SEC Form 10-Q filed by Repare Therapeutics Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _________________ to ___________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 2, 2024, there were
Table of Contents
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PART I. |
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Item 1. |
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3 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
30 |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
34 |
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i
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, research and development costs, plans and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.
The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:
Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, and involve known and unknown risks, uncertainties and other factors including, without limitation, risks, uncertainties and assumptions regarding the impact of the macroeconomic events on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results in this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Except as required by law, we do not intend, and undertake no obligation, to update any forward-looking information to reflect events or circumstances.
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Repare Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands of U.S. dollars, except share data)
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As of |
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As of |
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2024 |
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2023 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Income tax receivable |
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Other current receivables |
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Prepaid expenses |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Income tax receivable |
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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 SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liability, current portion |
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Deferred revenue, current portion |
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Total current liabilities |
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Operating lease liability, net of current portion |
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Deferred revenue, net of current portion |
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TOTAL LIABILITIES |
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SHAREHOLDERS’ EQUITY |
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Preferred shares, |
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Common shares, |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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Accumulated deficit |
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Total shareholders’ equity |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
Repare Therapeutics Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(Amounts in thousands of U.S. dollars, except share and per share data)
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue: |
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Collaboration agreements |
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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, net of tax credits |
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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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( |
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( |
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( |
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Other income (expense), net |
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Realized and unrealized gain (loss) on foreign exchange |
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( |
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( |
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Interest income |
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Other expense |
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( |
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( |
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( |
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Total other income, net |
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Loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax expense |
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( |
) |
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( |
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( |
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( |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive (loss) income: |
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Unrealized (loss) gain on available-for-sale marketable |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Total other comprehensive (loss) income |
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( |
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( |
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( |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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Net loss per share attributable to common shareholders - basic |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted-average common shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
Repare Therapeutics Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
(Amounts in thousands of U.S. dollars, except share data)
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Common Shares |
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Additional |
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Accumulated |
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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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Income (Loss) |
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Deficit |
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Equity |
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Balance, |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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( |
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— |
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— |
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Issuance of common shares |
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( |
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— |
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— |
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Other comprehensive |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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( |
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— |
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— |
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Other comprehensive |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Balance, |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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( |
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— |
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— |
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Issuance of common shares |
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( |
) |
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— |
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— |
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— |
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Issuance of common shares |
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( |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Balance, March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
Repare Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands of U.S. dollars)
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Six Months Ended |
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2024 |
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2023 |
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Cash Flows From Operating Activities: |
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Net loss for the period |
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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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Share-based compensation expense |
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Depreciation expense |
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Non-cash lease expense |
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Foreign exchange (gain) loss |
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( |
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Net accretion of marketable securities |
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( |
) |
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( |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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( |
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Other current receivables |
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( |
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Other non-current assets |
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Accounts payable |
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Accrued expenses and other current liabilities |
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( |
) |
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( |
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Operating lease liability, current portion |
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( |
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Income taxes |
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( |
) |
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Operating lease liability, net of current portion |
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( |
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( |
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Deferred revenue |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash Flows From Investing Activities: |
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Purchases of property and equipment |
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( |
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Proceeds from maturities of marketable securities |
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Purchase of marketable securities |
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( |
) |
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( |
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Net cash (used in) provided by investing activities |
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( |
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Cash Flows From Financing Activities: |
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Proceeds from exercise of stock options |
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Proceeds from issuance of common stock under the 2020 Employee Share Purchase Plan |
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Net cash provided by financing activities |
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Effect of exchange rate fluctuations on cash held |
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( |
) |
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Net Decrease In Cash And Cash Equivalents |
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( |
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( |
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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 Cash Flow Information: |
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Right-of-use asset obtained in exchange for new operating lease liability |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
6
REPARE THERAPEUTICS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars, unless otherwise specified)
1. Organization and Nature of Business
Repare Therapeutics Inc. (“Repare” or the “Company”) is a precision medicine oncology company focused on the development of synthetic lethality-based therapies for patients with cancer. The Company is governed by the Business Corporations Act (Québec). The Company’s common shares are listed on the Nasdaq Global Select Market under the ticker symbol “RPTX”.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, 2023, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of June 30, 2024, the consolidated results of its operations for the three and six months ended June 30, 2024 and 2023, its statements of shareholders’ equity for the three and six months ended June 30, 2024 and 2023 and its consolidated cash flows for the six months ended June 30, 2024 and 2023.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024 (the “Annual Report”). The condensed consolidated balance sheet data as of December 31, 2023 presented for comparative purposes was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.
The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 included in the Annual Report. There have been no changes to the Company's significant accounting policies since the date of the audited consolidated financial statements for the year ended December 31, 2023 included in the Annual Report.
Principles of Consolidation
These unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiary, Repare Therapeutics USA Inc. (“Repare USA”), which was incorporated under the laws of Delaware on June 1, 2017. The financial statements of Repare USA are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group transactions, balances, income, and expenses are eliminated in full upon consolidation.
Smaller Reporting Company
Repare qualifies as a “smaller reporting company” under the Exchange Act as of June 30, 2024 because the market value of its common shares held by non-affiliates was less than $200 million as of June 30, 2024. As a smaller reporting company, Repare may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. For so long as the Company remains a smaller reporting company, it is permitted and intends to rely on such exemptions from certain disclosure and other requirements that are applicable to other public companies that are not smaller reporting companies.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in consolidated financial statements and accompanying notes. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued research and development expenses, share-based compensation and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions that it believes to be reasonable under the
7
circumstances. Actual results could differ from those estimates. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB amended the guidance in ASU 280, Segment Reporting, to require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures currently required under ASC 280. The new guidance is effective for public entities in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the impact of this amendment on its consolidated financial statements.
In December 2023, the FASB amended the guidance in ASU 740, Income Taxes, to provide disaggregated income tax disclosures on the rate reconciliation and income taxes paid. The new guidance is effective for public entities in fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the impact of this amendment on its consolidated financial statements.
3. Cash and Cash Equivalents and Marketable Securities
Cash and cash equivalents and marketable securities were comprised of the following:
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
As of June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash and cash equivalents: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash and cash equivalents: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury and government-sponsored enterprises |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Interest receivable was $
The Company held available-for-sale marketable securities with an aggregate fair value of $
8
The Company recognized a net unrealized loss of
The maturities of the Company’s marketable securities as of June 30, 2024 and December 31, 2023 are less than one year.
4. Fair Value Measurements
Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values:
Description |
|
Financial Assets |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
As of June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury and government-sponsored enterprises |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure the fair value. In determining the fair values at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data.
During the six months ended June 30, 2024, there were
9
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
|
|
As of |
|
|
As of |
|
||
|
|
(in thousands) |
|
|||||
Accrued research and development expense |
|
$ |
|
|
$ |
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Accrued professional services |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
6. Collaborative Arrangements
Debiopharm Clinical Study and Collaboration Agreement
In January 2024, the Company entered into a clinical study and collaboration agreement with Debiopharm International S.A. (“Debiopharm”), a privately-owned, Swiss-based biopharmaceutical company, with the aim to explore the synergy between the Company’s compound, lunresertib, and Debiopharm’s compound, Debio 0123, a WEE1 inhibitor (the “Debio Collaboration Agreement”). The Company and Debiopharm are collaborating on the development of a combination therapy, with the Company sponsoring the global study, and will share all costs equally. The Company and Debiopharm are each supplying their respective drugs and retain all commercial rights to their respective compounds, including as monotherapy or as combination therapies. The activities associated with the Debio Collaboration Agreement are coordinated by a joint steering committee, which is comprised of an equal number of representatives from the Company and Debiopharm.
Based on the terms of the Debio Collaboration Agreement, the Company concluded that the Debio Collaboration Agreement meets the requirements of a collaboration within the guidance of ASC 808, Collaborative Arrangements, as both parties are active participants in the combination trial and are exposed to significant risks and rewards depending on the success of the combination trial. Accordingly, the net costs associated with the co-development are expensed as incurred and recognized within research and development expenses in the consolidated statement of operations and comprehensive loss.
During the three and six months ended June 30, 2024, the Company recognized $
7. Revenue recognition from Collaboration and License Agreements
The following table presents revenue from collaboration agreements:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Roche Collaboration and License Agreement |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Bristol-Myers Squibb Collaboration and License Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ono Collaboration Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company’s revenue recognition accounting policy, as well as additional information on the Company’s collaboration and license agreements are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 included in the Annual Report.
Roche Collaboration and License Agreement
In June 2022, the Company entered into a collaboration and license agreement (the “Roche Agreement”) with Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd (collectively, “Roche”) regarding the development and commercialization of the Company’s product candidate camonsertib (also known as RP-3500) and specified other Ataxia-Telangiectasia and Rad3-related protein kinase (“ATR”) inhibitors (the “Licensed Products”) which became effective July 13, 2022 (the “Effective Date”). Pursuant to the Roche
10
Agreement, the Company granted Roche a worldwide, perpetual, exclusive, sublicensable license to develop, manufacture, and commercialize the Licensed Products, as well as a non-exclusive, sublicensable license to certain related companion diagnostics. The Company agreed to complete specified ongoing clinical trials in accordance with the development plan in the Roche Agreement, as well as ongoing investigator sponsored trials (together, the “Continuing Trials”) at the Company’s expense. Roche assumed all subsequent development of camonsertib with the potential to expand development into additional tumors and multiple combination studies. The Company retained the right to conduct specified clinical trials (the “Repare Trials”) of camonsertib in combination with the Company’s PKMYT1 compound, lunresertib (also known as RP-6306). The Roche Agreement provided the Company, at its sole discretion, with the ability to opt-in to a 50/50 U.S. co-development and profit share arrangement, including participation in U.S. co-promotion if U.S. regulatory approval was received. If the Company chose to exercise its co-development and profit share option, it would continue to be eligible to receive certain clinical, regulatory, commercial and sales milestone payments, in addition to full ex-U.S. royalties.
On February 7, 2024, the Company received written notice from Roche of their election to terminate the Roche Agreement following a review of Roche’s pipeline and evolving external factors. The termination became effective May 7, 2024, at which time the Company regained global development and commercialization rights for camonsertib from Roche.
In February 2024, the Company received a $
In March 2024, the Company received a further payment of $
Deferred revenue pertaining to the Roche Agreement |
|
Completion of Continuing Trials |
|
|
|
|
(in thousands) |
|
|
Balance as of December 31, 2023 |
|
$ |
|
|
Increase in collaboration revenue |
|
|
|
|
Recognition as revenue, as the result of performance obligations satisfied |
|
|
( |
) |
Balance as of June 30, 2024 |
|
$ |
|
|
The Company recognized $
Bristol-Myers Squibb Collaboration and License Agreement
In May 2020, the Company entered into a collaboration and license agreement (the “BMS Agreement”) with Bristol-Myers Squibb Company (“Bristol-Myers Squibb”), pursuant to which the Company and Bristol-Myers Squibb have agreed to collaborate in the research and development of potential new product candidates for the treatment of cancer. The Company provided Bristol-Myers Squibb access to a selected number of its existing screening campaigns and novel campaigns. The Company was responsible for carrying out early-stage research activities directed to identifying potential targets for potential licensing by Bristol-Myers Squibb, in accordance with a mutually agreed upon research plan, and was solely responsible for such costs. The collaboration consisted of programs directed to both druggable targets and to targets commonly considered undruggable to traditional small molecule approaches. Upon Bristol-Myers Squibb’s election to exercise its option to obtain exclusive worldwide licenses for the subsequent development, manufacturing and commercialization of a program, Bristol-Myers Squibb will then be solely responsible for all such worldwide activities and costs.
Although the collaboration term expired in , the BMS Agreement will not expire until, on a licensed product-by-licensed product and country-by-country basis, the expiration of the applicable royalty term and in its entirety upon expiration of the last royalty term. Either party may terminate earlier upon an uncured material breach of the agreement by the other party, or the insolvency of the other party. Additionally, Bristol-Myers Squibb may terminate the BMS Agreement for any or no reason on a program-by-program basis upon specified written notice.
The Company is entitled to receive up to $
11
certain specified commercial milestones. The Company is further entitled to a tiered percentage royalty on annual net sales ranging from high-single digits to low-double digits, subject to certain specified reductions.
Deferred revenue pertaining to the BMS Agreement |
|
Options to license undruggable targets |
|
|
|
|
(in thousands) |
|
|
Balance as of December 31, 2023 |
|
$ |
|
|
Increase in collaboration revenue |
|
|
|
|
Recognition as revenue, as the result of performance obligations satisfied |
|
|
( |
) |
Balance as of June 30, 2024 |
|
$ |
|
|
In March 2024, Bristol-Myers Squibb exercised its one remaining option for an undruggable target. As a result, the Company recognized $
Ono Collaboration Agreement
In January 2019, the Company entered into a research services, license and collaboration agreement, (the “Ono Agreement”), with Ono Pharmaceutical Company Ltd., or (“Ono”), pursuant to which the Company and Ono agreed to collaborate in the research of potential product candidates targeting Polθ and the development of the Company’s small molecule Polθ inhibitor program. In June 2023, the Company and Ono determined not to further extend the term of the Ono Agreement. As a result, no product candidate would be licensed to Ono pursuant to the terms of the Ono Agreement. The Company recognized approximately $
8. Leases
The Company has historically entered into lease arrangements for its facilities. As of June 30, 2024, the Company had
Operating Leases
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Operating Leases - Lease Costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Six Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands, except as specified otherwise) |
|
|||||
Other Operating Lease Information |
|
|
|
|
|
|
||
Operating cash flows used for operating leases |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for new operating lease liability |
|
$ |
|
|
$ |
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
% |
|
|
% |
||
12
9. Share-Based Compensation
2020 Employee Share Purchase Plan
In June 2020, the Company’s board of directors adopted, and the Company’s shareholders approved the 2020 Employee Share Purchase Plan (“ESPP”). The number of shares reserved and available for issuance under the ESPP will automatically increase each January 1, beginning on January 1, 2021 and each January 1 thereafter through January 31, 2030, by the lesser of (1)
The Company issued
As of June 30, 2024, the number of common shares that may be issued under the ESPP is
2020 Equity Inventive Plan
In June 2020, the Company’s board of directors adopted, and the Company’s shareholders approved the 2020 Equity Incentive Plan (the ”2020 Plan”). The 2020 Plan became effective on the effective date of the IPO, at which time the Company ceased making awards under the Option Plan. The 2020 Plan allows the Company’s compensation committee to make equity-based and cash-based incentive awards to the Company’s officers, employees, directors and consultants including but not limited to stock options and restricted share units. The aggregate number of common shares reserved and available for issuance under the 2020 Plan has automatically increased on January 1 of each year beginning on January 1, 2021 and will continue to increase on January 1 of each year through and including January 1, 2030, by
As of June 30, 2024, the number of common shares reserved for issuance under the 2020 Plan is
Inducement Plan
In April 2024, the Company’s board of directors approved the adoption of the 2024 Inducement Plan (the “Inducement Plan”), to be used exclusively for grants of awards to individuals who were not previously employees or directors (or following a bona fide period of non-employment) as a material inducement to such individuals’ entry into employment with the Company, pursuant to Nasdaq Listing Rule 5635(c)(4). The terms and conditions of the Inducement Plan are substantially similar to those of the 2020 Plan.
Stock Options
The following table summarizes the Company’s stock options activity:
|
|
Number of |
|
|
Weighted |
|
||
Outstanding, January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Exercised |
|
|
( |
) |
|
$ |
|
|
Cancelled or forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding, June 30, 2024 |
|
|
|
|
$ |
|
||
The fair value of stock options, and the assumptions used in the Black Scholes option-pricing model to determine the grant date fair value of stock options granted to employees and non-employees were as follows, presented on a weighted average basis:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value of stock options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected terms (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
13
Restricted Share Units
The following table summarizes the Company’s restricted share unit activity:
|
|
Number of |
|
|
Weighted |
|
||
Outstanding, January 1, 2024 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested and released |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding, June 30, 2024 |
|
|
|
|
$ |
|
||
The fair value of each restricted share unit is estimated on the date of grant based on the fair value of our common shares on that same date.
Share-Based Compensation
Share-based compensation expense for all awards was allocated as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Share-based compensation expense by type of award was as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Stock options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of June 30, 2024, there was $
11. Net Loss per Share
The following table summarizes the computation of basic and diluted net loss per share attributable to common shareholders of the Company:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands, except share and per share amounts) |
|
|||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding — basic and |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
14
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Options to purchase common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted share units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Estimated shares issuable under the ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
||||
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with (i) our unaudited condensed consolidated financial statements and related notes, appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) the audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2023 included in our Annual Report on Form 10-K (the “Annual Report”), filed with the Securities and Exchange Commission, (the “SEC”), on February 28, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, contains forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” sections of this Quarterly Report on Form 10-Q and our Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a leading clinical-stage precision oncology company enabled by our proprietary synthetic lethality approach to the discovery and development of novel therapeutics. Synthetic lethality (“SL”) represents a clinically validated approach to drug development. We use our proprietary, genome-wide, CRISPR-enabled SNIPRx platform to systematically discover and develop highly targeted cancer therapies that preferentially treat cancers due to mechanisms of genomic instability, including DNA damage repair. SL arises when a deficiency in either of two genes is tolerated in cells, but simultaneous deficiencies in both genes cause cell death. Cancer cells that contain a mutation in one gene of a SL pair are susceptible to therapeutic intervention targeting the other gene pair.
Our Pipeline
Using our SNIPRx platform, we have internally developed four clinical or near-term clinical therapeutic candidates.
We presented positive initial Phase 1 data from our ongoing Phase 1 MYTHIC trial demonstrating proof of concept for lunresertib alone and in combination with camonsertib at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics in October 2023. Lunresertib was shown to be well tolerated, with a compelling safety profile. We further presented anti-tumor activity for lunresertib in combination with camonsertib. In the fourth quarter of 2024, we expect to provide updated MYTHIC data from ovarian and endometrial cancer expansion cohorts in approximately 20-30 patients each with the lunresertib and camonsertib combination. This data, if positive, may lead us to initiate a first pivotal trial in an indication for lunresertib and camonsertib in 2025. In the third quarter of 2023, we received Fast Track designation for lunresertib in combination with camonsertib for the treatment of adult patients with CCNE1 amplified, or
16
FBXW7 or PPP2R1A mutated endometrial cancer. In May 2024, we announced that an updated dosing schedule approach based on the patient’s entry hemoglobin level was agreed to by the U.S. Food and Drug Administration (the “FDA”) in March 2024, and results in improved tolerability of the lunresertib and camonsertib combination, reducing Grade 3 anemia from a reported level of 45% as of the data cut-off date of September 2023 to a reported level of 25% as of March 2024 in patients treated at the recommended Phase 2 dose and using the updated dosing schedule. The FDA has agreed with the recommended Phase 2 dose of lunresertib 80mg twice daily and camonsertib 80mg once daily for the MYTHIC trial. In June 2024, we were granted Fast-Track designation by the FDA for lunresertib in combination with camonsertib for the treatment of adult patients with CCNE1 amplified, or FBXW7 or PPP2R1A-mutated platinum-resistant ovarian cancer. In preparation for a potential registrational clinical trial start in 2025, we formed a collaboration with Foundation Medicine, Inc. to provide prospective genomic profiling to patients in the ongoing MYTHIC study of lunresertib alone or in combinations in genomically-defined patient populations. We are additionally exploring opportunities with Foundation Medicine to develop FoundationOne®CDx, a tissue-based comprehensive genomic profiling test, as a companion diagnostic for the lunresertib program.
We initiated additional Phase 1 combination clinical trials of lunresertib with gemcitabine (MAGNETIC) in December 2021 and with FOLFIRI (MINOTAUR) in August 2022. In May 2024, we announced preliminary safety data for MINOTAUR demonstrating no significant incremental toxicities for the lunresertib and FOLFIRI combination over FOLFIRI alone and an early signal with favorable tolerability in colorectal and other gastrointestinal tumors. We announced positive initial data from the ongoing Phase 1 MINOTAUR clinical trial at the European Society of Medical Oncology (“ESMO”) Gastrointestinal (GI) Cancers Congress in June 2024. In the fourth quarter of 2022, we received Fast Track designation for lunresertib in combination with gemcitabine for the treatment of adult patients with CCNE1 amplified, or FBXW7, or PPP2R1A mutated platinum resistant ovarian cancer. We are collaborating with the Canadian Cancer Trials Group in an ongoing basket Phase 2 Investigator Sponsored Clinical Trial (“IST”) that is enrolling patients with selected, advanced cancers receiving lunresertib as combination (NCT05605509). A sub-study to that protocol will evaluate lunresertib in combination with gemcitabine in patients with CDK4/6 inhibitor treated ER+/HER2- metastatic breast cancer (NCT05601440) was activated more recently and is also currently enrolling patients. We are also collaborating with University Health Network, Toronto on an investigator-sponsored Phase 1 clinical trial of lunresertib in combination with carboplatin and paclitaxel in TP53 ovarian and uterine cancer (NCT06107868) and such trial is currently enrolling patients.
In January 2024, we announced our collaboration with Debiopharm International S.A. (“Debiopharm”), a Swiss-based biopharmaceutical company. As part of this collaboration, we will sponsor a global trial as a new arm in the ongoing MYTHIC trial combining lunresertib with Debio 0123, a highly selective, brain penetrant, clinical WEE1 inhibitor. We announced the first patient was dosed with the synergistic lunresertib and Debio 0123 combination in April 2024. This is the first clinical trial inhibiting both PKMYT1 and WEE1. We expect to report initial data from this MYTHIC arm in 2025.
We presented initial clinical data from the Phase 1/2 TRESR and ATTACC clinical trials evaluating camonsertib in combination with three poly (ADP-ribose) polymerase (PARP) inhibitors - talazoparib, niraparib, and olaparib. Camonsertib demonstrated 48% overall CBR in patients with advanced solid tumors across tumor types regardless of choice of PARP inhibitor or platinum resistance, with a favorable safety and tolerability profile.
In June 2022, we entered into a worldwide license and collaboration agreement with Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd (collectively “Roche”) for the development and commercialization of camonsertib, which resulted in an initial $125 million upfront payment. In February 2024, we received a $40 million milestone payment from Roche upon dosing of the first patient with camonsertib in Roche’s TAPISTRY trial. Since inception of the Roche camonsertib collaboration, we have received a cumulative total of $182.6 million, including the upfront payment, the milestone payment, as well as additional reimbursements from Roche. On February 7, 2024, we received written notice from Roche of their election to terminate the Roche camonsertib collaboration. The termination became effective in May 2024, at which time we regained global development and commercialization rights for camonsertib from Roche. We engaged in transition activities related to the termination in the first half of 2024 and announced an expansion of the TRESR clinical trial as a Phase 2 clinical trial evaluating camonsertib monotherapy in approximately 20 patients with ATM-mutated (“ATMm”) NSCLC, supported by early, promising camonsertib monotherapy signal in patients with ATMm NSCLC from the ongoing Phase 1/2 TRESR trial. We expect to report initial data from the TRESR trial in 2025.
17
We reported comprehensive preclinical data for RP-1664 in November 2023, including deep tumor growth inhibition and regressions in multiple TRIM37-high solid tumor or neuroblastoma xenograft models. The preclinical in vivo animal model evaluations were performed both internally and in collaboration with Children’s Hospital of Philadelphia. In February 2024, we dosed the first patient in the LIONS (PLK4 Inhibitor in Advanced Solid Tumors) clinical trial, a multicenter, open-label Phase 1 clinical trial to investigate safety, pharmacokinetics, pharmacodynamics and the preliminary efficacy of RP-1664. After evaluating safety in adult patients with recurrent solid tumors in the LIONS clinical trial, we expect to move into a Phase 1/2 clinical trial in patients with high risk, recurrent pediatric neuroblastoma, where the patients have limited treatment options and a high prevalence of TRIM37-altered tumors.
Recent Developments
18
Liquidity Overview
Since our inception in September 2016, we have focused primarily on raising capital, organizing and staffing our company, conducting discovery and research activities, identifying potential SL gene pairs, establishing and protecting our intellectual property portfolio including for our proprietary SNIPRx platform, developing and progressing our product candidates through preclinical studies and preparing for clinical trials and establishing arrangements with third parties for the manufacture of initial quantities of our product candidates and component materials.
As of June 30, 2024, we had cash and cash equivalents and marketable securities on hand of $208.1 million. We believe that our cash, cash equivalents, and marketable securities will be sufficient to fund our anticipated operating and capital expenditure requirements at least into mid-2026. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect.
Since inception, we have incurred significant operating losses. Our net losses were $93.8 million and $29.0 million for the years ended December 31, 2023 and 2022, respectively, and $21.6 million for the six months ended June 30, 2024. As of June 30, 2024, we had an accumulated deficit of $354.7 million.
We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and seek regulatory approvals, manufacture drug product and drug supply, and maintain and expand our intellectual property portfolio. Our net losses are also expected to be impacted as we pay for accounting, audit, legal, regulatory and consulting services, and pay costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, directors and officers, or D&O, insurance, investor and public relations activities and other expenses associated with operating as a public company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies, our clinical trials, our expenditures on other research and development activities, and our revenue and expenses recognized from collaboration and license agreements.
We do not have any products approved for sale. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates, if ever. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when, needed, could have a negative effect on our business, results of operations and financial condition.
Macroeconomic Considerations
Unfavorable conditions in the economy in the United States, Canada and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including health pandemics, changes in inflation, interest rates and foreign currency exchange rates, banking crises or disruptions in access to bank deposits or lending commitments, natural disasters, geopolitical instability resulting from war, terrorism and other violence, as well as supply chain disruptions have led to economic uncertainty globally and could impact our overall business operations. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.
19
In addition, because some of our manufacturers and suppliers are located in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, laws, rules and regulations of the United States or Chinese governments, as well as political unrest or unstable economic conditions in China. For example, trade tensions between the United States and China have been escalating in recent years. Most notably, several rounds of U.S. tariffs have been placed on Chinese goods being exported to the United States. Each of these U.S. tariff impositions against Chinese exports was followed by a round of retaliatory Chinese tariffs on U.S. exports to China. Our components may in the future be subject to these tariffs, which could increase our manufacturing costs and could make our products, if successfully developed and approved, less competitive than those of our competitors whose inputs are not subject to these tariffs. We may otherwise experience supply disruptions or delays, and although we carefully manage our supply and lead-times, our suppliers may not continue to provide us with clinical supply in our required quantities, to our required specifications and quality levels or at attractive prices. In addition, certain Chinese biotechnology companies and CMOs may become subject to trade restrictions, sanctions, other regulatory requirements, or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, thereby potentially disrupting the supply of material to us. Such disruption could have adverse effects on the development of our product candidates and our business operations. In addition, the recently proposed BIOSECURE Act introduced in House of Representatives, as well as a substantially similar bill in the Senate, targets certain Chinese biotechnology companies. If these bills become law, or similar laws are passed, they would have the potential to severely restrict the ability of companies to contract with certain Chinese biotechnology companies of concern without losing the ability to contract with, or otherwise receive funding from, the U.S. government.
For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Components of Results of Operations
Revenue
To date, we have not recognized any revenue from product sales, and we do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.
The following table presents revenue from our collaboration agreements:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Roche Collaboration and License Agreement |
|
$ |
1,073 |
|
|
$ |
4,825 |
|
|
$ |
50,888 |
|
|
$ |
10,137 |
|
Bristol-Myers Squibb Collaboration and License Agreement |
|
|
— |
|
|
|
14,951 |
|
|
|
2,589 |
|
|
|
15,317 |
|
Ono Collaboration Agreement |
|
|
— |
|
|
|
10,473 |
|
|
|
— |
|
|
|
10,473 |
|
Total revenue |
|
$ |
1,073 |
|
|
$ |
30,249 |
|
|
$ |
53,477 |
|
|
$ |
35,927 |
|
Collaboration and License Agreement with Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd
On June 1, 2022, we entered into a collaboration and license agreement, or the Roche Agreement, with Roche regarding the development and commercialization of our product candidate camonsertib (also known as RP-3500) and specified other ATR inhibitors, which we refer to as the Licensed Products.
Under the Roche Agreement, we granted Roche a worldwide, perpetual, exclusive, sublicensable license to develop, manufacture, and commercialize the Licensed Products. Roche assumed all subsequent development of camonsertib with the potential to expand development into additional tumors and multiple combination studies. We agreed to complete specified ongoing clinical trials in accordance with the development plan in the Roche Agreement, as well as ongoing investigator sponsored trials, or together, the Continuing Trials, at our expense. We also retained the right to conduct specified clinical trials of camonsertib in combination with our PKMYT1 compound (also known as RP-6306).
In February 2024, we received a $40 million milestone payment from Roche that was earned upon dosing of the first patient with camonsertib in Roche’s Phase 2 TAPISTRY trial in January 2024.
In March 2024, we received a further payment of $4.0 million for revisions to the clinical development plan under the Roche Agreement, of which $2.1 million was previously recorded as a receivable on our balance sheet at December 31, 2023.
20
Deferred revenue pertaining to the Roche Agreement |
|
Completion of Continuing Trials |
|
|
|
|
(in thousands) |
|
|
Balance as of December 31, 2023 |
|
$ |
9,463 |
|
Increase in collaboration revenue |
|
|
41,425 |
|
Recognition as revenue, as the result of performance obligations satisfied |
|
|
(50,888 |
) |
Balance as of June 30, 2024 |
|
$ |
- |
|
We recognized $1.1 million and $4.8 million for the three months ended June 30, 2024 and 2023, respectively, and $50.9 million and $10.1 million for the six months ended June 30, 2024 and 2023, respectively as revenue associated with the Roche Agreement in relation to (i) the recognition of revenue from the $40.0 million milestone achievement in the first quarter of 2024, as well as (ii) the recognition of all remaining deferred revenue for research and development services performed towards the completion of the Continuing Trials during the period.
On February 7, 2024, we received written notice from Roche of their election to terminate the Roche Agreement following a review of Roche’s pipeline and evolving external factors. The termination became effective May 7, 2024, at which time we regained global development and commercialization rights for camonsertib from Roche.
Collaboration and License Agreement with Bristol-Myers Squibb Company
In May 2020, we entered into a collaboration and license agreement, or the BMS Agreement, with the Bristol-Myers Squibb Company, or Bristol-Myers Squibb, pursuant to which we and Bristol-Myers Squibb have agreed to collaborate in the research and development of potential new product candidates for the treatment of cancer. We provided Bristol-Myers Squibb access to a selected number of our existing screening campaigns and novel campaigns. We were responsible for carrying out early-stage research activities directed to identifying potential targets for potential licensing by Bristol-Myers Squibb. The collaboration consisted of programs directed to both druggable targets and to targets commonly considered undruggable to traditional small molecule approaches. In the event that Bristol-Myers Squibb elects to obtain an exclusive license for the subsequent development, manufacturing and commercialization of a program, Bristol-Myers Squibb will then be solely responsible for all such worldwide activities.
Although the collaboration term expired in November 2023, the BMS Agreement will not expire until, on a licensed product-by-licensed product and country-by-country basis, the expiration of the applicable royalty term and in its entirety upon expiration of the last royalty term. Either party may terminate earlier upon an uncured material breach of the agreement by the other party, or the insolvency of the other party. Additionally, Bristol-Myers Squibb may terminate the BMS Agreement for any or no reason on a program-by-program basis upon specified written notice. We are eligible to receive up to $301.0 million in total milestones on a program-by-program basis, subject upon the achievement of certain specified research, development, regulatory and commercial milestones. We are further entitled to a tiered percentage royalty on annual net sales ranging from high-single digits to low-double digits, subject to certain specified reductions.
In March 2024, Bristol-Myers Squibb exercised its one remaining option for an undruggable target for a combined total of five druggable targets and one undruggable target over the course of the collaboration. As a result, we recognized the remaining deferred revenue of $2.6 million as revenue related to undruggable targets, including an option fee payment of $0.1 million.
Ono Collaboration Agreement
In January 2019, we entered into a research services, license and collaboration agreement, or the Ono Agreement, with Ono Pharmaceutical Company Ltd., or Ono, pursuant to which we and Ono agreed to collaborate in the research of potential product candidates targeting Polθ and the development of our small molecule Polθ inhibitor program. In June 2023, we and Ono determined not to further extend the Term of the Ono Agreement. As a result, no product candidate would be licensed to Ono pursuant to the terms of the Ono Agreement. We recognized approximately $10.5 million as revenue for the three and six months ended June 30, 2023 with
21
regards to the performance obligation under the Ono Agreement. We did not recognize any revenue pursuant to the Ono Agreement during the three and six months ended June 30, 2024.
Operating Expenses
Debiopharm Collaborative Arrangement
In January 2024, we entered into a clinical study and collaboration agreement, or the Debio Collaboration Agreement, with Debiopharm International S.A., or Debiopharm, a privately-owned, Swiss-based biopharmaceutical company, with the aim to explore the synergy between our compound, lunresertib, and Debiopharm’s compound, Debio 0123, a WEE1 inhibitor. We are collaborating with Debiopharm on the development of a combination therapy, with us sponsoring the global study, and will share all costs equally. Both parties are each supplying their respective drugs and retain all commercial rights to their respective compounds, including as monotherapy or as combination therapies. The activities associated with the Debio Collaboration Agreement are coordinated by a joint steering committee, which is comprised of an equal number of representatives from both parties.
Based on the terms of the Debio Collaboration Agreement, we concluded that the Debio Collaboration Agreement meets the requirements of a collaboration within the guidance of ASC 808, “Collaborative Arrangements”, as both parties are active participants in the combination trial and are exposed to significant risks and rewards depending on the success of the combination trial. Accordingly, the net costs associated with the co-development are expensed as incurred and recognized within research and development expenses in our consolidated statement of operations and comprehensive loss.
During the three and six months ended June 30, 2024, we recognized $0.9 million and $1.4 million, respectively, in net research and development costs with regards to the Debiopharm portion of the 50/50 cost sharing terms in the Debio Collaboration Agreement, and recorded a receivable from Debiopharm of $0.7 million as of June 30, 2024 in “other current receivables”.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, partially offset by development cost reimbursements from collaborative arrangements and fully refundable Canadian research and development tax credits. We expense research and development costs as incurred, which include:
Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our studies or other services performed. Significant judgment and estimates are made in determining the accrued expense or prepaid balances at the end of any reporting period.
We characterize research and development costs incurred prior to the identification of a product candidate as discovery costs. We characterize costs incurred once a product candidate has been identified as development costs.
Our direct external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license, acquisition, and option
22
agreements. We track these external research and development costs on a program-by-program basis once we have identified a product candidate.
We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical development, process development, manufacturing, and clinical development activities.
The following table summarizes our research and development costs:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Discovery costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct external costs |
|
$ |
1,398 |
|
|
$ |
1,950 |
|
|
$ |
3,124 |
|
|
$ |
3,561 |
|
Laboratory supplies and research materials |
|
|
959 |
|
|
|
1,127 |
|
|
|
1,957 |
|
|
|
2,033 |
|
Personnel related costs |
|
|
3,232 |
|
|
|
3,141 |
|
|
|
6,418 |
|
|
|
6,263 |
|
Facilities related costs |
|
|
393 |
|
|
|
375 |
|
|
|
798 |
|
|
|
739 |
|
Other costs |
|
|
842 |
|
|
|
937 |
|
|
|
1,754 |
|
|
|
1,848 |
|
|
|
|
6,824 |
|
|
|
7,530 |
|
|
|
14,051 |
|
|
|
14,444 |
|
Development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct external costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Camonsertib program* |
|
|
3,961 |
|
|
|
5,595 |
|
|
|
7,941 |
|
|
|
11,551 |
|
Lunresertib program* |
|
|
7,660 |
|
|
|
8,222 |
|
|
|
15,767 |
|
|
|
14,243 |
|
RP-1664 program |
|
|
1,412 |
|
|
|
2,002 |
|
|
|
3,008 |
|
|
|
3,300 |
|
RP-3467 and Polθ program |
|
|
773 |
|
|
|
1,273 |
|
|
|
2,328 |
|
|
|
3,024 |
|
Personnel related costs |
|
|
9,186 |
|
|
|
8,047 |
|
|
|
18,845 |
|
|
|
17,131 |
|
Facilities related costs |
|
|
213 |
|
|
|
215 |
|
|
|
421 |
|
|
|
417 |
|
Other costs* |
|
|
1,186 |
|
|
|
1,268 |
|
|
|
2,618 |
|
|
|
2,251 |
|
Debiopharm development cost reimbursement |
|
|
(880 |
) |
|
|
— |
|
|
|
(1,380 |
) |
|
|
— |
|
|
|
|
23,511 |
|
|
|
26,622 |
|
|
|
49,548 |
|
|
|
51,917 |
|
R&D tax credits |
|
|
(260 |
) |
|
|
(364 |
) |
|
|
(554 |
) |
|
|
(743 |
) |
Total research and development costs |
|
$ |
30,075 |
|
|
$ |
33,788 |
|
|
$ |
63,045 |
|
|
$ |
65,618 |
|
*Certain amounts have been reclassified for presentation purposes.
The successful development of our product candidates is highly uncertain. We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our preclinical programs. 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. 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 as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as we commence clinical trials. We anticipate that our expenses will increase substantially, particularly due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
23
Any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on other product candidates. For example, if the FDA, the European Medicines Agency, (EMA), or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our ongoing and planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.
General and Administrative Expenses
General and administrative expense consists primarily of employee related costs, including salaries, bonuses, benefits, share-based compensation and other related costs, as well as expenses for outside professional services, including legal, accounting and audit services and other consulting fees, rent expense, directors and officers insurance expenses, investor and public relations expenses and other general administrative expenses.
We anticipate that we will continue to incur significant accounting, audit, legal, regulatory, compliance and directors’ and officers’ insurance costs as well as investor and public relations expenses.
Other Income (Expense), Net
Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign exchange, interest income earned on cash and cash equivalents and marketable securities, and other expenses such as interest and bank charges.
Realized and unrealized gains and losses on foreign exchange consist of realized and unrealized gains and losses from holding cash and foreign currency denominated other receivables, accounts payable, accrued expenses and other current liabilities as well as operating lease liabilities.
Results of Operations
Comparison of the Three Months Ended June 30, 2024 and 2023
The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Collaboration agreements |
|
$ |
1,073 |
|
|
$ |
30,249 |
|
|
$ |
(29,176 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development, net of tax credits |
|
|
30,075 |
|
|
|
33,788 |
|
|
|
(3,713 |
) |
General and administrative |
|
|
8,317 |
|
|
|
8,719 |
|
|
|
(402 |
) |
Total operating expenses |
|
|
38,392 |
|
|
|
42,507 |
|
|
|
(4,115 |
) |
Loss from operations |
|
|
(37,319 |
) |
|
|
(12,258 |
) |
|
|
(25,061 |
) |
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|||
Realized and unrealized gain (loss) on foreign exchange |
|
|
6 |
|
|
|
(41 |
) |
|
|
47 |
|
Interest income |
|
|
2,894 |
|
|
|
3,489 |
|
|
|
(595 |
) |
Other expense |
|
|
(29 |
) |
|
|
(26 |
) |
|
|
(3 |
) |
Total other income, net |
|
|
2,871 |
|
|
|
3,422 |
|
|
|
(551 |
) |
Loss before income taxes |
|
|
(34,448 |
) |
|
|
(8,836 |
) |
|
|
(25,612 |
) |
Income tax expense |
|
|
(326 |
) |
|
|
(3,110 |
) |
|
|
2,784 |
|
Net loss |
|
$ |
(34,774 |
) |
|
$ |
(11,946 |
) |
|
$ |
(22,828 |
) |
24
Revenue
Revenue was $1.1 million for the three months ended June 30, 2024, compared to $30.2 million for the three months ended June 30, 2023. The decrease of $29.1 million was primarily due to:
Research and Development Expenses, Net of Tax Credits
Research and development expenses were $30.1 million for the three months ended June 30, 2024, compared to $33.8 million for the three months ended June 30, 2023. The decrease of $3.7 million was primarily due to:
General and Administrative Expenses
General and administrative expenses were $8.3 million for the three months ended June 30, 2024, compared to $8.7 million for the three months ended June 30, 2023. The decrease of $0.4 million in general and administrative expenses consisted of:
Other Income (Expense), Net
Other income, net was $2.9 million and $3.4 million for the three months ended June 30, 2024 and 2023, respectively. The decrease of $0.5 million was primarily attributable to a decrease in cash and cash equivalents and marketable securities.
Income Tax Expense
Income tax expense were $0.3 million and $3.1 million for the three months ended June 30, 2024 and 2023, respectively. The decrease of $2.8 million was primarily due to the issuance of IRC Section 174 guidance on September 8, 2023.
25
Comparison of the Six Months Ended June 30, 2024 and 2023
The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:
|
|
Six Months Ended |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Collaboration agreements |
|
$ |
53,477 |
|
|
$ |
35,927 |
|
|
$ |
17,550 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development, net of tax credits |
|
|
63,045 |
|
|
|
65,618 |
|
|
|
(2,573 |
) |
General and administrative |
|
|
16,935 |
|
|
|
17,248 |
|
|
|
(313 |
) |
Total operating expenses |
|
|
79,980 |
|
|
|
82,866 |
|
|
|
(2,886 |
) |
Loss from operations |
|
|
(26,503 |
) |
|
|
(46,939 |
) |
|
|
20,436 |
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|||
Realized and unrealized gain (loss) on foreign exchange |
|
|
37 |
|
|
|
(97 |
) |
|
|
134 |
|
Interest income |
|
|
5,862 |
|
|
|
6,916 |
|
|
|
(1,054 |
) |
Other expense |
|
|
(53 |
) |
|
|
(41 |
) |
|
|
(12 |
) |
Total other income, net |
|
|
5,846 |
|
|
|
6,778 |
|
|
|
(932 |
) |
Loss before income taxes |
|
|
(20,657 |
) |
|
|
(40,161 |
) |
|
|
19,504 |
|
Income tax expense |
|
|
(955 |
) |
|
|
(6,726 |
) |
|
|
5,771 |
|
Net loss |
|
$ |
(21,612 |
) |
|
$ |
(46,887 |
) |
|
$ |
25,275 |
|
Revenue
Revenue was $53.5 million for the six months ended June 30, 2024, compared to $35.9 million for the six months ended June 30, 2023. The increase of $17.6 million was due to:
Research and Development Expenses, Net of Tax Credits
Research and development expenses were $63.0 million for the six months ended June 30, 2024, compared to $65.6 million for the six months ended June 30, 2023. The decrease of $2.6 million was primarily due to:
General and Administrative Expenses
General and administrative expenses were $16.9 million for the six months ended June 30, 2024, compared to $17.2 million for the six months ended June 30, 2023. The decrease of $0.3 million in general and administrative expenses consisted of:
26
Other Income (Expense), Net
Other income, net was $5.8 million and $6.8 million for the six months ended June 30, 2024 and 2023, respectively. The decrease of $1.0 million was primarily attributable to a decrease in cash and cash equivalents and marketable securities.
Income Tax Expense
Income tax expense were $1.0 million and $6.7 million for the six months ended June 30, 2024 and 2023, respectively. The decrease of $5.7 million was primarily due to the issuance of IRC Section 174 guidance on September 8, 2023.
Liquidity and Capital Resources
Since our inception, we have not recognized any revenue from product sales and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all.
In June 2020, we completed our IPO whereby we raised $232.0 million, net of underwriting commissions and offering expenses. In November 2021, we completed a follow-on offering whereby we raised $94.3 million, net of underwriting commissions and offering expenses. Prior to our IPO, we had funded our operations primarily through equity financings, having raised an aggregate of approximately $135.2 million of gross proceeds from the sale of our preferred shares and $15.0 million of gross proceeds from the issuance of a warrant to acquire our common shares. We have also received initial upfront and additional payments of approximately $60.5 million in the aggregate from partnerships with Ono for our Polθ ATPase inhibitor program and Bristol-Myers Squibb for research and development of potential new product candidates for the treatment of cancer. In June 2022, we entered into a collaboration and license agreement with Roche for camonsertib and have received a cumulative total of $182.6 million to date under the terms of the Roche Agreement, including an upfront payment of $125.0 million, a milestone payment of $40 million and additional reimbursements from Roche.
In August 2022, we entered into a Common Shares Sale Agreement, or the Sales Agreement, with Cowen and Company, LLC. Under the Sales Agreement, we may sell up to $125.0 million in common shares. No shares have been issued under the Sales Agreement as of the date of this Quarterly Report on Form 10-Q.
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development, seek regulatory approval and pursue commercialization of any approved product candidates and we will continue to incur additional costs associated with operating as a public company. We expect that our research and development and general and administrative costs will increase in connection with our planned research and development activities.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct certain U.S.-based research and development expenditures in the current fiscal year and required taxpayers to amortize them over five years pursuant to Section 174 of the Internal Revenue Code of 1986, as amended, or the IRC. This provision increased our 2023 and 2022 cash payments of income taxes significantly as compared to 2021 in compliance with IRC Section 174. In September 2023, new interim guidance was issued by the Department of Treasury and the Internal Revenue Service on IRC Section 174 that supports the deduction of such expenses. An income tax receivable in the amount of $12.1 million as of June 30, 2024 reflects the overpayment of tax installments by our U.S. subsidiary (net of a $4.8 million refund received in October 2023). Any changes to tax legislation may materially affect our cash flows. Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations or our interpretation or application thereof, could have a material adverse effect on our financial position, results of operations and/or cash flows.
As of June 30, 2024, our cash and cash equivalents and marketable securities on hand was $208.1 million. We believe that our existing cash and cash equivalents and marketable securities on hand will be sufficient to fund our anticipated operating and capital expenditure requirements at least into mid-2026. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect.
27
Because of the numerous risks and uncertainties associated with research, development, and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common shares. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
28
Cash Flows
Comparison of the Six Months Ended June 30, 2024 and 2023
The following table summarizes our cash flows for each of the periods presented:
|
|
Six Months Ended |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Net cash used in operating activities |
|
$ |
(18,582 |
) |
|
$ |
(66,132 |
) |
|
$ |
47,550 |
|
Net cash (used in) provided by investing activities |
|
|
(13,198 |
) |
|
|
21,664 |
|
|
|
(34,862 |
) |
Net cash provided by financing activities |
|
|
375 |
|
|
|
453 |
|
|
|
(78 |
) |
Effect of exchange rate fluctuations on cash held |
|
|
(43 |
) |
|
|
38 |
|
|
|
(81 |
) |
Net Decrease In Cash And Cash Equivalents |
|
$ |
(31,448 |
) |
|
$ |
(43,977 |
) |
|
$ |
12,529 |
|
Operating Activities
Net cash used in operating activities was $18.6 million for the six months ended June 30, 2024, reflecting a net loss of $21.6 million, a net change of $9.2 million in our net operating assets, offset by non-cash charges of $12.2 million. The non-cash charges primarily consist of share-based compensation for option and restricted share unit grants to employees, as well as depreciation expense, and non-cash lease expense offset by the net accretion of marketable securities. The change in our net operating assets was due to decreases of $12.0 million in deferred revenue, $1.7 million in accrued expenses and other current liabilities, $1.1 million in operating lease liability and $1.0 million in prepaid expenses, offset by increases of $0.9 million in other current receivables, $0.9 million in income taxes and $4.8 million in accounts payable.
Net cash used in operating activities was $66.1 million for the six months ended June 30, 2023, reflecting a net loss of $46.9 million, a net change of $29.7 million in our net operating assets, offset by non-cash charges of $10.5 million. The non-cash charges primarily consist of share-based compensation for option and restricted share unit grants to employees, as well as depreciation expense, and non-cash lease expense offset by the net accretion of marketable securities. The change in our net operating assets was primarily due to a decrease of $30.7 million in deferred revenue recognized during the six months ended June 30, 2023.
The $47.5 million increase in cash provided by operating activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily due to the $40.0 million milestone payment from Roche in the first quarter of 2024.
Investing Activities
Net cash used in investing activities was $13.2 million for the six months ended June 30, 2024 and resulted primarily from the purchases of marketable securities offset by proceeds on maturities of marketable securities.
Net cash provided by investing activities was $21.7 million for the six months ended June 30, 2023 and resulted primarily from proceeds on maturities of marketable securities offset by the purchases of marketable securities and property and equipment.
Financing Activities
Net cash provided by financing activities was $0.4 million and $0.5 million for the six months ended June 30, 2024 and 2023, respectively, consisting primarily of net proceeds from the issuance of common shares under the ESPP.
Material Cash Requirements
There were no material changes to our material cash requirements during the six months ended June 30, 2024 from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.
Critical Accounting Estimates
This management’s discussion and analysis is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reported periods. We base our estimates on historical experience, known trends and events, and various
29
other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates.
There have been no significant changes to our critical accounting estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report.
Recently Issued Accounting Pronouncements
See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a description of recent issued accounting pronouncements not yet adopted.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to certain risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position to adverse changes in financial market prices and rates. Our market risk exposure is primarily related to fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
Interest-earning instruments carry a degree of interest rate risk. In the six months ended June 30, 2024, we earned $5.9 million in interest income from cash balances held in cash and cash equivalents and marketable securities. As of June 30, 2024, we have a balance of $208.1 million in cash, money market funds, commercial paper and corporate debt securities. Our investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations. We do not have in place any tools to manage our interest rate risk. The risk of a sudden, significant change in market interest rates relative to the interest rates earned on our bank accounts and marketable securities having an impact on our results of operations or cash flows is limited owing to the relative short-term nature of these investments.
Foreign Currency Exchange Risk
Our reporting and functional currency is the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollar at exchange rates in effect at each balance sheet date. Income items and expenses are translated using average exchange rate in effect for the relevant period.
We incur a portion of our expenses in Canadian dollars, as well as other currencies to a lesser extent. A change in the relative value of the U.S. dollar to the Canadian dollar and other currencies may negatively affect our results of operations, financial potion or cash flows. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. We do, however, keep expected Canadian dollar cash requirements in Canadian dollars to form a natural hedge. We are exposed to currency risk through our cash, other current receivables, accounts payable, accrued expenses and other current liabilities, and operating lease liabilities denominated in Canadian dollars. Based on our Canadian dollar net exposure as of June 30, 2024, and assuming all other variables remain constant, a 10% depreciation in the relative value of the U.S. dollar to the Canadian dollar would result in a decrease of approximately $0.1 million in our net loss.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits 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 a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective.
30
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
31
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition.
Item 1A. Risk Factors.
Investing in our common shares involves a high degree of risk. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks described in the Annual Report, including the disclosure therein under Part I, Item 1A, "Risk Factors,” before deciding whether to invest in our common shares. These are not the only risks facing our business. Other risks and uncertainties that we are not currently aware of or that we currently consider immaterial also may materially adversely affect our business, financial condition and future results. Risks we have identified but currently consider immaterial could still also materially adversely affect our business, financial condition and future results of operations if our assumptions about those risks are incorrect or if circumstances change.
There were no material changes during the period covered in this Quarterly Report to the risk factors previously disclosed in Part I, Item 1A of the Annual Report, except as follows:
We are a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our common shares less attractive to investors.
Because the market value of our common shares held by non-affiliates was less than $200 million as of June 30, 2024, we qualify as a “smaller reporting company” under the Exchange Act as of June 30, 2024. We may continue to be a smaller reporting company if either (i) the market value of our common shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our common shares held by non-affiliates is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. For so long as we remain a smaller reporting company, we are permitted and intend to rely on such exemptions from certain disclosure and other requirements that are applicable to other public companies that are not smaller reporting companies.
We cannot predict if investors will find our common shares less attractive because we may rely on the exemptions and reduced disclosure obligations applicable to smaller reporting companies. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common shares.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as amended and the rules and regulations of The Nasdaq Global Market. Pursuant to Section 404 of the Sarbanes-Oxley Act, we are now required to perform system and process evaluation and testing of our internal control over financial reporting to allow our management to report on the effectiveness of our internal control over financial reporting. Furthermore, at such time we no longer qualify as a "smaller reporting company", our independent registered public accounting firm will be required to issue an annual report that attests the effectiveness of our internal control over financial reporting.
During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. Further, we may in the future discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Moreover, our internal controls over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
32
If we are unable to assert that our internal control over financial reporting is effective, investors could lose confidence in the reliability of our financial statements, the market price of our common shares could decline and we could be subject to sanctions or investigations by The Nasdaq Global Market, the SEC or other regulatory authorities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Recent Sales of Unregistered Securities
None.
(b) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Trading Arrangements
During the three months ended June 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
33
Item 6. Exhibits.
|
|
|
|
Incorporated by Reference |
||||||
Exhibit Number |
|
Description |
|
Schedule Form |
|
File Number |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K |
|
001-39335 |
|
3.1 |
|
June 23, 2020 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K |
|
001-39335 |
|
3.2 |
|
June 23, 2020 |
||
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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 as its XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
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104 |
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Inline Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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* Filed herewith.
** This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q 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, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
34
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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REPARE THERAPEUTICS INC. |
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Date: August 6, 2024 |
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By: |
/s/ Lloyd M. Segal |
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Lloyd M. Segal |
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President and Chief Executive Officer (Principal Executive Officer) |
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Date: August 6, 2024 |
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By: |
/s/ Steve Forte |
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Steve Forte |
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Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
35