Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this report. Some of the information contained in this discussion and analysis and set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements, based on current expectations and related to future events and our future financial and operational performance, that involve risks and uncertainties. You should review the discussion above under the heading “Summary of Risk Factors,” the risk factors detailed further in Item 1A, "Risk Factors" of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2020, and, if applicable, those included under Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Business Overview
We are a clinical-stage innovative biopharmaceutical company dedicated to developing novel medicines for people with cancer. We combine proven scientific expertise with a passion for developing novel small molecule drugs that target disease pathways for potential applications in oncology. We are focused on advancing eganelisib, also known as IPI-549, an orally administered, clinical-stage, immuno-oncology product candidate that reprograms macrophages through selective inhibition of the enzyme phosphoinositide-3-kinase-gamma, or PI3K-gamma. We have retained worldwide development and commercialization rights to eganelisib and we believe eganelisib is the only selective inhibitor of PI3K-gamma being investigated in clinical trials.
Clinical Development Program
We are conducting the following clinical trials investigating eganelisib in solid tumors:
MARIO-3 (MAcrophage Reprogramming in Immuno-Oncology-3)
MARIO-3 is a multi-arm Phase 2 study designed to evaluate eganelisib in the front-line setting for triple negative breast cancer, or TNBC, and front-line renal cell carcinoma, or RCC. The TNBC cohort is evaluating eganelisib in combination with atezolizumab, also known as Tecentriq®, and nab-paclitaxel, also known as Abraxane®, in up to 60 patients with front-line TNBC. The RCC cohort is evaluating eganelisib in combination with atezolizumab and bevacizumab, also known as Avastin®, in up to 30 patients with front-line RCC. We entered into a clinical supply agreement with F. Hoffmann-La Roche Ltd., or Roche, under which Roche has agreed to supply atezolizumab and bevacizumab for our use in MARIO-3.
On July 27, 2021, we presented updated data from the TNBC cohort of MARIO-3. As of the June 26, 2021 data cutoff date, 43 patients were enrolled in the study with 38 patients evaluable for efficacy. The data include the following findings:
•86.8% (33/38) of evaluable patients demonstrated tumor reduction.
•Disease control rate (DCR)
◦78.2% (18/23) DCR in PD-L1 negative patients: complete response (CR) 0% (0/23), partial response (PR) 47.8% (11/23), stable disease (SD) 30.4% (7/23)
◦91.7% (11/12) DCR in PD-L1 positive patients: CR 16.7% (2/12), PR 50% (6/12), SD 25% (3/12)
◦84.2% (32/38) DCR in all patients: CR 5.3% (2/38), PR 50% (19/38), SD 28.9% (11/38)
•Preliminary progression free survival (PFS)
◦In PD-L1(-) patients, PFS was extended as compared to benchmark data for atezolizumab and nab-paclitaxel alone, increasing from 5.6 months to 7.3 months (3.5, NA).
◦In PD-L1(+) patients, PFS was extended as compared to benchmark data for atezolizumab and nab-paclitaxel alone, increasing from 7.5 to 11.2 months (5.3, 11.2).
◦In the ITT population, PFS was extended as compared to benchmark data for atezolizumab and nab-paclitaxel alone, increasing from 7.2 months to 7.4 months (5.3, NA).
MARIO-3 did not demonstrate any new or additive safety signals compared to benchmark trials. The most common treatment emergent adverse events (TEAEs), all causality, were nausea (51.2%), fatigue (48.8%), alopecia (32.6%), diarrhea (32.6%), rash maculo-papular (30.2%), increased ALT (27.9%) with only one Grade 4, and increased AST (25.6%) with one Grade 4. No Hy’s Law or Grade 5 hepatic AEs were reported, and only one patient permanently discontinued study treatment due to an elevated liver function test. “Hy’s Law” describes a set of criteria that, when present, indicate that a patient is experiencing a drug-induced liver injury with a 10% to 50% chance of mortality or need for a liver transplant.
Quantification across 11 paired tumor biopsies shows increased immune activation and decreased immune suppression including an increase in CD8+ T cells, activated T cells, and anti-tumor M1 macrophages and a decrease in tumor cells and pro-tumor M2 macrophages resulting in an increase in the M1:M2 ratio.
Paired tumor biopsy data show 5 of 8 PD-L1(-) patients converting to PD-L1(+) two months after treatment utilizing the 1% PD-L1 cutoff standard. PD-L1 expression also increased in the three PD-L1(+) patients who started the study above the 1% cutoff. None of the patients converting to PD-L1(+) or PD-L1(+) patients who experienced increased PD-L1 expression had disease progression.
We expect to complete enrollment for the MARIO-3 TNBC cohort in the second half of 2021 and present updated data in the fourth quarter.
Enrollment is complete in the RCC cohort, and we expect to present data from the RCC cohort in the first half of 2022.
MARIO-275
MARIO-275 is our global, randomized, placebo-controlled Phase 2 study evaluating the effect of adding eganelisib to nivolumab, also known as Opdivo®, in checkpoint-naïve advanced urothelial cancer, or UC, patients whose cancer has progressed or recurred following treatment with platinum-based chemotherapy. Nivolumab is an immune checkpoint inhibitor therapy commercialized by Bristol Myers Squibb Company, or BMS, that targets programmed death receptor 1, or PD-1, a checkpoint protein that helps regulate the body’s immune system.
On July 27, 2021, we presented updated data from MARIO-275. The data include the following findings:
•49 patients were enrolled in the trial with the last patient enrolled in June 2020.
•Median overall survival (mOS) in the intent to treat (ITT) population was 15.4 months (6.2, NE) on the eganelisib plus nivolumab combination arm as compared to 7.9 months (2.3, NE) on the control arm of nivolumab alone with a hazard ratio of 0.62 (0.28, 1.36), which reflects a 38% lower probability of death on the combination arm.
◦At the one-year landmark, 59% of patients in the ITT population receiving the eganelisib plus nivolumab combination remained alive, compared to 32% in the nivolumab control arm.
•The mOS benefit observed in PD-L1(-) patients was the same as in the ITT population, with a mOS of 15.4 months (4.7, NE) on the eganelisib plus nivolumab combination arm as compared to 7.9 months (1.9, NE) on the control arm of nivolumab alone with a hazard ratio of 0.60 (0.21, 1.71), which reflects a 40% lower probability of death on the combination arm.
◦At the one-year landmark, 54% of the PD-L1(-) patients receiving the eganelisib plus nivolumab combination remained alive, compared to 17% in the nivolumab control arm.
The combination of eganelisib and nivolumab was well tolerated at the 30 mg once daily dose. The most common TEAEs across all doses, all causality, were pyrexia (33.3%), decreased appetite (30.3%), pruritus (27.3%), asthenia (27.3%), rash (27.3%), disease progression (27.3%) and increased alanine aminotransferase (24.2%); and the most common ≥Grade 3 TEAEs across all doses, all causality, were disease progression (27.3%), anemia (12.1%), and hepatic AEs including hepatotoxicity (15.2%), increased ALT (12.1%), and increased AST (12.1%) with no Hy’s Law. No Grade 5 hepatic AEs were reported.
Gene expression studies from peripheral blood, followed by gene set enrichment analysis using Hallmark gene signature sets show the pro-inflammatory interferon gamma and interferon alpha pathways were the most significantly enriched pathways in the combination arm when comparing Day 15 to baseline, regardless of PD-L1 status, with higher enrichment scores and lower p values than on the control arm. This data is consistent with eganelisib’s mechanism of action which decreases immune suppression and increases immune activation.
On February 11, 2021, we presented data at the American Society of Clinical Oncology Genitourinary Cancers Symposium, or ASCO GU, from MARIO-275. The greatest benefit of the combination of eganelisib and nivolumab was observed in the patient population (n=23) with tumors expressing low levels of programmed death ligand 1, or PD-L1, with improvement over nivolumab monotherapy (n=7) in overall response rate, or ORR (26% vs. 14%); disease control rate, or DCR (57% vs. 14%); and best responses of complete response, or CR (9% vs. 0%), and stable disease, or SD (30% vs. 0%). Of PD-L1 low patients in the combination arm, 58% (11 of 19) achieved a reduction in tumor burden, compared to 17% (1 of 6) in the nivolumab plus placebo arm. Additionally, PD-L1 low patients demonstrated an extended progression free survival, or PFS, with a hazard ratio of 0.54, which reflects a 46% reduction in probability of disease progression (median PFS of 9.1 weeks on combination arm versus 7.9 weeks on the nivolumab plus placebo arm).
MARIO-1
Enrollment is complete in MARIO-1, our Phase 1/1b clinical study designed to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics, and activity for eganelisib — both as a monotherapy and in combination with nivolumab — in 224 patients with advanced solid tumors. The study includes a dose escalation portion and a combination therapy expansion portion evaluating patients dosed at 40 mg QD of eganelisib in combination with the standard regimen of nivolumab in the following forms of cancer: TNBC, melanoma, squamous cell carcinoma of the head and neck, or SCCHN, non-small cell lung cancer, mesothelioma, adrenocortical carcinoma, and those with high baseline blood levels of MDSCs. Safety data demonstrates that eganelisib combined with nivolumab is well tolerated at all doses tested, up to the recommended combination therapy expansion dose of eganelisib at 40 mg QD plus the standard regimen of nivolumab. No maximum tolerated dose was determined, and there have been no treatment-related deaths.
We provided updated data for the melanoma expansion cohort and SCCHN expansion cohort at the 2021 Annual Meeting of the Society for Immunotherapy of Cancers, or SITC. Data from both cohorts shows evidence of clinical activity in patients not expected to benefit from checkpoint inhibitor, or CPI, monotherapy due to immediate prior progression on a CPI. Safety data from both cohorts indicates the combination therapy was generally well tolerated and associated with a favorable safety profile.
The melanoma cohort achieved a DCR of 52.6% (10 of 19 patients) and an ORR of 21.1% (4 of 19 patients) in patients with immediate prior progression on CPI therapy and two or fewer prior lines of therapies, and reversal of progressive disease in patients with immediate prior treatment with anti-PD1/PD-L1 therapy was observed. Translational data validate the on-mechanism eganelisib effect of decreased immune suppression as measured by MDSC levels, and increased immune activation as measured by increased levels of previously exhausted T cells.
The SCCHN cohort achieved a DCR of 40% (4 of 10 evaluable patients) and an ORR of 20% (2 of 10 evaluable patients) in patients with immediate prior progression on CPI therapy and two or fewer prior lines of therapy, and reversal of progressive disease with immediate prior treatment with an anti-PD1/PD-L1 therapy was observed.
Arcus Collaboration Trial
In December 2020, Arcus Biosciences, Inc., or Arcus, presented data at SABCS from the Phase 1/1b clinical study collaboration between Infinity and Arcus on ARC-2, a study designed to evaluate each company’s respective drug candidates in up to 40 patients with previously treated, advanced TNBC and ovarian cancer. The ARC-2 SABCS data showed that a novel triple-combination regimen of eganelisib in combination with etrumadenant, Arcus’s dual adenosine receptor antagonist, and liposomal doxorubicin chemotherapy, also known as Doxil®, lead to an increase in response in TNBC patients.
Business Update Regarding COVID-19
In December 2019, a novel strain of coronavirus surfaced causing the respiratory disease COVID-19. This disease has spread worldwide and was deemed a “pandemic” by the World Health Organization on March 11, 2020. The following guidance regarding the impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change. We cannot know with certainty what the ultimate impact of the pandemic will be.
We are continuing to evaluate enrollment trends in our studies as well as the impact of COVID-19 on our clinical programs. Patients enrolled on MARIO-275, MARIO-3 and MARIO-1 have continued treatment and study visits with limited disruption to date, and we are working closely with trial sites to support the continued treatment of patients in compliance with study protocols. New patient screening and enrollment are being assessed on a case-by-case basis and are ongoing for the TNBC cohort in MARIO-3. There are no anticipated disruptions to drug supply. The safety and well-being of our employees remains a top priority, and we are working to mitigate risk while minimizing disruptions through our work-from-home policy. We believe we are well suited to operate remotely as a clinically focused company.
Alliances, Collaborations, and Other Arrangements
We have primarily incurred operating losses since inception and will continue to fund our operations through collaboration and license arrangements or other strategic arrangements, as well as through the sale of securities or incurring debt, until such time as we are able to generate significant revenue from product sales, if ever. Such arrangements have provided access to breakthrough science, significant research and development support and funding, supply of clinical trial materials, and innovative drug development programs, all intended to help us realize the full potential of our product pipeline.
In July 2010, we entered into a development and license agreement with Intellikine, Inc., or Intellikine, under which we obtained rights to discover, develop and commercialize pharmaceutical products targeting the gamma and/or delta isoforms of PI3K, including eganelisib and duvelisib, or Copiktra®, an oral, dual inhibitor of PI3K delta and gamma. We licensed our
rights related to the development of duvelisib to Verastem Inc., or Verastem, in 2016. In September 2020, Verastem completed a disposition of its rights, title, and interest in and to duvelisib to Secura Bio, Inc., or Secura Bio, wherein Secura Bio assumed all liabilities and obligations under the Verastem Agreement. We now refer to the Verastem Agreement as the Secura Bio Agreement. In January 2012, Intellikine was acquired by Takeda Pharmaceutical Company Limited, or Takeda. In December 2012, we amended and restated our development and license agreement with Takeda and further amended the agreement in July 2014, September 2016, July 2017, and March 2019. We refer to the amended and restated development and license agreement, as amended, as the Takeda Agreement. We are obligated to pay Takeda up to $3.0 million in remaining success-based development milestone payments and up to $165.0 million in remaining regulatory and commercialization success-based milestone payments, for one product candidate other than duvelisib, which could be eganelisib.
Financial Overview
Revenue
To date, all our revenue has been generated under collaboration agreements, including payments to us of upfront license fees, funding or reimbursement of research and development efforts, milestone payments if specified objectives are achieved, and/or royalties on product sales.
We recognize revenue when we transfer goods or services to customers in an amount that reflects the consideration that we expect to receive for those goods or services. These principles are applied using a five-step model: 1) identify the customer contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied. We evaluate all promised goods and services within a customer contract and determine which of those are separate performance obligations. This evaluation includes an assessment of whether the good or service is capable of being distinct and whether the good or service is separable from other promises in the contract. When a performance obligation is satisfied, we recognize as revenue the amount of the transaction price, excluding estimates of variable consideration that are constrained, that is allocated to that performance obligation. For contracts that contain variable consideration, such as milestone payments, we estimate the amount of variable consideration by using either the expected value method or the most likely amount method. In making this assessment, we evaluate factors such as the clinical, regulatory, commercial and other risks that must be overcome to achieve the milestone. Each reporting period we re-evaluate the probability of achievement of such milestones and any related constraints. We will include variable consideration, without constraint, in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
We recognize sales-based milestones and royalty revenue based upon net sales by the licensee of licensed products in licensed territories, and in the period the sales occur under the sales- and usage-based royalty exception when the sole or predominate item to which the royalty relates is a license to intellectual property.
In the event of an early termination of a collaboration agreement, any contract liabilities would be recognized in the period in which all our obligations under the agreement have been fulfilled.
Research and Development Expense
We are a drug development company. Our research and development expense has historically consisted primarily of the following:
•compensation of personnel associated with research and development activities;
•clinical testing costs, including payments made to contract research organizations;
•costs of combination and comparator drugs used in clinical studies;
•costs of manufacturing product candidates for preclinical testing and clinical studies;
•costs associated with the licensing of research and development programs;
•preclinical testing costs, including costs of toxicology studies;
•fees paid to external consultants;
•fees paid to professional service providers for independent monitoring and analysis of our clinical trials;
•costs for collaboration partners to perform research and development activities, including development milestones for which a payment is due when achieved;
•depreciation of equipment; and
•allocated costs of facilities.
General and Administrative Expense
General and administrative expense primarily consists of compensation of personnel in executive, finance, accounting, legal and intellectual property, information technology infrastructure, corporate communications, and human resources functions. Other costs include facilities costs not otherwise included in research and development expense and professional fees for legal and accounting services.
Royalty Expense
Royalty expense represents the expense associated with amounts owed to third parties as a result of royalty revenue recognized and the amounts owed by us to Takeda in relation to the sale of future royalties.
Other Income and Expense
Other income and expense typically consist of interest earned on cash, cash equivalents and available-for-sale securities, non-cash interest expense, and changes in fair value of the warrant liability.
Critical Accounting Policies and Significant Judgments and Estimates
The discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to cumulative revenue related to variable consideration, accrued expenses, estimates of future net royalty payments used in the calculation of our liability related to the sale of future royalties, and assumptions in the valuation of stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.
There have been no material changes to our critical accounting policies during the six months ended June 30, 2021. Please refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report on Form 10-K for a discussion of our critical accounting policies and significant judgments and estimates.
Results of Operations
The following table summarizes our results of operations for each of the three and six months ended June 30, 2021 and 2020, together with the change in these items in dollars and as a percentage:
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Three Months Ended June 30,
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$ Change
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% Change
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2021
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2020
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(in thousands)
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|
|
|
|
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Royalty revenue
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$
|
512
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$
|
360
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|
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$
|
152
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|
|
42
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%
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|
Research and development expense
|
7,957
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|
|
6,125
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|
1,832
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|
|
30
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%
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|
General and administrative expense
|
3,498
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|
|
2,937
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|
|
561
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19
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%
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|
Royalty expense
|
308
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|
|
217
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|
|
91
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42
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%
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Investment and other income (expense)
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27
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50
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(23)
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(46)
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%
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Non-cash interest expense
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(45)
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(39)
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(6)
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15
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%
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Non-cash related party interest expense
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—
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(565)
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565
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(100)
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%
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Net loss
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(11,269)
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(9,473)
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(1,796)
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19
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%
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Six Months Ended June 30,
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$ Change
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% Change
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2021
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2020
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(in thousands)
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Royalty revenue
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$
|
979
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$
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788
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$
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191
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24
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%
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Research and development expense
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16,158
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|
13,470
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|
2,688
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20
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%
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|
General and administrative expense
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7,064
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|
|
6,261
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|
|
803
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13
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%
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|
Royalty expense
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590
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|
|
475
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|
|
115
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24
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%
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Investment and other income (expense)
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25
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235
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(210)
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(89)
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%
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Non-cash interest expense
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(90)
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(77)
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(13)
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17
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%
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|
Non-cash related party interest expense
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—
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(1,099)
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1,099
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(100)
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%
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Net loss
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(22,898)
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(20,359)
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(2,539)
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12
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%
|
Revenue
Royalty revenue for both periods is related to royalties from Secura Bio and Verastem on net sales of duvelisib. A portion of royalties received is owed to Mundipharma International Corporation Limited, or Mundipharma, and Purdue Pharmaceutical Products L.P., or Purdue. We refer to such portion as the Trailing Mundipharma Royalties (see Note 11 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q). We and HealthCare Royalty Partners III, L.P., or HCR, entered into a purchase and sale agreement in March 2019, or the HCR Agreement, pursuant to which HCR acquired our interest in royalties received from Verastem on net sales of duvelisib, less the Trailing Mundipharma Royalties (see Note 9 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Research and Development Expense
Research and development expense increased for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 due to an increase in clinical and development expenses for eganelisib of $1.5 million and an increase in consulting expense of $0.2 million to support continued development of eganelisib. Research and development expense increased for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 due to an increase in clinical and development expenses for eganelisib of $2.0 million and an increase in consulting expense of $0.6 million to support continued development of eganelisib.
We track and accumulate expenses by major program. These expenses primarily relate to payroll and related expenses for personnel working on our programs, process development and manufacturing, preclinical toxicology studies, clinical trial costs and allocated costs of facilities. During the three months ended June 30, 2021 and 2020, we estimated that we incurred $8.0 million and $6.1 million, respectively, on eganelisib. During the six months ended June 30, 2021 and 2020, we estimated that we incurred $16.2 million and $13.5 million, respectively, on eganelisib.
We do not believe that the historical costs associated with our drug development programs are indicative of the future costs associated with these programs. Due to the variability in the length of time and scope of activities necessary to develop a product candidate and uncertainties related to our cost estimates and our ability to obtain marketing approval for our product candidates, accurate and meaningful estimates of the total costs required to bring our product candidates to market are not available.
Because of the risks inherent in drug development, we cannot reasonably estimate or know:
•the nature, timing and estimated costs of the efforts necessary to complete the development of our programs;
•the completion dates of these programs; or
•the period in which material net cash inflows are expected to commence, if at all, from the programs described above and any potential future product candidates.
There is significant uncertainty regarding our ability to successfully develop any product candidates. These risks include the uncertainty of:
•the scope, rate of progress and cost of our clinical trials that we are currently conducting or may commence in the future;
•clinical trial results;
•the cost of establishing clinical supplies of any product candidates;
•the cost and availability of combination and comparator drugs;
•the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights relating to our programs under development;
•the terms and timing of any collaborations, licensing and other arrangements that we have or may establish in the future relating to our programs under development;
•the cost and timing of regulatory approvals;
•the effect of competing technological and market developments; and
•the impact of the COVID-19 pandemic.
General and Administrative Expense
General and administrative expense increased for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 due to an increase of $0.3 million in consulting, $0.2 million in compensation primarily related to an increase in stock compensation, and $0.1 million in professional services. General and administrative expense increased for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 due to an increase of $0.4 million in consulting and $0.4 million in compensation primarily related to an increase in stock compensation.
Royalty Expense
Royalty expense for the three and six months ended June 30, 2021 and 2020 included the Trailing Mundipharma Royalties of $0.2 million and $0.4 million, respectively, in both years.
Investment and Other Income (Expense)
Investment and other income decreased for the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020 primarily as a result of lower yields on our cash and investments.
Non-cash Interest Expense
Non-cash interest expense for the three and six months ended June 30, 2021 was the result of the sale of future royalties in relation to the HCR Agreement and BVF Funding Agreement, which we recognized as liabilities that are being amortized using the effective interest method over the life of the arrangements (see Note 9 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q). Non-cash interest expense for the three and six months ended June 30, 2020 was the result of the sale of future royalties in relation to the HCR Agreement. Over the course of the arrangements, the non-cash interest expense will be affected by the amount and timing of estimated royalty revenue, if any. We reassess the effective interest rate on a quarterly basis and adjust the rate prospectively as needed.
Non-cash Related Party Interest Expense
Non-cash related party interest expense for the three and six months ended June 30, 2020 was the result of the sale of future royalties in relation to the BVF Funding Agreement. Effective February 17, 2021, Biotechnology Value Fund, L.P. is no longer considered our related party. As a result, we have reclassed interest expense for the three and six months ended June 30, 2021 as non-cash interest expense.
Liquidity and Capital Resources
We have not generated any revenue from product sales to date, and we do not expect to generate any such revenue for the foreseeable future, if at all. We have instead relied on the proceeds from sales of equity securities, sales of future royalties, issuances of debt, interest on investments, upfront license fees, expense reimbursements, milestones, royalties and cost sharing under our collaborations to fund our operations. Because eganelisib is in clinical development, and the outcome of this effort is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidate or whether, or when, we may achieve profitability.
The following table summarizes the components of our financial condition:
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June 30, 2021
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December 31, 2020
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(in thousands)
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Cash, cash equivalents and available-for-sale securities
|
$
|
97,258
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|
|
$
|
34,108
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|
|
Working capital
|
89,123
|
|
|
24,973
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|
|
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|
|
|
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|
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Six Months Ended June 30,
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2021
|
|
2020
|
|
|
(in thousands)
|
|
Cash provided by (used in):
|
|
|
|
|
Operating activities
|
$
|
(23,038)
|
|
|
$
|
(19,346)
|
|
|
Investing activities
|
5,500
|
|
|
6,405
|
|
|
|
|
|
|
|
Financing activities
|
86,203
|
|
|
19,602
|
|
Cash Flows
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020, our cash used in operating activities increased primarily due to increased operating expenses as we continue clinical development of eganelisib. Our cash used in operating activities in future periods may vary significantly.
Net cash provided by investing activities decreased during the six months ended June 30, 2021 primarily due to net proceeds from maturities of available-for-sale securities of $5.5 million as compared to net proceeds of maturities of available-for-sale securities of $6.4 million for the six months ended June 30, 2020.
Net cash provided by financing activities for the six months ended June 30, 2021 was due to $85.8 million in net proceeds from our public offering in February 2021. Net cash provided by financing activities for the six months ended June 30, 2020 included $19.6 million in net proceeds from the sale of future royalties due to us from BVF (see Note 9 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Operating Capital Requirements
As of June 30, 2021, we had cash and cash equivalents of $97.3 million. We believe that our existing cash and cash equivalents at June 30, 2021 will be adequate to satisfy our capital needs for at least the next twelve months from the issuance date of the financial statements included in this Quarterly Report on Form 10-Q based on our current operational plans. We expect to continue to spend significant resources to fund the development and potential commercialization of eganelisib and to incur significant operating losses for the foreseeable future.
Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate. Our future funding requirements, both short-term and long-term, will depend on many factors, including, but not limited to:
•the scope, progress, results and costs of developing eganelisib, currently in clinical development;
•the impact of delays in patient enrollment and site activation related to the COVID-19 pandemic;
•the timing of, and the costs involved in, obtaining regulatory approvals for eganelisib;
•subject to receipt of marketing approval, revenue, if any, received from commercial sales of eganelisib;
•the timing and amount of additional revenues, if any, received from strategic agreements and funding arrangements;
•the timing and amount of additional royalty and milestone payments owed to Takeda;
•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
•any breach, acceleration event or event of default under any agreements with third parties;
•the outcome of any lawsuits that could be brought against us;
•the cost of acquiring raw materials for, and of manufacturing, eganelisib is higher than anticipated;
•the cost or quantity required of comparator or combination drugs used in clinical studies increases;
•the effect of competing technological and market developments;
•any federal government shutdown that prevents or delays the SEC from processing any future registration statements we may file to register shares for capital raising purposes; and
•a loss in our investments due to general market conditions or other reasons.
We may seek additional funds through arrangements with collaborators or other third parties, or through project financing. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or product candidates, and we may not be able to enter into such agreements on acceptable terms, if at all. We may also seek additional funding through public or private financings of equity or debt securities, but such financings may not be available on acceptable terms, if at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock, and such terms may impact our ability to make capital expenditures or incur additional debt. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs or to scale back, suspend or terminate our business operations.
Equity Offerings
On June 28, 2019, we entered into a Capital on Demand Sales Agreement with JonesTrading Institutional Services LLC, or JonesTrading, and on July 29, 2019 we amended and restated the sales agreement to add B. Riley Securities (f/k/a B. Riley FBR, Inc.), or B. Riley Securities, as a party to the agreement. On July 27, 2021, we entered into an amendment to the agreement to increase the maximum aggregate offering price of the shares of common stock that we may issue and sell from time to time under the agreement by $75.0 million. We refer to the amended and restated sales agreement, as amended, as the ATM Sales Agreement. As of July 27, 2021, we have an aggregate of $87.1 million available for future sales. Pursuant to the ATM Sales Agreement we may offer and sell shares of our common stock from time to time through JonesTrading or B. Riley Securities, each acting as our sales agent. We have agreed to pay commissions to the sales agents for their services in acting as agents in the sale of our common stock in the amount of up to 3.0% of the gross proceeds from sales of our common stock pursuant to the ATM Sales Agreement. Sales of shares of our common stock under the ATM Sales Agreement may be made by any method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. With our prior written approval, JonesTrading or B. Riley Securities may also sell the shares by any other method permitted by law, including in negotiated transactions. We and JonesTrading or B. Riley Securities may suspend or terminate the offering of shares upon notice to the other parties and subject to other conditions. During the three and six months ended June 30, 2021 and 2020, we did not sell any shares under the ATM Sales Agreement.
On February 11, 2021, we entered into a purchase agreement with Piper Sandler & Co., as representative of the underwriters named therein, pursuant to which we issued and sold to the underwriters in an underwritten public offering an aggregate of 24,150,000 shares of our common stock, including 3,150,000 shares of common stock sold in connection with the exercise in full of a 15% over-allotment option by the underwriters. The public offering price was $3.80 per share. The gross proceeds to us from this offering were approximately $91.8 million. After underwriting discounts and commissions and offering expenses, we received net proceeds from the offering of approximately $85.8 million.
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet financing activities, including the use of structured finance, special purpose entities or variable interest entities.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, or the Exchange Act, and are not required to provide the information under this item.
