Cidara Therapeutics(CDTX) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for June 30, 2022, reveal decreased assets, a significant net loss, and substantial doubt about the company's going concern status Condensed Consolidated Balance Sheets The balance sheets as of June 30, 2022, show a significant decrease in total assets and cash, resulting in a stockholders' deficit from prior equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $24,637 | $59,680 | | Total current assets | $36,546 | $71,698 | | Total assets | $39,524 | $75,325 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $31,455 | $34,017 | | Total liabilities | $47,485 | $53,752 | | Accumulated deficit | ($408,567) | ($377,167) | | Total stockholders' equity (deficit) | ($7,961) | $21,573 | | Total liabilities and stockholders' equity | $39,524 | $75,325 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Statements of operations for Q2 and H1 2022 show significant decreases in collaboration revenue and increased net losses, primarily due to a prior-year upfront payment Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $6,216 | $32,863 | $13,325 | $35,271 | | Research and development | $15,255 | $17,720 | $35,421 | $33,569 | | General and administrative | $4,074 | $4,370 | $9,278 | $9,151 | | Net income (loss) | ($13,119) | $10,711 | ($31,400) | ($7,581) | | Diluted net earnings (loss) per share | ($0.19) | $0.18 | ($0.46) | ($0.16) | Condensed Consolidated Statements of Cash Flows Cash flow statements for H1 2022 indicate a significant shift to net cash used in operating activities, leading to a substantial overall decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($35,444) | $1,647 | | Net cash used in investing activities | ($100) | ($29) | | Net cash (used in) provided by financing activities | ($1,722) | $8,532 | | Net (decrease) increase in cash | ($37,266) | $10,150 | | Cash at beginning of period | $62,273 | $42,949 | | Cash at end of period | $25,007 | $53,099 | Notes to Condensed Consolidated Financial Statements (unaudited) Notes to financial statements detail business operations, accounting policies, and significant agreements, highlighting substantial doubt about going concern status and reliance on collaboration revenue - The company is a biotechnology firm focused on long-acting therapeutics for infectious diseases and oncology, with lead candidates rezafungin and CD388[20] - Management has substantial doubt about the company's ability to continue as a going concern for one year, as cash of $25.0 million at June 30, 2022, is insufficient to fund planned operations. The company's survival depends on raising additional capital[21] - Revenue recognition is complex, involving the allocation of transaction prices from collaboration agreements (Mundipharma, Janssen) to distinct performance obligations like licenses, R&D services, and clinical supply. License revenue is recognized upfront, while service revenue is recognized over time[33][35] - Subsequent to the quarter end, on July 26, 2022, the company entered into a license agreement with Melinta Therapeutics for the U.S. commercialization of rezafungin, with a potential value of $460.0 million, including a a $30.0 million upfront payment[87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic focus, recent developments, and financial performance, highlighting decreased revenue, increased net loss, and significant liquidity concerns Overview and Recent Developments This section provides an overview of Cidara's biotechnology focus, recent NDA submission for rezafungin, and a new licensing agreement with Melinta Therapeutics - On July 22, 2022, the company submitted a New Drug Application (NDA) to the FDA for rezafungin for the treatment of candidemia and invasive candidiasis[93] - On July 26, 2022, Cidara granted Melinta Therapeutics an exclusive license to commercialize rezafungin in the U.S. The deal includes a $30.0 million upfront payment and up to $430.0 million in milestones, plus royalties[94] - The lead Cloudbreak candidate, CD388 for influenza, is in a Phase 1 trial initiated in March 2022, fully funded by Janssen[97] Results of Operations Financial results for H1 2022 show a sharp decline in collaboration revenue and an increased net loss, primarily due to a prior-year one-time payment Comparison of Results for the Three Months Ended June 30 (in thousands) | Account | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $6,216 | $32,863 | ($26,647) | | Research and development expense | $15,255 | $17,720 | ($2,465) | | General and administrative expense | $4,074 | $4,370 | ($296) | Comparison of Results for the Six Months Ended June 30 (in thousands) | Account | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $13,325 | $35,271 | ($21,946) | | Research and development expense | $35,421 | $33,569 | $1,852 | | General and administrative expense | $9,278 | $9,151 | $127 | - The significant decrease in collaboration revenue in Q2 and H1 2022 compared to 2021 is primarily because the 2021 periods included $27.0 million of revenue recognized upon the transfer of an intellectual property license to Janssen[127][133] Liquidity and Capital Resources The company's liquidity is severely constrained, with existing cash insufficient for future operations, raising substantial doubt about its going concern status without additional funding - The company believes its existing cash and cash equivalents of $25.0 million (as of June 30, 2022) will not be sufficient to fund its obligations for the next twelve months, raising substantial doubt about its ability to continue as a going concern[107][144] - Primary sources of liquidity are cash on hand, partnerships with Mundipharma and Janssen, the new license to Melinta, and equity/debt financings. The company's ability to execute its business plan depends on securing additional funding[137] Summary of Cash Flows for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by Operating activities | ($35,444) | $1,647 | | Net cash used in Investing activities | ($100) | ($29) | | Net cash (used in) provided by Financing activities | ($1,722) | $8,532 | Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Cidara Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk - The company is not required to provide information for this item as it qualifies as a smaller reporting company[145] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2022, due to a material weakness in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2022[146] - A material weakness was identified in internal control over financial reporting. The review control over accounting for non-routine transactions, such as collaboration revenue, was not appropriately designed or operating effectively[149] - A remediation plan is being implemented, which involves adding additional layers of management review for the evaluation of accounting standards and valuation assumptions related to non-routine transactions[150] PART II. OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - The company reports that there are no legal proceedings[152] Risk Factors The company outlines numerous risks, including dependence on key product success, substantial doubt about going concern, internal control weaknesses, and challenges in clinical development and commercialization Risks Related to the COVID-19 Pandemic The COVID-19 pandemic has adversely impacted and could continue to affect operations, causing clinical trial delays, potential FDA review delays, and challenges in capital raising - The COVID-19 pandemic has caused and is expected to continue causing trial site activation and enrollment delays for the ReSPECT clinical trial[159] - The pandemic could adversely impact the FDA's review of the rezafungin NDA if personnel are redirected or unable to conduct manufacturing or clinical site inspections[159] Risks Related to Drug Discovery, Development and Commercialization The company's success is highly dependent on lead candidates, facing risks of clinical trial delays, failures to demonstrate efficacy, and challenges in regulatory approval and market acceptance - The company depends heavily on the success of rezafungin (Phase 3) and CD388 (Phase 1), and its ability to generate revenue depends on their successful development and commercialization[161] - The company is experiencing difficulties enrolling patients in the ReSPECT trial, which could delay or prevent completion of the rezafungin clinical development program and receipt of regulatory approvals[164] - The company faces substantial competition from major pharmaceutical companies with approved products and candidates in development for the same indications, which could render its products obsolete or non-competitive[180][183] Risks Related to Our Financial Position and Need for Additional Capital The company faces significant financial risks, including a history of operating losses, substantial doubt about its going concern status, and a critical need for additional capital that may cause dilution - The company has a history of significant operating losses and an accumulated deficit of $408.6 million as of June 30, 2022[205] - The company needs substantial additional funding to meet its development obligations under the Mundipharma, Janssen, and Melinta agreements, and its ability to do so depends on obtaining this funding[196] - Raising additional capital may cause significant dilution to existing stockholders, and failure to secure funds could force the company to delay, reduce, or eliminate its development programs[199][198] Risks Related to Our Dependence on Third Parties The company is highly dependent on collaboration partners for funding and development, and on third-party manufacturers for supply, posing significant risks if these relationships falter - The company is dependent on its collaboration partners (Mundipharma, Melinta, Janssen) for funding, development, and commercialization of rezafungin and CD388. The success of these collaborations is critical but not guaranteed[211][213] - The company has no manufacturing experience or facilities and relies completely on third-party manufacturers for its product candidates. Problems with these third parties could delay clinical development and marketing approval[219] - The company relies on third parties like CROs to conduct clinical trials. Failure of these parties to perform satisfactorily could delay or prevent marketing approvals[217] Risks Related to Ownership of our Common Stock Ownership of common stock involves significant risks, including high price volatility, a material weakness in internal controls, potential future dilution from capital raises, and anti-takeover provisions - The company's stock price is highly volatile and subject to wide fluctuations due to factors like clinical trial results, regulatory decisions, and market conditions[279] - A material weakness in internal control over financial reporting has been identified, which could impair the ability to produce accurate financial statements and cause a loss of public confidence[287] - Future sales of common stock to raise needed capital will result in additional dilution of ownership for current stockholders[291] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - The company reports that there were no unregistered sales of equity securities[304] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, and required officer certifications - Key exhibits filed include the Fifth Amendment to the Loan and Security Agreement with Pacific Western Bank, dated April 4, 2022, and a Letter Agreement with Mundipharma Medical Company, dated April 20, 2022[307]