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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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 |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: ()
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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. ☑ No ☐
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). ☑ 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 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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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 November 5, 2024, the registrant had shares of common stock outstanding.
Table of Contents
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Page |
PART I. |
FINANCIAL INFORMATION |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
1 |
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2 |
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3 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
Item 3. |
38 |
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Item 4. |
38 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
39 |
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Item 1A. |
39 |
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Item 2. |
39 |
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Item 3. |
39 |
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Item 4. |
39 |
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Item 5. |
39 |
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Item 6. |
40 |
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41 |
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i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Erasca, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and par value amounts)
(Unaudited)
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September 30, |
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December 31, |
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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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Short-term marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term marketable securities |
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Property and equipment, net |
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Operating lease assets |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 11) |
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Stockholders' equity: |
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Preferred stock, $ par value; shares authorized at September 30, 2024 and December 31, 2023; shares issued and outstanding at September 30, 2024 and December 31, 2023 |
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— |
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— |
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Common stock, $ par value; shares authorized at September 30, 2024 and December 31, 2023; shares issued and outstanding at September 30, 2024; and shares issued and outstanding at December 31, 2023, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Erasca, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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In-process research and development |
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— |
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— |
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— |
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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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( |
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Other income (expense) |
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Interest income |
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Other income (expense), net |
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( |
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( |
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Total other income (expense), net |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares of common stock used in computing net loss per share, basic and diluted |
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Other comprehensive income (loss): |
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Unrealized gain on marketable securities, net |
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Comprehensive loss |
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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 condensed consolidated financial statements.
2
Erasca, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders' |
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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 at December 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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Exercise of stock options |
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— |
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— |
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— |
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Vesting of early exercised stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation 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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( |
) |
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( |
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Unrealized loss on marketable securities, net |
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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 at 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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Issuance of common stock in private placement, net of $ in fees and expenses |
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— |
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— |
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Issuance of common stock in underwritten offering, net of $ in discounts and offering costs |
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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 stock under the Employee Stock Purchase Plan |
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— |
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— |
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— |
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Vesting of early exercised stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation 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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( |
) |
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( |
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Unrealized gain on marketable securities, net |
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— |
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— |
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— |
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— |
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Balance at 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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Issuance of common stock in ATM offering, net of $ in commissions and expenses |
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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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Vesting of early exercised stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation 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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( |
) |
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( |
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Unrealized gain on marketable securities, net |
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— |
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— |
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— |
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— |
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Balance at September 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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3
Erasca, Inc.
Condensed Consolidated Statements of Stockholders’ Equity - Continued
(In thousands, except share data)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders' |
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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 at December 31, 2022 |
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$ |
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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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Vesting of early exercised stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation 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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( |
) |
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( |
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Unrealized gain on marketable securities, net |
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— |
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— |
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— |
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— |
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Balance at 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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Exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock under the Employee Stock Purchase Plan |
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— |
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— |
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— |
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Vesting of early exercised stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation 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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( |
) |
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( |
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Unrealized loss on marketable securities, net |
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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 at 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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Exercise of stock options |
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— |
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— |
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— |
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Vesting of early exercised stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation 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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( |
) |
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( |
) |
Unrealized gain on marketable securities, net |
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— |
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— |
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— |
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— |
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Balance at September 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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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Erasca, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Nine Months Ended September 30, |
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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 |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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In-process research and development expenses |
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— |
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Accretion on marketable securities, net |
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( |
) |
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( |
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Impairment charge on operating lease assets and property and equipment |
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— |
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Impairment charge on investment in equity securities |
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— |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current and long-term assets |
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( |
) |
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( |
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Accounts payable |
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Accrued expenses and other current and long-term liabilities |
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( |
) |
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Operating lease assets and liabilities, net |
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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 marketable securities |
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( |
) |
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( |
) |
Maturities of marketable securities |
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In-process research and development |
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( |
) |
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( |
) |
Payment made for investment in equity securities |
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( |
) |
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— |
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of common stock in private placement, net of fees and expenses |
|
|
|
|
|
— |
|
|
Proceeds from issuance of common stock in underwritten offering, net of discounts and offering costs |
|
|
|
|
|
— |
|
|
Proceeds from issuance of common stock in ATM offering, net of commissions and expenses |
|
|
|
|
|
— |
|
|
Proceeds from the exercise of stock options |
|
|
|
|
|
|
||
Proceeds from issuance of common stock under the Employee Stock Purchase Plan |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net decrease in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at beginning of the period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of the period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
||
Amounts accrued for purchases of property and equipment |
|
$ |
— |
|
|
$ |
|
|
Vesting of early exercised options |
|
$ |
|
|
$ |
|
||
Obligation accrued for investment in equity securities |
|
$ |
|
|
$ |
— |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Erasca, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company expects to use its cash, cash equivalents, and marketable securities to fund research and development, working capital, and other general corporate purposes. The Company does not expect to generate any revenues from product sales unless and until the Company successfully completes development and obtains regulatory approval for any of its product candidates, which will not be for at least the next several years, if ever. Accordingly, until such time as the Company can generate significant revenue from sales of its product candidates, if ever, the Company expects to finance its cash needs through equity offerings, debt financings, or other capital sources, including potential collaborations, licenses or other similar arrangements. However, the Company may not be able to secure additional financing or enter into such other arrangements in a timely manner or on favorable terms, if at all. The Company’s failure to raise capital or enter into such other arrangements when needed would have a negative impact on the Company’s financial condition and could force the Company to delay, limit, reduce or terminate its research and development programs or other operations, or grant rights to develop and market product candidates that the Company would otherwise prefer to develop and market itself. The Company believes its cash, cash equivalents, and marketable securities as of September 30, 2024 will be sufficient for the Company to fund operations for at least one year from the issuance date of these condensed consolidated financial statements.
2024 ATM offering
During the three months ended September 30, 2024, the Company sold shares of common stock at a weighted-average price of $ per share under the Open Market Sale Agreement effective August 2022 (the Sale Agreement) with Jefferies LLC (the Agent). Pursuant to the Sale Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ million from time to time, in ATM Offerings through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. Pursuant to the Sale Agreement, the Agent receives a commission from the Company of up to % of the gross proceeds of any shares of common stock sold under the Sale Agreement. Proceeds from the ATM Offering during the three months ended September 30, 2024 were $ million, net of commissions and expenses of $.
6
2024 private placement
In March 2024, the Company entered into a stock purchase agreement with the purchasers named therein for the private placement of shares of its common stock at a price of $ per share, which closed on April 2, 2024 (the 2024 Private Placement). Proceeds from the 2024 Private Placement were $ million, after deducting placement agent fees and expenses of approximately $ million.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with US generally accepted accounting principles (US GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to US GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB). The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Erasca Australia, ASN, and Erasca Ventures. All intercompany balances and transactions have been eliminated.
7
$
Restricted cash
Total cash, cash equivalents and restricted cash
$
$
8
9
$
$
—
$
—
Commercial paper(1)
—
—
US treasury securities(2)
—
—
US government agency securities(2)
—
—
Corporate debt securities(2)
—
—
Commercial paper(2)
—
—
US treasury securities(3)
—
—
US government agency securities(3)
—
—
Total fair value of assets
$
$
$
$
—
|
|
|
|
|
Fair value measurements as of December 31, 2023 using |
|
||||||||||
|
|
|
|
|
Quoted prices in |
|
|
Significant |
|
|
Significant |
|
||||
|
|
|
|
|
active markets |
|
|
other |
|
|
unobservable |
|
||||
|
|
December 31, |
|
|
for identical |
|
|
observable |
|
|
inputs |
|
||||
|
|
2023 |
|
|
assets (level 1) |
|
|
inputs (level 2) |
|
|
(level 3) |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds(1) |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
US treasury securities(2) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
US government agency securities(2) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Corporate debt securities(2) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Commercial paper(2) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
US treasury securities(3) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Total fair value of assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
10
Cash equivalents consist of money market funds and commercial paper, short-term marketable securities consist of US treasury securities, US government agency securities, corporate debt securities and commercial paper, and long-term marketable securities consist of US treasury securities and US government agency securities. The Company obtains pricing information from its investment manager and generally determines the fair value of marketable securities using standard observable inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, and bid and/or offers.
$
$
$
(
)
$
US government agency securities
or less
—
Corporate debt securities
or less
(
)
Commercial paper
or less
(
)
US treasury securities
-
—
US government agency securities
-
(
)
Total
$
$
$
(
)
$
|
|
December 31, 2023 |
|
|||||||||||||||
|
|
Maturity |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
|
|
(in years) |
|
cost |
|
|
gains |
|
|
losses |
|
|
fair value |
|
||||
US treasury securities |
|
or less |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
US government agency securities |
|
or less |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate debt securities |
|
or less |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Commercial paper |
|
or less |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
US treasury securities |
|
- |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
11
$
(
)
$
$
(
)
US government agency securities
(
)
—
—
(
)
Corporate debt securities
(
)
—
—
(
)
Commercial paper
(
)
—
—
(
)
Total
$
$
(
)
$
$
(
)
$
$
(
)
|
|
December 31, 2023 |
|
|||||||||||||||||||||
|
|
Unrealized losses less than 12 months |
|
|
Unrealized losses 12 months or greater |
|
|
Total |
|
|||||||||||||||
|
|
Fair value |
|
|
Unrealized losses |
|
|
Fair value |
|
|
Unrealized losses |
|
|
Fair value |
|
|
Unrealized losses |
|
||||||
US treasury securities |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
||
US government agency securities |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
||
Corporate debt securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Commercial paper |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
||
As of September 30, 2024, there were available-for-sale securities with an estimated fair value of $ million in gross unrealized loss positions, of which available-for-sale securities with an estimated fair value of $ million were in an unrealized loss position for more than 12 months. As of December 31, 2023, there were available-for-sale securities with an estimated fair value of $ million in gross unrealized loss positions, of which were in an unrealized loss position for more than 12 months.
As of September 30, 2024 and December 31, 2023, unrealized losses on available-for-sale securities are not attributed to credit risk. The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors and changes in interest rates. Additionally, the Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis.
Accrued interest on the Company’s available-for-sale securities was $ million and $ million as of September 30, 2024 and December 31, 2023, respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheets.
12
$
Furniture and fixtures
Leasehold improvements
Computer equipment and software
Property and equipment
Less accumulated depreciation and amortization
(
)
(
)
Property and equipment, net
$
$
Depreciation and amortization expense related to property and equipment was $ and $ million for the three and nine months ended September 30, 2024, respectively, and $ and $ million for the three and nine months ended September 30, 2023, respectively.
$
Accrued compensation
Unvested early exercised stock option liability
—
Accrued professional services
Accrued property and equipment
—
Other accruals and current liabilities
Total
$
$
13
Guangzhou Joyo Pharmatech Co., Ltd
In May 2024, the Company entered into an exclusive license agreement (the Joyo License Agreement) with Guangzhou Joyo Pharmatech Co., Ltd. (Joyo) under which the Company was granted an exclusive, worldwide (except mainland China, Hong Kong, and Macau), royalty-bearing license to certain patent and other intellectual property rights owned or controlled by Joyo to develop, manufacture, and commercialize certain pan-RAS inhibitors in all fields of use. The Company has an option to expand the territory of the license to include mainland China, Hong Kong and Macau by making a $ million payment to Joyo on or prior to the first dosing of the first patient in a Phase 2 clinical trial by either the Company or Joyo, or a payment of $ million after the first dosing of the first patient in a Phase 2 clinical trial by either the Company or Joyo and before filing a new drug application (or the foreign equivalent) by either the Company or Joyo. The Company has the right to sublicense (through multiple tiers) its rights under the Joyo License Agreement, subject to certain limitations and conditions, and is required to use commercially reasonable efforts to commercialize licensed products in the United States.
The license granted under the Joyo License Agreement is subject to Joyo’ reserved right to develop, manufacture, use, and commercialize licensed products in mainland China, Hong Kong and Macau, unless the Company exercises its option to expand the license to include mainland China, Hong Kong and Macau.
14
The Joyo License Agreement will expire upon the last to expire royalty term, which is determined on a licensed product-by-licensed product and country-by-country basis, and is the later of: (i) ten years from the date of first commercial sale for the licensed product in such country, (ii) the last to expire valid claim within the licensed patent rights covering such licensed product, or (iii) the expiration of all regulatory exclusivity for the licensed product in such country. Upon expiration of the Joyo License Agreement, on a licensed product-by-licensed product and country-by-country basis, the license granted to the Company with respect to such product in such countries shall be deemed to be fully paid-up, royalty-free, non-terminable, irrevocable and perpetual.
The Joyo License Agreement may be terminated in its entirety by either party in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency, or similar circumstances. Joyo may terminate the Joyo License Agreement in the event that the Company or its affiliates or any of its or their sublicensees institutes, prosecutes or otherwise participates in any challenge to the licensed patents. The Company may terminate the Joyo License Agreement in its entirety at any time upon the provision of prior written notice to Joyo.
Upon termination of the Joyo License Agreement for any reason, all rights and licenses granted to the Company will terminate. In addition, the licenses granted to Joyo under certain patent and other intellectual property rights owned or controlled by the Company to develop, manufacture, use, and commercialize the licensed products in mainland China, Hong Kong and Macau will survive the termination of the Joyo License Agreement for any reason, unless the Company exercises its option to expand the license to include mainland China, Hong Kong and Macau, in which case such licenses to Joyo will terminate automatically; and Joyo has an option to negotiate a license under any patent rights, know-how, or other intellectual property rights relating to the licensed products that are owned or controlled by the Company for the purpose of developing, manufacturing and commercializing the licensed products in the Company’s territory on terms to be negotiated between the parties.
Medshine Discovery Inc.
In May 2024, the Company entered into an exclusive license agreement (the Medshine License Agreement) with Medshine Discovery Inc. (Medshine) under which the Company was granted an exclusive, worldwide, royalty-bearing license to certain patent and other intellectual property rights owned or controlled by Medshine to develop, manufacture, and commercialize certain pan-KRAS inhibitors in all fields of use. The Company has the right to sublicense (through multiple tiers) its rights under the Medshine License Agreement, subject to certain limitations and conditions, and is required to use commercially reasonable efforts to commercialize licensed products in certain geographical markets.
Under the Medshine License Agreement, the Company made an upfront cash payment to Medshine of $ million. The Company is obligated to make development and regulatory milestone payments of up to $ million and commercial milestone payments of up to $ million upon the achievement of the corresponding milestones. The Company is also obligated to pay a low-single digit percentage royalty on net sales of all licensed products, subject to certain reductions. The Company recorded IPR&D expense of $ and $ million in connection with the upfront cash payment made during the three and nine months ended September 30, 2024, respectively.
The Medshine License Agreement will expire upon the last to expire royalty term, which is determined on a licensed product-by-licensed product and country-by-country basis, and is the later of: (i) ten years from the date of first commercial sale for the licensed product in such country, (ii) the last to expire valid claim within the licensed patent rights covering such licensed product, or (iii) the expiration of all regulatory exclusivity for the licensed product in such country. Upon expiration of the Medshine License Agreement, on a licensed product-by-licensed product and country-by-country basis, the license granted to the Company with respect to such product in such countries shall be deemed to be fully paid-up, royalty-free, non-terminable, irrevocable and perpetual.
The Medshine License Agreement may be terminated in its entirety by either party in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency, or similar circumstances.
15
NiKang Therapeutics, Inc.
In February 2020, the Company entered into a license agreement (the NiKang Agreement) with NiKang Therapeutics, Inc. (NiKang) under which the Company was granted an exclusive, worldwide license to certain intellectual property rights owned or controlled by NiKang related to certain SHP2 inhibitors to develop and commercialize ERAS-601 and certain other related compounds for all applications.
Under the NiKang Agreement, in 2020, the Company made an upfront payment of $ million to NiKang and reimbursed NiKang $ million for certain initial manufacturing costs. In addition, the Company paid $ million in 2020 related to the publication of a US patent application that covered the composition of matter of ERAS-601. The Company is also obligated to pay (i) development and regulatory milestone payments in an aggregate amount of up to $ million for the first licensed product, of which $ million was paid in January 2021, and $ million for a second licensed product, and (ii) commercial milestone payments in an aggregate amount of up to $ million for the first licensed product and $ million for a second licensed product. The Company is also obligated to: (i) pay tiered royalties on net sales of all licensed products in the mid-single digit percentages, subject to certain reductions; and (ii) equally split all net sublicensing revenues earned under sublicense agreements that the Company enters into with any third party before commencement of the first Phase I clinical trial for a licensed product. IPR&D expense was recorded during the three and nine months ended September 30, 2024 and 2023.
As of September 30, 2024 and December 31, 2023, no milestones are accrued for any license agreements as the underlying contingencies are not probable or estimable.
16
Subsequent to July 2021, further awards will be granted under the 2018 Plan and all future stock-based awards will be granted under the 2021 Plan. To the extent outstanding options or restricted stock granted under the 2018 Plan are cancelled, forfeited, repurchased, or otherwise terminated without being exercised or becoming vested, and would otherwise have been returned to the share reserve under the 2018 Plan, the number of shares underlying such awards will be available for future grant under the 2021 Plan.
Options granted are exercisable at various dates as determined upon grant and will expire no more than from their date of grant. Stock options generally vest over a term. The exercise price of each option shall be determined by the Company’s board of directors based on the estimated fair value of the Company’s stock on the date of the option grant. The exercise price shall not be less than % of the fair market value of the Company’s common stock at the time the option is granted. For holders of more than 10% of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than % of the fair market value of the Company’s common stock on the date of grant and for a term that exceeds . Early exercise was permitted for certain grants under the 2018 Plan.
Stock options
$
$
Granted
Exercised
(
)
Canceled
(
)
Outstanding at September 30, 2024
$
$
Options exercisable at September 30, 2024
$
$
The weighted-average grant date fair value of options granted for the three and nine months ended September 30, 2024 was $ and $, respectively, and for the three and nine months ended September 30, 2023 was $ and $, respectively. As of September 30, 2024, the unrecognized compensation cost related to unvested stock option grants was $ million and is expected to be recognized as expense over approximately years. The intrinsic value of the options exercised for the three and nine months ended September 30, 2024 was $ and $, respectively. The intrinsic value of the options exercised for the three and nine months ended September 30, 2023 was $ and $, respectively.
17
%-%
%-%
%-%
Expected volatility
%-%
%-%
%-%
%-%
Expected term (in years)
-
-
-
-
Expected dividend yield
-%
-%
-%
-%
Effective May 21, 2024, and in accordance with the terms of the 2021 Plan, the Company's board of directors approved a stock option repricing (the Option Repricing) whereby the exercise price of each Repriced Option (as defined below) was reduced to $ per share, the closing stock price on May 21, 2024. For purposes of the Option Repricing, “Repriced Options” are outstanding stock options as of May 21, 2024 (vested and unvested) granted under the 2021 Plan and held by those eligible employees of the Company identified by the Company's board of directors, excluding the Company’s Section 16 officers (the Chairman and Chief Executive Officer, the Chief Financial Officer and Chief Business Officer, the Chief Medical Officer, and the General Counsel) and the Company's board of directors.
To the extent a Repriced Option is exercised prior to the Premium End Date (as defined below), the eligible employee will be required to pay the original exercise price per share of the Repriced Options in connection with any exercise of the Repriced Option. The “Premium End Date” means the earliest of (i) May 21, 2026; (ii) the date of a change in control of the Company; (iii) the date of the eligible employee’s death or disability; or (iv) the date of the eligible employee’s termination without cause, provided that such termination without cause occurs after May 21, 2025. Except for the reduction in the exercise prices of the Repriced Options as described above, the Repriced Options will retain their existing terms and conditions as set forth in the 2021 Plan and the applicable award agreements. All repriced options will retain their original vesting schedule.
The Option Repricing resulted in $ million of incremental cost, which was calculated using the Black-Scholes option pricing model, of which $ of the incremental cost will be recognized on a straight-line basis through the Premium End Date, and $ of the incremental cost will be recognized on a straight-line basis over the greater of the period through the Premium End Date or the remaining service period. The incremental cost is included in general and administrative expense and research and development expense on the condensed consolidated statements of operations and comprehensive loss.
18
%
%-%
%-%
Expected volatility
%
%
%-%
%-%
Expected term (in years)
--
--
-
-
Expected dividend yield
%
%
-%
-%
Stock-based compensation expense
$
$
$
General and administrative
Total
$
$
$
$
Common stock reserved for future issuance
Awards available for future grant
Shares available for purchase under the ESPP
Total
19
The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases were years and %, respectively, at September 30, 2024. The weighted-average remaining lease term and the weighted-average discount rate of the Company’s operating leases were years and %, respectively, at December 31, 2023. The weighted-average remaining lease term does not include any renewal options at the election of the Company.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Facility leases
In September 2020, the Company entered into a lease agreement for square feet of laboratory and office space in San Diego, California, which represented a portion of a new facility that was under construction and which was subsequently amended in March 2021 to expand the rented premises by square feet (the 2020 Lease). The construction and design of the asset was the primary responsibility of the lessor. The Company was involved in certain aspects of construction and design for certain interior features and leasehold improvements that is beneficial to the Company to better suit its business needs and intended purpose of the space. The lease is accounted for as an operating lease and commenced in . In April 2022, the 2020 Lease was modified to amend the rent commencement date from to . The 2020 Lease, as amended, has a term of years and includes aggregate monthly payments to the lessor of approximately $ million beginning in May 2023 with a rent escalation clause, and a tenant improvement allowance of approximately $ million. The Company is responsible for its share of operating expenses based on actual operating expenses incurred by the landlord. The 2020 Lease is cancellable at the Company’s request after the th month with written notice and a lump-sum cancellation payment of $ million. The termination option has not been included in the Company's operating lease assets and liabilities. As discussed in Note 2, the Company provided a letter of credit to the lessor for $, which expires .
In December 2021, the Company entered into a lease agreement for square feet of office and laboratory space in South San Francisco, California. The lease is accounted for as an operating lease with the associated operating lease assets and liabilities recorded upon commencement, which occurred in . The non-cancellable operating lease has an initial term of months with an to extend the lease term by at the then-current market rates and includes aggregate monthly payments to the lessor of approximately $ million beginning in November 2022 with a rent escalation clause and a tenant improvement allowance of approximately $ million. The renewal option has not been included in the Company's operating lease assets and liabilities. The Company is responsible for its share of operating expenses based on actual operating expenses incurred by the landlord. The construction and design of the tenant improvements was the primary responsibility of the lessor. While the Company was involved in certain aspects of construction and design for certain interior features and leasehold improvements that is beneficial to the Company to better suit its business needs and intended purpose of the space, all construction was handled directly by the landlord. The Company was not deemed to be the accounting owner of the tenant improvements prior to or after the construction period. All payments made by the Company for landlord-owned tenant improvements were recorded as prepaid rent on the condensed consolidated balance sheets prior to lease commencement and included in the operating lease asset upon lease commencement. In February 2022, the expected project costs exceeded the tenant improvement allowances by $ million, which was paid directly to the landlord by the Company and was recorded as prepaid rent in the condensed consolidated balance sheets and as a cash outflow from operating activities in the condensed consolidated statements of cash flows. Upon lease commencement, the $ million of prepaid rent was included in the operating lease asset. The Company paid a security deposit of $ in December 2021 that was recorded as other assets in the condensed consolidated balance sheets.
20
The Company determined the subleases to be operating leases. Therefore, the Company recognizes sublease income on a straight-line basis over the lease term in its condensed consolidated statements of operations and comprehensive loss as a reduction to operating lease costs because the subleases are outside of the Company's normal business operations. The Company will continue to account for the operating lease assets and related liabilities of the original lease as it did prior to the commencement of the subleases. The Company recorded a reduction to operating lease costs of $ and $ related to income from these subleases during the three and nine months ended September 30, 2024, respectively.
In connection with committing to the plan to sublease the first floor in June 2024, the Company reassessed its asset groups for testing long-lived assets for impairment and determined the first floor operating lease assets and related property and equipment represented an asset group separate from the entity wide asset group. The Company concluded that the carrying value of the first floor asset group was not recoverable as it exceeded the future net undiscounted cash flows that are expected to be generated from the use and eventual disposition of the assets within the asset group. The Company determined the fair value of the first floor asset group based on the income approach using a discounted cash flow model. The cash flows used in the model were discounted using a rate of %. Based on this analysis, the Company recognized a noncash impairment charge of $ million, including $ million for the operating lease assets and $ million for the leasehold improvements and furniture, of which $ million was recorded to research and development expense and $ million was recorded to general and administrative expense, during the nine months ended September 30, 2024. impairment was recorded during the three months ended September 30, 2024. This represented a Level 3 nonrecurring fair value measurement. Calculating the fair value of the asset group involves significant estimates and assumptions, including projected future cash flows and a discount rate. Changes in the estimates and assumptions used could materially affect the amount of impairment loss recognized in the period the asset group is considered impaired.
2025
2026
2027
2028
Thereafter
Total lease payments
$
Less: Amount representing interest
(
)
Operating lease liabilities
$
21
)
$
(
)
$
(
)
$
(
)
Weighted-average shares of common stock used in computing net loss per share, basic and diluted
Net loss per share, basic and diluted
$
(
)
$
(
)
$
(
)
$
(
)
Options early exercised subject to future vesting
Estimated shares purchasable under the ESPP
Total potentially dilutive shares
22
Affini-T Therapeutics, Inc.
As of September 30, 2024 and December 31, 2023, the Company held a $ million and $ million equity investment in Affini-T, respectively (see Note 3). One of the Company’s board members is also a member of the board of Affini-T.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and planned clinical trials for our product candidates, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, if approved, the impact of global geopolitical and economic events and war on our business, the pricing and reimbursement of our product candidates, if approved, the potential to develop future product candidates, the potential benefits of current and future licenses, acquisitions, and strategic arrangements with third parties, and our intent to enter into any future strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “expect,” “intend,” "target," “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Overview
We are a clinical-stage precision oncology company singularly focused on discovering, developing, and commercializing therapies for patients with RAS/MAPK pathway-driven cancers. Molecular alterations in RAS, the most frequently mutated oncogene, and the MAPK pathway, one of the most frequently altered signaling pathways in cancer, account for approximately 5.4 million new patients diagnosed with cancer globally each year. Our company was co-founded by leading pioneers in precision oncology and RAS targeting to create novel therapies and combination regimens designed to comprehensively shut down the RAS/MAPK pathway for the treatment of patients with cancer. We have assembled one of the deepest, wholly-owned or controlled RAS/MAPK pathway-focused pipelines in the industry, which comprises modality-agnostic programs aligned with our three therapeutic strategies of: (1) targeting key upstream and downstream signaling nodes in the RAS/MAPK pathway; (2) targeting RAS directly; and (3) targeting escape routes that emerge in response to treatment.
24
The following figure shows the RAS/MAPK pathway and how the three therapeutic strategies listed above attempt to comprehensively and synergistically shut down the RAS/MAPK pathway.
The target breadth and molecular diversity represented in our pipeline enable us to pursue a systematic, data-driven, portfolio-wide clinical development effort to identify single agent and combination approaches with the goal of prolonging survival in numerous patient populations with high unmet medical needs. Our modality-agnostic approach aims to allow us to selectively and potently target critical signaling nodes with the most appropriate modality, including small molecule therapeutics and large molecule therapeutics. Our purpose-built pipeline consists of several molecules targeting key oncogenic drivers, including: one clinical-stage program (a pan-RAF inhibitor), two IND-enabling stage programs (a pan-RAS molecular glue and a pan-KRAS inhibitor), and an additional discovery-stage program. We believe our world-class team’s capabilities and experience, further guided by our scientific advisory board, which includes the world’s leading experts in the RAS/MAPK pathway, uniquely position us to achieve our bold mission of erasing cancer.
Our lead product candidate is naporafenib, a pan-RAF inhibitor with first-in-class and best-in-class potential for patients with NRASm melanoma and other RAS/MAPK pathway-driven tumors. RAF proteins are ubiquitously expressed serine-threonine kinases that constitute a key node of the RAS/MAPK pathway downstream of RAS and upstream of MEK. The RAF protein family consists of ARAF, BRAF, and CRAF (RAF1) that are activated through dimerization. Mutations in RAF proteins have been observed in many cancers, such as melanoma, colorectal cancer (CRC), non-small cell lung cancer (NSCLC), and thyroid cancer. We in-licensed naporafenib from Novartis Pharma AG (Novartis) in December 2022. Naporafenib has been dosed in over 500 patients to date, whereby safety, tolerability, pharmacokinetics (PK), and pharmacodynamics have been established in both monotherapy and select combinations, with clinical proof-of-concept (PoC) data in combination with trametinib (MEKINIST) for patients with NRASm melanoma, which includes NRAS Q61X melanoma. In December 2023, we announced that the US Food
25
and Drug Administration (FDA) granted Fast Track Designation (FTD) to naporafenib in combination with trametinib for the treatment of adult patients with unresectable or metastatic melanoma who have progressed on, or are intolerant to, an anti‑programmed death-1 (ligand 1) (PD‑(L)1)-based regimen, and whose tumors contain an NRAS mutation (NRASm). Programs that receive FTD may benefit from early and frequent interactions with the FDA during the clinical development process and, if relevant criteria are met, the FDA may consider reviewing portions of a marketing application before the sponsor submits the complete application.
Our development strategy for naporafenib includes our SEACRAFT trials designed to evaluate naporafenib in combination with other targeted therapies. We are advancing development for naporafenib plus trametinib in the Phase 3 SEACRAFT-2 trial for patients with NRASm melanoma, which we initiated in the second quarter of 2024. SEACRAFT-2 is supported by clinical PoC data in patients with NRASm melanoma, as presented by Novartis at the European Society for Medical Oncology Congress 2022 medical conference and as published in March 2023 by de Braud et al. in the Journal of Clinical Oncology. In connection with our SEACRAFT-2 trial, we have entered into a clinical trial collaboration and supply agreement (CTCSA) with Novartis for its MEK inhibitor, trametinib. Pursuant to the CTCSA, we are sponsoring and funding the clinical trial and Novartis is providing its drug to us free of charge. In addition, we are evaluating additional combinations of naporafenib with our other RAS/MAPK pathway targeting agents and/or external agents in preclinical models.
On October 24, 2024, we announced preliminary data from our SEACRAFT-1 trial in an oral presentation at the 36th EORTC-NCI-AACR (ENA) Symposium. The preliminary clinical activity of naporafenib plus trametinib in the melanoma cohort of SEACRAFT-1 include, as of the efficacy cutoff date*:
* Safety data cutoff date was September 3, 2024. Efficacy data cutoff date was September 5, 2024.
In addition, we reported that naporafenib plus trametinib has been generally well tolerated as of the safety cutoff date, with mostly low-grade adverse events in the majority of patients. We believe that the use of mandatory primary rash prophylaxis helped reduce the frequency and severity of skin toxicities, reduced the drug discontinuation rate due to adverse events, and improved the observed tolerability as measured by the increased relative dose intensity, as compared to the prior clinical trials of naporafenib plus trametinib conducted by Novartis, which did not include the use of mandatory primary rash prophylaxis.
We believe that while the preliminary SEACRAFT-1 data do not support further exploration of a tissue-agnostic indication, they do reinforce the potential of the ongoing Phase 3 SEACRAFT-2 trial in patients with NRASm melanoma. We expect to read out randomized dose optimization data of naporafenib plus trametinib from Stage 1 of the SEACRAFT-2 Phase 3 trial in 2025. Stage 2 of the SEACRAFT-2 Phase 3 trial is expected to compare naporafenib plus trametinib against physician's choice of chemotherapy or trametinib using dual primary endpoints of progression free survival and overall survival for regulatory approval.
Our next two programs are part of our RAS-targeting franchise, which we in-licensed in May 2024, as described below. These two programs fit within our second approach of targeting RAS directly, both in its active GTP and inactive GDP states. The RAS targeting landscape can be divided into pan-RAS, pan-KRAS, and mutant-selective approaches. Pan-RAS and pan-KRAS targeting molecules can address a broad population of patients with G12X, G13X, and possibly Q61X mutations, and also have the potential to address or prevent resistance by blocking wildtype RAS activation.
ERAS-0015 is a potential best-in-class pan-RAS molecular glue for treating patients with RAS-altered solid tumors. ERAS-0015 has demonstrated approximately 5-10 times greater potency as well as favorable absorption, distribution, metabolism and excretion (ADME) and PK properties in multiple animal species versus the leading pan-RAS molecular glue in development. More specifically, ERAS-0015 has stronger binding to cyclophilin A relative to the leading pan-RAS molecular glue in development, which enables more potent RAS inhibition. ERAS-0015 also showed sub-nanomolar to nanomolar preclinical IC50 in vitro potency against KRAS G12X, KRAS G13D, and RAS wildtype. In vivo, ERAS-0015 showed approximately 10 times higher potency than the leading pan-RAS molecular glue in development and good tumor regression in multiple models. It also showed superior clearance, half-life, oral bioavailability, and kinetic solubility in preclinical evaluations. The initial clinical trial for ERAS-0015 will be AURORAS-1, for which we plan to file an investigational new drug application (IND) in the first half of 2025, with an anticipated Phase 1 monotherapy data readout in 2026.
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ERAS-4001 is a potential first-in-class pan-KRAS inhibitor for treating patients with KRAS-altered solid tumors. The preclinical in vitro potency of ERAS-4001 showed good activity against KRAS G12X and G13D mutations, as well as KRAS wildtype amplifications, with no activity against HRAS or NRAS wildtype proteins. Sparing wild-type HRAS and NRAS has the potential to provide a greater therapeutic window. ERAS-4001 showed activity against both GDP-bound (“inactive state”) and GTP-bound (“active state”) KRAS G12D with single digit nanomolar IC50s in a biochemical RAS – RAF1 RBD (RAS Binding Domain) assay. In vivo, ERAS-4001 showed good tumor regression in multiple models. In combination with anti-PD-1, ERAS-4001 was able to achieve complete disappearance of tumors in mice on day 31. The initial clinical trial for ERAS-4001 will be BOREALIS-1, for which we plan to file an IND in the first quarter of 2025, with an anticipated Phase 1 monotherapy data readout in 2026.
ERAS-0015 and ERAS-4001 have the potential to address unmet needs in approximately 2.7 million patients who are diagnosed annually globally with RAS-mutant tumors, of which over 2.2 million patients are diagnosed with KRAS-mutant tumors.
In May 2024, in connection with entering into the Joyo License Agreement and Medshine License Agreement, a review of our strategic priorities, and our decision to deemphasize certain drug discovery activities, we approved a strategic reprioritization to focus our resources on our naporafenib program, ERAS-0015, and ERAS-4001. We deprioritized our HERKULES-3 clinical trial evaluating ERAS-007 in combination with encorafenib and cetuximab (EC) in patients with EC-naïve BRAFm colorectal cancer as we believe the clinical efficacy data do not support continued evaluation. We also deprioritized our THUNDERBBOLT-1 clinical trial evaluating ERAS-801 in patients with recurrent glioblastoma (GBM), although we plan to explore further advancement of ERAS-801, including via partnerships and select investigator-sponsored trials. Finally, we deprioritized our preclinical ERAS-4 program; however, certain of our existing ERAS-4 molecules may serve as backup compounds for ERAS-4001.
We are also advancing additional programs targeting key oncogenic drivers in the RAS/MAPK pathway, which we will need to successfully progress through appropriate preclinical activities (e.g., discovery and IND-enabling activities) prior to advancing these programs into clinical development, if at all.
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates obtain marketing approval. We are working with our current manufacturers to ensure that we will be able to scale up our manufacturing capabilities to support our clinical plans. We are also in the process of locating and qualifying additional manufacturers to build redundancies into our supply chain. In addition, we rely on third parties to package, label, store, and distribute our product candidates, and we intend to continue to rely on third parties with respect to our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the design and development of our product candidates.
In December 2022, we completed the sale and issuance of 15,384,616 shares of our common stock at a price to the public of $6.50 per share (the 2022 Offering). Proceeds from the 2022 Offering were $94.9 million, net of underwriting discounts and commissions and offering costs of $5.1 million.
In March 2024, we entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of our common stock at a price of $2.06 per share, which closed on April 2, 2024 (the 2024 Private Placement). Proceeds from the 2024 Private Placement were $43.6 million, after deducting placement agent fees and expenses of approximately $1.4 million.
In May 2024, we completed the sale and issuance of 99,459,458 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 12,972,972 shares of our common stock, at a price to the public of $1.85 per share (the 2024 Offering). Proceeds from the 2024 Offering were $174.4 million, net of underwriting discounts and commissions and offering costs of $9.6 million.
In August 2022, we entered into an Open Market Sale Agreement (the Sale Agreement) with Jefferies LLC (the Agent), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $200 million from time to time, in an “at-the-market offering” (ATM Offering) through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. Pursuant to the Sale Agreement, the Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement. During the three months ended September 30, 2024, we sold 9,231,114 shares of common stock under the Sale Agreement at a weighted-average price of $2.37 per share. Proceeds from the ATM Offering during the three months ended September 30, 2024 were $21.0 million, net of commissions and expenses of $0.8 million.
27
Since our inception in 2018, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, identifying, acquiring, and in-licensing our product candidates, establishing our intellectual property portfolio, conducting research, preclinical studies and clinical trials, establishing arrangements with third parties for the manufacture of our product candidates and related raw materials, and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue. As of September 30, 2024, we have raised a total of $1.0 billion to fund our operations, comprised primarily of gross proceeds from our IPO, underwritten offerings, a private placement of our common stock and the sale and issuance of convertible preferred stock. As of September 30, 2024, we had cash, cash equivalents and marketable securities of $463.3 million.
We have incurred significant operating losses since inception. Our net losses were $31.2 million and $30.4 million for the three months ended September 30, 2024 and 2023, respectively, and $129.4 million and $95.3 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $735.4 million. We expect our expenses and operating losses will increase substantially for the foreseeable future, particularly if and as we conduct our ongoing and planned clinical trials and preclinical studies; continue our research and development activities; utilize third parties to manufacture our product candidates and related raw materials; hire additional personnel; acquire, in-license, or develop additional product candidates; expand and protect our intellectual property; and incur additional costs associated with being a public company. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities.
Based upon our current operating plans, we believe that our cash, cash equivalents and marketable securities as of September 30, 2024 will be sufficient to fund our operations into the first half of 2027. We do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce, or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as geopolitical and economic events. We do not believe that such factors had a material adverse impact on our results of operations during the three months ended September 30, 2024.
Our acquisition and license agreements
Guangzhou Joyo license agreement
In May 2024, we entered into an exclusive license agreement (the Joyo License Agreement) with Guangzhou Joyo Pharmatech Co., Ltd. (Joyo) under which we were granted an exclusive, worldwide (except mainland China, Hong Kong and Macau), royalty-bearing license to certain patent and other intellectual property rights owned or controlled by Joyo to develop, manufacture, and commercialize certain pan-RAS inhibitors in all fields of use. We have an option to expand the territory of the license to include mainland China, Hong Kong and Macau by making a $50.0 million payment to Joyo on or prior to the first dosing of the first patient in a Phase 2 clinical trial by either us or Joyo, or a payment of $150.0 million after the first dosing of the first patient in a Phase 2 clinical trial by either us or Joyo, and before filing a new drug application (or the foreign equivalent) by either us or Joyo. We have the right to sublicense (through multiple tiers) our rights under the Joyo License Agreement, subject to certain limitations and conditions, and are required to use commercially reasonable efforts to commercialize licensed products in the United States.
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The license granted under the Joyo License Agreement is subject to Joyo’s reserved right to develop, manufacture, use, and commercialize licensed products in mainland China, Hong Kong and Macau, unless we exercise our option to expand the license to include mainland China, Hong Kong and Macau.
Under the Joyo License Agreement, we made an upfront cash payment to Joyo of $12.5 million. In addition, we are obligated to make development and regulatory milestone payments of up to $51.5 million (or up to $57.5 million if our territory is expanded to include mainland China, Hong Kong, and Macau) and commercial milestone payments of up to $125.0 million upon the achievement of the corresponding milestones. We are also obligated to pay tiered royalties on net sales of all licensed products, in the low- to mid-single digit percentages, subject to certain reductions.
The Joyo License Agreement will expire upon the last to expire royalty term, which is determined on a licensed product-by-licensed product and country-by-country basis, and is the later of: (i) ten years from the date of first commercial sale for the licensed product in such country, (ii) the last to expire valid claim within the licensed patent rights covering such licensed product, or (iii) the expiration of all regulatory exclusivity for the licensed product in such country. Upon expiration of the Joyo License Agreement, on a licensed product-by-licensed product and country-by-country basis, the license granted to us with respect to such product in such countries shall be deemed to be fully paid-up, royalty-free, non-terminable, irrevocable and perpetual.
The Joyo License Agreement may be terminated in its entirety by either party in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency, or similar circumstances. Joyo may terminate the Joyo License Agreement in the event that we or our affiliates or any of our or their sublicensees institutes, prosecutes or otherwise participates in any challenge to the licensed patents. We may terminate the Joyo License Agreement in its entirety at any time upon the provision of prior written notice to Joyo.
Upon termination of the Joyo License Agreement for any reason, all rights and licenses granted to us will terminate. In addition, the licenses granted to Joyo under certain patent and other intellectual property rights owned or controlled by us to develop, manufacture, use, and commercialize the licensed products in mainland China, Hong Kong and Macau will survive the termination of the Joyo License Agreement for any reason, unless we exercise our option to expand the license to include mainland China, Hong Kong and Macau, in which case such licenses to Joyo will terminate automatically; and Joyo has an option to negotiate a license under any patent rights, know-how, or other intellectual property rights relating to the licensed products that are owned or controlled by us for the purpose of developing, manufacturing and commercializing the licensed products in our territory on terms to be negotiated between the parties.
Medshine license agreement
In May 2024, we entered into an exclusive license agreement (the Medshine License Agreement) with Medshine Discovery Inc. (Medshine) under which we were granted an exclusive, worldwide, royalty-bearing license to certain patent and other intellectual property rights owned or controlled by Medshine to develop, manufacture and commercialize certain pan-KRAS inhibitors in all fields of use. We have the right to sublicense (through multiple tiers) our rights under the Medshine License Agreement, subject to certain limitations and conditions, and are required to use commercially reasonable efforts to commercialize licensed products in certain geographical markets.
Under the Medshine License Agreement, we made an upfront cash payment to Medshine of $10.0 million. In addition, we are obligated to make development and regulatory milestone payments of up to $30.0 million and commercial milestone payments of up to $130.0 million upon the achievement of the corresponding milestones. We are also obligated to pay a low-single digit percentage royalty on net sales of all licensed products, subject to certain reductions.
The Medshine License Agreement will expire upon the last to expire royalty term, which is determined on a licensed product-by-licensed product and country-by-country basis, and is the later of: (i) ten years from the date of first commercial sale for the licensed product in such country, (ii) the last to expire valid claim within the licensed patent rights covering such licensed product, or (iii) the expiration of all regulatory exclusivity for the licensed product in such country. Upon expiration of the Medshine License Agreement, on a licensed product-by-licensed product and country-by-country basis, the license granted to us with respect to such product in such countries shall be deemed to be fully paid-up, royalty-free, non-terminable, irrevocable and perpetual.
The Medshine License Agreement may be terminated in its entirety by either party in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency, or similar circumstances. Medshine may terminate the Medshine License Agreement in the event that we or our affiliates or any of our or their
29
sublicensees commences or actively and voluntarily participates in any challenge to the licensed patents. We may terminate the Medshine License Agreement in its entirety at any time upon the provision of prior written notice to Medshine.
Upon termination of the Medshine License Agreement for any reason, all rights and licenses granted to us will terminate. In addition, upon termination of the Medshine License Agreement by Medshine for cause, Medshine has an option to negotiate a license under any patent rights, know-how, or other intellectual property rights relating to the licensed products that are owned or controlled by us for the purpose of developing, manufacturing and commercializing the licensed products on terms to be negotiated between the parties.
In addition to the Joyo License Agreement and the Medshine License Agreement, we have entered into in-license and acquisition agreements pursuant to which we in-licensed or acquired certain intellectual property rights related to our product candidates and development programs. For additional information regarding these agreements, see the section titled “Business—Our acquisition and license agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.
Components of results of operations
Revenue
We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and obtained regulatory approval, if ever. If we fail to complete preclinical and clinical development of product candidates or obtain regulatory approval for them, our ability to generate future revenues, and our results of operations and financial position would be adversely affected.
Operating expenses
Research and development
Research and development expenses consist of external and internal costs associated with our research and development activities, including our discovery and research efforts and the preclinical and clinical development of our product candidates. Research and development costs are expensed as incurred. Our research and development expenses include:
• external costs, including expenses incurred under arrangements with third parties, such as contract research organizations (CROs), contract manufacturing organizations (CMOs), consultants and our scientific advisors; and
• internal costs, including:
• employee-related expenses, including salaries, benefits, and stock-based compensation for those individuals involved in research and development efforts;
• the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials; and
• facilities and depreciation, which include direct and allocated expenses for rent of facilities and depreciation.
The following table summarizes our research and development expenses incurred for the following periods (in thousands):
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||
Naporafenib |
|
|
$ |
12,579 |
|
|
|
$ |
10,285 |
|
|
|
$ |
39,086 |
|
|
|
$ |
21,576 |
|
Other clinical programs |
|
|
|
— |
|
|
|
|
10,096 |
|
|
|
|
7,047 |
|
|
|
|
38,140 |
|
Other discovery and preclinical programs |
|
|
|
15,052 |
|
|
|
|
4,832 |
|
|
|
|
43,104 |
|
|
|
|
19,300 |
|
Total research and development expenses |
|
|
$ |
27,631 |
|
|
|
$ |
25,213 |
|
|
|
$ |
89,237 |
|
|
|
$ |
79,016 |
|
30
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to conduct our ongoing research and development activities, conduct clinical trials and advance our preclinical research programs toward clinical development, particularly as more of our product candidates move into later stages of development, which typically cost more. The process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time-consuming. We may never succeed in achieving marketing approval for any of our product candidates.
The timelines and costs with research and development activities are uncertain, can vary significantly for each product candidate and program and are difficult to predict. We anticipate we will make determinations as to which product candidates and programs to pursue and how much funding to direct to each product candidate and program on an ongoing basis in response to preclinical and clinical results, regulatory developments, ongoing assessments as to each product candidate’s and program’s commercial potential, and our ability to enter into collaborations, licenses, or other similar agreements to the extent we determine the resources or expertise of a third-party would be beneficial for a given product candidate or program. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates and programs may be subject to future collaborations, licenses, or other agreements, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our development costs may vary significantly based on factors such as:
• the number and scope of preclinical and IND-enabling studies and clinical trials;
• per patient trial costs;
• the number of trials required for approval;
• the number of sites included in the trials;
• the countries in which the trials are conducted;
• the length of time required to enroll eligible patients;
• the number of patients that participate in the trials;
• the number of doses that patients receive;
• the drop-out or discontinuation rates of patients;
• potential additional safety monitoring requested by regulatory agencies;
• the duration of patient participation in the trials and follow-up;
• the cost and timing of manufacturing our product candidates;
• the phase of development of our product candidates;
• the efficacy and safety profile of our product candidates;
• the timing, receipt and terms of any approvals from applicable regulatory authorities;
• maintaining a continued acceptable safety profile of our products following approval, if any;
• significant and changing government regulation and regulatory guidance;
• the impact of any interruptions to our operations or to those of third parties with whom we work due to geopolitical and economic events; and
• the extent to which we establish additional collaboration, license or other arrangements.
31
In-process research and development
In-process research and development expenses include rights acquired as part of asset acquisitions or in-licenses to develop and commercialize product candidates. Upfront payments that relate to the acquisition of a new product candidate, as well as pre-commercial milestone payments, are immediately expensed as in-process research and development in the period in which they are incurred, provided that the new product candidate did not also include processes or activities that would constitute a “business” as defined under US generally accepted accounting principles (US GAAP), the product candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use.
In-process research and development expenses consist primarily of our upfront payments, milestone payments, and our stock issuances in connection with our acquisition and in-license agreements.
General and administrative
General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation, for employees in our finance, accounting, legal, information technology, business development and support functions. Other general and administrative expenses include allocated facility and depreciation related costs not otherwise included in research and development expenses and professional fees for auditing, tax, intellectual property and legal services. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses as incurred since recoverability of such expenditures is uncertain.
We expect our general and administrative expenses will increase substantially for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities, as well as to support our operations generally.
Other income (expense), net
Interest income
Interest income consists primarily of interest earned on our cash, cash equivalents and marketable securities.
Results of operations
Comparison of the three months ended September 30, 2024 and 2023
The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
27,631 |
|
|
$ |
25,213 |
|
|
$ |
2,418 |
|
In-process research and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
General and administrative |
|
|
9,611 |
|
|
|
9,445 |
|
|
|
166 |
|
Total operating expenses |
|
|
37,242 |
|
|
|
34,658 |
|
|
|
2,584 |
|
Loss from operations |
|
|
(37,242 |
) |
|
|
(34,658 |
) |
|
|
(2,584 |
) |
Total other income (expense), net |
|
|
6,042 |
|
|
|
4,297 |
|
|
|
1,745 |
|
Net loss |
|
$ |
(31,200 |
) |
|
$ |
(30,361 |
) |
|
$ |
(839 |
) |
32
Research and development expenses
Research and development expenses were $27.6 million for the three months ended September 30, 2024 compared to $25.2 million for the three months ended September 30, 2023. The increase of $2.4 million was primarily driven by an increase of $4.5 million in expenses incurred in connection with clinical trials, preclinical studies and discovery activities, partially offset by decreases of $1.5 million in personnel costs, including stock-based compensation expense, and $0.4 million in outsourced services and consulting fees.
In-process research and development expenses
We recorded no in-process research and development expenses for each of the three months ended September 30, 2024 and 2023.
General and administrative expenses
General and administrative expenses were $9.6 million for the three months ended September 30, 2024 compared to $9.4 million for the three months ended September 30, 2023. The increase of $0.2 million was primarily driven by an increase of $0.5 million in stock-based compensation expense, partially offset by a decrease in personnel costs of $0.2 million.
Other income (expense), net
Other income (expense), net was $6.0 million for the three months ended September 30, 2024 compared to $4.3 million for the three months ended September 30, 2023. The increase of $1.7 million was primarily related to an increase in interest earned on our cash, cash equivalents and marketable securities during the three months ended September 30, 2024.
Comparison of the nine months ended September 30, 2024 and 2023
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
89,237 |
|
|
$ |
79,016 |
|
|
$ |
10,221 |
|
In-process research and development |
|
|
22,500 |
|
|
|
— |
|
|
|
22,500 |
|
General and administrative |
|
|
32,138 |
|
|
|
28,637 |
|
|
|
3,501 |
|
Total operating expenses |
|
|
143,875 |
|
|
|
107,653 |
|
|
|
36,222 |
|
Loss from operations |
|
|
(143,875 |
) |
|
|
(107,653 |
) |
|
|
(36,222 |
) |
Total other income (expense), net |
|
|
14,457 |
|
|
|
12,312 |
|
|
|
2,145 |
|
Net loss |
|
$ |
(129,418 |
) |
|
$ |
(95,341 |
) |
|
$ |
(34,077 |
) |
Research and development expenses
Research and development expenses were $89.2 million for the nine months ended September 30, 2024 compared to $79.0 million for the nine months ended September 30, 2023. The increase of $10.2 million was primarily driven by an increase of $8.1 million in expenses incurred in connection with clinical trials, preclinical studies and discovery activities and an impairment charge of $3.0 million on operating lease assets, leasehold improvements, and furniture related to the sublease of the first floor of our San Diego facility during the nine months ended September 30, 2024, partially offset by a $0.7 million decrease in outsourced services and consulting fees.
In-process research and development expenses
In-process research and development expenses were $22.5 million for the nine months ended September 30, 2024 compared to $0 for the nine months ended September 30, 2023. The increase was driven by upfront payments of $22.5 million in connection with our license agreements with Joyo and Medshine during the nine months ended September 30, 2024.
33
General and administrative expenses
General and administrative expenses were $32.1 million for the nine months ended September 30, 2024 compared to $28.6 million for the nine months ended September 30, 2023. The increase of $3.5 million was primarily driven by an impairment charge of $1.7 million on operating lease assets, leasehold improvements, and furniture related to the sublease of the first floor of our San Diego facility during the nine months ended September 30, 2024, and increases of $1.4 million in legal fees and $1.1 million in stock-based compensation expense, partially offset by a decrease of $0.7 million in insurance costs.
Other income (expense), net
Other income (expense), net was $14.5 million for the nine months ended September 30, 2024 compared to $12.3 million for the nine months ended September 30, 2023. The increase of $2.1 million was primarily related to an increase in interest earned on our cash, cash equivalents and marketable securities of $2.3 million, partially offset by a $0.4 million impairment charge on our investment in equity securities during the nine months ended September 30, 2024.
Liquidity and capital resources
Sources of liquidity
In July 2021, we completed our IPO and issued 21,562,500 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 2,812,500 shares of our common stock, at a price to the public of $16.00 per share. Our aggregate net proceeds from the offering were $317.0 million, net of underwriting discounts and commissions of $24.2 million and offering costs of $3.8 million. Prior to the IPO, we received aggregate gross proceeds of $320.4 million from the sale of shares of our convertible preferred stock.
In August 2022, we entered into the Sale Agreement with the Agent, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $200 million from time to time, in ATM Offerings through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. Pursuant to the Sale Agreement, the Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement. During the three months ended September 30, 2024, we sold 9,231,114 shares of common stock under the Sale Agreement at a weighted-average price of $2.37 per share. Proceeds from the ATM Offering during the three months ended September 30, 2024 were $21.0 million, net of commissions and expenses of $0.8 million.
In December 2022, we completed the 2022 Offering and issued 15,384,616 shares of our common stock at a price to the public of $6.50 per share. Proceeds from the 2022 Offering were $94.9 million, net of underwriting discounts and commissions and offering costs of $5.1 million.
In March 2024, in connection with the 2024 Private Placement, we entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of our common stock at a price of $2.06 per share, which closed on April 2, 2024. Proceeds from the 2024 Private Placement were $43.6 million, net of placement agent fees and expenses of approximately $1.4 million.
In May 2024, we completed the 2024 Offering and issued 99,459,458 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 12,972,972 shares of our common stock, at a price to the public of $1.85 per share. Proceeds from the 2024 Offering were $174.4 million, net of underwriting discounts and commissions and offering costs of $9.6 million.
34
Future capital requirements
As of September 30, 2024, we had cash, cash equivalents and marketable securities of $463.3 million. Based upon our current operating plans, we believe that our cash, cash equivalents and marketable securities will be sufficient to fund our operations into the first half of 2027. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain.
Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:
• the type, number, scope, progress, expansions, results, costs and timing of discovery, preclinical studies and clinical trials of our product candidates that we are pursuing or may choose to pursue in the future, including the costs of any third-party products used in our combination clinical trials that are not covered by such third party or other sources;
• the costs and timing of manufacturing for our product candidates with CMOs, including commercial manufacturing, if any product candidate is approved;
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
• our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;
• the costs associated with hiring additional personnel, consultants, and CROs as our preclinical and clinical activities increase;
• the timing and amount of the milestone or other payments we must make to the licensors and other third parties from whom we have in-licensed or acquired our product candidates or technologies;
• the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;
• our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
• patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors;
• the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
• any delays and cost increases that result from geopolitical and economic events; and
• costs associated with any products or technologies that we may in-license or acquire.
35
We have no other committed sources of capital. Until we can generate a sufficient amount of product revenue to finance our cash requirements, if ever, we expect to finance our future cash needs primarily through equity offerings (including through the Sale Agreement), debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders 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 stockholders. Debt 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 additional funds through collaborations, licensing, 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. 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 research and development programs or other operations, or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.
Cash flows
The following table shows a summary of our cash flows for the periods presented (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(84,853 |
) |
|
$ |
(76,429 |
) |
Investing activities |
|
|
(179,233 |
) |
|
|
(95,765 |
) |
Financing activities |
|
|
239,896 |
|
|
|
839 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(24,190 |
) |
|
$ |
(171,355 |
) |
Operating activities
Cash used in operating activities was $84.9 million during the nine months ended September 30, 2024, primarily resulting from a net loss of $129.4 million and accretion on marketable securities of $7.2 million, partially reduced by in-process research and development expenses of $22.5 million in connection with our license agreements with Joyo and Medshine, which are reflected in investing activities, stock-based compensation expense of $20.7 million, an impairment charge of $4.7 million on operating lease assets, leasehold improvements and furniture, depreciation and amortization expense of $3.0 million, and changes in operating assets and liabilities of $0.6 million. Net cash provided by changes in operating assets and liabilities consisted primarily of an increase in accounts payable, accrued expenses and other current and long-term liabilities of $3.6 million, partially offset by an increase in prepaid expenses and other current and long-term assets of $2.6 million.
Cash used in operating activities was $76.4 million during the nine months ended September 30, 2023, primarily resulting from a net loss of $95.3 million and accretion on marketable securities of $4.8 million, partially reduced by stock-based compensation expense of $20.1 million, depreciation and amortization expense of $2.8 million, and changes in operating assets and liabilities of $0.8 million. Net cash provided by changes in operating assets and liabilities consisted primarily of an increase in operating lease assets and liabilities, net of $3.3 million primarily due to the receipt of $2.3 million in reimbursement from our landlord for tenant improvements, and an increase in accounts payable of $0.8 million, partially offset by a decrease in accrued expenses and other current and long-term liabilities of $3.3 million.
Investing activities
Net cash used in investing activities was $179.2 million during the nine months ended September 30, 2024 as compared to $95.8 million during the nine months ended September 30, 2023. The increase in cash used in investing activities of $83.5 million was primarily the result of increases in purchases of marketable securities of $82.8 million and in-process research and development of $2.5 million, partially offset by a decrease in purchases of property and equipment of $1.6 million.
36
Financing activities
Net cash provided by financing activities was $239.9 million during the nine months ended September 30, 2024 as compared to $0.8 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, we received $174.4 million of net proceeds for the issuance of common stock from the 2024 Offering, $43.6 million in net proceeds for the issuance of common stock from the 2024 Private Placement, $21.0 million in net proceeds for the issuance of common stock from the ATM offering, $0.4 million from the issuance of common stock under our Employee Stock Purchase Plan (ESPP) and $0.4 million from the exercise of stock options. During the nine months ended September 30, 2023, we received $0.5 million from the issuance of common stock under our ESPP and $0.3 million from the exercise of stock options.
Contractual obligations and commitments
As of September 30, 2024, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in “Management’s discussion and analysis of financial condition and results of operations – Cash requirements due to contractual obligations and other commitments,” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.
Critical accounting policies and estimates
This management discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. As of September 30, 2024, there have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s discussion and analysis of financial condition and results of operations – Critical accounting policies and estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.
Recently issued and adopted accounting pronouncements
See Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued and adopted accounting pronouncements.
Emerging growth company and smaller reporting company status
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the JOBS Act), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley).
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO; (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion; (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; or (iv) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period.
37
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of September 30, 2024, there have been no material changes surrounding our market risk, including interest rate risk, foreign currency exchange risk, and inflation risk, from the discussion provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any material proceedings. From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
Item 1A. Risk Factors.
There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 27, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the three months ended September 30, 2024, none of our officers (as defined in Rule 16a–1(f)) or directors , materially or any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each such term is defined in Item 408 of Regulation S-K.
39
Item 6. Exhibits.
Exhibit Number |
|
Exhibit Description |
|
Incorporated by Reference |
|
Filed Herewith |
||||
|
|
|
|
Form |
|
Date |
|
Number |
|
|
3.1 |
|
Amended and Restated Certificate of Incorporation of Erasca, Inc. |
|
8-K |
|
7/20/2021 |
|
3.1 |
|
|
3.2 |
|
|
8-K |
|
7/20/2021 |
|
3.2 |
|
|
|
4.1 |
|
Specimen stock certificate evidencing the shares of common stock |
|
S-1 |
|
6/25/2021 |
|
4.1 |
|
|
4.2 |
|
|
S-1 |
|
6/25/2021 |
|
4.2 |
|
|
|
31.1 |
|
|
|
|
|
|
|
|
X |
|
31.2 |
|
|
|
|
|
|
|
|
X |
|
32.1* |
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X |
32.2* |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X |
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
X |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
X |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
|
|
X |
* This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
40
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.
|
|
Erasca, Inc. |
|
|
|
|
|
Date: November 12, 2024 |
|
By: |
/s/ Jonathan E. Lim, M.D. |
|
|
|
Jonathan E. Lim, M.D. |
|
|
|
Chairman, Chief Executive Officer and Co-Founder |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: November 12, 2024 |
|
By: |
/s/ David M. Chacko, M.D. |
|
|
|
David M. Chacko, M.D. |
|
|
|
Chief Financial Officer and Chief Business Officer |
|
|
|
(Principal Financial and Accounting Officer) |
41