Erasca(ERAS) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements for H1 2023 show total assets decreased to $440.7 million, a net loss of $65.0 million (improved from $72.1 million), and stable operating cash usage Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $440.7 million from $514.9 million, driven by reduced cash, with liabilities and equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $138,787 | $284,217 | | Total current assets | $323,851 | $444,496 | | Total assets | $440,662 | $514,909 | | Liabilities & Equity | | | | Total current liabilities | $23,292 | $48,690 | | Total liabilities | $77,957 | $103,056 | | Accumulated deficit | ($545,951) | ($480,971) | | Total stockholders' equity | $362,705 | $411,853 | Condensed Consolidated Statements of Operations and Comprehensive Loss For H1 2023, net loss improved to $65.0 million from $72.1 million in H1 2022, primarily due to a significant increase in interest income Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $26,218 | $27,488 | $53,803 | $54,917 | | General and administrative | $9,752 | $8,417 | $19,192 | $15,493 | | Loss from operations | ($35,970) | ($35,905) | ($72,995) | ($72,410) | | Interest income | $4,251 | $388 | $8,128 | $502 | | Net loss | ($31,781) | ($35,608) | ($64,980) | ($72,066) | | Net loss per share | ($0.21) | ($0.30) | ($0.43) | ($0.60) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $411.9 million to $362.7 million in H1 2023, primarily due to net loss, partially offset by stock-based compensation Changes in Stockholders' Equity (H1 2023, in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2022 | $411,853 | | Net loss | ($64,980) | | Stock-based compensation expense | $13,857 | | Exercise of stock options & ESPP | $832 | | Other changes | ($8,857) | | Balance at June 30, 2023 | $362,705 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $52.3 million for H1 2023, while investing activities used $94.0 million, resulting in a $145.4 million net decrease in cash Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($52,309) | ($52,947) | | Net cash used in investing activities | ($93,953) | ($10,985) | | Net cash provided by financing activities | $832 | $1,452 | | Net decrease in cash, cash equivalents and restricted cash | ($145,430) | ($62,480) | Notes to Condensed Consolidated Financial Statements Notes detail the company's oncology focus, sufficient cash runway into 2024, significant future milestone obligations, and the UCSF license termination - The company is a clinical-stage precision oncology company focused on discovering and developing therapies for RAS/MAPK pathway-driven cancers[18] - Management believes its cash, cash equivalents, and short-term marketable securities of $317.2 million as of June 30, 2023, will be sufficient to fund operations for at least one year from the issuance date of the financial statements[19][20] - The company has significant future potential payment obligations under its license agreements, including up to $280.0 million in milestones to Novartis, up to $90.0 million to Asana, and up to $324.0 million to NiKang[50][53][57] - On August 7, 2023, the company sent a notice to terminate its license agreement with The Regents of the University of California, San Francisco (UCSF), with the termination effective October 6, 2023[65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses RAS/MAPK pathway therapies, naporafenib's Phase 3 advancement, strategic program deprioritizations, and a cash runway into H2 2025 Overview Erasca is advancing naporafenib to a pivotal Phase 3 trial in H1 2024 for NRAS-mutated melanoma, strategically deprioritizing other programs to focus resources - The company's lead product candidate is naporafenib, a pan-RAF inhibitor, with plans to begin a pivotal Phase 3 trial (SEACRAFT-2) in the first half of 2024 for patients with NRAS-mutated melanoma[95][97] - ERAS-801, a CNS-penetrant EGFR inhibitor, received FDA Fast Track Designation for recurrent glioblastoma multiforme (GBM) and Orphan Drug Designation for malignant glioma[103] - The company has deprioritized its CNS-penetrant KRAS G12C inhibitor, ERAS-3490, due to the competitive landscape, before enrolling any patients in its Phase 1 trial[104] - Strategic updates to the HERKULES clinical trial series include expanding the ERAS-007 plus EC combination in EC-naïve BRAFm CRC patients while deprioritizing other less promising combinations[100][107] Results of Operations For H1 2023, R&D expenses slightly decreased, G&A increased, and a significant rise in interest income led to a reduced net loss of $65.0 million Comparison of Results of Operations (in thousands) | Line Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $53,803 | $54,917 | ($1,114) | | In-process research and development | $0 | $2,000 | ($2,000) | | General and administrative | $19,192 | $15,493 | $3,699 | | Total other income, net | $8,015 | $344 | $7,671 | | Net loss | ($64,980) | ($72,066) | $7,086 | - The decrease in R&D expenses for H1 2023 was mainly due to lower costs for clinical trials and preclinical studies, partially offset by increased facilities-related expenses and personnel costs[132] Liquidity and Capital Resources As of June 30, 2023, Erasca held $365.3 million in cash, projected to fund operations into H2 2025, with future capital needs met via financing or collaborations - The company had cash, cash equivalents, and marketable securities of $365.3 million as of June 30, 2023[110][139] - Management believes the current cash position is sufficient to fund operations into the second half of 2025[112][139] Summary of Cash Flows (H1 2023 vs H1 2022, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Operating activities | ($52,309) | ($52,947) | | Investing activities | ($93,953) | ($10,985) | | Financing activities | $832 | $1,452 | Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures, including interest rate, foreign currency, and inflation risks, have occurred since the 2022 Annual Report - As of June 30, 2023, there have been no material changes to the company's market risk factors since its 2022 Annual Report on Form 10-K[153] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[155] - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2023[156] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings but may face claims in the ordinary course of business in the future - The company is not currently a party to any material legal proceedings[158] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes have occurred to the risk factors set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2022[159] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales were reported, and $242.1 million from the July 2021 IPO has been used for R&D, consistent with the original prospectus - As of June 30, 2023, the company has used approximately $242.1 million of the net proceeds from its IPO for general corporate purposes, including funding R&D of its pipeline programs[162] Item 3. Defaults Upon Senior Securities This item is not applicable as the company has no defaults upon senior securities - Not applicable[163] Item 4. Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[164] Item 5. Other Information Key events include a Lead Independent Director appointment, a board member's resignation, and the UCSF license agreement termination effective October 2023 - The Board of Directors established the position of Lead Independent Director and appointed James A. Bristol, Ph.D. to the role[165] - On August 7, 2023, Bihua Chen resigned from the Board of Directors due to compliance policies at her investment fund, not due to any disagreement with the company[166] - The company terminated its exclusive license agreement with The Regents of the University of California (UCSF), effective October 6, 2023, as it has deprioritized the related research program[167] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including an amended employment agreement and required CEO/CFO certifications - A list of exhibits filed with the report is provided, including corporate governance documents, an employment agreement, and required CEO/CFO certifications[170]