CymaBay Therapeutics(CBAY) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the quarter Item 1. Financial Statements CymaBay Therapeutics reported a net loss of $28.8 million for Q1 2023, with cash and equivalents significantly increasing to $236.4 million due to a public offering and collaboration payment Organization and Liquidity CymaBay, a clinical-stage biopharmaceutical company, focuses on seladelpar for PBC, with an accumulated deficit of $901.6 million and sufficient cash to fund operations through Q3 2024 - The company's lead clinical development candidate is seladelpar, primarily for the treatment of primary biliary cholangitis (PBC)[104] - As of March 31, 2023, the company had an accumulated deficit of $901.6 million and believes its cash, cash equivalents and marketable securities of approximately $236.4 million are sufficient to fund its operating plan through the third quarter of 2024[52][105] Collaboration and License Agreement In January 2023, CymaBay licensed seladelpar for PBC in Japan to Kaken Pharmaceutical, receiving a $34.2 million upfront payment and potential future milestones - Entered into a collaboration and license agreement with Kaken Pharmaceutical in January 2023, granting Kaken exclusive rights to develop and commercialize seladelpar for PBC in Japan[152] - Received an upfront payment of ¥4.5 billion (approx. $34.2 million) and is eligible for up to ¥17.0 billion (approx. $128.0 million) in regulatory and sales milestones[153] - No revenue was recognized in Q1 2023 as performance obligations, including the transfer of technology and know-how, were not completed, with the upfront payment recorded as deferred revenue[5][156] Development Financing Agreement The company secured $75.0 million from Abingworth for seladelpar development, with repayment obligations up to 3.1x the funding, recorded as a $94.6 million liability - The agreement with Abingworth provided $75.0 million in funding for seladelpar development[126] - Repayment obligations include fixed success payments of 2.0x funding upon regulatory approval and variable success payments of 1.1x funding upon reaching sales milestones[39][126] - As of March 31, 2023, the development financing liability was $94.6 million, with an imputed interest rate of approximately 19.2%[72][151] Stockholders' Equity In January 2023, the company raised $92.4 million net from a public offering and established a $100.0 million ATM facility in March, with no sales to date - In January 2023, the company raised net proceeds of $92.4 million from a public offering of 11.8 million shares of common stock and pre-funded warrants to purchase 2.1 million shares[56][157] - In March 2023, the company established an at-the-market (ATM) facility to sell up to $100.0 million of common stock, but no shares have been sold under it yet[6][161] Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Research and development | $18,551 | $18,415 | | General and administrative | $8,324 | $6,087 | | Total operating expenses | $26,875 | $24,502 | | Loss from operations | ($26,875) | ($24,502) | | Net loss | ($28,778) | ($27,769) | | Basic and diluted net loss per common share | ($0.29) | ($0.32) | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $59,150 | $20,291 | | Marketable securities | $177,215 | $115,194 | | Total Assets | $245,319 | $141,852 | | Development financing liability | $94,630 | $90,227 | | Deferred collaboration revenue | $33,733 | $0 | | Total Liabilities | $141,130 | $105,698 | | Accumulated deficit | ($901,635) | ($872,857) | | Total stockholders' equity | $104,189 | $36,154 | - The company believes its cash, cash equivalents, and marketable securities of $236.4 million as of March 31, 2023, are sufficient to fund its current operating plan for at least twelve months from the financial statement issuance date[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses seladelpar's clinical development, including RESPONSE Phase 3 trial completion, and analyzes Q1 2023 financial results, highlighting increased liquidity and operating expenses Overview The company focuses on seladelpar for PBC, with RESPONSE Phase 3 trial enrollment completed and top-line data expected in Q3 2023, supported by the ongoing ASSURE long-term study - Enrollment of 193 patients in the RESPONSE Phase 3 registration study for seladelpar in PBC was completed in July 2022[177] - Top-line data for the RESPONSE study is expected to be released in the third quarter of 2023[177] - The ASSURE trial, an open-label, long-term study, currently has over 200 patients enrolled and is expected to enroll over 300 patients to support registration[178] Results of Operations Q1 2023 total operating expenses increased by $2.4 million to $26.9 million, driven by higher G&A costs from increased headcount, while R&D expenses remained relatively flat Operating Expenses Comparison | Expense Category | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Research and development | $18,551 | $18,415 | $136 | | General and administrative | $8,324 | $6,087 | $2,237 | | Total operating expenses | $26,875 | $24,502 | $2,373 | - Total project costs for R&D decreased by $2.3 million, mainly due to the completion of enrollment for the RESPONSE trial and lower drug manufacturing spending for PBC[1] - Internal R&D costs increased by $2.4 million, and G&A expenses increased by $2.2 million, both primarily due to higher employee compensation and increased headcount[1][54] Liquidity and Capital Resources As of March 31, 2023, the company held $236.4 million in cash and equivalents, significantly boosted by a public offering and Kaken collaboration, improving operating cash flow - Cash, cash equivalents, and marketable securities totaled $236.4 million at March 31, 2023, compared to $135.5 million at December 31, 2022[3] Net Cash Flow Activity | Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $6,431 | ($25,362) | | Net cash (used in) investing activities | ($60,642) | ($50,990) | | Net cash provided by financing activities | $93,070 | $24,541 | - Net cash from financing activities of $93.0 million in Q1 2023 primarily consisted of $92.4 million in net proceeds from the January 2023 public equity offering[8] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company qualifies as a Smaller Reporting Company - This item is not applicable to Smaller Reporting Companies[13] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2023, the President and CEO and the Vice President, Finance concluded that the company's disclosure controls and procedures were effective[14] - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2023[53] PART II OTHER INFORMATION This section covers legal proceedings, comprehensive risk factors, and a list of exhibits filed with the quarterly report Item 1. Legal Proceedings The company settled a trade secret misappropriation lawsuit filed by Genfit S.A. in February 2023, resulting in dismissal with prejudice and no admission of liability - A complaint filed by Genfit S.A. in January 2021 alleging misappropriation of trade secrets was settled on February 21, 2023[23][166] - The action was dismissed with prejudice, the company did not admit to any liability, and the litigation has been completely resolved[23][166] Item 1A. Risk Factors The company faces significant risks including financial condition, clinical development, reliance on third parties, commercialization challenges, and intellectual property protection Risks Related to Our Financial Condition and Capital Requirements The company faces ongoing net losses, requires additional capital, and risks accelerated payments under the Abingworth agreement, with uncertain future revenue generation - The company has incurred significant net losses since inception and expects to continue incurring them for the foreseeable future[32][35] - Failure to comply with the Abingworth Development Financing Agreement could lead to accelerated payments, with termination penalties ranging from 100% to 310% of the funds provided[39][40][41] - Raising additional capital may cause dilution to existing stockholders, restrict operations, or require relinquishing rights to technologies or product candidates[32][215][341] Risks Related to Clinical Development and Regulatory Approval Drug development is costly and uncertain, with risks of trial delays, negative results, and regulatory approval failures, exacerbated by geopolitical events affecting trials - Drug development and obtaining regulatory approval is a costly, time-consuming, and highly uncertain process[25] - Clinical trials could be delayed or prevented by numerous factors, including regulatory holds, insufficient enrollment, negative results, or undesirable side effects[217][219] - Due to geo-political turmoil, the company has suspended clinical trial activity in Ukraine and is winding down activities in Russia, potentially complicating data analysis[225] Risks Related to Our Reliance on Third Parties The company relies heavily on third-party manufacturers and contract service providers, posing risks to quality control, supply chain, regulatory compliance, and trial execution - The company relies on third-party manufacturers for all drug supplies and is dependent on them for compliance with FDA manufacturing requirements[256][260] - Reliance on limited or single sources for key materials could lead to significant disruptions, potentially delaying clinical trials and commercialization[274][275] - The company relies on Contract Service Providers (CSPs) for conducting clinical trials, and their failure to perform can harm development programs[263][276] Risks Related to Commercialization of Our Product Candidates The company lacks commercialization experience, faces market acceptance challenges, intense competition, and uncertainty in obtaining adequate third-party reimbursement for its products - The company has never successfully commercialized a product and may be unable to gain sufficient market acceptance if its candidates are approved[28] - The company currently lacks sales, marketing, and distribution capabilities and may be unable to establish them or enter into effective third-party agreements[279] - Commercial success is subject to significant competition from companies with greater financial, manufacturing, and marketing resources[28][267] Risks Related to Our Intellectual Property Protecting intellectual property is uncertain, with risks of patent invalidation, infringement claims, and potential loss of key licenses, such as for seladelpar from Janssen NV - The company relies on patents, trade secrets, and confidentiality agreements, but cannot guarantee that its patent applications will issue or provide adequate protection[284] - The company faces risks of infringement claims from third parties, which could block product commercialization or result in substantial damages and litigation costs[285][316] - The company licenses key intellectual property for seladelpar from Janssen NV, and termination of this license would materially adversely affect the business[317] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, key agreements, and required certifications List of Exhibits | Exhibit No. | Description | | :--- | :--- | | 3.1, 3.2, 3.3 | Certificate of Incorporation and By-Laws | | 10.1 | Transition Agreement with Dennis Kim | | 10.2 | Collaboration and License Agreement with Kaken Pharmaceutical Co., Ltd. | | 31.1, 31.2 | CEO and CFO Certifications (Rule 13a-14(a)) | | 32.1 | CEO and CFO Certifications (Sarbanes-Oxley Act of 2002) | | 101, 104 | Inline XBRL Documents |