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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                     

Commission File Number: 001-37708

 

Syndax Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Delaware

32-0162505

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification No.)

 

 

35 Gatehouse Drive, Building D, Floor 3

Waltham, Massachusetts

02451

(Address of Principal Executive Offices)

(Zip Code)

(781) 419-1400

(Registrant’s Telephone Number, Including Area Code)

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

SNDX

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of May 6, 2022, there were 56,232,326 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.

 

 

 

 

 


 

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which are subject to the “safe harbor” created by those sections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “would,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend,” “project” or “continue,” or the negative or plural of these terms or other comparable terminology.

Forward-looking statements include, but are not limited to, statements about:

 

the impact of the ongoing COVID-19 pandemic and its effects on our operations, research and development and clinical trials and potential disruption in the operations and business of third-party manufacturers, contract research organizations, or CROs, other service providers, and collaborators with whom we conduct business;

 

our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing;

 

the timing of the progress and receipt of data from the pivotal Phase 2 cohorts of the AUGMENT-101 trial of SNDX-5613 in patients with relapsed/refractory, or R/R, acute leukemias;

 

the timing of the progress and receipt of data from the AUGMENT-102 trial of SNDX-5613 in combination with chemotherapy in patients with R/R mutant nucleophosmin, NPM1, or mixed lineage leukemia rearranged, MLLr, acute leukemias, as well as the combination trials as part of the Leukemia & Lymphoma Society’s Beat® AML Master Clinical Trial and as part of the Australian Leukemia and Lymphoma Group (ALLG) INTERCEPT Master Clinical Trial;

 

the timing of the progress and receipt of data from the pivotal Phase 2 trial, AGAVE-201, of axatilimab in chronic Graft Versus Host Disease, or cGVHD;

 

our ability to replicate results in future clinical trials;

 

our expectations regarding the potential safety, efficacy or clinical utility of our product candidates as well as the potential use of our product candidates to treat various cancer indications and fibrotic diseases;

 

our ability to obtain and maintain regulatory approval for our product candidates and the timing or likelihood of regulatory filings and approvals for such candidates;

 

our ability to maintain our licenses with Bayer Pharma AG, Eddingpharm Investment Company Limited, UCB Biopharma Sprl, and Vitae Pharmaceuticals, Inc., a subsidiary of Allergan plc, which was acquired by AbbVie Inc.;

 

the success of our collaboration with Incyte Corporation, or Incyte, to further develop and commercialize axatilimab;

 

the potential milestone and royalty payments under certain of our license agreements;

 

the implementation of our strategic plans for our business and development of our product candidates;

 

the scope of protection we establish and maintain for intellectual property rights covering our product candidates and our technology;

 

the market adoption of our product candidates by physicians and patients;

 

developments relating to our competitors and our industry; and

 

business interruptions resulting from geo-political actions, including war or the perception that hostilities may be imminent, including, the ongoing conflict in Ukraine and terrorism, or natural disasters and public health epidemics.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this report in greater detail in the section titled “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

 

ii


 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Unaudited Financial Statements:

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three months ended
March 31, 2022 and 2021

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022
and 2021

 

3

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

4

 

 

 

 

 

Item 2.

 

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

 

15

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

51

 

 

 

 

 

Item 3.

 

Defaults upon Senior Securities

 

51

 

 

 

 

 

Item 6.

 

Exhibits

 

52

 

 

 

iii


 

 

Part I:

FINANCIAL INFORMATION

Item 1:

Financial Statements

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

188,773

 

 

$

221,965

 

Restricted cash

 

 

115

 

 

 

115

 

Short-term investments

 

 

209,157

 

 

 

217,971

 

Short-term deposits

 

 

12,979

 

 

 

6,894

 

Prepaid expenses and other current assets

 

 

9,032

 

 

 

1,451

 

Total current assets

 

 

420,056

 

 

 

448,396

 

Property and equipment, net

 

 

266

 

 

 

278

 

Right-of-use asset, net

 

 

873

 

 

 

983

 

Other assets

 

 

1,027

 

 

 

 

Total assets

 

$

422,222

 

 

$

449,657

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

8,231

 

 

$

5,669

 

Accrued expenses and other current liabilities

 

 

18,421

 

 

 

14,466

 

Current portion of term loan

 

 

3,568

 

 

 

-

 

Current portion of right-of-use liability

 

 

331

 

 

 

361

 

Derivative liability

 

 

 

 

 

187

 

Total current liabilities

 

 

30,551

 

 

 

20,683

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Right-of-use liability, less current portion

 

 

643

 

 

 

711

 

Term loan, less current portion

 

 

16,479

 

 

 

19,895

 

Total long-term liabilities

 

 

17,122

 

 

 

20,606

 

Total liabilities

 

 

47,673

 

 

 

41,289

 

Commitment and contingencies (Note 13)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares

   outstanding at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized;

   55,030,890 and 54,983,105 shares issued and outstanding at

   March 31, 2022 and December 31, 2021, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

956,054

 

 

 

952,019

 

Accumulated other comprehensive (income) loss

 

 

(640

)

 

 

45

 

Accumulated deficit

 

 

(580,871

)

 

 

(543,702

)

Total stockholders’ equity

 

 

374,549

 

 

 

408,368

 

Total liabilities and stockholders’ equity

 

$

422,222

 

 

$

449,657

 

 

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

1


 

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share and per share data)

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

License fees

$

 

 

$

379

 

Total revenues

 

 

 

 

379

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

30,022

 

 

 

21,870

 

General and administrative

 

6,836

 

 

 

5,672

 

Total operating expenses

 

36,858

 

 

 

27,542

 

Loss from operations

 

(36,858

)

 

 

(27,163

)

Other expense, net:

 

 

 

 

 

 

 

Interest expense

 

(651

)

 

 

(623

)

Interest income

 

224

 

 

 

120

 

Other income (expense)

 

116

 

 

 

(57

)

Total other expense, net

 

(311

)

 

 

(560

)

Net loss

$

(37,169

)

 

$

(27,723

)

Other comprehensive income:

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

$

(685

)

 

$

13

 

Comprehensive loss

$

(37,854

)

 

$

(27,710

)

Net loss attributable to common stockholders

$

(37,169

)

 

$

(27,723

)

Net loss per share attributable to common stockholders—basic

   and diluted

$

(0.63

)

 

$

(0.54

)

Weighted-average number of common shares used to compute

   net loss per share attributable to common stockholders

   —basic and diluted

 

58,978,615

 

 

 

51,499,831

 

 

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

 

2


 

 

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(37,169

)

 

$

(27,723

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

11

 

 

 

16

 

Amortization and accretion of investments

 

 

(53

)

 

 

113

 

Non-cash operating lease expense

 

 

110

 

 

 

101

 

Non-cash interest expense

 

 

152

 

 

 

114

 

Changes in fair value of derivate liability

 

 

(187

)

 

 

 

Stock-based compensation

 

 

3,478

 

 

 

2,767

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(14,691

)

 

 

(660

)

Accounts payable

 

 

2,562

 

 

 

3,021

 

Deferred revenue

 

 

 

 

 

(379

)

Accrued expenses and other liabilities

 

 

3,856

 

 

 

41

 

Net cash used in operating activities

 

 

(41,931

)

 

 

(22,589

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(42,266

)

 

 

(66,728

)

Proceeds from sales and maturities of short-term investments

 

 

50,448

 

 

 

37,500

 

Net cash provided by (used in) investing activities

 

 

8,182

 

 

 

(29,228

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from Employee Stock Purchase Plan

 

 

92

 

 

 

79

 

Proceeds from stock option exercises

 

 

465

 

 

 

881

 

Net cash provided by financing activities

 

 

557

 

 

 

960

 

NET DECREASE IN CASH, CASH EQUIVALENTS AND

   RESTRICTED CASH

 

 

(33,192

)

 

 

(50,857

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—beginning of

   period

 

 

222,080

 

 

 

115,358

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —end of period

 

$

188,888

 

 

$

64,501

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

470

 

 

$

493

 

 

 

 

 

 

 

 

 

 

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

3


 

SYNDAX PHARMACEUTICALS, INC.

(unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business

Syndax Pharmaceuticals, Inc. (“we,” “us,” “our” or the “Company”) is a clinical stage biopharmaceutical company developing an innovative pipeline of cancer therapies. We were incorporated in Delaware in 2005. We base our operations in Waltham, Massachusetts and we operate in one segment.

2. Basis of Presentation

The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The interim unaudited condensed financial statements have been prepared on the same basis as the annual audited financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022, and the results of operations and comprehensive loss and cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022.

Certain prior period amounts reported in our condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Specifically, short-term deposits as of December 31, 2021, of $6.9 million were originally reported within the caption Prepaid expense and other current assets and have been separately presented in the comparative presentation. Such reclassifications did not affect total assets, total revenues, loss from operations, or net loss.

In 2011, the Company established a wholly owned subsidiary in the United Kingdom, in 2014 the Company established a wholly owned US subsidiary, and in 2021, the Company established a wholly owned subsidiary in the Netherlands. There have been no material activities for these entities to date. All intercompany balances and transactions have been eliminated in consolidation.

3. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies, which are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, and the notes thereto are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 1, 2022.  Since the date of filing, there have been no material changes to the Company’s significant accounting policies except as noted below.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management 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 condensed consolidated financial statements and the reported amounts of costs and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgement. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.  These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.

Significant Risks and Uncertainties

We have implemented business continuity plans designed to address and mitigate the impact of the ongoing COVID-19 pandemic on our business.  We anticipate that the COVID-19 pandemic could have an impact on the clinical development timelines for one or more of our clinical programs.  The extent to which the COVID-19 pandemic impacts our business, our clinical

4


 

development, manufacturing of clinical and commercial drug substance and drug product, and regulatory efforts, our corporate development objectives and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease.  The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of our late-stage product candidate; delays or problems in the supply of our products, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements.  In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other accounting standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed below, we do not believe that the adoption of recently issued standards have or may have a material impact on our consolidated statements or disclosures.

4. Collaborative Research and License Agreements

Incyte Collaboration

In September 2021, the Company entered into the Incyte License and Collaboration Agreement with Incyte covering the worldwide development and commercialization of SNDX-6352 (axatilimab) (the “Incyte License”) and the Company entered into a share purchase agreement with Incyte (the “Incyte Share Purchase Agreement”) and collective with the Incyte License, the “Incyte Agreements”). These agreements are collectively referred to as the Incyte Agreements. Under the terms of the Incyte Agreements, Incyte will receive exclusive commercialization rights outside of the United States, subject to tiered royalty payment obligations. In the United States, Incyte and the Company will co-commercialize axatilimab, with the Company having the right to co-promote axatilimab, subject to the Company’s exercise of its co-promotion option.  Incyte will be responsible for leading all aspects of commercialization of axatilimab in the United States.  The Company and Incyte have agreed to co-develop axatilimab and to share development costs associated with the global and U.S. – specific clinical trials, with Incyte responsible for 55% of such costs and the Company responsible for 45% of such costs.  Incyte is responsible for 100% of future development costs for trials that are specific to ex-U.S. countries.  Each company will be responsible for funding any of its own independent development of activities. All development costs related to the collaboration will be subject to a joint development plan.

The Company is eligible to receive up to $220 million in future contingent development and regulatory milestones and up to $230 million in commercialization milestones. In addition, the Company is eligible to receive tiered royalties on potential net sales of the licensed product comprising axatilimab ranging from the low to mid double-digit percentages.

In December 2021, the Company received the upfront cash payment of $117 million and the Company issued 1,421,523 shares of common stock for an aggregate purchase price of $35 million, or $24.62 per share. Additionally, in December 2021, Incyte and the Company entered into a Letter Agreement which permitted Incyte to terminate the Incyte Agreements, if prior to March 23, 2022 either Incyte or the Company received a notification from any government authority, challenging the transactions completed by the Incyte Agreements, hereafter referred to as the Termination Right. If such challenged occurred and Incyte exercised the Termination Right, the Incyte Agreement would be rescinded and the upfront payment of $117 million would be returned to Incyte and a cash settlement on the sale of the Company’s common stock would be made by to make the parties whole.  

In connection with the closing of this transaction in December 2021, the Company determined that the cash settlement feature of the Letter Agreement represented an embedded derivative requiring bifurcation and separate accounting recognition at fair value. Accordingly, the Company recorded the common stock issued to Incyte at fair value of $24.8 million, $0.6 million as a derivative liability and $126.6 million as license revenue as of December 31, 2021.  

On March 23, 2022, the Letter Agreement entered in December 2021, expired. Prior to the expiration date, the Company did not receive notification from any government authority, challenging the transaction and Incyte did not exercise the Termination Right.  Accordingly, the Company released the remaining $187,000 liability related to the Letter Agreement as of March 31, 2022.

5


 

As of March 31, 2022, the Company has recorded $6.3 million as a reimbursable expense due from Incyte related to development costs under the Agreement.  Additionally, the Company has recorded approximately $96,000 as a collaboration expense due to Incyte for development costs incurred by Incyte.  

5. Net Loss per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods. The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

 

(In thousands, except share and per

share data)

 

Numerator—basic and diluted:

 

 

 

 

 

 

 

Net loss

$

(37,169

)

 

$

(27,723

)

Net loss attributable to common

   stockholders—basic and diluted

$

(37,169

)

 

$

(27,723

)

Net loss per share attributable to common

   stockholders—basic and diluted

$

(0.63

)

 

$

(0.54

)

Denominator—basic and diluted:

 

 

 

 

 

 

 

Weighted-average number of common shares

   used to compute net loss per share attributable

   to common stockholders—basic and diluted

 

58,978,615

 

 

 

51,499,831

 

 

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares):

 

 

March 31,

 

 

 

2022

 

 

2021

 

Options to purchase common stock

 

 

8,419,541

 

 

 

7,404,823

 

Employee Stock Purchase Plan

 

 

10,805

 

 

 

8,214

 

Non-vested restricted stock units (RSUs)

 

 

256,583

 

 

 

124,083

 

 

As discussed in Note 12, in January 2020, the Company sold 3,036,719 shares of common stock at $8.00 per share and pre-funded warrants to purchase 1,338,287 shares of common stock.  In February 2021, 250,000 pre-funded warrants were exchanged for shares of common stock in a cash exercise and in November 2021, 475,784 pre-funded warrants were exchanged for shares of common stock in a cashless exercise.  As of March 31, 2022, 3,975,024 pre-funded warrants were considered issued and outstanding.

6. Significant Agreements

Vitae Pharmaceuticals, Inc.

In October 2017, the Company entered into a license agreement (the “Allergan License Agreement”) with Vitae Pharmaceuticals, Inc., a subsidiary of Allergan (“Allergan”), under which Allergan granted the Company an exclusive, sublicensable, worldwide license to a portfolio of preclinical, orally available, small molecule inhibitors of the interaction of menin with Mixed Lineage Leukemia (“MLL”) protein (the “Menin Assets”). The Company made a nonrefundable upfront payment of $5.0 million to Allergan in the fourth quarter of 2017. Additionally, subject to the achievement of certain milestone events, the Company may be required to pay Allergan up to $99.0 million in one-time development and regulatory milestone payments over the term of the Allergan License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes the Menin Assets, the Company will also be obligated to pay Allergan low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $70.0 million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with Allergan. The Company is solely responsible for the development and commercialization of the Menin Assets. Each party may terminate the Allergan License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the Allergan License Agreement at will at any time upon advance written notice to Allergan. Allergan may terminate the Allergan License Agreement if the Company or any of its

6


 

affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the Allergan License Agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country.

As of the date of the Allergan License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. In June 2019, the Company achieved certain development and regulatory milestones and recorded $4.0 million as research and development expense. In February 2022, the Company achieved certain development and regulatory milestones and recorded $2.0 million as research and development expense, which was paid in March 2022.

UCB Biopharma Sprl

In 2016, the Company entered into a license agreement (the “UCB License Agreement”) with UCB Biopharma Sprl (“UCB”), under which UCB granted to the Company a worldwide, sublicenseable, exclusive license to UCB6352, which the Company refers to as axatilimab, an investigational new drug (“IND”) ready anti-CSF-1R monoclonal antibody. The Company made a nonrefundable upfront payment of $5.0 million to UCB in 2016. Additionally, subject to the achievement of certain milestone events, the Company may be required to pay UCB up to $119.5 million in one-time development and regulatory milestone payments over the term of the UCB License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes axatilimab, the Company will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250.0 million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with UCB. Under this license, the Company is solely responsible for the development and commercialization of axatilimab. Each party may terminate the UCB License Agreement for the other party’s uncured material breach or insolvency; and the Company may terminate the UCB License Agreement at will at any time upon advance written notice to UCB. UCB may terminate the UCB License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the UCB License Agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country.

As of the date of the UCB License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. As a result, in 2016, the upfront payment of $5.0 million was recorded as research and development expense in the consolidated statements of operations. Since the start of the license agreement, the Company achieved certain development and regulatory milestones and has recorded $6.0 million as research and development expense.

Eastern Cooperative Oncology Group

In March 2014, the Company entered into the ECOG Agreement with Eastern Cooperative Oncology Group, a contracting entity for the Eastern Cooperative Oncology Group—American College of Radiology Imaging Network Cancer Research Group (“ECOG-ACRIN”), that describes the parties’ obligations with respect to the NCI-sponsored pivotal Phase 3 clinical trial of entinostat. Under the terms of the ECOG Agreement, ECOG-ACRIN will perform this clinical trial in accordance with the clinical trial protocol and a mutually agreed scope of work. The Company is providing a fixed level of financial support for the clinical trial through an upfront payment of $0.7 million and a series of payments of up to $1.0 million each that are comprised of milestone payments through the completion of enrollment and time-based payments through the completion of patient monitoring post-enrollment. In addition, the Company is obligated to supply entinostat and placebo to ECOG-ACRIN for use in the clinical trial. From the second quarter of 2016 through the fourth quarter of 2018, the Company has entered into a number of amendments to the agreement to provide for additional study activities resulting in an increase of the contractual obligation of $5.3 million. The Company has agreed to provide this additional financial support to fund the additional activities required to ensure that the E2112 clinical trial will satisfy FDA registration requirements.

In May 2020, the Company announced that the E2112 trial did not achieve the primary endpoint of demonstrating a statistically significant overall survival benefit over hormone therapy alone. As a result, the Company has decided to deprioritize the entinostat program to focus resources on advancing the remainder of its pipeline. As of March 31, 2022, the Company’s aggregate payment obligations under this agreement are approximately $24.7 million; and its remaining payment obligations are approximately $3.2 million, which are estimated to be paid over a period of approximately one year. As of March 31, 2022, the Company has accrued $3.0 million related to the ECOG Agreement.

7


 

Data and inventions from the Phase 3 clinical trial are owned by ECOG-ACRIN. The Company has access to the data generated in the clinical trial, both directly from ECOG-ACRIN under the ECOG Agreement as well as from the NCI. Additionally, ECOG-ACRIN has granted the Company a non-exclusive royalty-free license to any inventions or discoveries that are derived from entinostat as a result of its use during the clinical trial, along with a first right to negotiate an exclusive license to any of these inventions or discoveries. Either party may terminate the ECOG Agreement in the event of an uncured material breach by the other party or if the U.S. Food and Drug Administration (“FDA”) or National Cancer Institute (“NCI”) withdraws the authorization to perform the clinical trial in the United States. The parties may jointly terminate the ECOG Agreement if the parties agree that safety-related issues support termination of the clinical trial. The Company records the appropriate clinical trial expenses in its financial statements by matching those expenses with the period in which the services and efforts are expended. The Company accounts for these expenses according to the progress of the clinical trial as measured by patient enrollment and the timing of various aspects of the clinical trial. The Company determines accrual estimates through financial models, taking into account discussion with applicable personnel and ECOG-ACRIN as to the progress or state of consummation of the clinical trial or the services completed.

Bayer Pharma AG (formerly known as Bayer Schering Pharma AG)

In March 2007, the Company entered into a license agreement (the “Bayer Agreement”) with Bayer Schering Pharma AG (“Bayer”) for a worldwide, exclusive license to develop and commercialize entinostat and any other products containing the same active ingredient. Under the terms of the Bayer Agreement, the Company paid a nonrefundable upfront license fee of $2.0 million and is responsible for the development and marketing of entinostat. The Company recorded the $2.0 million license fee as research and development expense during the year ended December 31, 2007, as it had no alternative future use. The Company will pay Bayer royalties on a sliding scale based on net sales, if any, and make future milestone payments to Bayer of up to $150.0 million in the event that certain specified development and regulatory goals and sales levels are achieved.

7. Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, accounts payable, and accrued expenses approximated their estimated fair values due to the short-term nature of these financial instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an 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. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.

The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

 

 

Level 1—

Quoted prices (unadjusted) in active markets that are accessible at the market date for identical unrestricted assets or liabilities.

 

Level 2—

Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs 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 and that are significant to the fair value of the assets or liabilities.

8


 

The table below presents information about the Company’s assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques the Company utilized to determine such fair values (in thousands):

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

(unadjusted)

 

 

Other

 

 

Significant

 

 

 

Total

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

Carrying

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

(In thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

188,773

 

 

$

188,773

 

 

$

 

 

$

 

Short-term investments

 

 

209,157

 

 

 

 

 

 

209,157

 

 

 

 

Total assets

 

$

397,930

 

 

$

188,773

 

 

$

209,157

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

221,964

 

 

$

96,816

 

 

$

125,148

 

 

$

 

Short-term investments

 

 

217,971

 

 

 

 

 

 

217,971

 

 

 

 

Total assets

 

$

439,935

 

 

$

96,816

 

 

$

343,119

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

 

187

 

 

 

 

 

 

 

 

 

187

 

Total liabilities

 

$

187

 

 

$

 

 

$

 

 

$

187

 

 

There have been no material impairments of our assets measured and carried at fair value during the period ended March 31, 2022 and 2021. In addition, there have been no changes in valuation techniques during the period ended March 31, 2022 and 2021.  The fair value of Level 1 instruments classified as cash equivalents are valued using quoted market prices in active markets. The fair value of Level 2 instruments classified as cash equivalents and short – term investments was determined other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and fair value is determined using models or other valuation methodologies.  The fair value of the Level 3 instrument is determined using unobservable inputs and the Company utilized a Black Scholes valuation model as of December 9, 2021 (initial recognition) and December 31, 2021, respectively.

The following table summarizes the fair value rollforward (in thousands):

 

 

Fair Value

 

Derivative liability:

 

 

 

 

Beginning Balance 12/31/21

 

$

187

 

Change in fair value

 

 

(187

)

Ending Balance 3/31/22

 

$

 

The change in fair value of the Level 3 instrument, was directly related to the March 23, 2022, the Letter Agreement entered in December 2021 with Incyte, having expired. At the time of the expiration of the Letter Agreement, Incyte no longer had the ability to terminate the contract, as such the probability of payment to Incyte was assessed to be zero. Accordingly, the Company released the remaining $187,000 liability related to the Letter Agreement as of March 31, 2022.

The short-term investments are classified as available-for-sale securities. As of March 31, 2022, the remaining contractual maturities of the available-for-sale securities were less than 12 months, and the balance in the Company’s accumulated other comprehensive income was comprised solely of activity related to the Company’s available-for-sale securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities during the three months ended March 31, 2022 and 2021. As a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the same periods. The Company has a limited number of available-for-sale securities in insignificant loss positions as of March 31, 2022, which the

9


 

Company does not intend to sell and has concluded it will not be required to sell before recovery of the amortized cost for the investment at maturity.

The following table summarizes the available-for-sale securities:

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

 

 

(In thousands)

 

March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

163,462

 

 

$

 

 

$

(572

)

 

$

162,890

 

Corporate bonds

 

 

4,084

 

 

 

 

 

 

(9

)

 

 

4,075

 

US Treasury

 

 

42,251

 

 

 

 

 

 

(59

)

 

 

42,192

 

 

 

$

209,797

 

 

$

 

 

$

(640

)

 

$

209,157

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

306,715

 

 

$

70

 

 

$

(17

)

 

$

306,768

 

Corporate bonds

 

 

22,147

 

 

 

 

 

 

(6

)

 

 

22,141

 

US Treasury

 

 

14,212

 

 

 

 

 

 

(2

)

 

 

14,210

 

 

 

$

343,074

 

 

$

70

 

 

$

(25

)

 

$

343,119

 

 

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

March 31, 2022

 

 

December 31, 2021

 

Prepaid insurance

 

$

2,154

 

 

$

642

 

Interest receivable on investments

 

 

158

 

 

 

429

 

Reimbursable costs

 

 

6,260

 

 

 

 

Other

 

 

460

 

 

 

380

 

Total prepaid expenses and other current assets

 

$

9,032

 

 

$

1,451

 

 

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

March 31, 2022

 

 

December 31, 2021

 

Accrued clinical costs

 

$

8,320

 

 

$

7,760

 

Accrued compensation and related costs

 

 

1,937

 

 

 

4,342

 

Accrued professional fees

 

 

520

 

 

 

662

 

Accrued research and development costs - other

 

 

5,750

 

 

 

 

Other

 

 

1,893

 

 

 

1,702

 

Total accrued expenses and other current liabilities

 

$

18,421

 

 

$

14,466

 

 

10. Stock-Based Compensation

In January 2022, the number of shares of common stock available for issuance under the 2015 Omnibus Incentive Plan (“2015 Plan”) was increased by 2,198,134 shares due to the automatic annual provision to increase shares available under the 2015 Plan. As of March 31, 2022, the total number of shares of common stock available for issuance under the 2015 Plan was 1,534,513. The Company recognized stock-based compensation expense related to the issuance of stock option awards to employees and non-employees and related to the 2015 Employee Stock Purchase Plan (“ESPP”) in the condensed consolidated statements of comprehensive loss as follows:

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

 

(In thousands)

 

Research and development

$

1,353

 

 

$

903

 

General and administrative

 

2,125

 

 

 

1,864

 

Total

$

3,478

 

 

$

2,767

 

10


 

 

 

Compensation expense by type of award in the three months ended March 31, 2022 and 2021 was as follows:

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

 

(In thousands)

 

Stock Options

$

2,924

 

 

$

2,346

 

Restricted Stock Units

 

516

 

 

 

380

 

Employee Stock Purchase Plan

 

38

 

 

 

41

 

Total

$

3,478

 

 

$

2,767

 

 

During the three months ended March 31, 2022, the Company granted 1,560,850 stock options to certain executives and employees having service-based vesting conditions. The grant date fair value of the options granted in the three months ended March 31, 2022, was $16.9 million, or $10.83 per share on a weighted-average basis and will be recognized as compensation expense over the requisite service period of two to four years.

In 2019, the Company granted to certain employees 583,000 performance-based vesting criteria (“2019 Performance Awards”), primarily related to the achievement of certain clinical and regulatory development milestones related to product candidates. Additionally, in 2022, the Company granted to certain employees 140,000 performance-based vesting criteria (“2022 Performance Awards”), primarily related to the achievement of certain regulatory development milestones related to product candidates. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.

In the fourth quarter of 2020 one of the performance milestones of the 2019 Performance Awards was achieved and of the associated 194,331 stock options, 64,777 stock options vested, and 388,669 options were cancelled. In 2021, 64,780 stock options vested and in 2022 the remaining 59,443 (net of cancellations) will vest. The Company recorded approximately $64,000 of stock compensation expense associated with these awards for the three months ended March 31, 2022, and 2021. For the remaining milestones, the performance conditions were not met as of March 31, 2022. Therefore, no expense has been recognized related to these awards for the three months ended March 31, 2022.

In the first quarter 2022, management estimated one of the milestones, for the 2022 Performance Awards, was probable of achievement and, as such, the Company recorded approximately $83,000 of stock compensation expense for these awards for the three months ended March 31, 2022. As of March 31, 2022, all the 140,000 stock options outstanding were unvested, and no options had been cancelled.  

During the three months ended March 31, 2022, 28,839 options were exercised for cash proceeds of approximately $465,000 and 100,954 options were exercised for cash proceeds of approximately $881,000 in the three months ended March 31,2021.

As of March 31, 2022, there was $37.6 million of unrecognized compensation cost related to employee and non-employee unvested stock options granted under the 2015 and 2007 Plans, which is expected to be recognized over a weighted-average remaining service period of 3.4 years. Stock compensation costs have not been capitalized by the Company.

Restricted stock units

RSUs awarded to Board of Directors or employees vest on either i) on the one – year anniversary date of the related grant or ii) 25% on each anniversary for 4 years. The following table summarizes our RSU activity:

 

 

Number of

Shares

 

 

Weighted

Average

Grant Date Fair Value

 

UnvestedDecember 31, 2021

 

 

132,333

 

 

$

20.11

 

Granted (1)

 

 

128,000

 

 

$

15.79

 

Vested

 

 

(3,750

)

 

$

9.47

 

Forfeited

 

 

-

 

 

$

-

 

Unvested—March 31, 2022

 

 

256,583