Checkpoint Therapeutics(CKPT) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited statements show a net loss, a significant deficit, and substantial doubt about the company's going concern status Condensed Balance Sheet Data (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,421 | $12,068 | | Total Assets | $8,338 | $13,290 | | Total Liabilities | $31,608 | $32,773 | | Accumulated Deficit | $(289,481) | $(262,486) | | Total Stockholders' (Deficit) Equity | $(23,270) | $(19,483) | Condensed Statements of Operations (in thousands, except per share data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Research and development | $29,771 | $26,723 | | General and administrative | $4,573 | $4,372 | | Loss from operations | $(34,278) | $(31,025) | | Net Loss | $(26,995) | $(30,990) | | Basic and diluted net loss per share | $(1.97) | $(3.59) | - The company has incurred substantial operating losses since inception and has an accumulated deficit of $289.5 million as of June 30, 2023[187] - Management has concluded there is substantial doubt about the company's ability to continue as a going concern, as cash is only expected to fund operations through Q3 2023[196] - In February 2023, the company expensed a $2.2 million non-refundable milestone payment for the FDA's acceptance of the Biologics License Application (BLA) for cosibelimab[244] - The company closed registered direct offerings in February, April, and May 2023, raising total net proceeds of approximately $21.3 million[188][189][190] - Subsequent to the quarter end, the company closed another registered direct offering with gross proceeds of approximately $10.0 million in July 2023[191][310] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the cosibelimab BLA submission, a significant deficit, increased R&D expenses, and the need for future financing - The company submitted a BLA to the FDA for cosibelimab, which is under review with a PDUFA goal date of January 3, 2024[312] Comparison of Operating Expenses (in millions) | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $13.9 | $12.1 | $29.8 | $26.7 | | General & Administrative | $2.3 | $2.1 | $4.6 | $4.4 | - The increase in R&D expenses was primarily due to $15.7 million in commercial manufacturing costs for cosibelimab and a $3.2 million PDUFA fee[333] - The company's cash is only sufficient to fund operations through Q3 2023, raising substantial doubt about its ability to continue as a going concern[359] - For the six months ended June 30, 2023, net cash used in operating activities was $26.0 million, while financing activities provided $21.4 million[344][361] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is not required to provide disclosures about market risk - As a smaller reporting company, the company is not required to provide information under this item[362] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of June 30, 2023[365] - There were no material changes in internal control over financial reporting during the fiscal quarter ended June 30, 2023[366] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any litigation expected to have a material adverse effect - The company is not involved in any litigation that it believes could have a material adverse effect on its financial position or results of operations[368] Risk Factors The company faces significant financial, strategic, operational, and regulatory risks impacting its future viability Risks Related to Our Finances and Capital Requirements The company has a history of losses, faces a going concern risk, and requires substantial additional capital - The company has an accumulated deficit of $289.5 million as of June 30, 2023, and expects to incur continued losses[370][388] - There is substantial doubt about the company's ability to continue as a going concern, with cash sufficient only through Q3 2023[404][397] - Raising additional capital is necessary but may cause significant dilution to existing stockholders or require relinquishing valuable rights[406][407] Risks Related to our Business Strategy, Structure, and Organization Future success depends entirely on commercializing product candidates and acquiring new assets, as the company has no products for sale - The company's future is entirely dependent on its ability to develop, obtain approval for, and commercialize its product candidates[420][421] - The BLA for cosibelimab relies on foreign clinical data, and the FDA may require additional U.S. studies, causing delays and expense[432] - Future growth depends on acquiring or in-licensing new products, which presents numerous financial and integration risks[427][434] Risks Inherent in Drug Development and Commercialization Drug development is high-risk, with unpredictable clinical trials, potential regulatory delays, and intense competition - The outcome of early clinical trials is not necessarily predictive of future results, and candidates may fail in later stages[435][436] - The cosibelimab BLA may be impacted by the FDA's potential inability to audit clinical sites in Russia and Ukraine, which could delay approval[450] - The company faces significant competition from firms with substantially greater capital and commercialization resources[375][376] - Even if approved, products may not gain market acceptance, and securing adequate reimbursement is uncertain but critical for success[55][380][382] Risks Related to Reliance on Third Parties The company is heavily dependent on third-party manufacturers and CROs, which reduces direct control and introduces significant risk - The company relies on third-party contract manufacturers, increasing the risk of supply shortages and quality issues[35][352][353] - Reliance on third-party CROs is critical, and their failure to perform could compromise clinical data and delay regulatory approval[32][33][349] - The company's strategy relies on clinical data from third parties, which could prove to be inaccurate or unreliable[41][42] Risks Relating to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries The company operates in a highly regulated environment subject to risks from legislative changes and complex healthcare laws - The company is subject to new legislation that may increase compliance costs and adversely affect its ability to market products[2] - Uncertainty from the Affordable Care Act (ACA) and potential action against high drug prices by the Biden administration could negatively impact profitability[3][4][8] - Proposed rules on price transparency and drug importation could adversely impact the industry by influencing drug pricing[1] - Relationships with customers are subject to healthcare fraud and abuse laws, where violations can lead to criminal sanctions and civil penalties[10][11] Risks Related to Intellectual Property and Potential Disputes with Licensors Thereof Commercial success depends on obtaining and defending intellectual property, which is costly, uncertain, and reliant on licensors - The inability to maintain sufficient patent protection could impair commercialization by allowing competitors to develop similar products[15][16] - The patent process is expensive, time-consuming, and uncertain, and patents may be challenged through legal proceedings[18][19][21] - The company depends on its licensors to maintain and enforce IP for its product candidates and has limited control over their strategies[27][28][29] - The company may become involved in expensive lawsuits to protect its patents or defend against infringement claims[52][53][71] Risks Relating to Our Platform and Data Operations are vulnerable to IT system failures and cyber-attacks, which could compromise confidential data and cause reputational harm - The business is dependent on IT systems and vulnerable to cyber-attacks, which could compromise confidential information[81][82][83] - A security breach could lead to the loss of proprietary information, harm the company's reputation, and result in liability[86] - The risk of cyber-attacks has generally increased, and the company may be unable to anticipate or prevent all security threats[84][85] Risks Relating to Our Control by Fortress Biotech Inc. Fortress Biotech holds a voting majority, creating potential conflicts of interest and stockholder dilution through its equity grants - Fortress holds a voting majority and can control all matters requiring stockholder approval, creating potential conflicts of interest[90][96] - Under the Founders Agreement, Fortress receives an annual 2.5% equity grant, which dilutes other stockholders' holdings[91][97] - Agreements with Fortress might not reflect terms that would have resulted from arm's-length negotiations with unaffiliated parties[92][98] Risks Related to Conflicts of Interest Significant conflicts of interest exist due to overlapping leadership with parent company Fortress and collaborator TGTX - The Chairman of the Board is also the CEO of TGTX, with whom the company has collaboration agreements, creating potential conflicts of interest[93][100][101] - Shared directors with Fortress could create conflicts, especially as Fortress is not required to notify the company of corporate opportunities[102][103] General Risks The company is exposed to general business risks including public health crises, employee misconduct, and stock price volatility - Public health issues like the COVID-19 pandemic could adversely impact business by delaying clinical trials and disrupting supply chains[104][105][107] - The company is exposed to risks of employee misconduct, including noncompliance with FDA regulations and fraud laws[109][110] - The company's common stock price has been highly volatile and is likely to remain so, increasing the risk of securities litigation[117][118] Recent Sales of Unregistered Securities Information regarding recent sales of unregistered securities was previously disclosed in other SEC filings - Information regarding recent sales of unregistered securities has not been furnished in this report, as it was previously included in other filings[122] Defaults Upon Senior Securities The company reports no defaults upon its senior securities during the period - None[124] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[126] Other Information The company reports no other information for disclosure under this item - None[128] Exhibits This section lists exhibits filed with the report, including corporate amendments and required officer certifications - The report includes several exhibits, such as amendments to the company's certificate of incorporation and officer certifications under Sarbanes-Oxley[130] Signatures Signatures The report was duly signed and authorized by the President and CEO on August 14, 2023 - The report was signed on August 14, 2023, by James F. Oliviero, President and Chief Executive Officer[132][158]