Checkpoint Therapeutics(CKPT) - 2023 Q4 - Annual Report

PART I Business Checkpoint Therapeutics, a clinical-stage oncology company, faces an FDA CRL for its lead product cosibelimab due to manufacturing issues - The company's lead product, cosibelimab, received a Complete Response Letter (CRL) from the FDA in December 2023. The CRL cited issues at a third-party contract manufacturing organization, not issues with the clinical data, and a resubmission is planned[428][579] - As a development-stage company, Checkpoint has not generated any revenue from product sales and has a significant accumulated deficit[170][580] Key Financials as of December 31, 2023 | Metric | Value (USD) | | :--- | :--- | | Accumulated Deficit | $314.3 million | Products Under Development The pipeline is led by cosibelimab for CSCC, includes olafertinib and preclinical assets, with a terminated TG Therapeutics collaboration Cosibelimab Clinical Trial Results for CSCC | Indication | Patient Group | Confirmed Objective Response Rate (ORR) | | :--- | :--- | :--- | | Metastatic CSCC | 78 patients | 47.4% | | Locally Advanced CSCC | 31 patients | 54.8% | - Olafertinib (EGFR inhibitor) is being developed for metastatic NSCLC. The company plans to use data from an ongoing Phase 3 trial in China, conducted by its licensor NeuPharma, to support a U.S. NDA[61][618] - The company's anti-GITR (CK-302), BET inhibitor (CK-103), and anti-CAIX programs are currently in preclinical development[59][62][63] - Collaboration agreements with TG Therapeutics for developing assets in hematological malignancies were mutually terminated on September 30, 2023, with all rights reverting to Checkpoint[21][564][584] Intellectual Property and Patents Checkpoint's IP strategy relies on in-licensed and company-owned patents for key candidates, with expirations into the 2030s - The company in-licensed key intellectual property from Dana-Farber for its anti-PD-L1, anti-GITR, and anti-CAIX antibody programs. Patents related to the PD-L1 portfolio are scheduled to expire between 2033 and 2040[66][592] - The patent estate for olafertinib, licensed from NeuPharma, includes granted U.S. and foreign patents with terms running to August 2034, with potential for later expirations up to February 2039 for newer applications[35] - The company received FDA Orphan Drug Designation for olafertinib in September 2017 for the treatment of EGFR mutation-positive NSCLC, which could provide a seven-year period of marketing exclusivity upon approval[69] Licensing Agreements and Collaborations Key licensing agreements with Dana-Farber, Adimab, NeuPharma, and Jubilant involve upfront fees, milestones, and royalties for pipeline development - Licensed its core antibody portfolio (PD-L1, GITR, CAIX) from Dana-Farber, with potential milestone payments of approximately $21.5 million per product for development and regulatory achievements, plus up to $60.0 million in sales milestones and royalties[628] - Licensed olafertinib from NeuPharma, with eligibility for up to $39.0 million in clinical/regulatory milestones and $40.0 million in sales milestones, plus tiered royalties[72] - Licensed the BET inhibitor program (CK-103) from Jubilant, involving a $2.0 million upfront fee and potential for approximately $88.4 million in clinical/regulatory milestones and $89.3 million in sales milestones, plus royalties[40] - Collaborated with Adimab to optimize cosibelimab, with Adimab eligible for up to $2.5 million in regulatory milestone payments and low single-digit royalties. A $2.2 million milestone was expensed in February 2023 upon FDA's BLA filing acceptance[39] Competition Checkpoint faces intense competition in immuno-oncology and EGFR inhibitor markets from major pharmaceutical companies - Competes with established PD-1/PD-L1 inhibitors from major pharmaceutical companies such as Merck (Keytruda®), Bristol-Myers Squibb (Opdivo®), and Roche (Tecentriq®)[632] - In the EGFR inhibitor market for NSCLC, the company faces competition from approved drugs including AstraZeneca's Tagrisso®, as well as products in development from Novartis and Janssen[98] Supply and Manufacturing Checkpoint relies entirely on single-source third-party contract manufacturers, posing significant risks to supply, compliance, and production - The company relies on single contract manufacturers for each of its product candidates, creating a significant dependency and risk of supply disruption[44][634] - Switching manufacturers is a difficult and time-consuming process that requires advance approval from the FDA and other regulatory agencies, which could lead to significant delays[77] Government and Industry Regulations The company operates in a heavily regulated industry, requiring rigorous FDA approval, with ongoing oversight and uncertainty regarding pricing and reimbursement - All product candidates must undergo a rigorous, lengthy, and expensive regulatory approval process, including preclinical studies and sequential clinical trials (Phase 1, 2, 3) before they can be marketed[45][101][637] - The FDA may grant expedited review designations such as 'Fast Track' for drugs intended to treat serious conditions and fill an unmet medical need, potentially allowing for a more efficient review process[102][636] - Commercial success depends on securing adequate reimbursement from third-party payors, including government programs and private insurers, who are increasingly scrutinizing the cost-effectiveness of new drugs. The Inflation Reduction Act may also impact drug profitability[107] Risk Factors Checkpoint faces significant risks including substantial losses, going concern doubt, third-party reliance, competition, IP challenges, and Fortress Biotech control Risks Related to Finances and Capital Requirements The company has significant losses, a $314.3 million accumulated deficit, and substantial doubt about its going concern ability, requiring additional Q3 2024 funding - The company has incurred significant losses since inception, with an accumulated deficit of $314.3 million as of December 31, 2023, and anticipates continued losses[109][110] - There is substantial doubt about the company's ability to continue as a going concern, as its current cash and cash equivalents are only projected to fund operations into the third quarter of 2024[114][117][143] - The company requires substantial additional funding to continue development and commercialization, and failure to secure it could significantly harm the business[90][92] Risks Inherent in Drug Development and Commercialization Drug development is inherently risky; early trial results are not predictive, and cosibelimab's BLA relies on potentially insufficient single-trial data - Preclinical and early clinical trial results are not necessarily predictive of future success, and product candidates often fail in later-stage trials despite initial promise[132][159] - The BLA submission for cosibelimab relies on data from a single, primarily foreign clinical trial. The FDA may require additional studies, which would cause significant delays and expense[156] - Serious or unacceptable side effects identified during development could lead to the abandonment of a product candidate or significant limitations on its use[13][209] - Even with regulatory approval, commercial success is not guaranteed and depends on market acceptance by physicians, patients, and payors, as well as adequate reimbursement[138][186] Risks Related to Reliance on Third Parties Checkpoint's heavy reliance on third-party CMOs and CROs, highlighted by the cosibelimab CRL, poses significant development and commercialization risks - The company has no manufacturing facilities and relies on third-party contractors for all clinical and potential commercial supply, increasing risks of delays and quality control issues[228][258] - The FDA issued a CRL for the cosibelimab BLA due to inspection issues at its third-party contract manufacturer, underscoring the direct impact of third-party compliance on regulatory approval timelines[232] - The company depends on third-party CROs to conduct its clinical trials, and any failure by these CROs to perform satisfactorily or meet regulatory standards (like GCPs) could compromise trial data and delay approvals[225][226][254] Risks Related to Intellectual Property and Potential Disputes with Licensors Thereof Checkpoint's success depends on maintaining patent protection for in-licensed technologies, facing infringement, validity challenges, and licensor disputes - Commercial success depends on maintaining valid and enforceable patent protection, which is uncertain and involves complex legal questions[277][302] - The company depends on its licensors to maintain and enforce the intellectual property for its product candidates and has limited control over their actions, creating a risk of losing patent rights[285][286][310] - The company may become involved in expensive and time-consuming lawsuits to protect its patents or defend against infringement claims from competitors[288][338] - Any disputes with licensors over obligations in license agreements could result in the loss of rights to key product candidates[315][342] Risks Relating to Our Control by Fortress Biotech Inc. Fortress Biotech controls a voting majority of Checkpoint's common stock, influencing all stockholder matters and causing ongoing dilution - Fortress controls a voting majority of the company's common stock, enabling it to control stockholder votes on all major corporate actions[164][351] - Under the Founders Agreement, Fortress receives an annual grant of shares equal to 2.5% of the company's fully diluted equity, causing dilution to other stockholders[326][352] - Agreements with Fortress, such as the Management Services Agreement, may not be on terms as favorable as those that could be obtained from unaffiliated third parties[137][327] Cybersecurity Checkpoint manages cybersecurity risks via management and Audit Committee oversight, third-party assessments, and training, with no material threats - The company's management team is responsible for assessing and managing cybersecurity risks, with oversight provided by the Audit Committee[367][394] - Cybersecurity risk management strategies include engaging third-party experts, deploying detection and response services, and ongoing employee training[364][391] - No cybersecurity threats have been identified in the last two fiscal years that are deemed reasonably likely to have a material impact on the company's business or financial condition[393] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock trades on NASDAQ under "CKPT", no cash dividends paid, earnings retained for growth, with equity compensation plan details - The company's common stock trades on the NASDAQ Capital Market under the ticker symbol "CKPT"[396] - The company has never paid cash dividends and does not intend to in the foreseeable future, retaining any earnings for business development[371] Securities Authorized for Issuance under Equity Compensation Plans (as of Dec 31, 2023) | Plan Category | Securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 127,000 | $8.88 | 3,510,830 | Management's Discussion and Analysis of Financial Condition and Results of Operations As a clinical-stage company, Checkpoint has no product revenue, significant operating losses, a $314.3 million accumulated deficit, and critical liquidity Results of Operations In 2023, revenue was negligible at $0.1 million, R&D expenses decreased to $43.6 million, and G&A expenses remained stable Comparison of Operating Results (Years Ended Dec 31) | Metric (in millions) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $0.1 | $0.2 | ($0.1) | | Research & Development Expenses | $43.6 | $49.8 | ($6.2) | | General & Administrative Expenses | $8.7 | $8.7 | $0.0 | - The decrease in 2023 R&D expenses was mainly driven by lower commercial manufacturing costs for cosibelimab ($19.0M in 2023 vs. $25.3M in 2022) and reduced clinical costs[415] - The company anticipates that R&D expenses will decrease in 2024 compared to 2023, while G&A expenses are expected to remain relatively consistent[173][442] Liquidity and Capital Resources Cash from equity sales, including $40.5 million net financing in 2023, is only sufficient into Q3 2024, raising going concern doubt - The company's cash and cash equivalents are only sufficient to fund operating expenses into the third quarter of 2024, raising substantial doubt about its ability to continue as a going concern[470] - In 2023, the company raised capital through several registered direct offerings in February ($6.7M net), April ($5.5M net), May ($9.1M net), and July ($9.1M net), as well as an inducement offer for warrant exercises in October ($10.0M net)[422][448][449][467][469] Cash Flow Summary (Years Ended Dec 31) | Cash Flow (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($47.6) | ($57.6) | | Net cash provided by financing activities | $40.5 | $14.9 | Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective[476] - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2023[477] PART III Directors, Executive Officers and Corporate Governance Director, executive officer, and corporate governance information is incorporated by reference from the 2024 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement[463] Executive Compensation Executive compensation details are incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement[483][504] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership for major shareholders and management is incorporated by reference from the 2024 Proxy Statement - Information regarding security ownership is incorporated by reference from the 2024 Proxy Statement[464][505] Certain Relationships and Related Transactions, and Director Independence Related party transactions and director independence are incorporated by reference from the 2024 Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the 2024 Proxy Statement[506] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2024 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement[507] PART IV Exhibits and Financial Statement Schedules This section presents audited financial statements for 2023 and 2022, including the independent auditor's report and all Form 10-K exhibits Report of Independent Registered Public Accounting Firm KPMG LLP issued a fair opinion, but highlighted substantial doubt about going concern and identified a warrant inducement transaction as a critical audit matter - The auditor's report contains a "Going Concern" paragraph, explicitly stating that the company's recurring losses and net capital deficiency raise substantial doubt about its ability to continue as a going concern[500][527] - A critical audit matter was identified related to the accounting for a warrant inducement transaction in October 2023, which required complex judgment regarding accounting guidance and the fair value estimation of the warrants[503][537][538] Financial Statements As of December 31, 2023, cash decreased to $4.9 million, total liabilities exceeded assets, resulting in a $13.0 million stockholders' deficit Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,928 | $12,068 | | Total Assets | $5,378 | $13,290 | | Total Liabilities | $18,425 | $32,773 | | Total Stockholders' Equity (Deficit) | ($13,047) | ($19,483) | Consolidated Statement of Operations Data (in thousands) | Account | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Revenue | $103 | $192 | | Total operating expenses | $52,251 | $58,525 | | Net Loss | ($51,847) | ($62,624) | | Basic and diluted net loss per share | ($3.17) | ($7.09) |