Viracta(VIRX) - 2019 Q1 - Quarterly Report

Part I. Financial Information Financial Statements The company reported an improved net loss of $5.9 million in Q1 2019, driven by decreased operating expenses, and significantly strengthened its cash position to $24.8 million from financing activities, despite ongoing going concern doubts Condensed Consolidated Balance Sheets Total assets increased to $27.8 million by March 31, 2019, driven by a rise in cash to $24.8 million, while total stockholders' equity significantly grew to $17.1 million due to financing activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $24,811 | $13,696 | | Total current assets | $26,410 | $15,200 | | Total assets | $27,754 | $15,324 | | Liabilities & Equity | | | | Total current liabilities | $9,975 | $11,323 | | Total liabilities | $10,668 | $11,331 | | Total stockholders' equity | $17,086 | $3,993 | | Total liabilities and stockholders' equity | $27,754 | $15,324 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2019 saw no revenue, but operating expenses decreased to $5.7 million, resulting in an improved net loss of $5.9 million or ($0.10) per share compared to Q1 2018 Q1 2019 vs. Q1 2018 Statement of Operations (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total revenues | $0 | $237 | | Research and development | $3,248 | $3,969 | | General and administrative | $2,439 | $3,359 | | Total operating expenses | $5,687 | $7,328 | | Loss from operations | ($5,687) | ($7,091) | | Net loss | ($5,860) | ($7,273) | | Net loss per common share | ($0.10) | ($0.21) | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $6.1 million, offset by $17.2 million from financing activities, leading to an $11.1 million net increase in cash, bringing the quarter-end balance to $24.8 million Q1 2019 vs. Q1 2018 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,113) | ($6,550) | | Net cash provided by investing activities | $0 | $742 | | Net cash provided by financing activities | $17,228 | $196 | | Net increase (decrease) in cash | $11,115 | ($5,612) | | Cash at end of period | $24,811 | $21,365 | Notes to Condensed Consolidated Financial Statements The notes detail the company's cancer inhibitor development, disclose substantial doubt about its going concern ability due to insufficient cash, and highlight recent financing activities including a $18.6 million public offering and a $5.5 million debt refinancing - The company is a biopharmaceutical firm focused on developing targeted inhibitors for cancer, with its lead program being vecabrutinib, a BTK inhibitor for B-cell malignancies[17][18] - There is substantial doubt about the company's ability to continue as a going concern, as its cash and cash equivalents of $24.8 million are not sufficient to support operations for the next twelve months. The company will require additional financing to continue[21][23] - In January 2019, the company raised approximately $18.6 million in net proceeds from underwritten public offerings of common stock and Series E Convertible Preferred Stock[53] - In April 2019, the company entered into a new $5.5 million term loan agreement with Silicon Valley Bank (SVB) and used the proceeds to repay its existing $5.9 million debt obligation[52][62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the kinase inhibitor pipeline, reiterates substantial doubt about going concern due to insufficient cash, attributes reduced net loss to lower operating expenses, and explains the cash increase from a $18.6 million public offering - The company's lead program is vecabrutinib, a non-covalent BTK inhibitor being studied in a Phase 1b/2 trial for advanced B-cell malignancies. The company is also developing SNS-510, a PDK1 inhibitor[71][72] - Management explicitly states that current cash and cash equivalents are not sufficient to support operations for twelve months, which raises substantial doubt about the company's ability to continue as a going concern. Additional financing is required[80][97] Comparison of Operating Expenses (in millions) | Expense Category | Q1 2019 | Q1 2018 | Change | | :--- | :--- | :--- | :--- | | Research and Development | $3.2 | $4.0 | ($0.8) | | General and Administrative | $2.4 | $3.4 | ($1.0) | - The $11.1 million increase in cash during the quarter was primarily due to $18.6 million in net proceeds from stock offerings, offset by $6.1 million used in operations and a $1.4 million principal payment on debt[100] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company defined by Rule 12b-2 of the Securities Exchange Act of 1934, the company is not required to provide quantitative and qualitative disclosures about market risk[113] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes in internal control over financial reporting during the quarter - The company's management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of the end of the quarter[115] - No changes occurred in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[116] Part II. Other Information Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition or operations - The company believes there is no pending litigation that could, individually or in the aggregate, have a material adverse effect on its results of operations or financial condition[120] Risk Factors The company faces significant risks including financial viability, the need for substantial additional capital, substantial doubt about its going concern ability, potential clinical trial failures, reliance on third-party manufacturers, competition, intellectual property, and Nasdaq delisting risk - The company needs to raise substantial additional funding to continue its development programs and there is substantial doubt about its ability to continue as a going concern[123][128][129] - The development of key product candidates like vecabrutinib and SNS-510 could be halted or significantly delayed due to clinical trial failures, safety issues, or patient enrollment difficulties[130][138] - The company relies on a limited number of third-party contract manufacturers for its Active Pharmaceutical Ingredient (API) and Finished Drug Product (FDP), and any failure by these suppliers could halt development[133] - The company's common stock is at risk of delisting from The Nasdaq Capital Market if it fails to meet continued listing requirements, such as the minimum bid price. The company regained compliance in April 2019 but could fall out of compliance again[200] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period - None[211] Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - None[212] Mine Safety Disclosures This item is not applicable to the company - Not applicable[213] Other Information No other information to report for the period - None[214] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, the new term loan agreement, and officer certifications - A list of exhibits filed with the report is provided, including certifications by the CEO and CFO, and the Term Loan Agreement with Silicon Valley Bank dated April 26, 2019[215][217]