UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
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(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
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.
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Large accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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As of October 28, 2022, the registrant had
Oncternal Therapeutics, Inc.
FORM 10-Q
TABLE OF CONTENTS
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 1. |
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Item 1A. |
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Item 2. |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oncternal Therapeutics, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
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September 30, |
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December 31, |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Prepaid and other |
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Total current assets |
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Right-of-use asset |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Deferred grant revenue |
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Lease liability |
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Total current liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes.
3
Oncternal Therapeutics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
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Three Months Ended |
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Nine Months Ended |
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2022 |
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2021 |
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2022 |
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2021 |
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Grant revenue |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Interest income |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average shares outstanding, basic and diluted |
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See accompanying notes.
4
Oncternal Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
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Nine Months Ended |
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2022 |
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2021 |
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Cash flows from operating activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Non-cash lease expense |
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Changes in operating assets and liabilities: |
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Prepaid and other |
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Accounts payable |
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Accrued liabilities |
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Change in lease liability |
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Deferred grant revenue |
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Net cash used in operating activities |
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Cash flows from financing activities |
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Proceeds from issuance of common stock in public offerings, net |
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Repurchases of common stock for tax withholding obligations |
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Proceeds from exercise of stock options |
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Proceeds from exercise of common stock warrants |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of non-cash financing activities: |
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Cashless exercise of warrants |
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$ |
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$ |
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Right-of-use assets obtained in exchange for operating lease liabilities |
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$ |
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$ |
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See accompanying notes.
5
Oncternal Therapeutics, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited; in thousands)
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Three Months Ended September 30, 2022 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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Shares repurchased for settlement of minimum statutory tax withholdings |
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— |
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— |
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Issuance of common stock, net of issuance cost of $ |
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Stock-based compensation |
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Net loss |
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— |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended September 30, 2021 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Exercise of warrants for cash |
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Vesting related to unvested share liability |
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Stock-based compensation |
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Net loss |
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— |
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( |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes.
6
Oncternal Therapeutics, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited; in thousands)
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Nine Months Ended September 30, 2022 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Shares repurchased for settlement of minimum statutory tax withholdings |
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— |
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— |
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Issuance of common stock, net of issuance cost of $ |
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Stock-based compensation |
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— |
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— |
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Net loss |
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— |
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— |
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( |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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Nine Months Ended September 30, 2021 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity (Deficit) |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
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Exercise of stock options for cash |
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— |
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Exercise of warrants for cash |
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Cashless exercise of warrants |
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Vesting related to unvested share liability |
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Stock-based compensation |
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Net loss |
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— |
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( |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes.
7
Oncternal Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Description of Business
Oncternal Therapeutics, Inc. (the “Company” or “Oncternal”), formerly known as GTx, Inc., was incorporated in Tennessee in September 1997 and reincorporated in Delaware in 2003 and is based in San Diego, California. The Company is a clinical-stage biopharmaceutical company focused on the development of novel oncology therapies for the treatment of cancers with critical unmet medical need. The Company’s lead clinical program is zilovertamab, a humanized monoclonal antibody that binds to ROR1 (Receptor-tyrosine kinase-like Orphan Receptor 1). The Company is also developing ONCT-808, a CAR T (chimeric antigen receptor T cells) product candidate that targets ROR1, and ONCT-534, a dual-action androgen receptor inhibitor (“DAARI”) product candidate for the treatment of castration-resistant prostate cancer, including those with clinically important resistance to approved androgen receptor inhibitors.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Oncternal Oncology, Inc. and Oncternal, Inc. All intercompany accounts and transactions have been eliminated in the preparation of the condensed consolidated financial statements.
Liquidity
From inception, the Company has devoted substantially all of its efforts to drug discovery and development and conducting preclinical studies and clinical trials. The Company has a limited operating history and the sales and income potential of the Company’s business and market are unproven. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.
As of September 30, 2022, the Company had $
As of September 30, 2022, the Company had capacity to issue up to an additional $
The Company's ability to obtain additional financing (including through collaboration and/or licensing arrangements) will depend on a number of factors, including, among others, its ability to generate positive data from its clinical trials and preclinical studies, the condition of the capital markets and other risks, many of which are dependent on factors outside of its control. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future.
8
Basis of Presentation
The accompanying interim condensed financial statements are unaudited. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and with generally accepted accounting principles in the United States of America (“GAAP”). These unaudited condensed consolidated financial statements have been prepared on the same basis as the audited, consolidated financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ materially from those estimates. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021, filed with the SEC on its Annual Report on Form 10-K on March 10, 2022. The results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.
Use of Estimates
The Company’s condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements and accompanying notes requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates consist of those used to determine grant revenue and accruals for research and development costs. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include cash in readily available checking accounts and money market accounts.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institution in which those deposits are held. Additionally, the Company established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.
Patent Costs
Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.
Research and Development Expenses and Accruals
Research and development expenses consist of costs incurred for the Company’s own and for sponsored and collaborative research and development activities. Research and development costs are expensed as incurred and include manufacturing process development costs, manufacturing costs, costs associated with preclinical studies and clinical trials, regulatory and medical affairs activities, quality assurance activities, salaries and benefits, including stock-based compensation, fees paid to third-party consultants, license fees and overhead.
The Company has entered into various research and development contracts with research institutions, clinical research organizations, clinical manufacturing organizations and other companies. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying condensed consolidated balance sheets as prepaid expenses and other assets or accrued liabilities. The Company records accruals for estimated costs incurred for ongoing research and development activities and all clinical trial expenses are included in research and development expenses. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. At September 30, 2022, the Company’s clinical trial accrual balance of $
9
Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets.
Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The carrying amounts of the Company’s current financial assets and liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. The Company has no current financial assets or liabilities measured at fair value on a recurring basis and no transfers between levels have occurred during the periods presented.
Revenue Recognition
The Company generates revenue from certain grant awards or a research subaward (the “Grant Awards”) (see Note 4), which provide the Company with payments in return for certain research and development activities over a contractually defined period. Revenue from such Grant Awards is recognized in the period the related qualifying services are rendered and costs are incurred, provided that the applicable conditions under the Grant Awards have been met.
The Grant Awards are on a best-effort basis and do not require scientific achievement as a performance obligation. The Grant Awards are non-refundable. The costs associated with the Grant Awards are expensed as incurred and reflected as a component of research and development expense in the accompanying condensed consolidated statements of operations.
Funds received from the Grant Awards are recorded as revenue as the Company is the principal participant in the arrangement because the activities under the Grant Awards are part of the Company’s development programs. In those instances where the Company first receives consideration in advance of providing underlying services, the Company classifies such consideration as deferred revenue until (or as) the Company provides the underlying services. In those instances where the Company first provides the underlying services prior to its receipt of consideration, the Company records a grant receivable. At September 30, 2022, the Company had deferred grant revenue of $
Stock-Based Compensation
Stock-based compensation expense represents the fair value of equity awards, on the grant date, recognized in the period using the Black-Scholes option pricing model. The Company recognizes expense for awards with graded vesting schedules over the requisite service period of the awards (usually the vesting period) on a straight-line basis. For equity awards for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when the achievement of the milestone is deemed probable. The Company recognizes forfeitures for all awards as such forfeitures occur.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
10
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities and adjusted for the weighted-average number of common shares outstanding that are subject to repurchase. The Company has excluded weighted-average shares subject to repurchase of
Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):
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September 30, |
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2022 |
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2021 |
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Warrants to purchase common stock |
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Common stock options |
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Restricted stock unit awards |
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Common stock subject to repurchase |
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Total |
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Recently Adopted Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which intends to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance requires transition disclosures of the nature of and reasons for the accounting change, the transition method, and a qualitative description of the financial statement line items affected. The Company adopted this guidance effective January 1, 2022 and determined there were no modifications or exchanges of freestanding equity-classified written call options subject to ASU 2021-04 during the periods presented.
Accounting Standards Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Statements (Topic 362), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company was a smaller reporting company at the determination date, and therefore the new standard will be effective for the Company on January 1, 2023. An entity must apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach), except in certain circumstances. The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its condensed consolidated financial statements and related disclosures.
11
Prepaid and other consist of the following (in thousands):
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September 30, |
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|
December 31, |
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||
|
|
2022 |
|
|
2021 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
Clinical trials |
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|
||
Insurance |
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|
||
Other prepaid expenses |
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|
||
Related party receivable (see Note 3) |
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|
||
Other receivable |
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|
|
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||
|
|
$ |
|
|
$ |
|
||
Accrued liabilities consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
Clinical trials |
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|
|
|
|
|
||
Legal fees |
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|
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|
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|
||
Compensation |
|
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|
||
Other |
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|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Lease and Sublease
Rent expense was $
From May 2019 through April 30, 2022, the Company leased
The San Diego Lease is included in the accompanying condensed consolidated balance sheet at the present value of the lease payments. As the San Diego Lease does not have an implicit interest rate, the present value reflects a
Maturities of the lease liability due under this lease agreement as of September 30, 2022, are as follows (in thousands):
Maturity of lease liability |
|
Operating |
|
|
2022 |
|
$ |
|
|
2023 (7 months) |
|
|
|
|
Total lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Lease liability |
|
|
|
|
Less current portion of lease liability |
|
|
( |
) |
Lease liability, long-term |
|
$ |
|
|
12
Related Party Transactions
Effective in September 2019, the Company and Shanghai Pharmaceutical (USA) Inc. (“SPH USA”), the Company’s largest stockholder and an affiliate of two of the Company’s directors, entered into a Materials and Supply and Services Agreement (“SPH USA Services Agreement”). Pursuant to the SPH USA Services Agreement, the Company and SPH USA have executed and expect to continue to execute various statements of work for the transfer to SPH USA of key reagents and other materials, and for the supply of certain services by the Company to SPH USA, as contemplated under and in furtherance of a license and distribution agreement between the parties (see Note 4). The Company recorded amounts receivable from SPH USA, in prepaid and other assets, related to statements of work totaling $
Georgetown University (“Georgetown”)
In March 2014, the Company entered into an Exclusive License Agreement (the “Georgetown License Agreement”) with Georgetown, pursuant to which the Company: (i) licensed the exclusive worldwide right to patents and technologies for the development and commercialization of certain product candidates targeting EWS-FLI1 as an anti-tumor therapy for therapeutic, diagnostics, or research tool purposes, (ii) is solely responsible for all development and commercialization activities and costs, and (iii) is responsible for all costs related to the filing, prosecution and maintenance of the licensed patent rights.
Under the terms of the Georgetown License Agreement, commencing in 2015, the Company: (i) shall pay and has paid an annual license maintenance fee of $
The Georgetown License Agreement may be terminated by either party upon material breach or may be terminated by the Company as to one or more countries with
The University of Texas MD Anderson Cancer Center (“MD Anderson”)
In December 2014, the Company entered into a collaboration agreement (as amended, the “Collaboration”) with MD Anderson, which provides for the conduct of preclinical and clinical research for ONCT-216 in exchange for certain program payments. If MD Anderson successfully completes all the requirements of the Collaboration in full and the program is successfully commercialized, the Company will be required to pay aggregate milestone payments of $
Agreements with the Regents of the University of California (the “Regents”)
In March 2016, and as amended and restated in August 2018, and as amended thereafter, the Company and the Regents entered into a license agreement (as amended, the “Regents License Agreement”) for the development, manufacturing and distribution rights related to the development and commercialization of ROR1 related naked antibodies, antibody fragments or synthetic antibodies, and genetically engineered cellular therapy. The Regents License Agreement provides for the following: (i) in May 2016, an upfront license fee of $
13
spend annually through 2021. Under the Regents License Agreement, the Company recorded: (a) $
The Regents License Agreement will expire upon the later of the expiration date of the longest-lived patent rights or the 15th anniversary of the first commercial sale of a licensed product. The Regents may terminate the Regents License Agreement if: (i) a material breach by the Company is not cured within a reasonable time, (ii) the Company files a claim asserting the Regents licensed patent rights are invalid or unenforceable, and (iii) the Company files for bankruptcy. The Company may terminate the agreement at any time upon at least
In July 2016, and as modified by the amended and restated Regents License Agreement in August 2018, the Company entered into a research agreement with the Regents for further research on a ROR1 therapeutic development program. Under this
The University of Tennessee Research Foundation (“UTRF”)
In March 2015, and as amended and restated in March 2022, the Company and UTRF entered into a license agreement (the “DAARI License Agreement”) pursuant to which the Company was granted exclusive worldwide rights in all existing DAARI technologies owned or controlled by UTRF, including all improvements thereto. Under the DAARI License Agreement, the Company is obligated to employ active, diligent efforts to conduct preclinical research and development activities for the DAARI program to advance one or more lead compounds into clinical development. The Company is also obligated to pay UTRF annual license maintenance fees, low single-digit royalties on net sales of products and additional royalties on sublicense revenues, depending on the state of development of a clinical product candidate at the time it is sublicensed. The Company recorded research and development expense under this agreement of a nominal amount for the three months ended September 30, 2022 and 2021, and $
The California Institute for Regenerative Medicine (“CIRM”) Award
In August 2017, and as amended and restated in December 2020, CIRM awarded an $
The National Institute of Health (“NIH”) Grant Awards
In August 2021, the NIH awarded the Company two research and development grants for up to $
14
ended September 30, 2022, the Company received $
Clinical Trial and Supply Agreements
In April 2018, and as amended in August 2019, the Company entered into a Clinical Trial and Supply Agreement with Pharmacyclics, LLC, an AbbVie Company, to supply ibrutinib for the CIRLL study. Effective in June 2022, the Company entered into a Clinical Trial and Supply Agreement with Pharmacyclics, LLC, to supply ibrutinib for the Company’s global ZILO-301 Phase 3 study. Such agreements do not bear any upfront costs, inventory purchase costs, milestone or royalty payment commitments or other financial obligations.
License and Development Agreement (“LDA”) with SPH USA, a Related Party
In November 2018, and as amended in August 2020, the Company entered into the LDA with SPH USA for: (i) the territory of the People’s Republic of China, Hong Kong, Macau, and Taiwan (“Greater China”), and (ii) rights to manufacture, develop, market, distribute and sell all of the Company’s product candidates under the Georgetown License Agreement and the Regents License Agreement (exclusive to Greater China only). Under the LDA, SPH USA is solely responsible for: (a) all preclinical and clinical development activities required in order to obtain regulatory approval in Greater China for such product candidates, (b) any third-party license milestone or royalty payments owed under the Georgetown License Agreement and the Regents License Agreement, and (c) paying the Company a low single digit royalty on net sales in the territory.
The LDA will expire upon the expiration of the last royalty term for the last licensed product. The LDA may be terminated by: (i) SPH USA on a country by country or product by product basis with 180 days written notice, (ii) either party upon material breach that is not cured within 90 days, and (iii) either party in the event the other party declares insolvency or bankruptcy. There has been no significant activity under this agreement for each of the three and nine months ended September 30, 2022 and 2021 (see Note 3).
Contingent Value Rights Agreement (“CVR Agreement”)
Pursuant to the GTx merger agreement entered into in June 2019 (the “Merger”), the Company, a representative of holders of the CVRs, and Computershare, Inc. as rights agent, entered into the CVR Agreement. Pursuant to the CVR Agreement, the Company’s stockholders of record as of immediately prior to the Merger received one CVR for each share of the Company’s common stock held immediately prior to the Merger.
As amended on November 1, 2021, the CVR Agreement entitles holders of CVRs to receive: (i) 50% of certain net proceeds received by the Company during the
ATM Program
In December 2021, the Company entered into an Open Market Sale AgreementSM (the “Sales Agreement”) with Jefferies LLC, pursuant to which the Company is able to offer and sell, from time to time in its sole discretion, shares of its common stock having an aggregate offering price of up to $
Common Stock Warrants
15
A summary of warrant activity and changes in warrants outstanding is presented below:
|
|
Number of Shares Underlying Warrants |
|
|
Weighted-Average Exercise Price Per Share |
|
|
Weighted-Average Remaining Contractual Term (in years) |
|
|||
Balance at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|||
Issued |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
— |
|
|
Exercised |
|
|
|
|
$ |
|
|
|
— |
|
||
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|||
All warrants met the criteria for classification in stockholders’ equity.
Equity Incentive Plans
Stock Option Awards
Contemporaneous with the Merger closing: (i) Oncternal’s 2015 Equity Incentive Plan, as amended (“2015 Plan”) was assumed by the Company, and (ii) the Company adopted the 2019 Incentive Award Plan (“2019 Plan”) under which the sum of: (a)
In July 2015, Oncternal adopted the 2015 Plan which provided for the issuance of shares of common stock for incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards and other stock awards to its employees, members of its board of directors and consultants. In general, the options issued under the 2015 Plan expire
The 2019 Plan provides for the issuance of shares of common stock for incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards and other stock awards to its employees, members of its board of directors and consultants. In general, the stock options issued under the 2019 Plan expire
In February 2021, the Company’s board of directors adopted the 2021 Employment Inducement Incentive Award Plan (the “Inducement Plan”). The Inducement Plan is a non-shareholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. The Inducement Plan is used exclusively for the issuance of non-statutory stock options to certain new hires who satisfied the requirements to be granted inducement grants under Nasdaq rules as an inducement material to the individual’s entry into employment with the Company. The terms of the Inducement Plan are substantially similar to the terms of the 2019 Plan. As amended in May 2021 and December 2021, the Company has reserved
As of September 30, 2022,
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|
||||
|
|
Number of Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term (in years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
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|
||||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Exercised |
|
|
|
|
$ |
— |
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and expected to vest as of September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and exercisable as of September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
16
For the nine months ended September 30, 2022 and 2021, the weighted average grant date fair value per share of option grants was $
Restricted Stock Unit Awards
Restricted stock unit awards (“RSUs”) are rights to receive shares of the Company’s common stock upon satisfaction of specific vesting conditions. The Company began issuing RSUs in the first quarter of 2022. The RSUs generally vest over a two-year period.
|
|
|
|
|
|
|
|
|
|
|||
|
|
Number of Restricted Stock Units |
|
|
Weighted-Average Remaining Contractual Term (in years) |
|
|
Weighted-Average Grant Date Fair Value |
|
|||
Nonvested at December 31, 2021 |
|
|
— |
|
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited/ Repurchased |
|
|
( |
) |
|
|
|
|
|
|
||
Nonvested at September 30, 2022 |
|
|
|
|
|
|
|
$ |
|
|||
Units expected to vest as of September 30, 2022 |
|
|
|
|
|
|
|
$ |
|
|||
Stock-Based Compensation Expense
The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants, were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected term (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected dividend yield |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Expected volatility. The expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the life sciences industry with comparable characteristics to the Company including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.
Expected term. The expected term represents the period of time that options are expected to be outstanding. Due to limited historical exercise behavior, it determined the expected life assumption using the simplified method for employees, which is an average of the contractual term of the option and its vesting period. The expected term for nonemployee options is generally the remaining contractual term.
Risk-free interest rate. The risk-free interest rate is based on the implied yield on the U.S. Treasury securities with a maturity date similar to the expected term of the associated stock option award.
Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends and, therefore, used an expected dividend yield of zero.
RSU awards represent rights to receive shares of common stock contingent upon satisfaction of specific vesting conditions. The stock-based compensation expense for these awards was determined using the closing price on the grant date applied to the total number of shares that were anticipated to fully vest.
17
Stock-based compensation expense recognized for all equity awards has been reported in the condensed consolidated statements of operations as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2022, the unrecognized compensation cost related to non-vested stock options was $
As of September 30, 2022, the unrecognized compensation cost related to non-vested restricted stock units was $
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance is as follows (in thousands):
|
|
September 30, |
|
|
Common stock warrants |
|
|
|
|
Common stock options issued and outstanding |
|
|
|
|
Restricted stock unit awards |
|
|
|
|
Common stock available for issuance under the Inducement Plan and 2019 Plan |
|
|
|
|
|
|
|
|
|
The COVID-19 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 the Company’s preclinical and manufacturing activities, planned regulatory submissions and clinical trials, including the Company’s global Phase 3 study of zilovertamab. The Company considered the impacts of COVID-19 on the assumptions and estimates used to prepare its condensed consolidated financial statements and determined that there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2022. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact the Company’s 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, the emergence and spread of additional variants of COVID-19, as well as the economic impact on local, regional, national and international markets.
In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property, and authorized the Paycheck Protection Program. The CARES Act had no material impact on the Company’s income tax provision for the nine months ended September 30, 2022. The Company continues to monitor changes and revisions to the CARES Act and its impact on the Company’s condensed consolidated financial position, results of operations and cash flows.
18
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 September 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:
We initiated our Phase 3 global registrational study of zilovertamab, ZILO-301, for the treatment of patients with relapsed or refractory mantle cell lymphoma, or MCL, in the second half of 2022. The Phase 3 clinical trial ZILO-301 is a randomized, double-blind, placebo-controlled study evaluating 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.
19
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 September 30, 2022, we have funded our operations primarily through: (i) gross proceeds of $132.9 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 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 September 30, 2022, we had cash and cash equivalents of $70.6 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 $32.8 million for the nine months ended September 30, 2022 and we had an accumulated deficit of $146.9 million as of September 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:
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.
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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 regulatory submissions and clinical trials, including ZILO-301, our global Phase 3 study of zilovertamab. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact 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 received $14.5 million during the project period related to development milestone payments under research subaward agreements. In addition, we were committed to certain co-funding requirements and we were 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 nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we believe we have met our obligations under the CIRM award and UC San Diego subawards.
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 nine months ended September 30, 2022, we received $1.2 million in award payments, and recorded $1.1 million in grant revenue and $0.1 million of deferred revenue.
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:
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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 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 primarily consist of money market funds. Our interest income has not been significant due to low interest yields earned on invested balances.
22
Results of Operations
Comparison of Three and Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the periods indicated:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
(in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
Grant revenue |
|
$ |
382 |
|
|
$ |
2,128 |
|
|
$ |
(1,746 |
) |
|
$ |
1,319 |
|
|
$ |
3,759 |
|
|
$ |
(2,440 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development |
|
|
8,442 |
|
|
|
8,963 |
|
|
|
(521 |
) |
|
|
24,182 |
|
|
|
18,068 |
|
|
|
6,114 |
|
General and administrative |
|
|
3,265 |
|
|
|
2,802 |
|
|
|
463 |
|
|
|
10,169 |
|
|
|
8,977 |
|
|
|
1,192 |
|
Total operating expenses |
|
|
11,707 |
|
|
|
11,765 |
|
|
|
(58 |
) |
|
|
34,351 |
|
|
|
27,045 |
|
|
|
7,306 |
|
Loss from operations |
|
|
(11,325 |
) |
|
|
(9,637 |
) |
|
|
(1,688 |
) |
|
|
(33,032 |
) |
|
|
(23,286 |
) |
|
|
(9,746 |
) |
Interest income |
|
|
200 |
|
|
|
7 |
|
|
|
193 |
|
|
|
262 |
|
|
|
26 |
|
|
|
236 |
|
Net loss |
|
$ |
(11,125 |
) |
|
$ |
(9,630 |
) |
|
$ |
(1,495 |
) |
|
$ |
(32,770 |
) |
|
$ |
(23,260 |
) |
|
$ |
(9,510 |
) |
Comparison of Three Months Ended September 30, 2022 and 2021
Grant Revenue
Grant revenue was $0.4 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively. The decrease of $1.7 million was primarily due to the completion of the CIRM subaward in the first quarter of 2022.
Research and Development Expenses
The following table summarizes our research and development expenses for the periods indicated:
|
|
Three Months Ended September 30, |
|
|
Increase/ |
|
||||||
(in thousands) |
|
2022 |
|
|
2021 |
|
|
(Decrease) |
|
|||
Zilovertamab |
|
$ |
2,359 |
|
|
$ |
5,176 |
|
|
$ |
(2,817 |
) |
ONCT-534 |
|
|
673 |
|
|
|
90 |
|
|
|
583 |
|
ONCT-808 |
|
|
1,720 |
|
|
|
860 |
|
|
|
860 |
|
ONCT-216 |
|
|
520 |
|
|
|
739 |
|
|
|
(219 |
) |
Unallocated research and development expenses |
|
|
3,170 |
|
|
|
2,098 |
|
|
|
1,072 |
|
Total research and development expenses |
|
$ |
8,442 |
|
|
$ |
8,963 |
|
|
$ |
(521 |
) |
Research and development expenses for the three months ended September 30, 2022 and 2021 were $8.4 million and $8.9 million, respectively, a decrease of $0.5 million. The decrease was primarily due to a $1.5 million decrease in direct product candidate costs and a $1.0 million increase in unallocated expenses.
Direct expenses for zilovertamab decreased $2.8 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to a decrease in manufacturing development costs.
Direct expenses for ONCT-534 increased $0.6 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to an increase in preclinical activity.
Direct expenses for ONCT-808 increased $0.9 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to an increase in manufacturing development costs.
Direct expenses for ONCT-216 decreased $0.2 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to a decrease in clinical trial costs.
Unallocated expenses increased $1.0 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to higher personnel costs, including stock-based compensation costs.
23
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2022 and 2021 were $3.3 million and $2.8 million, respectively, an increase of $0.5 million. The increase was primarily due to higher non-cash stock-based compensation and legal expenses.
Comparison of Nine Months Ended September 30, 2022 and 2021
Grant Revenue
Grant revenue for the nine months ended September 30, 2022 was $1.3 million, compared to $3.8 million for the nine months ended September 30, 2021. The decrease of $2.5 million was primarily due to the completion of the CIRM subaward in the first quarter of 2022.
Research and Development Expenses
The following table summarizes our research and development expenses for the periods indicated:
|
|
Nine Months Ended |
|
|
Increase/ |
|
||||||
(in thousands) |
|
2022 |
|
|
2021 |
|
|
(Decrease) |
|
|||
Zilovertamab |
|
$ |
7,570 |
|
|
$ |
8,888 |
|
|
$ |
(1,318 |
) |
ONCT-534 |
|
|
1,585 |
|
|
|
278 |
|
|
|
1,307 |
|
ONCT-808 |
|
|
3,920 |
|
|
|
1,465 |
|
|
|
2,455 |
|
ONCT-216 |
|
|
2,077 |
|
|
|
2,475 |
|
|
|
(398 |
) |
Unallocated research and development expenses |
|
|
9,030 |
|
|
|
4,962 |
|
|
|
4,068 |
|
Total research and development expenses |
|
$ |
24,182 |
|
|
$ |
18,068 |
|
|
$ |
6,114 |
|
Research and development expenses for the nine months ended September 30, 2022 and 2021 were $24.2 million and $18.1 million, respectively, an increase of $6.1 million. The increase was primarily due to a $2.1 million increase in direct product candidate costs and a $4.0 million increase in unallocated expenses.
Direct expenses for zilovertamab decreased $1.3 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to a decrease in manufacturing development costs that was partially offset by an increase in clinical trial activity.
Direct expenses for ONCT-534 increased $1.3 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to an increase in preclinical activity and manufacturing development costs.
Direct expenses for ONCT-808 increased $2.5 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to an increase in manufacturing development costs.
Direct expenses for ONCT-216 decreased $0.4 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to lower clinical trial activity and manufacturing costs.
Unallocated expenses increased $4.0 million for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to higher personnel costs, including stock-based compensation costs.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2022 and 2021 were $10.2 million and $9.0 million, respectively, an increase of $1.2 million. The increase was primarily due to higher personnel costs and corporate expenses which were partially offset by lower legal costs.
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Liquidity and Capital Resources
We have incurred losses and negative cash flows from operations since inception. As of September 30, 2022, we had an accumulated deficit of $146.9 million and anticipate that we will continue to incur net losses for the foreseeable future. As of September 30, 2022, we had $70.6 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 nine months ended September 30, 2022, we sold 3,363,005 and 6,084,321 shares of common stock for net proceeds of $3.7 million and $7.6 million, respectively.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
|
|
Nine Months Ended |
|
|||||
(in thousands) |
|
2022 |
|
|
2021 |
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(27,702 |
) |
|
$ |
(19,973 |
) |
Financing activities |
|
|
7,565 |
|
|
|
616 |
|
Net decrease in cash and cash equivalents |
|
$ |
(20,137 |
) |
|
$ |
(19,357 |
) |
Operating Activities
Net cash used in operating activities was $27.7 million and $20.0 million for the nine months ended September 30, 2022 and 2021, respectively. The increase in cash used in operations was primarily attributable to the development and manufacturing activities associated with the clinical programs and higher personnel costs. The net cash used in operating activities during the nine months ended September 30, 2022 was primarily due to our net loss of $32.8 million adjusted for $5.8 million of non-cash charges, primarily for stock-based compensation, and a $0.7 million change in operating assets and liabilities. Net cash used in operating activities during the nine months ended September 30, 2021 was primarily due to our net loss of $23.3 million adjusted for $4.3 million of non-cash charges, primarily for stock-based compensation, and a $1.0 million change in operating assets and liabilities.
Investing Activities
No cash was used or provided by investing activities for the nine months ended September 30, 2022 and 2021.
Financing Activities
Net cash provided by financing activities was $7.6 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively. The net cash provided during 2022 resulted from proceeds received from the sale of common stock under the ATM program and the net cash provided during 2021 was primarily due to cash received from the exercise of common stock options and warrants.
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
25
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:
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
26
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 September 30, 2022, we have sold 6,084,321 shares of common stock for net proceeds of $7.6 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 September 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.
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 nine months ended September 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.
27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, who serve as our principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting
Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.
28
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
An investment in our securities involves a high degree of risk. You should carefully consider the specific factors discussed below, as well as all other information included in this Quarterly Report on Form 10-Q, including our financial statements, the notes thereto and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the following risks actually occurs, our business, financial condition, operating results, prospects and ability to accomplish our strategic objectives could be materially harmed. As a result, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. The occurrence of any of these known or unknown risks might cause you to lose all or part of your investment in our securities.
There have been no material changes to the risk factors included in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
29
Item 6. Exhibits.
EXHIBIT INDEX
30
|
|
|
|
|
|
|
|
|
|
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4.9 |
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8-K |
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000-50549 |
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4.1 |
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19-Nov-20 |
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4.10 |
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8-K |
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000-50549 |
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4.1 |
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11-Dec-20 |
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10.1*† |
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31.1* |
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31.2* |
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32.1‡ |
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2‡ |
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS* |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104* |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* Filed herewith
‡ Furnished herewith
† Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Oncternal Therapeutics, Inc. |
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Date: November 3, 2022 |
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By: |
/s/ James B. Breitmeyer |
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Name: James B. Breitmeyer |
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Title: President and Chief Executive Officer |
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Date: November 3, 2022 |
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By: |
/s/ Richard G. Vincent |
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Name: Richard G. Vincent |
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Title: Chief Financial Officer |
32
Exhibit 10.1
[***] Certain information in this document has been excluded pursuant to Regulation S-K,
Item 601(b)(10). Such excluded information is not material and would likely cause
competitive harm to the registrant if publicly disclosed.
FIRST AMENDMENT to THE AMENDED AND RESTATED License Agreement Between THE UNIVERSITY OF TENNESSEE RESEARCH FOUNDATION and ONCTERNAL THERAPEUTICS, INC.
This First Amendment to the Amended and Restated License Agreement Between the University of Tennessee Research Foundation and Oncternal Therapeutics, Inc. (“First Amendment”), effective as of the latest date of signing below, between the University of Tennessee Research Foundation, having an office at 910 Madison Avenue, Suite 827, Memphis TN 38163 (“UTRF”) and Oncternal Therapeutics, Inc., a company organized and existing under the laws of California and having its principal place of business at 12230 El Camino Real, Suite 300 San Diego, CA 92130 (“LICENSEE”), herein after referred to as the “Parties.”
Background
WHEREAS, UTRF and LICENSEE entered into the Amended and Restated License Agreement between University of Tennessee Research Foundation and Oncternal Therapeutics, Inc. (“Agreement”) having an Effective Date of March 9, 2022;
WHEREAS, the Parties desire to amend the Agreement to include additional invention disclosures within Article 1.6 and to update the table of Licensed Patents in Appendix A;
NOW, THEREFORE, the Parties hereto agree as follows:
1.6 “Invention Disclosure” means the UTRF file numbers:
1
IN WITNESS WHEREOF, the Parties execute this First Amendment by their duly authorized representatives and acknowledge that they understand and agree to be bound by its terms and conditions.
UNIVERSITY OF TENNESSEE RESEARCH FOUNDATION (“UTRF”)
Signature: /s/ Stacey Patterson
Name: Stacey Patterson
Title: President
Date: 8/20/2022 |
ONCTERNAL THERAPEUTICS, INC. (“LICENSEE”)
Signature: /s/ James Breitmeyer
Name: James Breitmeyer
Title: President & CEO
Date: 8/22/2022 |
2
APPENDIX A
[***]
3
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James B. Breitmeyer, certify that:
/s/ James B. Breitmeyer |
President and Chief Executive Officer |
(Principal Executive Officer) |
Dated: November 3, 2022
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard G. Vincent, certify that:
/s/ Richard G. Vincent |
Chief Financial Officer |
(Principal Financial Officer) |
Dated: November 3, 2022
Exhibit 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
In connection with the Quarterly Report on Form 10-Q of Oncternal Therapeutics, Inc. (the “Company”) for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James B. Breitmeyer, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
/s/ James B. Breitmeyer |
President and Chief Executive Officer |
(Principal Executive Officer) |
Dated: November 3, 2022
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
In connection with the Quarterly Report on Form 10-Q of Oncternal Therapeutics, Inc. (the “Company”) for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard G. Vincent, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
/s/ Richard G. Vincent |
Chief Financial Officer |
(Principal Financial Officer) |
Dated: November 3, 2022
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.