QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 84-1475642 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | ZIOP | The Nasdaq Stock Market LLC |
| Large Accelerated Filer | Accelerated Filer | |||||
Non- Accelerated Filer | ☐ | Smaller Reporting Company | ||||
| Emerging Growth Company | ☐ | |||||
The☒
ZIOPHARM Oncology, Inc.
contain these identifying words. These statements involve known and unknown risks, uncertainties and other factors that may cause our abilityactual results, levels of activity, performance or achievements to raise substantial additional capital to fundbe materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our planned operations in the near term and to continue as a going concern;
our estimates regarding expenses, use of cash, timing of future cash needs and capital requirements;
the development of our product candidates, including statements regarding the timing of initiation, completion and the outcome of clinical studies or trials and related preparatory work and the period during which the resultsexpectations of the trials will become available;
our ability
• | our ability to raise substantial additional capital to fund our planned operations in the near term; |
• | estimates regarding our expenses, use of cash, timing of future cash needs and anticipated capital requirements; |
• | the development of our product candidates, including statements regarding the initiation, timing, progress and results of our preclinical clinical studies, clinical trials and research and development programs; |
• | our ability to advance our product candidates through various stages of development, especially through pivotal safety and efficacy trials; |
• | the risk that final trial data may not support interim analysis of the viability of our product candidates; |
• | our expectation regarding the safety and efficacy of our product candidates; |
• | the timing, scope or likelihood of regulatory filings and approvals from the U.S. Food and Drug Administration or equivalent foreign regulatory agencies for our product candidates and for which indications; |
• | our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements; |
• | our ability to enter into partnerships or strategic collaboration agreements, our ability to achieve the results contemplated and the potential benefits to be derived from relationships with collaborators; |
• | our ability to maintain and establish collaborations and licenses; developments and projections relating to competition from other pharmaceutical and biotechnology companies or our industry; |
• | our estimates regarding the potential market opportunity for our product candidates; |
• | the anticipated rate and degree of commercial scope and potential, as well as market acceptance of our product candidates for any indication, if approved; |
• | the anticipated amount, timing and accounting of contract liability (formerly deferred revenue), milestones and other payments under licensing, collaboration or acquisition agreements, research and development costs and other expenses; |
• | our intellectual property position, including the strength and enforceability of our intellectual property rights; |
• | our ability to attract and retain qualified employees and key personnel; |
• | the impact of government laws and regulations in the United States and foreign countries; |
• | our expectations regarding the impact of the ongoing coronavirus disease 2019, or COVID-19, pandemic, included the expected duration of disruption and immediate and long-term impact and effect on our business and operations; |
• | the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; |
others in connection with the risk that final trial data may not support interim analysis of the viability of our product candidates;
our expectation regarding the safety and efficacy of our product candidates, the progress and timing of our research and development programs;
the timing, scope or likelihood of regulatory filings and approvals from the U.S. Food and Drug Administration or equivalent foreign regulatory agencies for our product candidates and for which indications;
our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements;
our ability to enter into partnerships or achieve the results contemplated by our collaboration agreements and the benefits to be derived from relationships with collaborators;
developments and projections relating to competition from other pharmaceutical and biotechnology companies or our industry;
our estimates regarding the potential market opportunity for our product candidates;
the anticipated rate and degree of market acceptance of our product candidates for any indication, if approved;
the anticipated amount, timing and accounting of contract liability (formerly deferred revenue), milestones and other payments under licensing, collaboration or acquisition agreements, research and development costs and other expenses;
our intellectual property position, including the strength and enforceability of our intellectual property rights;
our ability to attract and retain qualified employees and key personnel;
the impact of government laws and regulations in the United States and foreign countries; and
other risks and uncertainties, including those listed under Part I,II, Item 1A, “Risk Factors”.
These
reason, even if new information becomes available in the future.
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Item 1. | ||||||||||
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Item 2. | ||||||||||
Item 3. | ||||||||||
Item 4. | ||||||||||
Item 1. | ||||||||||
Item 1A. | ||||||||||
Item 2. | ||||||||||
Item 3. | ||||||||||
Item 4. | ||||||||||
Item 5. | ||||||||||
Item 6. | ||||||||||
Item 1. | Financial Statements |
| September 30, 2019 | December 31, 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 88,419 | $ | 61,729 | ||||
Receivables | 3,441 | 1,864 | ||||||
Prepaid expenses and other current assets | 23,739 | 20,692 | ||||||
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Total current assets | 115,599 | 84,285 | ||||||
Property and equipment, net | 828 | 1,097 | ||||||
Operating lease right of use assets | 1,283 | — | ||||||
Deposits | 130 | 128 | ||||||
Other non-current assets | 109 | 9,541 | ||||||
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Total assets | $ | 117,949 | $ | 95,051 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 926 | $ | 707 | ||||
Accrued expenses | 9,573 | 8,763 | ||||||
Lease liability—current portion | 677 | — | ||||||
Deferred rent—current portion | — | 13 | ||||||
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Total current liabilities | 11,176 | 9,483 | ||||||
Lease liability—noncurrent portion | 647 | — | ||||||
Deferred rent—noncurrent portion | — | 4 | ||||||
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Total liabilities | 11,823 | 9,487 | ||||||
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Commitments and contingencies (Note 7) | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.001 par value; 250,000,000 shares authorized; 181,030,020 and 161,066,136 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 181 | 161 | ||||||
Additional paid-in capital | 774,324 | 651,732 | ||||||
Accumulated deficit | (668,379 | ) | (566,329 | ) | ||||
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Total stockholders’ equity | 106,126 | 85,564 | ||||||
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Total liabilities and stockholders’ equity | $ | 117,949 | $ | 95,051 | ||||
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September 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 135,471 | $ | 79,741 | ||||
Receivables | 5,428 | 3,330 | ||||||
Prepaid expenses and other current assets | 14,172 | 22,421 | ||||||
Total current assets | 155,071 | 105,492 | ||||||
Property and equipment, net | 7,577 | 1,110 | ||||||
Right of use asset | 2,370 | 2,272 | ||||||
Deposits | 130 | 130 | ||||||
Other non-current assets | 746 | 110 | ||||||
Total assets | $ | 165,894 | $ | 109,114 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,619 | $ | 906 | ||||
Accrued expenses | 15,836 | 10,846 | ||||||
Lease liability - current portion | 866 | 774 | ||||||
Total current liabilities | 19,321 | 12,526 | ||||||
Lease liability - noncurrent portion | 1,655 | 1,578 | ||||||
Total liabilities | 20,976 | 14,104 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.001 par value; 250,000,000 shares authorized; 214,165,690 and 181,803,320 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 214 | 182 | ||||||
Additional paid-in capital | 886,033 | 778,953 | ||||||
Accumulated deficit | (741,329 | ) | (684,125 | ) | ||||
Total stockholders’ equity | 144,918 | 95,010 | ||||||
Total liabilities and stockholders’ equity | $ | 165,894 | $ | 109,114 | ||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
Collaboration revenue | $ | — | $ | — | $ | — | $ | 146 | ||||||||
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Operating expenses: | ||||||||||||||||
Research and development | 8,641 | 8,263 | 28,115 | 25,935 | ||||||||||||
General and administrative | 4,807 | 4,307 | 13,707 | 15,355 | ||||||||||||
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Total operating expenses | 13,448 | 12,570 | 41,822 | 41,290 | ||||||||||||
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Loss from operations | (13,448 | ) | (12,570 | ) | (41,822 | ) | (41,144 | ) | ||||||||
Other income, net | 203 | 150 | 523 | 462 | ||||||||||||
Change in fair value of derivative liabilities | — | (165 | ) | — | 46 | |||||||||||
Non-cash inducement warrant expense | (60,751 | ) | — | (60,751 | ) | — | ||||||||||
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Net loss | $ | (73,996 | ) | $ | (12,585 | ) | $ | (102,050 | ) | $ | (40,636 | ) | ||||
Preferred stock dividends | $ | — | $ | (6,074 | ) | $ | — | $ | (16,656 | ) | ||||||
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Net loss applicable to common stockholders | $ | (73,996 | ) | $ | (18,659 | ) | $ | (102,050 | ) | $ | (57,292 | ) | ||||
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Basic and diluted net loss per share | $ | (0.43 | ) | $ | (0.13 | ) | $ | (0.62 | ) | $ | (0.41 | ) | ||||
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Weighted average common shares outstanding used to compute basic and diluted net loss per share | 170,613,712 | 141,185,404 | 164,053,029 | 141,020,025 | ||||||||||||
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For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 13,968 | $ | 8,641 | $ | 38,725 | $ | 28,115 | ||||||||
General and administrative | 6,353 | 4,807 | 18,862 | 13,707 | ||||||||||||
| Total operating expenses | 20,321 | 13,448 | 57,587 | 41,822 | ||||||||||||
| Loss from operations | (20,321 | ) | (13,448 | ) | (57,587 | ) | (41,822 | ) | ||||||||
Other income, net | 6 | 203 | 383 | 523 | ||||||||||||
Non-cash inducement warrant expense | — | (60,751 | ) | — | (60,751 | ) | ||||||||||
| Net loss | $ | (20,315 | ) | $ | (73,996 | ) | $ | (57,204 | ) | $ | (102,050 | ) | ||||
Basic and diluted net loss per share | $ | (0.10 | ) | $ | (0.43 | ) | $ | (0.27 | ) | $ | (0.62 | ) | ||||
Weighted average common shares outstanding used to compute basic and diluted net loss per share | 212,837,367 | 170,613,712 | 208,497,410 | 164,053,029 | ||||||||||||
2020
| Series 1 Preferred Stock - Mezzanine | Common Stock | Additional Paid In Capital | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Common Stock | Deficit | Deficit | ||||||||||||||||||||||
Balance at June 30, 2018 | 127,002 | $ | 154,428 | 142,379,770 | $ | 142 | $ | 609,247 | $ | (748,624 | ) | $ | (139,235 | ) | ||||||||||||||
Stock-based compensation | — | — | — | — | 1,480 | — | 1,480 | |||||||||||||||||||||
Preferred stock dividends | 3,847 | 6,001 | — | — | (6,074 | ) | — | (6,074 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (12,585 | ) | (12,585 | ) | |||||||||||||||||||
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Balance at September 30, 2018 | 130,849 | $ | 160,429 | 142,379,770 | $ | 142 | $ | 604,653 | $ | (761,209 | ) | $ | (156,414 | ) | ||||||||||||||
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| For the Nine Months Ended September 30, 2018 |
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| Series 1 Preferred Stock - Mezzanine | Common Stock | Additional Paid In Capital | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Common Stock | Deficit | Deficit | ||||||||||||||||||||||
Balance at December 31, 2017 | 119,644 | 143,992 | 142,658,037 | 143 | 615,493 | (712,442 | ) | (96,806 | ) | |||||||||||||||||||
Adjustment for implementation of ASU No. 2014-09, Revenue from contracts with customers | — | — | — | — | — | (8,131 | ) | (8,131 | ) | |||||||||||||||||||
Stock-based compensation | — | — | — | — | 6,850 | — | 6,850 | |||||||||||||||||||||
Exercise of employee stock options | — | — | 104,166 | — | 240 | — | 240 | |||||||||||||||||||||
Cancelled restricted common stock | — | — | (70,867 | ) | — | — | — | — | ||||||||||||||||||||
Repurchase of restricted common stock | — | — | (311,566 | ) | (1 | ) | (1,274 | ) | — | (1,275 | ) | |||||||||||||||||
Preferred stock dividends | 11,205 | 16,437 | — | — | (16,656 | ) | — | (16,656 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (40,636 | ) | (40,636 | ) | |||||||||||||||||||
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Balance at September 30, 2018 | 130,849 | $ | 160,429 | 142,379,770 | $ | 142 | $ | 604,653 | $ | (761,209 | ) | $ | (156,414 | ) | ||||||||||||||
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2020
Common Stock | Additional Paid In Capital Common Stock | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance at June 30, 2020 | 214,150,940 | $ | 214 | $ | 884,214 | $ | (721,014 | ) | 163,414 | |||||||||||
Stock-based compensation | — | — | 1,792 | — | 1,792 | |||||||||||||||
Exercise of employee stock options | 14,750 | — | 27 | — | 27 | |||||||||||||||
Net loss | — | — | — | (20,315 | ) | (20,315 | ) | |||||||||||||
Balance at September 30, 2020 | 214,165,690 | $ | 214 | $ | 886,033 | $ | (741,329 | ) | $ | 144,918 | ||||||||||
For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||
Common Stock | Additional Paid In Capital Common Stock | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance at December 31, 2019 | 181,803,320 | $ | 182 | $ | 778,953 | $ | (684,125 | ) | $ | 95,010 | ||||||||||
Stock-based compensation | — | — | 5,393 | — | 5,393 | |||||||||||||||
Exercise of employee stock options | 22,916 | — | 43 | — | 43 | |||||||||||||||
Restricted stock awards | 555,900 | 1 | (1 | ) | — | — | ||||||||||||||
Cancelled restricted common stock | (141,230 | ) | — | — | — | — | ||||||||||||||
Issuance of common stock in connection with a public offering, net of commissions and expenses of $5.9 million | 29,110,111 | 29 | 88,632 | — | 88,661 | |||||||||||||||
Issuance of common stock in connection with an at the market offering, net of commissions and expenses of $0.4 million | 2,814,673 | 2 | 13,013 | — | 13,015 | |||||||||||||||
Net loss | — | — | — | (57,204 | ) | (57,204 | ) | |||||||||||||
Balance at September 30, 2020 | 214,165,690 | $ | 214 | $ | 886,033 | $ | (741,329 | ) | $ | 144,918 | ||||||||||
EQUITY…continued
For the Three Months Ended September 30, 2019 | ||||||||||||||||||||
| Common Stock | Additional Paid In Capital Common Stock | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||
| Shares | Amount | |||||||||||||||||||
Balance at June 30, 2019 | 162,477,963 | $ | 162 | $ | 656,216 | $ | (594,383 | ) | $ | 61,995 | ||||||||||
Stock-based compensation | — | — | 1,486 | — | 1,486 | |||||||||||||||
Exercise of employee stock options | 94,584 | — | 420 | — | 420 | |||||||||||||||
Restricted stock awards | 15,000 | — | — | — | — | |||||||||||||||
Issuance of common stock upon exercise of warrants, net | 17,803,031 | 18 | 52,481 | — | 52,499 | |||||||||||||||
Issuance of inducement warrants | — | — | 60,751 | — | 60,751 | |||||||||||||||
Issuance of common stock in connection with at the market offering, net | 639,442 | 1 | 2,970 | — | 2,971 | |||||||||||||||
Net loss | — | — | — | (73,996 | ) | (73,996 | ) | |||||||||||||
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Balance at September 30, 2019 | 181,030,020 | $ | 181 | $ | 774,324 | $ | (668,379 | ) | $ | 106,126 | ||||||||||
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For the Nine Months Ended September 30, 2019 | ||||||||||||||||||||
| Common Stock | Additional Paid In Capital Common Stock | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||
| Shares | Amount | |||||||||||||||||||
Balance at December 31, 2018 | 161,066,136 | $ | 161 | $ | 651,732 | $ | (566,329 | ) | $ | 85,564 | ||||||||||
Stock-based compensation | — | — | 4,741 | — | 4,741 | |||||||||||||||
Exercise of employee stock options | 352,652 | — | 1,020 | — | 1,020 | |||||||||||||||
Restricted stock awards | 1,408,536 | 1 | 999 | — | 1,000 | |||||||||||||||
Issuance of common stock upon exercise of warrants, net | 17,803,031 | 18 | 52,481 | — | 52,499 | |||||||||||||||
Issuance of inducement warrants | — | 60,751 | — | 60,751 | ||||||||||||||||
Cancelled restricted common stock | (74,599 | ) | — | — | — | — | ||||||||||||||
Restricted stock buy-back at vesting to cover taxes | (165,178 | ) | — | (370 | ) | — | (370 | ) | ||||||||||||
Issuance of common stock in connection with at the market offering, net | 639,442 | 1 | 2,970 | — | 2,971 | |||||||||||||||
Net loss | — | — | — | (102,050 | ) | (102,050 | ) | |||||||||||||
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Balance at September 30, 2019 | 181,030,020 | $ | 181 | $ | 774,324 | $ | (668,379 | ) | $ | 106,126 | ||||||||||
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| Common Stock | Additional Paid In Capital Common Stock | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||
| Shares | Amount | |||||||||||||||||||
Balance at June 30, 2019 | 162,477,963 | $ | 162 | $ | 656,216 | $ | (594,383 | ) | $ | 61,995 | ||||||||||
Stock-based compensation | — | — | 1,486 | — | 1,486 | |||||||||||||||
Exercise of employee stock options | 94,584 | — | 420 | — | 420 | |||||||||||||||
Restricted stock awards | 15,000 | — | — | — | — | |||||||||||||||
Issuance of common stock upon exercise of warrants, net | 17,803,031 | 18 | 52,481 | — | 52,499 | |||||||||||||||
Issuance of inducement warrants | — | — | 60,751 | — | 60,751 | |||||||||||||||
Issuance of common stock in connection with at the market offering, net | 639,442 | 1 | 2,970 | — | 2,971 | |||||||||||||||
Net loss | — | — | — | (73,996 | ) | (73,996 | ) | |||||||||||||
Balance at September 30, 2019 | 181,030,020 | $ | 181 | $ | 774,324 | $ | (668,379 | ) | $ | 106,126 | ||||||||||
For the Nine Months Ended September 30, 2019 | ||||||||||||||||||||
Common Stock | Additional Paid In Capital Common Stock | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||
Shares | Amount | |||||||||||||||||||
Balance at December 31, 2018 | 161,066,136 | $ | 161 | $ | 651,732 | $ | (566,329 | ) | $ | 85,564 | ||||||||||
Stock-based compensation | — | — | 4,741 | — | 4,741 | |||||||||||||||
Exercise of employee stock options | 352,652 | — | 1,020 | — | 1,020 | |||||||||||||||
Restricted stock awards | 1,408,536 | 1 | 999 | — | 1,000 | |||||||||||||||
Issuance of common stock upon exercise of warrants, net | 17,803,031 | 18 | 52,481 | — | 52,499 | |||||||||||||||
Issuance of inducement warrants | — | 60,751 | — | 60,751 | ||||||||||||||||
Cancelled restricted common stock | (74,599 | ) | — | — | — | — | ||||||||||||||
Restricted stock buy-back at vesting to cover taxes | (165,178 | ) | — | (370 | ) | — | (370 | ) | ||||||||||||
Issuance of common stock in connection with at the market offering, net | 639,442 | 1 | 2,970 | — | 2,971 | |||||||||||||||
Net loss | — | — | — | (102,050 | ) | (102,050 | ) | |||||||||||||
Balance at September 30, 2019 | 181,030,020 | $ | 181 | $ | 774,324 | $ | (668,379 | ) | $ | 106,126 | ||||||||||
| For the Nine Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (102,050 | ) | $ | (40,636 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 453 | 412 | ||||||
Stock-based compensation | 5,741 | 6,850 | ||||||
Change in fair value of derivative liabilities | — | (46 | ) | |||||
Non-cash inducement warrant expense | 60,751 | — | ||||||
Change in operating assets and liabilities | ||||||||
(Increase) decrease in: | ||||||||
Receivables | (1,577 | ) | (1,002 | ) | ||||
Prepaid expenses and other current assets | (3,047 | ) | 5,406 | |||||
Other noncurrent assets | 9,432 | (4,684 | ) | |||||
Deposits | (2 | ) | — | |||||
Increase (decrease) in: | ||||||||
Accounts payable | 219 | (3,148 | ) | |||||
Accrued expenses | 810 | (532 | ) | |||||
Deferred revenue | — | (146 | ) | |||||
Deferred rent | 17 | (112 | ) | |||||
Other liabilities | 7 | — | ||||||
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Net cash used in operating activities | (29,246 | ) | (37,638 | ) | ||||
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Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (184 | ) | (545 | ) | ||||
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Net cash used in investing activities | (184 | ) | (545 | ) | ||||
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Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options | 1,020 | 240 | ||||||
Repurchase of common stock | (370 | ) | (1,275 | ) | ||||
Issuance of common stock in connection with at the market offering, net | 2,971 | — | ||||||
Issuance of common stock upon exercise of warrants, net | 52,499 | — | ||||||
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Net cash provided by (used in) financing activities | 56,120 | (1,035 | ) | |||||
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Net increase (decrease) in cash and cash equivalents, and restricted cash | 26,690 | (39,218 | ) | |||||
Cash and cash equivalents, and restricted cash, beginning of period | 61,729 | 71,335 | ||||||
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Cash and cash equivalents, and restricted cash, end of period | $ | 88,419 | $ | 32,117 | ||||
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Supplementary disclosure of cash flow information: | ||||||||
Compensation paid in restricted stock, gross | $ | 1,000 | $ | — | ||||
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Supplementary disclosure of noncash investing and financing activities: | ||||||||
Payment of Series 1 preferred stock dividends in preferred stock | $ | — | $ | 16,656 | ||||
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For the Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (57,204 | ) | $ | (102,050 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 708 | 453 | ||||||
Stock-based compensation | 5,393 | 5,741 | ||||||
Non-cash inducement warrant expense | — | 60,751 | ||||||
Change in operating assets and liabilities | ||||||||
(Increase) decrease in: | ||||||||
Receivables | (2,098 | ) | (1,577 | ) | ||||
Prepaid expenses and other current assets | 8,249 | (3,047 | ) | |||||
Right of use asset | (98 | ) | — | |||||
Deposits | — | (2 | ) | |||||
Other noncurrent assets | (636 | ) | 9,432 | |||||
Increase (decrease) in: | ||||||||
Accounts payable | 1,713 | 219 | ||||||
Accrued expenses | 3,828 | 810 | ||||||
Deferred rent | — | 17 | ||||||
Lease liabilities | 168 | 7 | ||||||
Net cash used in operating activities | (39,977 | ) | (29,246 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (6,012 | ) | (184 | ) | ||||
Net cash used in investing activities | (6,012 | ) | (184 | ) | ||||
Cash flows from financing activities: | ||||||||
Repurchase of common stock | — | (370 | ) | |||||
Proceeds from exercise of stock options | 43 | 1,020 | ||||||
Issuance of common stock in connection with a public offering, net | 88,661 | 2,971 | ||||||
Issuance of common stock in connection with at the market offerings, net | 13,015 | 52,499 | ||||||
Net cash provided by financing activities | 101,719 | 56,120 | ||||||
Net increase in cash and cash equivalents, and restricted cash | 55,730 | 26,690 | ||||||
Cash and cash equivalents, and restricted cash, beginning of period | 79,741 | 61,729 | ||||||
Cash and cash equivalents, and restricted cash, end of period | $ | 135,471 | $ | 88,419 | ||||
Supplementary disclosure of cash flow information: | ||||||||
Compensation paid in restricted stock, gross | $ | — | $ | 1,000 | ||||
Accounts included in accounts payable and accrued expenses related to property and equipment | $ | 1,163 | $ | — | ||||
Annual Report.
(Continued)
Clinical trial expenses;
• | Clinical trial expenses; |
Collaboration agreements
• | Collaboration agreements; |
• | Fair value measurements of stock-based compensation; and |
• | Income taxes |
Fair
Income taxes
The Company will own all intellectual property developed under the 2019 Agreement and will retain all rights to intellectual property for oncology products manufactured using non-viral gene transfer technologies under the Agreement, including the Company’sSleeping Beauty technology. The Company has granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize autologous TCR products manufactured using viral gene transfer technologies, and a non-exclusive license for allogeneic TCR products manufactured using viral-based technologies.
The Company has agreed, beginning on January 1, 2021, to reimburse MD Anderson up to a total of $20.0 million for development costs under the 2019 Agreement. In addition, the Company will pay MD Anderson royalties on net sales of its TCR products at rates in the low single digits. The Company is required to make performance-based payments upon the successful completion of clinical and regulatory benchmarks relating to its TCR products. The aggregate potential benchmark payments are $36.5 million, of which only $3.0 million will be due prior to the first marketing approval of the Company’s TCR products. The royalty rates and benchmark payments owed to MD Anderson may be reduced upon the occurrence of certain events. The Company also agreed that it will sell the Company’s TCR products to MD Anderson at preferential prices and will sell its TCR products in Texas exclusively to MD Anderson for a limited period of time following the first commercial sale of the Company’s TCR products.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. Business – (continued)
The 2019 Agreement will terminate on December 31, 2026 and either party may terminate the 2019 Agreement following written notice of a material breach. The 2019 Agreement also contains customary provisions related to indemnification obligations, confidentiality and other matters. In connectionS-3ASR
Also, in connection with the execution of the 2019 Agreement, on October 22, 2019, the Company and MD Anderson entered into the Fifth Amendment to the Research and Development Agreement, or, the Fifth Amendment, which amended the Research and Development Agreement, dated August 17, 2015 by and between the Company and MD Anderson, or, the 2015 Agreement. The 2015 Agreement governed the research and development activities of the parties for the Company’s chimeric antigen receptor (CAR-T) program. The Fifth Amendment extended the term of the 2015 Agreement until December 31, 2026 and amended the terms of the 2015 Agreement to allow cash resources on hand at MD Anderson under the 2015 Agreement to now be used for development costs under the 2019 Agreement.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
2. Financings
At-the-Market Offering
Leases
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
3. Summary of Significant Accounting Policies (continued)
The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date.for interim periods within those fiscal years. The Company adopted Topic 842 asis currently evaluating the impact of January 1, 2019 using the effective date method, in which it did not restate prior periods. Upon adoption, the Company elected the package of practical expedients permitted under the transitionthis new guidance within Topic 842 which, among other things, allowed it to carry forward the historical lease classification.
The adoption of Topic 842 on January 1, 2019 resulted in recognition of approximately $1.6 million of right-of-use assets and $1.6 million of lease liabilities on the Company’s balance sheets. The adoption did not have a material impact on the Company’s statements of operations or accumulated deficit.
New Accounting Pronouncements
its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07,Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. The guidance in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The new standard was effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within each annual reporting period. The Company adopted this ASU on January 1, 2019. The adoption did not have a material impact on the Company’s financial statements.
Variable Interest Entities
The Company reviews each legal entity formed by parties related to the Company to determine whether or not the entity is a Variable Interest Entity, or VIE. If the entity is a VIE, the Company assesses whether or not it is the primary beneficiary
Level 1—Quoted prices in active markets for identical assets or liabilities.
• | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
• | Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
• | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
| ($ in thousands) | Fair Value Measurements at Reporting Date Using | |||||||||||||||
Description | Balance as of September 30, 2019 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 73,198 | $ | 73,198 | $ | — | $ | — | ||||||||
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| ($ in thousands) | Fair Value Measurements at Reporting Date Using | |||||||||||||||
Description | Balance as of December 31, 2018 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 24,437 | $ | 24,437 | $ | — | $ | — | ||||||||
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($ in thousands) | Fair Value Measurements at Reporting Date Using | |||||||||||||||
Description | Balance as of September 30, 2020 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 75,300 | $ | 75,300 | $ | — | $ | — | ||||||||
($ in thousands) | Fair Value Measurements at Reporting Date Using | |||||||||||||||
Description | Balance as of December 31, 2019 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 68,031 | $ | 68,031 | $ | — | $ | — | ||||||||
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
| September 30, | ||||||||
| 2019 | 2018 | |||||||
Stock options | 4,995,549 | 4,569,468 | ||||||
Inducement stock options | 965,000 | — | ||||||
Unvested restricted stock | 1,569,579 | 1,164,352 | ||||||
Warrants | 18,939,394 | — | ||||||
Preferred stock | — | 52,583,921 | ||||||
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| 26,469,522 | 58,317,741 | |||||||
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On October 5, 2018, the Company and Precigen, Inc., or Precigen, a wholly owned subsidiary of Intrexon Corporation, or Intrexon, entered into an exclusive license agreement, or the License Agreement, to replace all existing agreements between the companies that provides the Company with certain exclusive and non-exclusive rights to technology controlled by Precigen. In consideration of the Company entering into the License Agreement, Intrexon agreed to forfeit and return to the Company all shares of the Company’s Series 1 Preferred Stock held by or payable to Intrexon as of the date of the License Agreement (Note 9).
| September 30, | ||||||||
| 2020 | 2019 | |||||||
Stock options | 6,572,191 | 4,995,549 | ||||||
Inducement stock options | 863,333 | 965,000 | ||||||
Unvested restricted stock | 1,289,389 | 1,569,579 | ||||||
Warrants | 22,272,727 | 18,939,394 | ||||||
| 30,997,640 | 26,469,522 | |||||||
The Company adopted Accounting Standards Codification, or ASC Topic 606,Revenue from Contracts with Customers, or ASC 606, using the modified retrospective approach on January 1, 2018. The Company completed its assessment and the implementation resulted in a cumulative effect adjustment to accumulated deficit as of January 1, 2018 of approximately $8.1 million and a corresponding increase to the contract liability (formerly deferred revenue). The adjustment to the Company’s financial statements due to the adoption of ASC 606 is related to the Company’s License and Collaboration Agreement with Ares Trading S.A., a subsidiary of Merck KGaA, or the Ares Trading Agreement (Note 6), which was the Company’s sole open revenue contract outstanding at January 1, 2018. The remaining revenue under the Ares Trading Agreement was recognized in 2018.
The Company primarily generates revenue through collaboration arrangements with strategic partners for the development and commercialization of product candidates. Commencing January 1, 2018, the Company recognized revenue in accordance with ASC 606 which replaced ASC 605,Multiple Element Arrangements, as used in historical years. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods and/or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and/or services. To determine the appropriate amount of revenue to be recognized for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) each performance obligation is satisfied.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
6. Revenue Recognition (continued)
The Company recognizes collaboration revenue under certain of the Company’s license or collaboration agreements that are within the scope of ASC 606. The Company’s contracts with customers typically include promises related to licenses to intellectual property, research and development services and options to purchase additional goods and/or services. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. Contracts that include an option to acquire additional goods and/or services are evaluated to determine if such option provides a material right to the customer that it would not have received without entering into the contract. If so, the option is accounted for as a separate performance obligation. If not, the option is considered a marketing offer which would be accounted for as a separate contract upon the customer’s election.
The terms of the Company’s arrangements with customers typically include the payment of one or more of the following: (i) non-refundable, up-front payment, (ii) development, regulatory and commercial milestone payments, (iii) future options and (iv) royalties on net sales of licensed products. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. The Company measures the transaction price based on the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods and/or services to the customer. The Company utilizes the most likely amount method to estimate the amount of variable consideration, to predict the amount of consideration to which it will be entitled for its one open contract. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includes development and regulatory milestone payments, the Company evaluates whether the associated event is considered probable of achievement and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within the control of the Company or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement until the triggering event occurs. At the end of each reporting period, the Company reevaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, the Company recognizes revenue upon the later of: (i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any development, regulatory or commercial milestones or royalty revenue resulting from any of its collaboration arrangements. Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.
The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. However, certain components of variable consideration are allocated specifically to one or more particular performance obligations in a contact to the extent both of the following criteria are met: (i) the terms of the payment relate specifically to the efforts to satisfy the performance obligation or transfer the distinct good or service and (ii) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective of the standard whereby the amount allocated depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services. The Company develops assumptions that require judgment to determine the standalone selling price for each performance obligation identified in each contract. The key assumptions utilized in determining the standalone selling price for each performance obligation may include forecasted revenues, development timelines, estimated research and development costs, discount rates, likelihood of exercise and probabilities of technical and regulatory success.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
6. Revenue Recognition (continued)
Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. For performance obligations that are satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. The Company uses input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.
As it relates to the Ares Trading Agreement (Note 6), the Company recognized the upfront payment associated with its one open contract as a contract liability upon receipt of payment as it requires deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. The Company determined that there were three performance obligations; the first performance obligation consists of the license and research development services and the other two performance obligations are material rights as it relates to potential future targets that have not yet been identified. As described above, the transaction price of $57.5 million was allocated to the performance obligations based on their relative standalone selling prices (Note 6).
The Company did not believe that any variable consideration should be included in the transaction price at the date of adoption of ASC 606 on January 1, 2018. Such assessment considered the application of the constraint to ensure that estimates of variable consideration would be included in the transaction price only to the extent the Company had a high degree of confidence that revenue would not be reversed in a subsequent reporting period. The Company re-evaluated the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period since adoption, as applicable.
On October 5, 2018, the Company entered into the license agreement with Precigen (Note 7). As between the Company and Precigen, the terms of the License Agreement replace the terms of: (a) the Channel Agreement previously entered into with Intrexon Corporation, of the Channel Agreement, including all amendments to the Channel Agreement; (b) certain rights and obligations pursuant to the Ares Trading Agreement; (c) the MD Anderson License (Note 7); and (d) the 2015 Agreement and any amendments or statements of work thereto.
In partial consideration of the Company entering into the License Agreement, Precigen is required to use diligent good faith efforts to transfer the Company’s rights and obligations under the Ares Trading Agreement to Intrexon (or its affiliate). As a result, the Company has very limited remaining obligations under the Ares Trading Agreement, and following the Company’s entry into the License Agreement, will not be recognizing any additional revenue under the Ares Trading Agreement.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies
PGEN Therapeutics
Precigen has also granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license to research, develop and commercialize products utilizing an additional construct that expresses RTS IL-12 for the treatment of cancer, referred to as Gorilla IL-12 Products.
three and nine months ended September
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies (Continued)
PrecigenPGEN will pay the Company royalties ranging from
In consideration2020,
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies (Continued)
The termfirst marketing approval of the MD Anderson License expires on the lastCompany’s TCR products. The royalty rates and benchmark payments owed to occur of (a) the expiration of all patents licensed thereunder, or (b) the twentieth anniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term of the MD Anderson License, the Company, together with Precigen, shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensed intellectual property thereunder. After ten years from the date of the MD Anderson License and subject to a 90-day cure period, MD Anderson will have the right to convert the MD Anderson License into a non-exclusive license if the Company and Precigen are not using commercially reasonable efforts to commercialize the licensed intellectual property on a case-by-case basis. After five years from the date of the MD Anderson License and subject to a 180-day cure period, MD Anderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subject to a third-party contract if the Company and Precigen are not meeting the diligence requirements in such funding agreement or contract, as applicable. MD Anderson may also terminate the agreement with written notice upon material breach by the Company and Precigen, if such breach has not been cured within 60 days of receiving such notice. In addition, the MD Anderson License will terminatebe reduced upon the occurrence of certain insolvency eventsevents. The Company also agreed that it will sell the Company’s TCR products to MD Anderson at preferential prices and will sell its TCR products in Texas exclusively to MD Anderson for botha limited period of time following the first commercial sale of the Company’s TCR products.
common stock. Refer to Note 9 –
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies (Continued)
As of September 30, 2020, the Company included a prepayment of $0.3 million related to the Patent License as prepaid expenses and other current assets on the Company’s
Company. In February 2019, the Company extended the CRADA with the NCI for two years, committing an additional $5.0 million to this program through January 2022.program. The remaining obligation, asCompany
Exclusive Channel Partner Agreement with Precigen for the Cancer Programs
From 2011 to 2018, the Company was party to various arrangements with Intrexon (now Precigen) in which the Company used Precigen’s technology to research and develop cancer treatments in return for various future profit sharing and royalty arrangements. These agreements were modified or terminated by the License Agreement described in Note 9.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies (Continued)
Precigen
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies (Continued)
use.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
7. Commitments and Contingencies (Continued)
Solasia will be responsible for all costs related to the development, manufacturing and commercialization of darinaparsin. The Company’s Licensors, as defined in the agreement, will receive a portion of all milestone and royalty payments made by Solasia to the Company in accordance with the terms of the license agreement with the Licensors.
8. Related Party Transactions
Collaborations with Intrexon/ Precigen
During the three and nine months ended September 30, 2018, the Company issued an aggregate
9. Settlement of a Related Party Relationship
Exclusive License Agreement with Precigen
On October 5, 2018, the Company entered into the license agreement with Precigen. As between the Company and Precigen, the terms of the License Agreement replace the terms of: (a) the Channel Agreement, including all amendments to the Channel Agreement; (b) certain rights and obligations pursuant to the Ares Trading Agreement; (c) the MD Anderson License; and (d) the 2015 Agreement, and any amendments or statements of work thereto.
Pursuant to the terms of the License Agreement, Precigen has granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license to research, develop and commercialize (i) products utilizing Precigen’s RheoSwitch® gene switch, or RTS, for the treatment of cancer, referred to as IL-12 Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target, subject to the terms of the Ares Trading Agreement, and (iii) TCR Products designed for neoantigens for the treatment of cancer. Precigen has also granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license for certain patents relating to theSleeping Beauty technology to research, develop and commercialize TCR Products.
The Company is solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for the treatment of cancer. The Company is required to use commercially reasonable efforts to develop and commercialize IL-12 Products and CD19 Products and after a two-year period, the TCR Products. Precigen has also granted the Company an exclusive, worldwide, royalty-bearing, sub-licensable license to research, develop and commercialize Gorilla IL-12 Products. Ziopharm agreed to reimburse Precigen for certain historical costs of the licensed programs up to $1.0 million, payable quarterly. The Company determined that the fair value of this program was $1.0 million, and this was expensed in accordance with ASC 730,Research and Development, during the year ended December 31, 2018 and it was included in accrued expense on the balance sheet. The accrued balance is $0.8 million at September 30, 2019.
The agreement also calls for an annual license fee of $0.1 million as long as the agreement is effective. The Company will also make milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions. In addition, the Company will pay Precigen tiered royalties ranging from low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 Products and CAR Products. The Company will also pay Precigen royalties ranging from low-single digit to mid-single digit on the net sales derived from the sales of any approved TCR Products, up to a maximum royalty amount of $100.0 million in the aggregate. The Company will also pay Precigen 20% of any sublicensing income received by the Company relating to the licensed products.
The Company is responsible for all development costs associated with each of the licensed products, other than Gorilla IL-12 Products. The Company and Precigen will share the development costs and operating profits for Gorilla IL-12 Products, with the Company responsible for 80% of the development costs and receiving 80% of the operating profits, and Precigen responsible for the remaining 20% of the development costs and receiving 20% of the operating profits.
Precigen will pay the Company royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of Precigen’s CAR products, up to $50.0 million.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
9. Settlement of a Related Party Relationship (continued)
In consideration of the Company entering into the License Agreement, Intrexon forfeited and returned to the Company all shares of the Company’s Series 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement. In addition, Precigen is required to transfer all of Ziopharm’s rights and obligations under the Ares Trading Agreement to Intrexon (or its affiliate). See Note 7 for further information regarding the Company’s remaining obligations under the Ares Trading Agreement.
The Company determined that this transaction represented a capital transaction between related parties. The Company calculated the fair value of the preferred stock and the derivative liability on the date of the transaction, noting a total fair value of $163.3 million. The relinquishment of the Company’s obligation under the Ares Trading Agreement was also considered part of the overall capital transaction. The Company recognized an additional credit to accumulated deficit of $49.5 million as a result of the relief of the obligation under the Ares Trading Agreement (Note 7). The total amount of the settlement was $212.8 million.
The Company incurred approximately $7.4 million of transaction advisory costs with third-party vendors, of which $5.4 million was considered a direct cost associated with the Series 1 preferred stock extinguishment and is also included as part of the consideration transferred. The remaining $2.0 million of transaction costs were recognized as an expense during the year ended December 31, 2018.
The Company recognized a net credit to accumulated deficit of $207.3 million, calculated as the difference in the carrying value of the Series 1 preferred stock, derivative liability, and contract liability, and the consideration transferred of $5.4 million, in connection with the transaction. This amount is included in net income available to common shareholders in the calculation of earnings per share (Note 5).
10.
The Company adopted Topic 842 on January 1, 2019 using the effective date method, in which it did not restate prior periods. Upon adoption, the Company elected the package of practical expedients permitted under the transition guidance within Topic 842 which, among other things, allowed it to carry forward the historical lease classification. The Company does not allocate consideration in its leases to lease and non-lease components and does not record leases on its balance sheets with terms of 12 months or less.
The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company’s incremental borrowing rate represents the rate of interest that it would have to pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment. The Company considers publicly available data for instruments with similar terms and characteristics when determining its incremental borrowing rates.
The adoption of Topic 842 resulted in recognition of approximately $1.6 million of right-of-use assets and $1.6 million of lease liabilities on the Company’s balance sheets. The adoption did not have a material impact on the Company’s statements of operations or accumulated deficit. The Company will review the classification of newly entered leases as either an operating or a finance lease and recognize a related right-of-use asset and lease liabilities on its balance sheets upon commencement.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
10. Leases (continued)
On January 30, 2018, the Company entered into a lease agreement for office space in Houston at MD Anderson. Under the terms of the Houston lease agreement, the Company leasesleased approximately two hundred and ten square feet and arewere required to make rental payments at an average monthly rate of approximately $1 thousand through April 2021. All future rent expense incurred in Houston, will be deducted from the Company’s prepayments at MD Anderson.
thousand. This lease was terminated effective March 31, 2020.
On October 15, 2019, the Company entered into a lease agreement for additional office space in Houston. Under the terms of the Second Houston Lease, the Company leases, from MD Anderson, approximately eight thousand four hundred and forty-three square feet and is initially required to make rental payments of approximately $17 thousand per month through February 2027, subject to an annual base rent increase of approximately 3.0% throughout the term.
(in thousands) | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||
Operating lease cost | $ | 184 | $ | 585 | ||||
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Total lease cost | $ | 184 | $ | 585 | ||||
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Weighted-average remaining lease term (years) | 2.15 | 2.15 | ||||||
Weighted-average discount rate | 8.00 | % | 8.00 | % | ||||
Cash paid for amounts included in the measurement
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (in thousands) | 2020 | 2020 | ||||||
Operating lease cost | $ | 267 | $ | 768 | ||||
Total lease cost | $ | 267 | $ | 768 | ||||
Weighted-average remaining lease term (years) | 4.99 | 4.99 | ||||||
Weighted-average discount rate | 8.00 | % | 8.00 | % | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (in thousands) | 2019 | 2019 | ||||||
Operating lease cost | $ | 184 | $ | 585 | ||||
Total lease cost | $ | 184 | $ | 585 | ||||
Weighted-average remaining lease term (years) | 2.15 | 2.15 | ||||||
Weighted-average discount rate | 8.00 | % | 8.00 | % | ||||
Maturity of Lease Liabilities | Operating Leases | |||
2019(excluding the nine months ended September 30, 2019) | $ | 188 | ||
2020 | 755 | |||
2021 | 491 | |||
|
| |||
Total lease payments | $ | 1,434 | ||
Less: Imputed Interest and Adjustments | 110 | |||
|
| |||
Present value of lease payments | $ | 1,324 | ||
|
| |||
Disclosures related to periods prior to adoption
2020 (excluding the nine months endedSeptember 30, 2020) | $ | 318 | ||
2021 | 896 | |||
2022 | 353 | |||
2023 | 364 | |||
2024 | 375 | |||
Thereafter | 851 | |||
Total lease payments | 3,157 | |||
Less: Imputed interest and adjustments | (637 | ) | ||
Present value of lease payments | $ | 2,520 | ||
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
11.
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| (in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Research and development | $ | 339 | $ | 552 | $ | 1,068 | $ | 1,765 | ||||||||
General and administrative | 1,147 | 928 | 3,673 | 5,085 | ||||||||||||
|
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|
|
|
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| |||||||||
Stock-based compensation expense | $ | 1,486 | $ | 1,480 | $ | 4,741 | $ | 6,850 | ||||||||
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| |||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Research and development | $ | 522 | $ | 339 | $ | 1,587 | $ | 1,068 | ||||||||
General and administrative | 1,270 | 1,147 | 3,806 | 3,673 | ||||||||||||
Stock-based compensation expense | $ | 1,792 | $ | 1,486 | $ | 5,393 | $ | 4,741 | ||||||||
2020
2020.
| For the three months ended September 30, | ||||
| 2019 | 2018 | |||
Risk-free interest rate | 1.39 - 1.92% | 2.82 - 2.98% | ||
Expected life in years | 6.25 | 6 | ||
Expected volatility | 72.87 - 78.34% | 82.27 - 83.08% | ||
Expected dividend yield | 0 | 0 | ||
For the three months ended September 30, | ||||
2020 | 2019 | |||
Risk-free interest rate | 0.36 - 0.39% | 1.39 - 1.92% | ||
Expected life in years | 5.75 - 6.25 | 6.25 | ||
Expected volatility | 73.59 - | 72.87 - 78.34% | ||
Expected dividend yield | 0% | 0% | ||
11.
(Continued)
| (in thousands, except share and per share data) | Number of Shares | Weighted- Average Exercise Price | Weighted- Average Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||
Outstanding, December 31, 2018 | 5,277,085 | $ | 4.24 | |||||||||||||
Granted | 1,835,755 | 2.69 | ||||||||||||||
Exercised | (482,500 | ) | 3.48 | |||||||||||||
Cancelled | (1,634,791 | ) | 4.11 | |||||||||||||
|
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|
| |||||||||||||
Outstanding, September 30, 2019 | 4,995,549 | $ | 3.78 | 7.84 | $ | 6,025 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Options exercisable, September 30, 2019 | 2,581,327 | $ | 4.59 | 6.60 | $ | 2,425 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Options exercisable, December 31, 2018 | 3,099,935 | $ | 5.15 | 4.93 | $ | 88 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Options available for future grant | 3,971,940 | |||||||||||||||
|
| |||||||||||||||
(in thousands, except share and per share data) | Number of Shares | Weighted- Average Exercise Price | Weighted- Average Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||
Outstanding, December 31, 2019 | 5,842,879 | $ | 3.21 | |||||||||||||
Granted | 1,252,178 | 3.89 | ||||||||||||||
Exercised | (22,916 | ) | 1.87 | |||||||||||||
Cancelled | (499,950 | ) | 3.84 | |||||||||||||
Outstanding, September 30, 2020 | 6,572,191 | $ | 3.93 | 7.82 | $ | 978 | ||||||||||
Options exercisable, September 30, 2020 | 3,711,684 | $ | 4.10 | 6.96 | $ | 704 | ||||||||||
Options exercisable, December 31, 2019 | 2,765,357 | $ | 4.39 | 6.70 | $ | 3,603 | ||||||||||
Options available for future grant | 6,986,610 | |||||||||||||||
| Number of Shares | Weighted-Average Grant Date Fair Value | |||||||
Non-vested, December 31, 2018 | 682,070 | $ | 3.47 | |||||
Granted | 1,408,536 | 2.26 | ||||||
Vested | (446,428 | ) | 2.24 | |||||
Cancelled | (74,599 | ) | 3.41 | |||||
|
|
|
| |||||
Non-vested, September 30, 2019 | 1,569,579 | $ | 2.91 | |||||
|
|
|
| |||||
Number of Shares | Weighted-Average Grant Date Fair Value | |||||||
Non-vested, December 31, 2019 | 939,636 | $ | 2.93 | |||||
Granted | 555,900 | 4.21 | ||||||
Vested | (64,917 | ) | 3.42 | |||||
Cancelled | (141,230 | ) | 3.15 | |||||
Non-vested, September 30, 2020 | 1,289,389 | $ | 3.43 | |||||
12. Preferred Stock
The Company’s Board of Directors is authorized to designate any series of Preferred Stock, to fix and determine the variations in relative rights, preferences, privileges and restrictions as between and among such series.
On June 29, 2016, the Company entered into the 2016 ECP Amendment and Amendment to Exclusive Channel Collaboration Agreement, or the 2016 GvHD Amendment, with Intrexon (now Precigen) (Note 7). In consideration for the execution and delivery of the 2016 ECP Amendment and the 2016 GvHD Amendment, the Company issued to Intrexon 100,000 shares of its newly designated Series 1 preferred stock. Each share of the Company’s Series 1 preferred stock had a stated value of $1,200, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other recapitalization. The Series 1 preferred stock had certain rights, preferences, privileges and obligations, including dividend rights, conversion rights, consent rights with respect to certain Company actions, and rights to preferential payments in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or a change of control or sale, lease, transfer or exclusive license of all or substantially all of the Company’s assets prior to the conversion of the Series 1 preferred stock.
On October 5, 2018, the Company and Precigen entered into the License Agreement to replace all existing agreements between the companies, which provides the Company with certain exclusive and non-exclusive rights to technology controlled by Precigen. In consideration of the Company entering into the License Agreement, Intrexon forfeited and returned to the Company all shares of the Company’s Series 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement (Notes 7, 8 and 12).
13. Derivative Financial Instruments
The Company determined that certain embedded features related to the Series 1 preferred stock were derivative financial instruments. The company values the embedded derivative financial instruments related to the Series 1 preferred stock as Level 3 financial liabilities (Note 4).
On October 5, 2018, the Company entered into the License Agreement with Precigen. In partial consideration for the termination of the former agreements, the Company and Precigen agreed that Intrexon would forfeit all outstanding shares of the Series 1 preferred stock held by Intrexon, including any accrued dividends and related financial instruments. Thus, upon closing of the transaction, these derivative financial instruments were no longer outstanding (Note 9).
14.
ZIOPHARM Oncology, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
14. Warrants (continued)
On July 26, 2019 and September 12, 2019, the Company entered into agreements with existing investors for the exercise of previously issued warrants to purchase common stock in athe private placement. Pursuant to the terms of the agreements, investors exercised their 2018 warrants for an aggregate of 17,803,031 shares of common stock, at an exercise price of $3.01 per share. The warrants exercised were originally issued by the Company in a private placement that closed in November 2018 (Note 2). Proceeds from the warrant exercise, after deducting placement agent fees and other related expenses of $1.1 million were approximately $52.5 million. The Company issued the participating investors new warrants to purchase up to 17,803,031 additional shares of common stock, or the 2019 warrants, as an inducement for the warrant holders to exercise their 2018 warrants early.warrants. The 2019 warrants will become exercisable six months following the date of issuance, will expire on the fifth anniversary of the initial exercise date and have an exercise price of $7.00. The 2019 warrants were valued using a Black-Scholes valuation model and resulted in a $60.8 million
The Company assessed whether the 2019 warrants require accounting as derivatives. The Company determined that the warrants were (1) indexed2020, work related to the Company’s own stockclinical milestones has not been started and (2) classified in stockholders’ equity in accordance with FASB ASC Topic 815,Derivatives and Hedging. As such,therefore, the Company has concludeddid not recognize any expense related to the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity.
15.warrant.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward Looking Statements
Thisthe notes thereto included in this Quarterly Report on Form contains “forward-looking statements” withinmeaning of Section 27Aaudited financial information and the notes thereto included in our Annual Report on Form
statements.
tumors.
We are also developing CAR+ T therapies using ourSleeping Beauty platform. Our CAR+ T program seeks to solve the complex and costly manufacturing limitations of existing CD19-specific CAR+ T therapies that we believe will continue limiting their commercial potential. We believe using DNA plasmids in theSleeping Beauty
our Library TCR Approach.
As of September 30, 2019,
refractory CD19
Organizational Updates
On October 8, 2019, Chris Bowden, M.D., an oncology drug development executive with more than 20 yearsThe ongoing
•Under our Cooperative Research and Development Agreement, or CRADA, the National Cancer Institute, or NCI, is undertaking a phase 2 clinical trial testing autologous peripheral blood lymphocytes genetically modified with theSleeping Beauty system to express TCRs that recognize neoantigens expressed by patients’ solid tumors. On June 11, 2019, we announced the U.S. Food and Drug Administration, or FDA, had cleared the investigational new drug application submitted by the NCI for this clinical trial. The trial was initiated in early October and preparations for patient enrollment by the NCI are underway. We expect the trial will enroll patients with a broad range of solid tumors.•Enrollment has commenced in our phase 2 clinical trial evaluating ControlledIL-12 in combination withPD-1 antibody Libtayo® (cemiplimab-rwlc) for the treatment of rGBM in adults. The multi-center trial will be conducted at approximately 10 hospitals specializing in the treatment of brain cancers in the United States. This open-label,single-arm phase 2 clinical trial will enroll approximately 30 patients with rGBM, with the primary endpoints being safety and efficacy. As of the date hereof, six patients have been enrolled in the clinical trial and those patients are nearing the end of the monitoring period prescribed in the clinical protocol. After this period ends, patient enrollment can resume.June 2019,this study, the NCI will test autologous peripheral blood lymphocytes genetically modified with thewas complete in three dosing cohorts of a phaseour Phase 1 clinical trial of adult patients with rGBM to evaluateevaluating Ad-RTS-hIL-12 plus daily veledimex in combination with OPDIVO. InvestigatorsOPDIVOtheour Phase 2 clinical trial indicated interest in expanding the trial and 12 additional patients have been enrolled at the highest dosing level.At the November 2019 Annual Meeting of the Society for Neuro-Oncology, investigators will present data from ourevaluating ControlledIL-12 clinical trials, which are studying the treatment both as monotherapy and in combination with OPDIVO.On August 8, 2019, we announced the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP) adopted a positive opinion recommendingAd-RTS-hIL-12 plus veledimex for designation as an orphan medicinal product for the treatment of glioma, which has subsequentlyrGBM. In July 2020, we announced the first patient had been adopteddosed in a Phase 1/2 clinical trial evaluating Ad-RTS-hIL-12 plus veledimex for the treatment of DIPG. Data will be presented from all three trials at the 2020 Society for Neuro-Oncology Annual Meeting (SNO).
|
|
Business Developments
On October 22, 2019,2011. Following the acquisition of Cephalon by Teva in 2011, Mr. Buchi served as corporate vice president of global branded products at Teva. Following Teva, he was Chief Executive Officer of TetraLogic Pharmaceuticals and Biospecifics Technologies.
We will own all intellectual property developed under the 2019 Agreement and will retain all rights to intellectual property for oncology products manufactured usingnon-viral gene transfer technologies under the Agreement, including ourSleeping Beauty technology. We have granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize autologous TCR products manufactured using viral gene transfer innovative technologies and anon-exclusive license for allogeneic TCR products manufactured using viral-based technologies.
We have agreed, beginning on January 1, 2021, to reimburse MD Anderson up to a totalpipeline of $20 million for certain development costs incurred under the 2019 Agreement. In addition, we will pay MD Anderson royalties on net sales of its TCR products at rates in the low single digits. We are required to make performance-based payments upon the successful completion of clinical and regulatory benchmarks relating to its TCR products. The aggregate potential benchmark payments are $36.5 million, of which only $3.0 million will be due prior to the first marketing approval of our TCR products. The royalty rates and benchmark payments owed to MD Anderson may be reduced upon the occurrence of certain events. We also agreed that it will sell our TCR products to MD Anderson at preferential prices, and will sell its TCR products in Texas exclusively to MD Anderson for a limited period of time following the first commercial sale of our TCR products.
The 2019 Agreement will terminate on December 31, 2026 and either party may terminate the 2019 Agreement following written notice of a material breach. The 2019 Agreement also contains customary provisions related to indemnification obligations, confidentiality and other matters. In connection with the execution of the 2019 Agreement, on October 22, 2019, we issued MD Anderson a warrant to purchase 3,333,333 shares of our common stock, or the Warrant. The Warrant has an initial exercise price of $0.001 per share, expires on December 31, 2026 and vests upon the occurrence of certain clinical milestones.
Also in connection with the execution of the 2019 Agreement, on October 22, 2019, we and MD Anderson entered into the Fifth Amendment to Research and Development Agreement, the Fifth Amendment, which amended the Research and Development Agreement dated August 17, 2015 between the parties, or the 2015 Agreement. The 2015 Agreement governed the research and development activities of the parties for our chimeric antigen receptor(CAR-T) program. The Fifth Amendment extended the term of the 2015 Agreement until December 31, 2026 and amended the terms of the 2015 Agreement to allow cash resources on hand at MD Anderson under the 2015 Agreement to now be used for development costs under the 2019 Agreement.
Revenue. Revenue during the three and nine months ended September 30, 2019 and 2018 was as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
Collaboration revenue | $ | — | $ | — | $ | — | 0 | % | $ | — | $ | 146 | $ | (146 | ) | -100 | % | |||||||||||||||
We recognized previously deferred revenue from the License and Collaboration Agreement among us, Precigen and Ares Trading S.A., or the Ares Trading Agreement, amounting to $0.1 million for the nine months ended September 30, 2019 under ASC 605. During the three months ended September 30, 2019 and 2018, we did not recognize any revenue as we did not have any outstanding contract liability under ASC 606.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
Research and development | $ | 8,641 | $ | 8,263 | $ | 378 | 5 | % | $ | 28,115 | $ | 25,935 | $ | 2,180 | 8 | % | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
Research and development | $ | 13,968 | $ | 8,641 | $ | 5,327 | 62 | % | $ | 38,725 | $ | 28,115 | $ | 10,610 | 38 | % | ||||||||||||||||
decreased manufacturing technology initiatives and preclinical costs.
2020. The expense incurred by us to third parties for our
Clinical Phase | Estimated Completion Period | |
Phase 1 | 1 - 2 years | |
Phase 2 | 2 - 3 years | |
Phase 3 | 2 - 4 years |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
General and administrative | $ | 4,807 | $ | 4,307 | $ | 500 | 0 | % | $ | 13,707 | $ | 15,355 | $ | (1,648 | ) | -11 | % | |||||||||||||||
General and administrative expenses for the three months ended September 30, 2019 increased by $0.5 million as compared to three months ended September 30, 2018. The increase during the three months ended September 30, 2019 was primarily due to salary and employee related expense and stock compensation expense related to stock option modifications.
General and administrative expenses for the nine months ended September 30, 2019 decreased by $1.6 million as compared to nine months ended September 30, 2018. During the nine months ended September 30, 2018, general and administrative expenses were higher than the nine months ended September 30, 2019 due to $1.4 million of expenses related to stock option modifications for a departing officer and director and $1.0 million in costs related to consulting and advisory services. This $2.4 million decrease in the prior year period was offset by an increase of $ 0.8 million from employee-related and other expenses incurred during the nine months ended September 30, 2019.
Other income (expense). Other income (expense) for the three and nine months ended September 30, 2019 and 2018 were as follows:
|
| |||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
Other income (expense), net | $ | 203 | $ | 150 | $ | 53 | 35 | % | $ | 523 | $ | 462 | $ | 61 | 13 | % | ||||||||||||||||
Change in derivative value | — | (165 | ) | 165 | (100 | %) | — | 46 | (46 | ) | (100 | %) | ||||||||||||||||||||
Noncash inducement warrants | (60,751 | ) | — | (60,751 | ) | 100 | % | (60,751 | ) | — | (60,751 | ) | 100 | % | ||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | (60,548 | ) | $ | (15 | ) | $ | (60,228 | ) | $ | 508 | |||||||||||||||||||||
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| |||||||||||||||||||||||||
During
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
General and administrative | $ | 6,353 | $ | 4,807 | $ | 1,546 | 32 | % | $ | 18,862 | $ | 13,707 | $ | 5,155 | 38 | % | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
Other income, net | $ | 6 | $ | 203 | $ | (197) | (97 | %) | $ | 383 | $ | 523 | $ | (140) | (27 | %) | ||||||||||||||||
Noncash inducement warrants | — | (60,751) | $ | 60,751 | (100 | %) | — | (60,751) | $ | 60,751 | (100 | %) | ||||||||||||||||||||
Total | $ | 6 | $ | (60,548) | $ | 383 | $ | (60,228) | ||||||||||||||||||||||||
market fluctuations.
The
In June 2019, we entered into an “at-the-market”, or ATM, open market sale agreement with Jefferies LLC, or Jefferies, acting as sale agent with an aggregate offering value of up to $100.0 million which allows us to sell shares of our common stock through the facilities of the Nasdaq Capital Market. Subject to the terms of the open market sale agreement, we are able to determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. The compensation to Jefferies for sales of our common stock pursuant to the open market sale agreement will be an amount equal to 3% of the gross proceeds of any shares of common stock sold under the agreement.
During the three months ended September 30, 2019, we sold 639,442 shares of common stock in at-the-market offerings for net cash proceeds of $3.0 million, after deducting commission fees of $0.1 million. Additionally, on July 26, 2019 and September 12, 2019, we entered into agreements for the exercise of warrants issued in November 2018 to purchase common stock in a private placement. Pursuant to the terms of the agreements, investors exercised warrants for an aggregate of 17,803,031 shares of common stock, at an exercise price of $3.01 per share, and we issued the investors new warrants to purchase up to 17,803,031 additional shares of common stock. The new warrants will become exercisable six months following the date of issuance, will expire on the fifth anniversary of the initial exercise date, and have an exercise price of $7.00. Proceeds from the offering, after deducting placement agent and other offering expenses of $1.1 million were approximately $52.5 million.
We will need additional financing to support our long-term plans for clinical trials and new product development. We expect to finance our cash needs through the sale of equity securities, strategic collaborations and/or debt financings, or through other sources that may be dilutive to existing stockholders. There can be no assurance that we will be able to obtain funding from any of these sources or, if obtained, what the terms of such funding(s) may be, or that any amount that we are able to obtain will be adequate to support our working capital requirements until we achieve profitable operations. We have no current committed sources of additional capital. Capital markets continue to experience periods of instability that may severely hinder our ability to raise capital within the time periods needed or on terms we consider acceptable, if at all. If we are unable to raise additional funds when needed, we may not be able to continue development and regulatory approval of our products, or we could be required to delay, scale back or eliminate some or all our research and development programs.
| Nine months ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| ($ in thousands) | ||||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (29,246 | ) | $ | (37,638 | ) | ||
Investing activities | (184 | ) | (545 | ) | ||||
Financing activities | 56,120 | (1,035 | ) | |||||
|
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|
| |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 26,690 | $ | (39,218 | ) | |||
|
|
|
| |||||
2020:
Nine months ended September 30, | ||||||||
2020 | 2019 | |||||||
($ in thousands) | ||||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (39,977 | ) | $ | (29,246 | ) | ||
Investing activities | (6,012 | ) | (184 | ) | ||||
Financing activities | 101,719 | 56,120 | ||||||
Net increase in cash, cash equivalents, and restricted cash | $ | 55,730 | $ | 26,690 | ||||
Changes associated with the fair value of our derivative liabilities.
Net cash used in operating activities for the nine months ended September 30, 20192020 was $29.2$40.0 million, as compared to net cash used in operating activities of $37.6$29.2 million for the nine months ended September 30, 2019. The net cash used in operating activities for the nine months ended September 30, 20192020 was primarily due to our net loss of $102.1$57.2 million, (which included a $60.8the change in receivables of $2.1 million, non-cash charge for the issuanceother noncurrent assets of inducement warrants),$0.6 million, offset by the change in prepaid and other current assets of $4.8$8.2 million primarily related to the use of our long term and short term funds at MD Anderson, athe change in non-cash stock-based compensation and depreciation of $6.2 million, and changes in accrued expenses and other liabilities of $1.0$3.8 million, the change in accounts payable of $1.7 million and
Net cash used in investing activities was $0.2 million for the nine months ended September 30, 2019 compared to $0.5 million for2019.
ATM facility. Net cash provided by financing activities for the nine months ended September 30, 2019 was $56.1 million. During the quarter, we received $52.5 million in proceeds from the exercise of warrants (Note 2), $3.0 million in proceeds through at the marketATM offerings (Note 2) and $1.0 million in proceeds from the exercise of stock options.
Obligations
| Less than | More than | |||||||||||||||||||
| ($ in thousands) | Total | 1 year | 2 - 3 years | 4 - 5 years | 5 years | |||||||||||||||
Operating leases | $ | 1,434 | $ | 752 | $ | 682 | $ | — | $ | — | ||||||||||
CRADA | $ | 5,625 | 2,500 | 3,125 | — | — | ||||||||||||||
Royalty and license fees | $ | 4,750 | 1,350 | 950 | 700 | 1,750 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 11,809 | $ | 4,602 | $ | 4,757 | $ | 700 | $ | 1,750 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less than | More than | |||||||||||||||||||
($ in thousands) | Total | 1 year | 2 - 3 years | 4 - 5 years | 5 years | |||||||||||||||
Operating leases | $ | 3,157 | $ | 1,128 | $ | 712 | $ | 755 | $ | 562 | ||||||||||
CRADA | 3,125 | 2,500 | 625 | — | — | |||||||||||||||
Royalty and license fees | 3,461 | 434 | 700 | 700 | 1,627 | |||||||||||||||
Total | $ | 9,743 | $ | 4,062 | $ | 2,037 | $ | 1,455 | $ | 2,189 | ||||||||||
On October 15, 2019, we entered into another lease agreement for additional office and laboratory space in Houston through February 2027. On April 13, 2020, we entered into another lease agreement for additional office and laboratory space in Houston through February 2027. On June 1, 2020, we entered into a short-term lease in Houston for office and laboratory space. On September 1, 2020, we entered an additional short-term lease in Houston for additional office and laboratory space.
until January 9, 2022.
agreement.
Table of Contents
Off-balance sheet arrangements
During the nine months ended September 30, 2019 and the year ended December 31, 2018, we did not engage in any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
2020.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Our management,
Thererelated remediation efforts discussed above, there were no other changes in our internal control over financial reporting (as defined in Rule
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
The market price of our common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of your investment. The impact of
* | Our business, operations and clinical development plans and timelines could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturers, clinical research organizations, or CROs, shippers and others. |
common stock.
* | We will require substantial additional financial resources to continue ongoing development of our product candidates and pursue our business objectives; if we are unable to obtain these additional resources when needed, we may be forced to delay or discontinue our planned operations, including clinical testing of our product candidates. |
We continue to seek additional financial resources to fund the further development of our product candidates. If we are unable to obtain sufficient additional capital, one or more of these programs could be placed on hold.
*We need to raise additional capital to fund our operations. The manner in which we raise any additional funds may affect the value of your investment in our common stock.
Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings and license and collaboration agreements. As of September 30, 2019, we have incurred approximately $668.4 million of accumulated deficit and had approximately $88.4 million of cash and cash equivalents. Given our current development plans, we expect that our existing cash and cash equivalents will be sufficient to fund our current operations into the first half of 2021. However, changes may occur that would consume our existing capital prior to then, including expansion of the scope of, and/or slower than expected progress of, our research and development efforts and changes in governmental regulation. Actual costs may ultimately vary from our current expectations, which could materially impact our use of capital and our forecast of the period of time through which our financial resources will be adequate to support our operations.
In addition to the factors above, ourOur actual cash requirements may vary materially from our current expectations for a number of other factors that may include, but are not limited to, changes in the focus and direction of our development programs, slower than expected progress of our research and development efforts, changes in governmental regulation, competitive and technical advances, costs associated with the development of our product candidates, our ability to secure partnering arrangements, and costs of filing, prosecuting, defending and enforcing our intellectual property rights. The
Further, we may elect to prioritize one or more of our programs and reduce or eliminate our activities on our other programs to preserve our capital resources. Any decision to reduce or eliminate activities for a program may negatively impact the potential for the program, which could have a material adverse effect on our business.
* | We need to raise additional capital to fund our operations. The manner in which we raise any additional funds may affect the value of your investment in our common stock. |
Our need for additional capital and limited capital resources may force us to accept financing terms that could be significantly dilutive to existing stockholders.
* | We have issued or reserved for future issuance shares nearing the maximum number of shares of common stock authorized by our certificate of incorporation. If we are unable to increase the total number of authorized shares, we may be unable to effectively utilize our common stock to establish strategic relationships with other companies, expand our business through acquisitions, raise capital, or offer equity incentives to employees. |
financing opportunities may be limited, and stockholder value may be harmed.
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* | We face substantial competition from other biopharmaceutical companies, which may result in others discovering, developing or commercializing products before, or more successfully than, we do. |
The biopharmaceutical industry, and the rapidly evolving market for developing genetically engineered T-cells in particular, is characterized by intense competition and rapid innovation. The businessfield of cancer.
Two such companies, Novartis International AG (KymriahCAR+CAR+ T cells against CD19. Additional companies developing autologous CAR+CAR+ T productstargets include Juno TherapeuticsBristol-Myers Squibb Company, Precigen, Inc./Celgene Corporation,, bluebird bio, Inc., in collaboration with Celgene Corporation, Nanjing Legend Biotech and Janssen Biotech, Inc., a subsidiary of Johnson & Johnson, Bellicum Pharmaceuticals, Inc., Autolus Therapeutics plc, Exuma Biotech Corp., CARsgen Therapeutics Co., Ltd., Mustang Bio, Inc., Crispr Therapeutics AG, Precision Biosciences Inc., Protheragen Inc. and Marker Therapeutics, Inc. Several companies are pursuing the development of allogeneic CAR+CAR+ T therapies, including Allogene Therapeutics, Inc. (in collaboration with Pfizer Inc.), Atara Biotherapeutics, Inc. and Cellectis SA (in collaboration with Servier) which may also compete with our product candidates.
Other companies are developing
Several companies have product candidates in phasePhase 3 development for the treatment of glioblastoma, including, but not limited to, Tocagen Inc., Vascular Biogenics Ltd., and DelMar Pharmaceuticals, Inc.Kintra Therapeutics. Several companies and institutions have product candidates currently in phasePhase 2 clinical trials, including, but not limited to, Abbvie Inc., DNAtrix Therapeutics, Istari Oncology, Karyopharm and MedImmune LLC/AstraZeneca plc.
plc, and other companies are actively developing additional products to treat brain cancer including Mustang Bio Inc. and Northwest Biotherapeutics, Inc. Other competitors with product candidates currently in Phase 2 clinical trials include AbbVie Inc.’s
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*We are partly reliant on
the actions to contain
* | We are partly reliant on the National Cancer Institute for research and development and early clinical testing of certain of our product candidates. |
Further, in response to the
trial.
We will incur additional expenses in connection with our License Agreement with Precigen.
We expect our overall research and development expenses will continue to increase as we move forward with our research and development efforts under the License Agreement with Precigen. Although all human clinical trials are expensive and difficult to design and implement, we believe that due to complexity, costs associated with clinical trials for immuno-oncology products are greater than the corresponding costs associated with clinical trials for small-molecule candidates. We now control many
We may incur additional expenses in connection with our License Agreement with MD Anderson.
Pursuant
* | We may not be able to retain the rights licensed to us and PGEN by MD Anderson to technologies relating to CAR, T-cell therapies and other related technologies. |
Although our forecasts for expenses and the sufficiency of our capital resources takes into account the funds available at MD Anderson, our actual cash requirements may vary materially from our current expectations for a number of other factors that may include, but are not limited to, changes in the focus and direction of our development programs, competitive and technical advances, costs associated with the development of our product candidates and costs of filing, prosecuting, defending and enforcing our intellectual property rights. If we exhaust the funds available at MD Anderson more quickly than anticipated, regardless of the reason, and we are unable to obtain additional financing on terms acceptable to us or at all, we will be unable to proceed with development of some or all of our product candidates on expected timelines and will be forced to prioritize among them.
We may not be able to retain the rights licensed to us and Precigen by MD Anderson to technologies relating to CAR, T-cell therapies and other related technologies.
Under the MD Anderson License, we, together with Precigen, received an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR+ T cell and TCR cell therapies arising from the laboratory of Laurence Cooper, M.D., Ph.D., who was then at MD Anderson, as well as either co-exclusive or non-exclusive
Because we currently have limited internal research capabilities, we are dependent upon pharmaceutical and biotechnology companies and academic and other researchers to sell or license us their product candidates and technology.
* | Because we currently have limited internal research capabilities, we are dependent upon pharmaceutical and biotechnology companies and academic and other researchers to sell or license us their product candidates and technology. |
We may not be able to successfully manage our growth.
In the future, if we are able to advance our product candidates to the point
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For instance,
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Because we are dependent upon clinical research institutions and other contractors for clinical testing and for research and development activities, the results of our clinical trials and such research activities are, to a certain extent, beyond our control.
* | Because we are dependent upon clinical research institutions and other contractors for clinical testing and for research and development activities, the results of our clinical trials and such research activities are, to a certain extent, beyond our control. |
Our reliance on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the development, regulatory approval and commercialization of our products or result in higher product costs.
* | Our reliance on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the development, regulatory approval and commercialization of our products or result in higher product costs. |
*Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
* | Healthcare legislative reform measures may have a material adverse effect on our business and results of operations. |
Some of the provisions of the ACA have yet to be implemented, and there have been
Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. As a result, there have been several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal years 2019 and 2020 contain further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measuresyear 2021 includes a $135 billion allowance to permit Medicare Part D planssupport legislative proposals seeking to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiatereduce drug prices, under Medicaid,increase competition, lower
If we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
* | If we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected. |
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The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. We may also require the cooperation of our licensors in order to enforce the licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
trade secrets,confidential information, our business and competitive position would be harmed.
*If we breach any of the agreements under which we license rights to products or technology from others, we could lose license rights that are material to our business or be subject to claims by our licensors.
Our stock price has been, and may continue to be, volatile.
* | Our stock price has been, and may continue to be, volatile. |
Market conditions or trends in our industry or the economy as a whole;
Laboratory or clinical trial results;
Public concern as to the safety of drugs developed by us or others;
Changes in operating results and performance and stock market valuations of other biopharmaceutical companies generally, or those that develop and commercialize cancer drugs in particular;
In addition, the stock market in general and our stock in particular from time to time experiences significant price and volume fluctuations unrelated to the operating performance of particular companies. Thecompanies, including in connection with the ongoing
stock.
*Our principal stockholders, executive officers and directors have substantial control over the company, which may prevent you and other stockholders from influencing significant corporate decisions and may harm the market price of our common stock.
* | Our principal stockholders, executive officers and directors have substantial control over the company, which may prevent you and other stockholders from influencing significant corporate decisions and may harm the market price of our common stock. |
* | We have identified a material weakness in our internal control over financial reporting for the year ended December 31, 2019 and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or could have a material adverse effect on our business and trading price of our securities. |
Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds |
Item 3. | Defaults upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
During the three months ended September 30, 2019, we issued an inducement award in the form of an option to purchase 65,000 shares of our common stock, par value $0.001 per share, at an exercise price of $5.18 per share to one employee in connection the commencement of the employee’s employment with us. The Compensation Committee of our Board of Directors granted the inducement award to the employee outside of, but subject to terms generally consistent with, the Company’s 2012 Equity Incentive Plan, as amended, as a material inducement to the employee’s acceptance of employment with us in accordance with NASDAQ Listing Rule 5635(c)(4).
The inducement award is exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof and/or Regulation D promulgated thereunder. We intend to file a registration statement on Form S-8 with the Securities and Exchange Commission to register the shares underlying the inducement award prior to the time at which they vest.
Issuer Purchases of Equity Securities
None.
ContentsItem 3. Defaults upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
None.
The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed as part of this report and such Exhibit Index is incorporated herein by reference.
Item 6. | Exhibits |
| + | Filed herewith. |
| ++ | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as |
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Certain portions of this exhibit (indicated by asterisks) have been |
| By: |
/s/ Laurence J.N. Cooper |
| Laurence J.N. Cooper, M.D., Ph.D. |
Chief Executive Officer |
(On behalf of the Registrant and as Principal Executive Officer) |
| Dated: November |
| By: |
/s/ Satyavrat Shukla |
| Satyavrat Shukla |
| Executive Vice President and Chief Financial Officer |
(Principal Financial Officer) |
| Dated: November |
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