CymaBay Therapeutics(US:CBAY)2024-02-28 21:31markdown PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) CymaBay Therapeutics is a clinical-stage biopharmaceutical company focused on liver diseases, with its lead candidate, seladelpar, being developed for Primary Biliary Cholangitis (PBC) The company has submitted regulatory applications in the U.S., U.K., and E.U. for seladelpar, with a PDUFA target date of August 14, 2024, in the U.S. A significant corporate event is the pending acquisition by Gilead Sciences, Inc., initiated in February 2024 The company relies on third-party manufacturers and has strategic agreements for financing (Abingworth) and commercialization in Japan (Kaken) - The company's lead product candidate is seladelpar, a PPARδ agonist for treating Primary Biliary Cholangitis (PBC)[67](index=67&type=chunk)[624](index=624&type=chunk) - In February 2024, CymaBay entered into a merger agreement to be acquired by Gilead Sciences, Inc. through a tender offer at $32.50 per share[68](index=68&type=chunk)[626](index=626&type=chunk) Seladelpar Regulatory Status (as of Feb 2024) | Agency | Action | Key Date/Status | | :--- | :--- | :--- | | U.S. FDA | NDA accepted, Priority Review granted | PDUFA target date: August 14, 2024 | | U.K. MHRA | Application accepted for filing | February 2024 | | E.U. EMA | Application submitted | February 2024 | - The Phase 3 RESPONSE study met its primary endpoint, with **61.7%** of patients on seladelpar achieving the composite response compared to **20.0%** on placebo[73](index=73&type=chunk)[104](index=104&type=chunk) - The company has a collaboration and license agreement with Kaken Pharmaceutical to commercialize seladelpar for PBC in Japan, receiving a **$34.2 million** upfront payment[116](index=116&type=chunk)[174](index=174&type=chunk) - CymaBay has a development financing agreement with Abingworth, which provided **$75 million** in funding for seladelpar development, with future success-based payments owed to Abingworth[120](index=120&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company identifies significant risks, primarily related to the pending acquisition by Gilead, including uncertainties in timing and completion, and potential business disruptions Financial risks include a history of net losses and the need for future capital Development and regulatory risks are substantial, hinging on the success of seladelpar's clinical trials and approval process The company also highlights its dependence on third parties for manufacturing and clinical research, challenges in commercialization, protection of intellectual property, and operational risks like data security and retaining key personnel - Risks related to the proposed Gilead transaction include uncertainty of completion, potential termination fees of **$151.6 million**, and business disruptions during the pending period[247](index=247&type=chunk)[250](index=250&type=chunk)[596](index=596&type=chunk) - The company has a history of significant net losses and may need to raise additional capital, which could cause dilution or require relinquishing rights to product candidates[277](index=277&type=chunk)[284](index=284&type=chunk)[597](index=597&type=chunk) - Successful development and commercialization of seladelpar is uncertain and depends on positive clinical trial outcomes and obtaining regulatory approvals, which is a costly and lengthy process[295](index=295&type=chunk)[306](index=306&type=chunk)[598](index=598&type=chunk) - The company relies on third-party manufacturers for drug supply and contract service providers (CSPs) for clinical trials Failure by these third parties to perform adequately could harm the business[330](index=330&type=chunk)[348](index=348&type=chunk)[621](index=621&type=chunk) - The company faces risks in protecting its intellectual property through patents and trade secrets and may face infringement claims from third parties[58](index=58&type=chunk)[90](index=90&type=chunk)[600](index=600&type=chunk) - Significant disruptions of IT systems or data security breaches could materially adversely affect business operations, with increasing risks from cyber-attacks[39](index=39&type=chunk)[213](index=213&type=chunk) [Item 1C. Cybersecurity](index=61&type=section&id=Item%201C.%20Cybersecurity) The company has implemented information security processes to manage cybersecurity risks The IT department, along with senior management, legal, and compliance, oversees risk assessment and management This process is integrated into the company's overall risk management strategy The board of directors provides oversight, receiving periodic reports on cybersecurity threats and mitigation efforts The company utilizes third-party service providers for functions like threat monitoring and penetration testing - The company has implemented processes to identify, assess, and manage material risks from cybersecurity threats to its critical systems and data[439](index=439&type=chunk) - Cybersecurity risk management is overseen by the IT department with support from senior management, legal, and compliance, and is integrated into the company's overall risk management[422](index=422&type=chunk)[425](index=425&type=chunk) - The Board of Directors provides oversight for cybersecurity risk management, receiving periodic reports on threats and mitigation processes[424](index=424&type=chunk)[443](index=443&type=chunk) [Item 3. Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) The company has received three demand letters and two draft complaints from purported shareholders related to the pending acquisition by Gilead These communications allege disclosure deficiencies in the Schedule 14D-9 filing and threaten legal action to enjoin the transaction unless corrective disclosures are made The company believes these allegations are without merit - Between February 26 and 27, 2024, the company received three demand letters and two draft complaints from purported shareholders concerning the pending transaction with Gilead[427](index=427&type=chunk)[444](index=444&type=chunk) - The allegations claim that the Schedule 14D-9 filed with the SEC was materially incomplete and misleading, and threaten to seek an injunction to stop the transaction[428](index=428&type=chunk) - The company believes the allegations in the demand letters and draft complaints are without merit[428](index=428&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=63&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is traded on the Nasdaq Global Select Market under the symbol "CBAY" As of January 31, 2024, there were approximately 172 holders of record The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain any earnings for business development Dividend payments are also restricted under the Development Financing Agreement with Abingworth - The company's common stock is listed on the Nasdaq Global Select Market under the symbol "CBAY"[448](index=448&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, partly due to restrictions in its financing agreement with Abingworth[430](index=430&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For the year ended December 31, 2023, CymaBay reported a net loss of $105.4 million, slightly lower than the $106.0 million loss in 2022 The results were significantly impacted by the recognition of $31.1 million in collaboration revenue from the Kaken agreement Operating expenses increased to $132.8 million from $93.1 million, driven by higher G&A costs for pre-commercialization activities and increased R&D personnel costs The company's cash position strengthened to $416.2 million, largely due to net proceeds of $335.1 million from two public offerings and a $34.2 million upfront payment from Kaken The company expects expenses to continue increasing as it advances seladelpar's development and prepares for potential commercialization Financial Results Comparison (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Collaboration Revenue | $31,073 | $0 | | Research and Development | $80,799 | $67,995 | | General and Administrative | $51,953 | $25,116 | | **Loss from Operations** | **($101,679)** | **($93,111)** | | **Net Loss** | **($105,370)** | **($106,001)** | - Collaboration revenue of **$31.1 million** was recognized in 2023 from the Kaken agreement, primarily for the license transfer and delivery of technology and know-how[474](index=474&type=chunk)[494](index=494&type=chunk) - Research and development expenses increased by **$12.8 million** to **$80.8 million** in 2023, mainly due to higher internal costs from increased headcount to support new clinical trials (AFFIRM and IDEAL)[495](index=495&type=chunk)[525](index=525&type=chunk) - General and administrative expenses more than doubled to **$52.0 million** in 2023, up from **$25.1 million** in 2022, due to increased headcount and pre-commercial planning for seladelpar[499](index=499&type=chunk) Cash Flow Summary (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($72,531) | ($84,080) | | Net cash used in investing activities | ($86,569) | ($45,985) | | Net cash provided by financing activities | $345,772 | $24,550 | - Cash, cash equivalents, and marketable securities increased to **$416.2 million** at year-end 2023 from **$135.5 million** at year-end 2022, primarily due to public offerings and the Kaken upfront payment[505](index=505&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks, primarily credit risk and interest rate risk, related to its investment portfolio of cash and marketable securities The portfolio consists of high-quality, U.S. dollar-denominated securities like U.S. government issues, corporate bonds, and money market funds Due to the conservative and short-term nature of these investments, management does not believe the exposure to interest rate risk is material - The company's primary market risks are credit risk and interest rate risk associated with its investment portfolio[566](index=566&type=chunk) - The investment portfolio consists of high-quality, short-term instruments, and the company does not believe it has a material exposure to interest rate risk[540](index=540&type=chunk) [Item 9A. Controls and Procedures](index=77&type=section&id=Item%209A.%20Controls%20and%20Procedures) Based on an evaluation as of December 31, 2023, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at a reasonable assurance level Management also concluded that the company's internal control over financial reporting was effective as of the same date, based on the COSO framework The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified audit report on the effectiveness of the company's internal control over financial reporting - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[7](index=7&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[391](index=391&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified opinion on the company's internal control over financial reporting as of December 31, 2023[10](index=10&type=chunk)[544](index=544&type=chunk) PART III [Items 10-14](index=80&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information required for Items 10 through 14, which cover Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships and Related Transactions, Director Independence, and Principal Accountant Fees and Services, is incorporated by reference from the company's 2024 Proxy Statement, which will be filed with the SEC within 120 days after the fiscal year end - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and accountant fees is incorporated by reference from the forthcoming 2024 Proxy Statement[371](index=371&type=chunk)[550](index=550&type=chunk)[552](index=552&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=81&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section contains the consolidated financial statements for CymaBay Therapeutics, Inc. for the fiscal year ended December 31, 2023, and the accompanying report from the independent registered public accounting firm, Ernst & Young LLP The report provides an unqualified opinion on both the financial statements and the effectiveness of internal control over financial reporting The financial statements include the Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, Statements of Cash Flows, and detailed Notes to the Consolidated Financial Statements [Report of Independent Registered Public Accounting Firm](index=85&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified opinion on CymaBay's consolidated financial statements for the three years ended December 31, 2023, stating they are presented fairly in conformity with U.S. GAAP They also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023 A Critical Audit Matter was identified concerning Revenue Recognition, specifically the judgment required to identify distinct performance obligations in licensing and collaboration arrangements - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2023, 2022, and 2021[46](index=46&type=chunk) - An unqualified opinion was also issued on the company's internal control over financial reporting as of December 31, 2023[559](index=559&type=chunk) - The audit identified a Critical Audit Matter related to Revenue Recognition, focusing on the significant judgment needed to determine distinct performance obligations in collaboration agreements[48](index=48&type=chunk)[561](index=561&type=chunk)[584](index=584&type=chunk) [Consolidated Financial Statements](index=87&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position and results of operations As of December 31, 2023, total assets were $434.7 million and total liabilities were $142.4 million For the year, the company reported a net loss of $105.4 million, or ($0.99) per share Net cash used in operations was $72.5 million, while financing activities provided $345.8 million, primarily from public stock offerings Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents & marketable securities | $416,187 | $135,485 | | **Total Assets** | **$434,686** | **$141,852** | | Development financing liability (current & non-current) | $109,172 | $90,227 | | **Total Liabilities** | **$142,430** | **$105,698** | | **Total Stockholders' Equity** | **$292,256** | **$36,154** | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Collaboration Revenue | $31,073 | $0 | | Total Operating Expenses | $132,752 | $93,111 | | **Net Loss** | **($105,370)** | **($106,001)** | | **Net Loss Per Share** | **($0.99)** | **($1.21)** | Consolidated Statement of Cash Flows Data (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($72,531) | ($84,080) | | Net Cash Used in Investing Activities | ($86,569) | ($45,985) | | Net Cash Provided by Financing Activities | $345,772 | $24,550 | [Notes to Consolidated Financial Statements](index=92&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's accounting policies and financial items Key disclosures include the company's liquidity position, with $416.2 million in cash and securities, deemed sufficient for at least 12 months The Kaken collaboration agreement resulted in $31.1 million of revenue in 2023 The Abingworth financing agreement is accounted for as debt, with a liability of $109.2 million recorded The company has significant net operating loss carryforwards ($365.6 million federal) but maintains a full valuation allowance A significant subsequent event is the merger agreement with Gilead signed in February 2024 - The company believes its cash, cash equivalents, and marketable securities of **$416.2 million** are sufficient to fund operations for at least twelve months from the financial statement issuance date[673](index=673&type=chunk) - The Kaken license agreement, signed in January 2023, provided an upfront payment of **$34.2 million** The company identified three key performance obligations and recognized **$31.1 million** as collaboration revenue in 2023[708](index=708&type=chunk)[729](index=729&type=chunk)[733](index=733&type=chunk) - The Abingworth financing agreement is accounted for as a debt instrument As of Dec 31, 2023, the carrying value of the development financing liability was **$109.2 million**[739](index=739&type=chunk)[767](index=767&type=chunk) - In 2023, the company raised net proceeds of approximately **$242.8 million** from a September public offering and **$92.4 million** from a January public offering[638](index=638&type=chunk) - As of Dec 31, 2023, the company had federal and state net operating loss carryforwards of **$365.6 million** and **$214.9 million**, respectively, which are fully offset by a valuation allowance[834](index=834&type=chunk) - Subsequent to year-end, on February 11, 2024, the company entered into a definitive merger agreement to be acquired by Gilead Sciences, Inc[111](index=111&type=chunk)[820](index=820&type=chunk)