CymaBay Therapeutics(CBAY) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements CymaBay Therapeutics, Inc.'s unaudited condensed consolidated financial statements and notes are presented for periods ended June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Cash and cash equivalents | $35,482 | $20,291 | | Marketable securities | $178,362 | $115,194 | | Total current assets | $224,071 | $138,073 | | Total assets | $226,650 | $141,852 | | Total current liabilities | $17,894 | $15,441 | | Development financing liability | $99,248 | $90,227 | | Total liabilities | $118,242 | $105,698 | Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Collaboration revenue | $31,016 | $0 | $31,016 | $0 | | Research and development expenses | $19,537 | $17,891 | $38,088 | $36,306 | | General and administrative expenses | $11,578 | $5,878 | $19,902 | $11,965 | | Total operating expenses | $31,115 | $23,769 | $57,990 | $48,271 | | Loss from operations | $(99) | $(23,769) | $(26,974) | $(48,271) | | Net loss | $(808) | $(27,094) | $(29,586) | $(54,863) | | Basic and diluted net loss per common share | $(0.01) | $(0.31) | $(0.30) | $(0.62) | Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(19,006) | $(47,802) | | Net cash used in investing activities | $(59,923) | $(49,792) | | Net cash provided by financing activities | $94,120 | $24,541 | | Net increase (decrease) in cash and cash equivalents | $15,191 | $(73,053) | | Cash and cash equivalents at end of period | $35,482 | $52,753 | Condensed Consolidated Statements of Stockholders' Equity | Metric | Balances as of Dec 31, 2022 (in thousands) | Balances as of June 30, 2023 (in thousands) | | :----- | :----------------------------------------- | :------------------------------------------ | | Common Shares | 84,681,063 | 97,804,712 | | Stock Amount | $8 | $17 | | Additional Paid-in Capital | $909,329 | $1,010,958 | | Accumulated Comprehensive Other Loss | $(326) | $(124) | | Accumulated Deficit | $(872,857) | $(902,443) | | Total Stockholders' Equity | $36,154 | $108,408 | Notes to Condensed Consolidated Financial Statements Note 1. Organization and Description of Business - CymaBay is a clinical-stage biopharmaceutical company focused on developing innovative therapies for patients with liver and other chronic diseases, with seladelpar for primary biliary cholangitis (PBC) as its key clinical development candidate[24] - The company has incurred net operating losses and negative cash flows from operations since its inception, with an accumulated deficit of $902.4 million as of June 30, 2023[25] - As of June 30, 2023, the company had cash, cash equivalents, and marketable securities totaling $213.8 million, which is believed to be sufficient to fund its current operating plan for at least twelve months[27] Note 2. Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates - The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management to make informed estimates and assumptions[29][31] Revenue Recognition - The company applies a five-step model to recognize revenue from contracts with customers, including collaboration agreements, when control of promised goods or services is transferred[32] - Upfront license fees are recognized as revenue when the license is effective and the underlying intellectual property is made available to the collaborator[44] - Sales-based milestone and royalty payments are recognized upon the later of achievement of underlying sales or satisfaction of related performance obligations[45] Fair Value of Financial Instruments - Fair value is defined as an exit price in an orderly transaction, and assets/liabilities are reported using a three-level fair value hierarchy[39] - Cash equivalents are classified as Level 1, and marketable securities (money market funds, corporate debt, commercial paper, U.S. treasury, U.S. agency, supranational debt) are primarily Level 2[47][48] - The development financing liability is classified as Level 3, with its valuation based on a discounted cash flow model using unobservable inputs[48] Cash, Cash Equivalents, and Marketable Securities - Cash equivalents include highly liquid investments with an original maturity of 90 days or less[49] - Marketable securities are classified as 'available-for-sale' and consist of corporate debt, commercial paper, U.S. agency, U.S. treasury, and supranational debt securities[50] - Unrealized holding gains and losses on available-for-sale marketable securities are reported in accumulated other comprehensive loss[51] | Category | Amortized Cost (June 30, 2023, in thousands) | Fair Value (June 30, 2023, in thousands) | | :------- | :------------------------------------------- | :--------------------------------------- | | Money market funds | $28,261 | $28,261 | | Current marketable securities | $178,486 | $178,362 | | Total marketable securities | $206,747 | $206,623 | Concentration of Risk - The company is exposed to credit risk from financial institutions holding its cash, cash equivalents, and investments, and from issuers of investments[57] - Reliance on single suppliers for certain materials and key components poses a risk of significant delays if supply is interrupted, as new supplier qualification is time-consuming[58] Research and Development Expenses - Research and development expenses, including costs for personnel, CROs, clinical trials, manufacturing, and non-clinical studies, are expensed as incurred[59] - Expenses related to clinical studies and manufacturing development activities are recorded based on estimates of services received, with adjustments made if actual timing or effort varies[60] Development Financing Agreement (Accounting Policy) - The Development Financing Agreement is accounted for as a debt instrument, with payments received recorded as a development financing liability at amortized cost[61] - The liability is accreted to contractual success fee amounts based on estimated timing of regulatory approval and sales milestones, using an imputed interest rate[61][63] - Contingent repayment features are identified as embedded derivative liabilities and assessed for materiality at each reporting date[64] Stock-Based Compensation (Accounting Policy) - Stock-based compensation is measured at fair value on the grant date and recognized as expense on a straight-line basis over the vesting period[65] - The Black-Scholes option pricing model is used to determine the fair value of stock option awards, requiring subjective assumptions[65] Recently Issued Accounting Pronouncements (ASU 2016-13) - The company adopted ASU No. 2016-13, which modifies credit loss measurement, on January 1, 2023, with no material impact on its condensed consolidated financial statements[66] Note 3. Other Accrued Liabilities | Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------- | :--------------------------- | :------------------------------- | | Accrued compensation | $3,549 | $5,779 | | Accrued professional fees and other | $2,912 | $1,372 | | Current portion of operating lease liability | $374 | $664 | | Total other accrued liabilities | $6,835 | $7,815 | Note 4. Collaboration and License Agreement - On January 6, 2023, CymaBay entered into an exclusive Collaboration and License Agreement with Kaken Pharmaceuticals Co., Ltd. for seladelpar in Japan[68] - Kaken made an upfront cash payment of ¥4.5 billion (approximately $34.2 million) in January 2023 and is obligated to pay potential milestone payments totaling up to ¥17.0 billion (approximately $128.0 million)[73] - $31.0 million of the upfront fee was recognized as collaboration revenue upon completion of the initial technology transfer; the remaining $2.7 million is deferred for ongoing clinical data delivery and CMC development[83] Note 5. Development Financing Agreement - On July 30, 2021, the company entered into a Development Financing Agreement with Abingworth LLP, providing $75.0 million in base funding to support seladelpar development for PBC[84] - The agreement includes fixed success payments (2.0x funding) upon regulatory approval and variable success payments (1.1x funding) upon sales milestones, with total payment obligations capped at 3.1x the funding provided[78][84] - As of June 30, 2023, the development financing liability was classified as a long-term liability, with an imputed interest rate of approximately 19.2%[82] Note 6. Stockholders' Equity - The company is authorized to issue 10,000,000 shares of preferred stock and 200,000,000 shares of common stock[91] - In January 2023, the company issued 11,821,428 shares of common stock and a pre-funded warrant for 2,142,857 shares, generating aggregate net proceeds of $92.4 million[92] - As of June 30, 2023, pre-funded warrants to purchase 4,642,857 shares of common stock were outstanding[95] - In March 2023, the company established an At-the-Market (ATM) facility to sell up to $100.0 million of common stock, with no shares sold to date[96] Note 7. Net Loss Per Common Share | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss per share | $(0.01) | $(0.31) | $(0.30) | $(0.62) | | Weighted average common shares outstanding | 97,507,533 | 84,677,939 | 95,614,901 | 84,677,939 | | Pre-funded warrants outstanding | 4,642,857 | 3,125,000 | 4,457,380 | 3,125,000 | - Outstanding stock options were excluded from the calculation of net loss per share in all periods presented because their effect would be antidilutive[99] Note 8. Stock Plans and Stock-Based Compensation - In June 2023, stockholders approved the 2023 Equity Incentive Plan, authorizing the issuance of up to 25,883,628 shares for various equity awards[100][104] - As of June 30, 2023, there were 9,053,849 common stock shares available for future grants under the 2023 Plan[105] | Category | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Research and development | $1,347 | $1,070 | $2,948 | $2,168 | | General and administrative | $2,003 | $1,322 | $3,889 | $2,638 | | Total stock-based compensation expense | $3,350 | $2,392 | $6,837 | $4,806 | Note 9. Subsequent Event - In July 2023, the Board approved an amendment to the 2020 New Hire Plan to increase the number of shares available for grant by 1,000,000 shares of common stock[107] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses CymaBay's financial condition, results of operations, and liquidity, focusing on seladelpar's progress and financial performance for the three and six months ended June 30, 2023 Overview - CymaBay Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing innovative therapies for liver and other chronic diseases, with seladelpar as its lead product candidate for primary biliary cholangitis (PBC)[110][111] - Enrollment for RESPONSE, a Phase 3 registration study for seladelpar in PBC, was completed in July 2022, with top-line data expected in the third quarter of 2023[112] - The ASSURE trial, an open-label, long-term safety and efficacy study for seladelpar, currently has over 300 patients enrolled[117] - MBX-2982, targeting GPR119 for type 1 diabetes, is in a fully enrolled Phase 2a proof-of-pharmacology study, with CymaBay retaining full commercial rights[118] Critical Accounting Policies and Estimates - There have been no changes to critical accounting policies since the Annual Report on Form 10-K for December 31, 2022, except for the revenue recognition policy related to the Kaken license agreement[121] Recent Accounting Pronouncements - Refer to Note 2—Summary of Significant Accounting Policies for a discussion of recent accounting pronouncements[122] Results of Operations - The company has not generated income from operations and had an accumulated deficit of $902.4 million as of June 30, 2023, primarily due to research and development, general and administrative, and net interest expenses[116] - Substantial operating losses are expected to continue, requiring future financing through collaborations, equity offerings, or debt financings[116] Collaboration Revenue - The company recognized $31.0 million as collaboration revenue during the three and six months ended June 30, 2023, from the Kaken license agreement[126] - This revenue relates to the license transfer and delivery of underlying technology and know-how; the remaining $2.7 million of the upfront consideration was deferred[126] Research & Development Expenses | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | Change Q2 vs. 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | Change YTD vs. 2022 (in thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :--------------------------------- | | Total project costs | $10,615 | $11,733 | $(1,118) | $19,951 | $23,362 | $(3,411) | | Internal research and development costs | $8,922 | $6,158 | $2,764 | $18,137 | $12,944 | $5,193 | | Total research and development | $19,537 | $17,891 | $1,646 | $38,088 | $36,306 | $1,782 | - The increase in R&D expenses was primarily due to higher employee compensation and external contractor expenses to support clinical studies and potential regulatory submissions[130][131] - Total project costs decreased due to the completion of enrollment in the RESPONSE trial and lower spending in drug manufacturing and development for PBC[130][131] General and Administrative Expenses - General and administrative expenses increased by $5.7 million to $11.6 million for the three months and $7.9 million to $19.9 million for the six months ended June 30, 2023, compared to 2022[133][134] - This increase was driven by higher headcount in general and administrative personnel and increased professional services to support drug development activities and prepare for potential commercialization of seladelpar in PBC[133][134] Other Income (Expense), Net - Interest expense increased by $1.0 million (QoQ) and $2.0 million (YoY) primarily due to the accretion of the Abingworth Development Financing Arrangement liability[135] - Interest income increased significantly by $2.3 million (QoQ) and $4.2 million (YoY) due to higher prevailing interest rates and an increase in the marketable securities portfolio[135] - Other income increased by $1.3 million due to the recognition of refundable Employee Retention Tax Credits for 2020 and 2021[135] Liquidity and Capital Resources - At June 30, 2023, cash, cash equivalents, and marketable securities totaled $213.8 million, up from $135.5 million at December 31, 2022[136] - Net cash used in operating activities for the six months ended June 30, 2023, decreased by $28.8 million to $19.0 million, primarily due to the recognition of $31.0 million in collaboration revenue[145] Development Financing - The company received $75.0 million in funding from Abingworth LLP under the Development Financing Agreement to support seladelpar development for PBC, with tranches received in August 2021, November 2021, and January 2022[137] Collaboration and License Agreement - The January 2023 license agreement with Kaken includes a $34.2 million upfront payment and potential future milestone payments up to ¥17.0 billion[138] - CymaBay is responsible for manufacturing and supplying seladelpar to Kaken and delivering clinical trial data, nonclinical studies data, and CMC data[138] Sale of Common Stock and Pre-funded Warrant - The January 2023 public equity offering generated $92.4 million in net proceeds from the sale of common stock and pre-funded warrants[143] - Proceeds are anticipated to fund ongoing development of seladelpar, working capital, and general corporate purposes[143] At-the-Market (ATM) Facility - In March 2023, the company filed for an At-the-Market (ATM) facility to sell up to $100.0 million of common stock, with no shares sold to date[144] Cash Flows | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(19,006) | $(47,802) | | Net cash used in investing activities | $(59,923) | $(49,792) | | Net cash provided by financing activities | $94,120 | $24,541 | | Net increase (decrease) in cash and cash equivalents | $15,191 | $(73,053) | - Net cash used in operating activities decreased by $28.8 million due to lower net loss from collaboration revenue, partially offset by increased operating expenses[145] - Net cash provided by financing activities was $94.1 million, primarily from the January 2023 public equity offering[146] Capital Requirements - The company expects increased research and development and overall operating expenses due to late-stage product development and commercialization planning for seladelpar[147] - Additional financing will be required through equity, debt, or collaborative arrangements to fund operations and obligations under the Abingworth Financing Agreement[147] - As of June 30, 2023, cash, cash equivalents, and marketable securities of approximately $213.8 million are believed to be sufficient to fund the current operating plan through the third quarter of 2024[151] Item 3. Quantitative and Qualitative Disclosures About Market Risk - This item is not applicable to Smaller Reporting Companies[148] Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures - Management, including the President and CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023[149] Limitations on the Effectiveness of Controls - Control systems provide only reasonable, not absolute, assurance that objectives are met, and inherent limitations mean not all control issues may be detected[152] Changes in Internal Controls - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2023[153] PART II. OTHER INFORMATION Item 1. Legal Proceedings CymaBay is not currently involved in legal proceedings expected to materially affect its financial condition, operations, or cash flows - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its results of operations, financial condition, or cash flows[154] Item 1A. Risk Factors This section outlines significant risks to CymaBay's business, covering financial condition, clinical development, third-party reliance, commercialization, intellectual property, COVID-19, and operational factors RISK FACTOR SUMMARY - The summary highlights significant risks related to financial condition, capital requirements, clinical development, regulatory approval, reliance on third parties, commercialization, intellectual property, COVID-19, employees, information technology, and common stock ownership[157][158][160][161][162][163][164][165] Risks Related to Our Financial Condition and Capital Requirements - The company has incurred significant net losses since inception and anticipates continued losses, requiring additional equity and/or debt capital to fund operations and product development[158][167] - Failure to comply with obligations under the Development Financing Agreement with Abingworth could lead to acceleration of potentially significant payments, such as 310% of funding for a Fundamental Breach[158][172][173] - The ability to generate future revenues from product sales is uncertain and depends on successfully developing, obtaining regulatory approval for, and commercializing product candidates[158][180] - Raising additional capital may cause dilution to existing stockholders, restrict operations, or require relinquishing rights to technologies or product candidates[158][182][184][185] - Adverse developments in the financial services industry, such as the Silicon Valley Bank closure, could adversely affect the company's ability to access funds[187] Risks Related to Clinical Development and Regulatory Approval - Drug development and obtaining regulatory approval are costly, time-consuming, and highly uncertain processes[160][174] - Clinical testing is expensive, difficult, and uncertain; negative or inconclusive results could require additional studies or abandonment of product development programs[190][193] - Unforeseen events during clinical trials, such as enrollment issues, protocol amendments, or safety concerns, could delay or prevent their commencement and/or completion[191] - Geopolitical turmoil between Russia and Ukraine has led to the suspension or wind-down of clinical trial activity in those regions, potentially complicating data analysis[194] - Product candidates may cause adverse effects or have other properties that could delay or prevent regulatory approval or limit the scope of any approved label or market acceptance[198][199] - Relationships with health care professionals, customers, and payors are subject to anti-kickback, fraud, and abuse laws, with potential for significant penalties for non-compliance[205][278] - Current laws and future legislation, such as the PPACA and Inflation Reduction Act, may increase the difficulty and cost of obtaining marketing approval and affect product pricing[206][280] Risks Related to Our Reliance on Third Parties - The company relies on third-party manufacturers for preclinical, clinical, and commercial drug supplies, which entails risks such as manufacturing challenges, impurities, and delays[161][207][208] - Disruptions in the supply chain from limited sources of supply for product candidates could cause significant delays in development and commercialization[285] - Reliance on contract service providers (CSPs) to conduct, supervise, and monitor clinical studies means limited influence over their performance, and non-compliance could deem clinical data unreliable[255][256] Risks Related to Commercialization of Our Product Candidates - Commercial success depends on market acceptance by the medical community, including physicians, patients, and health care payors, which is uncertain[162][259] - The company lacks internal sales and marketing capabilities and must build them or enter into agreements with third parties, which is expensive and risky[162][261][263] - Significant competition from companies with greater financial, manufacturing, marketing, and drug development resources could negatively impact commercial opportunities[162][209][267] - Commercialization outside the United States introduces additional risks, including differing regulatory requirements, reduced intellectual property protection, economic instability, and foreign currency fluctuations[265] - Product liability lawsuits are an inherent risk, potentially leading to substantial liabilities, decreased demand, impairment to business reputation, and inability to commercialize products[300][301] - Limited resources may be expended on a particular product candidate or indication, potentially foregoing more profitable opportunities or those with a greater likelihood of success[302][303] Risks Related to Our Intellectual Property - The company relies on patents, trade secret protection, and confidentiality agreements, but these may be insufficient to protect its intellectual property[163][212][226] - Patent applications may fail to result in issued patents, or issued patents may be challenged, narrowed, or infringed by third parties, potentially leading to costly litigation[212][214][217][220] - Laws in some foreign countries may not protect patents and other proprietary rights to the same extent or in the same manner as the laws of the United States[215] - The loss of key license rights, such as the exclusive license from Janssen Pharmaceutica NV for seladelpar, could have a materially adverse effect on the business[219][230] Risks Related to COVID-19 - The COVID-19 situation may adversely affect the business, including the ability to enroll and conduct critical clinical trials, and impact other development efforts and third-party service providers[114][119][164] Other Risks Factors – Risks Related to Employees, Information Technology, and Owning Our Common Stock - The company's future success depends on its ability to retain key executives and to attract, retain, and motivate qualified personnel, facing intense competition for skilled employees[165][237] - Expanding the organization to build clinical and drug development operations may lead to difficulties in managing growth, potentially disrupting operations[239] - Significant disruptions of information technology systems or breaches of data security could materially adversely affect the business, results of operations, and financial condition[165][241][242] - Changes in and failures to comply with United States and foreign privacy and data protection laws (e.g., HIPAA, GDPR) may adversely affect business, operations, and financial performance due to complexity and high compliance costs[165][243][244] - The company's stock price is volatile, and future sales and issuances of common stock or rights to purchase common stock could result in additional dilution of existing stockholders' ownership[165][249][251] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition of the company more difficult and may prevent attempts by stockholders to replace or remove current management[287] - The company does not anticipate paying cash dividends, requiring stockholders to rely on stock appreciation for any return on their investment[290] - The company may be subject to securities litigation due to stock price volatility, which is expensive and could divert management attention[291] Item 6. Exhibits This section lists all exhibits filed as part of the 10-Q report, including corporate governance, equity plans, and executive certifications - Exhibits include the Amended and Restated Certificate of Incorporation, By-Laws, an Offer Letter, the 2023 Equity Incentive Plan, and certifications from the President and CEO and Chief Financial Officer[292] Signatures This section contains the official signatures of CymaBay's President and CEO, Sujal Shah, and CFO, Harish Shantharam, certifying the report on August 10, 2023 - The report is signed by Sujal Shah, President and Chief Executive Officer, and Harish Shantharam, Chief Financial Officer, on August 10, 2023[297]