gthx-10q_20170930.htm

 

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, 2017

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.)

 

 

79 T.W. Alexander Drive
4501 Research Commons, Suite 100
Research Triangle Park, NC

27709

(Address of principal executive offices)

(Zip Code)

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

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ☒    No  ☐

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

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

☒  (Do not check if a small reporting company)

 

Small 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 31, 2017, the registrant had 28,345,284 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 Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

2

 

Condensed Consolidated Statements of Cash Flows

3

 

Notes to Unaudited Condensed Consolidated Financial Statements

4

Item 2.

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

PART II.

OTHER INFORMATION

22

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

54

Item 4.

Mine Safety Disclosures

54

Item 5.

Other Information

54

Item 6.

Exhibits

55

Signatures

56

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

G1 Therapeutics, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except share and per share amounts)

 

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

118,380

 

 

$

47,305

 

Prepaid expenses and other current assets

 

 

655

 

 

 

596

 

Total current assets

 

 

119,035

 

 

 

47,901

 

Property and equipment, net

 

 

516

 

 

 

311

 

Total assets

 

$

119,551

 

 

$

48,212

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,234

 

 

$

2,605

 

Accrued expenses

 

 

6,187

 

 

 

2,853

 

Warrant liability

 

 

 

 

 

167

 

Total current liabilities

 

 

10,421

 

 

 

5,625

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Series C redeemable convertible preferred stock $0.0001 par value, 0 shares authorized,

   issued and outstanding on September 30, 2017 (unaudited), 17,000,000 shares authorized,

   5,609,398 issued and outstanding on December 31, 2016; (liquidation preference of $51,673 on

   December 31, 2016)

 

 

 

 

 

51,424

 

Series B redeemable convertible preferred stock $0.0001 par value, 0 shares authorized,

   issued and outstanding on September 30, 2017 (unaudited), 23,000,000 shares authorized,

   7,642,734 issued and outstanding on December 31, 2016; (liquidation preference of $35,722 on

   December 31, 2016)

 

 

 

 

 

40,355

 

Series A redeemable convertible preferred stock $0.0001 par value, 0 shares authorized,

   issued and outstanding on September 30, 2017 (unaudited), 14,996,692 shares authorized,

   4,998,895 issued and outstanding on December 31, 2016; (liquidation preference of $14,431 on

   December 31, 2016)

 

 

 

 

 

14,431

 

Series 1 redeemable convertible preferred stock $0.0001 par value, 0 shares authorized,

   issued and outstanding on September 30, 2017 (unaudited), 2,112,025 shares authorized,

   682,026 issued and outstanding on December 31, 2016; (liquidation preference of $931 on

   December 31, 2016)

 

 

 

 

 

1,370

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 120,000,000 shares and 73,000,000 shares authorized as of

    September 30, 2017 and December 31, 2016, respectively; 28,369,679 and 1,504,947 shares

    issued as of September 30, 2017 and December 31, 2016, respectively; 28,343,013 and

    1,478,281 shares outstanding as of September 30, 2017 and December 31, 2016, respectively

 

 

3

 

 

 

 

Treasury stock, 26,666 shares

 

 

(8

)

 

 

(8

)

Additional paid-in capital

 

 

221,272

 

 

 

 

Accumulated deficit

 

 

(112,137

)

 

 

(64,985

)

Total stockholders’ equity (deficit)

 

 

109,130

 

 

 

(64,993

)

Total liabilities, mezzanine equity and equity

 

$

119,551

 

 

$

48,212

 

 

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

 

1


 

G1 Therapeutics, Inc.

Condensed Consolidated Statements of operations and comprehensive loss (unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue

 

$

 

 

$

 

 

$

 

 

$

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,054

 

 

 

5,695

 

 

 

38,806

 

 

 

16,020

 

General and administrative

 

 

1,875

 

 

 

918

 

 

 

4,881

 

 

 

3,969

 

Total operating expenses

 

 

15,929

 

 

 

6,613

 

 

 

43,687

 

 

 

19,989

 

Operating loss

 

 

(15,929

)

 

 

(6,613

)

 

 

(43,687

)

 

 

(19,989

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

328

 

 

 

56

 

 

 

588

 

 

 

118

 

Change in fair value in warrant liability and other liabilities

 

 

 

 

 

 

 

 

(41

)

 

 

(19

)

Total other income, net

 

 

328

 

 

 

56

 

 

 

547

 

 

 

99

 

Net loss

 

$

(15,601

)

 

$

(6,557

)

 

$

(43,140

)

 

$

(19,890

)

Accretion of redeemable convertible preferred stock

 

 

 

 

 

(1,205

)

 

 

(4,757

)

 

 

(3,200

)

Net loss attributable to common stockholders

 

$

(15,601

)

 

$

(7,762

)

 

$

(47,897

)

 

$

(23,090

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.55

)

 

$

(5.21

)

 

$

(3.24

)

 

$

(15.55

)

Weighted average common shares outstanding, basic and diluted

 

 

28,318,656

 

 

 

1,490,552

 

 

 

14,772,621

 

 

 

1,484,713

 

 

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

2


 

G1 Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(amounts in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(43,140

)

 

$

(19,890

)

Adjustments to reconcile net loss to net cash used in operating

   activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

59

 

 

 

44

 

Stock-based compensation

 

 

2,357

 

 

 

908

 

Gain/loss on disposal of property and equipment

 

 

6

 

 

 

18

 

Increase in fair value of warrant activity

 

 

41

 

 

 

19

 

Change in operating assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(59

)

 

 

142

 

Accounts payable and accrued expenses

 

 

4,963

 

 

 

2,828

 

Net cash used in operating activities

 

 

(35,773

)

 

 

(15,931

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(270

)

 

 

(209

)

Net cash used in investing activities

 

 

(270

)

 

 

(209

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from stock options and warrants exercised

 

 

13

 

 

 

5

 

Proceeds from Series C preferred stock

 

 

 

 

 

50,000

 

Issuance costs for preferred share financings

 

 

 

 

 

(249

)

Proceeds from initial public offering, net of underwriting fees and commissions

 

 

108,503

 

 

 

 

Payment of public offering costs

 

 

(1,398

)

 

 

 

Net cash provided by financing activities

 

 

107,118

 

 

 

49,756

 

Net change in cash and cash equivalents

 

 

71,075

 

 

 

33,616

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

Beginning of period

 

 

47,305

 

 

 

22,938

 

End of period

 

$

118,380

 

 

$

56,554

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Accretion of redeemable convertible preferred stock

 

$

4,757

 

 

$

3,200

 

Conversion of preferred stock and preferred warrants to common stock and common warrants

 

$

112,337

 

 

$

-

 

Deferred offering costs reclassified to additional paid-in capital

 

$

1,398

 

 

$

-

 

 

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

3


 

G1 Therapeutics, Inc.

Notes to financial statements

(unaudited)

1. Business Description

G1 Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company based in Research Triangle Park, North Carolina dedicated to the discovery and development of novel therapeutics for the treatment of cancer. The Company was incorporated on May 19, 2008 in the state of Delaware.

The Company focuses on cyclin-dependent kinases (CDKs), a family of proteins that plays an important role in the growth and proliferation of all human cells. The Company has focused its CDK research on developing potent and selective inhibitors of the kinases CDK4 and CDK6, collectively known as CDK4/6, a validated and promising class of targets for anti-cancer therapeutics. The Company is currently advancing two CDK4/6 inhibitor product candidates in clinical development, trilaciclib and G1T38, each of which has broad therapeutic potential in many forms of cancer and may serve as the backbone of multiple combination regimens.

Trilaciclib, the Company’s most advanced clinical-stage candidate, is a potential first-in-class intravenous CDK4/6 inhibitor designed to preserve hematopoietic stem and progenitor cells and enhance immune system function during chemotherapy. Based on compelling response rates and favorable tolerability shown in early-stage trials, trilaciclib is currently being evaluated in four randomized trials: two Phase 1b/2a trials in patients with small cell lung cancer, or SCLC, an additional Phase 2 trial in combination with Tecentriq in SCLC and a Phase 2 in patients with triple-negative breast cancer, or TNBC.

G1T38, the Company’s second clinical-stage candidate, is a potential best-in-class oral CDK4/6 inhibitor, to be used in combination with other targeted therapies to treat multiple cancers. A Phase 1 trial of G1T38 in 75 healthy volunteers showed a favorable safety profile, and the Company is conducting a Phase 1/2 trial in ER+, HER2- breast cancer patients in combination with Faslodex® .

In November, G1 submitted an Investigational New Drug (IND) application to the U.S. Food and Drug Administration (FDA) to evaluate G1T38, an oral CDK4/6 inhibitor, in combination with Tagrisso® for the treatment of certain types of non-small cell lung cancer.

As part of the Company’s strategy to develop wholly-owned proprietary combinations, the Company is advancing the preclinical development of G1T48, a potential first/best-in-class oral selective estrogen receptor degrader, or SERD, which is targeted for the treatment of ER+, HER2- breast cancer.

The Company’s financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of September 30, 2017, the Company had an accumulated deficit of $112.1 million. The Company has reported a net loss in all fiscal periods since inception and expects to incur substantial losses in the future to conduct research and development and pre-commercialization activities. These factors raised substantial doubt about its ability to continue as a going concern prior to the Company’s initial public offering (the “IPO”).

On May 22, 2017, the Company closed its IPO of 7,781,564 shares of the Company’s common stock at a public offering price of $15.00 per share, including 781,564 shares of common stock issued upon exercise by the underwriters of their option to purchase additional shares. The gross proceeds from the IPO were $116.7 million and net proceeds were $107.1 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

Upon completion of the Company’s IPO, all outstanding preferred stock was automatically converted into an aggregate of 18.9 million shares of common stock. In connection with the IPO, the Board of Directors and the stockholders of the Company approved a one-for-three reverse stock split of the Company’s common stock. The reverse stock split became effective on May 11, 2017. All share and per share amounts in the condensed consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value to accumulated deficit. The authorized number of shares of common stock was increased to 120.0 million to be effective as of the date of effectiveness of the Company’s registration statement for its IPO.

As of September 30, 2017, the Company had cash and cash equivalents of $118.4 million. The Company expects that its existing cash and cash equivalents will enable it to fund its operating expenses and capital expenditure requirements for at least 18 months. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s results of operations and financial condition.

4


 

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated 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 consolidated financial position and results of operations for the interim periods presented. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The information presented in the condensed consolidated financial statements and related notes as of September 30, 2017, and for the three and nine months ended September 30, 2017 and 2016, is unaudited. The results for the nine months ended September 30, 2017 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 registration statement on Form S-1 under the Securities Act of 1933, as amended, declared effective by the SEC on May 16, 2017. The December 31, 2016 condensed consolidated 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 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, 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.

 

Income taxes

The Company did not record a federal or state income tax benefit for the three and nine months ended September 30, 2017 due to its conclusion that a full valuation allowance is required against the Company’s deferred tax assets.

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

In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Accounting for Income Taxes, the Company reflects in the financial statements the benefit of positions taken in a previously filed tax return or expected to be taken in a future tax return only when it is considered ‘more-likely-than-not’ that the position taken will be sustained by a taxing authority. As of September 30, 2017 and December 31, 2016, the Company had no unrecognized income tax benefits and correspondingly there is no impact on the Company’s effective income tax rate associated with these items. The Company’s policy for recording interest and penalties relating to uncertain income tax positions is to record them as a component of income tax expense in the accompanying statements of operations. As of September 30, 2017 and December 31, 2016, the Company had no such accruals.

Stock-Based Compensation

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

5


 

The Company accounts for stock-based non-employee compensation arrangements by recording the expense of such services based on the fair value of the equity instrument as estimated using the Black-Scholes pricing model. The fair value of the equity instrument is charged to operating expense over the term of the service agreement.

Recent Accounting Pronouncements

In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control, which amends the consolidation guidance on how a reporting entity that is a single decision maker of a variable interest entity should treat indirect interest in the entity held through related parties that are under common control. This guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. The Company adopted this ASU on January 1, 2017. The adoption of this standard did not have a material impact on the Company’s financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The FASB issued ASU 2016-09 to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences. This ASU is effective for annual and interim periods ending after December 15, 2016, with early adoption permitted. This ASU was adopted by the Company for the year ended December 31, 2016. The adoption of this standard did not have a material impact on the Company’s financial statements.

In November 2014, the FASB issued ASU No. 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The guidance requires an entity to determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of the relevant facts and circumstances (commonly referred to as the whole-instrument approach). ASU 2014-16 applies to all entities and is effective for annual periods beginning after December 15, 2015, and interim periods thereafter. The ASU was adopted by the Company for the year ended December 31, 2016. Adoption of this standard did not have material impact on the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, requiring management to evaluate whether events or conditions could impact an entity’s ability to continue as a going concern for at least one year after the date that the financial statements are issued and to provide disclosures if necessary. Disclosures will be required if conditions give rise to substantial doubt and the type of disclosure will be determined based on whether management’s plans will be able to alleviate the substantial doubt. The ASU was effective for the first annual period ending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted. The ASU was adopted by the Company for the fourth quarter ended December 31, 2016. Refer to the disclosures in Note 1 for the impact of this adoption.

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period, which requires the Company to assess share-based awards with performance targets that could be achieved after the requisite service period for potential treatment as performance conditions. Under the ASU, compensation expense is to be recognized when the performance target is deemed probable and should represent the compensation expense attributable to the periods for which service has already been rendered. If the performance target is reached prior to achievement of the service period, the remaining unrecognized compensation cost should be recognized over the remaining service period. The ASU is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted. This ASU was adopted by the Company for the year ended December 31, 2016. The adoption of this standard did not have a material impact on the Company’s financial statements.    

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The FASB issued ASU 2016-09 to improve U.S. GAAP by providing guidance on the cash flow statement classification of eight specific areas where there is existing diversity in practice. The FASB expects that the guidance in this ASU will reduce the current and potential future diversity in practice in such areas. This ASU is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises the accounting related to leases by requiring lessees to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions. This ASU is effective for annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s financial statements.

6


 

In May 2014, the FASB and the International Accounting Standards Board jointly issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605 and most industry-specific guidance. The new standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The update also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgements and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for public entities for annual and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the method of adoption and the potential impact this standard may have on its financial position and results of operations. The future impact of ASU 2014-09 will be dependent on the nature of the Company’s future revenue contracts and arrangements, if any.

3. Fair Value Measurements

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

Level 1

Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2

Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3

Unobservable inputs that reflect the Company’s estimates of the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

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

At September 30, 2017 and December 31, 2016 these financials instruments and respective fair values have been classified as follows (in thousands):

 

 

 

Quoted prices

in active

markets for

identical

assets

(Level 1)

 

 

Significant

other

observable

inputs

(Level 2)

 

 

Significant

other

unobservable

inputs

(Level 3)

 

 

Balance at

September 30,

2017

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

102,147

 

 

$

 

 

$

 

 

$

102,147

 

Certificates of Deposit

 

 

15,152

 

 

 

 

 

 

 

 

 

15,152

 

Total assets at fair value:

 

$

117,299

 

 

$

 

 

$

 

 

$

117,299

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant Liability

 

$

 

 

$

 

 

$

 

 

$

 

Total liabilities at fair value:

 

$

 

 

$

 

 

$

 

 

$

 

7


 

 

 

 

Quoted prices

in active

markets for

identical

assets

(Level 1)

 

 

Significant

other

observable

inputs

(Level 2)

 

 

Significant

other

unobservable

inputs

(Level 3)

 

 

Balance at

December 31,

2016

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

31,730

 

 

$

 

 

$

 

 

$

31,730

 

Certificates of Deposit

 

 

15,041

 

 

 

 

 

 

 

 

 

15,041

 

Total assets at fair value:

 

$

46,771

 

 

$

 

 

$

 

 

$

46,771

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant Liability

 

$

 

 

$

 

 

$

167

 

 

$

167

 

Total liabilities at fair value:

 

$

 

 

$

 

 

$

167

 

 

$

167

 

 

 During the three and nine months ended September 30, 2017 and the year ended December 31, 2016, there were no changes in valuation methodology.

 

4. Property and equipment

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

 

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

(unaudited)

 

 

 

 

 

Computer equipment

 

$

104

 

 

$

67

 

Laboratory equipment

 

 

268

 

 

 

207

 

Furniture and fixtures

 

 

174

 

 

 

64

 

Leasehold improvements

 

 

121

 

 

 

80

 

Construction in progress

 

 

 

 

 

 

Accumulated depreciation

 

 

(151

)

 

 

(107

)

Property and equipment, net

 

$

516

 

 

$

311

 

 

Depreciation expenses relating to property and equipment were $27 and $59 for the three and nine months ended September 30, 2017, respectively, and $18 and $44 for the three and nine months ended September 30, 2016, respectively.

5. Patent license agreement

On November 23, 2016, the Company entered into a license agreement with the Board of Trustees of the University of Illinois (the University), which was amended on March 24, 2017.  Pursuant to the license agreement, as amended, the University licensed patent rights to the Company, with rights of sublicense, to make, have made, use, import, sell and offer for sale products covered by certain patent rights owned by the University. The rights licensed to the Company are exclusive, worldwide, non-transferable rights, for all fields of use. Under the terms of the agreement the Company paid a one-time only, non-refundable license issue fee in the amount of $0.5 million which was charged to research and development expense in the fourth quarter of 2016.

The Company is also obligated to pay annual maintenance fees to the University. All annual minimum payments are fully creditable against any royalty payments made by the Company. Under the terms of the agreement, the Company must pay the University a royalty percentage on all net sales of products and a share of sublicensing revenues. The University is eligible to receive milestone payments of up to $2.625 million related to the initiation and execution of clinical trials and first commercial sale of a product in multiple countries. The Company is also responsible for all future patent prosecution costs.

The term of the license agreement will continue until the later of (i) the expiration of the last valid claim within the patent rights covering the product in such country, (ii) the expiration of market exclusivity in such country and (iii) the 10th anniversary of the first commercial sale in such country. The University may terminate the agreement in the event (i) the Company fails to pay any amount or make any report when required to be made and fails to cure such failure within thirty (30) days after receipt of notice from the University, (ii) is in breach of any provision of the agreement and fails to remedy within forty-five (45) days after receipt of notice, (iii) makes a report to the University under the agreement that is determine to be materially false, (iv) declares insolvency or bankruptcy or (v) takes an action that causes patent rights or technical information to be subject to lien or encumbrance and fails to

8


 

remedy any such breach with in forty-five (45) days of receipt of notice from the University. The Company may terminate the agreement at any time on written notice to the University at least ninety (90) days prior to the termination date specified in the notice. Upon expiration or termination of the agreement, all rights revert to the University.

6. Accrued expenses

Accrued expenses are comprised as follows (in thousands):

 

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

(unaudited)

 

 

 

 

 

Accrued external research and professional fees

 

$

913

 

 

$

295

 

Accrued external clinical study costs

 

 

4,340

 

 

 

1,897

 

Accrued compensation expense

 

 

854

 

 

 

617

 

Deferred rent

 

 

80

 

 

 

44

 

Accrued expenses

 

$

6,187

 

 

$

2,853

 

 

7. Common Stock and Preferred Stock

Common Stock

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

Preferred Stock

Upon completion of the Company’s IPO, all outstanding preferred stock was automatically converted into an aggregate of 18.9 million shares of common stock.  The Company is also authorized to issue 5.0 million shares of undesignated preferred stock in one or more series.  As of September 30, 2017, no shares of preferred stock were issued or outstanding.

Shares Reserved for Future Issuance

The Company has reserved for future issuance the following number of shares of common stock:

 

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

(unaudited)

 

 

 

 

 

Conversion of Series C Preferred Stock on a fully-diluted basis

 

 

 

 

 

5,609,398

 

Conversion of Series B Preferred Stock on a fully-diluted basis

 

 

 

 

 

7,642,734

 

Conversion of Series A Preferred Stock on a fully-diluted basis

 

 

 

 

 

4,998,895

 

Conversion of Series 1 Preferred Stock on a fully-diluted basis

 

 

 

 

 

682,026

 

Common stock warrants issued with promissory notes

 

 

 

 

 

16,666

 

Other common stock warrants

 

 

 

 

 

3,466

 

Series 1 Preferred Stock warrants issued with promissory notes

 

 

 

 

 

21,978

 

Common stock options outstanding

 

 

3,898,506

 

 

 

3,690,058

 

Options available for grant under Equity Incentive Plans

 

 

1,721,665

 

 

 

176,919

 

 

 

 

5,620,171

 

 

 

22,842,140

 

 

8. Stock-based Compensation

2011 Equity Incentive Plan

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

9


 

2017 Equity Incentive Plan

In May 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan provided for the direct award or sale of the Company’s common stock and for the grant of up to 1,932,000 stock options to employees, directors, officers, consultants and advisors of the Company.  The 2017 Plan provides for the grant of incentive stock options, non-statutory stock options or restricted stock.

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

As of September 30, 2017, there were a total of 1,721,665 shares of common stock available for future issuance under the  2017 Plan.  

Stock Option Expense

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

During the three and nine months ended September 30, 2017, the Company recorded employee share-based compensation expense of $501 and $1,175, respectively.   During the three and nine months ended September 30, 2016, the Company recorded employee share-based compensation expense of $276 and $610, respectively.  

The Company recognizes compensation costs related to stock options granted to non-employees based on the estimated fair value of the awards on the date of grant in the same manner as employees; however, the fair value of the stock options granted to non-employees is re-measured each reporting period until the service is complete, and the resulting increase or decrease in value, if any, is recognized as expense or income, respectively, during the period the related services are rendered.  

During the three and nine months ended September 30, 2017, the Company recorded non-employee share-based compensation expense of $539 and $1,182, respectively.   During the three and nine months ended September 30, 2016, the Company recorded non-employee share-based compensation expense of $93 and $298, respectively.  

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

Stock options— Black-Scholes inputs

The fair value of stock options was estimated using the following weighted-average assumptions for the three and nine months ended September 30, 2017 and September 30, 2016:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

Expected volatility

 

74.6 - 75.1%

 

 

78.2 - 78.4%

 

 

74.2 - 79.3%

 

 

74.7 - 78.4%

 

Weighted-average risk free rate

 

1.9 - 2.0%

 

 

 

1.3%

 

 

1.9 - 2.1%

 

 

1.2 - 1.4%

 

Dividend yield

 

 

—%

 

 

 

—%

 

 

 

—%

 

 

 

—%

 

Expected term (in years)

 

5.94

 

 

6.05

 

 

5.98

 

 

6.03

 

 


10


 

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

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

Research and development

 

$

792

 

 

$

222

 

 

$

1,796

 

 

$

576

 

General and administrative

 

 

248

 

 

 

147

 

 

 

561

 

 

 

332

 

Total stock-based compensation expense

 

$

1,040

 

 

$

369

 

 

$

2,357

 

 

$

908

 

Stock Option Activity

Stock option activity for the nine months ended September 30, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

average

 

 

contractual

 

 

Aggregate

 

 

 

Options

 

 

exercise

 

 

for

 

 

intrinsic

 

 

 

outstanding

 

 

price

 

 

life (Years)

 

 

value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance as of December 31, 2016

 

 

3,690,058

 

 

$

2.13

 

 

 

8.4

 

 

$

17,463

 

Cancelled

 

 

(31,665

)

 

$

2.01

 

 

 

 

 

 

 

 

 

Granted

 

 

361,997

 

 

 

12.68

 

 

 

 

 

 

 

 

 

Exercised

 

 

(121,884

)

 

 

1.46

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2017

 

 

3,898,506

 

 

$

3.14

 

 

 

7.9

 

 

$

84,796

 

Exercisable at December 31, 2016

 

 

1,396,191

 

 

 

0.84

 

 

 

7.8

 

 

$

8,410

 

Vested at December 31, 2016 and expected to vest

 

 

3,690,058

 

 

 

2.13

 

 

 

8.4

 

 

$

17,463

 

Exercisable at September 30, 2017

 

 

2,037,649

 

 

 

1.51

 

 

 

7.4

 

 

$

47,634

 

Vested at September 30, 2017 and expected to vest

 

 

3,898,506

 

 

 

3.14

 

 

 

7.9

 

 

$

84,796

 

 

 

9. Net loss per common share

Net loss per common share

Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period including nominal issuances of common stock warrants. Diluted net loss per common share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options, stock warrants and unvested restricted common stock. For the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, the following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding because the effect would be anti-dilutive:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

Stock options issued and outstanding

 

 

3,894,192

 

 

 

3,544,800

 

 

 

3,805,419

 

 

 

3,085,370

 

Stock warrants

 

 

 

 

 

25,444

 

 

 

15,223

 

 

 

25,444

 

 

 

 

3,894,192

 

 

 

3,570,244

 

 

 

3,820,642

 

 

 

3,110,814

 

 

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

11


 

The following table summarizes the calculation of the basic and diluted net loss per common share (in thousands, except share and per share amounts):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

(unaudited)

 

 

(unaudited)

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

$

(15,601

)

 

$

(6,557

)

 

$

(43,140

)

 

$

(19,890

)

Less: accretion of redeemable convertible preferred

   stock

 

 

 

 

(1,205

)

 

 

(4,757

)

 

 

(3,200

)

Net loss attributable to common stockholders

$

(15,601

)

 

$

(7,762

)

 

$

(47,897

)

 

$

(23,090

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average basic and diluted common

   shares

 

28,318,656

 

 

 

1,490,552

 

 

 

14,772,621

 

 

 

1,484,713

 

Basic and diluted net loss per common share

$

(0.55

)

 

$

(5.21

)

 

$

(3.24

)

 

$

(15.55

)

 

10. Related party transactions

Two co-founders and shareholders of the Company had consulting agreements with the Company relating to their continued development work through June 30, 2017. The Company renewed its consulting agreement with one of these founders through June 30, 2019. Combined consulting fees paid to both founders were approximately $5 and $27 for the three months ended September 30, 2017 and September 30, 2016, respectively, and $59 and $81 for the nine months ended September 30, 2017 and September 30, 2016, respectively under the agreements.

The Company paid approximately $2 and $3 to the Chairman of the Board of Directors for consulting services during the three months ended September 30, 2017 and September 30, 2016, respectively and $9 and $12 for the  nine months ended September 30, 2017 and September 30, 2016, respectively.

 

12


 

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

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

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery and development of novel therapeutics for the treatment of cancer. Our two clinical assets are based on our core understanding of cyclin-dependent kinases, or CDKs, a family of proteins that play an important role in the growth and proliferation of all human cells. Two particular CDKs, CDK4 and CDK6, collectively known as CDK4/6, represent a validated and promising class of targets for anti-cancer therapeutics. We have leveraged our deep expertise in CDK4/6 biology to discover and develop two highly potent and selective CDK4/6 inhibitors that may have broad applicability across multiple cancer indications. We believe we are the only company with two distinct clinical-stage CDK4/6 inhibitors, trilaciclib and G1T38, each of which has the potential to be the backbone therapy of multiple combination regimens.

CDK4/6 is required for growth and proliferation in certain normal cell types, such as hematopoietic stem and progenitor cells, or HSPCs. HSPCs reside in the bone marrow and are the “reservoir” from which all blood and immune system cells are formed. Additionally, CDK4/6 plays an integral role in the growth and proliferation of certain types of tumors. Tumors that rely on CDK4/6 to grow and proliferate are referred to as CDK4/6-dependent tumors, and include the most common kinds of prostate and breast cancer. Alternatively, some tumors can grow and proliferate without CDK4/6 activity and are referred to as CDK4/6-independent. CDK4/6 independent tumors include small cell lung cancer, or SCLC, and triple-negative breast cancer, or TNBC. Our two CDK4/6 inhibitors were rationally designed to treat distinct patient populations with different combination regimens. Trilaciclib is in development in combination with chemotherapy for the treatment of patients with CDK4/6-independent tumors. G1T38 is in development in combination with targeted therapies for the treatment of patients with CDK4/6-dependent tumors.

Trilaciclib, our most advanced candidate, is a potential first-in-class intravenous CDK4/6 inhibitor we rationally designed to preserve HSPCs and enhance immune system function during chemotherapy. Chemotherapy has significant clinical utility and continues to be the most effective treatment for many cancers. However, it also damages HSPCs (myelosuppression) and the immune system (immunosuppression), leading to severe adverse effects and limiting anti-tumor activity. We believe that if the beneficial effects of chemotherapy (i.e. potent tumor cell killing) could be maximized, while minimizing the deleterious side-effects of myelosuppression and immunosuppression, patient outcomes would be significantly improved.

Based on compelling response rates and favorable tolerability in early-stage trials, trilaciclib is currently being evaluated in four randomized trials: two Phase 1b/2a trials in patients with SCLC, an additional Phase 2 trial in combination with Tecentriq in SCLC and a Phase 2 trial in patients with TNBC. We have completed the Phase 1b parts of the two SCLC trials and have completed enrollment of the Phase 2a part of the first-line SCLC trial, with top-line data expected in the first quarter of 2018. Completion of enrollment for the Phase 2a trial in second/ third-line SCLC is expected in the second quarter of 2018. Preliminary data from this trial and the TNBC trial are expected in the second half of 2018.

G1T38, our second clinical-stage candidate, is a potential best-in-class oral CDK4/6 inhibitor being developed to be used in combination with other targeted therapies to treat multiple cancers. We rationally designed G1T38 to improve upon and address the shortcomings of the approved CDK4/6 inhibitors Ibrance, Kisqali and Verzenio. Our preclinical data and early clinical data indicate the potential for continuous daily dosing and improved antitumor activity and tolerability. A Phase 1 trial of G1T38 in 75 healthy volunteers showed a favorable safety profile leading to the initiation of a Phase 1/2 trial in ER+, HER2- breast cancer in combination with Faslodex. Our plans for G1T38 include its use in other cancers, serving as the backbone of multiple combination regimens.

In November, we submitted an Investigational New Drug (IND) application to the U.S. Food and Drug Administration (FDA) to evaluate G1T38, an oral CDK4/6 inhibitor, in combination with Tagrisso® for the treatment of certain types of non-small cell lung cancer.As part of our strategy to develop wholly owned proprietary combinations that complement our CDK4/6 portfolio, we are advancing the preclinical development of G1T48, a potential first/best-in-class oral selective estrogen receptor degrader, or SERD. We expect to develop G1T48 as a single agent and in combination with G1T38 for the treatment of ER+, HER2- breast cancer. Based on compelling preclinical efficacy and safety data, we expect to file an investigational new drug application, or IND, for G1T48 in December 2017. We plan to continue to leverage our proprietary assets and knowledge of CDK4/6 biology to explore additional combination treatments and to build a fully integrated oncology company.

13


 

Financial Overview

Since our inception in 2008, we have devoted substantially all of our resources to synthesizing, acquiring, testing and developing our product candidates, including conducting preclinical studies and clinical trials and providing general and administrative support for these operations as well as securing intellectual property protection for our product candidates. We do not have any products approved for sale and have not generated any revenues from product sales. We recorded $0 million of revenue for the three and nine months ended September 30, 2017 and the year ended December 31, 2016.  To date, we have financed our operations primarily through the sale of equity securities.

On May 22, 2017, we closed our initial public offering (“IPO”) of 7,781,564 shares of common stock at a public offering price of $15.00 per share, including 781,564 shares of common stock issued upon exercise by the underwriters of their option to purchase additional shares. The gross proceeds from the IPO were $116.7 million and net proceeds were $107.1 million, after deducting underwriting discounts and commissions and other offering expenses payable by us.

As of September 30, 2017, we had an accumulated deficit of $112.1 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative expenses associated with our operations. We expect to continue to incur significant expenses and increasing operating losses over at least the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing and future activities as we:

continue development of our product candidates, including initiating additional clinical trials of trilaciclib and G1T38 and completing preclinical studies and potentially initiating clinical trials of our preclinical-stage product candidate, G1T48;

identify and develop new product candidates;

seek marketing approvals for our product candidates that successfully complete clinical trials;

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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

maintain, expand and protect our intellectual property portfolio;

hire additional personnel;

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

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

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

License agreement with the University of Illinois

In November 2016, we entered into a license agreement with the University of Illinois, or UIC, pursuant to which we obtained an exclusive, worldwide license to make, have made, use, import, sell and offer for sale SERDs, including G1T48, covered by certain patent rights owned UIC. The rights licensed to us are for all fields of use. Under the terms of the agreement, as amended, we paid a one-time only, non-refundable upfront fee of $0.5 million, and are required to pay UIC low single-digit royalties on all net sales of products and a share of any sublicensing revenues. We are also obligated to pay annual maintenance fees, which are fully creditable against any royalty payments made by us. We may also be required to pay UIC milestone payments of up to an aggregate of $2.625 million related to the initiation and execution of clinical trials and first commercial sale of a product in multiple countries. We are responsible for all future patent prosecution costs.

14


 

Components of our Results of Operations

Research and Development Expenses

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

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

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

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

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

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

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

other costs incurred in seeking regulatory approval of our product candidates; and

allocated facility-related costs and overhead.

The successful development of our product candidates is highly uncertain. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, we expect research and development costs to increase significantly for the foreseeable future as programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

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

future clinical trial results;

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

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

potential additional studies requested by regulatory agencies;

significant and changing government regulation; and

the timing and receipt of any regulatory approvals.

We track research and development expenses on a program-by-program basis only for clinical-stage product candidates. Preclinical research and development expenses and chemical manufacturing research and development expenses are not assigned or allocated to individual development programs. We currently have two clinical-stage product candidates, trilaciclib and G1T38.  

General and administrative expenses

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

We also have incurred, and expect to continue to incur additional expenses as a public company, including expenses related to compliance with the rules and regulations of the SEC and NASDAQ, additional insurance expenses, and expenses related to investor relations activities and other administration and professional services.

15


 

Total other income, net

Total other income, net consists of interest income earned on cash and cash equivalents and the change in fair value of warrant liabilities and other liabilities.

Results of operations

Comparison of the three months ended September 30, 2017 and September 30, 2016

 

 

 

Three Months Ended September 30,

 

 

Change

 

 

 

2017

 

 

2016

 

 

$

 

 

 

(in thousands)

 

Revenue

 

$

 

 

$

 

 

$

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and Development

 

 

14,054

 

 

 

5,695

 

 

 

8,359

 

General and Administrative

 

 

1,875

 

 

 

918

 

 

 

957

 

Total Operating Expenses

 

 

15,929

 

 

 

6,613

 

 

 

9,316

 

Loss from Operations

 

 

(15,929

)

 

 

(6,613

)

 

 

(9,316

)

Other Income

 

 

328

 

 

 

56

 

 

 

272

 

Net Loss

 

$

(15,601

)

 

$

(6,557

)

 

$

(9,044

)

 

Revenue

Revenue was $0 for the three months ended September 30, 2017 and September 30, 2016.

Research and development

Research and development expenses were $14.1 million for the three months ended September 30, 2017 compared to $5.7 million for the three months ended September 30, 2016. The increase of $8.4 million, or 147%, was primarily due to an increase of $4.0 million in our clinical program costs, which included increased costs of $2.4 million in our trials of trilaciclib in SCLC, TNBC and initiation of our trial of trilaciclib in SCLC with Tecentriq, an increase of $0.3 million in connection with ongoing costs for a Phase 1/2 clinical trial in ER+, HER2- breast cancer offset by the completion of a Phase I trial for G1T38 in healthy normal volunteers and an increase of $1.3 million in personnel and other costs related to the trilaciclib and G1T38 clinical programs. The increase in overall research and development expenses also includes an increase of $3.0 million for external manufacturing of pharmaceutical active ingredient and drug product to support our clinical trials, an increase of $0.7 million in external research studies, an increase of $0.6 million in preclinical and drug development personnel-related costs as a result of increased headcount and fees paid to consultants, and an increase of $0.1 million in supplies and facility costs. The following table summarizes our research and development expenses for the periods indicated:

 

 

 

Three Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

Clinical Expenses—trilaciclib

 

$

6,428

 

 

$

2,976

 

Clinical Expenses—G1T38

 

 

918

 

 

 

394

 

Clinical Expenses—G1T48

 

 

25

 

 

 

 

Chemical Manufacturing and Development

 

 

4,050

 

 

 

1,022

 

Discovery and Pre-Clinical Expenses

 

 

2,633

 

 

 

1,303

 

Total Research and Development Expenses

 

$