G1 Therapeutics(GTHX) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Comprehensive financial data including statements, management's analysis, market risks, and internal controls Item 1. Financial Statements (Unaudited) Presents unaudited condensed financial statements, including balance sheets, operations, equity, and cash flows Condensed Balance Sheets Summarizes the company's financial position, including assets, liabilities, and stockholders' equity | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $93,238 | $221,186 | $(127,948) | -57.8% | | Marketable securities | $29,744 | — | $29,744 | N/A | | Accounts Receivable | $10,521 | $5,688 | $4,833 | 85.0% | | Inventories | $13,950 | $3,471 | $10,479 | 301.9% | | Total current assets | $157,465 | $243,565 | $(86,100) | -35.3% | | Total assets | $166,573 | $254,094 | $(87,521) | -34.4% | | Total current liabilities | $37,134 | $27,613 | $9,521 | 34.5% | | Loan payable | $76,558 | $75,190 | $1,368 | 1.8% | | Total liabilities | $120,608 | $110,553 | $10,055 | 9.1% | | Total stockholders' equity | $45,965 | $143,541 | $(97,576) | -68.0% | | Accumulated deficit | $(698,369) | $(584,459) | $(113,910) | 19.5% | Condensed Statements of Operations Reports revenues, expenses, and net loss for the three and nine months ended September 30, 2022 and 2021 Three Months Ended September 30, 2022 vs 2021 (in thousands) | Metric | 2022 | 2021 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Product sales, net | $8,269 | $3,576 | $4,693 | 131.2% | | License revenue | $15,307 | $1,282 | $14,025 | 1094.0% | | Total revenues | $23,576 | $4,858 | $18,718 | 385.3% | | Cost of goods sold | $1,111 | $591 | $520 | 88.0% | | Research and development | $19,581 | $21,143 | $(1,562) | -7.4% | | Selling, general and administrative | $24,432 | $24,268 | $164 | 0.7% | | Total operating expenses | $45,124 | $46,002 | $(878) | -1.9% | | Net loss | $(25,272) | $(42,468) | $17,196 | -40.5% | | Net loss per share, basic and diluted | $(0.59) | $(1.00) | $0.41 | -41.0% | Nine Months Ended September 30, 2022 vs 2021 (in thousands) | Metric | 2022 | 2021 | Change | % Change | | :-------------------------------- | :----- | :----- | :------- | :------- | | Product sales, net | $22,467 | $6,717 | $15,750 | 234.5% | | License revenue | $18,584 | $18,963 | $(379) | -2.0% | | Total revenues | $41,051 | $25,680 | $15,371 | 59.9% | | Cost of goods sold | $2,756 | $1,642 | $1,114 | 67.8% | | Research and development | $66,729 | $56,435 | $10,294 | 18.2% | | Selling, general and administrative | $76,857 | $72,474 | $4,383 | 6.0% | | Total operating expenses | $146,342 | $130,551 | $15,791 | 12.1% | | Net loss | $(113,910) | $(108,332) | $(5,578) | 5.1% | | Net loss per share, basic and diluted | $(2.67) | $(2.60) | $(0.07) | 2.7% | Condensed Statements of Stockholders' Equity Details changes in stockholders' equity, including accumulated deficit and additional paid-in capital | Metric | December 31, 2021 (in thousands) | September 30, 2022 (in thousands) | Change (in thousands) | | :----------------------- | :------------------------------- | :-------------------------------- | :-------------------- | | Total stockholders' equity | $143,541 | $45,965 | $(97,576) | | Accumulated deficit | $(584,459) | $(698,369) | $(113,910) | | Additional paid-in capital | $728,004 | $744,338 | $16,334 | - Stock-based compensation for the nine months ended September 30, 2022, was $16,189 thousand[16] Condensed Statements of Cash Flows Presents cash flows from operating, investing, and financing activities for the nine-month periods Nine Months Ended September 30, 2022 vs 2021 (in thousands) | Cash Flow Activity | 2022 | 2021 | Change | | :----------------------------------- | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(97,988) | $(97,448) | $(540) | | Net cash provided/used in investing activities | $(30,167) | — | $(30,167) | | Net cash provided by financing activities | $145 | $102,106 | $(101,961) | | Net change in cash, cash equivalents and restricted cash | $(128,010) | $4,658 | $(132,668) | | Cash, cash equivalents and restricted cash, End of period | $93,551 | $212,464 | $(118,913) | - The significant increase in net cash used in investing activities in 2022 was primarily due to the purchase of $29.7 million in marketable securities and $0.5 million of manufacturing equipment[217] - The substantial decrease in net cash provided by financing activities in 2022 was mainly due to the absence of proceeds from public offerings, which contributed $86.4 million in 2021[219] Notes to Unaudited Condensed Financial Statements Details the company's business, accounting policies, and specific financial items for the reporting periods 1. Business Description Describes G1 Therapeutics as a commercial-stage biopharmaceutical company focused on cancer therapeutics - G1 Therapeutics, Inc. is a commercial-stage biopharmaceutical company focused on developing and commercializing novel small molecule therapeutics for cancer treatment[21] - COSELA® (trilaciclib), the company's first FDA-approved product, is indicated to proactively protect bone marrow from chemotherapy damage (myeloprotection) and received conditional approval in China in July 2022[21][24] - The company is pursuing trilaciclib in five ongoing clinical trials across multiple tumor types (1L colorectal cancer, 1L metastatic triple negative breast cancer, 1L bladder cancer, ADC combination in mTNBC, and neoadjuvant TNBC) to evaluate myeloprotection and anti-tumor efficacy[26][28] - In November 2022, initial Phase 2 data for trilaciclib combined with sacituzumab govitecan-hziy showed potential to reduce adverse events (>50%) like myelosuppression, diarrhea, and alopecia[27] - Simcere paid a $13.0 million milestone payment in Q3 2022 due to COSELA's conditional approval in China; G1 may receive up to $156.0 million in total milestones and double-digit royalties[33] - The rintodestrant program was discontinued in Q3 2022, and rights reverted to the originator with no additional financial obligations[34] 2. Basis of Presentation and Summary of Significant Accounting Policies Outlines the financial statement basis, accounting policies, and going concern considerations - The company has an accumulated deficit of $698.4 million as of September 30, 2022, and expects to incur further losses, leading to substantial doubt about its ability to continue as a going concern for at least 12 months from the financial statement issuance date[37] - As of September 30, 2022, the company was in compliance with all minimum cash and monthly net product revenue covenants related to its loan payable[38] - Revenue from product sales is recognized when the customer obtains control of the product, net of estimated variable consideration for rebates, chargebacks, co-pay assistance, distribution fees, product returns, and GPO fees[51][52] - License revenue is recognized when the license is transferred and the customer can use and benefit from it; regulatory milestone payments are recognized upon approval[48][49] 3. Fair Value Measurements Details fair value of financial assets and liabilities, including cash, marketable securities, and loan payable Fair Value of Assets (in thousands) | Asset Category | September 30, 2022 (Level 1) | December 31, 2021 (Level 1) | | :----------------------- | :--------------------------- | :-------------------------- | | Cash and cash equivalents | $51,675 | $110,443 | | Marketable securities (U.S. Treasury Bills) | $29,744 | — | | Total assets at fair value | $81,419 | $110,443 | - The loan payable, with a carrying value of $76.6 million as of September 30, 2022, approximates its fair value and is recorded using Level 3 inputs[70] 4. Inventories Provides a breakdown of inventory components including raw materials, work in process, and finished goods Inventories (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :--------------- | :------------------- | :------------------ | | Raw materials | $7,516 | $2,105 | | Work in process | $2,845 | $1,342 | | Finished goods | $3,589 | $24 | | Total Inventories | $13,950 | $3,471 | - Total inventories increased by $10.5 million (301.9%) from December 31, 2021, to September 30, 2022, driven by increases across all categories, particularly raw materials and finished goods[71] 5. Property and Equipment Lists the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :-------------------- | :------------------- | :------------------ | | Computer equipment | $327 | $327 |\ | Laboratory equipment | $334 | $334 | | Furniture and fixtures | $866 | $866 | | Leasehold improvements | $1,782 | $1,782 | | Manufacturing equipment | $506 | — | | Accumulated depreciation | $(1,689) | $(1,296) | | Total, net | $2,126 | $2,013 | - Net property and equipment increased by $0.11 million, primarily due to the addition of $0.51 million in manufacturing equipment[72] - Depreciation expense for the nine months ended September 30, 2022, was $393 thousand, up from $355 thousand in the prior year period[72] 6. Patent License Agreement Discusses the termination of the rintodestrant license agreement and its strategic implications - The company terminated its license agreement with the University of Illinois for rintodestrant in May 2022, reverting the rights back to the originator with no additional financial obligations[73] - This decision followed an evaluation of partnering options and recent data in the competitive oral SERD space, leading to the strategic discontinuation of the program[73] 7. Accrued Expenses Details various accrued liabilities, including research, professional fees, clinical study costs, and compensation Accrued Expenses (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :-------------------------- | :------------------- | :------------------ | | Accrued external research | $367 | $773 | | Accrued professional fees and other | $5,321 | $8,058 | | Accrued external clinical study costs | $17,162 | $9,579 | | Accrued compensation expense | $4,401 | $4,770 | | Total Accrued Expenses | $27,251 | $23,180 | - Total accrued expenses increased by $4.07 million (17.6%) from December 31, 2021, to September 30, 2022, primarily driven by a $7.58 million (79.2%) increase in accrued external clinical study costs[74] 8. Loan Payable Outlines the terms and status of the loan agreement with Hercules Capital, including covenants and amendments - The company has a loan and security agreement with Hercules Capital, with a total potential facility of up to $150.0 million; $75.0 million was outstanding as of September 30, 2022[79][89] - The Third Amendment (June 2022) extended the draw period for a $25.0 million tranche to December 31, 2022, and introduced new minimum cash and revenue covenants[86] - As of September 30, 2022, the company was in compliance with all loan covenants[87] - Interest expense related to the debt for the nine months ended September 30, 2022, was $7.4 million[88] - A Fourth Amendment (November 2022) further extended the draw period for the $25.0 million advance to June 30, 2023, and revised the minimum cash covenant[129] 9. Stockholders' Equity Describes the company's authorized and outstanding stock, and equity incentive plans - The company is authorized to issue 120.0 million shares of common stock and 5.0 million shares of undesignated preferred stock (none outstanding)[90][95] - As of September 30, 2022, 10,399,973 shares of common stock were reserved for future issuance under equity incentive plans[96] - The company has a 2022 Sales Agreement for 'at the market offerings' to sell up to $100.0 million in common stock, but no shares have been sold under this agreement as of the report date[94][201] 10. Stock-Based Compensation Reports stock-based compensation expense and activity for stock options and restricted stock units Total Stock-Based Compensation Expense (in thousands) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sept 30 | $4,785 | $5,528 | | Nine Months Ended Sept 30 | $16,189 | $17,114 | - As of September 30, 2022, unrecognized compensation expense for unvested stock options totaled $25.7 million (expected to be recognized over ~2.3 years) and for RSUs totaled $6.1 million (expected over ~2.5 years)[110][112] Stock Option Activity (Nine Months Ended September 30, 2022) | Metric | Options Outstanding | Weighted Average Exercise Price | | :-------------------------------- | :------------------ | :------------------------------ | | Balance as of December 31, 2021 | 6,701,727 | $17.88 | | Granted | 1,695,639 | $9.58 | | Cancelled | (735,000) | $20.09 | | Exercised | (177,608) | $0.82 | | Balance as of September 30, 2022 | 7,484,758 | $16.19 | Restricted Stock Unit (RSU) Activity (Nine Months Ended September 30, 2022) | Metric | Number of RSUs | Weighted Average Fair Value per Share | | :-------------------------------- | :------------- | :------------------------------------ | | Balance as of December 31, 2021 | 414,991 | $18.24 | | Granted | 468,631 | $9.30 | | Cancelled | (93,091) | $12.34 | | Vested | (157,325) | $18.58 | | Balance as of September 30, 2022 | 633,206 | $12.40 | 11. License Revenue Details revenue recognized from various license agreements, including milestone payments and reimbursements - For the nine months ended September 30, 2022, the company recognized $14.0 million in milestone revenue from the Simcere license agreement due to COSELA's conditional approval in China[125] - Additionally, $1.9 million was recognized for reimbursement of clinical trial costs and $0.4 million for drug supply sold to Simcere during the same period[125] - The EQRx license agreement generated $1.9 million in revenue for reimbursement of clinical trial costs for the nine months ended September 30, 2022[122] - No revenue was recognized from the Incyclix or Genor license agreements for the nine months ended September 30, 2022[116][119] 12. Net Loss per Common Share Presents basic and diluted net loss per common share, considering potentially dilutive securities Net Loss per Share (Basic and Diluted) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sept 30 | $(0.59) | $(1.00) | | Nine Months Ended Sept 30 | $(2.67) | $(2.60) | - Potentially dilutive securities, including stock options and unvested RSUs (totaling 8.45 million for the three months and 8.39 million for the nine months ended September 30, 2022), were excluded from diluted EPS calculations as their effect would be anti-dilutive due to net losses[126] 13. Income Taxes Reports income tax expense, primarily related to foreign withholding taxes on milestone payments Income Tax Expense (in thousands) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sept 30 | $1,219 | $321 | | Nine Months Ended Sept 30 | $1,219 | $679 | - Income tax expense in both periods primarily relates to foreign withholding taxes incurred from Simcere milestone payments, as the company continues to recognize losses in the United States[63][127] - The effective income tax rate was (1.1%) for the nine months ended September 30, 2022[127] 14. Related Party Transactions Discloses agreements with related parties, specifically a senior advisor agreement with a board member - The company has a senior advisor agreement with board member Mark A. Velleca, M.D., Ph.D., for an annual payment of $200,000, paid quarterly, through December 31, 2023[128] 15. Subsequent Event Describes events occurring after the reporting period, including a Fourth Amendment to the loan agreement - On November 1, 2022, the company entered into a Fourth Amendment to its loan agreement with Hercules Capital, extending the draw period for a $25.0 million advance to June 30, 2023[129] - The Fourth Amendment also revised the minimum cash covenant, requiring the company to maintain unrestricted cash equal to at least 65% of outstanding debt (if <= $75M) or 70% (if > $75M), decreasing to 45% upon achieving specified COSELA net revenue[129] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial condition, operations, liquidity, and capital resources, highlighting product development and performance Overview Introduces G1 Therapeutics as a commercial-stage biopharmaceutical company focused on cancer treatment - G1 Therapeutics is a commercial-stage biopharmaceutical company focused on cancer, with its FDA-approved product COSELA (trilaciclib) for myeloprotection in ES-SCLC, also conditionally approved in China[133][141] - The company is expanding trilaciclib's indications through multiple clinical trials, including Phase 3 trials in 1L colorectal cancer (CRC) and 1L metastatic triple negative breast cancer (mTNBC), with initial results expected in 1Q 2023 and 2H 2023, respectively[144][145][147][152] - Encouraging initial Phase 2 data for trilaciclib in combination with an ADC (sacituzumab govitecan-hziy) showed a >50% reduction in adverse events, with comprehensive data expected in 1H 2023[148] - The co-promotion agreement for COSELA with Boehringer Ingelheim ended in March 2022, and G1 Therapeutics now utilizes its own 34-person sales team[140] - The rintodestrant program was strategically discontinued in Q3 2022, and rights reverted to the originator[154] - COVID-19 continues to impact operations, with most employees working remotely, potentially affecting R&D, sales, and clinical trial timelines[158] Financial Overview Summarizes the company's financial performance, accumulated deficit, and going concern considerations - The company has incurred net losses since inception, with an accumulated deficit of $698.4 million as of September 30, 2022[160] - Product sales from COSELA were $22.5 million and license revenue was $18.6 million for the nine months ended September 30, 2022[159] - Substantial doubt exists about the company's ability to continue as a going concern for at least the next 12 months due to expected losses and insufficient cash to fund planned operations and meet financial covenants[194] - The company expects research and development, commercial activities, and selling, general and administrative expenses to increase due to ongoing clinical trials, new product candidates, and commercialization efforts[162] Revenue Details the company's revenue streams from net product sales and license agreements Revenue (in millions) | Revenue Type | 9 Months Ended Sept 30, 2022 | Year Ended Dec 31, 2021 | | :------------- | :--------------------------- | :---------------------- | | Net Product Sales | $22.5 | $11.1 | | License Revenue | $18.6 | $20.4 | - The company recognized $14.0 million in milestone revenue from the Simcere license agreement in Q3 2022 due to COSELA's conditional approval in China[163] - The EQRx license agreement has a potential for $290.0 million in development and commercial milestones, with $1.9 million recognized for clinical trial cost reimbursement for the nine months ended September 30, 2022[122][164] Operating expenses Breaks down operating expenses into cost of goods sold, R&D, and selling, general and administrative - Operating expenses are categorized into cost of goods sold, research and development, and selling, general and administrative, with personnel costs being a significant component across all categories[167] - Research and development expenses are the largest component of total operating expenses and are expected to increase as products advance to later stages of clinical development[169][170] - Selling, general and administrative expenses are anticipated to increase with growing headcount and commercialization efforts for COSELA[172] Results of Operations Compares key financial changes and their primary reasons for the three and nine months ended September 30 Key Financial Changes (Three Months Ended September 30, 2022 vs 2021) | Metric | Change (in thousands) | % Change | Primary Reason | | :-------------------------------- | :-------------------- | :------- | :------------- | | Product sales, net | $4,693 | 131% | Increased sales volume | | License revenue | $14,025 | 1077% | Simcere development milestones | | Total revenues | $18,718 | 385% | Overall revenue growth | | Cost of goods sold | $520 | 83% | Increased units sold and overhead | | Research and development | $(1,562) | -7% | Decreases in manufacturing and pre-clinical costs | | Selling, general and administrative | $164 | 0.4% | Increased headcount, offset by lower commercialization activities | | Net loss | $17,196 | -40.5% | Improved net loss | Key Financial Changes (Nine Months Ended September 30, 2022 vs 2021) | Metric | Change (in thousands) | % Change | Primary Reason | | :-------------------------------- | :-------------------- | :------- | :------------- | | Product sales, net | $15,750 | 236% | Increased sales volume | | License revenue | $(379) | -2% | Less revenue from drug supply/manufacturing services, offset by reimbursements and Simcere milestones | | Total revenues | $15,371 | 60% | Overall revenue growth | | Cost of goods sold | $1,114 | 75% | Increased units sold and overhead | | Research and development | $10,294 | 18% | Increased clinical trial costs, partially offset by lower manufacturing costs | | Selling, general and administrative | $4,383 | 6% | Increased headcount, offset by lower commercialization activities | | Net loss | $(5,578) | 5.1% | Increased net loss | Liquidity and Capital Resources Discusses the company's cash position, funding sources, and ability to meet financial obligations - The company has an accumulated deficit of $698.4 million as of September 30, 2022, and expects continued losses, raising substantial doubt about its ability to continue as a going concern for the next 12 months[194] - As of September 30, 2022, cash and cash equivalents were $93.2 million, and marketable securities were $29.7 million[160] - The company relies on equity offerings, debt financings (including a $75.0 million outstanding loan from Hercules Capital), and licensing arrangements to fund its operations[194][195][205] - The company was in compliance with all loan covenants as of September 30, 2022, but failure to secure additional funding could lead to delays in product development or default on its loan[194][205][223] - The company has a shelf registration statement (2021 Form S-3) for up to $300.0 million in securities and a 2022 Sales Agreement for 'at the market offerings' of up to $100.0 million in common stock, with no sales under the latter as of the report date[197][200][201] - There have been no material changes to contractual obligations or off-balance sheet arrangements during the current period[224][225] Item 3. Quantitative and Qualitative Disclosures About Market Risk Analyzes the company's exposure to market risks, including interest rate sensitivity and foreign currency - The company's primary market risk is interest rate sensitivity, affecting its cash, cash equivalents ($93.2 million), and marketable securities ($29.7 million in U.S. Treasury bills)[229] - The loan agreement with Hercules Capital has $75.0 million outstanding as of September 30, 2022, accruing interest at a variable rate (greater of prime rate + 5.90% or 9.15%)[230] - The company is not currently exposed to significant market risk related to changes in foreign currency exchange rates, and inflation did not have a material effect on its business during the period[231] Item 4. Controls and Procedures Evaluates the effectiveness of disclosure controls and internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[232] - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[233] PART II. OTHER INFORMATION Additional disclosures covering risk factors, exhibit listings, and official report signatures Item 1A. Risk Factors Highlights significant investment risks, including financial stability and the need for additional capital - Investing in the company's common stock involves a high degree of risk[236] - The company's accumulated deficit of $698.4 million as of September 30, 2022, and expected continued losses raise substantial doubt about its ability to continue as a going concern for at least the next 12 months[237][238] - Failure to obtain additional funding could force delays, reductions, or termination of product development and commercialization efforts, or result in default on its loan payable[238] - The company must remain in compliance with minimum cash and monthly net product revenue covenants under its loan agreement, as non-compliance could trigger immediate debt repayment[238] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including key agreements and certifications - Exhibit 10.1 is the Fourth Amendment to the Loan and Security Agreement with Hercules Capital, Inc., dated November 1, 2022[240] - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[240] - Inline XBRL instance and taxonomy extension documents are also filed as exhibits[240] Signatures Contains the official signatures for the Form 10-Q report, confirming its submission - The report was signed on November 2, 2022, by Jennifer K. Moses, Chief Financial Officer of G1 Therapeutics, Inc.[245]