Aravive(ARAV) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Aravive, Inc.'s unaudited condensed consolidated financial statements for Q3 2021 detail its financial position, operations, and cash flows Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2021, shows an increase in total assets to $76.8 million, primarily driven by a rise in cash and cash equivalents from financing activities | Financial Metric | Sep 30, 2021 (unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $67,511 thousand | $60,541 thousand | | Total current assets | $71,523 thousand | $61,689 thousand | | Total assets | $76,793 thousand | $67,710 thousand | | Liabilities & Equity | | | | Total current liabilities | $14,194 thousand | $9,461 thousand | | Total liabilities | $22,457 thousand | $19,655 thousand | | Total stockholders' equity | $54,336 thousand | $48,055 thousand | Condensed Consolidated Statements of Operations For Q3 2021, Aravive reported new collaboration revenue of $2.4 million, while R&D expenses more than doubled to $11.3 million, resulting in an $11.1 million net loss | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $2,412 | $0 | $6,457 | $0 | | Research and development | $11,343 | $5,070 | $25,347 | $11,085 | | General and administrative | $2,643 | $2,715 | $8,102 | $9,866 | | Loss from operations | $(11,574) | $(10,699) | $(26,992) | $(26,735) | | Net loss | $(11,086) | $(10,660) | $(26,195) | $(26,497) | | Net loss per share | $(0.53) | $(0.66) | $(1.33) | $(1.69) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $54.3 million as of September 30, 2021, driven by capital raised from direct and at-the-market offerings - For the nine months ended September 30, 2021, total stockholders' equity increased from $48.1 million to $54.3 million, primarily due to proceeds from a direct offering ($20.9 million) and an at-the-market offering ($7.8 million), partially offset by the net loss for the period[16] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $23.8 million for the nine months ended September 30, 2021, largely offset by $30.8 million from financing activities | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(23,834) | $(16,393) | | Net cash provided by financing activities | $30,804 | $5,233 | | Net change in cash, cash equivalents, and restricted cash | $6,970 | $(11,160) | | Cash, cash equivalents, and restricted cash at end of period | $69,941 | $56,397 | Notes to Condensed Consolidated Financial Statements These notes detail Aravive's business, accounting policies, and financial items, highlighting its clinical-stage focus and going concern doubt - Aravive is a clinical-stage biopharmaceutical company developing batiraxcept, a decoy protein targeting the GAS6-AXL signaling pathway for treating cancer and fibrosis[23] - The company has a history of net losses and negative cash flows, with an accumulated deficit of $526.8 million as of September 30, 2021, raising substantial doubt about its ability to continue as a going concern[39] - In November 2020, the company entered a collaboration and license agreement with 3D Medicines, receiving $21 million in upfront and milestone payments to date, with revenue recognized over time for R&D services and at a point in time for the intellectual property license[29][94][101] - The company initiated a registrational Phase 3 trial of batiraxcept in platinum-resistant ovarian cancer (PROC) in Q1 2021, a Phase 1b/2 trial in clear cell renal cell carcinoma (ccRCC) in Q4 2020, and a trial in pancreatic adenocarcinoma in May 2021[30] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Aravive's financial condition, operations, and liquidity, emphasizing clinical program progress, R&D expenses, and financing needs Results of Operations This section provides a comparative analysis of operating results, highlighting $6.5 million in collaboration revenue and a 129% increase in R&D expenses for the nine months ended September 30, 2021 | Metric (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $6,457 | $0 | N/A | | Research and development | $25,347 | $11,085 | +129% | | General and administrative | $8,102 | $9,866 | -18% | | Net loss | $(26,195) | $(26,497) | -1% | - The increase in R&D expense was primarily due to clinical trial expenses for the Phase 3 trial of batiraxcept in PROC, along with Phase 1b trials in ccRCC and pancreatic adenocarcinoma[156] Liquidity and Capital Resources As of September 30, 2021, Aravive had $67.5 million in cash, which management believes is sufficient into H2 2022, despite substantial doubt about its going concern ability - The company had cash and cash equivalents of approximately $67.5 million as of September 30, 2021[160] - Management believes current cash will fund planned operations into the second half of 2022, but substantial doubt exists about the company's ability to continue as a going concern without additional financing[162][183] - Net cash used in operating activities increased to $23.8 million for the nine months ended Sep 30, 2021, from $16.4 million in the prior year, primarily due to the ramp-up of clinical trials[166] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is to interest rate fluctuations on its cash and cash equivalents, which is not considered significant due to their short-term nature - The company's main market risk is interest rate risk on its $67.5 million of cash and cash equivalents, which is considered not significant due to the short-term duration of the investments[169] Item 4. Controls and Procedures As of September 30, 2021, the company's disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[172] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[173] PART II. OTHER INFORMATION Item 1. Legal proceedings The company reports that it is not currently a party to any material legal proceedings - As of the filing date, Aravive is not subject to any material legal proceedings[176] Item 1A. Risk Factors This section updates Aravive's risk factors, emphasizing financial vulnerabilities, operational challenges, and capital needs - The company has a history of significant operating losses, an accumulated deficit of $526.8 million as of September 30, 2021, and expects to incur substantial losses, raising substantial doubt about its ability to continue as a going concern[178][179][183] - Aravive will require additional funds to support its operations and complete the development of batiraxcept, and such financing may not be available on acceptable terms, or at all[184] - The company's clinical trials for batiraxcept involve combination therapies with standard-of-care drugs, creating a dependency on the availability and safety of these third-party products[189][190] - As of September 30, 2021, executive officers, directors, and their controlled entities owned approximately 27.8% of the company's common stock, giving them significant influence over matters submitted to stockholders[196] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications by the CEO and CFO - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[198][199]