforts to resolve the clinical holds on the Phase 2b trial of zelnecirnon in AD and the Phase 2a trial in asthma, the development and validation of our manufacturing processes and other development activities.
We will need substantial additional funding to support our continuing operations and pursue our development strategy. Until we can generate significant revenue from sales of our drug candidates, if ever, we expect to finance our operations through equity or debt financings or other capital sources, including potential collaborations with other companies, or other strategic transactions. Adequate funding may not be available to us on acceptable terms or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our drug candidates or delay our efforts to expand our product pipeline. We may also be required to sell or license to other parties rights to develop or commercialize our drug candidates.
Components of Operating Results
Research and Development Expenses
We expense both internal and external research and development costs as such expenses are incurred. We track the external research and development costs incurred for each of our drug candidates. However, we do not track our internal research and development costs by drug candidate as the related efforts and their costs are typically spread across multiple drug candidates.
We account for non-refundable advance payments for goods or services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made.
Clinical trial costs are a component of research and development expenses. We expense costs for our clinical trial activities performed by third parties, including clinical research organizations (“CROs”) and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with the associated agreements. We use information received from our personnel and outside service providers to estimate the clinical trial costs incurred.
External research and development expenses consist primarily of costs incurred for the development of our drug candidates and include:
15
Internal research and development costs include:
Although we expect our research and development expenses to decrease in the near term due to the clinical holds that have been placed on the zelnecirnon clinical trials described above, we expect to devote substantial resources towards research and development during the next few years as we seek to complete existing and initiate additional clinical trials, pursue regulatory approval of zelnecirnon and tivumecirnon and advance other programs into clinical development. Predicting the timing or the final cost to complete our clinical program or validation of our manufacturing and supply processes is difficult and delays may occur because of many factors.
General and Administrative Expenses
General and administrative expenses consist principally of personnel-related costs, including payroll and stock‑based compensation for personnel in executive, finance, human resources, business and corporate development and other administrative functions; professional fees for legal, consulting and accounting services; rent and other facilities costs; depreciation and other general operating expenses not otherwise classified as research and development expenses.
We expect to continue to incur expenses to support our continued operations as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq Global Market, insurance expenses, investor relations expenses, audit fees, professional services and general overhead and administrative costs.
Other Income, Net
Our cash and cash equivalents and marketable securities are invested in money market funds, corporate debt securities, commercial paper and U.S. government agency securities. Other income, net, consists primarily of interest earned on our cash and cash equivalents and marketable securities and remeasurement gains and losses on foreign currency transactions.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 7, 2024. Our significant accounting policies are also described in “Summary of Significant Accounting Policies” in Note 2 of the accompanying condensed financial statements.
16
Results of Operations
Comparison of the Three Months Ended June 30, 2024 and 2023
The following table summarizes our results of operations for the periods indicated (in thousands):
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
June 30, |
|
|
|
|
||||||||||
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
22,640 |
|
|
|
21,642 |
|
|
|
998 |
|
|
|
5 |
% |
General and administrative |
|
6,690 |
|
|
|
6,722 |
|
|
|
(32 |
) |
|
* |
|
|
Total operating expenses |
|
29,330 |
|
|
|
28,364 |
|
|
|
966 |
|
|
|
3 |
% |
Loss from operations |
|
(29,330 |
) |
|
|
(28,364 |
) |
|
|
(966 |
) |
|
|
3 |
% |
Other income, net |
|
1,667 |
|
|
|
3,084 |
|
|
|
(1,417 |
) |
|
|
(46 |
)% |