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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2021

OR

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

For the transition period from              to             .

Commission File Number: 001-38096

 

G1 THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

26-3648180

( State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

        

       700 Park Offices Drive, Suite 200
        Research Triangle Park, NC 27709

(Address of principal executive offices including zip code)

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

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

GTHX

The Nasdaq Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit  such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

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

 

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

 

As of October 29, 2021, the registrant had 42,522,148 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations

2

 

Condensed Statements of Stockholders’ Equity

3

 

Condensed Statements of Cash Flows

4

 

Notes to Unaudited Condensed Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

39

PART II.

OTHER INFORMATION

40

Item 1A.

Risk Factors

40

Item 6.

Exhibits

41

Signatures

42

 

 

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

G1 Therapeutics, Inc.

Condensed Balance Sheets (unaudited)

(in thousands, except share and per share amounts)

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

212,089

 

 

$

207,306

 

Restricted cash

 

 

63

 

 

 

63

 

Accounts Receivable

 

 

5,240

 

 

 

237

 

Inventories

 

 

1,375

 

 

 

 

Prepaid expenses and other current assets

 

 

14,216

 

 

 

8,786

 

Total current assets

 

 

232,983

 

 

 

216,392

 

Property and equipment, net

 

 

2,127

 

 

 

2,482

 

Restricted cash

 

 

312

 

 

 

437

 

Operating lease assets

 

 

7,290

 

 

 

8,026

 

Other assets

 

 

785

 

 

 

1,215

 

Total assets

 

$

243,497

 

 

$

228,552

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,577

 

 

$

3,572

 

Accrued expenses

 

 

22,013

 

 

 

16,486

 

Deferred revenue

 

 

26

 

 

 

237

 

Other current liabilities

 

 

1,223

 

 

 

3,148

 

Total current liabilities

 

 

26,839

 

 

 

23,443

 

Loan payable

 

 

30,273

 

 

 

19,893

 

Deferred revenue

 

 

1,000

 

 

 

 

Operating lease liabilities

 

 

7,046

 

 

 

7,865

 

Total liabilities

 

 

65,158

 

 

 

51,201

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 120,000,000 shares authorized as of

    September 30, 2021 and December 31, 2020, respectively; 42,548,814 and 38,140,756 shares

    issued as of September 30, 2021 and December 31, 2020, respectively; 42,522,148 and

    38,114,090  shares outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

4

 

 

 

4

 

Treasury stock, 26,666 shares

 

 

(8

)

 

 

(8

)

Additional paid-in capital

 

 

722,782

 

 

 

613,462

 

Accumulated deficit

 

 

(544,439

)

 

 

(436,107

)

Total stockholders’ equity

 

 

178,339

 

 

 

177,351

 

Total liabilities and stockholders' equity

 

$

243,497

 

 

$

228,552

 

 

 

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

 

1


 

 

G1 Therapeutics, Inc.

Condensed Statements of Operations (unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

3,576

 

 

 

 

 

$

6,717

 

 

$

 

License revenue

 

 

1,282

 

 

 

26,599

 

 

$

18,963

 

 

$

28,739

 

Total revenues

 

 

4,858

 

 

 

26,599

 

 

$

25,680

 

 

$

28,739

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

591

 

 

 

 

 

 

1,642

 

 

 

 

Research and development

 

 

21,143

 

 

 

17,932

 

 

 

56,435

 

 

 

56,897

 

Selling, general and administrative

 

 

24,268

 

 

 

18,412

 

 

 

72,474

 

 

 

44,230

 

Total operating expenses

 

 

46,002

 

 

 

36,344

 

 

 

130,551

 

 

 

101,127

 

Loss from operations

 

 

(41,144

)

 

 

(9,745

)

 

 

(104,871

)

 

 

(72,388

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

7

 

 

 

50

 

 

 

35

 

 

 

922

 

Interest expense

 

 

(934

)

 

 

(757

)

 

 

(2,609

)

 

 

(1,022

)

Other income (expense)

 

 

(76

)

 

 

(291

)

 

 

(208

)

 

 

(488

)

Total other income (expense), net

 

 

(1,003

)

 

 

(998

)

 

 

(2,782

)

 

 

(588

)

Loss before income taxes

 

 

(42,147

)

 

 

(10,743

)

 

 

(107,653

)

 

 

(72,976

)

Income tax expense

 

 

321

 

 

 

931

 

 

 

679

 

 

 

931

 

Net loss

 

$

(42,468

)

 

$

(11,674

)

 

$

(108,332

)

 

$

(73,907

)

Net loss per share, basic and diluted

 

$

(1.00

)

 

$

(0.31

)

 

$

(2.60

)

 

$

(1.95

)

Weighted average common shares outstanding, basic and diluted

 

 

42,383,573

 

 

 

38,009,204

 

 

 

41,740,911

 

 

 

37,819,071

 

 

 

 

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


2


 

 

G1 Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity (unaudited)

(in thousands, except share and per share amounts)

 

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total stock-

holders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance at December 31, 2020

 

 

38,140,756

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

613,462

 

 

$

(436,107

)

 

$

177,351

 

Public offering (ATM)

 

 

3,513,027

 

 

 

 

 

 

 

 

 

 

 

 

86,378

 

 

 

 

 

 

86,378

 

Exercise of common stock options

 

 

388,857

 

 

 

 

 

 

 

 

 

 

 

 

2,264

 

 

 

 

 

 

2,264

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,892

 

 

 

 

 

 

5,892

 

Net loss during quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,442

)

 

 

(26,442

)

Balance at March 31, 2021

 

 

42,042,640

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

707,996

 

 

$

(462,549

)

 

$

245,443

 

Exercise of common stock options

 

 

230,347

 

 

 

 

 

 

 

 

 

 

 

 

1,481

 

 

 

 

 

 

1,481

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,694

 

 

 

 

 

 

5,694

 

Net loss during quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39,422

)

 

 

(39,422

)

Balance at June 30, 2021

 

 

42,272,987

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

715,171

 

 

$

(501,971

)

 

$

213,196

 

Exercise of common stock options

 

 

275,827

 

 

 

 

 

 

 

 

 

 

 

 

2,083

 

 

 

 

 

 

2,083

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,528

 

 

 

 

 

 

5,528

 

Net loss during quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,468

)

 

 

(42,468

)

Balance at September 30, 2021

 

 

42,548,814

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

722,782

 

 

$

(544,439

)

 

$

178,339

 

 

 

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total stock-

holders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balance at December 31, 2019

 

 

37,638,260

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

592,384

 

 

$

(336,853

)

 

$

255,527

 

Exercise of common stock options

 

 

125,666

 

 

 

 

 

 

 

 

 

 

 

 

219

 

 

 

 

 

 

219

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,727

 

 

 

 

 

 

4,727

 

Net loss during quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,023

)

 

 

(31,023

)

Balance at March 31, 2020

 

 

37,763,926

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

597,330

 

 

$

(367,876

)

 

$

229,450

 

Exercise of common stock options

 

 

175,140

 

 

 

 

 

 

 

 

 

 

 

 

1,238

 

 

 

 

 

 

1,238

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,367

 

 

 

 

 

 

4,367

 

Net loss during quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,210

)

 

 

(31,210

)

Balance at June 30, 2020

 

 

37,939,066

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

602,935

 

 

$

(399,086

)

 

$

203,845

 

Exercise of common stock options

 

 

117,535

 

 

 

 

 

 

 

 

 

 

 

 

379

 

 

 

 

 

 

379

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,922

 

 

 

 

 

 

4,922

 

Net loss during quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,674

)

 

 

(11,674

)

Balance at September 30, 2020

 

 

38,056,601

 

 

$

4

 

 

 

(26,666

)

 

$

(8

)

 

$

608,236

 

 

$

(410,760

)

 

$

197,472

 

 

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

 

 

 

 

 

 

 

 

 

3


 

 

G1 Therapeutics, Inc.

Condensed Statements of Cash Flows (unaudited)

(amounts in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(108,332

)

 

$

(73,907

)

Adjustments to reconcile net loss to net cash used in operating

   activities

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

17,114

 

 

 

14,016

 

Depreciation and amortization

 

 

355

 

 

 

462

 

Loss on disposal of fixed assets

 

 

 

 

 

303

 

Amortization of debt issuance costs

 

 

682

 

 

 

351

 

Non-cash interest expense

 

 

236

 

 

 

161

 

Non-cash equity interest, net

 

 

228

 

 

 

(926

)

Change in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,003

)

 

 

 

Inventories

 

 

(1,375

)

 

 

 

Prepaid expenses and other assets

 

 

(4,580

)

 

 

(4,316

)

Accounts payable

 

 

(109

)

 

 

(1,375

)

Accrued expenses and other liabilities

 

 

2,547

 

 

 

(1,034

)

Deferred revenue

 

 

789

 

 

 

14,031

 

Net cash used in operating activities

 

 

(97,448

)

 

 

(52,234

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from disposal of property and equipment

 

 

 

 

 

152

 

Purchases of property and equipment

 

 

 

 

 

 

Net cash provided/used in investing activities

 

 

 

 

 

152

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from stock options exercised

 

 

5,828

 

 

 

1,836

 

Proceeds from loan agreement

 

 

10,000

 

 

 

20,000

 

Payments of debt issuance costs

 

 

(100

)

 

 

(620

)

Proceeds from public offering, net of underwriting fees and commissions

 

 

86,429

 

 

 

 

Payment of public offering costs

 

 

(51

)

 

 

 

Net cash provided by financing activities

 

 

102,106

 

 

 

21,216

 

Net change in cash, cash equivalents and restricted cash

 

 

4,658

 

 

 

(30,866

)

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Beginning of period

 

 

207,806

 

 

 

269,708

 

End of period

 

$

212,464

 

 

$

238,842

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,856

 

 

$

509

 

Non-cash operating, investing and financing activities

 

 

 

 

 

 

 

 

Upfront project costs and other current assets in accounts payable and accrued expenses

 

$

114

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

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

4


 

G1 Therapeutics, Inc.

Notes to financial statements

(unaudited)

1. Business Description

G1 Therapeutics, Inc. (the “Company”) is a commercial-stage biopharmaceutical company based in Research Triangle Park, North Carolina focused on the development and commercialization of novel small molecule therapeutics for the treatment of patients with cancer. The Company’s first FDA-approved product, COSELA™ (trilaciclib) is the first and only therapy indicated to proactively help protect bone marrow from the damage of chemotherapy and is the first innovation in managing myelosuppression in decades. The Company was incorporated on May 19, 2008 in the state of Delaware.

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

The Company is advancing its lead clinical compound trilaciclib, a first-in-class therapy designed to improve outcomes for patients who are treated with chemotherapy, in clinical trials assessing myeloprotection and anti-tumor efficacy endpoints in a variety of tumors including colorectal cancer (“CRC”), metastatic triple negative breast cancer (“mTNBC”), neoadjuvant breast cancer, and bladder cancer. During the fourth quarter of 2021, the Company has decided to discontinue the non-small cell lung cancer trial as the competitive landscape has changed. The Company is in the process of evaluating partnering options for rintodestrant, an oral selective estrogen receptor degrader (SERD) for the potential treatment of ER+, HER2- breast cancer. In addition, the Company out-licensed global rights to lerociclib, an internally discovered and differentiated oral CDK4/6 inhibitor designed to enable more effective combination treatment strategies across multiple oncology indications.  The Company also has intellectual property focused on cyclin-dependent kinase targets.

Trilaciclib

The Company’s lead compound, trilaciclib, is a first-in-class therapy approved to help protect hematopoietic stem and progenitor cells (“HSPCs”) in bone marrow against chemotherapy-induced myelosuppression by transiently inhibiting CDK4/6 in patients with extensive-stage small cell lung cancer (“ES-SCLC”). This action leads to a temporary arrest of susceptible host cells during chemotherapy. This reduces the duration and severity of neutropenia and other myelosuppressive consequences of chemotherapy. Also, clinical trials have shown that trilaciclib has the potential to activate and enhance the immune system response driving increased anti-tumor efficacy, which the Company continues to explore in additional clinical trials in a variety of solid tumor types.

Trilaciclib is a novel therapeutic approach, which is given before chemotherapy, that temporarily blocks progression through the cell cycle. This provides two benefits. First, it proactively helps protect HSPCs in bone marrow leading to preservation of neutrophils, erythrocytes, and platelets (called myeloprotection) which reduces the occurrences and severity of neutropenia and other myelosuppressive consequences of chemotherapy. This myeloprotection benefit has been conclusively proven in double-blind placebo-controlled clinical trials in extensive-stage small cell lung cancer. Second, trilaciclib activates and enhances the immune system response driving increased anti-tumor efficacy, which the Company is exploring in clinical trials.

On February 12, 2021, COSELA for injection was approved by the U.S. Food and Drug Administration (“FDA”) to decrease the incidence of chemotherapy-induced myelosuppression in adult patients when administered prior to a platinum/etoposide-containing regimen or topotecan-containing regimen for ES-SCLC. On March 2, 2021, COSELA became commercially available through the Company’s specialty distributor network. COSELA is administered intravenously as a 30-minute infusion completed within four (4) hours prior to the start of chemotherapy and is the first FDA-approved therapy to provide proactive, multilineage protection from chemotherapy-induced myelosuppression. The approval of COSELA is based on data from three (3) randomized, placebo-controlled trials that showed patients receiving COSELA prior to chemotherapy had clinically meaningful and statistically significant reduction in the duration and severity of neutropenia, reduction of red blood cell transfusions, as well as improvements in other myeloprotection measures, compared to patients receiving chemotherapy without COSELA. The Company announced on March 25, 2021 that COSELA had been included in two updated National Comprehensive Cancer Network® (“NCCN”) Clinical Practice Guidelines in Oncology (NCCN Guidelines®): The Treatment Guidelines for Small Cell Lung Cancer and the Supportive Care Guidelines for Hematopoietic Growth Factors. These guidelines document evidence-based, consensus-driven management to ensure that all patients receive preventive, diagnostic, treatment, and supportive services that are most likely to lead to optimal outcomes. On October 1, 2021, the Company announced that the permanent J-code for COSELA that was issued in July 2021 by the Centers for Medicare & Medicaid Services (CMS) is now effective for provider billing for all sites of care. All hospital outpatient departments, ambulatory surgery centers and physician offices in the United States have one consistent Healthcare Common Procedure Coding System (HCPCS) code to standardize the submission and payment of COSELA insurance claims across Medicare, Medicare Advantage, Medicaid and commercial plans. G1’s new technology add-on payment (NTAP) for COSELA which provides additional payment to inpatient hospitals above the standard Medicare Severity Diagnosis-Related Group (MS-DRG) payment amount also became effective for provider billing on October 1, 2021.

5


 

In June 2020, the Company entered into a three-year co-promotion agreement for COSELA in the United States and Puerto Rico with Boehringer Ingelheim. The agreement is limited to support for SCLC. Under the terms of the agreement, the Company will record revenue in the United States and Puerto Rico and retain development and commercialization rights to trilaciclib. The Company leads marketing, market access and medical engagement initiatives; Boehringer Ingelheim will leads sales force engagements.

In September 2021, the Company announced that it would hire and deploy up to a 15-person oncology sales force to supplement the Boehringer Ingelheim oncology commercial team. The expansion is expected to allow the Company to target top tier accounts in order to accelerate sales activities and help maximize the adoption of COSELA.

In August 2020, the Company entered into an exclusive license agreement with Nanjing Simcere Dongyuan Pharmaceutical Co., Ltd (“Simcere”) for development and commercialization rights for trilaciclib in all indications in Greater China (mainland China, Hong Kong, Macau and Taiwan). Under the terms of the agreement, the Company received an upfront payment of $14.0 million in September 2020, and will be eligible to receive up to $156.0 million in development and commercial milestone payments. During the nine months ended September 30, 2021, the Company received three development milestone payments totaling $8.0 million. Simcere will also pay the Company tiered low double-digit royalties on annual net sales of trilaciclib in Greater China. As part of this agreement, Simcere will participate in global clinical trials of trilaciclib and the companies will be responsible for all development and commercialization costs in their respective territories.

The Company is also executing on its tumor-agnostic strategy to evaluate the potential benefits of providing trilaciclib to patients with other tumors and to continuously develop new data with trilaciclib in a variety of chemotherapeutic settings and in combination with other agents to maximize the applicability of the drug to potential future treatment paradigms. The Company’s on-going clinical trials include: a pivotal trial in 1L CRC, a pivotal trial in mTNBC (including 1L and 2L patients), a Phase 2 trial in neoadjuvant breast cancer (I-SPY 2), and a Phase 2 trial in 1L bladder cancer with chemotherapy and a checkpoint inhibitor. These studies across treatment settings and tumor types will evaluate trilaciclib’s dual benefits in both multi-lineage myeloprotection and anti-tumor efficacy. We also intend to initiate the following two new Phase 2 trials in the fourth quarter of 2021: (i) a trial designed to validate trilaciclib’s immune-based mechanism of action (MOA); and (ii) a trial designed to evaluate the antitumor efficacy and myeloprotective benefit of COSELA administered prior to an antibody-drug conjugate (ADC).

Rintodestrant

Rintodestrant is an oral selective estrogen receptor degrader (“SERD”) for the treatment of estrogen receptor-positive (“ER+”) breast cancer. It is a Phase 2 compound being developed as a monotherapy and in combination with CDK4/6 inhibitors, initially Ibrance® (palbociclib), for the treatment of ER+ breast cancer. In 2018, the Company initiated a Phase 1/2a (dose escalation/dose expansion) clinical trial in ER+, HER2- breast cancer. Preliminary data from the Phase 1 portion of this trial were presented at the 2019 ESMO Congress, showing that rintodestrant was well tolerated and demonstrated evidence of anti-tumor activity in heavily pre-treated patients. The mature monotherapy data were presented at the 2020 San Antonio Breast Cancer Symposium (“SABCS”) conference, confirming the safety and efficacy results of the preliminary analysis. Based on these findings the Company advanced an 800 mg dose of rintodestrant into a 40-patient Phase 1b combination arm with palbociclib, a CDK4/6 inhibitor, safety and antitumor activity data from which were presented at the 2021 American Society of Clinical Oncology (ASCO) annual virtual meeting. The Company is in the process of evaluating partnering options for rintodestrant.

Lerociclib

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

 

6


 

 

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

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

The information presented in the condensed financial statements and related notes as of September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020, is unaudited. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results expected for the full fiscal year or any future period. These interim financial statements should be read in conjunction with the financial statements and notes set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 24, 2021, (the “2020 Form 10-K”). The December 31, 2020 condensed balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by U.S. GAAP for complete financial statements.

Use of Estimates

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

Accounts Receivable

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

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

Inventories

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

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

Revenue Recognition

For elements of those arrangements that the Company determines should be accounted for under ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company assesses which activities in its license or collaboration agreements are performance obligations that should be accounted for separately and determines the transaction price of the arrangement, which includes the assessment of the probability of achievement of future milestones and other potential consideration. For arrangements that include

7


 

multiple performance obligations, such as granting a license or performing manufacturing or research and development activities, the Company allocates the transaction price based on the relative standalone selling price and recognizes revenue that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. Accordingly, the Company develops assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key assumptions may include revenue forecasts, clinical development timelines and costs, discount rates and probabilities of clinical and regulatory success.

License Revenue

Licenses of Intellectual Property

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

Milestone Payments

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

Royalties

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

Product Sales, Net

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

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