ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with: (i) our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended June 30, 2022, and (ii) our audited financial statements and notes thereto for the year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in in our Annual Report on Form 10-K for the year ended December 31, 2021. Except as otherwise indicated herein or as the context otherwise requires, references in this Quarterly Report to “Oncternal” “the Company,” “we,” “us” and “our” refer to Oncternal Therapeutics, Inc., a Delaware corporation.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategies and plans, prospective products, product approvals, research and development costs, the expected continued impact of COVID-19, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 10, 2022, and in Part II, Item 1A, “Risk Factors” of this Quarterly Report. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Overview
We are a clinical-stage biopharmaceutical company focused on the development of novel oncology therapies for cancers with critical unmet medical need. Our development efforts are focused on promising, yet untapped, biological pathways implicated in cancer generation or progression. Our pipeline includes:
Zilovertamab (formerly cirmtuzumab or UC-961) is an investigational, humanized, potentially first-in-class, monoclonal antibody designed to: (i) bind to a specific functionally important epitope of Receptor tyrosine kinase-like Orphan Receptor 1, or ROR1, a growth factor receptor that is widely expressed on many tumor types and that activates pathways leading to increased tumor proliferation, invasiveness, and drug resistance in preclinical models, and (ii) inhibit ROR1 function.
After reaching an agreement regarding the study design and major study details with the U.S. Food and Drug Administration, or FDA, we plan to evaluate zilovertamab in our potentially pivotal Phase 3 clinical trial for the treatment of patients with relapsed or refractory mantle cell lymphoma, or MCL, which is expected to be initiated in the third quarter of 2022. The Phase 3 clinical trial ZILO-301 is a randomized, double-blind, placebo-controlled study that will evaluate the potential benefit for up to approximately 250 MCL patients who achieve either a partial response or stable disease during an open-label lead-in with ibrutinib monotherapy, following which patients will receive zilovertamab or placebo while continuing to receive ibrutinib. The primary endpoint of the study is progression-free survival, and key secondary endpoints include objective response rate, duration of response, complete response rate, overall survival and the proportion of subjects experiencing grade 3 or 4 neutrophil count decrease. Zilovertamab is currently being evaluated in the Cirmtuzumab and Ibrutinib for Relapsed Lymphoma or Leukemia, or CIRLL, study, a Phase 1/2 clinical trial in combination with ibrutinib for the treatment of patients with B-cell lymphoid malignancies, including MCL, chronic lymphocytic leukemia, or CLL, or marginal zone lymphoma, or MZL. In the first quarter of 2022, we completed the enrollment of patients with MCL and CLL in the Phase 1/2 CIRLL study, and those patients are completing therapy or are in long-term follow-up. In addition, we are supporting two investigator-sponsored studies being conducted at the UC San Diego School of Medicine, or UC San Diego: (i) a Phase 2 clinical trial for metastatic castration-resistant prostate cancer study, including patients with resistance to approved androgen inhibitors, and (ii) a Phase 2 clinical trial of zilovertamab in combination with venetoclax, a Bcl 2 inhibitor, in patients with relapsed/refractory CLL.ONCT-808, our lead cell therapy product candidate, is an autologous chimeric antigen receptor T cell, or CAR-T, therapy that targets ROR1, is highly expressed by multiple solid tumors and hematological malignancies and confers both an aggressive phenotype and survival advantage to tumor cells.
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ONCT-808, our lead cell therapy product candidate, is an autologous chimeric antigen receptor T cell, or CAR-T, therapy that targets ROR1, is highly expressed by multiple solid tumors and hematological malignancies and confers both an aggressive phenotype and survival advantage to tumor cells. ONCT-808 is in preclinical development as a potential treatment for hematologic malignancies and solid tumors, and is being developed in collaboration with the Karolinska Institutet and under agreements with Lentigen Technology, Inc. (lentivirus manufacturing) and Miltenyi Biotec B.V. & Co. KG. (cell processing). We are performing preclinical activities to support the submission to the FDA of an Investigational New Drug Application, or IND, which we expect to submit in the third quarter of 2022.
ONCT-534, is a dual action androgen receptor inhibitor, or DAARI, product candidate in preclinical development as a potential treatment for advanced castration-resistant prostate cancers. We initiated GLP toxicology studies and GMP manufacturing activities in the second quarter of 2022.
Our pipeline previously included ONCT-216, an investigational small molecule designed to inhibit the ETS, or E26 Transformation Specific, family of oncoproteins, which had shown in preclinical studies to alter gene transcription and RNA processing that led to decreased cell proliferation and invasion. In April 2022, we deprioritized the development of ONCT-216 and stopped the enrollment of patients in a Phase 1/2 clinical trial in patients with relapsed or refractory Ewing sarcoma.
Since the inception of Oncternal Therapeutics, Inc. in 2013, we have devoted most of our resources to organizing and staffing, business planning, raising capital, acquiring product candidates and securing related intellectual property rights and advancing our zilovertamab and ONCT-216 clinical development programs as well as our ONCT-808 and ONCT-534 preclinical programs. Under research subaward agreements between us and UC San Diego, we were eligible to receive $14.6 million in development milestones during the award project period from October 1, 2017 to March 31, 2022. Through June 30, 2022, we have funded our operations primarily through: (i) gross proceeds of $129.0 million from the issuance of common stock, (ii) gross proceeds of $49.0 million from the issuance of convertible preferred stock, (iii) receipt of $14.5 million in subaward grant payments received from UC San Diego, and (iv) cash proceeds of $18.3 million received in connection with the closing of the merger with GTx, Inc. in June 2019, or the GTx Merger. As of June 30, 2022, we had cash and cash equivalents of $78.9 million and no debt.
We have incurred net losses in each year since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net loss was $21.6 million for the six months ended June 30, 2022 and we had an accumulated deficit of $135.8 million as of June 30, 2022. Substantially all of our net losses have resulted from costs incurred in connection with: (i) advancing our research and development programs, (ii) general and administrative costs associated with our operations, including the costs associated with operating as a public company, and (iii) in-process research and development costs associated with the GTX Merger. We expect to continue to incur significant and increasing operating losses for at least the next several years. We expect that our expenses and capital funding requirements will increase substantially in connection with our ongoing activities, particularly if and as we:
•advance zilovertamab, through clinical development in multiple indications, with a primary focus in MCL;
•advance ONCT-808 into clinical development, initially in hematological malignancies;
•advance ONCT-534 into clinical development, initially in castration resistant prostate cancer;
•respond to the impacts of the COVID-19 pandemic, which has slowed enrollment into our clinical trials and impacted our supply chain activities;
•evaluate zilovertamab in additional ROR1-positive hematologic malignancies;
•continue to develop additional product candidates; acquire or in-license other product candidates and technologies;
•maintain, expand and protect our intellectual property portfolio;
•establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
•seek regulatory approvals for any product candidates that successfully complete clinical trials;
•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
•add operational, financial and management information systems and personnel, including personnel to support our planned product development and future commercialization efforts.
22
We will not generate product sales revenue unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. In addition, we expect to incur additional costs associated with operating as a public company.
As a result, we believe we will need substantial additional funding to support our continuing operations and pursue our business strategy. Until such time as we can generate significant product sales revenue, if ever, we expect to finance our operations through a combination of public or private equity or debt offerings or other sources, including potential collaborations, strategic alliances and other similar arrangements. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in licenses or acquisitions.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the first half of 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Beyond that point, we will need to raise additional capital to finance our operations, which cannot be assured.
Business Update Regarding COVID-19
The COVID-19 worldwide pandemic has presented substantial public health and economic challenges and continues to affect economies, financial markets and business operations around the world. The pandemic may continue to directly or indirectly affect the timeline for our manufacturing activities, planned IND submissions and clinical trials, including ZILO-301, our global Phase 3 study of zilovertamab that we plan to initiate in the third quarter of 2022. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact the our business results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, the success or failure of ongoing vaccination programs worldwide, the emergence and spread of additional variants of COVID-19, as well as the economic impact on local, regional, national and international markets.
Components of Results of Operations
Grant Revenue
Our grant revenue has been derived from a California Institute for Regenerative Medicine, or CIRM, grant subaward with UC San Diego and research and development grants from the National Institutes of Health, or NIH.
In August 2017, CIRM awarded an $18.3 million grant to researchers at UC San Diego to advance the CIRLL study throughout the award project period from October 1, 2017 through March 31, 2022. We are conducting this study in collaboration with UC San Diego and have received $14.5 million to date and have recorded $38,000 in unbilled grant receivable, included in prepaid and other assets, related to development milestone payments under research subaward agreements. In addition, we are committed to certain co-funding requirements and are required to provide UC San Diego progress and financial update reports throughout the award project period. We received $0.7 million and $2.2 million in subaward payments in the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we believe we have met our obligations under the CIRM award and UC San Diego subawards.
23
In August 2021, the NIH awarded us two research and development grants for up to $2.2 million to support pre-clinical and other research activities for our ONCT-216 and ONCT-534 programs, including $0.7 million payable to subawardees. During the six months ended June 30, 2022, we received $0.9 million in award payments from the NIH and recorded $0.6 million in grant revenue and deferred revenue of $0.2 million.
Operating Expenses
Research and Development
Research and development expenses consist primarily of costs incurred for the preclinical and clinical development of our lead product candidate, zilovertamab, as well as ONCT-808, ONCT-534 and ONCT-216, which include:
•expenses under agreements with consultants, third-party contract organizations, and investigative clinical trial sites that conduct research and development activities on our behalf;
•costs related to the development and manufacture of preclinical study and clinical trial material;
•salaries and employee-related costs, including stock-based compensation;
•costs incurred under our collaboration and third-party licensing agreements; and
•laboratory and vendor expenses related to the execution of preclinical and clinical trials.
We accrue all research and development costs in the period for which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers. Advance payments for goods or services to be received in future periods for use in research and development activities are deferred and then expensed as the related goods are delivered and as services are performed. Any unearned advances would be refunded when known.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in: (i) developing our product candidates preclinically, advance them into later stages of clinical development, and as we begin to conduct larger clinical trials globally, and (ii) additional operational personnel to support our planned product development efforts. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. The de-prioritization of the development of ONCT-216 will result in lower future ONCT-216 expenses in future periods.
Our direct research and development expenses are tracked by product candidate and consist primarily of external costs, such as fees paid under third-party license agreements and to outside consultants, contract research organizations, or CROs, contract manufacturing organizations and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track our costs by product candidate unless we can include them as subaward costs.
We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development, including any potential expanded dosing beyond the original protocols based in part on ongoing clinical success and the potential effects of the COVID-19 pandemic. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments of each
24
product candidate’s commercial potential. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, insurance costs, facility costs and professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. Personnel-related costs consist of salaries, benefits and stock-based compensation. We expect our general and administrative expenses will increase as we: (i) incur additional costs associated with being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director’s and officer’s insurance premiums, and investor relations costs, (ii) hire additional personnel, and (iii) protect our intellectual property.
Interest Income
Interest income consists of interest earned on our cash equivalents, which consist of money market funds. Our interest income has not been significant due to low interest yields earned on invested balances.
Results of Operations
Comparison of Three and Six Months Ended June 30, 2022 and 2021
The following table summarizes our results of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
Grant revenue |
|
$ |
191 |
|
|
$ |
883 |
|
|
$ |
(692 |
) |
|
$ |
937 |
|
|
$ |
1,631 |
|
|
$ |
(694 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
8,761 |
|
|
|
5,192 |
|
|
|
3,569 |
|
|
|
15,740 |
|
|
|
9,105 |
|
|
|
6,635 |
|
General and administrative |
|
|
3,225 |
|
|
|
3,381 |
|
|
|
(156 |
) |
|
|
6,904 |
|
|
|
6,174 |
|
|
|
730 |
|
Total operating expenses |
|
|
11,986 |
|
|
|
8,573 |
|
|
|
3,413 |
|
|
|
22,644 |
|
|
|
15,279 |
|
|
|
7,365 |
|
Loss from operations |
|
|
(11,795 |
) |
|
|
(7,690 |
) |
|
|
(4,105 |
) |
|
|
(21,707 |
) |
|
|
(13,648 |
) |
|
|
(8,059 |
) |
Interest income |
|
|
54 |
|
|
|
8 |
|
|
|
46 |
|
|
|
62 |
|
|
|
18 |
|
|
|
44 |
|
Net loss |
|
$ |
(11,741 |
) |
|
$ |
(7,682 |
) |
|
$ |
(4,059 |
) |
|
$ |
(21,645 |
) |
|
$ |
(13,630 |
) |
|
$ |
(8,015 |
) |
Comparison of Three Months Ended June 30, 2022 and 2021
Grant Revenue
Grant revenue was $0.2 million and $0.9 million for the three months ended June 30, 2022 and 2021, respectively. The decrease of $0.7 million was due primarily to lower research and development subaward costs under the CIRM subaward in 2022 as compared to 2021.
25
Research and Development Expenses
The following table summarizes our research and development expenses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Increase/ |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
(Decrease) |
|
Zilovertamab |
|
$ |
3,311 |
|
|
$ |
1,683 |
|
|
$ |
1,628 |
|
ONCT-534 |
|
|
652 |
|
|
|
131 |
|
|
|
521 |
|
ONCT-808 |
|
|
1,336 |
|
|
|
470 |
|
|
|
866 |
|
ONCT-216 |
|
|
535 |
|
|
|
1,139 |
|
|
|
(604 |
) |
Unallocated research and development expenses |
|
|
2,927 |
|
|
|
1,769 |
|
|
|
1,158 |
|
Total research and development expenses |
|
$ |
8,761 |
|
|
$ |
5,192 |
|
|
$ |
3,569 |
|
Research and development expenses for the three months ended June 30, 2022 and 2021 were $8.8 million and $5.2 million, respectively, an increase of $3.6 million. The increase was primarily due to a $2.4 million increase in direct product candidate costs and a $1.2 million increase in unallocated expenses.
Direct expenses for zilovertamab increased $1.6 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to an increase in clinical trial and manufacturing development costs.
Direct expenses for ONCT-534 increased $0.5 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to an increase in preclinical activity and manufacturing development costs.
Direct expenses for ONCT-808 increased $0.9 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, due to an increase in preclinical activity and manufacturing development costs.
Direct expenses for ONCT-216 decreased $0.6 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to a decrease in clinical trial and manufacturing costs.
Unallocated expenses increased $1.2 million for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to higher personnel costs, including stock-based compensation costs.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2022 and 2021 were $3.2 million and $3.4 million, respectively, a decrease of $0.2 million. The decrease was primarily due to lower personnel costs and legal expenses.
Comparison of Six Months Ended June 30, 2022 and 2021
26
Grant Revenue
Grant revenue for the six months ended June 30, 2022 was $0.9 million, compared to $1.6 million for the six months ended June 30, 2021. The decrease of $0.7 million was primarily due to lower research and development subaward related costs under the CIRM subaward in 2022 as compared to 2021.
Research and Development Expenses
The following table summarizes our research and development expenses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
Increase/ |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
(Decrease) |
|
Zilovertamab |
|
$ |
5,211 |
|
|
$ |
3,253 |
|
|
$ |
1,958 |
|
ONCT-534 |
|
|
912 |
|
|
|
187 |
|
|
|
725 |
|
ONCT-808 |
|
|
2,200 |
|
|
|
606 |
|
|
|
1,594 |
|
ONCT-216 |
|
|
1,557 |
|
|
|
1,740 |
|
|
|
(183 |
) |
Unallocated research and development expenses |
|
|
5,860 |
|
|
|
3,319 |
|
|
|
2,541 |
|
Total research and development expenses |
|
$ |
15,740 |
|
|
$ |
9,105 |
|
|
$ |
6,635 |
|
Research and development expenses for the six months ended June 30, 2022 and 2021 were $15.7 million and $9.1 million, respectively, an increase of $6.6 million. The increase was primarily due to a $4.1 million increase in direct product candidate costs and a $2.5 million increase in unallocated expenses.
Direct expenses for zilovertamab increased $2.0 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to an increase in clinical trial activity and manufacturing development costs.
Direct expenses for ONCT-534 increased $0.7 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to an increase in preclinical activity and manufacturing development costs.
Direct expenses for ONCT-808 increased $1.6 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, due to an increase in preclinical activity and manufacturing development costs.
Direct expenses for ONCT-216 decreased $0.2 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to lower clinical trial activity and manufacturing costs.
Unallocated expenses increased $2.5 million for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to higher personnel costs, including stock-based compensation costs.
27
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2022 and 2021 were $6.9 million and $6.2 million, respectively, an increase of $0.7 million. The increase was primarily due to higher personnel costs of $0.8 million and corporate expenses of $0.3 million which were offset by lower legal costs of $0.4 million.
Liquidity and Capital Resources
We have incurred losses and negative cash flows from operations since inception. As of June 30, 2022, we had an accumulated deficit of $135.8 million and anticipate that we will continue to incur net losses for the foreseeable future. As of June 30, 2022, we had $78.9 million in cash and cash equivalents and no debt. We believe we have sufficient cash to fund our projected operating requirements for at least twelve months from the filing date of this Quarterly Report. We expect our operating expenses to continue to be substantial for the foreseeable future and, as a result, we will need additional capital to fund our operations, which we may obtain through a combination of public or private equity or debt offerings or other sources, including potential collaborations, strategic alliances and other similar arrangements.
In December 2021, we entered into an at-the-market Sales Agreement, or the Sales Agreement, with Jefferies LLC, providing for the sale of up $50.0 million of our common stock from time to time in “at-the-market” offerings under an existing shelf registration statement. During the three and six months ended June 30, 2022, we sold 2,721,316 shares of common stock for net proceeds of $3.9 million.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Net cash provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
$ |
(15,736 |
) |
|
$ |
(13,593 |
) |
Financing activities |
|
|
3,871 |
|
|
|
519 |
|
Net decrease in cash and cash equivalents |
|
$ |
(11,865 |
) |
|
$ |
(13,074 |
) |
Operating Activities
During the six months ended June 30, 2022, net cash used in operating activities was $15.7 million, resulting from our net loss of $21.6 million, which included non-cash charges of $3.7 million primarily related to stock-based compensation expenses, offset by a $2.1 million change in our operating assets and liabilities. The $2.1 million change in operating assets and liabilities primarily consisted of a $0.3 million decrease in prepaid and other assets and a $1.8 million increase in accounts payable and accrued expenses.
Investing Activities
No cash was used or provided by investing activities for the six months ended June 30, 2022 and 2021.
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Financing Activities
Financing activities provided net cash of $3.9 million for the six months ended June 30, 2022, which consisted of net proceeds from the sale of common stock under the ATM program.
Operating Capital Requirements
We anticipate that we will continue to incur losses for the foreseeable future, and we expect the losses to increase as we continue the research and development of, and seek regulatory approvals for, our product candidates and conduct additional research and development activities. Our product candidates have not yet achieved regulatory approval and we may not be successful in achieving commercialization of our product candidates.
We believe that our existing cash and cash equivalents will be sufficient to fund our operations into the first half of 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. For example, the FDA or other regulatory authorities may require us to generate additional data or conduct additional preclinical studies or clinical trials, or may impose other requirements beyond those that we currently anticipate. Additionally, it is possible for a product candidate to show promising results in preclinical studies or in clinical trials, but fail to establish the sufficient safety and efficacy data necessary to obtain regulatory approvals. As a result of these and other risks and uncertainties and the probability of success, the duration and the cost of our research and development activities required to advance a product candidate cannot be accurately estimated and are subject to considerable variation. We may encounter difficulties, complications, delays and other unknown factors and unforeseen expenses in the course of our research and development activities, any of which may significantly increase our capital requirements and could adversely affect our liquidity.
We will require additional capital for the research and development of our product candidates, and we may be forced to seek additional funds sooner than expected to pursue our research and development activities. We expect to finance our capital requirements in the foreseeable future through a combination of the sale of public or private equity or debt securities, government funding, or other sources, including potentially collaborations, licenses and other similar arrangements. There can be no assurance that we will be able to obtain any sources of financing on acceptable terms, or at all. To the extent that we can raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. Any of these events could significantly harm our business, operations, financial condition and prospects.
Our forecast of the period of time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties. We have based this forecast on assumptions that may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our capital resources and liquidity. We could utilize our available capital resources sooner than we currently expect. The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:
•the type, number, scope, progress, expansions, results, costs and timing of our clinical trials of zilovertamab and ONCT-216, and preclinical studies or clinical trials of our ROR1 CAR-T and DAARI product candidates or additional indications of our current product candidates as well as other product candidates that we may choose to pursue in the future;
•the costs incurred as a result of the COVID-19 pandemic, including preclinical, manufacturing and clinical trial delays;
•the costs and timing of manufacturing for our product candidates, including commercial manufacturing if any product candidate is approved;
•the costs of obtaining ibrutinib, for which we currently obtain supply at no cost under our agreement with Pharmacyclics LLC to conduct our clinical trials of zilovertamab;
•the costs and capacity for third-party process development and manufacturing, including for CAR-T and lentivirus;
•the costs, timing and outcome of seeking and obtaining worldwide regulatory approvals for our product candidates;
•the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
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•the costs associated with hiring additional personnel, CROs and consultants as our preclinical and clinical activities increase;
•our ability to achieve sufficient market acceptance, adequate coverage and reimbursement from third-party payors and adequate market share and revenue for any approved products;
•the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities for, and the pricing and reimbursement of, any products for which we may receive regulatory approval;
•the terms and timing of establishing and maintaining potential collaborations, strategic alliances and other similar arrangements, including milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future; and
•costs associated with any products or technologies that we may in-license or acquire.
If we cannot continue or expand our research and development operations, or otherwise capitalize on our business opportunities, because we lack sufficient capital, our business, operations, financial condition and prospects could be materially adversely affected.
In April 2021, our Form S-3 registration statement became effective. Future sales of our common stock, if any, will depend on a variety of factors including, but not limited to, the expected timing for achieving key milestones, including initiating, completing and announcing results of clinical trials of zilovertamab, announcing the first-in-human dosing of ONCT-808, our lead cell therapy product candidate targeting ROR1 which is currently in preclinical development, and advancing ONCT-534, our DAARI preclinical product candidate, prevailing market conditions, the trading price of our common stock and our capital needs. There can be no assurance that we will be successful in consummating future sales of our securities based on prevailing market conditions or in the quantities or at the prices that we deem appropriate.
In December 2021, we entered into an Open Market Sales AgreementSM, or the Sales Agreement, pursuant to which we are able to offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million. We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. Through June 30, 2022, we have sold 2,721,316 shares of common stock for net proceeds of $3.9 million, net of commissions, under the Sales Agreement.
Contractual Obligations and Commitments
We are party to a number of license agreements, pursuant to which we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. As of June 30, 2022, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales. See Note 4 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for a description of these agreements.
We enter into contracts in the normal course of business with clinical trial sites and clinical supply manufacturers and with vendors for preclinical studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination after a notice period and, therefore, are cancelable contracts.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.
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Our estimates are based on our historical experience, trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We consider our critical accounting policies and estimates to be related to research and development expenses and accruals, and revenue recognition. There have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2022, from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies & Estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2021.
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