UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 001-38096
G1 THERAPEUTICS, INC.
(Exact name of Registrant as specified in its Charter)
Delaware
( State or other jurisdiction of
incorporation or organization)
26-3648180
(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
Common Stock $.0001 par value
Trading Symbol
GTHX
Name of each exchange on which registered
The Nasdaq Stock Market
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
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
Non-accelerated filer
Emerging growth company
☒
☐
☐
Accelerated filer
Smaller reporting company
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The
Nasdaq Stock Market on June 30, 2019, was $853,358,707.
The number of shares of Registrant’s Common Stock outstanding as of February 21, 2020 was 37,642,199.
Documents Incorporated by Reference
Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders, scheduled to be held on June 11, 2020, are incorporated by reference into Part III
of this report.
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
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Special note regarding forward-looking statements
This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements that involve risks and uncertainties. All statements other than
statements of historical facts contained in this Annual Report are forward-looking statements. In some cases, you can identify forward-looking statements by
words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,”
“seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and
elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is
not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these
risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report may not occur and actual results could
differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-
looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the
forward-looking statements will be achieved or occur. Such forward looking statements speak only as of the date of this Annual Report. Except as may be
required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
You should read this Annual Report and the documents that we have filed as exhibits to this Annual Report with the understanding that our actual future
results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
This Annual Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies
conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from
sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
1
PART I
Item 1. Business.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule therapeutics for
the treatment of patients with cancer. Our product portfolio is built on a drug discovery platform that targets key cellular pathways with proprietary medicinal
chemistry. Our therapies are designed to improve outcomes for patients across multiple oncology indications.
We were incorporated under the laws of the State of Delaware in May 2008 under the name “G-Zero Therapeutics, Inc.” In September 2012, we changed our
name to “G1 Therapeutics, Inc.” Our principal executive offices are located at 700 Park Offices Drive, Suite 200, Research Triangle Park, NC 27709, and our
telephone number is (919) 213-9835.
We manage our operations as a single segment for the purposes of assessing performance and making operating decisions. All of our assets are held in the
United States.
“G1 Therapeutics” and our logo are our trademarks. All other service marks, trademarks and trade names appearing in this Annual Report are the property of
their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or
endorsement or sponsorship of us by, these other companies.
Product Pipeline
The Company is advancing three clinical stage programs. Trilaciclib is a first-in-class therapy designed to improve outcomes for patients who are treated with
chemotherapy. Rintodestrant, formerly known as G1T48, is a potential best-in-class oral selective estrogen receptor degrader (SERD) for the treatment of
ER+ breast cancer. Lerociclib is a differentiated oral CDK4/6 inhibitor designed to enable more effective combination treatment strategies across multiple
oncology indications, including ER+, HER2- breast cancer. The Company also has discovery capabilities focused on cyclin-dependent kinase targets. The
Company owns the global rights to all of its product candidates.
G1 Therapeutics Product Pipeline
Candidate
Target
Method Of Action (MOA)
Clinical Status
Global Rights
trilaciclib
CDK4/6
Short-acting intravenous CDK4/6 inhibitor
Preserves HSPC and immune system function
NDA
filing
Phase 2 TNBC
SCLC
rintodestrant
Estrogen Receptor
(f/k/a G1T48)
Oral selective estrogen receptor degrader (SERD)
Inhibits estrogen receptor driven tumor proliferation
Phase 1/2
lerociclib
CDK4/6
Oral CDK4/6 inhibitor
Phase 1/2
Inhibits tumor proliferation and growth
CDK4/6 are key cell signaling proteins that regulate cell growth and proliferation. The CDK4/6 pathway regulates proliferation and growth of both healthy
normal cells and certain tumor cells, representing a validated and promising class of targets for anti-cancer therapeutics. An example of normal cells whose
growth and proliferation are regulated by CDK4/6 are hematopoietic stem and progenitor cells, or HSPCs. HSPCs reside in the bone marrow and are the
“reservoir” from which all blood and immune system cells are formed. Additionally, CDK4/6 plays an integral role in the growth and proliferation of certain
types of tumors.
We have leveraged our deep knowledge of CDK4/6 biology to discover and develop two highly potent and selective CDK4/6 inhibitors that may have broad
applicability across multiple cancer indications. We believe we are the only company with two distinct clinical-stage CDK4/6 inhibitors, trilaciclib and
lerociclib, each of which has the potential to be the backbone therapy in multiple combination regimens. Our two CDK4/6 inhibitors were rationally designed
to treat distinct patient populations with different combination regimens.
2
Trilaciclib, a short-acting intravenous (IV) therapy, is in development for combinations with chemotherapy and chemotherapy/checkpoint inhibitor regimens.
Lerociclib, an oral therapy, is in development for use in combination with other targeted therapies for multiple indications, including in ER+, HER2- breast
cancer.
Trilaciclib: preserving bone marrow and immune system function during chemotherapy and improving patient outcomes
Chemotherapy is an effective and important weapon against cancer. However, chemotherapy does not differentiate between healthy cells and cancer cells and
kills both, including important stem cells in the bone marrow (hematopoietic stem and progenitor cells, or HSPCs) that produce white blood cells, red blood
cells and platelets, and immune cells. This chemotherapy-induced bone marrow damage is known as myelosuppression. When white blood cells, red blood
cells and platelets become depleted, chemotherapy patients are at increased risk of infection, experience anemia and fatigue, and are at increased risk of
bleeding. Myelosuppression often requires the administration of rescue interventions such as growth factors and blood or platelet transfusions and may also
result in chemotherapy dose delays and reductions. Immune cell damage may decrease the ability of the immune system to fight the cancer.
Trilaciclib is a first-in-class therapy designed to preserve bone marrow and immune system function during chemotherapy and improve patient outcomes. Our
randomized clinical trials have demonstrated that trilaciclib can provide myelopreservation benefits (i.e. reduction of chemotherapy-induced
myelosuppression) and, in certain settings, trilaciclib has the potential to improve survival. It is a short-acting CDK4/6 inhibitor that is administered
intravenously prior to chemotherapy.
In preclinical studies, administration of trilaciclib prior to chemotherapy has been shown to induce transient cell-cycle arrest of HSPCs, protect HSPCs from
chemotherapy-induced damage, preserve bone marrow and immune system function, protect against bone marrow exhaustion, improve complete blood
counts (CBC) recovery, prevent myeloid skewing and consequent lymphopenia, and enhance T-cell effector function in the tumor microenvironment.
Following evaluation of trilaciclib in a Phase 1 trial in healthy volunteers, we initiated two Phase 1b/2 trials in patients with extensive-stage small cell lung
cancer (SCLC); one in a first-line setting (in combination with carboplatin/etoposide) and the other in a second-/third-line setting (in combination with
topotecan). Enrollment in both trials has been completed and preliminary data from the open label Phase 1b segment were reported in 2016 and 2017. In the
Phase 1b segments of these two trials, we treated 51 patients with over 250 cycles of trilaciclib and chemotherapy. There were no episodes of febrile
neutropenia – one of the most common adverse consequences of these chemotherapy regimens. Further, there were no drug-related serious adverse events
reported during the Phase 1b segments of these two trials. There were some adverse events reported involving fatigue and cytopenias, but those adverse
events were less severe and less frequent than those generally reported in trials involving the use of chemotherapy alone.
Based on these encouraging preliminary data, we advanced both SCLC trials into the randomized, placebo-controlled, double-blind Phase 2 segment.
Enrollment in the first-line SCLC Phase 2 trial was completed in the second quarter of 2017 and positive multi-lineage myelopreservation results were
reported in March 2018, with additional data reported at the European Society of Medical Oncology (ESMO) 2018 Congress and published in Annals of
Oncology in 2019. Enrollment in the second-/third-line SCLC Phase 2 trial was completed in the second quarter of 2018, with positive multi-lineage
myelopreservation data reported in the fourth quarter of 2018 and full data presented at an oral session at the American Society of Clinical Oncology (ASCO)
2019 Annual Meeting.
Our third trial in SCLC was initiated in 2017, as part of our non-exclusive collaboration with Genentech, with the goal of exploring the use of trilaciclib in
combination with chemotherapy and a checkpoint inhibitor. The trial was a randomized, placebo-controlled, double-blind Phase 2 trial of trilaciclib in
combination with Tecentriq® (atezolizumab)/carboplatin/etoposide in first-line SCLC patients. We completed enrollment in February 2018 and reported
positive multi-lineage myelopreservation data in November 2018. Additional data, including myelopreservation and anti-tumor efficacy findings (measured
by overall survival, or “OS”), were reported at the ESMO 2019 Congress.
All three SCLC trials demonstrated that trilaciclib, when added to standard of care chemotherapy or chemotherapy/checkpoint inhibitor regimens, prevents or
mitigates clinically significant chemotherapy-induced myelosuppression. The U.S. Food and Drug Administration (FDA) has granted Breakthrough Therapy
Designation for trilaciclib based on myelopreservation data from our three randomized, double-blind, placebo-controlled SCLC clinical trials, as well as
safety data collected to date across all completed and ongoing clinical trials. The Breakthrough Therapy program is designed to expedite development and
review of drugs intended for serious or life-threatening conditions. Based on written feedback from its pre-New Drug Application (NDA) meeting with the
FDA, the Company began a rolling NDA submission for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2019 and expects to complete the
NDA submission in the second quarter of 2020. Based on discussions with European regulatory authorities, the Company plans to submit a Marketing
Authorization Application (MAA) to the European Medicines Agency (EMA) for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2020.
3
Trilaciclib is also being evaluated in patients with breast cancer. In 2017, we initiated a randomized Phase 2 trial of trilaciclib in patients with
first-/second-/third-line metastatic triple-negative breast cancer (mTNBC) receiving gemcitabine and carboplatin. Enrollment was completed in the second
quarter of 2018. At the December 2018 San Antonio Breast Cancer Symposium (SABCS), we presented preliminary trilaciclib data demonstrating
improvement in progression-free survival (PFS). In September 2019, the Company presented updated data demonstrating significant improvement in OS
(preliminary). Though the trial did not meet the primary myelopreservation endpoints, patients receiving trilaciclib were able to receive ~50% more cycles of
chemo, without additional hematological toxicity. These data were presented at the ESMO 2019 Congress and were concurrently published in The Lancet
Oncology. In January 2020, the Company announced that trilaciclib will be included in a new randomized, investigational treatment arm for the ongoing I-
SPY 2 TRIAL™ for neoadjuvant treatment of locally advanced breast cancer. The trial, run by the non-profit Quantum Leap Healthcare Collaborative, is
designed to rapidly screen promising experimental treatments and identify those most effective in specific patient subgroups based on molecular
characteristics (biomarker signatures).
The Company is planning to initiate a randomized, placebo-controlled Phase 3 trial in colorectal cancer in the fourth quarter of 2020.
Market opportunities for trilaciclib
Cancer is the second leading cause of death in the United States with approximately 1.8 million new cases and 607,000 deaths in 2019, according to the
American Cancer Society. Chemotherapy is the standard of care treatment for multiple cancers. We estimate that more than one million patients in the United
States receive chemotherapy annually.
Chemotherapy has significant clinical utility and continues to be the most effective treatment for many cancers. However, it also damages HSPCs
(myelosuppression) and the immune system (immunosuppression), leading to severe adverse effects and limiting anti-tumor activity. Chemotherapy-induced
myelosuppression causes abnormally low numbers of red blood cells, or anemia, abnormally low numbers of neutrophils, or neutropenia, and/or abnormally
low numbers of platelets, or thrombocytopenia. The treatment of myelosuppressive side effects of chemotherapy is a large market opportunity. The only
current treatment for chemotherapy-induced myelosuppression are rescue interventions like growth factors and/or transfusions. Two main types of
commercially available growth factors are: granulocyte-colony stimulating factor, or GCSF, and erythropoiesis stimulating agents, or ESAs. GCSF increases
production of neutrophils in patients to reduce the incidence of infection after chemotherapy. GCSF does not preserve the function of the bone marrow and
immune system from chemotherapy damage. ESAs increase production of red blood cells in patients. Accordingly, ESAs also do not preserve the function of
the bone marrow and immune system from chemotherapy. ESA use in oncology is limited due to a “black box” warning related to death and serious
cardiovascular events. Despite these limitations, we estimate that annual worldwide sales of growth factor support therapy in oncology exceeds $5 billion.
Our first trials for trilaciclib were in extensive-stage SCLC. According to the American Cancer Society, SCLC accounts for approximately 14% of all lung
cancers. Approximately 32,000 people are diagnosed annually with SCLC in the United States and approximately 70%, or 22,000, of those have extensive-
stage disease. First-line treatment for extensive-stage SCLC in the United States is typically a chemotherapy regimen of carboplatin and etoposide, each of
which has significant myelosuppressive side effects. Combination treatment with chemotherapy and immunotherapy has emerged as the standard of care in
the United States. While these patients often respond to first-line therapy, approximately 90% progress within one year and die within two years. Five-year
survival rates are less than 5% for patients with extensive-stage SCLC. Topotecan, approved for SCLC in 2007, is a standard treatment used in the
second/third line setting and is highly myelosuppressive.
Based on market research we have completed to date, many physicians see proactive myelopreservation as a better approach for patients and would
incorporate trilaciclib into their SCLC treatment regimen. We forecast the SCLC opportunity to be between $500 million to $750 million worldwide annual
net sales at peak.
We are also exploring the use of trilaciclib in breast cancer, and have conducted a trial in metastatic triple negative breast cancer, or mTNBC. According to
the World Health Organization, an estimated 2.1 million cases of breast cancer are diagnosed annually worldwide. TNBC makes up approximately 15-20% of
such diagnosed breast cancers. Because mTNBC cells lack key growth-signaling receptors, patients do not respond well to medications that block estrogen,
progesterone, or HER2 receptors. Instead, treating mTNBC typically involves chemotherapy, radiation, and surgery. In general, survival rates tend to be lower
with mTNBC compared to other forms of breast cancer, and mTNBC is also more likely than some other types of breast cancer to return after it has been
treated, especially in the first few years after treatment.
In addition, trilaciclib has been selected for inclusion in a randomized, investigational treatment arm of the ongoing Phase 2 I-SPY 2 TRIAL for neoadjuvant
treatment of locally advanced breast cancer. The study will generate data that will allow the company to evaluate trilaciclib in combination with several
broadly-used chemotherapy classes, an anti-PD-1 immunotherapy, and a range of breast cancer subtypes. Enrollment is expected to begin in the second
quarter of 2020.
4
We are also evaluating the use of trilaciclib in colorectal cancer, and plan to initiate a Phase 3 trial in the fourth quarter of 2020. Globally, more than 500,000
patients are diagnosed with colorectal cancer each year. Chemotherapy is the standard of care for colorectal cancer, and the majority of patients in the U.S.,
Europe and Japan receive chemotherapy as part of their treatment regimen.
There have been a number of positive registrational studies and approvals of checkpoint inhibitors in combination with chemotherapy, and these combination
regimens are emerging as a standard of care in multiple tumor types. Data from our trial of trilaciclib in combination with the checkpoint inhibitor Tecentriq
showed myelopreservation benefits without impairing efficacy. The I-SPY 2 trial will also explore the use of trilaciclib in combination with chemotherapy
and a checkpoint inhibitor. We believe trilaciclib may improve outcomes for patients receiving either chemotherapy or a regimen of chemotherapy with an
immunotherapy agent.
Advantages of trilaciclib
We believe that treating patients with trilaciclib prior to the administration of chemotherapy or chemotherapy/immunotherapy regimens may have the
following benefits and advantages:
•
•
•
•
•
•
•
•
Potential to prevent or mitigate chemotherapy-induced myelosuppression. Trilaciclib has been rationally designed and optimized to preserve
HSPCs from damage by chemotherapy, thereby minimizing cytopenias across neutrophils, red cells, and platelets. Trilaciclib has the potential
to decrease the clinically relevant consequences of these cytopenias and improve patient outcomes.
Potential to reduce chemotherapy dose-delays and dose reductions. Chemotherapy-induced myelosuppression is the major dose limiting
toxicity of chemotherapy and can lead to dose reductions and schedule delays that can limit therapeutic benefit. Trilaciclib has been designed
specifically to minimize myelosuppression and has the potential to enable maintenance of the indicated and planned chemotherapeutic dose and
schedule.
Potential to improve the patient experience as measured by validated Patient Reported Outcomes (PRO) instruments. PRO data from our
randomized trials demonstrate that patients receiving trilaciclib report less fatigue and improved physical and functional well-being.
Potential for use with chemotherapy/immune checkpoint inhibitors combinations. Immune checkpoint inhibitors are often combined with
chemotherapy. We have demonstrated that trilaciclib mitigates myelosuppression in first-line SCLC patients treated with the immune
checkpoint inhibitor Tecentriq and chemotherapy.
Potential broad applicability. We believe trilaciclib has the potential to benefit patients treated with multiple myelosuppressive
chemotherapeutic regimens across a wide range of tumor types.
Convenience of administration. Trilaciclib is designed to be administered via an IV infusion prior to chemotherapy treatment. This dosing
regimen fits with standard clinical practice for chemotherapy administration with or without checkpoint inhibitors.
Potential to reduce the cost of rescue interventions. Chemotherapy-induced myelosuppression leads to severe adverse side effects, such as
fatigue due to anemia, infections due to neutropenia, and bleeding due to thrombocytopenia. These adverse side effects often require costly
rescue interventions such as hospitalizations, transfusions, antibiotic usage and/or treatment with growth factor support. Because trilaciclib has
been designed specifically to minimize myelosuppression, we believe that it has the potential to reduce these costs. The positive multi-lineage
myelopreservation data we have reported to date and our market research with payers supports the value proposition of trilaciclib.
Potential to preserve/enhance anti-tumor immunity and prolong OS in certain settings. Chemotherapy can damage the immune system and
impair anti-tumor immunity. Trilaciclib has demonstrated the potential to preserve and enhance immune system function during
chemotherapy. The improvement in OS observed in the randomized trial of TNBC patients may be due trilaciclib’s ability to enhance anti-
tumor immunity during chemotherapy.
Trilaciclib: preclinical and clinical development
Preclinical development
We have published extensive biochemical, cellular and in vivo data on trilaciclib. Our preclinical data show that trilaciclib can induce transient and reversible
cell-cycle arrest of HSPCs; protect HSPCs from damage by chemotherapy; preserve bone marrow and immune system function; improve CBC recovery;
protect from bone marrow exhaustion; prevent myeloid skewing and consequent lymphopenia; activate T-cells in the tumor microenvironment; and enhance
chemotherapy and checkpoint inhibitor anti-tumor activity.
5
Completed Phase 1 clinical trial
In 2015, we completed a Phase 1 clinical trial of trilaciclib in 45 healthy volunteers in the Netherlands. In this trial, subjects in seven cohorts were
administered a single ascending dose of trilaciclib between 6 mg/m² and 192 mg/m². The purpose of this trial was to evaluate the safety including dose
limiting toxicities, or DLTs, serious adverse events, or SAEs, adverse events, or AEs, and pharmacokinetics, or PK, and identify a biologically effective dose
of trilaciclib. Published data from this trial demonstrated that trilaciclib was well tolerated, with no DLTs or SAEs reported. These data demonstrated that the
administration of trilaciclib resulted in the robust cell-cycle arrest of HSPCs for at least 32 hours and supported a starting dose of 200 mg/m 2 for the initial
studies in patients.
Four randomized clinical trials – enrollment completed
Trilaciclib (IV CDK4/6 inhibitor):
Indications
1st -line
Small Cell Lung Cancer
2nd /3rd –line
Small Cell Lung Cancer
1st-line
Small Cell Lung Cancer
metastatic Triple Negative
Breast Cancer
Regimen
+ etoposide/carboplatin
Phase
1b/2
Status
Final data published in Annals of Oncology (2019)
+ topotecan
1b/2
Latest data presented at ASCO 2019
+Tecentriq/carboplatin/
etoposide
+gemcitabine/carboplatin
2
2
Latest data presented at ESMO 2019 Congress
Latest data presented at ESMO 2019 Congress and
published in Lancet Oncology
Phase 1b/2 clinical trial in first-line treatment of SCLC
In 2015, we initiated a Phase 1b/2 clinical trial in first-line extensive-stage SCLC patients across multiple sites in the United States and Europe. The Phase 1b
segment of the trial was designed to confirm the trilaciclib dose to be used in the randomized, placebo-controlled Phase 2 segment. The goals of the trial are
to evaluate the safety, myelopreservation, pharmacokinetics, and anti-tumor activity of trilaciclib in combination with the existing first-line chemotherapy
standard of care regimen of etoposide and carboplatin and to confirm the dose to be used in future trials. All patients in the Phase 1b segment were
administered three-week cycles of trilaciclib plus etoposide/carboplatin, with an estimated four to six cycles administered in total per patient based on
historical practice. Trilaciclib was administered as an IV infusion prior to every dose of etoposide/carboplatin.
In the Phase 1b section of this trial, as reported at the American Society of Clinical Oncology meetings in June 2017, we treated 19 patients with multiple
cycles of trilaciclib and chemotherapy and did not have a single episode of febrile neutropenia – one of the most common adverse consequences of these
chemotherapy regimens. We also observed a dose dependent reduction in grade 3/4 hematologic adverse events. The results from the Phase 1b study support
the hypothesis that trilaciclib could ameliorate the significant acute and long-term consequences of chemotherapy-induced myelosuppression by preserving
hematopoietic and immune system function. Based on these results, we initiated the randomized, placebo-controlled Phase 2 segment of the trial in fourth-
quarter of 2016 with a trilaciclib dose of 240 mg/m2 and completed enrollment of a total of 77 patients in the second quarter of 2017. We reported positive
multi-lineage myelopreservation data from the Phase 2 segment of the trial in March 2018, with additional data from the trial presented at the 2018 ESMO
Congress and final data published in Annals of Oncology (2019).
Phase 1b/2 clinical trial in second/third-line treatment of SCLC
In 2015, we initiated a Phase 1b/2 clinical trial in second/third-line SCLC patients across multiple sites in the United States and Europe. The Phase 1b
segment of the trial was designed to confirm the trilaciclib dose to be used in the randomized, placebo-controlled Phase 2 segment of the trial. The goals of
the trial are to evaluate the safety, myelopreservation, PK, and anti-tumor activity of trilaciclib in combination with the existing second/third-line
chemotherapy standard of care regimen of topotecan and to confirm the dose to be used in future trials. All patients in the Phase 1b segment were
administered three-week cycles of trilaciclib plus topotecan until the progression of disease. Trilaciclib was administered as an IV infusion prior to every dose
of topotecan. Trilaciclib doses of 200 to 280 mg/m2 and topotecan doses of 0.75 to 1.5 mg/m2 were tested across 7 cohorts in the completed Phase 1b open-
label segment of the trial. The doses chosen for the randomized, placebo-controlled Phase 2 segment of this trial were trilaciclib 240 mg/m2 + topotecan 0.75
mg/m2 and trilaciclib 240 mg/m2 + topotecan 1.5 mg/m2.
In the Phase 1b segment we treated 32 patients with trilaciclib and topotecan without any episodes of febrile neutropenia or treatment related SAEs.
Preliminary results from Phase 1b were reported at the IASCLC World Conference on Lung Cancer in December 2016. Based on these results, the Phase 2
segment was initiated in the first quarter of 2017 and consists of a double blind-design with 91 patients randomized on a 2:1 basis to receive trilaciclib plus
topotecan, or placebo plus topotecan. We completed enrollment in this trial in the second quarter of 2018 and reported multi-lineage myelopreservation data
in the fourth quarter of 2018. Safety and anti-tumor efficacy data were presented at the 2019 ASCO Annual Meeting.
6
Phase 2 clinical trial in first-line treatment of SCLC with a checkpoint inhibitor
In December 2016, we entered into a non-exclusive agreement with Genentech to evaluate the combination of Genentech's immune checkpoint, anti-PD-L1
antibody Tecentriq with trilaciclib. Our first trial under the agreement is in first-line treatment for patients with extensive stage SCLC receiving carboplatin
and etoposide. We initiated enrollment in this randomized, double-blinded, placebo-controlled Phase 2 trial in the second quarter of 2017. The goals of the
clinical trial are to evaluate the safety, OS, myelopreservation, PK, and anti-tumor activity of trilaciclib in combination with Tecentriq and chemotherapy. We
completed enrollment in the first quarter of 2018. We reported positive multi-lineage myelopreservation data and preliminary progression free survival (PFS)
in November 2018, and presented updated safety and anti-tumor efficacy data at the 2019 ESMO Congress.
Phase 2 clinical trial in metastatic Triple Negative Breast Cancer (mTNBC)
In January 2017, we initiated an open label, randomized, Phase 2 trial that enrolled 102 patients with first, second or third-line mTNBC across multiple sites
in the United States and Europe. The goals of the clinical trial are to evaluate the safety, myelopreservation, PK, and anti-tumor activity of trilaciclib in
combination with the existing chemotherapy standard of care regimen of gemcitabine and carboplatin. We completed enrollment in the second-quarter of
2018. At the December 2018 San Antonio Breast Cancer Symposium (SABCS), we presented preliminary data demonstrating improvement in progression-
free survival (PFS). We presented additional safety and anti-tumor efficacy data at the 2019 ESMO Congress. The results of the trial demonstrated significant
improvement in OS (preliminary). Though the trial did not meet the primary myelopreservation endpoint, patients receiving trilaciclib were able to receive
~50% more cycles of chemo, without additional hematological toxicity. These data were presented at the 2019 ESMO Congress and concurrently published in
The Lancet Oncology.
Trilaciclib: regulatory status
All three SCLC trials demonstrated that trilaciclib, when added to standard of care chemotherapy or chemotherapy/checkpoint inhibitor regimens, prevents or
mitigates clinically significant chemotherapy-induced myelosuppression. The U.S. Food and Drug Administration (FDA) has granted Breakthrough Therapy
Designation for trilaciclib based on myelopreservation data from our three randomized, double-blind, placebo-controlled SCLC clinical trials, as well as
safety data collected to date across all completed and ongoing clinical trials. The Breakthrough Therapy program is designed to expedite development and
review of drugs intended for serious or life-threatening conditions. Based on written feedback from its pre-New Drug Application (NDA) meeting with the
FDA, the Company began a rolling NDA submission for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2019 and expects to complete the
NDA submission in the second quarter of 2020. Based on discussions with European regulatory authorities, the Company plans to submit a Marketing
Authorization Application (MAA) to the European Medicines Agency (EMA) for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2020.
Rintodestrant (formerly known as G1T48): Our oral SERD
Rintodestrant is a potential best-in-class oral SERD being developed as a monotherapy and in combination with CDK4/6 inhibitors, initially Ibrance®
(palbociclib), for the treatment of ER+, HER2- breast cancer. Based on compelling preclinical efficacy and safety data, we filed an Investigational New Drug
application (IND) with the FDA in the fourth quarter of 2017. In 2018, the Company initiated a Phase 1/2a (does escalation/dose expansion) clinical trial in
ER+, HER2- breast cancer. Preliminary data from the Phase 1 portion of this trial were presented at the ESMO 2019 Congress, showing that rintodestrant was
well tolerated and demonstrated evidence of anti-tumor activity in heavily pre-treated patients. We have completed enrollment of the dose escalation and dose
expansion portions of the trial and expect to initiate enrollment of patients receiving rintodestrant in combination with palbociclib in the second quarter of
2020. Palbociclib is being provided under a non-exclusive clinical supply agreement that we signed with Pfizer in February 2020.
Market opportunity for rintodestrant
Breast cancer accounts for 30% of all female cancers in the United States. The major cause of death from breast cancer is metastases, and approximately 30%
of early-stage patients develop metastatic disease. Approximately 65% of breast cancers are ER+ and depend on estrogen signaling for growth and survival of
the malignant cells. Patients with ER+ breast cancers are typically treated with endocrine therapies such as aromatase inhibitors, or AIs, selective estrogen
receptor modulators, or SERMs, and SERDs. AIs, which block the generation of estrogen, and SERMs, which selectively inhibit an ER’s ability to bind
estrogen, both block ER-dependent signaling but leave functional ERs present in breast cancer cells. For this reason, although AIs and SERMs are effective
treatments for some breast cancers, many patients acquire resistance to them by developing the ability to signal through the ER in a ligand-independent
manner. In contrast, SERDs are a class of endocrine therapies that directly induce ER degradation. Therefore, it is believed that SERDs have the potential to
treat ER+ tumors without allowing ligand-independent resistance to develop, and to act on AI- and SERM-resistant ER-positive tumors. Currently only one
SERD, fulvestrant, is approved for the treatment of ER+ metastatic breast cancer. Randomized clinical trials have demonstrated superior anti-tumor efficacy
of fulvestrant versus aromatase inhibitors.
7
Fulvestrant is administered as an IM injection, and requires a loading dose during the first month of treatment. This means it is typically given on days 1, 15,
and 29 of treatment and then once monthly thereafter. Each treatment typically consists of two injections, one into each buttock. Injection site reactions are
common, occurring in approximately 10% of patients. Injection site related events including sciatica, neuralgia, neuropathic pain, and peripheral neuropathy
have been reported. Other frequently reported adverse reactions with fulvestrant include nausea (9.7%) and bone pain (9.4%).
While fulvestrant has demonstrated significant benefit to patients in the metastatic setting, the intramuscular injections have precluded its use in the adjuvant
setting. Given the validated MOA of a SERD, and demonstration of superior efficacy to aromatase inhibitors, there is significant potential to improve
outcomes for patients being treated in the adjuvant setting. Consequently, there are several oral SERDs in early clinical development, though no one
candidate has emerged as a clear front runner as an oral alternative to fulvestrant based on early results.
Advantages of rintodestrant
We believe that rintodestrant has the potential to be first/best-in-class because of the following advantages:
•
•
•
•
Higher potency. In preclinical models of ER+, HER2- breast cancer, rintodestrant is more potent than fulvestrant in binding and degrading the
ER and inhibiting cell growth.
Improved safety and tolerability. Preliminary clinical data demonstrate that rintodestrant was well tolerated with a low incidence of mostly
Grade 1 adverse effects, and no severe adverse events.
Ease of administration. The only approved SERD, fulvestrant, is required to be given via IM injection. We have designed rintodestrant to be
administered orally.
Potential for usage in the adjuvant setting. Rintodestrant has the potential to offer superior efficacy to currently available anti-estrogen
therapies in the adjuvant setting.
Rintodestrant: Preclinical and clinical development
We have presented extensive biochemical, cellular and in vivo data on rintodestrant demonstrating that it: has drug-like properties, is highly potent, is active
on ER mutant receptors, is highly selective, leads to complete ER degradation, demonstrated a favorable safety profile, and has oral efficacy.
We initiated a Phase 1/2a (dose escalation/dose expansion) clinical trial in 2018 with the goal of evaluating the safety, tolerability, and PK of the drug in
breast cancer patients. Preliminary Phase 1 data were presented at the 2019 ESMO Congress. In the trial, rintodestrant was well tolerated and demonstrated
evidence of anti-tumor activity in heavily pre-treated patients.
We have completed enrollment of the dose escalation and dose expansion portions of the trial and expect to initiate enrollment of patients receiving
rintodestrant in combination with the CDK4/6 inhibitor palbociclib in the second quarter of 2020. Palbociclib is being provided under a non-exclusive clinical
supply agreement that we signed with Pfizer in February 2020.
Lerociclib: Our differentiated oral CDK4/6 inhibitor for patients with CDK4/6-dependent tumors
Lerociclib is a differentiated oral CDK4/6 inhibitor being developed for use in combination with other targeted therapies in multiple oncology indications,
including ER+, HER2- breast cancer. We rationally designed lerociclib to improve upon and address the shortcomings of the approved CDK4/6 inhibitors
Ibrance® (palbociclib), Kisqali® (ribociclib) and Verzenio® (abemaciclib), with fewer dose-limiting toxicities and potential for less frequent blood count
monitoring. Our preclinical data and early clinical data indicate the potential for continuous daily dosing, less dose-limiting neutropenia, and improved
tolerability. A Phase 1 trial of lerociclib in 75 healthy volunteers showed a favorable safety profile, and we reported encouraging preliminary Phase 1b data
from our Phase 1/2 trial in ER+, HER2- breast cancer (in combination with fulvestrant) at the ASCO 2018 Annual Meeting. Additional data from this trial
were presented at the San Antonio Breast Cancer Symposium in December 2019. We also initiated a Phase 1b/2 combination trial with the epidermal growth
factor reception (EGFR) inhibitor, Tagrisso® (osimertinib) in non-small cell lung cancer. Initial safety and tolerability data from this trial were presented at
the ESMO 2019 Congress. G1 is currently exploring partnering opportunities to continue to advance clinical development of lerociclib.
Market opportunity for lerociclib
The importance of CDK4/6 as a key regulator of tumor cell growth and proliferation in certain tumors has been validated by the FDA’s approval of Pfizer’s
CDK4/6 inhibitor Ibrance for the treatment of ER+, HER2- advanced breast cancer as initial endocrine therapy in combination with an aromatase inhibitor in
post-menopausal women and in women with disease progression following endocrine therapy in combination with fulvestrant, the approval in 2017 of Kisqali
in combination with an aromatase inhibitor, and the approval in 2017 of Verzenio in combination with fulvestrant.
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Advantages of lerociclib
We believe that lerociclib is differentiated from other CDK 4/6 inhibitors due to the following properties:
•
•
•
•
•
Less myelotoxicity. In preclinical studies, lerociclib has demonstrated less myelotoxicity than palbociclib, but equivalent anti-tumor efficacy.
We believe this is due to the inherently different PK properties of lerociclib.
Potential for continuous daily dosing. Patients on palbociclib and ribociclib can only be given the drug on a 21 days-on, followed by 7 days-off,
schedule. Even with this dosing holiday, dose-delays and dose reductions due to persistent neutropenia are common. Our preclinical data and
clinical data to date with lerociclib support the potential for continuous daily dosing with less dose-limiting neutropenia.
Improved cardiovascular and liver safety. Lerociclib has not shown any of the QT prolongation issues (seen with ribociclib) and liver injury
(seen with ribociclib and abemaciclib).
Improved tolerability profile. We have designed lerociclib to be selective for CDK4/6, which we believe will have an improved tolerability
profile.
Greater potential for combination therapies. We believe that lerociclib’s safety profile may enable it to be combined more easily with other
therapies. Lerociclib, to our knowledge, is the only selective CDK4/6 inhibitor in development that is not currently owned by a large
pharmaceutical company. We believe that other pharmaceutical and biotech companies with targeted therapies may want to test a combination
of their therapies with lerociclib. Accordingly, we are exploring partnership opportunities with these companies.
Lerociclib: preclinical and clinical development
Preclinical development
We have published extensive biochemical, cellular and in vivo data on lerociclib demonstrating: high potency and selectivity for CDK4/6; equivalent anti-
tumor activity to Ibrance when dosed orally once daily for 28-days in a mouse model of ER+, HER2- breast cancer; less myelotoxicity than Ibrance in dog
models, suggesting the potential for continuous daily dosing without the need for a treatment holiday; and anti-tumor efficacy in models of certain CDK4/6-
dependent tumor types, such as NSCLC and castrate resistant prostate cancer, or CRPC.
Completed Phase 1 clinical trial
In the fourth quarter of 2016, we completed a Phase 1 clinical trial of lerociclib in 75 healthy volunteers. The goals of the clinical trial were to obtain PK and
safety data to inform appropriate starting dose(s) for studies in patients. There were no DLTs, SAEs, or grade 3/4 AEs reported in this study.
Clinical trials – enrollment completed
Lerociclib (oral CDK4/6 inhibitor):
Indications
ER+, HER2-
Breast Cancer
EGFR mutant
Non-small Cell Lung Cancer
Regimen
fulvestrant
+ Tagrisso
Phase
1b/2a
1b
Status
Latest data presented at the 2019 SABCS Congress
Preliminary Phase 1b data presented at the 2019
ESMO Congress
Phase 1b/2a clinical trial in ER+, HER2- breast cancer
In January 2017, we initiated a Phase 1b/2a trial in ER+, HER2- breast cancer patients in combination with fulvestrant, an FDA-approved SERD. All patients
in the trial are being administered lerociclib orally continuously without a treatment holiday and intramuscular, or IM, fulvestrant per the label.
We reported positive preliminary safety and efficacy Phase 1b data at the 2018 American Society of Clinical Oncology (ASCO) annual meeting, and updated
data at the 2019 SABCS Congress. Lerociclib has a shorter half-life and larger volume of distribution than Ibrance and Kisqali and has not shown drug
accumulation. All of the enrolled patients had a decline in neutrophil counts, which was expected due to a mechanism-based decrease in neutrophil
production caused by lerociclib, which also occurs with other CDK4/6 inhibitors such as Ibrance and Kisqali. No cardiovascular or liver side effects have
been reported so far and there have been no lerociclib-related SAEs. The incidence of gastrointestinal AEs reported so far are similar to Ibrance and Kisqali
and less than Verzenio. These early clinical data indicate the potential for continuous daily dosing of lerociclib incombination with fulvestrant without a dose-
holiday, and the potential for improved tolerability compared to other marketed CDK4/6 inhibitors.
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Phase 1b clinical trial in Non-Small Cell Lung Cancer (NSCLC) in combination with Tagrisso
In the first quarter of 2018, we initiated a Phase 1b clinical trial in EGFR-mutant NSCLC patients in combination with Tagrisso, and FDA-approved
epidermal growth factor receptor tyrosine kinase inhibitor. The goals of the clinical trial are to evaluate the safety, PK, and anti-tumor activity of lerociclib in
combination with Tagrisso and to determine the dose to be used in future trials. Preliminary Phase 1b data were presented at the 2019 ESMO Congress.
Our Business Strategy
Our goal is to be a leader in the discovery and development of novel treatments that improve outcomes for people with cancer. Our strategy includes the
following key components:
•
•
•
•
Commercialize trilaciclib for SCLC in the US. We are preparing to bring trilaciclib to SCLC patients upon approval in the US. We are
exploring partnership opportunities to commercialize trilaciclib ex-US.
Develop trilaciclib in combination with chemotherapy and chemotherapy/immunotherapy treatment regiments across multiple indications.
We believe that trilaciclib has the potential to be used to treat patients receiving myelosuppressive chemotherapy across multiple oncology
indications.
Develop rintodestrant as a monotherapy and in combination with CDK4/6 inhibitors, initially palbociclib. Our short-term goal is to generate
additional clinical data to demonstrate rintodestrant’s potential as a best-in-class oral SERD. Our vision for rintodestrant is move it into the
adjuvant setting, to provide those with ER+ breast cancer the benefit of an oral SERD.
Explore partnership opportunities to develop lerociclib as a differentiated treatment across multiple cancer indications. We believe that
lerociclib has the potential for less dose-limiting neutropenia than Ibrance and Kisqali and an improved safety/tolerability profile versus Kisqali
and Verzenio. We are exploring partnerships to develop lerociclib across multiple cancer indications.
Commercialization
We plan to globally commercialize our product candidates through the establishment of collaboration agreements with global and/or regional pharmaceutical
companies to leverage our and their development and commercialization infrastructures and capabilities, enabling us to cost-effectively maximize the global
commercial opportunities of our product candidates.
Manufacturing
We do not own or operate, and currently have no plans to establish any manufacturing facilities. We rely, and expect to continue to rely, on third parties for
the manufacture of our product candidates for preclinical studies and clinical trials, as well as for the commercial manufacture of our drugs if any of our
product candidates receive marketing approval. To date, we have obtained drug substances and drug products for trilaciclib, rintodestrant and lerociclib for
our preclinical studies and clinical trials from multiple third-party manufacturers. Redundant suppliers are in place for some of our drug substances and drug
products. As development proceeds for our product candidates, we will evaluate qualifying additional redundant manufacturers for drug substances and drug
products.
Although we are reliant on third parties to manufacture our product candidates, we have personnel with extensive manufacturing experience to oversee the
relationships with our CMOs. CMOs are subject to extensive governmental regulations and we depend on them to manufacture our product candidates in
accordance with current good manufacturing practices, or cGMP. We have an established quality assurance program to ensure that the CMOs involved in the
manufacture of product candidates do so in accordance with cGMP and other applicable U.S. and foreign regulations. We believe that our current CMO
network complies with such regulations.
Competition
The development and commercialization of new drug therapies is highly competitive. We will face competition with respect to all therapeutics we may
develop or commercialize in the future from pharmaceutical and biotechnology companies worldwide. If any of our product candidates is approved, they will
compete with currently marketed drugs and therapies used for treatment of the same indications, and potentially with product candidates currently in
development for the same indications. Many of the entities marketing or developing potentially competing products have significantly greater financial
resources and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals
and marketing. We believe the key competitive factors affecting the success of any approved product will be its efficacy, safety profile, price, convenience of
administration, and level of promotional activity. Accordingly, our commercial opportunity will be reduced or eliminated if our competitors develop and
commercialize products that are more effective, have fewer side effects, are more convenient or are less expensive than any products that we may develop.
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If trilaciclib is approved, it will be the first approved therapy designed and optimized to preserve HSPCs and immune system function from damage by
chemotherapy. We believe administering trilaciclib with the current standard of care may minimize chemotherapy-induced myelosuppression, including the
following adverse side effects: fatigue due to anemia; infections due to neutropenia; and bleeding due to thrombocytopenia. Currently, these adverse side
effects often require costly rescue interventions such as hospitalizations, transfusions, antibiotic usage and/or treatment with growth factor support. Trilaciclib
may reduce the need to administer the existing rescue growth factor support treatments, including Neulasta® (pegfigrastim), Neupogen® (filgrastim),
Procrit® (epoeitin alpha), and Aranesp® (darbepoetin alfa) as well as biosimilars of these products when available. In addition, trilaciclib may compete with
multiple approved drugs or drugs that may be approved in the future for indications for which we develop trilaciclib.
If rintodestrant is approved, it will compete with AstraZeneca’s approved IM SERD, fulvestrant. Rintodestrant would also compete with other oral SERDs in
development including: RAD1901, being developed by Radius Health; GDC-9545, being developed by Genentech; AZD9833, being developed by
AstraZeneca; SAR439859, being developed by Sanofi; LY3484356, being developed by Eli Lilly; and ZN-c5, being developed by Zentalis. Rintodestrant
may compete with multiple approved drugs or drugs that may be approved in the future for indications for which we may develop rintodestrant.
If lerociclib is approved, it will compete with Pfizer’s approved CDK4/6 inhibitor Ibrance; Novartis’s approved CDK4/6 inhibitor Kisqali; and Eli Lilly’s
approved CDK4/6 inhibitor Verzenio.
Lerociclib may compete with multiple approved drugs or drugs that may be approved in the future for indications for which we develop lerociclib.
Intellectual property
Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our CDK4/6 inhibitor molecules, including our
CDK4/6 inhibitors in clinical trials and methods of treatment using our CDK4/6 inhibitors, alone and in combination with other therapeutic agents. We also
seek protection on processes for the production of our CDK4/6 inhibitors, formulations incorporating our CDK4/6 inhibitors, combinations of our product
candidates with other active agents and dosing schedules and regimens related to our CDK4/6 inhibitors. Our success also depends on our ability to operate
without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our
proprietary position by, among other methods, filing U.S. and foreign patent applications covering our proprietary technology, inventions, and improvements
that are important to the development and implementation of our business. In addition, we plan to seek patent term adjustments, restorations, and/or patent
term extensions where applicable in the United States and other jurisdictions. We also rely on trade secrets, know-how, continuing technological innovation
and potential in-licensing opportunities to develop and maintain our proprietary position. Additionally, we expect to benefit, where appropriate, from statutory
frameworks in the United States, Europe, and other countries that provide a period of clinical data exclusivity to compensate for the time required for
regulatory approval of our drug products. See also the “Government Regulation and Product Approval” section below.
We are the sole owner or exclusive licensee of all of our patents and currently filed patent applications that cover our product candidates. Our intellectual
property strategy is focused on patenting our CDK4/6 inhibitors, their uses, and methods of manufacturing as well as our licensed-in applications directed to
selective estrogen receptor degraders and their uses, manufacture, and combination with our CDK 4/6 inhibitors. We have obtained eighteen composition-of-
matter patents in the United States on a number of our CDK4/6 inhibitors, including claims that cover our product candidates trilaciclib and lerociclib, and we
continue to seek composition-of-matter patents on additional CDK4/6 inhibitors both in the United States and throughout the world. In addition, we have
obtained nine patents in the United States on methods of treatment using a number of our CDK4/6 inhibitors, including claims that cover methods of using
our product candidates trilaciclib and lerociclib. We continue to seek additional patents for our key CDK4/6 inhibitors and their uses in key therapeutic areas.
We have also obtained a composition-of-matter patent, and a method of use patent, in the United States on SERD compounds that we have exclusively in-
licensed from the University of Illinois Chicago. We also seek patent protection on methods of treatment that incorporate our CDK4/6 inhibitors in
combination with other therapeutic agents to treat specific clinical indications and targeted patient populations. Furthermore, we seek, where appropriate,
patent protection on processes of making certain CDK4/6 inhibitors, and intermediates used in the processes.
We continually assess and refine our intellectual property strategies as we develop new technologies and product candidates. We plan to file additional patent
applications based on our intellectual property strategies where appropriate, including where we seek to adapt to competition or to improve business
opportunities. Further, we plan to file patent applications, as we consider appropriate under the circumstances, to protect new technologies that we develop.
Our patent filing strategy typically includes seeking patent protection in the United States, the European Union, and in additional countries where we believe
such protection is likely to be useful, including one or more of Australia, Brazil, Canada, China, Hong Kong, India, Israel, Japan, Mexico, Macau, Russia,
Singapore, and South Korea.
11
Our owned and in-licensed patent estate as of December 31, 2019, on a worldwide basis, includes over 350 granted or pending patent applications spread over
more than 30 patent families with 31 granted U.S. patents. The term of individual patents depends upon the laws of the countries in which they are obtained.
In the countries in which we currently file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application which serves as a
priority application. However, the term of a U.S. patent may be extended to compensate for the time required to obtain regulatory approval to sell a drug (a
patent term extension) or by delays encountered during patent prosecution that are caused by the United States Patent and Trademark Office (USPTO)
(referred to as patent term adjustment). For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years
beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review and diligence
during the review process. Patent term extensions cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval,
and only one patent covering an approved drug or its method of use may be extended. A similar kind of patent extension, referred to as a Supplementary
Protection Certificate, is available in Europe. Legal frameworks are also available in certain other jurisdictions to extend the term of a patent. We currently
intend to seek patent term extensions on any of our issued patents in any jurisdiction where we have a qualifying patent and the extension is available;
however, there is no guarantee that the applicable regulatory authorities, including the FDA and the USPTO in the United States, will agree with our
assessment of whether such extensions should be granted, and even if granted, the length of such extensions. Further, even if our patent is extended, the
patent, including the extended portion of the patent, may be held invalid or unenforceable by a court of final jurisdiction in the United States or a foreign
country.
Our current issued patents covering the composition of matter for our present clinical candidates trilaciclib and lerociclib will expire in 2031, exclusive of any
patent term extension. Our current issued patents covering methods of use of trilaciclib and lerociclib will expire in 2034, exclusive of any patent term
extension. Our in-licensed patent covering the composition of matter of our clinical candidate rintodestrant will expire in 2036, exclusive of any patent term
extension. Our pending applications on additional methods of use of trilaciclib and lerociclib, should they issue, will expire on dates ranging from 2034 to
2039. We plan to file additional applications on aspects of our innovations that may have patent terms that extend beyond these dates.
Any of our patents, including patents that we may rely on to protect our market for approved drugs, may be held invalid or unenforceable by a court of final
jurisdiction. Alternatively, we may decide that it is in our interest to settle a litigation in a manner that affects the term or enforceability of our patent. Changes
in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish our ability to protect our inventions and
enforce our intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims that have been or may be granted in our patents
or in third-party patents. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual
property rights. Our ability to obtain and maintain our proprietary position for our CDK4/6 inhibitors and technology will depend on our success in enforcing
the claims that have been granted or may grant. We do not know whether any of the pending patent applications that we have filed or may file or license from
third parties will result in the issuance of any additional patents. The issued patents that we own or may receive in the future may be challenged, invalidated,
or circumvented, and the rights granted under any issued patents may not provide us with sufficient protection or competitive advantages against competitors
with similar technology. Furthermore, our competitors may be able to independently develop and commercialize drugs with similar mechanisms of action and
duplicate our methods of treatments or strategies without infringing our patents. Because of the extensive time required for clinical development and
regulatory review of a drug we may develop, it is possible that, before any of our drugs can be commercialized, any related patent may expire or remain in
force for only a short period following commercialization, thereby reducing any advantage of any such patent.
Trilaciclib and lerociclib patent coverage
We own five issued U.S. Patents (U.S. 8,598,186; U.S. 8,598,197; U.S. 9,957,276; U.S. 10,189,849; and U.S. 10,189,850) covering the trilaciclib
compositions-of-matter and its pharmaceutical composition. We also own five issued U.S. Patents (U.S. 8,598,186; U.S. 8,598,197; U.S. 9,481,691; U.S.
9,957,276; and U.S. 10,189,851) covering the lerociclib composition-of-matter and pharmaceutical composition. We own corresponding issued patents
covering trilaciclib and lerociclib and their pharmaceutical compositions in Europe, Canada, Japan, Mexico, China, Macau, Australia, Russia, Korea, India,
Hong Kong, Brazil, and Singapore, and an allowed application in Israel. The expected year of expiration for these composition-of-matter patents, where
issued, valid and enforceable, is 2031, without regard to any extensions, adjustments, or restorations of term that may be available under national law.
In addition, we own two issued U.S. Patents (U.S. 9,487,530 and U.S. 10,085,992) covering the use of trilaciclib to reduce the effect of chemotherapy on
healthy cells in a subject being treated for CDK4/6 replication independent cancer. This patent family covers, for example, SCLC treatment protocols
involving chemotherapeutic agents carboplatin, etoposide, and/or topotecan along with trilaciclib for protection of healthy replicating cells like hematopoietic
stem and progenitor cells. The patent filing also covers chemoprotection of healthy replicating cells with trilaciclib during the treatment of CDK4/6
independent cancer including triple negative breast cancer. Patents from this family have issued in Europe, China, Hong Kong, Macau, and Japan. A patent
application from this family is pending in Canada. The expected year of expiration for this patent family, where issued, valid and enforceable, is 2034,
without regard to any extensions, adjustments, or restorations of term that may be available under national law.
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We have filed applications in the United States, in the European Patent Office (EPO), Canada, China, Hong Kong, Australia, Brazil, Israel, Japan, South
Korea, Mexico, New Zealand, Russia, and the regional patent office of the Eurasian Patent Organization (EAPO) and the African Regional Intellectual
Property Organization (ARIPO) that covers the administration of trilaciclib in combination with a PD-L1 inhibitor such as Tecentriq. The expected year of
expiration for this patent family, where issued, valid and enforceable, is 2037, without regard to any extensions, adjustments, or restorations of term that may
be available under national law.
We own a patent family that is directed to the use of lerociclib to treat RB-positive tumors. The family includes three issued U.S. Patents (U.S. 9,527,857;
U.S. 10,076,523; and U.S. 10,434,104) and one pending US patent application. The ‘857 patent covers the use of lerociclib, to treat RB-positive breast cancer,
colon cancer, ovarian cancer, NSCL cancer, prostate cancer, and glioblastoma, the ‘523 patent covers the use of lerociclib to treat Rb-positive breast cancer
continuously for 28 days or more, and the ‘104 patent covers the use of lerociclib to treat Rb-positive breast cancer in combination with goserelin. Patents in
this family have also issued in China, Hong Kong, Macau, and Japan, and a patent application is pending in Canada. The expected year of expiration for this
patent family, where issued, valid and enforceable, is 2034, without regard to any extensions, adjustments, or restorations of term that may be available under
national law.
We own a patent family directed to the use of trilaciclib or lerociclib as an anti-neoplastic agent against a T or B cell cancer. This patent filing is pending in
the United States, Europe, Canada, and China, and has issued in Japan. The expected year of expiration for this patent family, where issued, valid and
enforceable, is 2034, without regard to any extensions, adjustments, or restorations of term that may be available under national law.
We have filed patent applications in the United States, Europe, and China that covers the administration of lerociclib in combination with an EGFR inhibitor,
for example osimertinib, for the treatment of EGFR-mutant cancers, most notably NSCLC. The expected year of expiration for this patent family, where
issued, valid and enforceable, is 2038, without regard to any extensions, adjustments, or restorations of term that may be available under national law.
We own a patent family directed to the use of lerociclib in combination with a Bruton’s tyrosine kinase inhibitor or other selected active agents to treat RB-
positive tumors. The family includes a granted U.S. patent (U.S. 10,231,969), a pending U.S. patent application and a pending European patent application.
The expected year of expiration for this patent family, where issued, valid and enforceable, is 2035, without regard to any extensions, adjustments, or
restorations of term that may be available under national law.
Rintodestrant Patent Coverage
We have exclusively licensed from University of Illinois, or the University, two patent families that cover rintodestrant and related compounds and their
pharmaceutical compositions and use as selective estrogen receptor down-regulators. Selected applications from these families are pending in ARIPO,
Australia, Brazil, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, Mexico, New Zealand, Russia, United States, and South Africa. Two U.S.
Patents (U.S. 10,118,910 and U.S. 10,377,735) have issued from this family. The expected year of expiration for these patent families, where issued, valid and
enforceable, is 2036, without regard to any extensions, adjustments, or restorations of term that may be available under national law. Under the Exclusive
License Agreement with the University, we have the right to prosecute the licensed applications, subject to review by the University.
We co-own, along with the University, patent applications files in the United States, Europe, Australia, Brazil, Canada, China, Israel, India, Japan, South
Korea, Mexico, Russia, New Zealand, and the regional patent offices of ARIPO and the EAPO directed to the combination of rintodestrant and related
compounds with lerociclib and related compounds for the treatment of estrogen-modulated disorders such as RB-positive breast cancer. We have exclusively
licensed the University’s rights in this co-owned application. The expected year of expiration for this patent family, where issued, valid and enforceable, is
2037, without regard to any extensions, adjustments, or restorations of term that may be available under national law.
A number of our pending patent applications covering certain aspects of using our current clinical candidates have not yet issued. As with other
biotechnology and pharmaceutical companies, our ability to obtain and maintain a proprietary position on our drug candidates and technologies will depend
on our success in obtaining effective patent claims on these pending patents and enforcing those claims if granted. However, our pending patent applications,
and any patent applications that we may in the future file or license from third parties, may not result in the issuance of patents. We also cannot predict the
breadth of claims that may be allowed or enforced in our patents.
Any issued patents that we have received or may receive in the future may be challenged, invalidated or circumvented. In addition, because of the extensive
time required for clinical development and regulatory review of a drug candidate we may develop, it is possible that, before any of our drug candidates can be
commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby limiting protection such patent
would afford the respective product and any competitive advantage such patent may provide. Moreover, even our issued patents do not guarantee us the right
to practice our technology in relation to the commercialization of our clinical candidates. The area of patent and other intellectual property rights in
pharmaceuticals is an evolving one with many risks and uncertainties, and third parties may have blocking patents that could be used to prevent us from
commercializing our clinical candidates.
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Exclusive license for rintodestrant
In November 2016, we entered into a license agreement with the University of Illinois, the University, pursuant to which we obtained an exclusive, worldwide
license to make, have made, use, import, sell and offer for sale certain SERDs, including rintodestrant, covered by patent rights owned by the University. The
rights licensed to us are for all fields of use. The November 2016 license agreement was amended in March 2017.
Under the terms of the agreement we paid a one-time only, non-refundable upfront fee of $0.5 million, and we are required to pay the University low single-
digit royalties on all net sales of products and a share of any sublicensing revenues. We are also obligated to pay annual maintenance fees, which are fully
creditable against any royalty payments made by us. We will also be required to pay the University milestone payments of up to an aggregate of $2.6 million
related to the initiation and execution of clinical trials and first commercial sale of a product in multiple countries. We are also responsible for any future
patent prosecution costs that may arise.
The term of the license agreement will continue on a country-by-country basis until the later of (i) the expiration of the last valid claim within the patent rights
covering the product in such country, (ii) the expiration of market exclusivity in such country and (iii) the 10th anniversary of the first commercial sale in
such country. The University may terminate the agreement in the event (i) we fail to pay any amount or make any report when required to be made and fail to
cure such failure within 30 days after receipt of notice, (ii) we are in breach of any provision of the agreement and fail to remedy such breach within 45 days
after receipt of notice, (iii) we make a report to the University under the agreement that is determined to be materially false, (iv) we declare insolvency or
bankruptcy or (v) we take any action that causes patent rights or technical information to be subject to any lien or encumbrance and fail to remedy within 45
days of receipt of notice. We may terminate the agreement at any time upon at least 90 days’ written notice. Upon expiration or termination of the agreement,
all rights revert to the University.
Trade secrets
In addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive
position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees,
and consultants, and invention assignment agreements with our employees. These agreements are designed to protect our proprietary information and, in the
case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These
agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be
independently discovered by competitors. To the extent that our commercial partners, collaborators, employees, and consultants use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Government regulation and product approval
FDA approval process
In the United States, pharmaceutical products are subject to extensive regulation by the U.S. Food and Drug Administration, or FDA. The Federal Food,
Drug, and Cosmetic Act, or the FDC Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing,
manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and
import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or
judicial sanctions, such as FDA refusal to approve pending new drug applications, or NDAs, warning letters, voluntary product recalls, product seizures, total
or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
Pharmaceutical product development in the United States typically involves the performance of nonclinical laboratory and animal tests, the submission to the
FDA of an investigational new drug application, or IND, which must become effective before clinical testing may commence, and adequate, well-controlled
clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market
approval requirements typically takes many years, and the actual time required may vary substantially based upon the type, complexity, and novelty of the
product or disease.
Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal studies to assess the characteristics and
potential safety and efficacy of the product. The conduct of the preclinical and other nonclinical tests must comply with certain federal regulations and
requirements, including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information,
including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term nonclinical tests, such as animal
tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.
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A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither
commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin.
Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator.
Clinical trials must be conducted: (i) in compliance with federal regulations, including those encompassing good clinical practice, or GCP, requirements that
are meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, investigators, and monitors, and (ii) under protocols
detailing the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol
involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time by imposing a clinical hold or impose other sanctions if it
believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients.
The clinical trial protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, at
each site where a clinical trial will be performed for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or
permanently, for failure to comply with the IRB’s requirements or it may impose other conditions.
Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap, and in some cases,
such as areas of high unmet medical need, approvals may be achieved without completing all phases. In Phase 1, the initial introduction of the drug into
healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing
doses, and, if possible, early evidence of effectiveness. Phase 2 usually involves clinical trials in a limited patient population to determine the effectiveness of
the drug for a particular indication, dosage tolerance, and optimum dosage, and to identify common adverse effects and safety risks. If a compound
demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 clinical trials are undertaken to obtain the additional
information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to
evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In some cases, the FDA may require
two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 clinical trial with other confirmatory
evidence may be sufficient in rare instances where the clinical trial is a large multicenter trial demonstrating internal consistency and a statistically very
persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity, or prevention of a disease with potentially serious outcome, and
confirmation of the result in a second clinical trial would be practically or ethically impossible.
After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of
the product may begin in the United States. The NDA must include the results of all nonclinical, clinical, and other testing and a compilation of data relating
to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA is substantial. Under federal law, the
submission of most NDAs is additionally subject to a substantial application user fee, currently over $2 million for an NDA with clinical information, and the
manufacturer and/or sponsor under an approved NDA is also subject to annual product and establishment user fees, currently approximately $100,000 per
product and over $500,000 per establishment. These fees are typically increased annually.
The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold
determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The
FDA has agreed to certain performance goals in the review of NDAs. The FDA seeks to review applications for standard review drug products within ten
months, and applications for priority review drugs within six months. Priority review can be applied to drugs intended to treat a serious condition and that the
FDA determines offer major advances in treatment, or provide a treatment where no adequate therapy exists. The review process for both standard and
priority review may be extended by FDA for three additional months to consider certain late-submitted information, or information intended to clarify
information already provided in the submission.
The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory committee,
which is typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be
approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an
NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities
at which the drug is manufactured. The FDA will not approve the product unless compliance with current good manufacturing practice, or cGMP,
requirements is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.
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After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter
generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the
application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter.
The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.
An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA
approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks.
REMS can include medication guides, communication plans for health care professionals, and elements to assure safe and effective use, or ETASU. ETASU
can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special
monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover,
product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may
be withdrawn if compliance with regulatory requirements is not maintained or problems are identified following initial marketing.
Disclosure of clinical trial information
Sponsors of clinical trials of certain FDA-regulated products, including prescription drugs, are required to register and disclose certain clinical trial
information on a public website maintained by the U.S. National Institutes of Health. Information related to the product, patient population, phase of
investigation, clinical trial sites and investigator, and other aspects of the clinical trial is made public as part of the registration. Sponsors are also obligated to
disclose the results of these clinical trials after completion if the product candidate is ultimately approved, and disclosure of the results of these clinical trials
will be delayed until such approval. Competitors may use this publicly-available information to gain knowledge regarding the design and progress of our
development programs.
The Hatch-Waxman Act
Orange book listing
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent that has claims that cover the applicant’s product or
method of therapeutic use. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug
Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by
potential generic competitors in support of approval of an abbreviated new drug application, or ANDA. The ANDA request to market a drug product that has
the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically
equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of,
nonclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as “generic
equivalents” to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.
The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the
applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but
will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product.
The ANDA applicant may also elect to submit a section viii statement, certifying that its proposed ANDA label does not contain or carve out any language
regarding the patented method-of-use, rather than certify to a listed method-of-use patent.
If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product
have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a
Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph
IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a
patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt
of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement
of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.
The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.
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Exclusivity
Upon NDA approval of a new chemical entity or NCE, which is a drug that contains no active moiety that has been approved by the FDA in any other NDA,
that drug receives five years of marketing exclusivity during which time the FDA cannot receive any ANDA seeking approval of a generic version of that
drug. Certain changes to a drug, such as the addition of a new indication to the package insert or a different formulation, are associated with a three-year
period of exclusivity during which the FDA cannot approval an ANDA for a generic drug that includes the change.
An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed on an NCE patent and any time after approval if
an ANDA is filed based on a new indication or a new formulation. If there is no listed patent in the Orange Book, there may not be a Paragraph IV
certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period.
Patent term extension
After NDA approval, owners of relevant drug patents may apply for up to a five-year patent term extension. The allowable patent term extension is calculated
as half of the drug’s testing phase—the time between when the IND becomes effective and NDA submission—and all of the review phase—the time between
NDA submission and approval, up to a maximum of five years. The time can be shortened if FDA determines that the applicant did not pursue approval with
due diligence. The total patent term after the extension may not exceed 14 years.
For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases
the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by
one year. The director of the PTO must determine that approval of the drug covered by the patent for which a patent extension is being sought is likely.
Interim patent extensions are not available for a drug for which an NDA has not been submitted.
Advertising and promotion
Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, FDA closely regulates the post-approval marketing
and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and
educational activities and promotional activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the
provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or
certain manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be
implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same
procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.
Adverse event reporting and cGMP compliance
Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The FDA also may require post-marketing
testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval
that could restrict the distribution or use of the product. In addition, quality-control, drug manufacture, packaging, and labeling procedures, among other
things, must continue to conform to cGMP after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments
with FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency
inspects manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the areas of
production and quality-control to maintain compliance with cGMP. Regulatory authorities may impose a range of enforcement actions, including bringing a
seizure and injunction in court, withdraw product approvals or request voluntary product recalls if a company fails to comply with cGMP requirements.
Pediatric information
Under the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for
the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug
is safe and effective. The sponsor must submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-phase 2 meeting or as may be agreed
between the sponsor and the FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study
objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request
for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.
The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the
pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs.
The FDA may grant full or partial waivers, or deferrals, for submission of data.
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The Best Pharmaceuticals for Children Act, or BPCA, provides NDA holders a six-month extension of any exclusivity—patent or non-patent—for a drug if
certain conditions are met, including satisfaction of a pediatric trial as described above. Conditions for exclusivity include the FDA’s determination that
information relating to the use of a new drug in the pediatric population may produce health benefits in that population, the FDA making a written request for
pediatric clinical trials, and the applicant agreeing to perform, and reporting on, the requested clinical trials within the statutory timeframe. Applications under
the BPCA are treated as priority applications, with all of the benefits that designation confers.
Special protocol assessment
A company may reach an agreement with FDA under the Special Protocol Assessment, or SPA, process as to the required design and size of clinical trials
intended to form the primary basis of an efficacy claim. Under the FDC Act and FDA guidance implementing the statutory requirement, an SPA is generally
binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue essential to determining safety or efficacy
after the clinical trial begins, public health concerns emerge that were unrecognized at the time of the protocol assessment, the sponsor and FDA agree to the
change in writing, or if the clinical trial sponsor fails to follow the protocol that was agreed upon with the FDA.
Expedited review and approval
The FDA has various programs, including Fast Track, priority review, accelerated approval and breakthrough therapy designation which are intended to
expedite or simplify the process for reviewing drugs, and/or provide for approval on the basis of surrogate endpoints. Even if a drug qualifies for one or more
of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval
will not be shortened. Generally, drugs that may be eligible for these programs are those for serious or life-threatening conditions, those with the potential to
address unmet medical needs, and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the
development, and expedite the review, of drugs to treat serious diseases and fill an unmet medical need. The request may be made at the time of IND
submission and generally no later than the pre-NDA meeting. The FDA will respond within 60 calendar days of receipt of the request. Priority review, which
is requested at the time of NDA submission, is designed to give drugs that offer major advances in treatment or provide a treatment where no adequate
therapy exists an initial review within six months as compared to a standard review time of ten months. Although Fast Track and priority review do not affect
the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite review
of the application for a drug designated for priority review. Accelerated approval provides an earlier approval of drugs to treat serious diseases, and that fill an
unmet medical need based on a surrogate endpoint, which is a laboratory measurement or physical sign used as an indirect or substitute measurement
representing a clinically meaningful outcome. Discussions with the FDA about the feasibility of an accelerated approval typically begin early in the
development of the drug in order to identify, among other things, an appropriate endpoint. As a condition of approval, the FDA may require that a sponsor of
a drug receiving accelerated approval perform post-marketing clinical trials to confirm the appropriateness of the surrogate marker clinical trial.
Another expedited program is that for Breakthrough Therapy Designation, which is designed to expedite the development and review of drugs that are
intended to treat a serious condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available
therapy on a clinically significant endpoint(s). A sponsor may request Breakthrough Therapy designation at the time that the IND is submitted, or no later
than at the end-of-Phase 2 meeting. The FDA will respond to a Breakthrough Therapy designation request within sixty days of receipt of the request. A drug
that receives Breakthrough Therapy designation is eligible for all fast track designation features, intensive guidance on an efficient drug development
program, beginning as early as Phase 1 and commitment from the FDA involving senior managers.
Regulation of companion diagnostic devices
If we decide that a diagnostic test would provide useful information for patient selection or if the FDA requires us to develop such a test, we may work with a
collaborator to develop an in vitro diagnostic, or companion test. The FDA regulates in vitro diagnostic tests as medical devices, and the type of regulation to
which such a test will be subjected will depend, in part, on a risk assessment by the FDA as well as a determination of whether the test is intended to yield
results that would be helpful to know versus one that the FDA or we believe is necessary to know for the safe and effective use of our drugs under
development.
The FDA issued Guidance on In-Vitro Companion Diagnostic Devices in August 2014, which is intended to assist companies developing in vitro companion
diagnostic devices and companies developing therapeutic products that depend on the use of a specific in vitro companion diagnostic for the safe and effective
use of the product. The FDA defined an in vitro companion diagnostic device, or IVD companion diagnostic device, as a device that provides information that
is essential for the safe and effective use of a corresponding therapeutic product. The use of an IVD companion diagnostic device with a therapeutic product
will be stipulated in the instructions for use in the labeling of both the diagnostic device and the corresponding therapeutic product, including the labeling of
any generic equivalents of the therapeutic product. The FDA expects that the therapeutic product sponsor will address the need for an approved or cleared
IVD companion diagnostic device in its therapeutic product development plan and that, in most cases, the therapeutic product and its corresponding
companion diagnostic will be developed contemporaneously.
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Europe/Rest of world government regulation
In addition to regulations in the United States, we are and will be subject, either directly or through our distribution partners, to a variety of regulations in
other jurisdictions governing, among other things, clinical trials and commercial sales and distribution of our products, if approved.
Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries prior to the
commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a process that requires the
submission of a clinical trial application much like an IND prior to the commencement of human clinical trials. In Europe, for example, a clinical trial
application, or CTA, must be submitted to the competent national health authority and to independent ethics committees in each country in which a company
plans to conduct clinical trials. Once the CTA is approved in accordance with a country’s requirements, clinical trials may proceed in that country.
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country, even
though there is already some degree of legal harmonization in the European Union member states resulting from the national implementation of underlying
E.U. legislation. In all cases, the clinical trials are conducted in accordance with GCP and other applicable regulatory requirements.
To obtain a marketing license for a new drug, or medicinal product in the European Union, the sponsor must obtain approval of a marketing authorization
application. The way in which a medicinal product can be approved in the European Union depends on the nature of the medicinal product.
The centralized procedure results in a single marketing authorization granted by the European Commission that is valid across the European Union, as well as
in Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for human drugs that are: (i) derived from biotechnology processes, such as
genetic engineering, (ii) contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative
diseases, autoimmune and other immune dysfunctions and viral diseases, (iii) officially designated “orphan drugs” (drugs used for rare human diseases) and
(iv) advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered medicines. The centralized procedure may at the request of
the applicant also be used for human drugs which do not fall within the above mentioned categories if the human drug (a) contains a new active substance
which was not authorized in the European Community; or (b) the applicant shows that the medicinal product constitutes a significant therapeutic, scientific or
technical innovation or that the granting of authorization in the centralized procedure is in the interests of patients or animal health at the European
Community level.
Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of a marketing authorization application by the EMA is
210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the
Committee for Medicinal Products for Human Use, or CHMP), with adoption of the actual marketing authorization by the European Commission thereafter.
Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest from
the point of view of therapeutic innovation, defined by three cumulative criteria: the seriousness of the disease to be treated; the absence of an appropriate
alternative therapeutic approach, and anticipation of exceptional high therapeutic benefit. In this circumstance, EMA ensures that the evaluation for the
opinion of the CHMP is completed within 150 days and the opinion issued thereafter.
The mutual recognition procedure, or MRP, for the approval of human drugs is an alternative approach to facilitate individual national marketing
authorizations within the European Union. Basically, the MRP may be applied for all human drugs for which the centralized procedure is not obligatory. The
MRP is applicable to the majority of conventional medicinal products, and is based on the principle of recognition of an already existing national marketing
authorization by one or more member states.
The characteristic of the MRP is that the procedure builds on an already existing marketing authorization in a member state of the E.U. that is used as
reference in order to obtain marketing authorizations in other E.U. member states. In the MRP, a marketing authorization for a drug already exists in one or
more member states of the E.U. and subsequently marketing authorization applications are made in other European Union member states by referring to the
initial marketing authorization. The member state in which the marketing authorization was first granted will then act as the reference member state. The
member states where the marketing authorization is subsequently applied for act as concerned member states.
The MRP is based on the principle of the mutual recognition by European Union member states of their respective national marketing authorizations. Based
on a marketing authorization in the reference member state, the applicant may apply for marketing authorizations in other member states. In such case, the
reference member state shall update its existing assessment report about the drug in 90 days. After the assessment is completed, copies of the report are sent
to all member states, together with the approved summary of product characteristics, labeling and package leaflet. The concerned member states then have 90
days to recognize the decision of the reference member state and the summary of product characteristics, labeling and package leaflet. National marketing
authorizations shall be granted within 30 days after acknowledgement of the agreement.
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Should any Member State refuse to recognize the marketing authorization by the reference member state, on the grounds of potential serious risk to public
health, the issue will be referred to a coordination group. Within a timeframe of 60 days, member states shall, within the coordination group, make all efforts
to reach a consensus. If this fails, the procedure is submitted to an EMA scientific committee for arbitration. The opinion of this EMA Committee is then
forwarded to the Commission, for the start of the decision-making process. As in the centralized procedure, this process entails consulting various European
Commission Directorates General and the Standing Committee on Human Medicinal Products or Veterinary Medicinal Products, as appropriate.
Brexit
The United Kingdom electorate voted in a referendum in June 2016 to voluntarily depart from the European Union, known as Brexit. In December 2019, the
United Kingdom approved the Withdrawal Agreement and left the European Union (“Brexit”) on January 31, 2020. As the regulatory framework for
pharmaceutical products in the United Kingdom is derived from European Union directives and regulations, Brexit could materially impact the future
regulatory regime which applies to products and the approval of product candidates in the United Kingdom. At this time it is unclear whether Brexit will have
a material regulatory impact with respect to product candidates and products in the United Kingdom.
Other Countries
For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance
with GCP and the other applicable regulatory requirements.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Employees
As of December 31, 2019, we had 104 full-time employees, including 75 in research and development and 29 in general and administrative functions. We
have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We consider our relations with our
employees to be good.
Available Information
Our internet address is www.g1therapeutics.com. Our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and all
amendments to those reports, are available to you free of charge through the Investors section of our website as soon as reasonably practicable after such
materials have been electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC. The information found on our website is
not part of this or any other report we file with, or furnish to, the SEC.
In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. Our filings with the SEC may be accessed through the SEC’s website at http://www.sec.gov.
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Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of
the other information in this Annual Report, including our financial statements and related notes, before investing in our common stock. The risks and
uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not
material, may also become important factors that affect us. If any of the following risks occur, our business, operating results and prospects could be
materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment.
Risks related to our financial position and need for additional capital
We have incurred significant operating losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain
profitability.
We have incurred significant operating losses since our inception. We incurred net losses of $122.4 million for the year ended December 31, 2019, $85.3
million for the year ended December 31, 2018, and $60.1 million for the year ended December 31, 2017. As of December 31, 2019, we had an accumulated
deficit of $336.9 million. Our product candidates span a range from preclinical development to Phase 2 clinical trials, and it may be several years, if ever,
before we have a product candidate ready for commercialization. To date, we have financed our operations primarily through sales of our preferred and
common stock. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may
fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:
continue development of our product candidates, including additional clinical trials;
identify and develop new product candidates;
seek marketing approvals for our product candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
achieve market acceptance of our product candidates in the medical community and with third-party payors;
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• maintain, expand and protect our intellectual property portfolio;
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hire additional personnel;
enter into collaboration arrangements, if any, for the development of our product candidates or in-license other products and technologies;
achieve milestones requiring payment under our in-licensing programs;
add operational, financial and management information systems and personnel, including personnel to support our product development and
planned future commercialization efforts; and
incur increased costs as a result of operating as a public company.
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Because of the numerous risks and uncertainties associated with developing pharmaceutical drugs, we are unable to predict the extent of any future losses or
when we will become profitable, if at all. In addition, our expenses could increase beyond expectations if we are required by the FDA or foreign regulatory
agencies, to perform studies and clinical trials in addition to those that we currently anticipate, or if there are any delays in our or our partners completing
clinical trials or the development of any of our product candidates.
To become and remain profitable, we must develop and eventually commercialize a product or products with significant market potential. This will require us
to be successful in a range of challenging activities, including the following:
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completing clinical trials of our product candidates that meet their clinical endpoints;
obtaining marketing approval for our product candidates;
manufacturing, marketing and selling those products for which we may obtain marketing approval; and
achieving market acceptance of our product candidates in the medical community and with third-party payors.
We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. If we
do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable
would decrease the value of the company and could impair our ability to raise capital, maintain our discovery and preclinical development efforts, expand our
business or continue our operations and may require us to raise additional capital that may dilute your ownership interest. A decline in the value of our
company could also cause you to lose all or part of your investment.
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Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
Biopharmaceutical drug development is a highly speculative undertaking and involves a substantial degree of risk. Our operations to date have been limited to
organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking
preclinical studies, and conducting clinical trials of trilaciclib, rintodestrant and lerociclib. We have not yet demonstrated our ability to successfully complete
large-scale, pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or
conduct sales and marketing activities necessary for successful product commercialization. Typically, it takes several years to develop one new drug from the
time it is discovered to when it is available for treating patients. In addition, as a new business, we may encounter unforeseen expenses, difficulties,
complications, delays and other known and unknown factors. We will need to transition from a company with a research focus to a company capable of
supporting commercial activities. We may not be successful in such a transition.
We will need substantial additional funding. If we are unable to raise capital when needed, we would be compelled to delay, reduce or eliminate our
product development programs or commercialization efforts.
The development of pharmaceutical drugs is a capital-intensive venture. We expect our expenses to increase along with our ongoing activities, particularly as
we conduct larger-scale clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our
product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We may
also need to raise additional funds sooner if we choose to pursue additional indications and/or geographies for our product candidates or otherwise expand
more rapidly than we presently anticipate. Furthermore, we have incurred and expect to continue to incur additional costs associated with operating as a
public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise
capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our clinical programs, development efforts or any future
commercialization efforts.
As of December 31, 2019, we had $269.2 million in cash and cash equivalents. We believe that, based upon our current operating plan, our existing capital
resources will be sufficient to fund our anticipated operations for greater than 12 months from the date of filing this Annual Report. Our future capital
requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly
spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated
with successful research and development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for
development and any approved marketing and commercialization activities. In addition, our future capital requirements will depend on many factors, and
could increase significantly as a result of many factors, including:
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the scope, progress, results and costs of preclinical 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 collaboration arrangements for the development of our product candidates on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under our license agreement and any collaboration
agreements into which we may enter, if any;
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, such as rintodestrant, and the terms of such in-licenses;
the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product
candidates for which we receive marketing approval;
revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
and
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims.
Conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that can take years to complete, and we may never
generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may
not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that may not be commercially available for some
time, if ever. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.
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Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and
commercialize our product candidates. Volatility in the financial markets have generally made equity and debt financing more difficult to obtain and may
have a material adverse effect on our ability to meet our fundraising needs. We cannot guarantee that future financing will be available in sufficient amounts
or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the
issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or
development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business
opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product
candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity financings,
debt financings, collaborations, strategic alliances and licensing arrangements. The sale of additional equity or convertible debt securities would dilute all of
our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive
covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights,
limitations on declaring dividends and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required
to seek funds through collaborations, strategic alliances or licensing arrangements with third parties, and we could be required to do so at an earlier stage than
otherwise would be desirable. In connection with any such collaborations, strategic alliances or licensing arrangements, we may be required to relinquish
valuable rights to our intellectual property, future revenue streams, research programs or product candidates, grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves, or otherwise agree to terms unfavorable to us, any of which may have a material
adverse effect on our business, operating results and prospects.
Risks related to development of our product candidates
Initial success in our ongoing clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.
We are currently evaluating our product candidates in clinical trials. There can be no assurance that any of our clinical trials will ultimately be successful or
support further clinical development of any of our product candidates. There is a high failure rate for drugs and biologics proceeding through clinical trials. A
number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving
promising results in earlier studies, and any such setbacks in our clinical development could have a material adverse effect on our business and operating
results.
If we are unable to successfully develop and commercialize our product candidates or experience significant delays in doing so, our business will be
materially harmed.
We currently do not have any products that have gained marketing approval. We have invested substantially all of our efforts and financial resources
identifying and developing our CDK4/6 inhibitor product candidates, trilaciclib and lerociclib, and our oral SERD product candidate, rintodestrant. Our
ability to generate product revenues will depend on the successful development and eventual commercialization of one or more of our product candidates. We
currently generate no revenues from sales of any drugs, and we may never be able to develop or commercialize a marketable drug. Each of our product
candidates will require development, management of development and manufacturing activities, marketing approval in multiple jurisdictions, obtaining
manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenues from
drug sales.
We have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and
rapidly evolving fields, particularly in the biopharmaceutical area. For example, to execute our business plan, we will need to successfully:
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execute development activities for our product candidates, including successful enrollment in and completion of clinical trials;
obtain required marketing approvals for the development and commercialization of our product candidates;
obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates and ensure that we do not infringe
the valid patent rights of third parties;
protect, leverage and expand our intellectual property portfolio;
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establish and maintain clinical and commercial manufacturing capabilities or make arrangements with third-party manufacturers for clinical
and commercial manufacturing;
build and maintain robust sales, distribution and marketing capabilities, either on our own or in collaboration with strategic partners, if our
product candidates are approved;
gain acceptance for our product candidates, if approved, by patients, the medical community and third-party payors;
compete effectively with other therapies;
obtain and maintain healthcare coverage and adequate reimbursement;
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• maintain a continued acceptable safety profile for our product candidates following approval, if approved;
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• manage our spending as costs and expenses increase due to preclinical development, clinical trials, marketing approvals and commercialization.
develop and maintain any strategic relationships we elect to enter into, if any;
enforce and defend intellectual property rights and claims; and
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully
commercialize our product candidates, which would materially harm our business. If we do not receive marketing approvals for our product candidates, we
may not be able to continue our operations.
Our development of a CDK4/6 to prevent or mitigate chemotherapy-induced myelosuppression is novel, unproven and rapidly evolving and may never
lead to a marketable product.
Trilaciclib is a short-acting intravenous CDK4/6 inhibitor. The use of a CDK4/6 inhibitor to prevent or mitigate chemotherapy-induced myelosuppression is a
novel approach and we believe that we are the only company currently developing a CDK4/6 inhibitor for this patient population. The scientific evidence to
support the feasibility of developing this product candidate is both preliminary and limited. Even though trilaciclib has demonstrated positive results in
clinical trials for small cell lung cancer, we may not succeed in demonstrating safety and efficacy of trilaciclib in additional indications.
Advancing this novel therapy creates significant challenges for us, including:
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obtaining marketing approval for multiple indications, as the FDA and other regulatory authorities have limited experience with commercial
development of a CDK4/6 inhibitor for this type of use;
educating medical personnel regarding the potential safety benefits, as well as the challenges, of incorporating our product candidates, if
approved, into their treatment regimens; and
establishing sales and marketing capabilities upon obtaining any marketing approval to gain market acceptance of a novel therapy.
If we experience delays or difficulties in the enrollment of patients in clinical trials, development of our product candidates may be delayed or prevented,
which would have a material adverse effect on our business.
Identifying and qualifying patients to participate in clinical trials for our product candidates is critical to our success. In particular, because we are initially
focused on patients with diseases with genetically defined tumors, our ability to enroll eligible patients may be limited or may result in slower enrollment than
we anticipate. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of
eligible patients to participate in these trials. Patient enrollment may be affected by many factors including:
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the severity of the disease under investigation;
the eligibility criteria for the clinical trial in question;
the perceived risks and benefits of the product candidate under study;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the availability of competing therapies and clinical trials; and
the proximity and availability of clinical trial sites for prospective patients.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our clinical trials may be delayed or terminated. Any delays in completing
our clinical trials will increase our costs, delay or prevent our product candidate development and approval process, and jeopardize our ability to commence
product sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly.
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Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in
completing, or ultimately be unable to complete, the development and may experience delays in obtaining, or ultimately be unable to obtain, the approval
of our product candidates.
The risk of failure in drug development is high. Before obtaining marketing approval from regulatory authorities for the sale of any of our product candidates,
we must complete preclinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.
Clinical trials are expensive, difficult to design and implement and can take several years to complete, and their outcomes are inherently uncertain. Failure
can occur at any time during the clinical trial process. Further, the results of preclinical studies and early clinical trials of our product candidates may not be
predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and
clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. It is impossible to predict when or
if any of our product candidates will prove effective or safe in humans or will receive marketing approval.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or
commercialize our product candidates. Clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for
a variety of reasons, such as:
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delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design that we are able to execute;
delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority
regarding the scope or design of a clinical trial;
delays in reaching, or failure to reach, agreement on acceptable terms with prospective trial sites and prospective contract research
organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial
sites;
inability, delay, or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other
clinical programs;
delay or failure in recruiting and enrolling suitable subjects to participate in a trial;
delay or failure in having subjects complete a trial or return for post-treatment follow-up;
clinical sites and investigators deviating from the clinical protocol, failing to conduct the trial in accordance with regulatory requirements, or
dropping out of a trial;
failure to initiate or delay of or failure to complete a clinical trial as a result of an IND being placed on clinical hold by the FDA, or for other
reasons;
lack of adequate funding to continue a clinical trial, including unforeseen costs due to enrollment delays, requirements to conduct additional
clinical trials and increased expenses associated with the services of our CROs and other third parties;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional clinical trials or abandon product development programs;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials
may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at
all;
regulators, or a Data Safety Monitoring Board, or DSMB, if one is used for our clinical trials, may require that we suspend or terminate our
clinical trials for various reasons, including noncompliance with regulatory requirements, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a drug, or a finding that the participants are being exposed to unacceptable health risks;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be
insufficient;
the FDA or other regulatory authorities may require us to submit additional data or impose other requirements before permitting us to initiate a
clinical trial; or
there may be changes in governmental regulations or administrative actions.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing
approval for our product candidates. Further, the FDA may disagree with our clinical trial design and our interpretation of data from clinical trials or may
change the requirements for approval even after it has reviewed and commented on the design for our clinical trials.
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If we are required to conduct additional clinical trials or other studies of our product candidates beyond those that we currently contemplate, if we are unable
to successfully complete clinical trials of our product candidates or other studies, if the results of these trials or tests are not positive or are only modestly
positive or if there are safety concerns, we may:
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be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval for our product candidates at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings that would reduce the potential market
for our products or inhibit our ability to successfully commercialize our products;
be subject to additional post-marketing restrictions and/or requirements; or
have the product removed from the market after obtaining marketing approval.
Our product development costs will also increase if we experience delays in preclinical and clinical development or receiving the requisite marketing
approvals. We do not know whether any of our preclinical studies or clinical trials will need to be restructured or will be completed on schedule, or at all.
Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product
candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and
may harm our business and results of operations.
Risks related to marketing approval of our product candidates
If we are not able to obtain, or if there are delays in obtaining, required marketing approvals, we will not be able to commercialize our product
candidates, and our ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, import and export are subject to comprehensive regulation by the FDA and
other regulatory agencies in the United States and by comparable authorities in other countries. These requirements include submissions of safety and other post-
marketing information and reports, registration and listing requirements, current good manufacturing practice, or cGMP, requirements relating to manufacturing,
quality control, quality assurance and corresponding maintenance of records and documents, including periodic inspections by FDA and other regulatory
authorities, requirements regarding the distribution of samples to physicians and recordkeeping. Before we can commercialize any of our product candidates, each
such product candidate must be approved by the FDA pursuant to a new drug application, or NDA, in the United States, by the European Medicines Agency, or
EMA, pursuant to a marketing authorization application, or MAA, in the European Union, and by similar regulatory authorities outside the United States prior to
commercialization.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive and takes several years, if approval is obtained at all, and
can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Failure to obtain
marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of our
product candidates from regulatory authorities in any jurisdiction. We have limited experience in planning and conducting the clinical trials required for
marketing approvals, and we expect to rely on third-party contract research organizations, or CROs, to assist us in this process. Obtaining marketing approval
requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to
establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product
manufacturing process, and in many cases the inspection of manufacturing facilities by the regulatory authorities. Our product candidates may not be
effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude
our obtaining marketing approval or prevent or limit commercial use. Regulatory authorities have substantial discretion in the approval process and may
refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical studies or clinical trials. Our
product candidates could be delayed in receiving, or fail to receive, marketing approval for many reasons, including the following:
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
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• we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe
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and effective for its proposed indication;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities
for approval;
• we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission
to obtain marketing approval in the United States or elsewhere;
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third-party manufacturers or our clinical or commercial product candidates may be unable to meet the FDA’s cGMP requirements or similar
requirements of foreign regulatory authorities; and
the approval requirements or policies of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering
our clinical data insufficient for approval.
In addition, even if we were to obtain approval, regulatory authorities may approve our product candidates for fewer or more limited indications than we
request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does
not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could
materially harm the commercial prospects for our product candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates
may be harmed and our ability to generate revenues will be materially impaired.
Our product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an
approved label, or result in significant negative consequences following marketing approval, if any.
Undesirable side effects caused by our product candidates could cause us or the FDA or other regulatory authorities to interrupt, delay or halt our clinical
trials and could result in more restrictive labels or the delay or denial of marketing approval by the FDA or other regulatory authorities of our product
candidates. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials
could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval
of our product candidates for any or all targeted indications. In addition to this, the drug-related side effects could affect patient recruitment or the ability of
enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and
prospects significantly.
Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients, rare and severe side effects of our
product candidates may only be uncovered with a significantly larger number of patients exposed to the product candidate. If our product candidates receive
marketing approval and we or others identify undesirable side effects caused by such product candidates (or any other similar drugs) after such approval, a
number of potentially significant negative consequences could result, including:
regulatory authorities may withdraw or limit their approval of such product candidates;
regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;
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• we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
• we may be required to change the way such product candidates are distributed or administered, conduct additional clinical trials or change the
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labeling of the product candidates;
regulatory authorities may require a Risk Evaluation and Mitigation Strategy plan to mitigate risks, which could include medication guides,
physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk
minimization tools;
• we may be subject to regulatory investigations and government enforcement actions;
• we may decide to remove such product candidates from the marketplace after they are approved;
• we could be sued and held liable for injury caused to individuals exposed to or taking our product candidates; and
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our reputation may suffer.
We believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidates and could
substantially increase the costs of commercializing our product candidates, if approved, and significantly impact our ability to successfully commercialize our
product candidates and generate revenues.
A Breakthrough Therapy Designation by the FDA may not lead to a faster development or regulatory review or approval process, and does not increase
the likelihood that our product candidates will receive marketing approval.
A Breakthrough Therapy Designation may be granted to a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or
life-threatening disease or condition, and for which preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over
existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that
have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient
path for development. Drugs designated as Breakthrough Therapies are also eligible for accelerated approval.
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Designation as a Breakthrough Therapy is within the discretion of the FDA. Although the FDA granted Breakthrough Therapy Designation to trilaciclib, the
receipt of such Breakthrough Therapy Designation by itself for a product candidate may not result in a faster development process, review or approval
compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even though
trilaciclib qualifies as a Breakthrough Therapy, the FDA may later decide that it no longer meet the conditions for qualification.
A Fast Track Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or
approval process and does not increase the likelihood that our product candidates will receive marketing approval.
We do not currently have Fast Track Designation for any of our product candidates but may seek such designation. If a drug is intended for the treatment of a
serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply
for FDA Fast Track Designation. The FDA has broad discretion whether to grant this designation. Even if we believe a particular product candidate is eligible
for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a
faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that
the designation is no longer supported by data from our clinical development program. Many drugs that have received Fast Track Designation have failed to
obtain drug approval.
Any product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject
to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we
experience unanticipated problems with our products, when and if any of them are approved.
If the FDA or a comparable foreign regulatory authority approves any of our product candidates, activities such as the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing
regulatory requirements. The FDA or a comparable foreign regulatory authority may also impose requirements for costly post-marketing preclinical studies or
clinical trials and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs
to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent
restrictions on manufacturers’ communications regarding use of their products, and if we promote our products beyond their approved indications, we may be
subject to enforcement actions or prosecution arising from that off-label promotion. Violations of the Federal Food, Drug, and Cosmetic Act relating to the
promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state
consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure
to comply with regulatory requirements, may yield various results, including:
restrictions on such products, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
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• withdrawal of the products from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.
Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties.
Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties
and sanctions.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval of our product
candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to
maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and
ability to achieve or sustain profitability.
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Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future
earnings.
Although we do not currently have any drugs on the market, once we begin commercializing our product candidates, we will be subject to additional
healthcare statutory and regulatory requirements and enforcement by federal government and the states and foreign governments in the jurisdictions in which
we conduct our business. Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any
product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly
applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through
which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and
regulations include the following:
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the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or paying
remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the
purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as
Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have
committed a violation;
the federal false claims laws impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities
for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a
false statement to avoid, decrease or conceal an obligation to pay money to the federal government; in addition, the government may assert that
a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for
purposes of the False Claims Act;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme
to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-
Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have
committed a violation;
the federal physician payment transparency requirements, sometimes referred to as the “Sunshine Act” under the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, require
manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health
Insurance Program to report to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of
value to physicians and teaching hospitals and the ownership and investment interests of physicians and their immediate family members in
such manufacturers;
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imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business
associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory
contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers;
some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to
payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and
state and foreign laws also govern the privacy and security of health information in certain circumstances, many of which differ from each
other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.
It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other
governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment,
exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If
any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they
may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
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Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and
affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the
healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability
to profitably sell any product candidates for which we obtain marketing approval.
In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and
pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and certain disabled people and introduced a
reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this law provided authority for limiting the number
of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this law and future laws could decrease the coverage
and price that we will receive for any approved products. While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often
follow Medicare coverage policy and payment limitations in setting their own payment rates. Therefore, any limitations in reimbursement that results from
the MMA may result in reductions in payments from private payors.
In March 2010, the ACA became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of
healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose
new taxes and fees on the health industry and impose additional health policy reforms.
Among the provisions of the ACA of importance to our potential product candidates are the following:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative
powers, and enhanced penalties for noncompliance;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated
prices;
extension of manufacturers’ Medicaid rebate liability;
expansion of eligibility criteria for Medicaid programs;
expansion of the entities eligible for discounts under the Public Health Service Act’s pharmaceutical pricing program;
new requirements to report financial arrangements with physicians and teaching hospitals;
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,
along with funding for such research.
The current administration supports a repeal of the ACA and an Executive Order has been signed commanding federal agencies to try to waive or delay
requirements of the ACA that impose economic or regulatory burdens on states, families, the health-care industry and others. The Executive Order also
declares that the administration will seek the “prompt repeal” of the law and that the government should prepare to “afford the States more flexibility and
control to create a more free and open healthcare market.” At this time, the immediate impact of the Executive Order is not clear. In addition, other legislative
changes have been proposed and adopted since the ACA was enacted. These new laws may result in additional reductions in Medicare and other healthcare
funding.
In addition, there have been several recent U.S. congressional inquiries and proposed and enacted federal and state legislation designed to bring more
transparency to drug pricing, reduce the costs of drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and
reform government program reimbursement methodologies for drug products. The current administration’s proposed budget contains further drug price
control measures that could be enacted or in other future legislation. Although any proposed measures will require authorization through additional legislation
to become effective, Congress and the current administration have each indicated that it will continue to seek new legislative and/or administrative measures
to control drug costs. Also, the FDA recently issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are
authorized for sale in other countries as a means to lower drug prices.
We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in
additional downward pressure on the price that we will receive for any approved product. Any reduction in payments from Medicare or other government
programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms
may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
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Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical
products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed,
or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition, increased scrutiny by the U.S.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and
post-marketing conditions and other requirements.
Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other
risks and uncertainties.
Our future profitability may depend, in part, on our ability to commercialize our product candidates in foreign markets. In order to market and sell our
products in the European Union and many other jurisdictions, we or our third-party collaborators must obtain separate marketing approvals and comply with
numerous and varying regulatory requirements. The approval procedure varies among countries and economic areas and can involve additional testing. The
time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval process outside the United
States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that
the product be approved for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approvals
from regulatory authorities outside the United States on a timely basis, if at all. Approval by FDA does not ensure approval by regulatory authorities in other
countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other
countries or jurisdictions or by FDA. Additionally, a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the
marketing approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods
different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. Obtaining foreign marketing approvals
and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction
of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing
approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we obtain
approval of our product candidates and ultimately commercialize our product candidates in foreign markets, we would be subject to additional risks and
uncertainties, including:
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our customers’ ability to obtain reimbursement for our product candidates in foreign markets;
our inability to directly control commercial activities because we are relying on third parties;
the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;
different medical practices and customs in foreign countries affecting acceptance in the marketplace;
import or export licensing requirements;
longer accounts receivable collection times;
longer lead times for shipping;
language barriers for technical training;
reduced or no protection on pharmaceutical products or their use in some foreign countries;
the unwillingness of courts in some foreign jurisdictions to enforce patents even when valid and infringed in that country;
the possibility of pre-grant or post-grant review proceedings in certain foreign countries that allow a petitioner to hold up patent rights for an
extended period or permanently by challenging the patent filing at the patent office of that country;
the possibility of a compulsory license issued by a foreign country that allows a third-party company or a government to manufacture, use or
sell our products with a government-set low royalty to us;
the existence of additional potentially relevant third-party intellectual property rights;
foreign currency exchange rate fluctuations; and
the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade
restrictions and changes in tariffs.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain
reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product
candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, our business could be harmed, possibly materially.
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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could
harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use,
storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals
and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials
and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of
hazardous materials, we could be held liable for any resulting damages, and the amount of the liability could exceed our resources. We also could incur
significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the
use of hazardous materials, this insurance may not provide adequate coverage against other potential liabilities. We do not maintain insurance for
environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive
materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or
future laws and regulations may impair our discovery, preclinical development or production efforts. Our failure to comply with these laws and regulations
also may result in substantial fines, penalties or other sanctions.
Risks related to the commercialization of our product candidates
Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-
party payors and others in the medical community necessary for commercial success.
If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party
payors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant
product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will
depend on a number of factors, including:
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the timing of our receipt of any marketing approvals;
the terms of any approvals and the countries in which approvals are obtained;
the efficacy and safety and potential advantages and disadvantages compared to alternative treatments;
the prevalence and severity of any side effects associated with our products;
the indications for which our products are approved;
adverse publicity about our products or favorable publicity about competing products;
the approval of other products for the same indications as our products;
our ability to offer our products for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the success of our physician education programs;
the strength of our marketing and distribution support;
the availability of third-party coverage and adequate reimbursement, including patient cost-sharing programs such as copays and deductibles;
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any restrictions on the use of our products together with other medications.
If any product we commercialize fails to achieve market acceptance, it could have a material and adverse effect on our business, financial condition, results of
operation and prospects.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully
than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates and
will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical
companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology
companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are
developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our
approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other
public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development,
manufacturing and commercialization.
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Specifically, there are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnology
companies. If trilaciclib is approved, it would compete with (a) existing growth factor support treatments, and (b) multiple approved drugs or drugs that may
be approved in the future for indications for which we may develop trilaciclib. If lerociclib is approved, it would compete with (a) Pfizer’s approved CDK4/6
inhibitor, Ibrance, (b) Novartis’s approved CDK4/6 inhibitor, Kisqali, (c) Eli Lilly’s approved CDK4/6 inhibitor, Verzenio, (d) if approved, other non-
selective CDK4/6 inhibitor product candidates in clinical development, including product candidates being developed by FLX Bio and OncoMed
Pharmaceuticals, and (e) multiple approved drugs or drugs that may be approved in the future for indications for which we may develop lerociclib. If
rintodestrant is approved, it would compete with (a) the approved intramuscular SERD, fulvestrant, being marketed by AstraZeneca, (b) if approved, other
oral SERDs in development by Radius Health, Genentech, AstraZeneca, Sanofi, Eli Lilly and Zentalis; and (c) multiple approved drugs or drugs that may be
approved in the future for indications for which we may develop rintodestrant.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer
or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other
marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market
position before we are able to enter the market and/or slow our marketing approval. Some of the important competitive factors affecting the success of all of
our product candidates, if approved, are likely to be their efficacy, safety, convenience, price and the availability of reimbursement from government and
other third-party payors.
Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and
expertise in research and development, manufacturing, preclinical studies, conducting clinical trials, obtaining marketing approvals and marketing approved
products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated
among a smaller number of our competitors. Smaller and early-stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and
management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or
necessary for, our programs.
Even if we are able to commercialize any product candidates, such drugs may become subject to unfavorable pricing regulations or third-party coverage
and reimbursement policies, which would harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries require
approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In
some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a
result, we might obtain marketing approval for a product candidate in a particular country, but then be subject to price regulations that delay our commercial
launch of the product candidate, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product
candidate in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product
candidates obtain marketing approval.
Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and reimbursement for these
product candidates and related treatments will be available from government authorities, private health insurers and other organizations. In the United States,
the principal decisions about reimbursement for new medicines are typically made by the CMS, an agency within the U.S. Department of Health and Human
Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to
a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement. Reimbursement agencies in Europe may be more
conservative than CMS. For example, a number of cancer drugs are generally covered and paid for in the United States, but have not been approved for
reimbursement in certain European countries. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and
third-party payors have attempted to control costs by limiting coverage and the amount of payments for particular drugs. Increasingly, third-party payors are
requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for drugs. We cannot be sure
that coverage will be available for any product candidate that we commercialize and, if coverage is available, the level of payments. Reimbursement may
impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only
to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
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In addition to CMS and private payors, professional organizations such as the National Comprehensive Cancer Network and the American Society of Clinical
Oncology can influence decisions about reimbursement for new medicines by determining standards of care. In addition, many private payors contract with
commercial vendors who sell software that provide guidelines that attempt to limit utilization of, and therefore reimbursement for, certain products deemed to
provide limited benefit to existing alternatives. Such organizations may set guidelines that limit reimbursement or utilization of our products.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the
drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug
will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement
levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to
the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated
into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare
programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices
than in the United States. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any
approved drugs that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize drugs and
our overall financial condition.
If we are unable to establish effective sales or marketing capabilities or enter into agreements with third parties to sell or market our product candidates,
we may not be able to effectively sell or market our product candidates, if approved, or generate product revenues.
We have limited infrastructure for the sale, marketing or distribution of drugs. To achieve commercial success for any approved product candidate for which
we retain sales and marketing responsibilities, we must build our sales, marketing, managerial, and other non-technical capabilities or make arrangements
with third parties to perform these services. There are risks involved with both establishing our own sales and marketing capabilities and entering into
arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay
any drug launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not
occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would
be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
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our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future drugs;
the lack of complementary drugs to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with
more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our drug revenues or the profitability of these drug
revenues to us are likely to be lower than if we were to market and sell any product candidates that we develop ourselves. In addition, we may not be
successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so when needed or on terms that
are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell
and market our product candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with
third parties, we will not be successful in commercializing our product candidates that receive marketing approval or any such commercialization may
experience delays or limitations. If we are not successful in commercializing our product candidates, either on our own or through collaborations with one or
more third parties, our business, results of operations, financial condition and prospects will be materially adversely affected.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the evaluation of our product candidates in human clinical trials and will face an even greater
risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or
products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any product candidates or products that we may develop;
injury to our reputation and significant negative media attention;
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significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the inability to successfully commercialize any products that we may develop.
We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be adequate
to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence
commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost or in an amount adequate to satisfy any liability that may arise.
Risks related to our dependence on third parties
We rely on, and expect to continue to rely on, third parties to conduct our clinical trials for our product candidates. If these third parties do not
successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain marketing
approval for or commercialize our product candidates, and our business could be substantially harmed.
We do not have the ability to independently conduct clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third
parties, such as CROs, to conduct or otherwise support clinical trials for our product candidates. We expect to rely heavily on these parties for performance of
clinical trials for our product candidates. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the
applicable protocol, legal and regulatory requirements and scientific standards.
We, our investigators, and our CROs will be required to comply with regulations, including good clinical practice, or GCP, and other related requirements for
conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that
the trial patients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. These regulations are enforced
by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any drugs in
clinical development. The FDA enforces GCPs through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If we, our
investigators or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be called into question and the FDA or
comparable foreign regulatory authorities may require us to perform additional clinical trials before considering our marketing applications for approval. We
cannot assure you that, upon inspection, the FDA will determine that any of our future clinical trials will comply with GCPs.
In addition, our clinical trials must be conducted with product candidates produced under cGMPs. Our failure or the failure of our investigators or CROs to
comply with these requirements may require us to repeat clinical trials, which would delay the marketing approval process and could also subject us to
enforcement action. We also are required to register certain clinical trials and post the results of such completed clinical trials involving product candidates for
which we receive marketing approval on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines,
adverse publicity and civil and criminal sanctions.
Although we intend to design the clinical trials for our product candidates, CROs will administer all of the clinical trials. As a result, many important aspects
of our development programs, including their conduct and timing, will be outside of our direct control. Our reliance on third parties to conduct future clinical
trials will also result in less direct control over the management of data developed through clinical trials than would be the case if we were relying entirely
upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating
activities. Outside parties may:
have staffing difficulties;
fail to comply with contractual obligations;
experience regulatory compliance issues;
undergo changes in priorities or become financially distressed;
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• make errors in the design, management or retention of our data or data systems; and/or
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form relationships with other entities, some of which may be our competitors.
These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost
increases that are beyond our control. If the CROs do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with
regulatory requirements, the development, marketing approval and commercialization of our product candidates may be delayed, we may not be able to
obtain marketing approval and commercialize our product candidates, or our development program may be materially and irreversibly harmed. If we are
unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of any clinical trials we
conduct, and this could significantly delay commercialization and require significantly greater expenditures.
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If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not
successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical
data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such
CROs are associated with may be extended, delayed or terminated, and we may not be able to obtain marketing approval for or successfully commercialize
our product candidates. As a result, we believe that our financial results and the commercial prospects for our product candidates in the subject indication
would be harmed, our costs could increase and our ability to generate revenue could be delayed.
We contract with third parties for the manufacture of our product candidates for preclinical studies and clinical trials and expect to continue to do so for
commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such
quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not currently own or operate, nor do we have any plans to establish in the future, any manufacturing facilities. We rely, and expect to continue to rely,
on third parties for the manufacture of our product candidates for preclinical studies and clinical trials, as well as for the commercial manufacture of our drugs
if any of our product candidates receive marketing approval. This reliance on third parties increases the risk that we will not have sufficient quantities of our
product candidates or drugs or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization
efforts.
The facilities used to manufacture our product candidates (drug substance and drug product) must be approved by the FDA (and comparable foreign
regulatory authority depending on where marketing authorizations are filed) before marketing authorizations are approved. Often, but not always, these
inspections are triggered by marketing authorization submissions. We are completely dependent on our contract manufacturers for compliance with current
Good Manufacturing Practices (cGMPs) in connection with the manufacture of our product candidates. If our contract manufacturers cannot successfully
manufacture material that conforms to our specifications and to the regulatory requirements of the FDA or comparable foreign regulatory authority, then we
will not be able to use the products produced at their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to
maintain adequate quality control, quality assurance and qualified personnel. If the FDA or comparable foreign regulatory authority finds that these facilities
do not comply with cGMP, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain
marketing approval for or market our product candidates, if approved. Further, our failure, or the failure of our third party manufacturers, to comply with
these or other applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, if approved, operating restrictions and criminal
prosecutions, any of which could significantly and adversely affect our business and supplies of our product candidates.
We may be unable to establish any agreements with third-party manufacturers or do so on acceptable terms. Even if we are able to establish agreements with
third party manufacturers, reliance on third party manufacturers entails additional risks, including:
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reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
Our product candidates and any other drugs that we may develop may compete with other product candidates and approved drugs for access to manufacturing
facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.
Any performance failure on the part of our existing or future manufacturers could delay clinical development, marketing approval, or commercialization
efforts. If our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers. Although we believe that there are
several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying
any such replacements.
Our current and anticipated future dependence upon others for the manufacture of our product candidates or drugs may adversely affect our future profit
margins and our ability to commercialize any drugs that receive marketing approval on a timely and competitive basis.
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We, or our third-party manufacturers, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity,
which would delay or prevent us from developing our product candidates and commercializing approved products, if any.
In order to conduct large-scale clinical trials of our product candidates, or successfully commercialize such product candidates, we will need to manufacture
them in large quantities. We, or any of our manufacturing partners, may be unable to successfully increase the manufacturing capacity for any of our product
candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If we, or any manufacturing partners,
are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing, and clinical trials of
that product candidate may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained,
which could significantly harm our business.
The third parties upon which we rely for the supply of the drug substance, and drug products are our sole sources of supply and have limited capacity,
and the loss of any of these suppliers could harm our business.
Some drug substances and drug products for our product candidates are supplied to us from single source suppliers with limited capacity. Our ability to
successfully develop our product candidates, and to ultimately supply our commercial drugs in quantities sufficient to meet the market demand, depends in
part on our ability to obtain the drug substances and drug products in accordance with cGMP requirements and in sufficient quantities for clinical trials and
commercialization. It is possible that our suppliers of drug substance or drug product which are not dual-sourced could, for any reason, cease their
operations.
We do not know whether our suppliers will be able to meet our demand, either because of the nature of our agreements with those suppliers, our limited
experience with those suppliers or our relative importance as a customer to those suppliers. It may be difficult for us to assess their ability to timely meet our
demand in the future based on past performance. While our suppliers have generally met our demand for their products on a timely basis in the past, they may
subordinate our needs in the future to their other customers.
For all of our product candidates, we intend to identify and qualify additional manufacturers to provide drug substances and drug products ideally prior to
submission of an NDA to the FDA and/or an MAA to the EMA. Establishing additional or replacement suppliers for drug substances and drug products for
our product candidates, if required, may not be accomplished quickly. If we are able to find a replacement supplier, such replacement supplier would need to
be qualified, or we may have to perform comparative studies comparing the drug product from a new manufacturer to the product used in any completed
clinical trials. All of this may require additional regulatory approval, which could result in further delay. While we seek to maintain adequate inventory of
drug substance and drug product for our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain such
drug substance and drug product from alternate sources at acceptable prices in a timely manner could impede, delay, limit, or prevent our development efforts,
which could harm our business, results of operations, financial condition, and prospects.
We may seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have to alter our
development and commercialization plans.
Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For
some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential
commercialization of those product candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other
things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed
collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or
similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing
and delivering such product candidate to patients, the potential of competing drugs and market conditions generally. The proposed collaborator may also
consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could
be more attractive than the one with us for our product candidate. The terms of any collaborations or other arrangements that we may establish may not be
favorable to us.
We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business
combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.
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We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the
development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other
development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and
undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or
commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not
have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate drug revenue.
In addition, any collaboration that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and
activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these
collaborations. Any such collaboration may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose
significant integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and
financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage
a collaboration, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected
collaboration or integration costs, write-down of assets or goodwill or impairment charges, increased amortization expenses and difficulty and cost in
facilitating the collaboration.
Lastly, disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the
development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These
disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology
companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect us
financially and could harm our business reputation.
Risks related to our intellectual property
If we are unable to obtain and maintain intellectual property protection for our technology and products, or if the scope of the intellectual property
protection obtained is not sufficiently broad, our competitors could commercialize technology and products similar or identical to ours, and our ability to
successfully commercialize our technology and products may be impaired and, if we infringe the valid patent rights of others, we may be prevented from
making, using or selling our products or may be subject to damages or penalties.
Our success depends in large part on our ability to obtain and maintain patents in the United States and other countries that adequately protect our proprietary
technology and products. We seek to protect our proprietary position by filing patent applications in the United States and in foreign countries that cover our
novel product candidates and their uses, pharmaceutical formulations and dosages, and processes for the manufacture of them. Our patent portfolio currently
includes both patents and patent applications.
The patent prosecution process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in
certain jurisdictions. Under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope. It is also
possible that we will fail to identify patentable aspects of our research and development before it is too late to obtain patent protection.
We currently solely own or exclusively license our patents and patent applications and we have the right to control the prosecution of the in-licensed patent
applications. In the future, we may choose to in-license additional patents or patent applications from third parties that we conclude are useful or necessary for
our business goals. We may not have the right to control the preparation, filing, prosecution or maintenance of such patent applications. Therefore, if we do
license additional patents or patent applications in the future, these patents and applications may not be prosecuted and enforced in a manner consistent with
the best interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in
recent years been the subject of much litigation. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we
cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that
we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in
whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or
interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
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Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or
defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith
Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also
affect patent litigation. The U.S. Patent and Trademark Office, or U.S. PTO, recently developed new regulations and procedures to govern administration of
the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions,
became effective on March 16, 2013. The Leahy-Smith Act also created certain new administrative adversarial proceedings, discussed below. It is not clear
what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase
the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could
have a material adverse effect on our business and financial condition.
The U.S. Supreme Court has issued opinions in patent cases in the last few years that many consider may weaken patent protection in the United States, either
by narrowing the scope of patent protection available in certain circumstances, holding that certain kinds of innovations are not patentable or generally
otherwise making it easier to invalidate patents in court. Additionally, there have been recent proposals for additional changes to the patent laws of the United
States and other countries that, if adopted, could impact our ability to obtain patent protection for our proprietary technology or our ability to enforce our
proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the U.S. PTO and the relevant law-making bodies in other
countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce
our existing patents and patents that we might obtain in the future.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from
competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by
developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the
courts or patent offices in the United States and in other countries. Such challenges may result in loss of exclusivity or in patent claims being narrowed,
invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical
technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates
are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing
products similar or identical to ours. Likewise, a court could uphold and enforce a third-party patent that it rules we have infringed, which would subject us to
damages or prevent us from making, using or selling our products.
During patent prosecution in the United States and in most foreign countries, a third party can submit prior art or arguments to the reviewing patent office to
attempt to prevent the issuance of a competitor’s patent. For example, our pending patent applications may be subject to a third-party pre-issuance submission
of prior art to the U.S. PTO or an Observation in Europe. Such submission may convince the receiving patent office not to issue the patent. In addition, if the
breadth or strength of protection provided by our patents and patent applications is reduced by such third-party submission, it could affect the value of our
resulting patent or dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
The risks described here pertaining to our patents and other intellectual property rights also apply to any intellectual property rights that we may license in the
future, and any failure to obtain, maintain and enforce these rights could have a material adverse effect on our business. In some cases, we may not have
control over the prosecution, maintenance or enforcement of the patents that we license, and our licensors may fail to take the steps that we believe are
necessary or desirable in order to obtain, maintain and enforce the licensed patents. Any inability on our part to adequately protect or defend our intellectual
property may have a material adverse effect on our business, operating results and financial position.
Some intellectual property may have been discovered through government funded programs and thus may be subject to federal regulations such as
“march-in” rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive
rights, and limit our ability to contract with non-U.S. manufacturers.
Many of our intellectual property rights were generated through the use of U.S. government funding and are therefore subject to certain federal regulations.
As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh-
Dole Act of 1980, or Bayh-Dole Act. These U.S. government rights in certain inventions developed under a government-funded program include a non-
exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right,
under certain limited circumstances, to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if
it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety
needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to
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as “march-in rights”). The U.S. government also has the right to take title to these inventions if we fail to disclose the invention to the government or fail to
file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also
subject to certain reporting requirements, compliance with which may require us to expend substantial resources. In addition, the U.S. government requires
that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States.
The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been
made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the
circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S.
product manufacturers for products covered by such intellectual property. To the extent any of our current or future intellectual property is generated through
the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
We may become involved in administrative adversarial proceedings in the U.S. PTO or in the patent offices of foreign countries brought by a third party
to attempt to cancel or invalidate our patent rights, which could be expensive, time consuming and cause a loss of patent rights.
The Leahy-Smith Act created for the first time new procedures to challenge issued patents in the United States, including post-grant review and inter
partes review proceedings, which some third parties have been using to cause the cancellation of selected or all claims of issued patents of competitors. For a
patent with a priority date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in a nine-month window from issuance of
the patent. A petition for inter partes review can be filed immediately following the issuance of a patent if the patent was filed prior to March 16, 2013. A
petition for inter partes review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with a priority date of
March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of challenge, whereas inter partes review proceedings can only be
brought to raise a challenge based on published prior art. These administrative adversarial actions at the U.S. PTO review patent claims without the
presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, use a lower burden of proof than used by U.S. federal courts. The U.S. PTO
issued a Final Rule on November 11, 2018, announcing that it will now use the same claim construction currently used in the U.S. federal courts to interpret
patent claims , which is the plain and ordinary meaning of words used. If any of our patents are challenged by a third party in such a U.S. patent office
proceeding, there is no guarantee that we will be successful in defending the patent, which would result in a loss of the challenged patent right to us. Further,
even if a U.S. federal court or PTAB rules that a patent owned by us is valid and enforceable, if the other venue takes a contrary position, the patent is
considered invalid and not enforceable. Therefore, a party seeking to invalidate a patent owned by us in the United States has the procedural advantage of two
alternative venues.
Opposition or invalidation procedures are also available in most foreign countries. Many foreign authorities, such as the authorities at the European Patent
Office, have only post-grant opposition proceedings, however, certain countries, such as India, have both pre-grant and post-grant opposition proceedings.
These procedures have been used frequently against pharmaceutical patents in foreign countries. For example, in some foreign countries, these procedures are
used by generic companies to hold up an innovator’s patent rights as a means to allow the generic company to enter the market. This activity is particularly
prevalent in India, China and South America and may become more prevalent in Africa and other parts of Asia as certain countries reach more established
economies. If any of our patents are challenged in a foreign opposition or invalidation proceeding, we could face significant costs to defend our patents, and
we may not be successful. Uncertainties resulting from the initiation, continuation or loss of such proceedings could have a material adverse effect on our
ability to compete in the market place. Further, in many foreign jurisdictions, the losing party must pay the attorneys’ fees of the winning party, which can be
substantial.
We may have to file one or more lawsuits in court to prevent a third party from selling a product or using a product in a manner that infringes our patent,
which could be expensive, time consuming and unsuccessful, and ultimately result in the loss of our proprietary market.
Because competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors or other intellectual
property. To counter infringement or unauthorized use, we may be required to file infringement lawsuits, which can be expensive and time consuming. Any
claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition,
in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims
narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An
adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. We may also elect to enter
into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us
to pay royalties and other fees that could be significant. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure.
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Because our CDK 4/6 inhibitor candidates are small molecules, after commercialization they will be subject in the United States to the patent litigation
process of the Hatch Waxman Act, which allows a generic company to submit an Abbreviated New Drug Application, or ANDA, to the FDA to obtain
approval to sell our drug using bioequivalence data only. Under the Hatch Waxman Act, we will have the opportunity to list all of our patents that cover our
drug product or its method of use in the FDA’s compendium of “Approved Drug Products with Therapeutic Equivalence Evaluation,” sometimes referred to
as the FDA’s Orange Book. A generic company can submit an ANDA to the FDA four years after our drug approval because our drug products candidates,
trilaciclib and lerociclib, would be deemed new chemical entities. The submission of the ANDA by a generic company is considered a technical act of patent
infringement. The generic company can certify that it will wait until the natural expiration date of our listed patents to sell a generic version of our product or
can certify that one or more of our listed patents are invalid, unenforceable, or not infringed. If the latter, we will have 45 days to bring a patent infringement
lawsuit against the generic company. This will initiate a challenge to one or more of our Orange Book listed patents based on arguments from the generic
company that either our patent is invalid, unenforceable or not infringed. Under the Hatch Waxman Act, if a lawsuit is brought, the FDA is prevented from
issuing a final approval on the generic drug until the earlier of seven-and-a-half years from our drug approval or a final decision of a court holding that our
asserted patent claims are invalid, unenforceable or not infringed. If we do not properly list our relevant patents in the Orange Book, or timely file a lawsuit in
response to a certification from a generic company under an ANDA, or if we do not prevail in the resulting patent litigation, we can lose our proprietary
market, which can rapidly become generic. Further, even if we do correctly list our relevant patents in the Orange Book, bring a lawsuit in a timely manner
and prevail in that lawsuit, it may be at a very significant cost to us of attorneys’ fees and employee time and distraction over a long period. Further, it is
common for more than one generic company to try to sell an innovator drug at the same time, and so we may be faced with the cost and distraction of
multiple lawsuits. We may also determine it is necessary to settle the lawsuit in a manner that allows the generic company to enter our market prior to the
expiration of our patent or otherwise in a manner that adversely affects the strength, validity or enforceability of our patent.
A number of pharmaceutical companies have been the subject of intense review by the U.S. Federal Trade Commission or a corresponding agency in
another country based on how they have conducted or settled drug patent litigation, and certain reviews have led to an allegation of an anti-trust
violation, sometimes resulting in a fine or loss of rights. We cannot be sure that we would not also be subject to such a review or that the result of the
review would be favorable to us, which could result in a fine or penalty.
The U.S. Federal Trade Commission, or FTC, has brought a number of lawsuits in federal court in the past few years to challenge Hatch Waxman ANDA
litigation settlements between innovator companies and generic companies as anti-competitive. The FTC has taken an aggressive position that anything of
value is a payment, whether money is paid or not. Under their approach, if an innovator as part of a patent settlement agrees not to launch or delay launch of
an authorized generic during the 180-day period granted to the first generic company to challenge an Orange Book listed patent covering an innovator drug,
or negotiates a delay in entry without payment, the FTC may consider it an unacceptable reverse payment. The biopharmaceutical industry argues that such
agreements are rational business decisions to dismiss risk and are immune from antitrust attack if the terms of the settlement are within the scope of the
exclusionary potential of the patent. In 2013, the U.S. Supreme Court, in a five-to-three decision in FTC v. Actavis, Inc. rejected both the biopharmaceutical
industry’s and FTC’s arguments with regard to so-called reverse payments, and held that whether a “reverse payment” settlement involving the exchange of
consideration for a delay in entry is subject to an anticompetitive analysis depends on five considerations: (a) the potential for genuine adverse effects on
competition; (b) the justification of payment; (c) the patentee’s ability to bring about anticompetitive harm; (d) whether the size of the payment is a workable
surrogate for the patent’s weakness; and (e) that antitrust liability for large unjustified payments does not prevent litigating parties from settling their lawsuits,
for example, by allowing the generic to enter the market before the patent expires without the patentee’s paying the generic. Furthermore, whether a reverse
payment is justified depends upon its size, its scale in relation to the patentee’s anticipated future litigation costs, its independence from other services for
which it might represent payment, as was the case in Actavis, and the lack of any other convincing justification. The Court held that reverse payment
settlements can potentially violate antitrust laws and are subject to the standard antitrust rule-of-reason analysis, with the burden of proving that an agreement
is unlawful on the FTC and leaving to lower courts the structuring of such rule of reason analysis. If we are faced with drug patent litigation, including Hatch
Waxman litigation with a generic company, we could be faced with such an FTC challenge based on that activity, including how or whether we settle the case,
and even if we strongly disagree with the FTC’s position, we could face a significant expense or penalty.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain
and could have a material adverse effect on the success of our business.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights covering our products and
technology, including interference or derivation proceedings before the U.S. PTO. Third parties may assert infringement claims against us based on existing
patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a
license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license
on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the
same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition,
we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of
infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially
harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on
our business.
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We may not be able to effectively enforce our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and therefore we
only file for patent protection in selected countries. The requirements for patentability may differ in certain countries, particularly in developing countries.
Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property
laws.
The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, Europe, India, China and certain
other countries do not allow patents for methods of treating the human body. Many companies have encountered significant problems in protecting and
defending intellectual property rights in certain foreign jurisdictions that do not favor patent protection on drugs. This could make it difficult for us to stop the
infringement of our patents or the misappropriation of our other intellectual property rights. Competitors may use our technologies in jurisdictions where we
have not obtained patent protection to develop their own drugs and, further, may export otherwise infringing drugs to territories where we have patent
protection, if our ability to enforce our patents to stop infringing activities is inadequate. These drugs may compete with our product candidates, and our
patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and
resources from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in the major markets for our product
candidates, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our product
candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
A number of foreign countries have stated that they are willing to issue compulsory licenses to patents held by innovator companies on approved drugs to
allow the government or one or more third party companies to sell the approved drug without the permission of the innovator patentee where the foreign
government concludes it is in the public interest. India, for example, has used such a procedure to allow domestic companies to make and sell patented drugs
without innovator approval. There is no guarantee that patents covering any of our drugs will not be subject to a compulsory license in a foreign country, or
that we will have any influence over if or how such a compulsory license is granted. Further, Brazil allows its regulatory agency ANVISA to participate in
deciding whether to grant a drug patent in Brazil, and patent grant decisions are made based on several factors, including whether the patent meets the
requirements for a patent and whether such a patent is deemed in the country’s interest. In addition, several other countries have created laws that make it
more difficult to enforce drug patents than patents on other kinds of technologies. Further, under the treaty on the Trade-Related Aspects of Intellectual
Property, or TRIPS, as interpreted by the Doha Declaration, countries in which drugs are manufactured are required to allow exportation of the drug to a
developing country that lacks adequate manufacturing capability. Therefore, our drug markets in the United States or foreign countries may be affected by the
influence of current public policy on patent issuance, enforcement or involuntary licensing in the healthcare area.
In addition, in November 2015, members of the World Trade Organization, or the WTO, which administers TRIPS, voted to extend the exemption against
enforcing pharmaceutical drug patents in least developed countries until 2033. We currently have no patent applications filed in least developed countries, and
our current intent is not to file in these countries in the future, at least in part due to this WTO pharmaceutical patent exemption.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the U.S.
PTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have
systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent
agencies. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late
fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of
the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be
able to enter the market and this circumstance would have a material adverse effect on our business.
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Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time
consuming and is likely to divert significant resources from our core business, including distracting our technical and management personnel from their
normal responsibilities. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements
of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it
could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and
reduce the resources available for development activities or any future sales, marketing or distribution activities.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain
the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed
intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from
successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings
could have a material adverse effect on our ability to compete in the marketplace.
If we fail to comply with our obligations under the license agreement with the University of Illinois, we could lose license rights that are necessary for
developing and commercializing rintodestrant.
Our exclusive license with the University of Illinois, or the University, for technology relating to rintodestrant imposes various development,
commercialization, royalty payment, diligence and other obligations on us. Specifically, we are required to:
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pay the University a minimum annual fee and potential milestone payments;
pay the University low single-digit royalties on all net sales of products and a share of any sublicensing revenues;
use commercially reasonable efforts to bring products to market;
provide financial reports to the University;
file, prosecute, defend and maintain patent rights; and
indemnify the University against certain claims and maintain insurance coverage.
If we breach any of these obligations, the University may have the right to terminate the license, which would result in our being unable to develop,
manufacture and sell products that are covered by the licensed technology, including rintodestrant, or in a competitor’s gaining access to the licensed
technology.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of
what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential
competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be
subject to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such
employee’s former employer. Litigation may be necessary to defend against these claims.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute
agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops
intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to
bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to
management.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology
and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract
manufacturers, consultants, advisors and other third parties. We seek
43
to protect our confidential proprietary information, in part, by entering into confidentiality and invention or patent assignment agreements with our employees
and consultants, however, we cannot be certain that such agreements have been entered into with all relevant parties. Moreover, to the extent we enter into
such agreements, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be
able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive
and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect
trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or
those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or
independently developed by a competitor, our competitive position would be harmed.
Risks related to employee matters, managing growth and other risks related to our business
We currently have a limited number of employees, and our future success depends on our ability to retain key executives and to attract, retain and
motivate qualified personnel.
We are a clinical development company, and, as of December 31, 2019, had only 104 employees, which includes seven executive officers. We are highly
dependent on the research and development, clinical and business development expertise of our executive officers, as well as the other principal members of
our management, scientific and clinical team. Although we have entered into employment agreements with our executive officers, each of them may
terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. In addition, we rely
on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization
strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with
other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth
strategy will be limited.
Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. The loss of the
services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and
seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and
may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to
successfully develop, obtain marketing approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable
to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology
companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.
Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel. If we are unable to continue to attract and
retain high quality personnel, our ability to pursue our growth strategy will be limited.
We expect to potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth,
which could disrupt our operations.
To manage our anticipated expansion, we must continue to implement and improve our managerial, operational and financial systems, and continue to recruit
and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day
activities and devote a substantial amount of time to managing these growth activities. Due to our limited resources, we may not be able to effectively manage
the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational
mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The expansion of our operations may lead
to significant costs and may divert financial resources from other projects, such as the development of our product candidates. If our management is unable to
effectively manage our expected expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced
and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our product candidates, if
approved, and compete effectively will depend, in part, on our ability to effectively manage the future expansion of our company.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The global financial
crisis at the end of the last decade caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such
as that global financial crisis, could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable
terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. Any of the foregoing could harm our
business, and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
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Our business and operations could suffer in the event of system failures.
We utilize information technology systems and networks to process, transmit and store electronic information in connection with our business activities. As
use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and
networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality,
availability and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their effects.
Despite the implementation of security measures, our internal computer systems and those of our third-party CROs and other contractors and consultants are
vulnerable to damage from cyber-attack, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical
failures. Furthermore, we have little or no control over the security measures and computer systems of our third-party CROs and other contractors and
consultants. While we have not experienced any such system failure, accident, or security breach to date, if such an event were to occur and cause
interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data for our product candidates
could result in delays in our marketing approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption
or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or
inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be
delayed.
Our employees, principal investigators, CROs and consultants may engage in misconduct or other improper activities, including non-compliance with
regulatory standards and requirements and insider trading.
We are exposed to the risk that our employees, principal investigators, CROs and consultants may engage in fraudulent conduct or other illegal activity.
Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate the
regulations of the FDA and other regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such
authorities; healthcare fraud and abuse laws and regulations in the United States and abroad; or laws that require the reporting of financial information or data
accurately. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also
involve the improper use of information obtained in the course of clinical trials or creating fraudulent data in our preclinical studies or clinical trials, which
could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of conduct applicable to all of our employees, but it is
not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may
not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits
stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person could allege such fraud or other
misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines,
possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished
profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of
operations.
We may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates that may be more profitable or
for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on specific product candidates. As a result, we may forgo or delay pursuit of
opportunities with other product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to
capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and
product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial
potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or
other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such
product candidate.
45
We may acquire businesses or drugs, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.
We may acquire additional businesses or drugs, form strategic alliances or create joint ventures with third parties that we believe will complement or augment
our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses
if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing,
manufacturing and marketing any new drugs resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or
enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.
We or the third parties upon which we depend may be adversely affected by earthquakes, pandemics, or other natural disasters and our business
continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Earthquakes, pandemics such as the COVID-19 (coronavirus), or other natural disasters could severely disrupt our operations and have a material adverse
effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us
from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract
manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial
period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event.
We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse
effect on our business.
Risks related to our common stock
The price of our common stock may be volatile and fluctuate substantially.
The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others
beyond our control, including:
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•
results of preclinical and clinical trials of our product candidates, including trilaciclib, rintodestrant and lerociclib;
results of clinical trials of our competitors’ products;
regulatory actions with respect to our products or our competitors’ products;
actual or anticipated fluctuations in our financial condition and operating results;
publication of research reports by securities analysts about us or our competitors or our industry;
our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
additions and departures of key personnel;
strategic decisions by us or our competitors, such as acquisitions, collaborations, divestitures, spin-offs, joint ventures, strategic investments or
changes in business strategy;
the passage of legislation or other regulatory developments in the United States and other countries affecting us or our industry;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
sales of our common stock by us, our insiders or our other stockholders;
speculation in the press or investment community;
announcement or expectation of additional financing efforts;
changes in accounting principles;
changes in the structure of healthcare payment systems;
terrorist acts, acts of war or periods of widespread civil unrest;
natural disasters and other calamities;
changes in market conditions for pharmaceutical and biopharmaceutical stocks;
changes in general market, industry and economic conditions; and
the other factors described in this “Risk Factors” section.
In addition, the stock market has experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company
stocks. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the
companies represented by the stock. In the past, securities class action litigation has often been initiated against companies following periods of volatility in
their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to
make substantial payments to satisfy judgments or to settle litigation.
46
Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our
stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a merger, acquisition or other change in control of our
company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions
could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our
common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate
or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of
our board of directors. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring
potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board of directors were considered beneficial by
some stockholders. Among other things, these provisions:
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establish a classified board of directors such that only one of three classes of directors is elected each year;
allow the authorized number of our directors to be changed only by resolution of our board of directors;
limit the manner in which stockholders can remove directors from our board of directors;
establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of
directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written
consent;
limit who may call stockholder meetings;
authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that
would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our
board of directors; and
require the approval of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of capital stock that would be
entitled to vote generally in the election of directors to amend or repeal specified provisions of our certificate of incorporation or by-laws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which
prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of
the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed
manner.
Our certificate of incorporation includes a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for
disputes with us.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of
Delaware will be the sole and exclusive forum for any stockholder to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to our stockholders, (iii) any action asserting a
claim arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or by-laws, or (iv) any action asserting a
claim governed by the internal affairs doctrine; in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as
defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the
foregoing provisions. This forum selection provision in our certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our certificate of incorporation, a court could rule that such
a provision is inapplicable or unenforceable.
We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote
substantial time to new compliance initiatives and corporate governance practices.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the
Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Stock Market and other applicable securities rules and
regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and
corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these
rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules
and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance.
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We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and
development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if
any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our corporate headquarters is located in Research Triangle Park, North Carolina, where we lease approximately 60,000 square feet of laboratory and office
space. This lease on our corporate headquarters commenced in September 2019 and expires on September 30, 2027. In addition, we currently have a lease on
20,700 square feet of laboratory and office space in Research Triangle Park, North Carolina which previously served as our corporate headquarters. This lease
expires on December 31, 2022. None of our leases are material to our business operations. We believe our facilities are adequate for our current needs and
that suitable additional or substitute space would be available if needed.
Item 3. Legal Proceedings.
We are not currently subject to any material pending legal proceedings.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock has traded on the Nasdaq Global Select Market under the symbol “GTHX” since May 17, 2017. Prior to that time, there was no public
market for our common stock.
Holders
As of February 21, 2020, there were approximately 10 stockholders of record of our common stock. Holders of record are defined as those stockholders
whose shares are registered in their names in our stock records and do not include beneficial owners of common stock whose shares are held in the names of
brokers, dealers or clearing agencies.
Stock Performance Graph
This performance graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing by us under the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general
incorporation language in any such filing. The stock price performance shown on the graph is not necessarily indicative of future price performance.
Comparison of Cumulative Total Return
Among G1 Therapeutics, Inc., the Nasdaq Biotechnology Index and the Nasdaq Composite Index
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The above graph measures the change in a $100 investment in our common stock from May 17, 2017 (the date our common stock commenced trading on the Nasdaq
Global Select Market) through December 31, 2019. Our relative performance is then compared with the Nasdaq Composite Index and the Nasdaq Biotechnology
Index.
Recent Sales of Unregistered Securities
None.
Equity Compensation Plans
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference from Item 12 of Part III of this
Annual Report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our equity securities during the fiscal year 2019.
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Item 6. Selected Financial Data.
You should read the following selected financial data together with the information under the caption “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our audited financial statements and accompanying notes included in this Annual Report. We have derived the
statement of operations data for the years ended December 31, 2019, 2018 and 2017 and the balance sheet data as of and December 31, 2019 and 2018 from
our audited financial statements included elsewhere in this Annual Report. The statement of operations data for the year ended December 31, 2016 and 2015
and the balance sheet data as of December 31, 2017, 2016 and 2015 is derived from audited financial statements that are not included in this Annual
Report. Our historical results are not necessarily indicative of results that should be expected in the future.
Statements of Operations Data:
Grant revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expenses):
Other income
Change in fair value of warrant liability
Change in fair value of Series B purchase option liability
Total other income (expense), net
Net loss and comprehensive loss
Accretion of redeemable convertible preferred stock(1)
Net loss attributable to common shareholders
Basic and diluted net loss per share(2)
Weighted average shares outstanding, basic and diluted(2)
Balance Sheet Data:
Cash, cash equivalents and short-term investments
Working capital(3)
Total assets
Redeemable convertible preferred stock
Total stockholders' equity/(deficit)
2019
2018
Year Ended December 31,
2017
(in thousands except share and per share amounts)
2016
2015
$
— $
—
$
— $
— $
522
89,002
40,039
129,041
(129,041)
6,594
—
—
6,594
(122,447)
—
(122,447)
70,683
18,603
89,286
(89,286)
3,998
—
—
3,998
(85,288)
—
(85,288)
53,881
7,087
60,968
(60,968)
888
(41)
—
847
(60,121)
(4,757)
(64,878)
$
(3.27) $
(2.56) $
(3.57) $
37,499,256
33,316,719
18,197,970
25,161
5,230
30,391
(30,391)
12,730
3,216
15,946
(15,424)
182
(82)
—
100
(30,291)
(4,405)
(34,696)
(23.33) $
1,486,986
18
(85)
(4,772)
(4,839)
(20,263)
(1,427)
(21,690)
(16.13)
1,344,584
2019
2018
Year Ended December 31,
2017
(in thousands)
2016
2015
$
$
269,208
$
251,234
284,831
—
255,527
369,290
357,771
371,270
—
358,820
103,812 $
92,957
105,171
—
93,388
47,305 $
42,276
48,212
107,580
(64,993)
22,938
21,582
23,897
53,424
(31,695)
(1)
(2)
Subsequent to our initial public offering in May 2017, our redeemable convertible preferred stock was converted to common stock and no further accretion has
been recorded.
See Note 9 to our financial statements appearing elsewhere in this Annual Report for further details on the calculation of basic and diluted net loss per share
applicable to common stockholders.
(3) We define working capital as current assets less current liabilities.
51
Item 7. 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 Annual Report. This discussion contains forward-looking statements that involve risk 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 this Annual
Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following
discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule therapeutics for
the treatment of patients with cancer. Our product portfolio is built on a drug discovery platform that targets key cellular pathways with proprietary medicinal
chemistry. Our therapies are designed to improve outcomes for patients across multiple oncology indications.
Product Pipeline
The Company is advancing three clinical stage programs. Trilaciclib is a first-in-class therapy designed to improve outcomes for patients who are treated with
chemotherapy. Rintodestrant, formerly known as G1T48, is a potential best-in-class oral selective estrogen receptor degrader (SERD) for the treatment of
ER+ breast cancer. Lerociclib is a differentiated oral CDK4/6 inhibitor designed to enable more effective combination treatment strategies across multiple
oncology indications, including ER+, HER2- breast cancer. The Company also has discovery capabilities focused on cyclin-dependent kinase targets. The
Company owns the global rights to all of its product candidates.
G1 Therapeutics Product Pipeline
Candidate
trilaciclib
Target
Method of Action (MOA)
CDK4/6
Short-acting intravenous CDK4/6 inhibitor
Preserves HSPC and immune system function
rintodestrant (f/k/a G1T48)
Estrogen
Receptor
Oral selective estrogen receptor degrader (SERD)
Inhibits estrogen receptor driven tumor proliferation
Global Rights
Clinical
Status
NDA filing
SCLC
Phase 2 TNBC
Phase 1
lerociclib
CDK4/6
Oral CDK4/6 inhibitor
Inhibits tumor proliferation and growth
Phase 1/2
Trilaciclib: preserving bone marrow and immune system function during chemotherapy and improving patient outcomes
Chemotherapy is an effective and important weapon against cancer. However, chemotherapy does not differentiate between healthy cells and cancer cells and
kills both, including important stem cells in the bone marrow (hematopoietic stem and progenitor cells, or HSPCs) that produce white blood cells, red blood
cells and platelets, and immune cells. This chemotherapy-induced bone marrow damage is known as myelosuppression. When white blood cells, red blood
cells and platelets become depleted, chemotherapy patients are at increased risk of infection, experience anemia and fatigue, and are at increased risk of
bleeding. Myelosuppression often requires the administration of rescue interventions such as growth factors and blood or platelet transfusions and may also
result in chemotherapy dose delays and reductions. Immune cell damage may decrease the ability of the immune system to fight the cancer, as well as
infection.
52
Trilaciclib is a first-in-class therapy designed to preserve bone marrow and immune system function during chemotherapy and improve patient outcomes. Our
randomized clinical trials have demonstrated that trilaciclib can provide myelopreservation benefits (i.e. reduction of chemotherapy-induced
myelosuppression effects) and, in certain settings, trilaciclib has the potential to improve survival. It is a short-acting CDK4/6 inhibitor that is administered
intravenously prior to chemotherapy.
In preclinical studies, administration of trilaciclib prior to chemotherapy has been shown to induce transient cell-cycle arrest of HSPCs, protect HSPCs from
chemotherapy-induced damage, preserve bone marrow and immune system function, protect against bone marrow exhaustion, improve complete blood
counts (CBC) recovery, prevent myeloid skewing and consequent lymphopenia, and enhance T-cell effector function in the tumor microenvironment.
Following evaluation of trilaciclib in a Phase 1 trial in healthy volunteers, we initiated two Phase 1b/2 trials in patients with extensive-stage small cell lung
cancer (SCLC); one in a first-line setting (in combination with carboplatin/etoposide) and the other in a second/third-line setting (in combination with
topotecan). Enrollment in both trials has been completed and preliminary data from the open label Phase 1b segment were reported in 2016 and 2017. In the
Phase 1b segments of these two trials, we treated 51 patients with over 250 cycles of trilaciclib and chemotherapy. There were no episodes of febrile
neutropenia – one of the most common adverse consequences of these chemotherapy regimens. Further, there were no drug-related serious adverse events
reported during the Phase 1b segments of these two trials. There were some adverse events reported involving fatigue and cytopenias, but those adverse
events were less severe and less frequent than those generally reported in trials involving the use of chemotherapy alone.
Based on these encouraging preliminary data, we advanced both SCLC trials into the randomized, placebo-controlled, double-blind Phase 2 segment.
Enrollment in the first-line SCLC Phase 2 trial was completed in the second quarter of 2017 and positive multi-lineage myelopreservation results were
reported in March 2018, with additional data reported at the European Society for Medical Oncology (ESMO) 2018 Congress and published in Annals of
Oncology in 2019. Enrollment in the second-/third-line SCLC Phase 2 trial was completed in the second quarter of 2018, with positive multi-lineage
myelopreservation data reported in the fourth quarter of 2018 and full data presented at an oral session at the American Society of Clinical Oncology (ASCO)
2019 Annual Meeting.
Our third trial in SCLC was initiated in 2017, as part of our non-exclusive collaboration with Genentech, with the goal of exploring the use of trilaciclib in
combination with chemotherapy and a checkpoint inhibitor. The trial was a randomized, placebo-controlled, double-blind Phase 2 trial of trilaciclib in
combination with Tecentriq® (atezolizumab)/carboplatin/etoposide in first-line SCLC patients. We completed enrollment in February 2018 and reported
positive multi-lineage myelopreservation data in November 2018. Additional data, including myelopreservation and anti-tumor efficacy findings (as
measured by overall survival, or “OS”), were reported at the 2019 ESMO Congress.
All three SCLC trials demonstrated that trilaciclib, when added to standard of care chemotherapy or chemotherapy/checkpoint inhibitor regimens, prevents or
mitigates clinically significant chemotherapy-induced myelosuppression. The U.S. Food and Drug Administration (FDA) has granted Breakthrough Therapy
Designation for trilaciclib based on myelopreservation data from our three randomized, double-blind, placebo-controlled SCLC clinical trials, as well as
safety data collected across all completed and ongoing clinical trials. The Breakthrough Therapy program is designed to expedite development and review of
drugs intended for serious or life-threatening conditions. Based on written feedback from its pre-New Drug Application (NDA) meeting with the FDA, the
Company began a rolling NDA submission for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2019 and expects to complete the NDA
submission in the second quarter of 2020. Based on discussions with European regulatory authorities, the Company plans to submit a Marketing
Authorization Application (MAA) to the European Medicines Agency (EMA) for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2020.
Trilaciclib is also being evaluated in patients with breast cancer. In 2017, we initiated a randomized Phase 2 trial of trilaciclib in patients with
first-/second-/third-line metastatic triple-negative breast cancer (mTNBC) receiving gemcitabine and carboplatin. Enrollment was completed in the second
quarter of 2018. At the December 2018 San Antonio Breast Cancer Symposium (SABCS), we presented preliminary trilaciclib data demonstrating
improvement in progression-free survival (PFS). In September 2019, the Company presented updated data demonstrating significant improvement in OS
(preliminary). Though the trial did not meet the primary myelopreservation endpoints, patients receiving trilaciclib were able to receive ~50% more cycles of
chemo, without additional hematological toxicity. These data were presented at the 2019 ESMO Congress, and were concurrently published in The Lancet
Oncology. In January 2020, the Company announced that trilaciclib will be included in a new randomized, investigational treatment arm for the ongoing I-
SPY 2 TRIAL™ for neoadjuvant treatment of locally advanced breast cancer. The trial, run by the non-profit Quantum Leap Healthcare Collaborative, is
designed to rapidly screen promising experimental treatments and identify those most effective in specific patient subgroups based on molecular
characteristics (biomarker signatures).
The Company is planning to initiate a randomized, placebo-controlled Phase 3 trial in colorectal cancer in the fourth quarter of 2020.
53
Rintodestrant (formerly known as G1T48): Our oral SERD
Rintodestrant is a potential first/best in-class oral SERD, which we plan to initially develop as a monotherapy and in combination with CDK4/6 inhibitors,
initially Ibrance® (palbociclib), for the treatment of ER+, HER2- breast cancer. Based on compelling preclinical efficacy and safety data, we filed an
Investigational New Drug application (IND) with the FDA in the fourth quarter of 2017. In 2018, the Company initiated a Phase 1/2a (does escalation/dose
expansion) clinical trial in ER+, HER2- breast cancer. Preliminary data from the Phase 1 portion of this trial were presented at the ESMO 2019 Congress,
showing that rintodestrant was well tolerated and demonstrated evidence of anti-tumor activity in heavily pre-treated patients. We have completed enrollment
of the dose escalation and dose expansion portions of the trial and expect to initiate enrollment of patients receiving rintodestrant in combination with
palbociclib in the second quarter of 2020. Palbociclib is being provided under a non-exclusive clinical supply agreement that we signed with Pfizer in
February 2020.
Lerociclib: Our differentiated CDK4/6 inhibitor for patients with CDK4/6-dependent tumors
Lerociclib is a differentiated oral CDK4/6 inhibitor being developed for use in combination with other targeted therapies in multiple oncology indications,
including ER+, HER2- breast cancer. We rationally designed lerociclib to improve upon and address the shortcomings of the approved CDK4/6 inhibitors
Ibrance® (palbociclib), Kisqali® (ribociclib) and Verzenio® (abemaciclib), with fewer dose-limiting toxicities and potential for less frequent blood count
monitoring. Our preclinical data and early clinical data indicate the potential for continuous daily dosing, less dose-limiting neutropenia, and improved
tolerability. A Phase 1 trial of lerociclib in 75 healthy volunteers showed a favorable safety profile, and we reported encouraging preliminary Phase 1b data
from our Phase 1/2 trial in ER+, HER2- breast cancer (in combination with fulvestrant) at the ASCO 2018 Annual Meeting. Additional data from this trial
were presented at the San Antonio Breast Cancer Symposium in December 2019. We also initiated a Phase 1b/2 combination trial with the epidermal growth
factor receptor (EGFR) inhibitor, Tagrisso® (osimertinib) in non-small cell lung cancer. Initial safety and tolerability data from this trial were presented at the
ESMO 2019 Congress. G1 is currently exploring partnering opportunities to continue to advance clinical development of lerociclib.
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 general and administrative support for these operations as well as securing
intellectual property protection for our product candidates. We do not have any products approved for sale and have not generated any revenues from product
sales. We recorded $0 million of revenue for the years ended December 31, 2019, 2018 and 2017, respectively. We do not expect to generate any revenue
from any drug candidates that we develop unless and until we obtain regulatory approval and commercialize our drugs or enter into collaborative agreements
with third parties. To date, we have financed our operations primarily through public offerings of equity securities and private placements of convertible debt
and equity securities. From inception through December 31, 2019, we raised an aggregate of $577.6 million to fund our operations.
As of December 31, 2019, we had cash and cash equivalents of $269.2 million. Since inception, we have incurred net losses. Our net losses were
$122.4 million, $85.3 million and $60.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, we had an
accumulated deficit of $336.9 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development
programs and from general and administrative expenses associated with our operations. We expect to continue to incur significant expenses and increasing
operating losses for the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities as we:
•
•
•
•
•
•
•
•
continue development of our product candidates, including additional clinical trials
identify and develop new product candidates;
seek marketing approvals for our product candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
achieve market acceptance of our product candidates 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 candidates or in-license other products and technologies;
54
•
•
add operational, financial and management information systems and personnel, including personnel to support our product development and
planned future commercialization efforts; and
incur increased costs as a result of operating as a public company.
License agreement with the University of Illinois
In November 2016, and as amended in March 2017, we entered into a license agreement with the Board of Trustees of the University of Illinois, or the
University. Pursuant to the license agreement, as amended, the University licensed patent rights to the Company, with rights to sublicense, to make, have
made, use, import, sell and offer for sale SERDs, including rintodestrant, covered by certain patent rights owned by the University. The rights licensed to us
are exclusive, worldwide, non-transferable rights, for all fields of use. Under the terms of the agreement, as amended, we paid a one-time only, non-
refundable upfront fee of $0.5 million, and are required to pay the University low single-digit royalties on all net sales of products and a share of any
sublicensing revenues. We are also obligated to pay annual maintenance fees, which are fully creditable against any royalty payments made by us. In addition,
the Company may also be required to pay the University milestone payments of up to an aggregate of $2.6 million related to the initiation and execution of
clinical trials, with payments made for the initial dosing for each phase of the clinical trials, as well as the first commercial sale of a product in another
country. To date, the Company has made milestone payments totaling $0.6 million, of which $0.5 million was incurred during 2019. We will also be
responsible for any future patent prosecution costs that may arise. See “Business—Intellectual Property—Exclusive License for rintodestrant.”
Financial operations overview
Revenues
To date, we have not generated any revenues from the commercial sale of approved products or out-licensing of our product candidates, and we do not expect
to generate substantial revenue from the commercial sale of our products for the foreseeable future, if ever. In the future, we will seek to generate revenue
primarily from product sales and, potentially, regional or global collaborations with strategic partners. We have received all of our revenues to date from
government grants related to our research.
Operating expenses
We classify our operating expenses into two categories: research and development and 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.
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.
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 candidate development;
other costs incurred in seeking regulatory approval of our product candidates; and
allocated facility-related costs and overhead.
The successful development of our product candidates is highly uncertain. Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
Accordingly, we expect research and development costs to increase significantly for the foreseeable future as programs progress. However, we do not believe
that it is possible at this time to accurately project total program-specific expenses through commercialization. We are also unable to predict when, if ever,
material net cash inflows will commence
55
from our product candidates to offset these 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 product candidates 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. In 2017, we had
ongoing clinical trials for two of our product candidates, trilaciclib and lerociclib, and began incurring costs related to our rintodestrant product candidate as
we prepared to initiate a clinical trial in 2018. In 2019, we had three clinical-stage product candidates, trilaciclib, rintodestrant and lerociclib.
General and administrative expenses
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 general and administrative expenses
include facility-related costs not otherwise allocated to research and development expense, professional fees, pre-commercialization costs, expenses
associated with obtaining and maintaining patents and costs of our information systems. We anticipate that our general and administrative expenses will
continue to increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our
product candidates.
We expect to continue to incur additional general and administrative expenses in 2020 as we support continued research and development activities and
support our operations in a public company environment, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq,
additional insurance expenses, and expenses related to investor relations activities, pre-commercialization costs and other administration and professional
services.
Total other income (expense), net
Total other income (expense), net consists of interest income earned on cash and cash equivalents and the change in fair value of warrant liabilities and other
liabilities.
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.
Critical accounting policies and significant judgments and estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance
with U.S. generally accepted accounting principles. The preparation of our financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported
expenses incurred during the reporting periods. Our estimates are based on our historical experience 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.
While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report, we
believe that the following 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.
56
Accrued research and development expenses
As part of the process of preparing our financial statements, we estimate and accrue research and development expenses, including external clinical study
costs associated with clinical trial activities. The process involves reviewing contracts and purchase orders, identifying services that have been provided on
our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise
notified of the actual costs.
Costs for clinical trial activities are recognized based on an evaluation of our vendors’ progress towards completion of specific tasks, using data such as
patient enrollment, clinical site activations or information provided to us by our 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. We determine
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. Our estimates of accrued external clinical study costs as of each balance sheet date are based on the facts and circumstances
known at the time.
Although we do not expect our estimates to be materially different from the amounts actually incurred, if our estimates of the status and timing of the services
performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date,
there have been no material differences from our estimates to the amount actually incurred.
Warrant liability
Warrants to purchase our preferred stock have been classified as liabilities and recorded at their estimated fair value. In each reporting period, any change in
fair value of the warrants has been recorded as expense in the case of an increase in fair value and income in the case of a decrease in fair value. We used
significant assumptions in estimating the fair value of our warrant liability including the estimated volatility, risk free interest rate, estimated fair value of our
redeemable convertible preferred shares and the estimated life of the warrant. These assumptions were used in our option pricing method and the probability
weighted expected return method, a blend of which were considered in establishing fair value. Following the initial public offering in May 2017, the warrant
liabilities no longer exist and are therefore no longer reflected on the balance sheets presented as of December 31, 2019.
Stock-based compensation
We account for stock-based compensation awards in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations based on their fair values. Our stock-based compensation awards have historically consisted of
stock options.
We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant. We
estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. 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. We account for forfeitures as they occur, rather than estimating forfeitures as of the date of grant.
We recognize compensation costs related to stock options granted to non-employees based on the estimated fair value of the awards on the date of grant in the
same manner as we do options for employees; however, the fair value of the stock options granted to non-employees is re-measured each reporting period
until the service is complete, and the resulting increase or decrease in value, if any, is recognized as expense or income, respectively, during the period the
related services are rendered. In accordance with the implementation of ASU No. 2018-07 on January 1, 2019, the fair value of non-employee stock options is
no longer be re-measured each reporting period
We recorded non-cash stock-based compensation expense for employee and non-employee stock option grants of $16.4 million, $10.2 million and $3.4
million for the years ended December 31, 2019, 2018 and 2017, respectively.
57
We calculate 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 our common stock, the assumed dividend yield, the expected term of our stock options, the risk-
free interest rate for a period that approximates the expected term of our stock options, and the fair value of the underlying common stock on the date of grant.
In applying these assumptions, we considered the following factors:
•
•
•
•
•
we do not have sufficient history to estimate the volatility of our common stock; we calculate expected volatility based on reported data for
selected similar publicly traded companies for which the historical information is available as we do not have sufficient history to estimate
volatility using only our common stock; in 2019, we began incorporating our historical stock price in conjunction with selected similar publicly
traded companies; we plan to continue to use the guideline peer group volatility information until the historical volatility of our common stock
is sufficient to measure expected volatility for future option grants;
the assumed dividend yield of zero is based on our expectation of not paying dividends for the foreseeable future;
our estimates of expected term used in the Black-Scholes option-pricing model were based on the estimated time from the grant date to the date
of exercise;
we determine the risk-free interest rate by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the
expected life assumed at the date of grant; and
we account for forfeitures as they occur, rather than estimating forfeitures as of an award’s grant date.
See “Note 8 – Stock Option Plan” to the accompanying audited financial statements included in Item 15 of this Annual Report for the weighted average
assumptions used in the Black-Scholes option-pricing model for awards granted in the years ended December 31, 2019, 2018 and 2017.
Prior to our initial public offering, the fair value of our common shares underlying our stock options was estimated on each grant date by our board of
directors. In order to determine the fair value of our common shares underlying granted stock options, our board of directors considered, among other things,
timely valuations of our common shares prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American
Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
Given the absence of a public trading market for our common shares, our board of directors exercised reasonable judgment and considered a number of
objective and subjective factors to determine the best estimate of the fair value of our common shares, including (1) our business, financial condition and
results of operations, including related industry trends affecting our operations; (2) our forecasted operating performance and projected future cash flows;
(3) the illiquid nature of our common shares; (4) liquidation preferences and other rights and privileges of our common shares; (5) market multiples of our
most comparable public peers and (6) market conditions affecting our industry. Since our IPO, our board of directors has determined the fair value of each
common share underlying share-based awards based on the closing price of our common shares as reported by the Nasdaq on the date of grant.
Income taxes
We recognize deferred income taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. We
periodically evaluate the positive and negative evidence bearing upon the ability to realize our deferred tax assets. Based upon the weight of the available
evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future
results, we maintained a full valuation allowance on the net deferred tax assets for all periods presented. We intend to maintain a full valuation allowance on
the U.S. deferred tax assets for the foreseeable future until sufficient positive evidence exists to support reversal of the valuation allowance.
At December 31, 2019, the Company has federal net operating loss carryforwards (“NOLs”) of approximately $286.1 million, which are available to offset
future taxable income. Of the $286.1 million available, $92.7 million will begin to expire in 2029. The remaining $193.4 million has an indefinite
carryforward period. Under the Tax Cuts and Jobs Act (“Tax Act”), federal NOLs arising after December 31, 2017 may be carried forward indefinitely.
However, for NOLs arising after December 31, 2017, NOL carryforwards will be limited to 80% of taxable income. Our NOLs generated in 2017 and in prior
years will not be subject to the 80% limitation under the Tax Act. In addition, we had state net operating loss carryforwards totaling approximately $292.9
million, which are available to offset future state taxable income. State net operating losses begin to expire in 2024. Because we had incurred cumulative net
operating losses since inception, all tax years remain open to examination by U.S. federal and state income tax authorities. As of December 31, 2019, we also
had federal research and development (R&D) credit carryforwards of approximately $10.9 million available to offset future income tax which begin to expire
in 2034.
58
Our ability to utilize its net operating loss and research and development credit carryforwards may be substantially limited due to ownership changes that may
have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar
state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable
income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series of transactions
over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public
groups.
In April 2019, we completed an evaluation study as to whether an “ownership change” had occurred and determined that the limitation would be
approximately $8.0 million on federal net operating loss carryforwards, $1.2 million on state net operating loss carryforwards, and $0.1 million on R&D tax
credit carryforwards, thereby reducing the federal net operating loss which remains to approximately $286.1 million, state net operating loss which remains to
$292.9 million, and the R&D tax credit carryforward to $10.9 million at December 31, 2019. We continue to maintain a valuation allowance on the remaining
NOLs as we believe that it is more likely than not that all of the deferred tax asset associated with the NOLs will not be realized regardless of whether an
“ownership change” has occurred.
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. The only significant impact to was the remeasurement of its net deferred
tax asset in 2017 based on the newly enacted 21% federal corporate income tax rate, which was effective beginning in tax year 2018.
Results of operations
Comparison of the year ended December 31, 2019 and December 31, 2018
Revenue
Operating Expenses:
Research and Development
General and Administrative
Total Operating Expenses
Loss from Operations
Other Income
Net Loss
Year Ended December 31,
2019
2018
(in thousands)
Change
$
$
— $
— $
—
89,002
40,039
129,041
(129,041)
6,594
(122,447) $
70,683
18,603
89,286
(89,286)
3,998
(85,288) $
18,319
21,436
39,755
(39,755)
2,596
(37,159)
$
Revenue
Revenue was $0 for the years ended December 31, 2019 and December 31, 2018.
59
Research and development
Research and development expenses were $89.0 million for the year ended December 31, 2019 as compared to $70.7 million for the year ended December 31,
2018. The increase of $18.3 million, or 26%, was primarily due to an increase of $11.8 million in our clinical program costs which reflects increased costs in
our ongoing clinical trials, increased headcount-related expenses to support these trials, and costs associated with seeking regulatory approval for our product
candidates. The increase in research and development expenses was also due to an increase of $6.0 million in costs for manufacturing of active
pharmaceutical ingredient and drug product to support our clinical trials, as well as an increase of $0.5 million in external costs related to discovery and
preclinical development. The following table summarizes our research and development expenses allocated to trilaciclib, lerociclib and rintodestrant, and
unallocated research and development expenses for the periods indicated:
Clinical Expenses—trilaciclib
Clinical Expenses—rintodestrant
Clinical Expenses—lerociclib
Chemical Manufacturing and Development
Discovery and Pre-clinical Expenses
Total Research and Development Expenses
Year Ended December 31,
2018
2019
(in thousands)
$
$
36,196 $
8,334
13,041
23,364
8,067
89,002 $
35,116
2,251
8,383
17,323
7,610
70,683
General and administrative
General and administrative expenses were $40.0 million for the year ended December 31, 2019 as compared to $18.6 million for the year ended
December 31, 2018. The increase of $21.4 million, or 115%, was due to an increase of $8.1 million in personnel related costs due to increased headcount, of
which $5.2 million related to non-cash stock compensation expense, an increase of $5.5 million in pre-commercialization activities, an increase of $3.1
million in medical affairs costs related to trilaciclib, an increase of $1.6 million in information technology systems and related expenses, and an increase of
$3.1 million professional services, insurance, and other administrative costs.
Total other income (expense), net
Total other income, net was $6.6 million for the year ended December 31, 2019 as compared to $4.0 million for the year ended December 31, 2018. The
increase in income of $2.6 million was due to additional interest income earned on a higher balance of cash and cash equivalents during the year ended
December 31, 2019 as compared to the year ended December 31, 2018.
Comparison of the year ended December 31, 2018 and December 31, 2017
Revenue
Operating Expenses:
Research and Development
General and Administrative
Total Operating Expenses
Loss from Operations
Other Income
Net Loss
Year Ended December 31,
2018
2017
(in thousands)
Change
$
$
— $
—
$
—
70,683
18,603
89,286
(89,286)
3,998
(85,288) $
53,881
7,087
60,968
(60,968)
847
(60,121) $
16,802
11,516
28,318
(28,318)
3,151
(25,167)
$
Revenue
Revenue was $0 for the years ended December 31, 2018 and December 31, 2017.
60
Research and development
Research and development expenses were $70.7 million for the year ended December 31, 2018 as compared to $53.9 million for the year ended December 31,
2017. The increase of $16.8 million, or 31%, was primarily due to an increase of $14.2 million in our clinical program costs which reflects increased costs in
our ongoing clinical trials, as well as increased headcount-related expenses to support these trials. The increase in research and development expenses was
also due to an increase in costs for manufacturing of active pharmaceutical ingredient and drug product to support our clinical trials, offset by a decrease in
external costs related to preclinical development. The following table summarizes our research and development expenses allocated to trilaciclib, lerociclib
and rintodestrant, and unallocated research and development expenses for the periods indicated::
Clinical Expenses—trilaciclib
Clinical Expenses—rintodestrant
Clinical Expenses—lerociclib
Chemical Manufacturing and Development
Discovery and Pre-clinical Expenses
Total Research and Development Expenses
Year Ended December 31,
2017
2018
(in thousands)
$
$
35,116 $
2,251
8,383
17,323
7,610
70,683 $
26,801
366
4,336
13,142
9,236
53,881
General and administrative
General and administrative expenses were $18.6 million for the year ended December 31, 2018 as compared to $7.1 million for the year ended December 31,
2017. The increase of $11.5 million, or 162%, was due to an increase of $7.6 million in personnel related costs due to increased headcount and non-cash stock
option expense charges, and an increase of $3.9 million in professional services, insurance, and other administrative costs necessary to support our operations
as a public company.
Total other income (expense), net
Total other income, net was $4.0 million for the year ended December 31, 2018 as compared to $0.8 million for the year ended December 31, 2017. The
increase of $3.2 million was due to additional interest income earned on a higher balance of cash and cash equivalents during the year ended December 31,
2018 as compared to the year ended December 31, 2017
Liquidity and Capital Resources
We have incurred significant operating losses since our inception. We incurred net losses of $122.4 million for the year ended December 31, 2019, $85.3
million for the year ended December 31, 2018, and $60.1 million for the year ended December 31, 2017. As of December 31, 2019, we had an accumulated
deficit of $336.9 million. Our product candidates span a range from preclinical development to Phase 2 clinical trials, and it may be several years, if ever,
before we have a product candidate ready for commercialization. To date, we have financed our operations primarily through sales of our preferred and
common stock. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.
Initial public offering
On May 22, 2017, we closed our IPO of 7,781,564 shares of common stock at a public offering price of $15 per share, including 781,564 shares of common
stock issued upon exercise by the underwriters of their option to purchase additional shares. The gross proceeds from the IPO were $116.7 million and net
proceeds were $107.1 million, after deducting underwriting discounts and commissions and other offering expenses payable by us.
Follow-on offering
On March 12, 2018, we closed an underwritten public offering of 3,910,000 shares of common stock at a public offering price of $29.50 per share, including
510,000 shares of common stock issued upon exercise by the underwriters of their option to purchase additional shares. The gross proceeds from the offering
were $115.3 million and net proceeds were $107.9 million, after deducting underwriting discounts and commissions and other offering expenses payable by
us.
At-the-market offering
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
61
$125.0 million from time to time through Cowen, acting as our agent. Between June 18, 2018 and August 2, 2018, we sold 752,008 shares of common stock
pursuant to this 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. As of December 31, 2019 we have remaining authorization to sell up to $88.2 million under this sales agreement with Cowen.
Follow-on offering
On September 21, 2018, we closed an underwritten public offering of 3,450,000 shares of common stock at a public offering price of $60.00 per share,
including 450,000 shares of common stock issued upon exercise by the underwriters of their option to purchase additional shares, pursuant to a shelf
registration statement. The gross proceeds from the offering were $207.0 million and net proceeds were $194.9 million, after deducting underwriting
discounts and commissions and other offering expenses payable by us.
As of December 31, 2019, we had cash, cash equivalents and short-term investments of $269.2 million. We believe that our existing cash and cash
equivalents will be sufficient to fund our projected cash needs for greater than 12 months following the filing of this Annual Report. In order to complete the
process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be
necessary to commercialize our product candidates, if approved, we will require substantial additional funding.
Cash flows
The following table summarizes our cash flows for the periods indicated:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net change in cash, cash equivalents and restricted cash
Net cash used in operating activities
2019
Year Ended December 31,
2018
(in thousands)
2017
$
$
(99,571) $
(2,716)
2,705
(99,582) $
(74,307) $
(709)
340,494
265,478 $
(50,519)
(294)
107,320
56,507
During the year ended December 31, 2019, net cash used in operating activities was $99.6 million, which consisted of a net loss of $122.4 million, partially
offset by non-cash stock compensation expense of $16.4 million, working capital adjustments of $6.0 million and $0.4 million of depreciation expense.
During the year ended December 31, 2018, net cash used in operating activities was $74.3 million, which consisted of a net loss of $85.3 million, partially
offset by non-cash stock compensation expense of $10.2 million, working capital adjustments of $0.6 million and $0.2 million of depreciation expense.
During the year ended December 31, 2017, net cash used in operating activities was $50.5 million, which consisted of a net loss of $60.1 million, partially
offset by non-cash stock compensation of $3.4 million, working capital adjustments of $6.1 million and $0.1 million of depreciation expense.
Net cash used in investing activities
Net cash used in investing activities was $2.7 million, $0.7 million and $0.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Net cash used in investing activities represented purchases of property and equipment, primarily associated with laboratory equipment and leasehold
improvements for new office space.
Net cash provided by financing activities
During the year ended December 31, 2019, net cash provided by financing activities was $2.7 million in net proceeds from the exercise of stock options.
62
During the year ended December 31, 2018, net cash provided by financing activities was $340.5 million, consisting of $338.7 million of net proceeds from
our public offerings, after deducting cash paid for underwriting discounts and commissions and other expenses, and $1.8 million of proceeds from the
exercise of stock options.
During the year ended December 31, 2017, net cash provided by financing activities was $107.3 million, consisting of $107.1 million of net proceeds from
our IPO and $0.2 million of proceeds from the exercise of stock options and warrants.
Operating capital requirements and plan of operations
To date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not
expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future
product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the
development of and seek regulatory approvals for our product candidates, and begin to commercialize any approved products. 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 expect to incur additional costs associated with operating as a public company and we anticipate that we will need
substantial additional funding in connection with our continuing operations.
We believe that our existing cash and cash equivalents will be sufficient to fund our projected cash needs for greater than 12 months following the filing of
this Annual Report. In order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and
distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional
funding.
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 agreement 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, such as rintodestrant, and the terms of such in-licenses;
the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product
candidates for which we receive marketing approval;
revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
and
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims.
63
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. We do not have any
committed external source of funds. 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
Our principal commitments consist of obligations under our clinical trial commitments, consulting fees and operating lease commitments. The following table
summarizes these contractual obligations as of December 31, 2019:
Contractual Obligations:
Operating lease obligations(1)
Total contractual obligations(2,3)
Total
Less than
1 Year
Payments due by period
1 to 3
Years
(in thousands)
3 to 5
Years
More Than
5 Years
$
$
13,714 $
13,714 $
1,459 $
1,459 $
4,087 $
4,087 $
3,313 $
3,313 $
4,855
4,855
(1)
Represents future minimum lease payments under the non-cancelable lease for our headquarters in Research Triangle Park, NC and our former
headquarters in Research Triangle Park, NC. The lease for the new office space commenced in September 2019 for approximately 60,000 square feet
of laboratory space and office space in Research Triangle Park, NC. The lease will expire in September 2027, with the Company having the option to
renew for an additional 5 years. The lease for our former headquarters will expire in December 2022. The minimum lease payments above do not
include any related common area maintenance charges or real estate taxes.
(2) We enter into agreements in the normal course of business with contract research organizations (CROs) for clinical trials and with vendors for
preclinical studies and other services and products for operating purposes which are cancelable at any time by us, generally upon 30-60 days prior
written notice. As of December 31, 2019, we have several on-going clinical studies in various stages. Under agreements with various CROs and
clinical study sites, we incur expenses related to clinical studies of our product candidates and potential other clinical candidates. The timing and
amounts of these disbursements are contingent upon the services rendered or as expenses are incurred by the CROs or clinical trial sites. Therefore, we
cannot estimate the potential timing and amount of these payments and they have been excluded from the table above. Also, the above amounts
exclude potential payments to be made under our license agreement for rintodestrant with the University of Illinois that are based on the progress of
rintodestrant, as these payments are not determinable.
Effective on October 22, 2019, we entered into a Product Agreement with Patheon Manufacturing Services, LLC as issued under the Master
Manufacturing Services Agreement dated August 27, 2019 to manufacture and supply trilaciclib for commercial production. The initial term of the
agreement is effective until December 31, 2024. If the annual volume of product ordered does not meet a specified amount, a true-up payment to this
minimum will be due at the end of the applicable year. This minimum purchase amount was excluded from the table above as the conditions of the
committed amount make it undeterminable at this time.
(3)
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.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this report regarding the impact of certain recent accounting pronouncements on
our consolidated financial statements.
64
Item 7A. 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. We had cash and cash
equivalents of $269.2 million as of December 31, 2019, which consists of deposits in banks, including checking accounts, money market accounts and
certificates of deposit. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been
significant. We had no outstanding debt as December 31, 2019.
Item 8. Financial Statements and Supplementary Data.
The financial statements of G1 Therapeutics, Inc. are provided in Part IV, Item 15 in this Annual Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not Applicable.
65
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit
under the Securities and Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely
decisions regarding required disclosure.
As of December 31, 2019, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). 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 management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive
officer and principal financial officer have concluded based upon the evaluation described above that, as of December 31, 2019, our disclosure controls and
procedures were effective at the reasonable assurance level.
Changes in Internal Controls Over Financial Reporting
During the fiscal year 2019, the Company implemented a new enterprise resource planning (ERP) system. The new ERP system replaced our existing
accounting systems and the general ledger. We have made changes to our internal controls over financial reporting during the implementation of the new
system and will continue to evaluate the operating effectiveness of related controls during the subsequent periods.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief
Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control
—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under
the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of
December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report, which is included in this Annual Report on Form 10-K.
Item 9B. Other Information.
None.
66
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item is incorporated herein by reference from the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days after the end of our 2019 fiscal year pursuant to Regulation 14A for our 2020 Annual Meeting of
Stockholders (the “Proxy Statement”), under the captions “Management and Corporate Governance” and “Code of Conduct and Ethics.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by reference from the Proxy Statement under the captions “Executive Officer and Director
Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Management and Corporate Governance –
Compensation Committee Interlocks and Insider Participation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated herein by reference from the Proxy Statement, under the captions “Security Ownership of Certain
Beneficial Owners and Management” and “Equity Compensation Plan Information.”
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated herein by reference from the Proxy Statement, under the captions “Management and Corporate
Governance” and “Certain Relationships and Related Person Transactions.”
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated herein by reference from the Proxy Statement under the caption “Independent Registered Public
Accounting Firm”
67
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this Annual Report:
(a)
Financial Statements.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2019 and 2018
Statements of Operations for the Years ended December 31, 2019, 2018 and 2017
Statements of Stockholders’ Equity for the Years ended December 31, 2019, 2018 and 2017
Statements of Cash Flows for the Years ended December 31, 2019, 2018 and 2017
Notes to the Financial Statements
(b)
Financial Statement Schedules.
F-1
F-3
F-4
F-5
F-6
F-7
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or notes.
(c)
Exhibits.
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
10.1**
10.2**
Amended and Restated Certificate of Incorporation of G1 Therapeutics, Inc., dated as of May 22, 2017, filed as Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K filed on May 26, 2017 (File No. 001-38096), and incorporated herein by reference.
Description
Amended and Restated Bylaws of G1 Therapeutics, Inc., dated as of May 22, 2017, filed as Exhibit 3.2 to the Registrant’s Current Report
on Form 8-K filed on May 26, 2017 (File No. 001-38096), and incorporated herein by reference.
Specimen Common Stock Certificate, filed as Exhibit 4.1 to the Registrant’s Second Amendment to the Registration Statement on Form S-
1 filed on May 8, 2017 (File No. 333-217285), and incorporated herein by reference.
Description of Securities of the Registrant.
Second Amended and Restated Registration Rights Agreement, dated as of April 27, 2016, by and among the Registrant and the
Stockholders listed therein, filed as Exhibit 4.6 to the Registrant’s Registration Statement on Form S-1 filed on April 13, 2017 (File No.
333-217285), and incorporated herein by reference.
Exclusive License Agreement, dated November 23, 2016, by and between the Registrant and The Board of Trustees of the University of
Illinois, filed as Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 filed on April 13, 2017 (File No. 333-217285), and
incorporated herein by reference.
Amendment No. 1 to Exclusive License Agreement, dated March 24, 2017, by and between the Registrant and The Board of Trustees of
the University of Illinois, filed as Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 filed on April 13, 2017 (File No.
333-217285), and incorporated herein by reference.
68
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
2011 Equity Incentive Plan, dated March 3, 2011, as amended; First Amendment effective August 27, 2011; Second Amendment effective
October 8, 2013; Third Amendment effective February 4, 2015; Fourth Amendment effective December 10, 2015; Fifth Amendment
effective April 27, 2016; and Sixth Amendment effective November 7, 2016, filed as Exhibit 10.2 to the Registrant’s Registration
Statement on Form S-1 filed on April 13, 2017 (File No. 333-217285), and incorporated herein by reference.
Amended and Restated 2017 Employee, Director and Consultant Equity Plan, filed as Exhibit 10.4 to the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2018 filed on August 8, 2018 (File No. 001-38096), and incorporated herein by reference.
Form of Indemnification Agreement, filed as Exhibit 10.1 to the Registrant’s Second Amendment to the Registration Statement on Form
S-1 filed on May 8, 2017 (File No. 333-217285), and incorporated herein by reference.
Non-Employee Director Compensation Policy, filed as Exhibit 10.13 to the Registrant’s Second Amendment to the Registration Statement
on Form S-1 filed on May 8, 2017 (File No. 333-217285), and incorporated herein by reference.
Director Agreement, by and between the Registrant and Seth A. Rudnick, M.D., dated July 15, 2016, filed as Exhibit 10.8 to the
Registrant’s Registration Statement on Form S-1 filed on April 13, 2017 (File No. 333-217285), and incorporated herein by reference.
Advisory Board Members Agreement, by and between the Registrant and Seth A. Rudnick, M.D., dated July 15, 2016, filed as Exhibit
10.9 to the Registrant’s Registration Statement on Form S-1 filed on April 13, 2017 (File No. 333-217285), and incorporated herein by
reference.
Advisory Board Members Agreement, by and between the Registrant and Seth A. Rudnick, M.D., dated July 27, 2018, filed as Exhibit
10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed on August 8, 2018 (File No. 001-38096),
and incorporated herein by reference.
Executive Employment Agreement, by and between the Registrant and Mark A. Velleca, M.D., Ph.D., dated May 19, 2014, as amended;
First Amendment effective February 1, 2015; Second Amendment effective May 10, 2016; and Third Amendment effective May 5, 2017,
filed as Exhibit 10.4 to the Registrant’s Second Amendment to the Registration Statement on Form S-1 filed on May 8, 2017 (File No.
333-217285), and incorporated herein by reference.
Employment Agreement by and between the Registrant and Mark Avagliano, dated as of July 29, 2019, filed as Exhibit 10.4 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed on August 7, 2019 (File No. 001-38096), and
incorporated herein by reference.
Employment Agreement by and between the Registrant and John Demaree, dated as of July 3, 2018, filed as Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed on August 8, 2018 (File No. 001-38096), and
incorporated herein by reference.
Employment Agreement by and between the Registrant and James S. Hanson, dated as of June 25, 2018, filed as Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed on August 8, 2018 (File No. 001-38096), and
incorporated herein by reference.
Employment Agreement, by and between the Registrant and Rajesh K. Malik, M.D., dated July 1, 2014, as amended; First Amendment
effective May 5, 2017, filed as Exhibit 10.5 to the Registrant’s Second Amendment to the Registration Statement on Form S-1 filed on
May 8, 2017 (File No. 333-217285), and incorporated herein by reference; and Second Amendment effective June 12, 2019, filed as
Exhibit 10.2 to the Registrant’s Form 8-K filed on June 13, 2019 (File No. 001-38096), and incorporated herein by reference.
Amended and Restated Employment Agreement by and between the Registrant and Jennifer K. Moses dated May 8, 2019, filed as Exhibit
10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed on May 9, 2019 (File No. 001-38096),
and incorporated herein by reference.
69
10.16*
10.17*
10.18*
21.1
23.1
31.1
31.2
32.1
32.2
Employment Agreement by and between the Registrant and Terry Murdock, dated as of August 1, 2017, filed as
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed on
November 8, 2017 (File No. 001-38096) incorporated herein by reference; and First Amendment effective June 12,
2019, filed as Exhibit 10.3 to the Registrant’s Form 8-K filed on June 13, 2019 (File No. 001-38096), and
incorporated herein by reference.
Employment Agreement by and between the Registrant and Barclay A. Phillips, dated as of November 13, 2017, filed as Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed on November 13, 2017 (File No. 001-38096), and incorporated herein by reference.
Separation and Transition Agreement by and between Registrant and Barclay Phillips, dated as of May 8, 2019, filed as Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed on August 7, 2019 (File No. 001-38096), and
incorporated herein by reference.
Subsidiaries of the Registrant, filed as Exhibit 21.1 to the Registrant’s Registration Statement on Form S-1 filed on April 13, 2017 (File
No. 333-217285), and incorporated herein by reference.
Consent of PricewaterhouseCoopers LLP.
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.
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.
Certification of Principal Executive Officer Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. § 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
*
**
Management contract or compensatory plan or arrangement.
Confidential treatment has been requested for portions of this exhibit. These portions have been omitted and have been filed separately with the U.S.
Securities and Exchange Commission.
Item 16. Form 10-K Summary.
None.
70
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 26, 2020
G1 THERAPEUTICS, INC.
By:
/s/ Mark A. Velleca
Mark A. Velleca, M.D., Ph.D.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Name
Title
/s/ Mark A. Velleca
Mark A. Velleca, M.D., Ph.D.
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Jennifer K. Moses
Jennifer K. Moses
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Fredric N. Eshelman
Fredric N. Eshelman, Pharm.D.
/s/ Willie A. Deese
Willie A. Deese
/s/ Glenn P. Muir
Glenn P. Muir
/s/ Garry A. Nicholson
Garry A. Nicholson
/s/ Seth A. Rudnick
Seth A. Rudnick, Ph.D.
/s/ Cynthia L. Schwalm
Cynthia L. Schwalm
/s/ Andrew P. Witty
Sir Andrew P. Witty
Director
Director
Director
Director
Director
Director
Director
71
Date
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
February 26, 2020
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of G1 Therapeutics, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying balance sheets of G1 Therapeutics, Inc. (the “Company”) as of December 31, 2019 and 2018, and the related statements
of operations, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended
December 31, 2019, including the related notes (collectively referred to as the “financial statements”). We also have audited the Company's internal control
over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the COSO.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, the Company changed the manner in which it accounts for leases in 2019.
Basis for Opinions
The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
F-1
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required
to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Accrued External Clinical Study Costs
As described in Notes 2 and 5 to the financial statements, management estimated and accrued research and development expenses including external clinical
study costs associated with clinical trial activities. The Company’s accrued external clinical study costs were $8 million as of December 31, 2019. The
process of estimating and accruing expenses involved 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 cost. Costs for clinical trial activities were estimated based on an evaluation of the 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.
Management determined accrual estimates through reports from and discussion with applicable personnel and outside service providers as to the progress or
state of completion of trials, or the services completed.
The principal considerations for our determination that performing procedures relating to accrued external clinical study costs is a critical audit matter is there
was significant judgment by management in estimating the costs incurred to date, specifically progress towards completion of specific tasks. This in turn led
to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to cost estimates made by
management to establish accrued external clinical study costs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial
statements. These procedures included testing the effectiveness of controls relating to the completeness and accuracy of accrued external clinical study costs.
These procedures also included, among others, (i) testing management’s process for estimating accrued external clinical study costs, (ii) evaluating the
appropriateness of the method used by management to develop the estimate, (iii) evaluating the reasonableness of significant assumptions, including the
progress towards completion of specific tasks and the associated cost incurred for services the Company has not yet been invoiced or otherwise notified of the
actual cost, and (iv) testing the completeness and accuracy of the data inputs to the model including actual billed expenses.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 26, 2020
We have served as the Company’s auditor since 2014.
F-2
G1 Therapeutics, Inc.
Balance Sheets
(in thousands, except share and per share amounts)
December 31, 2019
December 31, 2018
Assets
Current assets
Cash and cash equivalents
Restricted cash
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Restricted cash
Operating lease assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
Accrued expenses
Other current liabilities
Total current liabilities
Operating lease liabilities
Other non-current liabilities
Total liabilities
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value, 120,000,000 shares authorized as of
December 31, 2019 and December 31, 2018, respectively; 37,638,260 and 37,268,792 shares
issued as of December 31, 2019 and December 31, 2018, respectively; 37,611,594 and
37,242,126 shares outstanding as of December 31, 2019 and December 31, 2018, respectively
Treasury stock, 26,666 shares
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders' equity
$
$
$
$
$
269,208 $
63
1,732
271,003
3,538
437
9,853
284,831 $
3,684 $
15,403
682
19,769
9,535
—
29,304
4
(8)
592,384
(336,853)
255,527
284,831 $
369,290
—
843
370,133
1,137
—
—
371,270
3,377
8,985
—
12,362
—
88
12,450
4
(8)
573,230
(214,406)
358,820
371,270
The accompanying notes are an integral part of these financial statements.
F-3
G1 Therapeutics, Inc.
Statements of Operations
(in thousands, except share and per share amounts)
Grant revenue
Operating expenses
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expense)
Other income
Change in fair value in warrant liability and other liabilities
Total other income, net
Net loss
Accretion of redeemable convertible preferred stock
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders, basic and diluted
Weighted average common shares outstanding, basic and diluted
2019
Year Ended December 31,
2018
2017
$
— $
— $
—
89,002
40,039
129,041
(129,041)
6,594
—
6,594
(122,447) $
—
(122,447) $
(3.27) $
70,683
18,603
89,286
(89,286)
3,998
—
3,998
(85,288) $
—
(85,288) $
(2.56) $
37,499,256
33,316,719
53,881
7,087
60,968
(60,968)
888
(41)
847
(60,121)
(4,757)
(64,878)
(3.57)
18,197,970
$
$
$
The accompanying notes are an integral part of these financial statements.
F-4
G1 Therapeutics, Inc.
Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
Preferred stock
series C
Preferred stock
series B
Preferred stock
series A
Preferred stock
series 1
Common stock
Treasury stock
Shares
Amount
Shares
Amount
Shares
Amount Shares
Amount
Shares
Amount Shares Amount
Additional
paid-in Accumulated
capital
deficit
Total
stock-
holders'
equity
5,609,398
7,642,734
4,998,895
682,026
1,504,947
(26,666)
$ 51,424
$ 40,355
$ 14,431
$ 1,370
$ —
$
(8)
$
—
$
(64,985)
$ (64,993)
—
3,732
—
620
—
235
—
171
— —
— —
(745)
(4,012)
(4,757)
—
—
—
—
—
—
—
— 7,781,564
1
— — 108,502
— 108,503
(5,609,398) (55,156) (7,642,734) (40,975) (4,998,895) (14,666) (682,026) (1,541) 18,933,053
2
— — 112,335
— 112,337
—
—
—
—
—
—
—
—
— —
— —
208
—
208
—
—
—
—
—
—
—
—
160,579 —
— —
214
—
214
—
—
—
—
—
—
—
—
40,368 —
— —
1
—
1
—
—
—
—
—
—
—
—
— —
— —
3,394
—
3,394
—
—
—
—
—
—
—
—
— —
— —
(1,398)
—
(1,398)
—
—
—
—
—
—
—
—
— —
— —
—
(60,121)
(60,121)
—
$
—
— $
—
—
$
—
— $ —
$
3
$
(8)
$ 222,511
$
(129,118)
$
93,388
28,420,511
(26,666)
—
—
—
—
—
—
—
— 7,360,000
1
— — 303,521
— 303,522
—
—
—
—
—
—
—
—
752,008 —
—
36,068
36,068
—
—
—
—
—
—
—
—
736,273 —
— —
1,797
—
1,797
—
—
—
—
—
—
—
—
— —
— —
10,225
—
10,225
—
—
—
—
—
—
—
—
— —
— —
(892)
—
(892)
—
—
—
—
—
—
—
—
— —
— —
—
(85,288)
(85,288)
—
$
—
— $
—
—
$
—
— $ —
37,268,792
$
4
(26,666)
$
(8)
$ 573,230
$
(214,406)
$ 358,820
—
—
—
—
—
—
—
—
369,468 —
— —
2,705
—
2,705
—
—
—
—
—
—
—
—
— —
— —
16,449
—
16,449
—
—
—
—
—
—
—
—
— —
— —
—
(122,447) (122,447)
—
$
—
— $
—
—
$
—
— $ —
37,638,260
$
4
(26,666)
$
(8)
$ 592,384
$
(336,853)
$ 255,527
The accompanying notes are an integral part of these financial statements.
F-5
Balance at
December
31, 2016
Accretion of
redeemable,
convertible
preferred
stock
Initial public
offering
Automatic
conversion of
preferred
stock
Automatic
conversion of
preferred
warrants
Exercise of
common
stock options
Exercise of
common
stock
warrants
Stock-based
compensation
IPO
financing
costs
Net loss
during year
Balance at
December
31, 2017
Public
offering
(Follow-on
Financings)
Public
offering
(ATM)
Exercise of
common
stock options
Stock-based
compensation
Stock
financing
costs
Net loss
during year
Balance at
December
31, 2018
Exercise of
common
stock options
Stock-based
compensation
Net loss
during year
Balance at
December
31, 2019
G1 Therapeutics, Inc.
Statements of Cash Flows
(amounts in thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
2019
Year Ended December 31,
2018
2017
$
(122,447) $
(85,288) $
(60,121)
Depreciation and amortization
Stock-based compensation
Gain/loss on disposal of property and equipment
Increase in fair value of warrant activity
Change in operating assets and liabilities
Prepaid expenses and other assets
Accounts payable
Accrued Expenses
Deferred Rent
Net cash used in operating activities
Cash flows from investing activities
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from stock options and warrants exercised
Proceeds from public offering, net of underwriting fees and commissions
Payment of public offering costs
Net cash provided by financing activities
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash
Beginning of period
End of period
Non-cash investing and financing activities
Upfront project costs and other current assets in accounts payable and accrued expenses
Accretion of redeemable convertible preferred stock
Purchases of equipment in accounts payable and accrued expenses
Conversion of preferred stock and preferred warrants to common stock and common
warrants
Operating lease liabilities arising from obtaining right-of-use asset
356
16,449
—
—
(219)
248
6,042
-
(99,571)
(2,716)
(2,716)
2,705
—
—
2,705
(99,582)
175
10,225
8
—
113
(1,002)
1,446
16
(74,307)
(709)
(709)
1,797
339,589
(892)
340,494
265,478
$
$
$
$
$
$
369,290
269,708 $
103,812
369,290 $
43 $
— $
41 $
— $
8,947 $
107 $
— $
100 $
— $
— $
89
3,394
6
41
(253)
1,578
4,709
38
(50,519)
(294)
(294)
215
108,503
(1,398)
107,320
56,507
47,305
103,812
—
4,757
—
112,545
—
The accompanying notes are an integral part of these financial statements.
F-6
G1 Therapeutics, Inc.
Notes to Financial Statements
1. Description of business
G1 Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company based in Research Triangle Park, North Carolina focused on the
discovery, development and commercialization of novel small molecule therapeutics for the treatment of patients with cancer. The Company was incorporated
on May 19, 2008 in the state of Delaware.
The Company is advancing three clinical-stage programs. Trilaciclib is a first-in-class therapy designed to improve outcomes for patients who are treated with
chemotherapy. Rintodestrant (formerly known as G1T48) is a potential best-in-class oral selective estrogen receptor degrader (SERD) for the treatment of
ER+ breast cancer. Lerociclib is a differentiated oral CDK4/6 inhibitor designed to enable more effective combination treatment strategies across multiple
oncology indications, including estrogen receptor-positive, HER2-negative (ER+, HER2-) breast cancer. The Company also has an active discovery program
focused on cyclin-dependent kinase targets. The Company owns the global rights to all of its product candidates.
Trilaciclib, the Company’s most advanced clinical-stage candidate, is a first-in-class therapy designed to preserve bone marrow and immune system function
during chemotherapy and improve patient outcomes. The U.S. Food and Drug Administration (FDA) has granted Breakthrough Therapy Designation for
trilaciclib based on myelopreservation data from three randomized, double-blind, placebo-controlled small cell lung cancer (SCLC) clinical trials, as well as
safety data collected across all completed and ongoing clinical trials. The Breakthrough Therapy program is designed to expedite development and review of
drugs intended for serious or life-threatening conditions. Based on written feedback from its pre-New Drug Application (NDA) meeting with the FDA, the
Company began a rolling NDA submission for trilaciclib for myelopreservation in SCLC in the fourth quarter of 2019 and expects to complete the NDA
submission in the second quarter of 2020. Based on discussions with European regulatory authorities, the Company plans to submit a Marketing
Authorization Application (MAA) to the European Medicines Agency (EMA) for trilaciclib for myelopreservation in SCLC in the second half of 2020. In
September 2019, the Company presented updated data from a randomized Phase 2 trial of trilaciclib in combination with chemotherapy in metastatic triple-
negative breast cancer (mTNBC). The results of the trial demonstrated significant improvement in overall survival, or “OS” (preliminary). Though the trial
did not meet the primary myelopreservation endpoints, patients receiving trilaciclib were able to receive ~50% more cycles of chemo, without additional
hematological toxicity. These data were presented at the 2019 European Society for Medical Oncology (ESMO) Congress and were concurrently published in
The Lancet Oncology. In January 2020, the Company announced that trilaciclib will be included in a new randomized, investigational treatment arm for the
ongoing I-SPY 2 TRIAL™ for neoadjuvant treatment of locally advanced breast cancer. The trial, run by the non-profit Quantum Leap Healthcare
Collaborative, is designed to rapidly screen promising experimental treatments and identify those most effective in specific patient subgroups based on
molecular characteristics (biomarker signatures). The Company is planning to initiate a randomized, placebo-controlled Phase 3 trial in colorectal cancer in
the fourth quarter of 2020.
The Company is developing rintodestrant, a potential best-in-class oral SERD, as a monotherapy and in combination with the CDK4/6 inhibitors, initially
Ibrance® (palbociclib), for the treatment of ER+ breast cancer. In 2018, the Company initiated a Phase 1/2a (dose escalation/dose expansion) clinical trial in
ER+, HER2- breast cancer. Preliminary data from the Phase 1 potion of this trial were presented at the 2019 ESMO Congress, showing that rintodestrant was
well tolerated and demonstrated evidence of anti-tumor activity in heavily pre-treated patients. We have completed enrollment of the dose escalation and dose
expansion portions of the trial and expect to initiate enrollment of patients receiving rintodestrant in combination with palbociclib in the second quarter of
2020. Palbociclib is being provided under a non-exclusive clinical supply agreement that we signed with Pfizer in February 2020.
Lerociclib is a differentiated oral CDK4/6 inhibitor being developed for use in combination with other targeted therapies in multiple oncology indications,
including ER+, HER2- breast cancer. In 2018, the Company reported encouraging preliminary Phase 1b data from its Phase 1/2 trial in ER+, HER2- breast
cancer (in combination with fulvestrant) and will report additional Phase 1b/2a data from this trial at the San Antonio Breast Cancer Symposium on
December 11, 2019. The Company also initiated a Phase 1b/2 combination trial with the epidermal growth factor receptor (EGFR) inhibitor, Tagrisso®
(osimertinib) in non-small cell lung cancer. Initial safety and tolerability data from this trial were presented at the 2019 ESMO Congress. The Company is
currently exploring partnering opportunities to continue to advance clinical development of lerociclib.
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. As of December 31, 2019, the Company had an accumulated deficit
of $336.9 million. The Company has reported a net loss in all fiscal periods since inception and expects to incur substantial losses in the future to conduct
research and development and pre-commercialization activities.
F-7
As of December 31, 2019, the Company had cash and cash equivalents of $269.2 million. The Company expects that its existing cash and cash equivalents
will enable it to fund its operating expenses and capital expenditure requirements for greater than 12 months from the date of filing this Annual Report.
2. Summary of significant accounting policies
Basis of presentation
The Company has prepared the accompanying financial statements in conformity with generally accepted accounting principles in the United States of
America (“U.S. GAAP”).
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. Actual results could differ from those estimates. These estimates include the Company’s
common stock valuation, stock compensation, warrant valuation and deferred tax asset valuation allowance.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents at December 31, 2019 and 2018 consist of amounts on deposit in banks, including checking accounts, money market
accounts and certificates of deposit. Cash deposits are all in financial institutions in the United States. As part of the lease for the new office space, the
Company obtained a standby letter of credit in the amount of $0.5 million related to the security deposit. This letter of credit is secured by money market
funds at the financial institution. Therefore, these funds are classified as restricted cash on the balance sheet. The letter of credit will be reduced ratably on
each anniversary of the commencement of the lease until the end of the lease term.
Concentration of credit risk
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents. Deposits with financial institutions are insured,
up to certain limits, by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s cash deposits often exceed the FDIC insurance limit; however,
all deposits are maintained with high credit quality institutions and the Company has not experienced any losses in such accounts. The financial condition of
financial institutions is periodically reassessed, and the Company believes the risk of any loss is minimal. The Company believes the risk of any loss on cash
due to credit risk is minimal.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally calculated using the straight-line method over the
following estimated useful lives:
Computer equipment
Laboratory equipment
Furniture and fixtures
Leasehold improvements
5 years
5 years
7 years
7 years
Costs associated with maintenance and repairs are charged to expense as incurred. Property and equipment held under leasehold improvements are amortized
over the shorter of the lease term or the estimated useful life of the related asset.
Impairment of long-lived assets
The Company evaluates its long-lived assets for indicators of possible impairment by comparison of the carrying amounts to future net undiscounted cash
flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value based on
discounted estimates of future cash flows. For the years ended December 31, 2019, 2018 and 2017, the Company’s management evaluated its long-lived
assets and determined no impairment charge was needed.
F-8
Warrant liability
Warrants to purchase the Company’s redeemable convertible preferred stock were classified as liabilities and recorded at their estimated fair value. In each
reporting period, any change in fair value of the warrants has been recorded as expense in the case of an increase in fair value and income in the case of a
decrease in fair value.
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 involved 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.
Fair value of financial instruments
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
Level 2
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.
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 December 31, 2019 and 2018 these financial instruments and respective fair values have been classified as follows (in thousands):
Assets
Money market funds
Certificates of Deposit
Total assets at fair value:
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,
2019
$
$
252,563 $
15,873
268,436 $
— $
—
— $
— $
—
— $
252,563
15,873
268,436
F-9
Assets
Money market funds
Certificates of Deposit
Total assets at fair value:
Patent costs
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,
2018
$
$
352,934 $
15,501
368,435 $
— $
—
— $
— $
—
— $
352,934
15,501
368,435
Costs associated with the submission of patent applications are expensed as incurred given the uncertainty of the future economic benefits of the patents.
Patent-related legal expenses included in general and administrative costs were approximately $2,114 thousand, $1,352 thousand, and $997 thousand for the
years ended December 31, 2019, 2018 and 2017, respectively.
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 December 31, 2019 and 2018, 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 December 31, 2019 and 2018, the Company had no such accruals.
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 accounts for stock-based non-employee compensation arrangements by recording the expense of such services based on the fair value of the
equity instrument as estimated using the Black-Scholes pricing model. The fair value of the equity instrument is charged to operating expense over the term of
the service agreement. In accordance with the implementation of ASU No. 2018-07 on January 1, 2019, the fair value of non-employee stock options is no
longer be re-measured each reporting period.
Segment information
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. All of the Company’s
assets are held in the United States.
Comprehensive loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than
those with stockholders. There was no difference between net loss and comprehensive loss for each of the periods presented in the accompanying financial
statements.
F-10
Redeemable convertible preferred stock
The Company classifies its redeemable convertible preferred stock, for which the Company does not control the redemption, outside of permanent equity. The
Company records redeemable convertible preferred stock at fair value upon issuance, net of any offering costs, and the carrying value is adjusted to the
redemption value at the end of each reporting period. These adjustments are effected through charges against additional paid-in capital and accumulated
deficit.
Leases
We determine if an arrangement is a lease at inception. Operating lease assets represent our right to use an underlying asset for the lease term and lease
liabilities represent our obligation to make lease payments arising from the lease. Operating leases are included in operating lease assets, other current
liabilities, and operating lease liabilities on our balance sheet at December 31, 2019. Operating lease assets and operating lease liabilities are recognized based
on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate,
we use our incremental borrowing rate based on the information available at commencement date to determine the present value of future payments. Our
lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum
lease payments is recognized on a straight-line basis over the lease term.
Prior period amounts continue to be reported in accordance with our historic accounting under previous lease guidance, Topic 840. See “Adoption of New
Accounting Standards – Impact of Adoption of Topic 842” below, for more information about the impact of the adoption of Topic 842.
Recent Accounting Pronouncements
Adoption of New Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This guidance revises the accounting related to leases by
requiring lessees to recognize a lease liability and a right-of-use asset for all leases. In January 2019, the Company adopted ASU 2016-02 using the modified
retrospective transition method with an effective date as of the beginning of our fiscal year, January 1, 2019. Prior period amounts have not been adjusted and
continue to be reported in accordance with our historical reporting under previous lease guidance, ASC Topic 840. As part of the adoption, we have elected to
account for separate lease and associated non-lease components as a single lease component for our real estate leases.
In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07
expands the scope of Topic 718, Compensation – Stock Compensation, to include share-based payments issued to non-employees for goods or services.
Consequently, non-employees and employees will be substantially aligned. ASU 2018-07 supersedes Subtopic 505-50, Equity – Equity-Based Payments to
Non-Employees. The amendments are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted, but not earlier than the
adoption of Topic 606, Revenue from Contracts with Customers. The Company adopted ASU 2018-07 on January 1, 2019. The adoption of this standard did
not have a material impact on the Company’s financial statements.
Impact of Adoption of Topic 842
With the adoption of Topic 842 on January 1, 2019, the Company recognized operating lease assets and operating lease liabilities of $1.5 million and
$1.6 million, respectively, with the difference due to the de-recognition of current and non-current deferred rent. There was no impact to the opening
accumulated deficit as of January 1, 2019.
F-11
The impact of the adoption of Topic 842 on the accompanying balance sheet as of January 1, 2019 was as follows (in thousands):
Operating lease assets
Accrued expenses
Operating lease liabilities:
Other current liabilities
Non-current operating lease liabilities
Other non-current liabilities
Stockholders' equity
December 31,
2018
Adjustments Due
to the Adoption of
Topic 842
January 1, 2019
$
$
—
8,985
$
1,533
(9)
—
—
88
358,820
352
1,278
(88)
—
1,533
8,976
352
1,278
—
358,820
Recently Issued Accounting Standards
In August 2018, the FASB issued ASU No. 2018-15, Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The FASB issued ASU 2018-15 to align
the requirements for capitalizing implementation costs incurred in a cloud-based hosting arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual and interim reporting periods
beginning after December 15, 2019, and early adoption is permitted. The amendments under ASU 2018-15 may be applied either retrospectively or
prospectively to all implementation costs incurred after adoption. The Company is evaluating the impact of ASU 2018-15 on its financial statements and the
timing of adoption.
3. Property and equipment
Property and equipment consists of the following (in thousands):
Computer equipment
Laboratory equipment
Furniture and fixtures
Leasehold improvements
Construction in progress
Accumulated depreciation
Property and equipment, net
December 31,
2019
December 31,
2018
$
$
332 $
871
1,071
1,941
—
(677)
3,538 $
246
611
293
238
71
(322)
1,137
Depreciation expenses relating to property and equipment were $356 thousand, $175 thousand, and $89 thousand for the years ended December 31, 2019,
2018 and 2017, respectively.
4. 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. Pursuant to the license agreement, as amended, the University licensed patent rights to the Company, with rights of sublicense,
to make, have made, use, import, sell and offer for sale products covered by certain patent rights owned by the University. The rights licensed to the Company
are exclusive, worldwide, non-transferable rights, for all fields of use. Under the terms of the agreement the Company paid a one-time only, non-refundable
license issue fee in the amount of $0.5 million which was charged to research and development expense in the fourth quarter of 2016.
The Company is also obligated to pay annual maintenance fees to the University. All annual minimum payments are fully creditable against any royalty
payments made by the Company. Under the terms of the agreement, the Company must pay the University royalty percentage on all net sales of products and
a share of sublicensing revenues. In addition, the University is eligible to receive milestone payments of up to $2.6 million related to the initiation and
execution of clinical trials and the first commercial sale of a product in another country. To date, the Company has made milestone payments totaling $0.6
million, of which $0.5 million was incurred during 2019. The Company will be responsible for any future patent prosecution costs that may arise.
F-12
The term of the license agreement will continue until the later of (i) the expiration of the last valid claim within the patent rights covering the product in such
country, (ii) the expiration of market exclusivity in such country and (iii) the 10th anniversary of the first commercial sale in such country. The University
may terminate the agreement in the event (i) the Company fails to pay any amount or make any report when required to be made and fails to cure such failure
within thirty (30) days after receipt of notice from the University, (ii) is in breach of any provision of the agreement and fails to remedy within forty-five
(45) days after receipt of notice, (iii) makes a report to the University under the agreement that is determined to be materially false, (iv) declares insolvency or
bankruptcy or (v) takes an action that causes patent rights or technical information to be subject to lien or encumbrance and fails to remedy any such breach
with in forty-five (45) days of receipt of notice from the University. The Company may terminate the agreement at any time on written notice to the
University at least ninety (90) days prior to the termination date specified in the notice. Upon expiration or termination of the agreement, all rights revert to
the University.
5. Accrued expenses
Accrued expenses are comprised as follows (in thousands):
Accrued external research
Accrued professional fees
Accrued external clinical study costs
Accrued compensation expense
Deferred rent, current portion
Accrued expenses
December 31,
2019
December 31,
2018
$
$
$
2,737 $
1,487 $
7,996
3,183
-
15,403 $
1,242
349
4,692
2,693
9
8,985
6. Leases
As described in our “Note 2. Basis of Presentation and Summary of Significant Accounting Policies”, we adopted Topic 842 as of January 1, 2019. Prior
period amounts have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 840.
Pursuant to a lease agreement dated January 10, 2014 (the “Lease”), on April 1, 2014, the Company leased office and lab space with a free rent period and
escalating rent payments; the Lease had an expiration date of July 31, 2017. The Lease was amended on January 27, 2016 to lease new larger office and lab
space beginning in August 2016 with a discounted rent period and escalating rent payments and the Lease term was extended to December 31, 2022. The
amendment also contained an option for a five-year renewal and a right of first refusal to lease adjacent office space. The Lease was further amended on
March 27, 2017 to lease additional office space beginning in August 2017 with a discounted rent period and escalating rent payments. The Lease was
amended again in January 2018 to lease additional adjacent office space beginning in August 2018 with a discounted rent period and escalating rent
payments. The term of the renewal option contained in the Lease, as amended, was not included in the measurement of the operating lease asset and liability
since exercise of the option was uncertain.
In November 2018, the Company signed a new lease to secure approximately 60,000 square feet of laboratory and office space at 700 Park Offices Drive in
Research Triangle Park, NC (“700 Lease”). The 700 Lease commenced on September 2, 2019 and has an expiration date of September 30, 2027 for the initial
term with the Company having the option to renew for an additional 5 years. The term of the renewal option contained in the Lease was not included in the
measurement of the operating lease asset and liability since exercise of the option was uncertain. As part of the 700 Lease, the Company obtained a standby
letter of credit in the amount of $0.5 million related to the security deposit. This letter of credit is secured by money market funds at the financial institution.
Therefore, these funds are classified as restricted cash on the balance sheet. The letter of credit will be reduced ratably on each anniversary of the
commencement of the 700 Lease until the end of the lease term.
F-13
The tables below reflect the Company’s lease position and weighted-average lease terms and discount rates for our operating leases as of December 31, 2019.
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value
of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date.
Classification on the Balance Sheet
December 31, 2019
(in thousands)
Assets
Operating lease assets
Total lease assets
Liabilities
Current
Operating
Non-current
Operating
Total lease liabilities
Operating lease assets
Other current liabilities
Operating lease liabilities
$
$
$
$
9,853
9,853
682
9,535
10,217
December 31, 2019
7.2
7.7%
Lease Term and Discount Rate
Weighted-average remaining lease term (years)
Operating leases
Weighted-average discount rate
Operating leases
The table below presents information related to the lease costs for operating leases (in thousands):
(in thousands)
Classification
Operating lease costs (a)
Research and development
General and administrative
Total operating lease costs
(a) Includes variable lease costs
which are immaterial.
Year Ended December 31,
2018
2017
2019
$
$
609
368
977
$
$
298
83
381
$
$
207
45
252
F-14
The table below reconciles the undiscounted cash flow for each of the first five years and total of the remaining years to the operating lease liabilities
recorded on the balance sheet as of December 31, 2019 (in thousands):
Years ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total future minimum lease payments
Less: present value adjustment
Total operating lease liabilities
Operating leases
1,459
2,015
2,072
1,634
1,679
4,855
13,714
(3,497)
10,217
$
$
Cash payments included in the measurement of our operating leases were $688 thousand for the twelve months ended December 31, 2019.
ASC 840 Disclosures
The Company elected the alternative modified transition method and included the following table previously disclosed.
The following is a schedule by years of minimum future rental payments on noncancelable operating leases as of December 31, 2018 (in thousands):
2019
2020
2021
2022
2023
2024 and thereafter
$
$
680
1,427
1,960
2,015
1,577
6,155
13,814
7. Stockholders’ Equity
Redeemable convertible preferred stock
The Company has determined that the Series C, Series B, Series A and Series 1 redeemable convertible preferred stock were redeemable, after a stated period
of time, based on voting thresholds that vary by stockholder class, as outlined in the Company’s certificate of incorporation. The Company classified its
redeemable convertible preferred stock outside of permanent equity and into mezzanine equity.
The Company recorded its redeemable convertible preferred stock at fair value upon issuance, net of any issuance costs or discounts, and the carrying value is
increased by periodic accretion to its redemption value until the earliest possible date of redemption. These increases were recorded as charges against
additional paid-in-capital until the additional paid-in-capital balance is reduced to zero. At that time, additional accretion adjustments were recorded as
additions to accumulated deficit.
In April 2016, the Company’s Board of Directors and stockholders approved the Fifth Amended and Restated Certification of Incorporation which increased
the authorized number of shares of its redeemable convertible preferred stock to 57,108,717, of which 2,112,025 were be designated as Series 1 redeemable
convertible preferred stock, 14,996,692 as Series A redeemable convertible preferred stock, 23,000,000 as Series B redeemable convertible preferred stock
and 17,000,000 as Series C redeemable convertible preferred stock. In the second quarter of 2016, the Company authorized 16,828,217 shares of its Series C
redeemable convertible preferred stock and issued 5,609,398 shares of its Series C redeemable convertible preferred stock for cash consideration at a price of
$8.91 per share. Total additional proceeds amounted to $50.0 million.
F-15
Prior to the IPO, the holders of the Company’s convertible preferred stock had certain voting and dividend rights, as well as liquidation preferences and
conversion privileges. All rights, preferences and privileges associated with the convertible preferred stock were terminated at the time of the Company’s IPO
in conjunction with the conversion of all outstanding shares of convertible preferred stock into shares of common stock.
On May 22, 2017, the Company closed its IPO of 7,781,564 shares of the Company’s common stock at a public offering price of $15.00 per share, including
781,564 shares of common stock issued upon exercise by the underwriters of their option to purchase additional shares. The gross proceeds from the IPO
were $116.7 million and net proceeds were $107.1 million, after deducting underwriting discounts and commissions and other offering expenses payable by
the Company.
Upon closing of the IPO, all outstanding shares of the Company’s preferred stock were automatically converted into 18,933,053 shares of common stock. In
connection with the IPO, the Board of Directors and the stockholders of the Company approved a one-for-three reverse stock split of the Company’s common
stock. The reverse stock split became effective on May 11, 2017. All share and per share amounts in the financial statements have been retroactively adjusted
for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value to accumulated deficit.
Preferred stock
Upon completion of the IPO, all outstanding preferred stock was automatically converted into 18,933,053 shares of common stock. The Company is also
authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series. As December 31, 2019, no shares of preferred stock were issued
or outstanding.
Common stock
The Company’s common stock has a par value of $0.0001 per share and consists of 120,000,000 authorized shares as of December 31, 2019 and 2018,
respectively. Holders of common stock are entitled to one vote per share and are entitled to receive dividends, as if and when declared by the Company’s
Board of Directors.
The Company has reserved authorized shares of common stock for future issuance at December 31, 2019 and December 31, 2018 as follows:
Common stock options outstanding
Options available for grant under Equity Incentive Plans
December 31,
2019
December 31,
2018
5,744,036
938,738
6,682,774
4,502,133
1,547,306
6,049,439
8. Stock option plan
2011 Equity Incentive Plan
In March 2011, the Company adopted the 2011 Equity Incentive Plan (the “Plan”). As amended, 4,400,640 shares of common stock were reserved for
issuance under the 2011 Plan. Eligible plan participants included employees, directors, officers, consultants and advisors of the Company. The 2011 plan
permitted the granting of incentive stock options, nonqualified stock options and other stock- based awards. 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, 2018, and in accordance with the
“evergreen” provision of the 2017 plan, an additional 1,066,692 shares were made available for issuance. Effective January 1, 2019, and in accordance with
the “evergreen” provision of the 2017 plan, an additional 1,096,553 shares were made available for issuance.
F-16
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.
As of December 31, 2019, there were a total of 938,738 shares of common stock available for future issuance under the 2017 Plan.
Stock-based Compensation
During the years ended December 31, 2019, 2018 and 2017, the Company recorded employee share-based compensation expense of $16,351, $8,157, and
$1,772, respectively. The Company recorded non-employee share-based compensation expense of $98, $2,068, and $1,622 during the years ended
December 31, 2019, 2018 and 2017, respectively. Total share-based compensation expense included in the statements of operations is as follows:
Research and development
General and administrative
Total stock-based compensation expense
2019
Year Ended December 31,
2018
in thousands
2017
$
$
6,261
10,188
16,449
$
$
5,218
5,007
10,225
$
$
2,531
863
3,394
The fair value of each option grant is estimated on the grant date using the Black-Scholes option-pricing model, using the following weighted average
assumptions:
Expected volatility
Weighted-average risk free rate
Dividend yield
Expected term (in years)
Weighted-average grant-date fair value per share
2019
74.2 - 82.1%
1.4 - 2.6%
—%
6.02
14.94
$
Year Ended December 31,
2018
74.9 - 86.5%
2.3 - 3.0%
—%
6.04
26.42
$
$
2017
74.2 - 79.3%
1.9 - 2.2%
—%
6.01
10.71
The expected term of stock options represents the weighted-average period the stock options are expected to remain outstanding and is based on the option
vesting term, contractual terms and industry peers as the Company did not have sufficient historical information to develop reasonable expectations about
future exercise patterns and post-vesting employment termination behavior.
The expected stock price volatility assumptions for the Company’s stock options were determined by examining the historical volatilities for industry peers as
the Company does not have sufficient history to estimate volatility using only its common stock. In 2019, the Company began incorporating its historical
stock price in conjunction with selected similar publicly traded companies. The Company plans to continue to use the guideline peer group volatility
information until the historical volatility of its common stock is sufficient to measure expected volatility for future option grants.
The risk-free interest rate assumption at the date of grant is based on the U.S. Treasury instruments whose term was consistent with the expected term of the
Company’s stock options.
F-17
The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.
Stock option activity during 2019 is as follows:
Weighted average
Options
outstanding
Weighted
average
exercise
price
Remaining
contractual
for
life (Years)
Balance as of December 31, 2018
Cancelled
Granted
Exercised
Balance as of December 31, 2019
Exercisable at December 31, 2019
Vested at December 31, 2019 and expected to vest
4,502,133 $
(326,654) $
1,938,025 $
(369,468) $
5,744,036 $
3,001,179 $
5,744,036 $
14.13
20.49
22.06
7.32
16.88
8.93
16.88
Aggregate
intrinsic
value
(in thousands)
46,575
7.6 $
7.5 $
6.1 $
7.5 $
72,251
58,797
72,251
As of December 31, 2019, there was $42,049 of total unrecognized share-based compensation costs, which is expected to be recognized over a weighted-
average period of 2.69 years.
Prior to our initial public offering, the fair value of our common shares underlying our stock options was estimated on each grant date by our board of
directors. In order to determine the fair value of our common shares underlying granted stock options, our board of directors considered, among other things,
timely valuations of our common shares prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American
Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
Since the IPO, the board of directors has determined the fair value of each common share underlying share-based awards based on the closing price of the
common shares as reported by Nasdaq on the date of grant.
9. 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 years ended December 31, 2019, 2018 and 2017, the following potentially dilutive
securities have been excluded from the computations of diluted weighted-average shares outstanding because the effect would be anti-dilutive:
Stock options issued and outstanding
Stock warrants
2019
Year Ended December 31,
2018
2017
5,443,730
—
5,443,730
4,318,731
—
4,318,731
3,838,358
11,385
3,849,743
Amounts in the table above reflect the common stock equivalents of the noted instruments.
10. 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.
F-18
In accordance with FASB 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 December 31, 2019 and 2018, 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 December 31,
2019 and 2018, the Company had no such accruals.
The components of income tax expense (benefit) attributable to continuing operations are as follows:
Current Expense:
Federal
State
Deferred Expense:
Federal
State
Year ended December 31,
2019
2018
2017
$
$
— $
—
—
—
—
— $
— $
—
—
—
—
— $
—
—
—
—
—
—
The differences between the company’s income tax expense attributable to continuing operations and the expense computed at the 21% U.S. statutory income
tax rate were as follows (in thousands):
Federal income tax benefit at statutory rate:
Increase (reduction) in income tax resulting from:
State Income Taxes
Increase in Valuation Allowance
Write off Sec. 382 Limited Carryforwards
Equity Financing Expenses
Stock Compensation
Research and Development Credit
Effect on Tax Cuts & Job Acts Rate Reduction
Other
Year ended December 31,
2018
(17,910) $
2019
(25,714) $
$
2017
(20,441)
(2,369)
29,499
1,858
—
461
(3,529)
—
(206)
— $
(1,518)
26,614
—
—
(3,011)
(4,187)
—
12
— $
(1,623)
8,977
—
39
152
(1,882)
14,770
8
—
$
F-19
The tax effects of temporary differences and operating loss carryforwards that gave rise to significant portions of the deferred tax assets and deferred tax
liabilities were as follows at December 31, 2019 and 2018 (in thousands):
Deferred tax assets
Accrued expenses
Deferred rent
Operating lease liabilities
Stock compensation
Charitable contributions
Capitalized patents and licenses
R&D credits
Net operating loss carryforwards
Deferred tax assets
Deferred tax liabilities
Operating lease assets
Property, plant and equipment, primarily
due to differences in depreciation
Deferred tax liabilities
Valuation allowance
Net deferred tax assets
$
Year ended December 31,
2018
2019
2,205 $
—
2,348
4,865
6
2,156
10,874
65,869
88,323
1,413
23
—
2,038
2
1,544
7,521
43,997
56,538
(2,263)
—
(60)
(2,323)
(86,000)
$
— $
(37)
(37)
(56,501)
—
At December 31, 2019 and December 31, 2018, the Company evaluated all significant available positive and negative evidence, including the existence of
losses in recent years and management’s forecast of future taxable income, and, as a result, determined it was more likely than not that federal and state
deferred tax assets, including benefits related to net operating loss carryforwards, would not be realized. The valuation allowance was increased from $56.5
million at December 31, 2018 to $86.0 million at December 31, 2019. The increase in valuation allowance was due primarily to the increase in net operating
loss carryforwards and income tax credits.
The table below summarizes changes in the deferred tax valuation allowance (in thousands):
Balance at beginning of year
Charges to costs and expenses
Write-offs
Balance at end of year
$
2019
2018
2017
56,501 $
31,357
(1,858)
86,000
29,887 $
26,614
—
56,501
20,910
8,977
—
29,887
At December 31, 2019, the Company has federal net operating loss carryforwards (“NOLs”) of approximately $286.1 million, which are available to offset
future taxable income. Of the $286.1 million available, $92.7 million will begin to expire in 2029. The remaining $193.4 million has an indefinite
carryforward period. Under the Tax Cuts and Jobs Act (“Tax Act”), federal NOLs arising after December 31, 2017 may be carried forward indefinitely.
However, for NOLs arising after December 31, 2017, NOL carryforwards will be limited to 80% of taxable income. The Company’s NOLs generated in 2017
and in prior years will not be subject to the 80% limitation under the Tax Act. In addition, the Company has state net operating loss carryforwards totaling
approximately $292.9 million, which are available to offset future state taxable income. State net operating losses begin to expire in 2024. Because the
Company has incurred cumulative net operating losses since inception, all tax years remain open to examination by U.S. federal and state income tax
authorities. As of December 31, 2019, the Company also had federal research and development (R&D) credit carryforwards of approximately $10.9 million
available to offset future income tax which begin to expire in 2034.
In accordance with FASB 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 December 31, 2019 and 2018, 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 income. As of December 31, 2019
and 2018, the Company had no such accruals.
F-20
On December 22, 2017, the Tax Act was signed into law. The only significant impact to the Company was the remeasurement of its net deferred tax asset in
2017 based on the newly enacted 21% federal corporate income tax rate, which was effective beginning in tax year 2018.
Section 382 Limitation
The Company’s ability to utilize its net operating loss and research and development credit carryforwards may be substantially limited due to ownership
changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the Code), as
well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset
future taxable income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series of
transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders
or public groups.
In April 2019, the Company completed an evaluation study as to whether an “ownership change” had occurred and determined that the limitation would be
approximately $8.0 million on federal net operating loss carryforwards, $1.2 million on state net operating loss carryforwards, and $0.1 million on R&D tax
credit carryforwards, thereby reducing the federal net operating loss which remains to approximately $286.1 million, state net operating loss which remains to
$292.9 million, and the R&D tax credit carryforward to $10.9 million at December 31, 2019. The Company continues to maintain a valuation allowance on
the remaining NOLs as it believes that it is more likely than not that all of the deferred tax asset associated with the NOLs will not be realized regardless of
whether an “ownership change” has occurred.
11. Related party transactions
The Company paid approximately $6 thousand, $6 thousand, $11 thousand to the Chairman of the Board of Directors for scientific advisory services outside
of his role on the board of directors during the years ended December 31, 2019, 2018 and 2017, respectively.
12. Quarterly Results of Operations (Unaudited)
The following table contains quarterly financial information for 2019 and 2018. The Company believes that the following information reflects all normal
recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarily
indicative of results for any future period.
Total operating expenses
Operating loss
Total other income (expense), net
Net loss
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders, basic and diluted
Three Months Ended
(unaudited)
(in thousands, except share and per share amounts)
March 31,
June 30,
September 30,
December 31,
2019
2019
2019
2019
$
$
$
$
25,881 $
(25,881)
1,929
(23,952) $
(23,952) $
(0.64) $
32,583 $
(32,583)
1,893
(30,690) $
(30,690) $
(0.82) $
34,024 $
(34,024)
1,660
(32,364) $
(32,364) $
(0.86) $
36,553
(36,553)
1,112
(35,441)
(35,441)
(0.94)
Weighted average common shares outstanding, basic and diluted
37,396,980
37,470,926
37,540,380
37,586,218
Total operating expenses
Operating loss
Total other income (expense), net
Net loss and comprehensive loss
Net loss attributable to common stockholders
Net loss per share attributable to common stockholders, basic and diluted
March 31,
June 30,
September 30,
December 31,
2018
2018
2018
2018
$
$
$
$
20,725 $
(20,725)
315
(20,410) $
(20,410) $
(0.70) $
21,653 $
(21,653)
785
(20,868) $
(20,868) $
(0.64) $
20,822 $
(20,822)
904
(19,918) $
(19,918) $
(0.59) $
26,086
(26,086)
1,994
(24,092)
(24,092)
(0.65)
Weighted average common shares outstanding, basic and diluted
29,360,470
32,781,921
33,829,437
37,203,233
F-21
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.2
General
The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated by-laws are
summaries of material terms and provisions and are qualified by reference to our amended and restated certificate of incorporation and amended and restated
by-laws, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus is a part.
Our authorized capital stock consists of 120,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value
$0.0001 per share, all of which are undesignated. Only share of our common stock are and no shares of preferred stock outstanding.
Common stock
We are authorized to issue one class of common stock. Holders of our common stock are entitled to one vote for each share of common stock held of record
for the election of directors and on all matters submitted to a vote of stockholders. Holders of our common stock are entitled to receive dividends ratably, if
any, as may be declared by our board of directors out of legally available funds, subject to any preferential dividend rights of any preferred stock then
outstanding. Upon our dissolution, liquidation or winding up, holders of our common stock are entitled to share ratably in our net assets legally available after
the payment of all our debts and other liabilities, subject to the preferential rights of any preferred stock then outstanding. Holders of our common stock have
no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. Except as described
under the “—Anti-Takeover Effects of Delaware Law, Our Amended and Restated Certificate of Incorporation and Our Amended and Restated By-Laws”
section below, a majority vote of the holders of common stock is generally required to take action under our amended and restated certificate of incorporation
and amended and restated by-laws.
Preferred stock
Our board of directors is authorized, without action by the stockholders, to designate and issue up to an aggregate of 5,000,000 shares of preferred stock in
one or more series. Our board of directors can designate the rights, preferences and privileges of the shares of each series and any of its qualifications,
limitations or restrictions. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the
voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible future
financings and acquisitions and other corporate purposes could, under certain circumstances, have the effect of restricting dividends on our common stock,
diluting the voting power of our common stock, impairing the liquidation rights of our common stock, or delaying, deferring or preventing a
change in control of our company, which might harm the market price of our common stock. See also the “—Anti-Takeover Effects of Delaware Law, Our
Amended and Restated Certificate of Incorporation and Our Amended and Restated By-Laws” section below.
Our board of directors will make any determination to issue such shares based on its judgment as to our company’s best interests and the best interests of our
stockholders. We have no shares of preferred stock outstanding.
Warrants
There are no warrants outstanding.
Anti-takeover effects of Delaware law, our amended and restated certificate of incorporation and our amended and restated by-laws
Our amended and restated certificate of incorporation and amended and restated by-laws include a number of provisions that may have the effect of
encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue
non-negotiated takeover attempts. These provisions include the items described below.
Board composition and filling vacancies
In accordance with our amended and restated certificate of incorporation, our board of directors is divided into three classes serving three-year terms, with
one class being elected each year. Our amended and restated certificate of incorporation also provides that directors may be removed only for cause and then
only by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our
board of directors, however occurring, including a vacancy resulting from an increase in the size of our board of directors, may only be filled by the
affirmative vote of a majority of our directors then in office, even if less than a quorum.
No written consent of stockholders
Our amended and restated certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual
or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting.
Meetings of stockholders
Our amended and restated by-laws provide that only a majority of the members of our board of directors then in office may call special meetings of
stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our
amended and restated by-laws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the
meeting.
Advance notice requirements
Our amended and restated by-laws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for
election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must
be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at
our principal executive offices not less than 90 days or more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The
notice must contain certain information specified in the amended and restated by-laws. These provisions may have the effect of precluding the conduct of
certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a
solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
Amendment to by-laws and certificate of incorporation
As required by the Delaware General Corporation Law, any amendment of our amended and restated certificate of incorporation must first be approved by a
majority of our board of directors and, if required by law or our amended and restated certificate of incorporation, thereafter be approved by a majority of the
outstanding shares entitled to vote on the amendment, and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the
amendment of the provisions relating to stockholder action, directors, limitation of liability, exclusive jurisdiction of Delaware Courts and the amendment of
our amended and restated by-laws and amended and restated certificate of incorporation must be approved by not less than 75% of the outstanding shares
entitled to vote on the amendment, and not less than 75% of the outstanding shares of each class entitled to vote thereon as a class. Our amended and restated
by-laws may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the amended and restated
by-laws; and may also be amended by the affirmative vote of at least 75% of the outstanding shares
entitled to vote on the amendment, or, if the board of directors recommends that the stockholders approve the amendment, by the affirmative vote of the
majority of the outstanding shares entitled to vote on the amendment, in each case voting together as a single class.
Blank check preferred stock
Our amended and restated certificate of incorporation provides for 5,000,000 authorized shares of preferred stock. The existence of authorized but unissued
shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a
takeover proposal is not in the best interests of us or our stockholders, our board of directors could cause shares of preferred stock to be issued without
stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent
stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation grants our board of directors broad power to establish
the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of
earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including
voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder
becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other
things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person
who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of
the corporation’s voting stock.
Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following
conditions:
•
•
•
before the stockholder became interested, the board of directors approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the
voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or
at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and
authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is
not owned by the interested stockholder.
A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its
amended and restated certificate of incorporation or by-laws resulting from a stockholders’ amendment approved by at least a majority of the outstanding
voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us may be discouraged or
prevented.
Exclusive jurisdiction of certain actions
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions
against our directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State
of Delaware, unless we otherwise consent. Although we believe this provision benefits us by providing increased consistency in the application of Delaware
law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Nasdaq Global Select Market Listing
Our common stock is listed on The Nasdaq Global Select Market under the trading symbol “GTHX.”
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-236229, 333-232106, 333-226701, and 333-
218468) and Form S-3 (No. 333-225678) of G1 Therapeutics, Inc. of our report dated February 26, 2020 relating to the financial statements and the
effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 26, 2020
Exhibit 31.1
CERTIFICATION 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
I, Mark A. Velleca, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of G1 Therapeutics, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 26, 2020
By:
/s/ Mark A. Velleca, M.D., Ph.D.
Mark A. Velleca, M.D., Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION 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
I, Jennifer K. Moses, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on 10-K of G1 Therapeutics, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 26, 2020
By:
/s/ Jennifer K. Moses
Jennifer K. Moses
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION UNDER SECTION 906
Exhibit 32.1
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United
States Code), the undersigned officer of G1 Therapeutics, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s
knowledge, that:
The Annual Report for the year ended December 31, 2019 (the “Form 10-K”) of the Company fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: February 26, 2020
/s/ Mark A. Velleca, M.D., Ph.D.
Mark A. Velleca, M.D., Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION UNDER SECTION 906
Exhibit 32.2
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United
States Code), the undersigned officer of G1 Therapeutics, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s
knowledge, that:
The Annual Report for the year ended December 31, 2019 (the “Form 10-K”) of the Company fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: February 26, 2020
/s/ Jennifer K. Moses
Jennifer K. Moses
Chief Financial Officer
(Principal Financial and Accounting Officer)