Cardiff Oncology, Inc. - Quarter Report: 2023 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended June 30, 2023
| ☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to
COMMISSION FILE NUMBER 001-35558
CARDIFF ONCOLOGY, INC.
(Exact Name of registrant as specified in its charter)
| Delaware | 27-2004382 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
11055 Flintkote Avenue, San Diego, California | 92121 | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(858) 952-7570 | ||||||||
| (Registrant’s telephone number, including area code) | ||||||||
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||||||||||||
| Common Stock | CRDF | Nasdaq Capital Market | ||||||||||||
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ | Emerging growth company ☐ | ||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised 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 3, 2023, the issuer had 44,677,169 shares of Common Stock issued and outstanding.
CARDIFF ONCOLOGY, INC.
Table of Contents
| Page | ||||||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARDIFF ONCOLOGY, INC.
CONDENSED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
| June 30, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 19,369 | $ | 16,347 | |||||||
| Short-term investments | 70,059 | 88,920 | |||||||||
| Accounts receivable and unbilled receivable | 161 | 771 | |||||||||
| Prepaid expenses and other current assets | 3,142 | 5,246 | |||||||||
| Total current assets | 92,731 | 111,284 | |||||||||
| Property and equipment, net | 1,356 | 1,269 | |||||||||
| Operating lease right-of-use assets | 1,978 | 2,251 | |||||||||
| Other assets | 1,390 | 1,387 | |||||||||
| Total Assets | $ | 97,455 | $ | 116,191 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 2,939 | $ | 1,956 | |||||||
| Accrued liabilities | 5,501 | 5,177 | |||||||||
| Operating lease liabilities | 683 | 675 | |||||||||
| Total current liabilities | 9,123 | 7,808 | |||||||||
| Operating lease liabilities, net of current portion | 1,753 | 2,040 | |||||||||
| Total Liabilities | 10,876 | 9,848 | |||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock, 20,000 shares authorized; Series A Convertible Preferred Stock liquidation preference $1,056 and $1,044 at June 30, 2023 and December 31, 2022, respectively (Note 6) | — | — | |||||||||
Common stock, $0.0001 par value, 150,000 shares authorized; 44,677 shares issued and outstanding at June 30, 2023 and December 31, 2022 | 4 | 4 | |||||||||
| Additional paid-in capital | 407,479 | 404,834 | |||||||||
| Accumulated other comprehensive loss | (431) | (395) | |||||||||
| Accumulated deficit | (320,473) | (298,100) | |||||||||
| Total stockholders’ equity | 86,579 | 106,343 | |||||||||
| Total liabilities and stockholders’ equity | $ | 97,455 | $ | 116,191 | |||||||
See accompanying notes to the unaudited condensed financial statements.
3
CARDIFF ONCOLOGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Royalty revenues | $ | 108 | $ | 91 | $ | 191 | $ | 165 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Research and development | 8,020 | 7,448 | 17,072 | 14,656 | |||||||||||||||||||
| Selling, general and administrative | 4,296 | 3,086 | 7,379 | 7,026 | |||||||||||||||||||
| Total operating expenses | 12,316 | 10,534 | 24,451 | 21,682 | |||||||||||||||||||
| Loss from operations | (12,208) | (10,443) | (24,260) | (21,517) | |||||||||||||||||||
| Other income (expense), net: | |||||||||||||||||||||||
| Interest income, net | 1,053 | 253 | 1,993 | 383 | |||||||||||||||||||
| Other income (expense), net | 5 | (253) | (106) | (302) | |||||||||||||||||||
| Total other income (expense), net | 1,058 | — | 1,887 | 81 | |||||||||||||||||||
| Net loss | (11,150) | (10,443) | (22,373) | (21,436) | |||||||||||||||||||
| Preferred stock dividend payable on Series A Convertible Preferred Stock | (6) | (6) | (12) | (12) | |||||||||||||||||||
| Net loss attributable to common stockholders | $ | (11,156) | $ | (10,449) | $ | (22,385) | $ | (21,448) | |||||||||||||||
| Net loss per common share — basic and diluted | $ | (0.25) | $ | (0.24) | $ | (0.50) | $ | (0.50) | |||||||||||||||
| Weighted-average shares outstanding — basic and diluted | 44,677 | 43,306 | 44,677 | 43,269 | |||||||||||||||||||
See accompanying notes to the unaudited condensed financial statements.
4
CARDIFF ONCOLOGY, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net loss | $ | (11,150) | $ | (10,443) | $ | (22,373) | $ | (21,436) | |||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Unrealized loss on securities available-for-sale | (355) | (234) | (36) | (840) | |||||||||||||||||||
| Total comprehensive loss | (11,505) | (10,677) | (22,409) | (22,276) | |||||||||||||||||||
| Preferred stock dividend payable on Series A Convertible Preferred Stock | (6) | (6) | (12) | (12) | |||||||||||||||||||
| Comprehensive loss attributable to common stockholders | $ | (11,511) | $ | (10,683) | $ | (22,421) | $ | (22,288) | |||||||||||||||
See accompanying notes to the unaudited condensed financial statements.
5
CARDIFF ONCOLOGY, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2023 | 61 | $ | — | 44,677 | $ | 4 | $ | 404,834 | $ | (395) | $ | (298,100) | $ | 106,343 | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,064 | — | — | 1,064 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain | — | — | — | — | — | 319 | — | 319 | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (11,223) | (11,223) | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | 61 | $ | — | 44,677 | $ | 4 | $ | 405,898 | $ | (76) | $ | (309,323) | $ | 96,503 | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,581 | — | — | 1,581 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (355) | — | (355) | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (11,150) | (11,150) | |||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | 61 | $ | — | 44,677 | $ | 4 | $ | 407,479 | $ | (431) | $ | (320,473) | $ | 86,579 | |||||||||||||||||||||||||||||||||
| Preferred Stock Shares | Preferred Stock Amount | Common Stock Shares | Common Stock Amount | Additional Paid-In Capital | Service Receivable | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2022 | 716 | $ | 1 | 41,964 | $ | 4 | $ | 400,503 | $ | (139) | $ | (142) | $ | (259,810) | $ | 140,417 | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,152 | — | — | — | 1,152 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | (606) | — | (606) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of Series E Convertible Preferred Stock | (328) | (1) | 1,342 | — | — | — | — | — | (1) | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividend | — | — | — | — | — | — | — | (6) | (6) | ||||||||||||||||||||||||||||||||||||||||||||
| Release of clinical trial funding commitment | — | — | — | — | — | 139 | — | — | 139 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (10,993) | (10,993) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 388 | $ | — | 43,306 | $ | 4 | $ | 401,655 | $ | — | $ | (748) | $ | (270,809) | $ | 130,102 | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,055 | — | — | — | 1,055 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | (234) | — | (234) | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividend | — | — | — | — | — | — | — | (6) | (6) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (10,443) | (10,443) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | 388 | $ | — | 43,306 | $ | 4 | $ | 402,710 | $ | — | $ | (982) | $ | (281,258) | $ | 120,474 | |||||||||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed financial statements.
6
CARDIFF ONCOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Operating activities | |||||||||||
| Net loss | $ | (22,373) | $ | (21,436) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation | 188 | 69 | |||||||||
| Stock-based compensation expense | 2,645 | 2,207 | |||||||||
| Amortization of premiums (discounts) on short-term investments | (405) | 557 | |||||||||
| Release of clinical trial funding commitment | — | 139 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Other assets | (3) | 54 | |||||||||
| Accounts receivable and unbilled receivable | 610 | (16) | |||||||||
| Prepaid expenses and other assets | 2,260 | 18 | |||||||||
| Operating lease right-of-use assets | 273 | 272 | |||||||||
| Accounts payable and accrued expenses | 1,293 | 1,367 | |||||||||
| Operating lease liabilities | (279) | (143) | |||||||||
| Other liabilities | — | (32) | |||||||||
| Net cash used in operating activities | (15,791) | (16,944) | |||||||||
| Investing activities: | |||||||||||
| Capital expenditures | (259) | (483) | |||||||||
| Insurance proceeds from casualty loss | — | 71 | |||||||||
| Maturities of short-term investments | 68,265 | 48,801 | |||||||||
| Purchases of short-term investments | (50,868) | (57,309) | |||||||||
| Sales of short-term investments | 1,675 | 34,886 | |||||||||
| Net cash provided by investing activities | 18,813 | 25,966 | |||||||||
| Financing activities: | |||||||||||
| Net cash provided by financing activities | — | — | |||||||||
| Net change in cash and cash equivalents | 3,022 | 9,022 | |||||||||
| Cash and cash equivalents—Beginning of period | 16,347 | 11,943 | |||||||||
| Cash and cash equivalents—End of period | $ | 19,369 | $ | 20,965 | |||||||
| Supplementary disclosure of cash flow activity: | |||||||||||
| Cash paid for taxes | $ | 1 | $ | 1 | |||||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| Acquisition of property and equipment included in accounts payable and accrued expenses | $ | 16 | $ | 456 | |||||||
| Acquisition of property and equipment included in insurance proceeds receivable | $ | — | $ | 43 | |||||||
See accompanying notes to the unaudited condensed financial statements.
7
CARDIFF ONCOLOGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
Business Organization and Overview
Cardiff Oncology, Inc. (“Cardiff Oncology” or the “Company”) headquartered in San Diego, California, is a clinical-stage biotechnology company leveraging Polo-like Kinase 1 (“PLK1”) inhibition to develop novel therapies across a range of cancers. The Company’s lead asset is onvansertib, a PLK1 inhibitor that is being evaluated in combination with standard-of-care therapies in clinical programs targeting indications such as RAS-mutated metastatic colorectal cancer, metastatic pancreatic cancer, as well as investigator-initiated trials in triple negative breast cancer and small cell lung cancer. These programs and the Company’s broader development strategy are designed to target tumor vulnerabilities in order to overcome treatment resistance and deliver superior clinical benefit compared to the standard-of-care alone. The Company's common stock is listed on the Nasdaq Capital Market under the ticker symbol "CRDF".
Basis of Presentation
The accompanying unaudited interim condensed financial statements of Cardiff Oncology have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows for the periods presented. The unaudited condensed balance sheet at December 31, 2022, has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for annual financial statements. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2022, included in the Company’s annual report on Form 10-K filed with the SEC on March 2, 2023.
Liquidity
The Company has incurred net losses since its inception and has negative operating cash flows. As of June 30, 2023, the Company had $89.4 million in cash, cash equivalents and short-term investments and believes it has sufficient cash to meet its funding requirements for at least the next 12 months following the issuance date of these financial statements.
For the foreseeable future, the Company expects to continue to incur losses and require additional capital to further advance its clinical trial programs and support its other operations. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company can raise additional funds by issuing equity securities, the Company’s stockholders may experience additional dilution.
2. Summary of Significant Accounting Policies
During the six months ended June 30, 2023, there have been no changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Net Loss Per Share
Basic and diluted net loss per common share is determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. Preferred dividends are included in net loss attributable to common stockholders in the computation of basic and diluted earnings per share.
8
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their effect was anti-dilutive:
| June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Options to purchase Common Stock | 6,603,661 | 5,131,195 | |||||||||
| Warrants to purchase Common Stock | 2,807,948 | 4,490,159 | |||||||||
| Series A Convertible Preferred Stock | 877 | 877 | |||||||||
| Series E Convertible Preferred Stock | — | 1,342,250 | |||||||||
| 9,412,486 | 10,964,481 | ||||||||||
Recent Accounting Pronouncement Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06 ("ASU 2020-06"), Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2021 (or December 15, 2023, for companies who meet the SEC definition of Smaller Reporting Companies), and interim periods within those fiscal years. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures, and will adopt this standard on January 1, 2024.
3. Fair Value Measurements
The following table presents the Company’s assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2023, and December 31, 2022:
| Fair Value Measurements at June 30, 2023 | |||||||||||||||||||||||
| (in thousands) | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market fund | $ | 18,792 | $ | — | $ | — | $ | 18,792 | |||||||||||||||
| Total included in cash and cash equivalents | 18,792 | — | — | 18,792 | |||||||||||||||||||
| Available for sale investments: | |||||||||||||||||||||||
| Certificate of deposit | — | 7,991 | — | 7,991 | |||||||||||||||||||
| Corporate debt securities | — | 23,062 | — | 23,062 | |||||||||||||||||||
| Commercial paper | — | 11,089 | — | 11,089 | |||||||||||||||||||
| U.S. government agencies | — | 7,802 | 7,802 | ||||||||||||||||||||
| U.S. treasury securities | 20,115 | — | — | 20,115 | |||||||||||||||||||
| Total available for sale investments | 20,115 | 49,944 | — | 70,059 | |||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | 38,907 | $ | 49,944 | $ | — | $ | 88,851 | |||||||||||||||
9
| Fair Value Measurements at December 31, 2022 | |||||||||||||||||||||||
| (in thousands) | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market fund | $ | 15,722 | $ | — | $ | — | $ | 15,722 | |||||||||||||||
| Total included in cash and cash equivalents | 15,722 | — | — | 15,722 | |||||||||||||||||||
| Available for sale investments: | |||||||||||||||||||||||
| Certificate of deposit | — | 16,023 | — | 16,023 | |||||||||||||||||||
| Corporate debt securities | — | 49,535 | — | 49,535 | |||||||||||||||||||
| Commercial paper | — | 13,187 | — | 13,187 | |||||||||||||||||||
| U.S. government agencies | — | 2,288 | — | 2,288 | |||||||||||||||||||
| U.S. treasury securities | 7,887 | — | — | 7,887 | |||||||||||||||||||
| Total available for sale investments | 7,887 | 81,033 | — | 88,920 | |||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | 23,609 | $ | 81,033 | $ | — | $ | 104,642 | |||||||||||||||
The Company’s policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 3 during the six months ended June 30, 2023.
10
4. Supplementary Balance Sheet Information
Investments available for sale
Investments available for sale consist of the following:
| As of June 30, 2023 | |||||||||||||||||||||||
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Market Value | |||||||||||||||||||
| Maturity less than 1 year: | |||||||||||||||||||||||
| Certificate of deposit | $ | 8,005 | $ | — | $ | (14) | $ | 7,991 | |||||||||||||||
| Corporate debt securities | 14,465 | 5 | (53) | 14,417 | |||||||||||||||||||
| Commercial paper | 11,102 | — | (13) | 11,089 | |||||||||||||||||||
| U.S. government agencies | 7,841 | — | (39) | 7,802 | |||||||||||||||||||
| Total maturity less than 1 year | 41,413 | 5 | (119) | 41,299 | |||||||||||||||||||
| Maturity 1 to 2 years: | |||||||||||||||||||||||
| Corporate debt securities | 8,711 | 16 | (82) | 8,645 | |||||||||||||||||||
| U.S. treasury securities | 20,366 | — | (251) | 20,115 | |||||||||||||||||||
| Total maturity 1 to 2 years | 29,077 | 16 | (333) | 28,760 | |||||||||||||||||||
| Total short-term investments | $ | 70,490 | $ | 21 | $ | (452) | $ | 70,059 | |||||||||||||||
| As of December 31, 2022 | |||||||||||||||||||||||
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Market Value | |||||||||||||||||||
| Maturity less than 1 year: | |||||||||||||||||||||||
| Certificate of deposit | $ | 16,101 | $ | 3 | $ | (81) | $ | 16,023 | |||||||||||||||
| Corporate debt securities | 44,806 | 8 | (275) | 44,539 | |||||||||||||||||||
| Commercial paper | 13,203 | 4 | (20) | 13,187 | |||||||||||||||||||
| Non U.S. government | 2,284 | 4 | — | 2,288 | |||||||||||||||||||
| U.S. treasury securities | 7,905 | — | (18) | 7,887 | |||||||||||||||||||
| Total maturity less than 1 year | 84,299 | 19 | (394) | 83,924 | |||||||||||||||||||
| Maturity 1 to 2 years: | |||||||||||||||||||||||
| Corporate debt securities | 5,016 | 1 | (21) | 4,996 | |||||||||||||||||||
| Total maturity 1 to 2 years | 5,016 | 1 | (21) | 4,996 | |||||||||||||||||||
| Total short-term investments | $ | 89,315 | $ | 20 | $ | (415) | $ | 88,920 | |||||||||||||||
We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses in investments available for sale debt securities at June 30, 2023, were substantially due to increases in interest rates, not due to increased credit risks associated with specific securities. Accordingly, we have not recorded an allowance for credit losses. It is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.
11
Investments available for sale that have been in a continuous unrealized loss position for greater than one-year consist of the following:
| As of June 30, 2023 | |||||||||||
| (in thousands) | Fair Market Value | Gross Unrealized Loss | |||||||||
| Corporate debt securities | $ | 2,963 | $ | (24) | |||||||
Property and equipment
Property and equipment consist of the following:
| (in thousands) | As of June 30, 2023 | As of December 31, 2022 | |||||||||
| Furniture and office equipment | $ | 1,081 | $ | 1,066 | |||||||
| Leasehold improvements | 2,568 | 2,560 | |||||||||
| Laboratory equipment | 1,264 | 1,056 | |||||||||
| 4,913 | 4,682 | ||||||||||
| Less—accumulated depreciation and amortization | (3,557) | (3,413) | |||||||||
| Property and equipment, net | $ | 1,356 | $ | 1,269 | |||||||
Accrued Liabilities
Accrued liabilities consisted of the following:
| (in thousands) | As of June 30, 2023 | As of December 31, 2022 | |||||||||
| Accrued compensation | $ | 2,175 | $ | 1,849 | |||||||
| Clinical trials | 2,364 | 2,333 | |||||||||
| Research agreements and services | 543 | 509 | |||||||||
| Director fees | 125 | 125 | |||||||||
| Patent, license and other fees | 83 | 24 | |||||||||
| Other accrued liabilities | 211 | 337 | |||||||||
| Total accrued liabilities | $ | 5,501 | $ | 5,177 | |||||||
5. Leases
As a lessee, the Company’s current leases include its master facility lease and immaterial equipment leases, all of which are considered operating leases.
Master Facility Lease
The Company currently leases office and lab space in San Diego that expires on February 28, 2027. The lease currently requires monthly payments of approximately $61,000 per month with 3% annual escalation.
The components of lease expense were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Operating lease cost | $ | 180 | $ | 190 | $ | 363 | $ | 381 | |||||||||||||||
12
Supplemental balance sheet information related to leases was as follows:
| (in thousands) | As of June 30, 2023 | As of December 31, 2022 | |||||||||
| Operating lease ROU assets | $ | 1,978 | $ | 2,251 | |||||||
| Current operating lease liabilities | $ | 683 | $ | 675 | |||||||
| Non-current operating lease liabilities | 1,753 | 2,040 | |||||||||
| Total operating lease liabilities | $ | 2,436 | $ | 2,715 | |||||||
| Weighted-average remaining lease term–operating leases | 3.7 years | 4.2 years | |||||||||
| Weighted-average discount rate–operating leases | 7.0 | % | 7.0 | % | |||||||
Supplemental cash flow and other information related to leases was as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||||||||
| Operating cash flows from operating leases | $ | 183 | $ | 180 | $ | 368 | $ | 251 | |||||||||||||||
Total remaining annual commitments under non-cancelable lease agreements for each of the years ended December 31 are as follows:
| (in thousands) | |||||
| Year Ending December 31, | Operating Leases | ||||
2023 (excluding the six months ended June 30, 2023) | $ | 306 | |||
| 2024 | 754 | ||||
| 2025 | 775 | ||||
| 2026 | 796 | ||||
| Thereafter | 136 | ||||
| Total future minimum lease payments | 2,767 | ||||
| Less imputed interest | (331) | ||||
| Total | $ | 2,436 | |||
6. Stockholders’ Equity
Stock Options
Stock-based compensation expense related to Cardiff Oncology equity awards have been recognized in operating results as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Included in research and development expense | $ | 297 | $ | 126 | $ | 691 | $ | 460 | |||||||||||||||
| Included in selling, general and administrative expense | 1,284 | 929 | 1,954 | 1,747 | |||||||||||||||||||
| Total stock-based compensation expense | $ | 1,581 | $ | 1,055 | $ | 2,645 | $ | 2,207 | |||||||||||||||
The unrecognized compensation cost related to non-vested stock options outstanding at June 30, 2023, net of estimated forfeitures, was $8.4 million, which is expected to be recognized over a weighted-average remaining vesting period of 2.5 years. The weighted-average remaining contractual term of outstanding options as of June 30, 2023, was approximately 8.4
13
years. The total fair value of stock options vested during the six months ended June 30, 2023 and 2022, were $3.2 million and $3.0 million, respectively.
The estimated fair value of stock option awards was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions during the following periods indicated:
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Risk-free interest rate | 3.61 | % | 1.87 | % | |||||||
| Dividend yield | 0 | % | 0 | % | |||||||
| Expected volatility of Cardiff Oncology common stock | 109 | % | 106 | % | |||||||
Expected term(1) | 5.3 years | 6.0 years | |||||||||
(1)The expected term for options granted after January 1, 2023 is estimated based on the Company's historical employee data. Prior to January 1, 2023, the Company used the "simplified method" to estimate expected term.
A summary of stock option activity and changes in stock options outstanding is presented below:
| Total Options | Weighted-Average Exercise Price Per Share | Intrinsic Value | |||||||||||||||
| Balance outstanding, December 31, 2022 | 5,069,458 | $ | 5.92 | $ | 19,322 | ||||||||||||
| Granted | 2,088,608 | $ | 1.71 | ||||||||||||||
| Forfeited and expired | (554,405) | $ | 7.12 | ||||||||||||||
| Balance outstanding, June 30, 2023 | 6,603,661 | $ | 4.49 | $ | 23,351 | ||||||||||||
| Exercisable at June 30, 2023 | 2,766,027 | $ | 6.16 | $ | 21,713 | ||||||||||||
| Vested and expected to vest at June 30, 2023 | 6,410,335 | $ | 4.55 | $ | 23,269 | ||||||||||||
2021 Equity Incentive Plan
In June 2021 the Company's stockholders approved the 2021 Omnibus Equity Incentive Plan ("2021 Plan"). The number of authorized shares in the 2021 Plan is equal to the sum of (i) 3,150,000 shares, plus (ii) the number of shares of Common Stock reserved, but unissued under the 2014 Plan; and (iii) the number of shares of Common Stock underlying forfeited awards under the 2014 Plan. On June 9, 2022, the shareholders approved an increase of shares authorized in the 2021 Plan to 5,150,000 from 3,150,000. As of June 30, 2023, there were 2,013,871 shares available for issuance under the 2021 Plan.
2014 Equity Incentive Plan
Subsequent to the adoption of the 2021 Plan, no additional equity awards can be made under the terms of the 2014 Plan.
Inducement Grants
The Company issues equity awards to certain new employees as inducement grants outside of its 2021 Plan. As of June 30, 2023, an aggregate of 1,385,240 shares were issuable upon the exercise of inducement grant stock options approved by the Company.
Modification of Stock Options
In June 2023 the Company modified stock options for a departing employee. The modification resulted in an incremental stock-based compensation expense of $0.6 million during the three month period ended June 30, 2023.
14
Warrants
A summary of warrant activity and changes in warrants outstanding, including both liability and equity classifications is presented below:
| Total Warrants | Weighted-Average Exercise Price Per Share | Weighted-Average Remaining Contractual Term | |||||||||||||||
| Balance outstanding, December 31, 2022 | 4,360,968 | $ | 5.33 | 2.1 years | |||||||||||||
| Expired | (1,553,020) | $ | 10.54 | ||||||||||||||
| Balance outstanding, June 30, 2023 | 2,807,948 | $ | 2.45 | 2.5 years | |||||||||||||
Preferred Stock
A summary of our Company's classes of preferred stock is presented below:
| Shares outstanding | ||||||||||||||||||||||||||
| Class | Par value | Shares designated | As of June 30, 2023 | As of December 31, 2022 | ||||||||||||||||||||||
| Series A Convertible Preferred Stock | $ | 0.001 | 277,100 | 60,600 | 60,600 | |||||||||||||||||||||
| Series B Convertible Preferred Stock | $ | 0.001 | 8,860 | — | — | |||||||||||||||||||||
| Series C Convertible Preferred Stock | $ | 0.001 | 200,000 | — | — | |||||||||||||||||||||
| Series D Convertible Preferred Stock | $ | 0.0001 | 154,670 | — | — | |||||||||||||||||||||
| Series E Convertible Preferred Stock | $ | 0.001 | 865,824 | — | — | |||||||||||||||||||||
Subsequent to quarter-end the Company filed a certificate of elimination and the Series B, C, D & E preferred stock have been eliminated from authorized series of preferred stock.
7. Commitments and Contingencies
Executive Agreements
Certain executive agreements provide for severance payments in case of terminations without cause or certain change of control scenarios.
Research and Development Agreements
In March 2017, the Company entered into a license agreement with Nerviano which granted the Company development and commercialization rights to NMS-1286937, which Cardiff Oncology refers to as onvansertib. Terms of the agreement also provide for the Company to pay development and commercial milestones, and royalties based on sales volume. These potential development milestones include: (a) dosing of the first subject in the first Phase III Clinical Trial for the first Product, a registration enabling Phase II Clinical Trial, or after completion of a Phase II Clinical Trial that is used as the basis for an NDA submission; and (b) upon filing of the first NDA or equivalent for the first product candidate. During the six months ended June 30, 2023 and 2022 no milestone or royalty payments were made.
The Company is a party to various agreements under which it licenses technology on an exclusive basis in the field of oncology therapeutics. These agreements include License fees, Royalties and Milestone payments. The Company also has a legacy license agreement in the field of oncology diagnostics under which royalty payments are due. These royalty payments are calculated as a percent of revenue. For the six months ended June 30, 2023 and 2022, payments have not been material.
15
Litigation
Cardiff Oncology does not believe that it has legal liabilities that are probable or reasonably possible that require either accrual or disclosure. From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in matters may arise from time to time that may harm the Company’s business. As of the date of this report, management believes that there are no claims against the Company, which it believes will result in a material adverse effect on the Company’s business or financial condition.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding the future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions.
In addition, our business and financial performance may be affected by the factors that are discussed under “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 2, 2023. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
The following discussion and analysis is qualified in its entirety by, and should be read in conjunction with, the more detailed information set forth in the financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Overview
We are a clinical-stage biotechnology company leveraging PLK1 inhibition, a well-validated oncology drug target, to develop novel therapies across a range of cancers with the greatest unmet medical need. Our goal is to target tumor vulnerabilities with treatment combinations of onvansertib, our oral and highly selective PLK1 inhibitor, and standard-of-care ("SoC") therapeutics. We are focusing our clinical program in indications such as RAS-mutated metastatic colorectal cancer ("mCRC") and metastatic pancreatic ductal adenocarcinoma ("mPDAC"), as well as in investigator-initiated trials in triple negative breast cancer ("TNBC") and small cell lung cancer ("SCLC"). Our clinical development programs incorporate tumor genomics and biomarker assays to refine assessment of patient response to treatment.
Our Lead Drug Candidate, Onvansertib
Onvansertib is an oral, small molecule drug candidate that is highly specific for PLK1 inhibition with a 24-hour half-life.
We believe the attributes of onvansertib described below, as well as clinical evidence of favorable safety and efficacy, with expected on-target, easy to manage and reversible side effects, may prove beneficial in addressing clinical therapeutic needs across a variety of cancers:
•Onvansertib is highly potent and highly selective against the PLK1 enzyme (IC50 = 2nM; IC50 is the concentration for 50% inhibition), compared to prior PLK1 inhibitors that were pan-inhibitors of several PLK targets. Low or no activity of onvansertib was observed on a panel of 63 kinases (IC50>500 nM), including the PLK members PLK2 and PLK3 (IC50>10,000 nM);
•Onvansertib is orally bioavailable, allowing for relative ease and flexibility of dosing.
17
•Onvansertib has a relatively short drug half-life of 24 hours, allowing for flexible dosing and scheduling which has shown favorable safety and tolerability across multiple clinical trials;
In vitro studies have shown synergistic effects when onvansertib was administered in combination with different cytotoxic agents including microtubule-targeting agents, topoisomerase 1 inhibitors, antimetabolites, alkylating agents, proteasome inhibitors, kinase inhibitors, PARP inhibitors, BCL-2 inhibitors, and androgen biosynthesis inhibitors.
In addition, in vivo combination studies have confirmed the positive results obtained in vitro and synergistic effects have been observed in xenograft models of onvansertib in combination with irinotecan, 5-fluorouracil ("5-FU"), abiraterone, PARP inhibitors, venetoclax, and paclitaxel, while additive effects in combination with cytarabine or bevacizumab have been demonstrated. Combining onvansertib with standard-of-care cancer agents provides opportunities for synergy with many cancer therapies.
There are five ongoing and planned clinical trials of onvansertib: one trial (CRDF-004) in first line treatment in patients with RAS-mutated mCRC, one trial (TROV-054) in second line treatment in patients with KRAS-mutated Metastatic Colorectal Cancer ("mCRC"), one trial in second line treatment in patients with Metastatic Pancreatic Ductal Adenocarcinoma ("mPDAC"), and two investigator-initiated trials in patients with locally advanced or metastatic Triple Negative Breast Cancer ("TNBC") and relapsed Small Cell Lung Cancer ("SCLC").
CRDF-004 Clinical Trial in RAS-mutated mCRC
CRDF-004 is a Phase 2 open-label, randomized multi-center clinical trial of onvansertib in combination with standard-of-care FOLFIRI and bevacizumab or FOLFOX and bevacizumab for the first line treatment of patients with RAS-mutated mCRC. The primary objectives of the CRDF-004 trial are to evaluate onvansertib’s safety and efficacy in combination with the standard-of-care, as well as to evaluate two doses of onvansertib, 20mg and 30mg given in combination with standard-of-care, against standard-of-care alone. The primary endpoint of the trial is objective response rate. Progression-free survival and duration of response will be secondary endpoints. We expect to begin enrollment during the second half of 2023, with initial data anticipated in mid-2024. The trial is expected to enroll approximately 90 patients.
Phase 1b/2 Clinical Trial in KRAS-mutated mCRC
TROV-054 is a Phase 1b/2 open-label multi-center clinical trial of onvansertib in combination with standard-of-care FOLFIRI and bevacizumab for the second line treatment of patients with KRAS-mutated mCRC. This trial completed enrollment in October 2022.
The primary objectives of this trial are to evaluate the Dose-Limiting Toxicities ("DLTs"), maximum tolerated dose ("MTD") and recommended Phase 2 dose ("RP2D") of onvansertib in combination with FOLFIRI and bevacizumab (Phase 1b) and to continue to assess the safety and preliminary efficacy of onvansertib in combination with FOLFIRI and bevacizumab patients with KRAS-mutated mCRC (Phase 2).
The scientific rationale for this clinical trial is based on the two key principles of synthetic lethality and synergy, with the objective of demonstrating a proof-of-concept of clinical benefit within this Phase 1b/2 trial. Synthetic lethality refers to a critical vulnerability to tumor cell death by way of PLK1 inhibition within CRC tumor cells harboring KRAS mutations versus KRAS wild-type isogenic cells. Synergy occurs when the combination of multiple drugs results in an unexpected greater activity than an expected additive effect of the individual drugs. Onvansertib in combination with two DNA-damaging agents, irinotecan and 5-FU (two components of FOLFIRI), demonstrated synergy in colorectal cancer cell lines and both combinations have demonstrated significantly greater tumor growth inhibition than either drug alone in CRC in vivo models. We believe this synergy occurs because PLK1 can promote the repair of DNA damage caused by chemotherapeutic agents and by inhibiting PLK1, onvansertib leaves damaged tumor cells unable to repair DNA damage from chemotherapy and then replicate. For more information, please visit NCT03829410 at www.clinicialtrials.gov.
Data presented on August 7, 2023, provided an update of the ongoing TROV-054 Phase 1b/2 single arm clinical trial in KRAS-mutated metastatic colorectal cancer:
•Objective response rate ("ORR") across all evaluable patients was 29%, with 19 of 66 evaluable patients achieving an objective response. Responses have been observed across multiple KRAS variants;
18
•Median duration of response ("mDoR") across all evaluable patients was 12.0 months (95% confidence interval ("CI"): 8.9 – not reached);
•Median progression free survival ("mPFS") across all evaluable patients was 9.3 months (95% CI: 7.8 – 14). Historical control trials of different drug combinations, including the standard-of-care ("SOC") of FOLFIRI with bevacizumab, in similar patient populations have shown ORR and mPFS of 5 – 13% and ~4.5 – 6.7 months, respectively.
•A subgroup analysis of patients who were bevacizumab naïve when they entered 2nd line therapy vs patients who had received prior bevacizumab in 1st line therapy showed that patients who were bevacizumab naïve (n=15) had an ORR of 73% and mPFS of 15 months, which is well above historical controls. In contrast, patients previously treated with bevacizumab (n=51) had an ORR of 16% and mPFS of 7.8 months.
In reviewing the TROV-054 clinical data, we originally designed the ONSEMBLE trial (CRDF-003) as the next phase of our mCRC program. Upon review of the clinical data from the bev naïve subgroup (those patients who did not receive bev in their 1st line therapy), the preclinical data on the mechanism of action and the feedback from the FDA on our clinical development strategy, we made the decision to discontinue enrollment in the ONSEMBLE trial and to initiate CRDF-004.
Phase 2 Clinical Trial in mPDAC
CRDF-001 is a Phase 2 open-label multi-center clinical trial of onvansertib in combination with nanoliposomal irinotecan (Onivyde®), leucovorin, and fluorouracil for second line treatment of patients with mPDAC, which is being conducted at six clinical trial sites across the U.S. – The Mayo Clinic Cancer Centers (Arizona, Minnesota, and Florida), Kansas University Medical Center, Inova Schar Cancer Institute, and the University of Nebraska Medical Center. The first patient was dosed in June 2021.
The objective of this trial is to assess the safety and preliminary efficacy of onvansertib in combination with nanoliposomal irinotecan (Onyvide®), 5-FU and leucovorin as a second-line treatment in patients with mPDAC who have failed 1st line gemcitabine-based therapy. The trial is expected to enroll approximately 45 patients. For more information, please visit NCT04752696 at www.clinicialtrials.gov.
Preliminary data presented on September 12, 2022 provided an update of the ongoing CRDF-001 Phase 2 open label clinical trial in mPDAC:
•Preliminary data from 5 evaluable patients showed 1 patient achieving an initial partial response ("PR") and 3 patients achieving stable disease ("SD");
•The 4 patients achieving SD or PR remain on study; the fifth evaluable patient discontinued treatment due to disease progression and an additional 3 patients remain on study awaiting their first post-baseline scan;
•Additional data is expected in mid-2023.
Phase 1b/2 Investigator-Initiated Clinical Trial in TNBC
A single-arm, Phase 1b/2 trial of onvansertib in combination with paclitaxel in patients with unresectable locally advanced or metastatic TNBC is open for enrollment at Dana Farber Cancer Institute ("DFCI"). In Phase 1b, approximately 14-16 patients will be treated with different doses of onvansertib in combination with a fixed dose of paclitaxel to determine the maximum tolerated dose and RP2D of onvansertib. In Phase 2, approximately 34 patients will be treated with the selected onvansertib RP2D in combination with paclitaxel.
The primary endpoint of Phase 2 of the trial is ORR, with PFS included as a secondary endpoint. Preliminary data from the trial are expected in the fourth-quarter of 2023 or first-quarter of 2024. For more information, please visit NCT05383196 at www.clinicialtrials.gov.
19
Phase 2 Investigator-Initiated Clinical Trial in SCLC
A single-arm, two-stage, Phase 2 trial of onvansertib monotherapy in patients with relapsed SCLC is open for enrollment at the University of Pittsburgh Medical Center ("UPMC"). The trial is designed to enroll 15 patients in Stage 1, with the study proceeding to Stage 2 if 2 or more Stage 1 patients achieve an objective response. Stage 2 is designed to enroll an additional 20 patients. The primary endpoint of the trial is ORR, while key secondary endpoints include PFS and overall survival. Preliminary data from the trial are expected in mid-2023. For more information, please visit NCT05450965 at www.clinicialtrials.gov.
Recent Updates
Pfizer Ignite to Conduct CRDF-004 Clinical Trial
Pfizer Ignite will conduct the clinical activities of our new CRDF-004 trial in 1st line RAS-mutated mCRC, which expands the relationship established in November 2021 when Pfizer made an investment in Cardiff Oncology through its Pfizer Breakthrough Growth Initiative. Pfizer VP and Development head Adam Schayowitz sits on the Cardiff Oncology Scientific Advisory Board.
Critical Accounting Policies
Our accounting policies are described in ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of our Annual Report on Form 10-K as of and for the year ended December 31, 2022, filed with the SEC on March 2, 2023. There have been no changes to our critical accounting policies since December 31, 2022.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2023 and 2022
Revenues
Total revenues were $108,000 for the three months ended June 30, 2023, as compared to $91,000 for the prior period. Revenues are from our sales-based or usage-based royalties on other intellectual property licenses, unrelated to onvansertib. Revenue recognition of the royalty depends on the timing and overall sales activities of the licensees.
Research and Development Expenses
Research and development expenses consisted of the following:
| Three Months Ended June 30, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | Increase (Decrease) | ||||||||||||||
| Salaries and staff costs | $ | 1,487 | $ | 1,069 | $ | 418 | |||||||||||
| Stock-based compensation | 297 | 126 | 171 | ||||||||||||||
| Clinical trials, outside services, and lab supplies | 5,670 | 5,903 | (233) | ||||||||||||||
| Facilities and other | 566 | 350 | 216 | ||||||||||||||
| Total research and development | $ | 8,020 | $ | 7,448 | $ | 572 | |||||||||||
Research and development expenses increased by $0.6 million for the three months ended June 30, 2023, compared to the same period in 2022. The overall increase in expenses was primarily related to salaries and staff costs from additional hires in senior management and our clinical operations team (research and development average headcount grew by 35% over the comparative period). The increase in facilities and other is primarily due to increased allocation of facilities cost resulting from headcount growth compared to the prior period. The decrease in clinical trials, outside services, and lab supplies was primarily related to costs incurred in the prior period related to CMC and clinical pharmacology for studies to support the development of our lead drug candidate, onvansertib.
20
Selling, General and Administrative Expenses
Selling, general and administrative expenses consisted of the following:
| Three Months Ended June 30, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | Increase (Decrease) | ||||||||||||||
| Salaries and staff costs | $ | 1,358 | $ | 792 | $ | 566 | |||||||||||
| Stock-based compensation | 1,284 | 929 | 355 | ||||||||||||||
| Outside services and professional fees | 1,070 | 673 | 397 | ||||||||||||||
| Facilities and other | 584 | 692 | (108) | ||||||||||||||
| Total selling, general and administrative | $ | 4,296 | $ | 3,086 | $ | 1,210 | |||||||||||
Selling, general and administrative expenses increased by $1.2 million for the three months ended June 30, 2023, compared to the same period in 2022. Salaries and staff costs increased due to an employee severance agreement. The increase in outside services and professional fees was due to additional contract review legal fees, public relations and external accounting fees.
Interest Income, Net
Interest income, net was $1.1 million for the three months ended June 30, 2023 as compared to $0.3 million for the same period of 2022. The increase in interest income was primarily due to higher interest rates on our short-term investments portfolio for the three months ended June 30, 2023 as compared to the same period of 2022.
Six Months Ended June 30, 2023 and 2022
Revenues
Total revenues were $191,000 for the six months ended June 30, 2023, as compared to $165,000 for the same period in 2022. Revenues are from our sales-based or usage-based royalties on other intellectual property licenses, unrelated to onvansertib. Revenue recognition of the royalty depends on the timing and overall sales activities of the licensees.
Research and Development Expenses
Research and development expenses consisted of the following:
| Six Months Ended June 30, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | Increase (Decrease) | ||||||||||||||
| Salaries and staff costs | $ | 2,860 | $ | 2,130 | $ | 730 | |||||||||||
| Stock-based compensation | 691 | 460 | 231 | ||||||||||||||
| Clinical trials, outside services, and lab supplies | 12,515 | 11,419 | 1,096 | ||||||||||||||
| Facilities and other | 1,006 | 647 | 359 | ||||||||||||||
| Total research and development | $ | 17,072 | $ | 14,656 | $ | 2,416 | |||||||||||
Research and development expenses increased by $2.4 million for the six months ended June 30, 2023, compared to the same period in 2022. The overall increase in expenses was primarily due to costs associated with clinical programs and outside service costs related to the development of our lead drug candidate, onvansertib. Salaries and staff costs increased primarily from additional hires in senior management and our clinical operations team (research and development average headcount grew by 30% over the comparative period). The increase in facilities and other is primarily due to increased allocation of facilities cost resulting from headcount growth compared to the prior period.
21
Selling, General and Administrative Expenses
Selling, general and administrative expenses consisted of the following:
| Six Months Ended June 30, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | Increase (Decrease) | ||||||||||||||
| Salaries and staff costs | $ | 2,157 | $ | 1,652 | $ | 505 | |||||||||||
| Stock-based compensation | 1,954 | 1,747 | 207 | ||||||||||||||
| Outside services and professional fees | 2,091 | 2,279 | (188) | ||||||||||||||
| Facilities and other | 1,177 | 1,348 | (171) | ||||||||||||||
| Total selling, general and administrative | $ | 7,379 | $ | 7,026 | $ | 353 | |||||||||||
Selling, general and administrative expenses increased by $0.4 million for the six months ended June 30, 2023, compared to the same period in 2022. Salaries and staff costs increased due to an employee severance agreement.
Interest Income, Net
Interest income, net was $2.0 million for the six months ended June 30, 2023 as compared to $0.4 million for the same period of 2022. The increase in interest income was primarily due to higher interest rates on our short-term investments portfolio for the six months ended June 30, 2023 as compared to the same period of 2022.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the six months ended June 30, 2023, was $15.8 million, compared to $16.9 million for the six months ended June 30, 2022. Our use of cash was primarily a result of the net loss of $22.4 million for the six months ended June 30, 2023, adjusted for non-cash items related to stock-based compensation of $2.6 million. The net change in our operating assets and liabilities decreased cash used in operations by $4.2 million. At our current and anticipated level of operating loss, we expect to continue to incur an operating cash outflow for the next several years.
Net cash provided by investing activities was $18.8 million primarily related to sales and maturities in excess of purchases of marketable securities for the six months ended June 30, 2023, compared to net cash provided by investing activities of $26.0 million primarily related to sales and maturities in excess of purchases of marketable securities during the same period in 2022.
Net cash provided in financing activities was $0 for the six months ended June 30, 2023, and 2022.
As of June 30, 2023, and December 31, 2022, we had working capital of $83.6 million and $103.5 million, respectively.
We have incurred net losses since our inception and have negative operating cash flows. As of June 30, 2023, we had $89.4 million in cash, cash equivalents and short-term investments and we believe we have sufficient cash to meet our funding requirements for at least the next 12 months following the issuance date of this Quarterly Report on Form 10-Q. Based on our current projections we expect that our capital resources are sufficient to fund our operations into 2025.
Our drug development efforts are in their early stages, and we cannot make estimates of the costs or the time that our development efforts will take to complete, or the timing and amount of revenues related to the sale of our drug candidates. The risk of completion of any program is high because of the many uncertainties involved in developing new drug candidates to market, including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of research and development expenses, and competing technologies being developed by organizations with significantly greater resources.
For the foreseeable future, we expect to continue to incur losses and require additional capital to further advance our clinical trial programs and support our other operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we can raise additional funds by issuing equity securities, our stockholders may experience additional dilution.
22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have performed an evaluation under the supervision and with the participation of our management, including our principal executive officer (CEO) and principal financial officer (CFO), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2023, to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, 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, if any, within our company have been detected.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the three months ended June 30, 2023, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
23
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended December 31, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Exhibit Number | Description of Exhibit | |||||||
| 10.1# | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 101.INS | Inline XBRL Instance Document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |||||||
| 104 | Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, is formatted in Inline XBRL | |||||||
# Portions of this exhibit (indicated by asterisks) have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).
24
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.
| CARDIFF ONCOLOGY, INC. | ||||||||
| August 9, 2023 | By: | /s/ Mark Erlander | ||||||
| Mark Erlander | ||||||||
Chief Executive Officer | ||||||||
| CARDIFF ONCOLOGY, INC. | ||||||||
| August 9, 2023 | By: | /s/ James Levine | ||||||
| James Levine | ||||||||
Chief Financial Officer | ||||||||
25