Leap Therapeutics(LPTX) - 2019 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements Unaudited financial statements as of June 30, 2019, report a $17.0 million net loss for H1 2019, $15.7 million cash, and substantial doubt about going concern Condensed Consolidated Balance Sheets As of June 30, 2019, total assets were $20.1 million, with $15.7 million in cash, and total stockholders' equity at $10.9 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,747 | $16,284 | | Total current assets | $16,794 | $17,322 | | Total assets | $20,137 | $19,074 | | Total current liabilities | $8,456 | $6,451 | | Total liabilities | $9,198 | $9,899 | | Total stockholders' equity | $10,939 | $9,175 | Condensed Consolidated Statements of Operations Net loss for Q2 2019 increased to $8.4 million, while H1 2019 net loss decreased to $17.0 million due to non-recurring warrant liability loss in prior year Operating Results (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $6,136 | $4,234 | $12,926 | $8,465 | | General and administrative | $2,325 | $2,603 | $4,330 | $4,716 | | Loss from operations | $(8,461) | $(6,837) | $(17,256) | $(13,181) | | Net loss | $(8,366) | $(7,364) | $(16,969) | $(17,986) | | Net loss per share | $(0.37) | $(0.50) | $(0.82) | $(1.32) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $14.1 million in H1 2019, with financing activities providing $13.6 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,051) | $(11,531) | | Net cash used in investing activities | $(100) | $0 | | Net cash provided by financing activities | $13,582 | $16,013 | | Net (decrease) increase in cash | $(537) | $4,744 | Notes to Condensed Consolidated Financial Statements Notes detail the company's pre-revenue status, going concern doubt, adoption of new lease and financial instrument accounting standards, and recent financing activities - The company is a biopharmaceutical firm focused on developing cancer therapeutics and has not yet generated any revenue or achieved profitable operations[39][42] - Management has concluded that substantial doubt exists about the company's ability to continue as a going concern for one year, given its need for additional capital to fund operations[44] - On January 1, 2019, the company adopted ASU 2017-11, reclassifying its $3.448 million 2017 Warrant liability to additional paid-in capital[58][87] - The company adopted new lease accounting standard ASU 2016-02 on January 1, 2019, recording a right-of-use asset of $1.755 million and a lease liability of $1.720 million[83] - In February 2019, the company completed a public offering, raising net proceeds of approximately $12.1 million[93] - Subsequent to the quarter end, in July 2019, the company entered into an agreement with Lincoln Park Capital for the right to sell up to $20.0 million in common stock and completed an initial sale of $1.0 million[117][118] - The company is involved in patent opposition proceedings at the European Patent Office (EPO) regarding its TRX518 antibody patents[110][112] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased R&D expenses, critical liquidity with $15.7 million cash, and substantial doubt about going concern, mitigated by a $20 million equity commitment Company Overview and Recent Developments The company focuses on developing DKN-01 and TRX518, with recent positive clinical data for DKN-01 and a new $21 million equity commitment facility - Presented positive data for DKN-01 in combination with KEYTRUDA for esophagogastric cancer, showing a 50% overall response rate and 31.6 weeks median overall survival in DKK1-high patients[124] - Initiated a clinical trial evaluating TRX518 in a triple combination with cyclophosphamide chemotherapy and BAVENCIO (avelumab)[125] - Entered into a purchase agreement with Lincoln Park Capital for an initial $1 million stock purchase and the option to sell up to an additional $20 million in common stock[127] Results of Operations R&D expenses increased to $6.1 million in Q2 2019 and $12.9 million in H1 2019, while H1 net loss decreased to $17.0 million due to non-recurring items R&D Expenses by Program (in thousands) | Program | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | | :--- | :--- | :--- | :--- | :--- | | DKN-01 program | $3,247 | $3,652 | $8,622 | $6,845 | | TRX518 program | $2,889 | $582 | $4,304 | $1,620 | | Total R&D Expenses | $6,136 | $4,234 | $12,926 | $8,465 | - The increase in R&D expenses for H1 2019 was primarily due to a $4.7 million increase in clinical trial costs from higher patient enrollment, partially offset by a $1.2 million decrease in manufacturing costs[156] - General and administrative expenses for H1 2019 decreased by $0.4 million compared to H1 2018, mainly due to lower bonus expense and reduced legal and consulting fees[158] Financial Position, Liquidity and Capital Resources The company ended Q2 2019 with $15.7 million cash, faces substantial doubt about going concern, and relies on a July 2019 Lincoln Park agreement for future capital - As of June 30, 2019, the company had cash and cash equivalents of $15.7 million[166] - Due to the need for additional capital and uncertainties in raising it, management determined there is substantial doubt about the company's ability to continue as a going concern[166][188] - In July 2019, the company secured access to up to $20.0 million in capital through a purchase agreement with Lincoln Park[167] Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Cash used in operating activities | $(14,051) | $(11,531) | | Cash provided by financing activities | $13,582 | $16,013 | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the reporting period - Not Applicable[177] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes in internal control - The Principal Executive Officer and Principal Financial Officer concluded that as of June 30, 2019, the company's disclosure controls and procedures were effective[179] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to affect, internal control[180] PART II — OTHER INFORMATION Legal Proceedings The company reported no legal proceedings for the period - None[182] Risk Factors The company faces significant risks including substantial financial losses, a $17.0 million net loss for H1 2019, and substantial doubt about its ability to continue as a going concern - The company has a history of significant losses, reporting a net loss of $17.0 million for the six months ended June 30, 2019, and an accumulated deficit of $179.2 million[186] - Management has concluded that substantial doubt exists as to the company's ability to continue as a going concern due to its need for additional capital[188] - The company will require substantial additional capital to fund operations and advance its clinical programs; failure to obtain this financing could force delays or elimination of R&D programs[191] - Raising additional capital may cause significant dilution to existing stockholders or require the company to relinquish valuable rights to its product candidates[193] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities for the period - None[194] Other Information The company reported no other information for the period - None[197] Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files - The Exhibit Index lists certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1) and the company's financial statements formatted in XBRL (Exhibit 101)[198][201]