Leap Therapeutics(LPTX) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the company's financial performance Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Leap Therapeutics, Inc., including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and financial position as of June 30, 2025 Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $18,130 | $47,249 | | Total current assets | $19,161 | $48,039 | | Total assets | $20,042 | $49,124 | | Total current liabilities | $14,325 | $14,076 | | Total stockholders' equity | $5,717 | $35,048 | - Cash and cash equivalents decreased significantly from $47.2 million at December 31, 2024, to $18.1 million at June 30, 2025[19] - Total stockholders' equity declined from $35.0 million to $5.7 million over the same period[19] Condensed Consolidated Statements of Operations This section details the company's operational performance, including revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $10,537 | $17,885 | $23,448 | $29,184 | | General and administrative | $1,817 | $3,367 | $4,823 | $6,893 | | Restructuring charges | $4,527 | $0 | $4,527 | $0 | | Total operating expenses | $16,881 | $21,252 | $32,798 | $36,077 | | Net loss | $(16,643) | $(20,128) | $(32,078) | $(33,948) | | Net loss per share (Basic and diluted) | $(0.40) | $(0.52) | $(0.78) | $(1.01) | - Research and development expenses decreased by $7.3 million (41%) for the three months ended June 30, 2025, compared to the same period in 2024, and by $5.7 million (20%) for the six months[22] - The company incurred $4.5 million in restructuring charges during the three and six months ended June 30, 2025, related to a workforce reduction[22] Condensed Consolidated Statements of Comprehensive Loss This section details the company's comprehensive loss, including net loss and other comprehensive income/loss items Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(16,643) | $(20,128) | $(32,078) | $(33,948) | | Foreign currency translation adjustments | $31 | $123 | $38 | $(103) | | Comprehensive loss | $(16,612) | $(20,005) | $(32,040) | $(34,051) | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balances at Dec 31, 2024 | Balances at June 30, 2025 | | :-------------------- | :----------------------- | :------------------------ | | Common Stock Shares | 38,329,894 | 41,439,529 | | Common Stock Amount | $38 | $41 | | Additional Paid-in Capital | $502,501 | $505,207 | | Accumulated Deficit | $(467,371) | $(499,449) | | Total Stockholders' Equity | $35,048 | $5,717 | - Total stockholders' equity decreased from $35.0 million at December 31, 2024, to $5.7 million at June 30, 2025, primarily due to a net loss of $32.1 million[32] - Common stock shares outstanding increased from 38,329,894 to 41,439,529, mainly due to the exercise of prefunded warrants and vesting of restricted stock units[32] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(28,966) | $(29,187) | | Net cash provided by (used in) financing activities | $(180) | $37,146 | | Net increase (decrease) in cash and cash equivalents | $(29,119) | $7,836 | | Cash and cash equivalents at end of period | $18,130 | $78,479 | - Net cash used in operating activities remained consistent year-over-year, at approximately $29 million for both periods[35] - Financing activities shifted from providing $37.1 million in 2024 (due to a private placement) to using $0.18 million in 2025[35] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Nature of Business, Basis of Presentation and Liquidity This note describes the company's business, basis of financial statement presentation, and assessment of its liquidity and going concern status - Leap Therapeutics, Inc. is a biopharmaceutical company focused on developing novel biomarker-targeted antibody therapies for cancer, with lead clinical program sirexatamab (DKN-01) and preclinical program FL-501[43][111][112] - As of June 30, 2025, the company had cash and cash equivalents of $18.1 million and an accumulated deficit of $499.4 million, leading to substantial doubt about its ability to continue as a going concern for at least the next 12 months[47][149] - The company is exploring strategic alternatives, including mergers, asset sales, license agreements, or additional financing, to preserve and maximize shareholder value. Failure to complete a transaction could lead to business discontinuation and liquidation[48][150] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting policies and estimates used in preparing the financial statements - The company recognizes Australian research and development incentives as other income, with a refundable tax offset of 43.5% of eligible R&D expenses[51][53] Research and Development Incentive Receivable (in thousands) | Date | Amount | | :-------------------- | :----- | | Balance at January 1, 2024 | $771 | | Balance at December 31, 2024 | $704 | | Balance at June 30, 2025 | $798 | - The company recorded $4.5 million in restructuring charges during Q2 2025 due to a 75% workforce reduction, primarily for severance and stock-based compensation[58][134] - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and its effects on income taxes will be recognized in Q3 2025[70] Note 3. Accrued Expenses This note details the composition of accrued expenses, including clinical trials, professional fees, and payroll Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Clinical trials | $2,600 | $4,798 | | Professional fees | $369 | $274 | | Payroll and related expenses | $114 | $3,464 | | Severance | $3,540 | $0 | | Total accrued expenses | $6,623 | $8,536 | - Accrued severance increased significantly to $3.54 million as of June 30, 2025, reflecting the recent workforce reduction[75] Note 4. Leases This note provides information on the company's operating lease arrangements and related expenses - The company has an operating lease for real estate, with a right-of-use asset of $38 thousand and a lease liability of $39 thousand as of June 30, 2025[78] - Rent expense for the six months ended June 30, 2025, was $235 thousand, slightly up from $225 thousand in the prior year[78] Note 5. Warrants This note describes the company's outstanding warrants, their terms, and exercise activity Outstanding Warrants as of June 30, 2025 | Description | Number of Common Shares Issuable | Exercise Price | Expiration Date | | :---------------------- | :------------------------------- | :------------- | :---------------- | | January 23 2017 Warrants | 5,450 | $0.10 | Upon M&A Event | | 2019 Warrants | 690,813 | $19.50 | February 2026 | | March 2020 Coverage Warrants | 2,594,503 | $21.10 | Jan - March 2027 | | Total | 3,290,766 | | | - During the six months ended June 30, 2025, a total of 2,939,765 pre-funded warrants (March 2020, September 2021, April 2024) were cashless exercised, resulting in the issuance of 2,921,041 common shares[82][83][84] Note 6. Common Stock This note provides details on the company's common stock, including shares outstanding and recent equity issuances - As of June 30, 2025, 41,439,529 shares of common stock were outstanding. No dividends have been declared for common stock through this period[4][87] - In April 2024, the company completed a private placement, issuing 12,660,993 common shares and 1,523,404 prefunded warrants, generating $37.05 million in net proceeds[88] Note 7. Equity Incentive Plans This note outlines the company's equity incentive plans, stock option activity, and stock-based compensation expense - As of June 30, 2025, there were 3,922,812 shares available for grant under the company's equity incentive plans[91] Stock Option Activity | Metric | Outstanding at Dec 31, 2024 | Outstanding at June 30, 2025 | | :---------------------- | :-------------------------- | :--------------------------- | | Options | 6,416,744 | 5,031,973 | | Weighted Average Exercise Price | $8.43 | $8.68 | Stock Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---------------------- | :------------------------------- | :----------------------------- | | Research and development | $387 | $1,021 | | General and administrative | $476 | $1,046 | | Restructuring charges | $626 | $626 | | Total | $1,489 | $2,693 | Note 8. Net Loss Per Share This note details the calculation of basic and diluted net loss per share attributable to common stockholders Net Loss Per Share Attributable to Common Stockholders (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(16,643) | $(20,362) | $(32,078) | $(34,182) | | Weighted average common shares outstanding | 41,444,979 | 39,122,662 | 41,357,423 | 33,830,083 | | Net loss per share (Basic and diluted) | $(0.40) | $(0.52) | $(0.78) | $(1.01) | - Potentially dilutive securities (RSUs, stock options, and warrants) were excluded from diluted EPS calculations due to their anti-dilutive effect, given the net loss[101] Note 9. Commitments and Contingencies This note discloses the company's contractual commitments, insurance agreements, and potential future obligations - The company has $12 thousand in noncancelable commitments under manufacturing agreements for DKN-01[102] - An insurance premium financing agreement was entered in March 2025 for $440 thousand at an 8.74% fixed annual interest rate, with an outstanding principal of $245 thousand as of June 30, 2025[103] - The company has license and collaboration agreements that may require future royalty and milestone payments upon product commercialization, but no such payments have been made or accrued through June 30, 2025[104][105] Note 10. Subsequent Events This note reports on significant events that occurred after the balance sheet date but before the financial statements were issued - On July 1, 2025, the company amended its 47 Thorndike Street Lease, extending it as a tenancy-at-will until at least August 31, 2025, and reducing the premises size, with annual fixed rent of $230 thousand ($19 thousand per month) from August 1, 2025[108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting recent developments, financial performance comparisons for the three and six months ended June 30, 2025 and 2024, and a discussion of liquidity and capital resources, including the ongoing going concern issue and strategic alternatives Company Overview This section discusses company overview - Leap Therapeutics is a biopharmaceutical company developing biomarker-targeted antibody therapies for cancer, with lead clinical program sirexatamab (DKN-01) and preclinical program FL-501[111][112] - The company has not yet generated product sales revenue and has funded operations primarily through common and preferred stock sales and notes payable[113] Recent Developments This section discusses recent developments - Updated clinical data from the DeFianCe study of sirexatamab showed statistically significant benefits in ORR and PFS for CRC patients with high DKK1 levels, no prior anti-VEGF therapy, or liver metastasis[115] - The Board of Directors initiated a process to explore strategic alternatives to maximize shareholder value, including potential sale or partnership opportunities for sirexatamab and FL-501[116] - The company implemented an additional workforce reduction of approximately 75% to reduce spending and preserve capital, incurring estimated costs of $4.5 million[116] Financial Overview This section discusses financial overview Research and Development Expenses by Program (in thousands) | Program | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | DKN-01 program | $9,999 | $17,806 | $22,786 | $28,989 | | FL-501 program | $538 | $45 | $662 | $103 | | Total R&D expenses | $10,537 | $17,885 | $23,448 | $29,184 | | Australian R&D incentives | $1 | $253 | $56 | $499 | - DKN-01 program expenses decreased by $7.8 million (44%) for the three months and $6.2 million (21%) for the six months ended June 30, 2025, compared to the prior year[120] - Australian R&D incentive income significantly decreased from $253 thousand to $1 thousand for the three months, and from $499 thousand to $56 thousand for the six months ended June 30, 2025[120] Critical Accounting Policies and Estimates This section discusses critical accounting policies and estimates - Key accounting policies involving significant judgment and complexity include accrued research and development expenses, research and development incentive receivable, and stock-based compensation[130] Results of Operations This section discusses results of operations Operating Expenses Comparison (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (Decrease) | | :-------------------- | :--------------------------- | :--------------------------- | :---------------- | | Research and development | $10,537 | $17,885 | $(7,348) | | General and administrative | $1,817 | $3,367 | $(1,150) | | Restructuring charges | $4,527 | $0 | $4,527 | | Total operating expenses | $16,881 | $21,252 | $(4,371) | - The decrease in R&D expenses for Q2 2025 was primarily due to a $3.9 million decrease in clinical trial costs, $1.7 million in payroll, $1.4 million in manufacturing, and $0.4 million in stock-based compensation[132] - General and administrative expenses decreased by $1.6 million in Q2 2025, mainly due to a $1.4 million decrease in payroll and incentive-based compensation[133] Six Months Operating Expenses Comparison (in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (Decrease) | | :-------------------- | :--------------------------- | :--------------------------- | :---------------- | | Research and development | $23,448 | $29,184 | $(5,736) | | General and administrative | $4,823 | $6,893 | $(2,070) | | Restructuring charges | $4,527 | $0 | $4,527 | | Total operating expenses | $32,798 | $36,077 | $(3,279) | - Interest income decreased from $0.9 million to $0.2 million for the three months and from $1.6 million to $0.7 million for the six months ended June 30, 2025, due to a lower average cash balance[135][144] Financial Position, Liquidity and Capital Resources This section discusses financial position, liquidity and capital resources - The company has not achieved profitable operations or positive cash flows from operations since inception and expects to continue generating operating losses[148][149] - As of June 30, 2025, cash and cash equivalents were $18.1 million, and an accumulated deficit of $499.4 million raises substantial doubt about the company's ability to continue as a going concern[149] - Net cash used in operating activities was $29.0 million for the six months ended June 30, 2025, consistent with $29.2 million in the prior year[151][152] - Net cash used in financing activities was $0.18 million for the six months ended June 30, 2025, a significant change from $37.1 million provided in the prior year due to the absence of a private placement[151][155] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reported period - The company has no applicable quantitative and qualitative disclosures about market risk[156] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting - As of June 30, 2025, management concluded that the company's disclosure controls and procedures were effective[158] - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[159] PART II — OTHER INFORMATION This section covers other required disclosures, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section states that the company is not currently a party to any material legal proceedings - The company is not currently involved in any material legal proceedings[161] Item 1A. Risk Factors This section highlights significant risks, particularly the substantial doubt about the company's ability to continue as a going concern due to the need for additional capital and uncertainties in securing funding or completing strategic transactions - Management concluded that substantial doubt exists about the company's ability to continue as a going concern due to the need for additional capital and uncertainties in raising such funding[163] - Failure to successfully complete a strategic transaction (merger, asset sale, license, or financing) could materially adversely affect the business and force discontinuation of operations[164] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities This section indicates that there were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities were reported[165] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - No defaults upon senior securities were reported[166] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures applicable to the company - No mine safety disclosures were reported[167] Item 5. Other Information This section reports on other information, specifically regarding Rule 10b5-1 trading plans - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[168] Item 6. Exhibits This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including lease amendments, certifications, and XBRL data - Exhibits include a Fifth Amendment to Lease, CEO/CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350), and XBRL formatted financial statements[171]