Cullinan Oncology(CGEM) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited consolidated financial statements for the quarter ended March 31, 2023, show a significant increase in net loss to $58.1 million, compared to $12.9 million in the prior-year period, primarily driven by higher R&D expenses Consolidated Balance Sheets As of March 31, 2023, the company's total assets were $515.0 million, a decrease from $561.1 million at December 31, 2022 Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $122,128 | $156,152 | | Total current assets | $399,031 | $474,472 | | Total assets | $514,990 | $561,117 | | Liabilities & Equity | | | | Total current liabilities | $26,171 | $22,498 | | Total liabilities | $29,341 | $26,088 | | Total stockholders' equity | $485,649 | $535,029 | | Accumulated deficit | $(105,657) | $(47,695) | Consolidated Statements of Operations and Comprehensive Income (Loss) For the three months ended March 31, 2023, the company reported a net loss of $58.1 million, a substantial increase from the net loss of $12.9 million in the same period of 2022 Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Research and development | $52,096 | $24,536 | | General and administrative | $10,660 | $8,121 | | Loss from operations | $(62,756) | $(32,657) | | Interest income | $4,508 | $197 | | Net loss | $(58,141) | $(12,892) | | Net loss per share (basic and diluted) | $(1.42) | $(0.27) | Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $535.0 million at the end of 2022 to $485.6 million as of March 31, 2023, mainly due to the quarterly net loss - The primary driver for the decrease in stockholders' equity was the net loss of $58.1 million for the quarter[22] - The company issued 647,500 shares of preferred stock in exchange for 6,475,000 shares of common stock[22] Consolidated Statements of Cash Flows For Q1 2023, net cash used in operating activities was $51.0 million, a significant increase from Q1 2022, leading to a $34.0 million decrease in cash and cash equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(50,997) | $(21,908) | | Net cash provided by investing activities | $15,184 | $34,711 | | Net cash provided by financing activities | $1,789 | $3,541 | | Net decrease in cash and cash equivalents | $(34,024) | $16,344 | Notes to the Consolidated Financial Statements The notes detail key agreements, including a $25.0 million upfront R&D expense for a license agreement with Harbour BioMed, and confirm sufficient cash to fund operations for at least twelve months - The company is a clinical-stage biopharmaceutical company focused on modality-agnostic targeted oncology[28] - In February 2023, the company entered into a license and collaboration agreement with Harbour BioMed for CLN-418, paying a $25.0 million upfront fee which was immediately expensed as research and development[39][63] - The company has a co-development agreement with Taiho for zipalertinib, where development costs and potential U.S. pre-tax profits are shared 50/50 For Q1 2023, Cullinan recorded a net R&D expense of $3.7 million related to this arrangement[64] - As of March 31, 2023, the company's cash, cash equivalents, and short-term investments of $390.7 million are expected to be sufficient to fund operations for at least twelve months from the issuance date of the financial statements[57] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on advancing its six clinical-stage oncology product candidates, noting a significant increase in R&D expenses primarily due to a $25.0 million upfront license fee for CLN-418, while affirming sufficient capital for future operations - The company's pipeline includes six clinical-stage product candidates: Zipalertinib, CLN-049, CLN-619, CLN-418, CLN-978, and CLN-617[83] R&D and G&A Expense Comparison (in thousands) | Expense Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Research and development | $52,096 | $24,536 | | General and administrative | $10,660 | $8,121 | - The primary reason for the $27.6 million increase in R&D expenses was a $25.0 million upfront fee for in-licensing CLN-418[91] - Based on current plans, the company expects its cash, cash equivalents, and investments to be sufficient to fund operations for at least twelve months from the report's issuance date[98][118] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company has elected to use the scaled disclosure requirements available to smaller reporting companies - The company is a smaller reporting company and has elected to omit the information required by this item[125] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls over financial reporting during the quarter - Based on an evaluation as of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[147] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[148] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business - The company is not currently a party to any litigation or legal proceedings that management believes would have a material adverse effect on the business[150] Item 1A. Risk Factors This section refers investors to the detailed risk factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - Investors are directed to carefully consider the risk factors discussed in Part I, 'Item 1A. Risk Factors' of the company's 2022 Annual Report on Form 10-K[151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company provides an update on the use of proceeds from its Initial Public Offering (IPO) in January 2021, noting that none of the $264.5 million in net proceeds have been used as of March 31, 2023 - The company received net proceeds of $264.5 million from its IPO[152] - As of March 31, 2023, the company had not used any of the net proceeds from the IPO and has invested them in money market funds and marketable securities[152] Item 3. Defaults Upon Senior Securities Not applicable - This item is not applicable[152] Item 4. Mine Safety Disclosures Not applicable - This item is not applicable[152] Item 5. Other Information Not applicable - This item is not applicable[152] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including the License and Collaboration Agreement with Harbour BioMed and Sarbanes-Oxley Act certifications - Exhibit 10.2 is the License and Collaboration Agreement with Harbour BioMed US Inc., dated February 13, 2023[155] - Exhibits 31.1 and 31.2 are the required Sarbanes-Oxley Act Section 302 certifications from the CEO and CFO, respectively[133][156] - Exhibit 32.1 contains the Sarbanes-Oxley Act Section 906 certifications[134]