G1 Therapeutics, Inc. - Quarter Report: 2022 September (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________________________________________________

FORM 10-Q

_________________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


o			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: 001-38096

_________________________________________________________

G1 THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

_________________________________________________________


Delaware						26-3648180
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

700 Park Offices Drive, Suite 200 Research Triangle Park, NC 27709
(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (919) 213-9835

_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	GTHX	The Nasdaq Stock Market

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. Yes x No o

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). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

As of October 28, 2022 the registrant had 42,912,081 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	42
Item 1A.	Risk Factors	42
Item 6.	Exhibits	43
	Signatures	44

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

G1 Therapeutics, Inc.

Condensed Balance Sheets (unaudited)

(in thousands, except share and per share amounts)


	September 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	93,238	$	221,186
Restricted cash	63		63
Marketable securities	29,744		—
Accounts Receivable	10,521		5,688
Inventories	13,950		3,471
Prepaid expenses and other current assets	9,949		13,157
Total current assets	157,465		243,565
Property and equipment, net	2,126		2,013
Restricted cash	250		312
Operating lease assets	6,239		7,035
Other assets	493		1,169
Total assets	$	166,573	$	254,094
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	8,442	$	2,897
Accrued expenses	27,251		23,180
Deferred revenue	9		31
Other current liabilities	1,432		1,505
Total current liabilities	37,134		27,613
Loan payable	76,558		75,190
Deferred revenue	1,000		1,000
Operating lease liabilities	5,916		6,750
Total liabilities	120,608		110,553
Stockholders’ equity
Common stock, $0.0001 par value, 120,000,000 shares authorized as of September 30, 2022, and December 31, 2021; 42,923,747 and 42,588,814 shares issued as of September 30, 2022, and December 31, 2021, respectively; 42,897,081 and 42,562,148 shares outstanding as of September 30, 2022, and December 31, 2021, respectively	4		4
Treasury stock, 26,666 shares as of September 30, 2022, and December 31, 2021	(8)		(8)
Additional paid-in capital	744,338		728,004
Accumulated deficit	(698,369)		(584,459)
Total stockholders’ equity	45,965		143,541
Total liabilities and stockholders' equity	$	166,573	$	254,094

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

G1 Therapeutics, Inc.

Condensed Statements of Operations (unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues
Product sales, net	$	8,269	$	3,576	$	22,467	$	6,717
License revenue	15,307		1,282		18,584		18,963
Total revenues	23,576		4,858		41,051		25,680
Operating expenses
Cost of goods sold	1,111		591		2,756		1,642
Research and development	19,581		21,143		66,729		56,435
Selling, general and administrative	24,432		24,268		76,857		72,474
Total operating expenses	45,124		46,002		146,342		130,551
Loss from operations	(21,548)		(41,144)		(105,291)		(104,871)
Other income (expense)
Interest income	211		7		270		35
Interest expense	(2,764)		(934)		(7,436)		(2,609)
Other income (expense)	48		(76)		(234)		(208)
Total other income (expense), net	(2,505)		(1,003)		(7,400)		(2,782)
Loss before income taxes	(24,053)		(42,147)		(112,691)		(107,653)
Income tax expense	1,219		321		1,219		679
Net loss	$	(25,272)	$	(42,468)	$	(113,910)	$	(108,332)
Net loss per share, basic and diluted	$	(0.59)	$	(1.00)	$	(2.67)	$	(2.60)
Weighted average common shares outstanding, basic and diluted	42,799,342		42,383,573		42,731,826		41,740,911

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

G1 Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity (unaudited)

(in thousands, except share and per share amounts)


	Common stock			Treasury stock			Additional paid-in capital		Accumulated deficit		Total stock- holders' equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	42,588,814	$	4	(26,666)	$	(8)	$	728,004	$	(584,459)	$	143,541
Exercise of common stock options	27,333	—		—	—		18		—		18
Restricted stock units vested	116,051	—		—	—		—		—		—
Stock-based compensation	—	—		—	—		5,765		—		5,765
Net loss during quarter	—	—		—	—		—		(49,192)		(49,192)
Balance at March 31, 2022	42,732,198	$	4	(26,666)	$	(8)	$	733,787	$	(633,651)	$	100,132
Exercise of common stock options	—	—		—	—		—		—		—
Restricted stock units vested	21,945	—		—	—		—		—		—
Stock-based compensation	—	—		—	—		5,639		—		5,639
Net loss during quarter	—	—		—	—		—		(39,446)		(39,446)
Balance at June 30, 2022	42,754,143	$	4	(26,666)	$	(8)	$	739,426	$	(673,097)	$	66,325
Exercise of common stock options	150,275	$	—	—	$	—	$	127	$	—	$	127
Restricted stock units vested	19,329	$	—	—	$	—	$	—	$	—	$	—
Stock-based compensation	—	$	—	—	$	—	$	4,785	$	—	$	4,785
Net loss during quarter	—	$	—	—	$	—	$	—	$	(25,272)	$	(25,272)
Balance at September 30, 2022	42,923,747	$	4	(26,666)	$	(8)	$	744,338	$	(698,369)	$	45,965


	Common stock			Treasury stock			Additional paid-in capital		Accumulated deficit		Total stock- holders' equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	38,140,756	$	4	(26,666)	$	(8)	$	613,462	$	(436,107)	$	177,351
Public offering (ATM)	3,513,027	—		—	—		86,378		—		86,378
Exercise of common stock options	388,857	—		—	—		2,264		—		2,264
Stock-based compensation	—	—		—	—		5,892		—		5,892
Net loss during quarter	—	—		—	—		—		(26,442)		(26,442)
Balance at March 31, 2021	42,042,640	$	4	(26,666)	$	(8)	$	707,996	$	(462,549)	$	245,443
Exercise of common stock options	230,347	—		—	—		1,481		—		1,481
Stock-based compensation	—	—		—	—		5,694		—		5,694
Net loss during quarter	—	—		—	—		—		(39,422)		(39,422)
Balance at June 30, 2021	42,272,987	$	4	(26,666)	$	(8)	$	715,171	$	(501,971)	$	213,196
Exercise of common stock options	275,827	$	—	—	$	—	$	2,083	$	—	$	2,083
Stock-based compensation	—	$	—	—	$	—	$	5,528	$	—	$	5,528
Net loss during quarter	—	$	—	—	$	—	$	—	$	(42,468)	$	(42,468)
Balance at September 30, 2021	42,548,814	$	4	(26,666)	$	(8)	$	722,782	$	(544,439)	$	178,339

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

G1 Therapeutics, Inc.

Condensed Statements of Cash Flows (unaudited)

(amounts in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(113,910)	$	(108,332)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation	16,189		$	17,114
Accretion of discount on available for sale securities	(83)		$	—
Depreciation and amortization	393		$	355
Amortization of debt issuance costs	1,690		$	682
Non-cash interest expense	726		$	236
Non-cash equity interest, net	354		$	228
Change in operating assets and liabilities
Accounts receivable	(4,833)		$	(5,003)
Inventories	(10,479)		$	(1,375)
Prepaid expenses and other assets	5,730		$	(4,580)
Accounts payable	3,819		$	(109)
Accrued expenses and other liabilities	2,438		$	2,547
Deferred revenue	(22)		$	789
Net cash used in operating activities	(97,988)		$	(97,448)
Cash flows from investing activities
Purchases of marketable securities	(29,661)		$	—
Purchases of property and equipment	(506)		$	—
Net cash provided/used in investing activities	(30,167)		$	—
Cash flows from financing activities
Proceeds from stock options exercised	145		$	5,828
Proceeds from loan agreement	—		$	10,000
Payments of debt issuance costs	—		$	(100)
Proceeds from public offering, net of underwriting fees and commissions	—		$	86,429
Payment of public offering costs	—		$	(51)
Net cash provided by financing activities	145		$	102,106
Net change in cash, cash equivalents and restricted cash	(128,010)		$	4,658
Cash, cash equivalents and restricted cash
Beginning of period	221,561		$	207,806
End of period	$	93,551	$	212,464
Supplemental disclosure of cash flow information
Cash paid for interest	$	5,610	$	1,856
Non-cash operating, investing and financing activities
Upfront project costs and other current assets in accounts payable and accrued expenses	$	1,726	$	114

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

G1 Therapeutics, Inc.

Notes to financial statements

(unaudited)

1. Business Description

G1 Therapeutics, Inc. (the “Company” or “G1”) is a commercial-stage biopharmaceutical company focused on the development and commercialization of novel small molecule therapeutics for the treatment of patients with cancer. The Company’s first U.S. Food and Drug Administration (“FDA”)-approved product, COSELA® (trilaciclib), is the first and only therapy indicated to proactively help protect bone marrow from the damage of chemotherapy (myeloprotection) and is the first innovation in managing myelosuppression in decades. In July 2022, COSELA (trilaciclib hydrochloride for injection) was conditionally approved by the China National Medical Products Administration (NMPA) for marketing in China.

Trilaciclib was developed from a technology platform that targets key cellular pathways, including transient arrest of the cell cycle at the G1 phase, prior to the beginning of DNA replication. G1 is currently pursuing trilaciclib across key growth platforms. Controlled administration and clean G1 arrest from transient cyclin-dependent kinase 4/6 (“CDK4/6") inhibition can protect the bone marrow and reduce hematologic adverse events (“AEs”) caused by cytotoxic therapy and may increase the ability to receive longer treatment durations. Transient CDK4/6 inhibition also may improve survival in combination with leading and emerging treatments through (1) myeloprotection, enabling increased cytotoxic exposure while protecting the immune system, and/or (2) immunomodulation, while also allowing beneficial T cell proliferation, which may improve patients’ overall anti-tumor immune responses. The Company is exploring the use of trilaciclib in a variety of trials across multiple tumor types and treatment combinations to optimize these potential benefits of myeloprotection and improved survival in combination with leading and emerging treatments for patients globally. The Company was incorporated on May 19, 2008 in the State of Delaware.

The Company uses “COSELA” when referring to its FDA approved drug and “trilaciclib” when referring to the development of COSELA for additional indications.

Product Portfolio

The Company’s lead compound, trilaciclib, is a first-in-class therapy initially designed to help protect against chemotherapy-induced myelosuppression. Trilaciclib helps protect hematopoietic stem and progenitor cells (“HSPCs”) in the bone marrow by transiently inhibiting CDK4/6 leading to a temporary arrest of susceptible host cells during chemotherapy in patients. This reduces the duration and severity of neutropenia and other myelosuppressive consequences of chemotherapy. In addition, trilaciclib may improve survival outcomes when administered as combination with leading and emerging treatments in patients by increasing their ability to receive more cytotoxic therapy, protecting their immune systems from damage caused by cytotoxic therapy (myeloprotection), and improving their immune response by modulating multiple immune functions while also allowing beneficial T cell proliferation (immunomodulation). On February 12, 2021, trilaciclib (COSELA) was approved by the FDA to decrease the incidence of chemotherapy-induced myelosuppression in adult patients when administered prior to a platinum/etoposide-containing regimen or topotecan-containing regimen for extensive small cell lung cancer (“ES-SCLC”). On July 13, 2022, COSELA (trilaciclib hydrochloride for injection) was conditionally approved in China by the NMPA to decrease the incidence of chemotherapy-induced myelosuppression in adult patients when administered prior to a platinum/etoposide-containing regimen for ES-SCLC. The Company continues to explore these potential benefits across multiple clinical trials.

Table of Contents

The Company is also executing on its tumor-agnostic strategy to evaluate the potential benefits of trilaciclib to patients with other tumors and to generate new data for trilaciclib in a variety of cytotoxic settings and treatment combinations to maximize its potential for patients in existing and future treatment paradigms. The Company currently has five on-going clinical trials: a Phase 3 pivotal trial in 1L colorectal cancer (“CRC”), a Phase 3 pivotal trial in 1L metastatic triple negative breast cancer (“mTNBC”), a Phase 2 trial in 1L bladder cancer with chemotherapy induction and checkpoint inhibitor maintenance, a Phase 2 trial in combination with an antibody-drug conjugate (“ADC”) in 2L/3L mTNBC, and a Phase 2 trial in neoadjuvant TNBC designed to validate trilaciclib’s immune-based mechanism of action (“MOA”). These studies will evaluate trilaciclib’s benefits of proactive multi-lineage myeloprotection and anti-tumor efficacy/survival in combination with leading and emerging treatments by myeloprotection and/or immunomodulation. In addition, the MOA and ADC Phase 2 trials will inform the design of future additional pivotal studies across multiple tumor types and treatment combinations. The Company is also conducting extensive preclinical work to assess the additive/synergistic potential of trilaciclib with a variety of new and emerging therapeutic agents that may be pursued as combination treatments in future clinical trials. New non-clinical data presented in September 2022 showed consistent synergistic potential of trilaciclib to enhance the cancer immune cycle by enhancing T cell activation, favorably altering the tumor microenvironment, and improving long-term surveillance.

In November 2022, the Company provided encouraging initial data from its ongoing Phase 2 trial of trilaciclib in combination with the ADC, sacituzumab govitecan-hziy. Initial data demonstrate the potential for an on-target effect of trilaciclib to reduce (>50%) the rates of adverse events associated with sacituzumab govitecan-hziy, including myelosuppression, diarrhea, and potentially alopecia, due to the presence of CDK4/6-expressing cells in the intestinal crypt and hair follicles, compared to the previously published sacituzumab govitecan-hziy single agent safety profile. The Company expects to release a more comprehensive data set including safety and initial efficacy results at a medical meeting in the first half of 2023.

Trilaciclib Product Portfolio

Candidate

Indication

Current Status

Timing of
Initial
Results

Endpoints

Development &
Commercialization Rights
(all indications)

trilaciclib

1L metastatic Colorectal cancer (CRC)

Registrational Phase 3 trial (enrollment completed in June 2022)

1Q 2023

Primary: myeloprotection*
Secondary: ORR, PFS/OS, PRO

G1 Therapeutics owns all global development and commercial rights across all indications, with the exception of Greater China (Simcere)

1L metastatic Triple negative breast cancer (mTNBC)

Registrational Phase 3 trial (enrollment completed in October 2022)

2H 2023

Primary: OS*
Secondary: PRO, myeloprotection, PFS/ORR

1L Bladder cancer (mUC)

Phase 2 trial
(enrollment completed in August 2022)

4Q 2022

Primary: PFS
Secondary: ORR, OS, safety*, others

Antibody-drug conjugate (ADC) combination trial in mTNBC

Phase 2 trial (enrolling)

4Q 2022 - milestone achieved

Primary: PFS
Secondary: ORR, OS, safety*, myeloprotection*, others

Mechanism of action trial in early stage neoadjuvant TNBC

Phase 2 trial (enrollment completed in August 2022)

4Q 2022

Primary: Immune-based MOA*
Secondary: pCR, immune response, others

Table of Contents

PFS=progression-free survival; OS=overall survival; PRO=patient reported outcome; ORR=overall response rate; pCR=pathological complete response; MOA=mechanism of action.

*Additional initial results expected: (i) Phase 3 colorectal cancer trial: myeloprotection and ORR endpoints; (ii) Phase 3 1L mTNBC trial: interim OS analysis; if the trial meets the interim analysis stopping rule, it will terminate and we will report the topline results. If it does not, the trial will continue to the final analysis; (iii) Phase 2 bladder cancer trial: ORR and preliminary safety data; (iv) Phase 2 trial to confirm the immune-based mechanism of action (MOA) of trilaciclib in early-stage neoadjuvant TNBC: immune endpoints (e.g., CD8+ / Treg ratio)

The Company also has an active investigator Initiated Studies (“ISS”) program. An ISS is a study that is developed and conducted by a qualified physician external to the Company who assumes full responsibility for the conduct of the study. The Company supports investigator sponsored studies that align with its areas of scientific interest. In October of 2022, the Company announced that it is supporting a recently-initiated Phase 2 ISS of trilaciclib and lurbinectedin in patients with ES-SCLC. The primary endpoint is the rate of grade 4 neutropenia in any cycle when trilaciclib is administered prior to lurbinectedin in enrolled subjects.

The Company has partnered with Nanjing Simcere Dongyuan Pharmaceutical Co., Ltd (“Simcere”) to develop trilaciclib in all indications in Greater China (mainland China, Hong Kong, Macau and Taiwan) since August 2020. On July 13, 2022, the NMPA conditionally approved COSELA (trilaciclib hydrochloride for injection) for marketing in China. COSELA is currently indicated in China to decrease the incidence of chemotherapy-induced myelosuppression in adult patients when administered prior to a platinum/etoposide-containing regimen for ES-SCLC. As a result of receiving approval in China, Simcere paid the Company a $13.0 million milestone payment in the third quarter of 2022. In total, G1 may receive up to $156.0 million in milestone payments. G1 will also receive double-digit royalties on annual net sales of COSELA in China.

The Company out-licensed global rights to lerociclib in 2020, an internally discovered and differentiated oral CDK4/6 inhibitor designed to enable more effective combination treatment strategies across multiple oncology indications. In addition, the company out-licensed global rights to an internally discovered cyclin-dependent kinase 2 (“CDK2”) inhibitor for all human and veterinary uses. After completing the evaluation of the Company’s rintodestrant partnering options and recent data in the highly competitive oral SERD space, the Company made the strategic decision to discontinue the program. The Company reverted the rights back to the originator (University of Illinois Chicago) during the third quarter of 2022; there are no additional financial obligations due to the originator resulting from the reversion. The Company also has intellectual property focused on cyclin-dependent kinase targets.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s financial position and results of operations for the interim periods presented.

The information presented in the condensed financial statements and related notes as of September 30, 2022, and for the three and nine months ended September 30, 2022, and 2021, is unaudited. The results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results expected for the full fiscal year or any future period. These interim financial statements should be read in conjunction with the financial statements and notes set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022, (the “2021 Form 10-K”). The December 31, 2021 condensed balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by U.S. GAAP for complete financial statements. Certain amounts have been reclassified to conform to current presentation.

Table of Contents

The Company has experienced net losses since its inception and has an accumulated deficit of $698.4 million and $584.5 million as of September 30, 2022 and December 31, 2021, respectively. The Company expects to incur losses and have negative net cash flows from operating activities as it executes on its strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials. The success of the Company depends on the ability to successfully commercialize its technologies to support its operations and strategic plan. As of the date of issuance of these financial statements, the Company expects that its cash and cash equivalents and marketable securities as of September 30, 2022 will not be sufficient to fund the Company’s planned operations and remain in compliance with its financial covenants for the next 12 months from the date of issuance of these financial statements. Based on the foregoing, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed financial statements. Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. There can be no assurances that the Company will be able to secure such additional financing if at all, or on terms that are satisfactory to the Company, and that it will be sufficient to meet its needs. In the event the Company is not successful in obtaining sufficient funding, this could force it to delay, limit, or reduce its product development, commercialization efforts or other operations, and could result in the default on our loan payable. The Company’s financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

In connection with the Loan Payable described in Note 8, the Company is required to remain in compliance with a minimum cash covenant and a minimum monthly net product revenue covenant (determined in accordance with U.S. GAAP), measured on a trailing six-month basis. The lender also has the ability to call debt based on a material adverse change clause, which is subjectively defined. If the Company is not in compliance with the monthly net revenue covenants, the minimum cash covenant, or the subjective acceleration clauses are triggered under the agreement, then the lender may call the debt resulting in the Company immediately needing additional funds. As of September 30, 2022, the Company was in compliance with all covenants.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates which include, but are not limited to, estimates related to accrued expenses, accrued external clinical costs, net product sales, common stock valuation, stock-based compensation expense and deferred tax asset valuation allowance. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held primarily in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair market value.

Marketable Securities

The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each condensed balance sheet date. The Company classified all of its marketable securities at September 30, 2022 as “available-for-sale” pursuant to ASC Topic 320, Investments – Debt and Equity Securities. Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their maturities as well as the time period the Company intends to hold such securities. Available-for-sale securities are maintained by an investment manager and primarily consist of fixed income securities. Available-for-sale securities are carried at fair value. Any premium or discount arising at purchase is amortized or accreted to interest income over the life of the instrument. Realized gains and losses are determined using the specific identification method and are included in other (income) expense, net.

Table of Contents

Accounts Receivable

The Company’s accounts receivable consists of amounts due from specialty distributors in the U.S. (collectively, its “Customers”) related to sales of COSELA and have standard payment terms. Trade receivables are recorded net of the estimated variable consideration for chargebacks based on contractual terms and the Company’s expectation regarding the utilization and earnings of the chargebacks and discounts as well as the net amount expected to be collected from its customers. Estimates of the Company’s credit losses are determined based on existing contractual payment terms, individual customer circumstances, and any changes to the economic environment.

In addition, the Company’s accounts receivable consists of open invoices issued to its license partners for services rendered by the Company or receivables with its license partners for invoices related to milestones that were completed and recognized as revenue.

Inventories

Inventories are stated at the lower of cost or net realizable value and recognized on a weighted-average cost method. The Company uses actual cost to determine the cost basis for inventory. Inventory is capitalized based on when future economic benefit is expected to be realized. Due to the nature of the Company’s supply chain process, inventory that is owned by the Company, is physically stored at third-party warehouses, logistics providers, and contract manufacturers. The Company began capitalizing inventory upon receiving FDA approval for COSELA on February 12, 2021. Prior to FDA approval of COSELA, expenses associated with the manufacturing of the Company's products were recorded as research and development expense.

Inventory valuation reserves are established based on a number of factors including, but not limited to, finished goods not meeting product specifications, product excess and obsolescence, or application of the lower of cost or net realizable value concepts. The determination of events requiring the establishment of inventory valuation, together with the calculation of the amount of such reserves may require judgment. The Company analyzes its inventory levels on a periodic basis to determine if any inventory is at risk for expiration prior to sale or has a cost basis that is greater than its estimated future net realizable value. Any adjustments are recognized through cost of sales in the period in which they are incurred. No inventory valuation reserves have been recorded for any periods presented.

Debt

The Company classifies its loan payable in current or long-term liabilities based on the timing of scheduled principal payments. The loan and security agreement (the "Loan Agreement") with Hercules Capital contains events of default, including a material adverse change, which is subjectively defined, in the Company’s business, payment defaults, and breaches of covenants following any applicable cure period. In the event of default by the Company under the Loan Agreement, the Company may be required to repay all amounts then outstanding under the Loan Agreement. The Company has determined that subjective acceleration under the material adverse events clause included in the Loan Agreement is not probable and, therefore, has classified the outstanding principal amount in long-term liabilities based on the timing of scheduled principal payments.

Revenue Recognition

For elements of those arrangements that the Company determines should be accounted for under ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company assesses which activities in its license or collaboration agreements are performance obligations that should be accounted for separately and determines the transaction price of the arrangement, which includes the assessment of the probability of achievement of future milestones and other potential consideration. For arrangements that include multiple performance obligations, such as granting a license or performing manufacturing or research and development activities, the Company allocates the transaction price based on the relative standalone selling price and recognizes revenue that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. Accordingly, the Company develops assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key assumptions may include revenue forecasts, clinical development timelines and costs, discount rates and probabilities of clinical and regulatory success.

Table of Contents

License Revenue

Licenses of Intellectual Property

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue associated with the bundled performance obligation. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition.

Milestone Payments

At the inception of each arrangement that includes developmental and regulatory milestone payments, the Company evaluates whether the achievement of each milestone specifically relates to the Company’s efforts to satisfy a performance obligation or transfer a distinct good or service within a performance obligation. The Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty). The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances. For regulatory milestones, the Company recognizes revenue at a point in time upon approval, as that is when achievement of the milestone is considered probable. The Company assesses milestones as they are achieved to determine whether they are tied to any other performance obligations in the respective license agreements.

Royalties

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any revenue related to sales-based royalties or milestone payments based on the level of sales.

Product Sales, Net

The Company sells COSELA to specialty distributors in the U.S. and, in accordance with ASC 606, recognizes revenue at the point in time when the customer is deemed to have obtained control of the product. The customer is deemed to have obtained control of the product at the time of physical receipt of the product at the customers’ distribution facilities, or Free on Board (“FOB”) destination, the terms of which are designated in the contract.

Product sales are recorded at the net selling price, which includes estimates of variable consideration for which reserves are established for (a) rebates and chargebacks, (b) co-pay assistance programs, (c) distribution fees, (d) product returns, and (e) GPO fees. Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as current contractual and statutory requirements, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the applicable contract. The amount of variable consideration may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results in the future vary from estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

Liabilities related to co-pay assistance, rebates, and GPO fees are classified as “Accrued Expenses” in the Condensed Balance Sheets. Discounts such as chargebacks, returns, and specialty distributor fees are recorded as a reduction to trade accounts receivable, which is included in “Accounts Receivable” in the Condensed Balance Sheets.

Table of Contents

Forms of Variable Consideration

Rebates and Chargebacks: The Company estimates reductions to product sales for Public Health Service Institutions, such as Medicaid, Medicare and Veterans’ Administration (“VA”) programs, as well as certain other qualifying federal and state government programs, and other group purchasing organizations. The Company estimates these reductions based upon the Company’s contracts with government agencies and other organizations, statutorily defined discounts and estimated payor mix. These organizations purchase directly from the Company’s specialty distributors at a discount and the specialty distributors charge the Company back the difference between the wholesaler price and the discounted price. The Company’s liability for Medicaid rebates consists of estimates for claims that a state will make. The Company’s reserve for this discounted pricing is based on expected sales to qualified healthcare providers and the chargebacks that customers have already claimed.

Co-pay assistance: Eligible patients who have commercial insurance may receive assistance from the Company to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are calculated by actual program participation from third-party administrators.

Distribution Fees: The Company has written contracts with its customers that include terms for distribution fees and costs for inventory management. The Company estimates and records distribution fees due to its customers based on gross sales.

Product Returns: The Company generally offers a right of return based on the product’s expiration date and certain spoilage and damaged instances. The Company estimates the amount of product sales that may be returned and records the estimate as a reduction of product sales in the period the related product sales are recognized. The Company’s estimates for expected returns are based primarily on an ongoing analysis of sales information and visibility into the inventory remaining in the distribution channel.

Cost of Goods Sold

Cost of goods sold includes direct and indirect costs related to the manufacturing and distribution of COSELA, including third-party manufacturing costs, packaging services, freight-in, third-party logistics costs associated with COSELA, and Company personnel costs. Cost of goods sold may also include period costs related to certain inventory manufacturing services and inventory adjustment charges. In connection with the FDA approval of COSELA on February 12, 2021, the Company subsequently began capitalizing inventory manufactured or purchased after this date. As a result, certain manufacturing costs associated with product shipments of COSELA were expensed prior to FDA approval and, therefore, are not included in cost of goods sold during the current period.

Research and Development

Research and development expenses consist of costs incurred to further the Company’s research and development activities and include salaries and related employee benefits, manufacturing of pharmaceutical active ingredients and drug products, costs associated with clinical trials, nonclinical activities, regulatory activities, research-related overhead expenses and fees paid to expert consultants, external service providers and contract research organizations which conduct certain research and development activities on behalf of the Company. Costs incurred in the research and development of products are charged to research and development expense as incurred.

Each reporting period, management estimated and accrued research and development expenses, including external clinical study costs associated with clinical trial activities. The process of estimating and accruing expenses involves reviewing contracts and purchase orders, identifying services that have been provided on the Company’s behalf, and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of the actual costs.

Costs for clinical trial activities were estimated based on an evaluation of vendors’ progress towards completion of specific tasks, using data such as patient enrollment, clinical site activations or information provided by vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services were performed. The Company determines accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion of trials, or the services completed. The estimates of accrued external clinical study costs as of each balance sheet date are based on the facts and circumstances known at the time.

Table of Contents

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of assets and liabilities and their respective tax bases, operating loss carryforwards, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Accounting for Income Taxes, the Company reflects in the financial statements the benefit of positions taken in a previously filed tax return or expected to be taken in a future tax return only when it is considered ‘more-likely-than-not’ that the position taken will be sustained by a taxing authority. As of September 30, 2022, and December 31, 2021, the Company had no unrecognized income tax benefits and correspondingly there is no impact on the Company’s effective income tax rate associated with these items. The Company’s policy for recording interest and penalties relating to uncertain income tax positions is to record them as a component of income tax expense in the accompanying statements of operations. As of September 30, 2022, and December 31, 2021, the Company had no such accruals.

There was $1.2 million of income tax expense recognized during the three and nine months ended September 30, 2022. There was $0.3 million and $0.7 million of income tax expense recognized during the three and nine months ended September 30, 2021, respectively. The income tax expense related to the foreign withholding taxes incurred as a result of the Simcere milestone payments received during the respective periods.

Stock-Based Compensation

The primary type of stock-based payments utilized by the Company are stock options. The Company accounts for stock-based employee compensation arrangements by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award on the grant date. The fair value of each employee stock option is estimated on the date of grant using an options pricing model. The Company currently uses the Black-Scholes valuation model to estimate the fair value of its share-based payments. The model requires management to make a number of assumptions including expected volatility, expected life, risk-free interest rate and expected dividends.

The Company also incurs stock-based compensation expense related to restricted stock units (“RSUs”) granted to employees. The fair value of RSUs is determined by the closing market price of the Company’s common stock on the date of grant and then recognized over the requisite service period of the award.

Debt Issuance Costs

Debt issuance costs are amortized to interest expense over the estimated life of the related debt based on the effective interest method. In accordance with ASC 835, Interest, the Company presents debt issuance costs on the condensed balance sheet as a direct deduction from the associated debt.

Table of Contents

3. Fair Value Measurements

The Company provides disclosure of financial assets and financial liabilities that are carried at fair value based on the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements may be classified based on the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities using the following three levels:


Level 1			Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2			Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3			Unobservable inputs that reflect the Company’s estimates of the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

The carrying amounts of cash, cash equivalents, accounts payable and accrued liabilities approximate fair value because of their short-term nature.

At September 30, 2022, and December 31, 2021, these financial instruments and respective fair values have been classified as follows (in thousands):


	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant other unobservable inputs (Level 3)		Balance at September 30, 2022
Assets:
Cash and cash equivalents	$	51,675	$	—	$	—	$	51,675
Marketable securities:
U.S. Treasury Bills	$	29,744	$	—	$	—	$	29,744
Total assets at fair value	$	81,419	$	—	$	—	$	81,419


	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant other unobservable inputs (Level 3)		Balance at December 31, 2021
Assets
Cash and cash equivalents	$	110,443	$	—	$	—	$	110,443
Marketable securities:
U.S. Treasury Bills	$	—	$	—	$	—	$	—
Total assets at fair value	$	110,443	$	—	$	—	$	110,443

During the three and nine months ended September 30, 2022, and the year ended December 31, 2021, there were no changes in valuation methodology.

The Loan Payable (discussed in Note 8), which was recorded using Level 3 inputs, has a variable interest rate and the carrying value approximates its fair value. As of September 30, 2022, the carrying value was $76.6 million.

Table of Contents

4. Inventories

Inventories as of September 30, 2022, and December 31, 2021 consist of the following (in thousands):


	September 30, 2022		December 31, 2021
Raw materials	$	7,516	$	2,105
Work in process	2,845		1,342
Finished goods	3,589		24
Inventories	$	13,950	$	3,471

The Company uses third party contract manufacturing organizations for the production of its raw materials, active pharmaceutical ingredients, and finished drug product which the Company owns. Costs incurred by the Company for manufacturing of initial commercial product of COSELA in preparation of commercial launch were expensed prior to FDA approval.

5. Property and Equipment

Property and equipment consists of the following (in thousands):


	September 30, 2022		December 31, 2021
Computer equipment	$	327	$	327
Laboratory equipment	334		334
Furniture and fixtures	866		866
Leasehold improvements	1,782		1,782
Manufacturing equipment	506		—
Accumulated depreciation	(1,689)		(1,296)
Property and equipment, net	$	2,126	$	2,013

Depreciation expense relating to property and equipment was $139 thousand and $393 thousand for the three and nine months ended September 30, 2022, respectively, and $117 thousand and $355 thousand for the three and nine months ended September 30, 2021, respectively.

6. Patent License Agreement

On November 23, 2016, the Company entered into a license agreement with the Board of Trustees of the University of Illinois (the “University”), which was amended on March 24, 2017. In May 2022, the Company notified the University that it was terminating the license agreement. After completing the evaluation of the Company’s rintodestrant partnering options and recent data in the highly competitive oral SERD space, the Company made the strategic decision to discontinue the program. The Company reverted the rights back to the originator, the University, during the third quarter of 2022; there are no additional financial obligations due to the originator resulting from the reversion.

7. Accrued Expenses

Accrued expenses are comprised as follows (in thousands):


	September 30, 2022		December 31, 2021
Accrued external research	$	367	$	773
Accrued professional fees and other	5,321		8,058
Accrued external clinical study costs	17,162		9,579
Accrued compensation expense	4,401		4,770
Accrued expenses	$	27,251	$	23,180

Table of Contents

8. Loan Payable

On May 29, 2020, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), under which Hercules agreed to lend the Company up to $100.0 million, to be made available in a series of tranches, subject to certain terms and conditions. The first tranche totals $30.0 million, of which the Company received $20.0 million at closing. Upon initiation of the Phase 3 trial of COSELA for metastatic colorectal cancer and receiving FDA approval for COSELA for small cell lung cancer (“Performance Milestone”), the second tranche of $20.0 million became available to the Company for drawdown through December 15, 2021. The third tranche of $30.0 million will be available through December 31, 2022. The fourth tranche of $20.0 million will be available at Hercules’ approval through December 31, 2022. On March 31, 2021, the Company entered into a First Amendment to Loan and Security Agreement (the “First Amendment”) with Hercules whereby the Company drew the remaining $10.0 million of the first tranche and the interest rate and financial covenants were amended. Unless loan advances exceeded $40.0 million, no financial covenants were required.

Amounts initially borrowed under the Loan Agreement bore an interest rate equal to the greater of either (i) (a) the prime rate as reported in The Wall Street Journal, plus (b) 6.40%, and (ii) 9.65%. Based on original terms of the Loan Agreement, the Company agreed to make interest only payments through June 1, 2022 and following the interest only period, the Company agreed to repay the principal balance and interest of the advances in equal monthly installments through June 1, 2024. Based on the original terms of the Loan Agreement, upon satisfaction of the Performance Milestone, the interest only period was extended through January 1, 2023 and the maturity date was extended to June 1, 2025. Upon entering into the First Amendment on March 31, 2021, the interest rate was amended to the greater of either (i) (a) the prime rate as reported in The Wall Street Journal, plus (b) 6.20%, and (ii) 9.45%.

The Company may prepay advances under the Loan Agreement, in whole or in part, at any time subject to a prepayment charge equal to (a) 3.0% of the prepayment amount in the first year; (b) 2.0% of the prepayment amount in the second year; and (c) 1.0% of the prepayment amount in the third year.

Upon prepayment or repayment of all or any of the advances under the Loan Agreement, the Company will pay (in addition to the prepayment charge) an end of term charge of 6.95% of the aggregate funded amount. With respect to the first tranche, the end of term charge of $2.1 million will be payable upon any prepayment or repayment. To the extent that the Company is provided additional advances under the Loan Agreement, the 6.95% end of term charge will be applied to such additional amounts. These amounts have been accrued over the term of the loan using effective-interest method.

On November 1, 2021, the Company entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”) under which Hercules agreed to lend the Company up to $150.0 million, to be made available in a series of tranches, subject to certain terms and conditions. The first tranche was increased to $100.0 million. At close of the Second Amendment, the Company borrowed an additional $45.0 million from the first tranche. The Company had the right to request that Hercules make the remaining $25.0 million term loan advances under the first tranche to the Company by September 15, 2022, which the Company did not exercise. The second tranche of $20.0 million will become available to the Company upon achievement of $50.0 million trailing six-month net product revenue of COSELA no later than June 30, 2023 and will be available through December 15, 2023. The third tranche of $15.0 million will become available upon achievement of certain development performance milestones and available through December 15, 2023. The fourth tranche of $15.0 million will be available at Hercules’ approval through June 30, 2024.

Amounts borrowed under the Second Amendment bore an interest rate equal to the greater of either (i) (a) the prime rate as reported in The Wall Street Journal, plus (b) 5.90%, and (ii) 9.15%. The Company will make interest only payments through December 1, 2024 and may be extended through December 1, 2025, in quarterly increments, subject to compliance with covenants of the Second Amendment. Following the interest only period, the Company will repay the principal balance and interest of the advances in equal monthly installments through November 1, 2026.

The Company may prepay advances under the Second Amendment, in whole or in part, at any time subject to a prepayment charge equal to (a) 3.0% of the prepayment amount in the first year from the closing of the Second Amendment; (b) 2.0% of the prepayment amount in the second year from the closing of the Second Amendment; and (c) 1.0% of the prepayment amount in the third year from the closing of the Second Amendment.

Table of Contents

Upon prepayment or repayment of all or any of the advances under the Second Amendment, the Company will pay (in addition to the prepayment charge) an end of term charge of 6.75% of the aggregate amount funded. The Company will be required to make a final payment to Hercules in the amount of 6.75% of the amounts funded, less any amount previously paid. In addition, the Company will be required to make a payment to Hercules for $2.1 million on the earliest occurrence of (i) June 1, 2025, (ii) the date the Company repays the outstanding principal amount in full, or (iii) the date that the principal amount becomes due and payable in full.

The Second Amendment is secured by substantially all of the Company’s assets, including intellectual property, subject to certain exemptions. The Company out-licensed lerociclib as permitted in the Loan Agreement and the Company may out-license rintodestrant upon approval of the licensing terms by Hercules.

The Second Amendment contains a minimum revenue covenant. Beginning August 15, 2022, with the reporting of the financial results for the second fiscal quarter ended June 30, 2022, and tested monthly, the Company must have achieved net product revenue of COSELA of at least 65% of the amounts projected in the Company’s forecast. Testing of the minimum revenue covenant shall be waived at any time in which either (a) the Company’s market capitalization exceeds $750.0 million and the Company maintains unrestricted cash equal to at least 50% of the total amounts funded, or (b) the Company maintains unrestricted cash equal to at least 100% of the total amounts funded.

The Company evaluated the Second Amendment under the guidance found in ASC 470-50 Modification and Extinguishment. The Company concluded that the previous debt under the Loan Agreement was extinguished based on the difference in present value of the cash flows of the Loan Agreement and the Second Amendment. Accordingly, the difference between the carrying value of the Loan Agreement as of November 1, 2021, including the unamortized debt issuance costs, and the fair value of the Second Amendment was recorded as a $0.2 million loss on extinguishment of debt for the twelve months ended December 31, 2021. Fees paid to third parties directly related to the funded portion of the Second Amendment have been capitalized as debt issuance costs and will be amortized to interest expense over the life of the Second Amendment using the effective interest method. Fees paid that were directly related to the unfunded portion is accounted for as a deferred financing charge and amortized to interest expense over the period the unfunded portions are available. The end of term charges associated with the Second Amendment are being accreted through interest expense using the effective interest method over the related term of the debt.

On June 24, 2022, the Company entered into a Third Amendment to Loan and Security Agreement (the “Third Amendment”) with Hercules which extended the time for drawing the remainder of the first tranche advance of up to $25.0 million from September 15, 2022 to December 31, 2022. The Third Amendment also added a minimum cash covenant whereby the Company must maintain unrestricted cash equal to at least 50% of the outstanding debt, and such percentage shall decrease upon the Company achieving specified net product revenue of COSELA. It further provides for a minimum revenue covenant that, beginning August 15, 2022 with the reporting of the financial results for the second fiscal quarter ended June 30, 2022, and tested monthly, the Company must have achieved net product revenue of COSELA of at least 80% of the amounts projected in the Company’s forecast. Testing of the minimum revenue covenant shall be waived at any time in which either (a) the Company’s market capitalization exceeds $750.0 million and the Company maintains unrestricted cash equal to at least 50% of the total amounts funded, or (b) the Company maintains unrestricted cash equal to at least 100% of the total amounts funded. The Company evaluated the Third Amendment under the guidance found in ASC 470-50 Modification and Extinguishment. The Company concluded that the Third Amendment was a modification and there was no impact to the financial statements.

The Loan Agreement contains events of default, including a material adverse change, which is subjectively defined, in the Company’s business, payment defaults, and breaches of covenants following any applicable cure period. In the event of default by the Company under the Loan Agreement, the Company may be required to repay all amounts then outstanding under the Loan Agreement. The Company has determined that subjective acceleration under the material adverse events clause included in the Loan Agreement is not probable and, therefore, has classified the outstanding principal amount in long-term liabilities based on the timing of scheduled principal payments. As of September 30, 2022 and as of the date of the issuance of these financial statements, the Company was in compliance with all covenants and has not been notified of an event of default by the lender under the Loan Agreement.

During the nine months ended September 30, 2022, the Company recognized $7.4 million of interest expense related to the debt, which is reflected in other income (expense), net on the statement of operations.

Table of Contents

As of September 30, 2022, the future principal payments due under the Loan Agreement, excluding interest, is as follows (in thousands):


	Amount
2022	$	—
2023	—
2024	2,776
2025	35,495
2026	36,729
Total principal outstanding	75,000
End of term charge	2,313
Unamortized debt issuance costs	(755)
Total	$	76,558

9. Stockholders’ Equity

Common Stock

The Company is authorized to issue 120.0 million shares of common stock. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, as, if and when declared by the Company’s Board of Directors.

On June 15, 2018, the Company entered into a sales agreement for “at the market offerings” with Cowen and Company, LLC (“Cowen”), which allowed the Company to issue and sell shares of common stock pursuant to a shelf registration statement for total gross sales proceeds of up to $125.0 million from time to time through Cowen, acting as its agent. Between January 14, 2021 and February 9, 2021, the Company sold 3,513,027 shares of common stock pursuant to this agreement, resulting in $86.4 million in net proceeds. As of February 9, 2021, the Company used the entirety of the remaining availability under the 2018 sales agreement with Cowen.

On July 2, 2021, the Company filed an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission (the “SEC”), which became effective upon filing, pursuant to which the Company registered for sale an unlimited amount of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that the Company may determine, so long as the Company continued to satisfy the requirements of a “well-known seasoned issuer” under SEC rules (the “2021 Form S-3”).

In connection with the 2021 Form S-3, on July 2, 2021, the Company entered into a sales agreement for “at the market offerings” with Cowen, which allowed the Company to issue and sell shares of common stock pursuant to the 2021 Form S-3 for total gross sales proceeds of up to $150.0 million from time to time through Cowen, acting as its agent (the “2021 Sales Agreement”). The Company did not sell any shares of common stock under the 2021 Sales Agreement.

Since the Company no longer qualified as a “well-known seasoned issuer” as such term is defined in Rule 405 under the Securities Act of 1933, as amended, at the time of the filing of the Company’s 2021 Form 10-K in February 2022, the Company filed an automatic post-effective amendment to the 2021 Form S-3 on Form POSASR prior to filing of the Company’s 2021 Form 10-K, which became effective upon filing, to register for sale up to $300.0 million of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that the Company may determine and, as required by SEC rules, and another post-effective amendment to the 2021 Form S-3 on Form POS AM after the filing of the Company’s 2021 Form 10-K. The post-effective amendment to the 2021 Form S-3 on Form POS AM was declared effective by the SEC on May 3, 2022 and the 2021 Form S-3 will remain in effect for up to three years from the date it originally became effective, which was July 2, 2021. The 2021 Form S-3 also includes a prospectus covering up to an aggregate of $100.0 million in common stock that the Company may issue and sell from time to time, through Cowen acting as its sales agent, pursuant to that certain sales agreement that the Company entered into with Cowen on February 23, 2022 (the “2022 Sales Agreement”). In connection with the Company entering into the 2022 Sales Agreement with Cowen, the Company terminated the 2021 Sales Agreement. As of the date hereof, the Company has not sold any shares of common stock or other securities under the 2022 Sales Agreement for “at the market offerings.”

Table of Contents

Preferred Stock

The Company is authorized to issue 5.0 million shares of undesignated preferred stock in one or more series. As of September 30, 2022, no shares of preferred stock were issued or outstanding.

Shares Reserved for Future Issuance

The Company has reserved authorized shares of common stock for future issuance at September 30, 2022, and December 31, 2021 as follows:


	September 30, 2022	December 31, 2021
Common stock options outstanding	7,484,758	6,701,727
RSUs outstanding	633,206	414,991
Options and RSUs available for grant under Equity Incentive Plans	2,282,009	1,771,635
	10,399,973	8,888,353

10. Stock-Based Compensation

2011 Equity Incentive Plan

In March 2011, the Company adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provided for the direct award or sale of the Company’s common stock and for the grant of stock options to employees, directors, officers, consultants and advisors of the Company. The 2011 Plan was subsequently amended in August 2012, October 2013, February 2015, December 2015, April 2016 and November 2016 to allow for the issuance of additional shares of common stock. In connection with the adoption of the 2017 Plan (as defined below), the 2011 Plan was terminated and no further awards will be made under the 2011 Plan.

2017 Equity Incentive Plan

In May 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan provided for the direct award or sale of the Company’s common stock and for the grant of up to 1,932,000 stock options to employees, directors, officers, consultants and advisors of the Company. The 2017 Plan provides for the grant of incentive stock options, non-statutory stock options or restricted stock. Effective January 1, 2022, and in accordance with the “evergreen” provision of the 2017 Plan, an additional 1,096,553 shares were made available for issuance.

Under both the 2011 Plan and the 2017 Plan, options to purchase the Company’s common stock may be granted at a price no less than the fair market value of a share of common stock on the date of grant. The fair value shall be the closing sales price for a share as quoted on any established securities exchange for such grant date or the last preceding date for which such quotation exists. Vesting terms of options issued are determined by the Board of Directors or Compensation Committee of the Board. The Company’s stock options vest based on terms in the stock option agreements. Stock options have a maximum term of ten years.

Beginning in January 2021, the Company began granting Restricted Stock Units (“RSUs”) under the 2017 Plan. RSUs are granted at the fair market value of a share of common stock on the date of grant.

As of September 30, 2022, there were a total of 1,630,159 shares of common stock available for future issuance under the 2017 Plan.

Amended and Restated 2021 Inducement Equity Incentive Plan

In February 2021, the Company adopted the 2021 Inducement Equity Incentive Plan (the “2021 Inducement Plan”). The 2021 Inducement Plan provides for the grant of up to 500,000 non-qualified options, stock grants, and stock-based awards to employees and directors of the Company. The 2021 Inducement Plan does not include an evergreen provision.

Table of Contents

In September 2021, the Company adopted the 2021 Sales Force Inducement Equity Incentive Plan (the “2021 Sales Force Inducement Plan”). The 2021 Sales Force Inducement Plan provides for the grant of up to 500,000 non-qualified options, stock grants, and stock-based awards to sales force individuals and support staff that were not previously employees or directors of the Company. The 2021 Sales Force Inducement Plan does not include an evergreen provision.

In March 2022, the Company merged the 2021 Sales Force Inducement Plan into the 2021 Inducement Plan and amended and restated the 2021 Inducement Plan to create the Amended and Restated 2021 Inducement Equity Incentive Plan (the “Amended and Restated 2021 Plan”). In addition, the number of shares reserved for issuance under the Amended and Restated 2021 Plan was increased by 750,000 shares of the Company’s common stock, for an aggregate of 1,750,000 shares of the Company’s common stock authorized to issue under the Amended and Restated 2021 Plan. The Amended and Restated 2021 Plan does not include an evergreen provision.

As of September 30, 2022, there was a total of 651,850 shares of common stock available for future issuance under the Amended and Restated 2021 Plan.

Stock-Based Compensation

The Company recognizes compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Share-based awards granted to non-employee directors as compensation for serving on the Company’s Board of Directors are accounted for in the same manner as employee share-based compensation awards.

The Company calculates the fair value of stock options using the Black-Scholes option pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions, including the expected volatility of the Company’s common stock, the assumed dividend yield, the expected term of the Company’s stock options and the fair value of the underlying common stock on the date of grant.

The Company also incurs stock-based compensation expense related to RSUs. The fair value of RSUs is determined by the closing market price of the Company’s common stock on the date of grant and then recognized over the requisite service period of the award.

The table below summarizes the stock-based compensation expense recognized in the Company’s statement of operations by classification (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of goods sold	$	52	$	68	$	155	$	237
Research and development	980		1,142		3,149		3,775
Selling, general and administrative	3,753		4,318		12,885		13,102
Total stock-based compensation expense	$	4,785	$	5,528	$	16,189	$	17,114

Stock options— Black-Scholes inputs

The fair value of stock options was estimated using the following weighted-average assumptions for the three and nine months ended September 30, 2022, and September 30, 2021:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Expected volatility	79.1% - 80.1%	77.7% - 78.4%	76.7% - 80.1%	77.7% - 79.6%
Weighted-average risk free rate	2.6% - 3.3%	0.9% - 1.1%	1.4% - 3.3%	0.4% - 1.2%
Dividend yield	—%	—%	—%	—%
Expected term (in years)	5.91	6.05	6.00	6.00

Table of Contents

Stock Option Activity

The following table is a summary of the Stock option activity for the nine months ended September 30, 2022:


				Weighted average
	Options outstanding	Weighted average exercise price		Remaining contractual life (Years)	Aggregate intrinsic value
					(in thousands)
Balance as of December 31, 2021	6,701,727	$	17.88	7.2	$	10,427
Granted	1,695,639	9.58
Cancelled	(735,000)	20.09
Exercised	(177,608)	0.82
Balance as of September 30, 2022	7,484,758	$	16.19	7.1	$	15,909
Exercisable at December 31, 2021	3,660,578	$	16.72	5.9	$	10,422
Vested at December 31, 2021 and expected to vest	6,701,727	$	17.88	7.2	$	10,427
Exercisable at September 30, 2022	4,377,489	$	17.82	5.9	$	11,419
Vested at September 30, 2022 and expected to vest	7,484,758	$	16.19	7.1	$	15,909

As of September 30, 2022, unrecognized compensation expense related to unvested stock options totaled $25.7 million, which the Company expects to be recognized over a weighted-average period of approximately 2.3 years.

Restricted Stock Units

The Company’s restricted stock units (“RSUs”) are considered nonvested share awards and require no payment from the employee. For each RSU, employees receive one common share at the end of the vesting period. Compensation cost is recorded based on the market price of the Company’s common stock on the grant date and is recognized on a straight-line basis over the requisite service period.

The following table is a summary of the RSU activity for nine months ended September 30, 2022:


	Number of RSUs	Weighted – Average Fair Value per Share
Balance as of December 31, 2021	414,991	$	18.24
Granted	468,631	9.30
Cancelled	(93,091)	12.34
Vested	(157,325)	18.58
Balance as of September 30, 2022	633,206	$	12.40

As of September 30, 2022, there was $6.1 million of total unrecognized compensation cost related to Company RSUs that are expected to vest. These costs are expected to be recognized over a weighted-average period of approximately 2.5 years.

11. License Revenue

Incyclix License Agreement

On May 22, 2020, the Company entered into an exclusive license agreement with Incyclix Bio, LLC (“Incyclix”), formerly ARC Therapeutics, LLC, a company primarily owned by a former board member, whereby the Company granted to Incyclix an exclusive, worldwide, royalty-bearing license, with the right to sublicense, solely to make, have made, use, sell, offer for sale, import, export, and commercialize products related to its CDK2 inhibitor compounds. At close, the Company received consideration in the form of an upfront payment of $1.0 million and an equity interest in Incyclix equal to 10% of its issued and outstanding units valued at $1.1 million. In addition, the Company may receive a future development milestone payment totaling $2.0 million and royalty payments in the mid-single digits based on net sales of the licensed compound after commercialization. The Company has right of first negotiation to re-acquire these assets.

Table of Contents

The Company assessed the license agreement in accordance with ASC 606 and identified one performance obligation in the contract, which is the transfer of the license, as Incyclix can benefit from the license using its own resources. The Company recognized $2.1 million in license revenue consisting of the upfront payment and the 10% equity interest in Incyclix upon the effective date as the Company determined the license was a right to use the intellectual property and the Company had provided all necessary information to Incyclix to benefit from the license.

The Company considers the future potential development milestones and sales-based royalties to be variable consideration. The development milestone is excluded from the transaction price because it determined the payment to be fully constrained under ASC 606 due to the inherent uncertainty in the achievement of such milestone due to factors outside of the Company’s control. As sales-based royalties are all related to the license of the intellectual property, the Company will recognize revenue in the period when subsequent sales are made pursuant to the sales-based royalty exception. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

There was no revenue recognized during the nine months ended September 30, 2022.

Genor License Agreement

On June 15, 2020, the Company entered into an exclusive license agreement with Genor Biopharma Co. Inc. (“Genor”) for the development and commercialization of lerociclib in the Asia-Pacific region, excluding Japan (the “Genor Territory”). Under the license agreement, the Company granted to Genor an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize lerociclib, in the Genor Territory.

Under the license agreement, Genor agreed to pay the Company a non-refundable, upfront cash payment of $6.0 million with the potential to pay an additional $40.0 million upon reaching certain development and commercial milestones. In addition, Genor will pay the Company tiered royalties ranging from high single to low double-digits based on annual net sales of lerociclib in the Genor Territory. In September 2020, the Company transferred to Genor the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize lerociclib in the Genor Territory, which resulted in the recognition of $6.0 million in revenue in accordance with ASC 606. Through December 31, 2021, the Company recognized an additional $3.0 million in revenue for the achievement of development and commercial milestones as defined by the license agreement.

There was no milestone revenue recognized during the nine months ended September 30, 2022.

EQRx License Agreement

On July 22, 2020, the Company entered into an exclusive license agreement with EQRx, Inc. (“EQRx”) for the development and commercialization of lerociclib in the U.S., Europe, Japan and all other global markets, excluding the Asia-Pacific region (except Japan) (the “EQRx Territory”). Under the license agreement, the Company granted to EQRx an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize lerociclib in the EQRx Territory.

Under the license agreement, EQRx agreed to pay the Company a non-refundable, upfront cash payment of $20.0 million with the potential to pay an additional $290.0 million upon reaching certain development and commercial milestones. In addition, EQRx will pay the Company tiered royalties ranging from mid-single digits to mid-teens based on annual net sales of lerociclib in the EQRx Territory. In September 2020, the Company transferred to EQRx the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize lerociclib in the EQRx Territory which resulted in the recognition of $20.0 million in revenue in accordance with ASC 606. EQRx will be responsible for the development of the product in the EQRx Territory. The Company will continue until completion, as the clinical trial sponsor, its two primary clinical trials at EQRx’s sole cost and expense. EQRx agreed to reimburse the Company for all of its out-of-pocket costs incurred after the effective date of the license agreement in connection with these clinical trials. The Company will invoice EQRx within 30 days following the end of each quarter, and EQRx will pay within 30 days after its receipt of such invoice.

For the nine months ended September 30, 2022, the Company recognized revenue of $1.9 million for the reimbursement of clinical trial costs. No development and commercial milestones, as defined by the license agreement, have been achieved through September 30, 2022.

Table of Contents

Simcere License Agreement

On August 3, 2020, the Company entered into an exclusive license agreement with Simcere for the development and commercialization of trilaciclib in all indications in Greater China (mainland China, Hong Kong, Macau, and Taiwan) (the “Simcere Territory”). Under the license agreement, the Company granted to Simcere an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize trilaciclib in the Simcere Territory.

Under the license agreement, Simcere agreed to pay the Company a non-refundable, upfront cash payment of $14.0 million with the potential to pay an additional $156.0 million upon reaching certain development and commercial milestones. In addition, Simcere will pay the Company tiered low double-digit royalties on annual net sales of trilaciclib in the Simcere Territory. In 2020, the Company transferred the license and related technology and know-how to Simcere, which resulted in the recognition of $14.0 million in revenue in accordance with ASC 606. Through December 31, 2021, the Company recognized an additional $8.0 million in revenue for the achievement of development and commercial milestones as defined by the license agreement.

For the nine months ended September 30, 2022, the Company recognized $1.9 million for reimbursement of clinical trial costs and $0.4 million for drug supply sold to Simcere. There was $14.0 million of milestone revenue recognized during the nine months ended September 30, 2022.

12. Net Loss per Common Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period including nominal issuances of common stock warrants. Diluted net loss per common share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options, stock warrants and unvested restricted common stock. For the three and nine months ended September 30, 2022, and 2021, the following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding because the effect would be anti-dilutive:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Stock options issued and outstanding	7,800,293	6,892,488	7,766,062	7,162,589
Unvested RSUs	649,883	476,735	626,889	461,337
Total potential dilutive shares	8,450,176	7,369,223	8,392,951	7,623,926

Amounts in the table above reflect the common stock equivalents of the noted instrument.

13. Income Taxes

The Company’s effective income tax rate was (5.1%) and (0.8%) for the three months ended September 30, 2022 and 2021 and (1.1%) and (0.6%) for the nine months ended September 30, 2022, and 2021, respectively. The Company continues to recognize losses in the United States and therefore, has recorded no tax benefit associated with these losses. The only income tax expense recognized related to the foreign withholding taxes incurred as a result of the Simcere licensing agreement. See Note 11 for further discussion on this transaction.

14. Related Party Transactions

The Company entered into a senior advisor agreement on September 29, 2020 with Mark A. Velleca, M.D., Ph.D., a member of the Board of Directors, with an effective date of January 1, 2021. Pursuant to the terms of the agreement, Dr. Velleca will receive $200,000 annually, paid in equal quarterly installments, for his services. The senior advisor agreement will expire on December 31, 2023.

Table of Contents

15. Subsequent Event

On November 1, 2022, the Company and Hercules Capital, Inc. entered into a fourth amendment (the “Fourth Amendment”) to amend the loan and security agreement (the "Loan and Security Agreement"), dated as of May 29, 2020. As of September 30, 2022, the total loan amount outstanding is $75.0 million. The Fourth Amendment extended the time for drawing the Tranche 1D Advance (as defined in the Loan and Security Agreement) of up to $25.0 million from December 31, 2022 to June 30, 2023. The Fourth Amendment also amended the minimum cash covenant such that if the outstanding debt is less than or equal to $75.0 million, the Company must maintain unrestricted cash equal to at least 65% of the outstanding debt. In addition, if the outstanding debt is greater than $75.0 million, the Company must maintain unrestricted cash equal to at least 70% of the outstanding debt. If the Company achieves specified net revenue of COSELA, the cash percentage decreases to 45% of the outstanding debt. The Fourth Amendment also re-set the prepayment premiums associated with any prepayment of the loans under the Loan and Security Agreement.

This description is only a summary of the Fourth Amendment and is qualified in its entirety by reference to the Fourth Amendment, a copy of which is filed as an Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2022 and incorporated herein by reference.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this quarterly report. This discussion and other parts of this quarterly report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of our 2021 Form 10-K, and in our subsequently filed Quarterly Reports on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “G1” mean G1 Therapeutics, Inc.

Overview

We are a commercial-stage biopharmaceutical company focused on the development and commercialization of novel small molecule therapeutics for the treatment of patients with cancer. Our first product approved by the U.S. Food and Drug Administration (“FDA”), COSELA® (trilaciclib), is the first and only therapy indicated to proactively help protect bone marrow from the damage of chemotherapy (myeloprotection) and is the first innovation in managing myeloprotection in decades. In July 2022, COSELA (trilaciclib hydrochloride for injection) was conditionally approved by the China National Medical Products Administration (NMPA) for marketing in China.

Trilaciclib was developed from a technology platform that targets key cellular pathways including transient arrest of the cell cycle at the G1 phase, prior to the beginning of DNA replication. Controlled administration and clean G1 arrest from transient CDK4/6 inhibition can protect bone marrow and reduce hematologic adverse events (“AEs”) caused by cytotoxic therapy and may increase the ability to receive longer treatment durations. Transient CDK4/6 inhibition also may improve survival in combination with leading and emerging treatments through myeloprotection, enabling increased cytotoxic exposure while protecting the immune system, and/or through immunomodulation, which may improve patients’ overall anti-tumor immune responses. We are exploring the use of trilaciclib in a variety of trials across multiple tumor types and treatment combinations to optimize these potential benefits of proactive multi-lineage myeloprotection and survival in combination with leading and emerging treatments for patients globally.

We use “COSELA” when referring to our FDA approved drug and “trilaciclib” when referring to our development of COSELA for additional indications.

COSELA is a prescription medicine used to help reduce the occurrence of low blood cell counts caused by damage to bone marrow from chemotherapy. COSELA is used to treat adults taking certain chemotherapies (platinum/etoposide or topotecan) for extensive-stage small cell lung cancer.

COSELA is an injection for intravenous (IV) use given within four hours before chemotherapy.

Table of Contents

Commercial Product

On February 12, 2021, COSELA was approved by the FDA to decrease the incidence of chemotherapy-induced myelosuppression in adult patients treated with a platinum/etoposide-containing regimen or topotecan-containing regimen for ES-SCLC. COSELA became commercially available through our specialty distributor network on March 2, 2021.

We announced on March 25, 2021 that COSELA had been included in two updated National Comprehensive Cancer Network® (“NCCN”) Clinical Practice Guidelines in Oncology (NCCN Guidelines®): The Treatment Guidelines for Small Cell Lung Cancer and the Supportive Care Guidelines for Hematopoietic Growth Factors. These guidelines document evidence-based, consensus-driven management to ensure that all patients receive preventive, diagnostic, treatment, and supportive services that are most likely to lead to optimal outcomes. On October 1, 2021, we announced that the permanent J-code for COSELA that was issued in July 2021 by the Centers for Medicare & Medicaid Services (CMS) is now effective for provider billing for all sites of care. All hospital outpatient departments, ambulatory surgery centers and physician offices in the United States have one consistent Healthcare Common Procedure Coding System (HCPCS) code to standardize the submission and payment of COSELA insurance claims across Medicare, Medicare Advantage, Medicaid and commercial plans. Our new technology add-on payment (NTAP) for COSELA which provides additional payment to inpatient hospitals above the standard Medicare Severity Diagnosis-Related Group (MS-DRG) payment amount also became effective for provider billing on October 1, 2021.

We are also exploring potential use of trilaciclib in a variety of tumors, including colorectal cancer (“CRC”), breast cancer, bladder cancer, and in trials designed to inform the design of future additional pivotal studies across multiple tumor types and treatment combinations including certain chemotherapies, checkpoint inhibitors, and targeted chemotherapy medicines called antibody-drug conjugates (ADCs).

In June 2020, we entered into a three-year co-promotion agreement for COSELA in the United States and Puerto Rico with Boehringer Ingelheim Pharmaceuticals, Inc. (“Boehringer Ingelheim”). In December 2021, the Company and Boehringer Ingelheim mutually agreed to end the co-promotion agreement for COSELA, effective March 2022. At that time, we announced that we would hire and deploy a total of 34 oncology sales representatives to allow us to target all accounts to accelerate sales activities and help maximize the adoption of COSELA. As of February 21, 2022, all 34 sales representatives were hired, trained, and deployed into their respective regions. Starting from the second quarter of 2022, the sales of COSELA has been solely conducted by the G1 COSELA sales team.

On August 3, 2020, we entered into an exclusive license agreement with Nanjing Simcere Dongyuan Pharmaceutical Co., Ltd (“Simcere”) for the development and commercialization of trilaciclib in all indications in Greater China (mainland China, Hong Kong, Macau and Taiwan). On July 13, 2022, the NMPA conditionally approved COSELA (trilaciclib hydrochloride for injection) for marketing in China. COSELA is indicated in China to decrease the incidence of chemotherapy-induced myelosuppression in adult patients when administered prior to a platinum/etoposide-containing regimen for ES-SCLC. As a result of receiving approval in China, Simcere paid the Company a $13.0 million milestone (less applicable withholding taxes of $1.3 million) payment in the third quarter of 2022. In total, we may receive up to $156.0 million in milestone payments. We will also receive double-digit royalties on annual net sales of COSELA in China.

Product Portfolio

Trilaciclib is a first-in-class therapy designed to help protect against chemotherapy-induced myelosuppression. Trilaciclib, a novel transient IV CDK4/6 inhibitor has unique attributes including rapid onset from IV administration, potent and selective CDK4 and CDK6 inhibition and a short half-life. Controlled administration and clean G1-phase arrest reduce hematologic AEs caused by cytotoxic therapy and may increase patients’ abilities to receive longer treatment durations. Transient CDK4/6 inhibition also modulates multiple immune functions ("immunomodulation") while allowing beneficial T cell proliferation which may improve patients’ anti-tumor immune responses.

Table of Contents

Trilaciclib transiently blocks progression through the cell cycle. This provides benefits which manifest depending on the tumor type and therapeutic backbone, including: (1) proactive multi-lineage myeloprotection to protect the bone marrow from cytotoxic damage, and (2) potentially improved survival in combination with leading and emerging treatments.

We are pursuing trilaciclib across key growth platforms. First, trilaciclib provides proactive multi-lineage myeloprotection by transiently arresting hematopoietic stem and progenitor cells (“HSPCs”), helping to protect them from damage caused by cytotoxic therapy thereby minimizing cytopenias across neutrophils, erythrocytes, and platelets. These proactive multi-lineage myeloprotection benefits were seen in our three double-blind, placebo-controlled clinical trials in ES-SCLC, where highly myelosuppressive chemotherapy regimens are administered multiple days in a row. This myeloprotection benefit is being explored as the primary endpoint in our ongoing PRESERVE 1 pivotal Phase 3 trial in 1L CRC which is exploring the use of trilaciclib in combination with FOLFOXIRI, the most efficacious chemotherapy regimen in CRC but also the most myelosuppressive. We have received support from preclinical models for the benefits of trilaciclib in combination with 5-FU-based chemo regimens and expect to obtain our initial results from the PRESERVE 1 Phase 3 trial in the first quarter of 2023. If the myeloprotection data are positive, we will meet with regulatory authorities to discuss filing for approval in this indication.

Second, trilaciclib has the potential to improve survival in combination with leading and emerging treatments, as a result of (1) myeloprotection, thus enabling increased cytotoxic exposure while protecting the immune system, and/or (2) immunomodulation, thus improving overall immune response. Its ability to enhance the cancer immune cycle occurs through multiple factors, including (1) enhancing T cell activation (via increased antigen presentation and secretion of IL-2 and IFNγ), (2) favorably altering the tumor microenvironment (via increased chemokines responsible for trafficking T cells to tumors and reducing the number and function of immunosuppressive cell populations), and (3) improving long-term immune surveillance (via increased generation of memory CD8+ T cells). We are exploring this potential survival benefit in a variety of ongoing Phase 2 and Phase 3 clinical trials. A meaningful anti-tumor efficacy benefit was observed in our Phase 2 mTNBC study in which trilaciclib led to a significant improvement in overall survival when administered in combination with chemotherapy (gemcitabine/carboplatin) compared to chemotherapy alone. These are the foundational data for our ongoing PRESERVE 2 pivotal Phase 3 trial in 1L mTNBC.

Table of Contents

We are executing on our tumor-agnostic strategy to evaluate the potential benefits of trilaciclib to patients with other tumors to continuously develop new data with trilaciclib in a variety of chemotherapeutic settings and in combination with other agents to maximize the applicability of the drug to potential future treatment paradigms. We currently have five ongoing clinical trials: a pivotal Phase 3 trial in 1L CRC, a pivotal Phase 3 trial in 1L mTNBC, a Phase 2 trial in 1L bladder cancer with chemotherapy induction and a checkpoint inhibitor maintenance, a Phase 2 trial in combination with an antibody-drug conjugate (“ADC”) in 2L/3L mTNBC, and a Phase 2 trial in neoadjuvant TNBC designed to validate trilaciclib’s immune-based mechanism of action (“MOA”). These studies across treatment settings and tumor types will evaluate trilaciclib’s benefits of proactive multi-lineage myeloprotection and survival in combination with leading and emerging treatments via myeloprotection and/or immunomodulation. In addition, the MOA and ADC Phase 2 trials will inform the design of future additional pivotal studies across multiple tumor types and treatment combinations. We are also conducting significant preclinical work to assess the additive/synergistic potential of trilaciclib with a variety of novel and emerging therapeutic agents to identify synergies to evaluate in future clinical trials. New non-clinical data presented in September 2022 showed consistent synergistic potential of trilaciclib to enhance the cancer immune cycle by enhancing T cell activation, favorably altering the tumor microenvironment, and improving long-term surveillance. Our overall development approach includes monitoring and anticipating the evolving future standards of care across tumor types in order to design or support studies that generate important data for trilaciclib across relevant future treatment settings and maximize future usage.

In November 2022, we provided encouraging initial data from our ongoing Phase 2 trial of trilaciclib in combination with the ADC, sacituzumab govitecan-hziy. Initial data demonstrate the potential for an on-target effect of trilaciclib to reduce (>50%) the rates of adverse events associated with sacituzumab govitecan-hziy, including myelosuppression, diarrhea, and potentially alopecia, due to the presence of CDK4/6-expressing cells in the intestinal crypt and hair follicles, compared to the previously published sacituzumab govitecan-hziy single agent safety profile. We expect to release a more comprehensive data set including safety and initial efficacy results at a medical meeting in the first half of 2023.

Trilaciclib Product Portfolio

Candidate

Indication

Current Status

Timing of
Initial Results

Endpoints

Development &
Commercialization Rights
(all indications)

trilaciclib

1L metastatic Colorectal cancer (CRC)

Registrational Phase 3 trial (enrollment completed in June 2022)

1Q 2023

Primary: myeloprotection*
Secondary: ORR, PFS/OS, PRO

G1 Therapeutics owns all global development and commercial rights across all indications, with the exception of Greater China (Simcere)

1L metastatic Triple negative breast cancer (mTNBC)

Registrational Phase 3 trial (enrollment completed in October 2022)

2H 2023

Primary: OS*
Secondary: PRO, myeloprotection, PFS/ORR

1L Bladder cancer (mUC)

Phase 2 trial
(enrollment completed in August 2022)

4Q 2022

Primary: PFS
Secondary: ORR, OS, safety*, others

Antibody-drug conjugate (ADC) combination trial in mTNBC

Phase 2 trial (enrolling)

4Q 2022 - milestone achieved

Primary: PFS
Secondary: ORR, OS, safety*, myeloprotection*, others

Mechanism of action trial in early stage neoadjuvant TNBC

Phase 2 trial (enrollment completed in August 2022)

4Q 2022

Primary: Immune-based MOA*
Secondary: pCR, immune response, others

PFS=progression-free survival; OS=overall survival; PRO=patient reported outcome; ORR=overall response rate; pCR=pathological complete response; MOA=mechanism of action.

Table of Contents

Lerociclib

Lerociclib is a differentiated clinical-stage oral CDK4/6 inhibitor being developed for use in combination with other targeted therapies in multiple oncology indications. In 2020, we entered into separate, exclusive agreements with EQRx, Inc. (rights for U.S., Europe, Japan and all markets outside Asia-Pacific) and Genor Biopharma Co. Inc. (rights for Asia-Pacific, excluding Japan) for the development and commercialization of lerociclib in all indications. Combined, these agreements provide $26.0 million in upfront payments, along with sales-based royalties, and the opportunity for up to $330.0 million in potential milestone payments. EQRx, Inc. and Genor Biopharma Co. Inc. are responsible for all costs related to the development and commercialization of lerociclib in their respective territories.

Rintodestrant

Rintodestrant is an oral SERD for use as a monotherapy and in combination with CDK4/6 inhibitors, initially Ibrance® (palbociclib), for the treatment of ER+, HER2- breast cancer. After completing the evaluation of our rintodestrant partnering options and recent data in the highly competitive oral SERD space, we made the strategic decision to discontinue the program. We reverted the rights back to the originator (University of Illinois Chicago) during the third quarter of 2022; there are no additional financial obligations due to the originator resulting from the reversion.

CDK2 Inhibitor

In 2020, we entered into a global license agreement with Incyclix Bio, LLC (“Incyclix”), formerly ARC Therapeutics, LLC, for the development and commercialization of an internally discovered cyclin-dependent kinase 2 (“CDK2”) inhibitor for all human and veterinary uses. Incyclix is currently granted an exclusive, royalty-bearing, license with the right to grant sublicenses to one of our solely owned patent families.

Coronavirus (COVID-19) impact on operations

We have implemented business continuity plans to address the COVID-19 pandemic and minimize disruptions to ongoing operations. Enrollment of patients in current and future clinical trials may be impacted by COVID-19. Although we have not had any significant supply chain delays or shortages as a result of the COVID-19 pandemic to date, we have experienced delays in the delivery of our investigational product to certain investigative sites due to shortages of ancillary materials and the delay of governmental inspections. If the COVID-19 pandemic continues or increases in severity, we could experience disruptions to our clinical development timelines. If we experience delays in patient enrollment, we could incur increased clinical program expense if it is deemed necessary or advisable to improve patient recruitment by opening additional clinical sites. COVID-19 travel limitations and government-mandated work-from-home or shelter-in-place orders may reduce the number of in-person meetings with prescribers and fewer patient visits with physicians, potentially resulting in fewer new prescriptions.

We established a COVID-19 response team which continually monitors the impact of COVID-19 on our operations. The COVID-19 response team manages our workplace protocols that govern our employees’ use of our office. To mitigate the impact of COVID-19 on our business, we put in place the following safety measures for our employees, patients, healthcare professionals, and suppliers to limit exposure: we substantially restricted travel, supplied personal protective equipment to employees, limited access to our headquarters and asked most of our staff to work remotely.

As of September 30, 2022, the majority of our employees are still working remotely, which may negatively impact our ability to conduct research and development activities, engage in sales-related initiatives, or efficiently conduct day-to-day operations. In addition, we added bandwidth and VPN capacity to our infrastructure to facilitate remote work arrangements. We will continue to monitor the impact of COVID-19 on our operations, including how it will impact our employees, clinical trials, development programs, supply chain, and other aspects of our operations, and report to our Board of Directors regularly on the progress of our response to the COVID-19 outbreak.

Table of Contents

Financial Overview

Since our inception in 2008, we have devoted substantially all of our resources to synthesizing, acquiring, testing and developing our product candidates, including conducting preclinical studies and clinical trials and providing selling, general and administrative support for these operations as well as securing intellectual property protection for our products. Currently, COSELA is our only product approved for sale. We began generating revenue for the net product sales from COSELA in March of 2021. We recorded $22.5 million and $11.1 million of net product sales from COSELA for nine months ended September 30, 2022, and the year ended December 31, 2021, respectively. We recorded $18.6 million and $20.4 million of license revenue for the nine months ended September 30, 2022, and the year ended December 31, 2021, respectively. To date, we have financed our operations primarily through the sale of equity securities, our loan agreement with Hercules Capital, Inc., and licensing arrangements. Under our licensing arrangements, we are eligible to receive certain development and sales-based milestones. Our ability to earn these milestones and the timing of achieving these milestones is primarily dependent upon the outcome of the licensee’s activities and is uncertain at this time.

As of September 30, 2022, we had cash and cash equivalents of $93.2 million and marketable securities of $29.7 million. Since inception we have incurred net losses. As of September 30, 2022, we had an accumulated deficit of $698.4 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs, our commercial launch of COSELA, and from selling, general and administrative expenses associated with our operations. We expect to continue to incur significant expenses and increasing operating losses. We expect our research and development, commercial activities, and selling, general and administrative expenses will continue to increase in connection with our ongoing and future activities as we:

•continue development of trilaciclib, including initiation of additional clinical trials;

•identify and develop new product candidates;

•seek additional marketing approvals for trilaciclib upon successful completion of clinical trials;

•grow our sales, marketing and distribution infrastructure to commercialize COSELA and any future products for which we may obtain marketing approval;

•achieve market acceptance of our product in the medical community and with third-party payors;

•maintain, expand and protect our intellectual property portfolio;

•hire additional personnel;

•enter into collaboration arrangements, if any, for the development of our product or in-license other products and technologies;

•identify and develop new product candidates;

•add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and

•continue to incur increased costs as a result of operating as a public company.

Components of our Results of Operations

Revenue

On February 12, 2021, COSELA was approved by the FDA and we began generating revenue for the product sales of COSELA in March 2021. Prior to the approval of COSELA, our revenues have been derived from our license agreements.

Table of Contents

We entered into an exclusive license agreement with Simcere in August 2020 and granted them the rights to develop and commercialize trilaciclib in Greater China (mainland China, Hong Kong, Macau, and Taiwan) (the “Simcere Territory”). Under the license agreement, Simcere agreed to pay us a non-refundable, upfront cash payment of $14.0 million, which we received (less applicable withholding taxes of $1.4 million) in September 2020. We have the potential to receive an additional $156.0 million upon reaching development and commercial milestones, and to receive tiered low double-digit royalties on annual net sales of trilaciclib in the Simcere Territory. The upfront payment of $14.0 million was recognized as revenue in the fourth quarter of 2020, once the transfer of the related technology and know-how was completed. Through December 31, 2021, we recognized an additional $8.0 million in revenue for the achievement of development and commercial milestones as defined by the license agreement. On July 13, 2022, the NMPA conditionally approved COSELA (trilaciclib hydrochloride for injection) for marketing in China. As a result of receiving approval in China, Simcere paid us a $13.0 million milestone payment (less applicable withholding taxes of $1.3 million) in the third quarter of 2022. Additionally, for the completion of manufacturing technology transfer in the third quarter of 2022, Simcere paid us a $1.0 million (less applicable withholding taxes of $0.1 million) milestone payment in October 2022. For the nine months ended September 30, 2022, we recognized $14.0 million of revenue related to development milestones.

We entered into an exclusive license agreement with EQRx, Inc. (“EQRx”) in July 2020 and granted them the rights to develop and commercialize lerociclib in the U.S, Europe, Japan and all other global markets, excluding the Asia-Pacific region (except Japan) (the “EQRx Territory”). We received an upfront payment of $20.0 million in August 2020. This was recognized as revenue in September 2020 when we transferred the license and related technology and know-how. We have the potential to receive $290.0 million upon reaching development and commercial milestones, and receive tiered royalties ranging from mid-single digits to mid-teens based on annual net sales of lerociclib in the EQRx Territory. We did not receive any development milestones during the nine months ended September 30, 2022.

We entered into an exclusive license agreement with Genor Biopharma Co. Inc. (“Genor”) in June 2020 and granted them the rights to develop and commercialize lerociclib in the Asia-Pacific Region, excluding Japan (the “Genor Territory”). We received an upfront payment of $6.0 million in July 2020. This was recognized as revenue in September 2020 when we transferred the license and related technology and know-how. We have the potential to receive $40.0 million upon reaching development and commercial milestones, and receive tiered royalties ranging from high single to low double-digits based on annual net sales of lerociclib in the Genor Territory. Through December 31, 2021, we recognized an additional $3.0 million in revenue for the achievement of development and commercial milestones as defined by the license agreement. We did not receive any development milestones during the nine months ended September 30, 2022.

We entered into an exclusive license agreement with Incyclix, formerly ARC Therapeutics, LLC, a company primarily owned by a former board member, in May 2020. We granted Incyclix an exclusive, worldwide, royalty-bearing license of its CDK2 inhibitor compounds in exchange for an upfront payment and equity in Incyclix with a total value of approximately $2.1 million, which resulted in the recognition of related party revenue. We are entitled to receive additional milestone payments and sales-based royalties, and has right of first negotiation to re-acquire these assets.

Operating expenses

We classify our operating expenses into three categories: cost of goods sold, research and development and selling, general and administrative expenses. Personnel costs, including salaries, benefits, bonuses, and stock-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources. In addition, costs to sell and market COSELA are included within selling, general and administrative expense categories.

Cost of goods sold

Research and development expenses

The largest component of our total operating expenses since inception has been research and development activities, including the preclinical and clinical development of our product candidates.

Table of Contents

Research and development costs are expensed as incurred. Our research and development expense primarily consists of:

•salaries and personnel-related costs, including bonuses, benefits and any stock-based compensation, for our scientific personnel performing or managing out-sourced research and development activities;

•costs incurred under agreements with contract research organizations and investigative sites that conduct preclinical studies and clinical trials;

•costs related to manufacturing pharmaceutical active ingredients and drug products for preclinical studies and clinical trials;

•costs related to upfront and milestone payments under in-licensing agreements;

•fees paid to consultants and other third parties who support our product development; and

•allocated facility-related costs and overhead.

The successful development of our products is highly uncertain. Products in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, we expect research and development costs to increase as we conduct later stage clinical trials. However, we do not believe that it is possible at this time to accurately project total program-specific expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of clinical trials and development of our products will depend on a variety of factors, including:

•the scope, rate of progress, and expenses of our ongoing as well as any additional clinical trials and other research and development activities;

•future clinical trial results;

•achievement of milestones requiring payments under our in-licensing agreements;

•uncertainties in clinical trial enrollment rates or drop-out or discontinuation rates of patients;

•potential additional studies requested by regulatory agencies;

•significant and changing government regulation; and

•the timing and receipt of any regulatory approvals.

We track research and development expenses on a program-by-program basis only for clinical-stage product candidates. Preclinical research and development expenses and chemical manufacturing research and development expenses are not assigned or allocated to individual development programs.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, audit and accounting services. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation. Other selling, general and administrative expenses include facility-related costs not otherwise allocated to research and development expense, professional fees, commercialization costs, expenses associated with obtaining and maintaining patents and costs of our information systems. We anticipate that our selling, general and administrative expenses will continue to increase in the future as we increase our headcount to support our continued research and development and commercialization of COSELA.

Total other income (expense), net

Total other income (expense), net consists of interest income earned on cash and cash equivalents and interest expenses incurred under our loan and security agreement with Hercules.

Income taxes

To date, we have not been required to pay U.S. federal or state income taxes because we have not generated taxable income. Income tax expense recognized during the three and nine months ended September 30, 2022 relates to the foreign withholding taxes incurred as a result of the milestone payments received from the Simcere license agreement during the quarter.

Table of Contents

Results of Operations

Comparison of the three months ended September 30, 2022 and September 30, 2021


	Three Months Ended September 30,				Change
	2022		2021		$
			(in thousands)
Revenues
Product sales, net	$	8,269	$	3,576	$	4,693
License revenue	15,307		1,282		14,025
Total revenues	23,576		4,858		18,718
Operating expenses
Cost of goods sold	1,111		591		520
Research and development	19,581		21,143		(1,562)
Selling, general and administrative	24,432		24,268		164
Total operating expenses	45,124		46,002		(878)
Loss from operations	(21,548)		(41,144)		19,596
Other income (expense)
Interest income	211		7		204
Interest expense	(2,764)		(934)		(1,830)
Other income (expense)	48		(76)		124
Total other income (expense), net	(2,505)		(1,003)		(1,502)
Loss before income taxes	(24,053)		(42,147)		18,094
Income tax expense	1,219		321		898
Net loss	$	(25,272)	$	(42,468)	$	17,196

Product sales, net

Product sales, net was $8.3 million and $3.6 million for the three months ended September 30, 2022 and 2021, respectively. The increase of $4.7 million, or 131%, was primarily due to increased sales volume as we continued our commercialization efforts. We received FDA approval on February 12, 2021 and COSELA was commercially available in the United States and Puerto Rico beginning March 2, 2021.

License Revenue

License revenue was $15.3 million and $1.3 million for the three months ended September 30, 2022 and 2021, respectively. The increase of $14.0 million, or 1077%, was primarily due to revenue recognized from two development milestones related to the Simcere license agreement.

Cost of goods sold

Cost of goods sold was $1.1 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively. The increase of $0.5 million, or 83%, was primarily due to an increase in units sold and an increase in overhead during the current period, partially offset by a decrease in third-party logistics costs.

Table of Contents

Research and development

Research and development expenses were $19.6 million for the three months ended September 30, 2022, compared to $21.1 million for the three months ended September 30, 2021. The decrease of $1.5 million, or 7%, was primarily due to decreases of $0.1 million in clinical trial costs, $1.3 million in costs for manufacturing of active pharmaceutical ingredients and drug product to support clinical trials, and $0.1 million in pre-clinical and discovery costs. The following table summarizes our research and development expenses allocated to trilaciclib, rintodestrant, lerociclib and unallocated research and development expenses for the periods indicated:


	Three Months Ended September 30,
	2022		2021
	(in thousands)
Clinical Program Expenses—trilaciclib	$	17,245	$	17,169
Clinical Program Expenses—rintodestrant	511		675
Clinical Program Expenses—lerociclib	600		655
Chemical Manufacturing and Development	604		1,901
Discovery, Pre-Clinical and Other Expenses	621		743
Total Research and Development Expenses	$	19,581	$	21,143

Selling, general and administrative

Selling, general and administrative expenses were $24.4 million for the three months ended September 30, 2022, compared to $24.3 million for the three months ended September 30, 2021. The increase of $0.1 million, or 0.4%, was primarily due to increases of $3.4 million in personnel costs due to increased headcount, $0.1 million in audit and legal fees, and $0.1 million in insurance and other administrative costs. The increase is offset by decreases of $0.4 million in medical affairs costs, $2.4 million in commercialization activities, $0.4 million in professional fees, and $0.3 million in IT-related costs.

Total other income (expense), net

Total other income (expense), net was $(2.5) million for the three months ended September 30, 2022, as compared to $(1.0) million for the three months ended September 30, 2021. The change of $1.5 million, or 150%, was primarily due to an increase in interest expense recognized on our loan payable.

Income tax expense

There was $1.2 million of income tax expense recognized for the three months ended September 30, 2022, as compared to $0.3 million for the three months ended September 30, 2021. Income tax expense in both periods relates to the foreign withholding taxes incurred as a result of the development milestone payments received from the Simcere license agreement during the respective quarters.

Table of Contents

Results of Operations

Comparison of the nine months ended September 30, 2022 and September 30, 2021


	Nine Months Ended September 30,				Change
	2022		2021		$
			(in thousands)
Revenues
Product sales, net	$	22,467	$	6,717	$	15,750
License revenue	18,584		18,963		(379)
Total revenues	41,051		25,680		15,371
Operating expenses
Cost of goods sold	2,756		1,642		1,114
Research and development	66,729		56,435		10,294
Selling, general and administrative	76,857		72,474		4,383
Total operating expenses	146,342		130,551		15,791
Loss from operations	(105,291)		(104,871)		(420)
Other income (expense)
Interest income	270		35		235
Interest expense	(7,436)		(2,609)		(4,827)
Other income (expense)	(234)		(208)		(26)
Total other income (expense), net	(7,400)		(2,782)		(4,618)
Loss before income taxes	(112,691)		(107,653)		(5,038)
Income tax expense	1,219		679		540
Net loss	$	(113,910)	$	(108,332)	$	(5,578)

Product sales, net

Product sales, net was $22.5 million and $6.7 million for the nine months ended September 30, 2022 and 2021, respectively. The increase of $15.8 million, or 236%, was primarily due to increased sales volume as we continued our commercialization efforts. We received FDA approval on February 12, 2021 and COSELA was commercially available beginning March 2, 2021.

License Revenue

License revenue was $18.6 million and $19.0 million for the nine months ended September 30, 2022 and 2021, respectively. The decrease of $0.4 million, or 2%, was primarily due to $4.9 million less in revenue for the delivery of clinical drug supply and manufacturing services to Simcere, EQRx, and Genor, offset by increases of $1.5 million in revenue from reimbursement of clinical trial costs by Simcere and EQRx and $3.0 million in revenue from development milestones related to the Simcere license agreement.

Cost of goods sold

Cost of goods sold was $2.8 million and $1.6 million for the nine months ended September 30, 2022 and 2021, respectively. The increase of $1.2 million, or 75%, was primarily due to an increase in units sold and an increase in overhead during the current period.

Table of Contents

Research and development

Research and development expenses were $66.7 million for the nine months ended September 30, 2022, compared to $56.4 million for the nine months ended September 30, 2021. The increase of $10.3 million, or 18%, was primarily due to an increase of $13.6 million in clinical trial costs offset by a decrease of $3.0 million in costs for manufacturing of active pharmaceutical ingredients and drug product to support clinical trials, and a decrease of $0.3 million in pre-clinical and discovery costs. The following table summarizes our research and development expenses allocated to trilaciclib, rintodestrant, lerociclib and unallocated research and development expenses for the periods indicated:


	Nine Months Ended September 30,
	2022		2021
	(in thousands)
Clinical Program Expenses—trilaciclib	$	58,950	$	43,890
Clinical Program Expenses—rintodestrant	1,717		2,571
Clinical Program Expenses—lerociclib	2,066		2,650
Chemical Manufacturing and Development	2,177		5,151
Discovery, Pre-Clinical and Other Expenses	1,819		2,173
Total Research and Development Expenses	$	66,729	$	56,435

Selling, general and administrative

Selling, general and administrative expenses were $76.9 million for the nine months ended September 30, 2022, compared to $72.5 million for the nine months ended September 30, 2021. The increase of $4.4 million, or 6%, was due to increases of $12.1 million in personnel costs due to increased headcount and $0.4 million in insurance and other administrative costs. The increase is offset by decreases of $1.1 million in medical affairs costs, $5.1 million in commercialization activities, $0.2 million in professional service fees, $0.1 million in legal fees, $1.3 million in IT-related costs, and $0.3 million in franchise taxes.

Total other income (expense), net

Total other income (expense), net was $(7.4) million for the nine months ended September 30, 2022, as compared to $(2.8) million for the nine months ended September 30, 2021. The change of $4.6 million, or 164%, was primarily due to an increase in interest expense recognized on our loan payable.

Income tax expense

There was $1.2 million of income tax expense recognized for the nine months ended September 30, 2022, as compared to $0.7 million for the nine months ended September 30, 2021. Income tax expense in both periods relates to the foreign withholding taxes incurred as a result of the development milestone payments received from the Simcere license agreement.

Table of Contents

Liquidity and Capital Resources

We have experienced net losses since our inception, and have an accumulated deficit of $698.4 million and $584.5 million as of September 30, 2022 and December 31, 2021, respectively. We expect to incur losses and have negative net cash flows from operating activities as we execute on our strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials. Our success depends on the ability to successfully commercialize our technologies to support our operations and strategic plan. As of the date of issuance of these financial statements, we expect that our cash and cash equivalents and marketable securities as of September 30, 2022 will not be sufficient to fund our planned operations and remain in compliance with our objective financial covenants for at least the next 12 months from the date of issuance of these financial statements. Based on the foregoing, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed financial statements. Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. There can be no assurances that we will be able to secure such additional financing if at all, or on terms that are satisfactory to us, and that it will be sufficient to meet our needs. In the event we are not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations and could result in the default of our loan payable. Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. In connection with the Loan Payable described in Note 8, we are required to remain in compliance with a minimum cash covenant and a minimum monthly net product revenue covenant (determined in accordance with U.S. GAAP), measured on a trailing six-month basis. The lender also has the ability to call debt based on a material adverse change clause, which is subjectively defined. If we are not in compliance with the monthly net revenue covenant, the minimum cash covenant, or the subjective acceleration clauses are triggered under the agreement, then the lender may call the debt resulting in us immediately needing additional funds. As of September 30, 2022, we were in compliance with all covenants.

To date, we have funded our operations primarily through proceeds from our initial public offering, our follow-on stock offerings, our debt agreement with Hercules Capital, Inc. (“Hercules”), and proceeds from our license agreements. Under our licensing arrangements, we are eligible to receive certain development and sales-based milestones. Our ability to earn these milestones and the timing of achieving these milestones is primarily dependent upon the outcome of the licensee’s activities and are uncertain at this time.

Shelf registration statement

On July 2, 2021, we filed an automatically effective shelf registration statement (the “2021 Form S-3”) with the Securities and Exchange Commission (the “SEC”). Each issuance under the shelf registration statement would have required the filing of a prospectus supplement identifying the amount and terms of securities to be issued. The 2021 Form S-3 did not limit the amount of securities that could have been issued thereunder.

Since we no longer qualified as a “well-known seasoned issuer” as such term is defined in Rule 405 under the Securities Act of 1933, as amended, at the time of the filing of our 2021 Form 10-K in February 2022, we filed an automatic post-effective amendment to the 2021 Form S-3 on Form POSASR prior to the filing of our 2021 Form 10-K, which became effective upon filing, to register for sale up to $300.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine and, as required by SEC rules, and another post-effective amendment to the 2021 Form S-3 on Form POS AM after the filing of our 2021 Form 10-K. The post-effective amendment to the 2021 Form S-3 on Form POS AM was declared effective by the SEC on May 3, 2022 and the 2021 Form S-3 will remain in effect for up to three years from the date it originally became effective, which was July 2, 2021.

At-the-market offerings

On June 15, 2018, we entered into a sales agreement for “at the market offerings” with Cowen and Company, LLC (“Cowen”), which allows us to issue and sell shares of common stock pursuant to a shelf registration statement for total gross sales proceeds of up to $125.0 million from time to time through Cowen, acting as our agent (the "2018 Sales Agreement"). Between June 18, 2018 and August 2, 2018, we sold 752,008 shares of common stock pursuant to the 2018 Sales Agreement resulting in $36.1 million in net proceeds, realizing $12.1 million in the second quarter and the remaining $24.0 million by August 2, 2018.

Table of Contents

Between January 14, 2021 and February 9, 2021, we sold 3,513,027 shares of common stock pursuant to the 2018 Sales Agreement resulting in $86.4 million in net proceeds. As of February 9, 2021, we used the entirety of the remaining availability under the 2018 Sales Agreement with Cowen.

In connection with the 2021 Form S-3, on July 2, 2021, we entered into a sales agreement for “at the market offerings” with Cowen, which allowed us to issue and sell shares of common stock pursuant to the 2021 Form S-3 for total gross sales proceeds of up to $150.0 million from time to time through Cowen, acting as our agent (the “2021 Sales Agreement”). We did not sell any shares of common stock or other securities under the 2021 Sales Agreement and we terminated the 2021 Sales Agreement on February 23, 2022. Also, on February 23, 2022, we entered into a sales agreement for “at the market offerings” with Cowen, acting as our agent (the "2022 Sales Agreement"), which allows us to issue and sell shares of common stock pursuant to the 2021 Form S-3 for total gross sales proceeds of up to $100.0 million from time to time through Cowen.

As of the date hereof, we have not sold any shares of common stock or other securities under the 2022 Sales Agreement.

Loan and Security Agreement

On May 29, 2020, we entered into a loan and security agreement with Hercules under which they agreed to lend us up to $100.0 million, to be made available in a series of tranches, subject to specified conditions. We borrowed $20.0 million at loan closing. The term of the loan is approximately 48 months, with a maturity date of June 1, 2024. No principal payments are due during an interest-only period, commencing on the initial borrowing date and continuing through June 1, 2022. The interest only period may be extended through January 1, 2023 upon satisfaction of certain milestones. Following the interest only period, we will repay the principal balance and interest of the advances in equal monthly installments through June 1, 2024.

On March 31, 2021, we entered into a First Amendment to Loan and Security Agreement (the “First Amendment”) with Hercules whereby we drew the remaining $10.0 million of the first tranche and the interest rate and financial covenants were amended. Unless loan advances exceeded $40.0 million, no financial covenants were required.

On November 1, 2021, we entered into a Second Amendment to the Loan and Security Agreement (the "Second Amendment") with Hercules under which Hercules has agreed to lend us up to $150.0 million, to be made available in a series of tranches, subject to certain terms and conditions. The first tranche was increased to $100.0 million. At close of the Second Amendment, we borrowed an additional $45.0 million from the first tranche. We had the right to request that Hercules make the remaining $25.0 million term loan advances under the first tranche to us by September 15, 2022, which we did not exercise. No principal payments are due during an interest-only period, commencing on the close of the Second Amendment and continuing through December 1, 2024. The interest only period may be extended through December 1, 2025, in quarterly increments, subject to compliance with covenants of the Second Amendment. Following the interest only period, we will repay the principal balance and interest of the advances in equal monthly installments through the maturity date of November 1, 2026.

On June 24, 2022, we entered into a Third Amendment to Loan and Security Agreement (the “Third Amendment”) with Hercules which extended the time for drawing the remainder of the first tranche advance of up to $25.0 million from September 15, 2022 to December 31, 2022. The Third Amendment also added a minimum cash covenant whereby we must maintain unrestricted cash equal to at least 50% of the outstanding debt, and such percentage shall decrease upon us achieving specified net product revenue of COSELA. It further provides for a minimum revenue covenant that, beginning August 15, 2022, with the reporting of the financial results for the second fiscal quarter ended June 30, 2022, and tested monthly, we must have achieved net product revenue of COSELA of at least 80% of the amounts projected in our forecast. Testing of the minimum revenue covenant shall be waived at any time in which either (a) our market capitalization exceeds $750.0 million and we maintain unrestricted cash equal to at least 50% of the total amounts funded, or (b) we maintain unrestricted cash equal to at least 100% of the total amounts funded. Hercules also has the ability to call debt based on a material adverse change clause, which is subjectively defined. If we are not in compliance with the monthly net revenue covenants, minimum cash covenant or the subjective acceleration clauses are triggered under the agreement, then Hercules may call the debt resulting in us immediately needing additional funds. We have determined that subjective acceleration under the material adverse events clause included in the Loan Agreement is not probable and, therefore, have classified the outstanding principal amount in long-term liabilities based on the timing of scheduled principal payments. As of September 30, 2022 and as of the date of the issuance of these financial statements, we were in compliance with all covenants and has not been notified of an event of default by the lender under the Loan Agreement.

Table of Contents

Genor License Agreement

On June 15, 2020, we entered into an exclusive license agreement with Genor for the development and commercialization of lerociclib in the Genor Territory. Under the license agreement, we granted to Genor an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize lerociclib, in the Genor Territory.

Under the license agreement, Genor agreed to pay us a non-refundable, upfront cash payment of $6.0 million with the potential to pay an additional $40.0 million upon reaching certain development and commercial milestones. In addition, Genor will pay us tiered royalties ranging from high single to low double-digits based on annual net sales of lerociclib in the Genor Territory. The upfront cash payment was received in July 2020. In September 2020, we transferred to Genor the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize lerociclib in the Genor Territory. Genor will be responsible for the development of the product in the Genor Territory and will be responsible, at its sole cost, for obtaining supply of lerociclib to meet its development, regulatory approval, and commercialization obligations under the agreement. We did not recognize any revenue related to development milestones through the third quarter of 2022.

EQRx License Agreement

On July 22, 2020, we entered into an exclusive license agreement with EQRx for the development and commercialization of lerociclib in the EQRx Territory. Under the license agreement, we granted to EQRx an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize lerociclib in the EQRx Territory.

Under the license agreement, EQRx agreed to pay us a non-refundable, upfront cash payment of $20.0 million with the potential to pay an additional $290.0 million upon reaching certain development and commercial milestones. In addition, EQRx will pay us tiered royalties ranging from mid-single digits to mid-teens based on annual net sales of lerociclib in the EQRx Territory. The upfront cash payment was received in August 2020. In September 2020, we transferred to EQRx the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize lerociclib in the EQRx Territory. EQRx will be responsible for the development of the product in the EQRx Territory. We will continue until completion, as the clinical trial sponsor, its two primary clinical trials at EQRx’s sole cost and expense. EQRx agreed to reimburse us for all of its out-of-pocket costs incurred after the effective date of the license agreement in connection with these clinical trials. We will invoice EQRx within 30 days following the end of each quarter, and EQRx will pay within 30 days after its receipt of such invoice. We did not recognize any revenue related to development milestones through the third quarter of 2022.

Simcere License Agreement

On August 3, 2020, we entered into an exclusive license agreement with Simcere for the development and commercialization of trilaciclib in all indications in the Simcere Territory. Under the license agreement, we granted to Simcere an exclusive, royalty-bearing, non-transferable license, with the right to grant sublicenses, to develop, obtain, hold and maintain regulatory approvals for, and commercialize trilaciclib in the Simcere Territory.

Under the license agreement, Simcere agreed to pay us a non-refundable, upfront cash payment of $14.0 million with the potential to pay an additional $156.0 million upon reaching certain development and commercial milestones. In addition, Simcere will pay us tiered low double-digit royalties on annual net sales of trilaciclib in the Simcere Territory. The upfront payment of $14.0 million (less applicable withholding taxes of $1.4 million) was received in September 2020. In return, we will furnish to Simcere the related technology and know-how that is necessary to develop, seek regulatory approval for, and commercialize trilaciclib in the Simcere Territory. Simcere will be responsible for all development and commercialization costs in its territory and may be able to participate in global clinical trials as agreed upon by the companies.

On July 13, 2022, the NMPA conditionally approved COSELA (trilaciclib hydrochloride for injection) for marketing in China. As a result of receiving approval in China, Simcere paid us a $13.0 million milestone payment (less applicable withholding taxes of $1.3 million) in the third quarter of 2022. For the completion of manufacturing technology transfer in the third quarter of 2022, Simcere paid us a $1.0 million (less applicable withholding taxes of $0.1 million) milestone payment in October 2022. We recognized $14.0 million of revenue related to development milestones through the third quarter of 2022.

Table of Contents

Cash flows

The following table summarizes our cash flows for the periods indicated:


	Nine Months Ended September 30, 2022				Change
	2022		2021		$
	(in thousands)
Net cash used in operating activities	$	(97,988)	$	(97,448)	$	(540)
Net cash provided/used in investing activities	(30,167)		—		(30,167)
Net cash provided by financing activities	145		102,106		(101,961)
Net change in cash, cash equivalents, and restricted cash	$	(128,010)	$	4,658	$	(132,668)

Net cash used in operating activities

During the nine months ended September 30, 2022, net cash used in operating activities was $98.0 million which consisted primarily of a net loss of $113.9 million, a decrease in net operating assets and liabilities of $3.4 million, and $0.1 million accretion of discount on available for sale securities, partially offset by non-cash stock compensation expense of $16.2 million, $0.4 million of depreciation expense, $1.7 million in amortization of debt issuance costs, $0.7 million of non-cash interest expense, and $0.4 million in non-cash equity interest.

During the nine months ended September 30, 2021, net cash used in operating activities was $97.4 million, which consisted primarily of a net loss of $108.3 million and a decrease in net operating assets and liabilities of $7.7 million, partially offset by non-cash stock compensation expense of $17.1 million, $0.4 million of depreciation expense, $0.7 million in amortization of debt issuance costs, $0.2 million of non-cash interest expense, and $0.2 million of non-cash equity interest.

Net cash used in operating activities increased by $0.5 million as compared to the nine months ended September 30, 2021 primarily due to increase in net loss from an increase in research costs related to clinical trials as well as administrative costs operating as a commercial company.

Net cash used in investing activities

During the nine months ended September 30, 2022, net cash used in investing activities was $30.2 million due to the purchase of $29.7 million in marketable securities and $0.5 million of manufacturing equipment placed in service during the quarter ended June 30, 2022.

During the nine months ended September 30, 2021, there was no cash provided or used in investing activities.

Net cash provided by financing activities

During the nine months ended September 30, 2022, net cash provided by financing activities consisted of proceeds from exercise of stock options.

During the nine months ended September 30, 2021, net cash provided by financing activities was $102.1 million, which consisted of $86.4 million in net proceeds from our at-the-market offering after deducting cash paid during the year for underwriting discounts and commissions and other expenses, $9.9 million in net proceeds from debt funding, and $5.8 million from proceeds from the exercise of stock options.

Operating capital requirements and plan of operations

To date, we have generated limited revenue from product sales. We expect our expenses to increase as we continue the development of and seek additional regulatory approvals for trilaciclib, and continue to commercialize COSELA. As described in the risk factors included in the 2021 Form 10-K, we are subject to all of the risks inherent in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

We believe that our existing cash and cash equivalents will be sufficient to fund our projected cash needs for at least the next 12 months from the date of issuance of the financial statements.

Table of Contents

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

•the scope, progress, results and costs of nonclinical development, laboratory testing and clinical trials for our product candidates;

•the scope, prioritization and number of our research and development programs;

•the costs, timing and outcome of regulatory review of our product candidates;

•the extent to which we enter into non-exclusive, jointly funded clinical research collaboration arrangements, if any, for the development of our product candidates in combination with other companies’ products;

•our ability to establish such collaborative co-development arrangements on favorable terms, if at all;

•the achievement of milestones or occurrence of other developments that trigger payments under our license agreements and any collaboration agreements into which we enter;

•the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any;

•the extent to which we acquire or in-license product candidates and technologies and the terms of such in-licenses;

•the costs of commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

•the potential benefit of the NMPA’s conditional approval for our products and product candidates and our ability to provide comprehensive clinical data from post-approval clinical research;

•revenue received from commercial sales of our product candidates;

•our ability to meet the required financial covenants under our loan agreement; and

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims.

Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Other than amounts included under the terms of our licensing arrangements and the loan agreement with Hercules, which are subject to certain conditions, we do not have any committed external source of funds. We may be bound by ongoing compliance with financial covenants under the loan agreement with Hercules. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. 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 funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations, Commitments and Contingencies

There have been no material changes to our contractual obligations during the current period from those disclosed in our Annual Report on Form 10-K for year ended December 31, 2021.

Table of Contents

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of our financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the dates of the balance sheet, and the reported amount of expenses incurred during the reporting period. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that our accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results. We discussed our accounting policies and significant assumptions used in our estimates in Note 2 of our audited financial statements included in our 2021 Form 10-K. We have updated Note 2 to the condensed financial statements to include disclosure related to our critical accounting policy and significant judgment related to the classification of debt.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed in Note 2, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities, which are affected by changes in the general level of U.S. interest rates. We had cash and cash equivalents of $93.2 million and marketable securities of $29.7 million as of September 30, 2022. Cash and cash equivalents consist of deposits in banks, including checking accounts, money market accounts and certificates of deposit. Marketable securities consist of U.S. Treasury bills. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant. Due to the short-term nature of our cash equivalents, a sudden change in interest rates would not be expected to have a material effect on our business, financial condition or results of operations.

We also have exposure to market risk on our loan agreement with Hercules. Our loan agreement (as such is amended from time to time) accrues interest from its date of issue at a variable interest rate equal to the greater of either (i) (a) the prime rate as reported in The Wall Street Journal, plus (b) 5.90%, and (ii) 9.15%. As of September 30, 2022, $75.0 million was outstanding under the loan agreement with Hercules.

We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation generally affects us by increasing our cost of labor. We do not believe that inflation had a material effect on our business financial condition or results of operations during the three and nine months ended September 30, 2022.

Table of Contents

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2022, our principal executive officer and our principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Change in Internal Controls

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II—OTHER INFORMATION

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. In addition to the other information contained elsewhere in this report, you should carefully consider the risks and uncertainties described in our “Item 1A. Risk Factors” of our 2021 Form 10-K, which could materially affect our business, financial condition or future results before investing in our common stock. [The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Form 10-K, as updated in our quarterly reports. Except as presented below,] there have been no material changes in the risk factors set forth in Part II, Item 1A of our 2021 Form 10-K.

Risks Related to Our Financial Position and Need for Additional Capital

Our financial condition raises substantial doubt as to our ability to continue as a going concern

We may be forced to delay or reduce the scope of our development programs and/or limit or cease our operations if we are unable to obtain additional funding to support our current operating plan. We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.

We have experienced net losses since inception and have an accumulated deficit of $698.4 million and $584.5 million as of September 30, 2022 and December 31, 2021, respectively. We expect to incur losses and have negative net cash flows from operating activities as we execute on our strategy including engaging in further research and development activities, particularly conducting non-clinical studies and clinical trials. Our success depends on the ability to successfully commercialize our technologies to support our operations and strategic plan. As of the date of issuance of these financial statements, we expect that our cash and cash equivalents and marketable securities as of September 30, 2022 will not be sufficient to fund our planned operations and remain in compliance with our objective financial covenants for the next 12 months from the date of issuance of these financial statements. Based on the foregoing, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed financial statements. Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. There can be no assurances that we will be able to secure such additional financing if at all, or on terms that are satisfactory to us, and that it will be sufficient to meet our needs. In the event we are not successful in obtaining sufficient funding, this could force us to delay, limit, or reduce our product development, commercialization efforts or other operations, and could result in the default of our loan payable. Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. In connection with the Loan Payable described in Note 8, we are required to remain in compliance with a minimum cash covenant and a minimum monthly net product revenue covenant (determined in accordance with U.S. GAAP), measured on a trailing six-month basis. The lender also has the ability to call debt based on a material adverse change clause, which is subjectively defined. If we are not in compliance with the monthly net revenue covenant, the minimum cash covenant, or the subjective acceleration clauses are triggered under the agreement, then the lender may call the debt resulting in us immediately needing additional funds. As of September 30, 2022, we were in compliance with all covenants.

Table of Contents

Item 6. Exhibits.


Exhibit Number						Description
10.1*						Fourth Amendment to Loan and Security Agreement by and between Registrant and Hercules Capital, Inc., dated November 1, 2022
31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)XBRL Taxonomy Extension Presentation Linkbase Document

_______________________

* Filed herewith.

Table of Contents

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.


	G1 THERAPEUTICS, INC.



Date: November 2, 2022	By:	/s/ Jennifer K. Moses
		Jennifer K. Moses
		Chief Financial Officer (On behalf of the Registrant and as Principal Financial and Accounting Officer)