Janux Therapeutics(JANX) - 2023 Q4 - Annual Report

PART I Item 1. Business Janux Therapeutics is a clinical-stage biopharmaceutical company developing tumor-activated immunotherapies for cancer using its proprietary TRACTr and TRACIr platforms, with lead candidates JANX007 and JANX008 in Phase 1 clinical trials demonstrating promising early anti-tumor activity and favorable safety profiles Overview Janux is a clinical-stage biopharmaceutical company developing tumor-activated immunotherapies using its proprietary TRACTr (Tumor Activated T Cell Engagers) and TRACIr (Tumor Activated Immunomodulators) platforms[20] The company's technology aims to overcome key limitations of previous T cell engagers (TCEs), such as cytokine release syndrome (CRS), on-target healthy tissue toxicity, and short half-life[20] Lead candidate JANX007, a PSMA-TRACTr for metastatic castration-resistant prostate cancer (mCRPC), has shown meaningful PSA drops and a favorable safety profile in a Phase 1 trial[20] Second clinical candidate JANX008, an EGFR-TRACTr for multiple solid cancers, has shown anti-tumor activity with low-grade CRS in early Phase 1 data[20] Our TRACTr and TRACIr Platforms The platforms are designed to be selectively activated by proteases in the tumor microenvironment, which unmasks the T-cell and tumor-binding domains, thereby localizing immune activation to the tumor site[23][43] An albumin-binding domain is incorporated into the masked, inactive form of the therapeutic to extend its serum half-life, allowing for less frequent dosing compared to first-generation TCEs[23][45] Once activated in the tumor, the therapeutic is designed to have a short half-life if it escapes back into circulation, minimizing systemic toxicity like CRS and on-target, off-tumor effects[41][46] In a proof-of-concept study in non-human primates (NHPs), an EGFR-TRACTr demonstrated a half-life of over 100 hours (vs. ~1 hour for a standard TCE) and significantly reduced inflammatory cytokine release, a marker for CRS[59][61] Our Lead Programs Janux Therapeutics Wholly-Owned Pipeline | Program | Target(s) | Initial Indication(s) | Stage of Development | | :--- | :--- | :--- | :--- | | TRACTr Programs | | | | | PSMA-TRACTr JANX007 | PSMAxCD3 | mCRPC | Phase 1 | | EGFR-TRACTr JANX008 | EGFRxCD3 | CRC, SCCHN, NSCLC, RCC | Phase 1 | | Unnamed TRACTr Programs | TxCD3 | Undisclosed | Discovery | | Unnamed TRACIr Programs | | | | | TRACIr | TxCD28 | Undisclosed | Discovery | JANX007 (PSMA-TRACTr) Interim Phase 1 Efficacy Data (as of Feb 12, 2024) | Metric | Starting Dose ≥ 0.1 mg | Starting Step Dose ≥ 0.2 mg | | :--- | :--- | :--- | | PSA30 Declines | 78% (14 of 18) | 100% (6 of 6) | | PSA50 Declines | 56% (10 of 18) | 83% (5 of 6) | For JANX007, Cytokine Release Syndrome (CRS) was temporary and mild (Grade 1 or 2), mainly occurring in the first cycle, with no Grade 4 or 5 treatment-related adverse events (TRAEs) observed[87] For JANX008 (EGFR-TRACTr), early data from 11 patients showed encouraging clinical activity, including a confirmed partial response in an NSCLC patient, with a favorable safety profile and only Grade 1 CRS in two subjects and no dose-limiting toxicities[114][116] Manufacturing The company does not own or operate cGMP manufacturing facilities and relies on third-party manufacturers for raw materials and production of its TRACTr and TRACIr molecules[121] The manufacturing process for TRACTr and TRACIr molecules is similar to that of standard monoclonal antibodies, utilizing common Chinese hamster ovary (CHO) cells and standard purification techniques like Protein A affinity chromatography[120] The company has or intends to have a master cell bank for each product candidate, stored in two independent locations to mitigate risk of loss[122] Competition The company faces intense competition from large pharmaceutical and biotechnology companies, including AbbVie, Amgen, AstraZeneca, Bristol Myers Squibb, Johnson & Johnson, Merck & Co., Pfizer, and Roche/Genentech[124][125] For its lead PSMA-TRACTr program, competitors include Amgen, Johnson & Johnson, Regeneron, Novartis, and Bayer, who are developing T-cell engagers, ADCs, CAR-T therapies, and radiopharmaceuticals targeting PSMA[128] For its EGFR-TRACTr program, competition comes from approved therapies like cetuximab and panitumumab, as well as clinical-stage immunotherapies from companies like Amgen/CytomX, AstraZeneca, and Regeneron[129] The company also competes with other biologic prodrug developers such as CytomX Therapeutics, BioAtla, and Xilio Therapeutics[131] Collaborations and License Agreements Janux has a research collaboration and exclusive license agreement with Merck Sharp & Dohme Corp. (Merck) to develop TRACTr candidates against two cancer targets selected by Merck[134] Under the Merck agreement, Janux is eligible to receive up to $500.5 million per target in upfront and milestone payments, plus tiered royalties on sales, with Merck providing research funding[134][136] The company has a cell line license agreement with WuXi Biologics for technology used to manufacture components of its PSMA-TRACTr and EGFR-TRACTr candidates, including a one-time license fee, potential future royalties, and a buyout option[139][140] Intellectual Property The company's intellectual property strategy relies on a combination of patents, trade secrets, and know-how to protect its TRACTr and TRACIr platform technologies and product candidates[142] As of February 16, 2024, the company's patent portfolio includes 2 U.S. patents, 24 pending U.S. applications, 7 pending PCT applications, and 72 foreign patent applications covering its platform technologies, specific product candidates like JANX007 and JANX008, and their components[143] Patents expected to issue from these pending applications are projected to expire between 2038 and 2044, excluding any potential patent term adjustments or extensions[143] Government Regulation The company's products are subject to extensive regulation by the FDA in the United States and comparable authorities in other countries, covering research, development, testing, manufacturing, approval, and marketing[148] The U.S. drug approval process involves preclinical studies, submitting an Investigational New Drug (IND) application, and conducting Phase 1, 2, and 3 clinical trials before submitting a Biologics License Application (BLA) for marketing approval[150][151][155] In the European Union, clinical trials are governed by the Clinical Trials Regulation (CTR), and marketing authorization for biologics typically follows the centralized procedure administered by the European Medicines Agency (EMA)[185][189] The company is also subject to healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act), data privacy laws (e.g., GDPR, CCPA), and regulations concerning pricing and reimbursement, which are critical for commercial success[208][216][232] Employees and Human Capital Resources As of December 31, 2023, Janux had 64 full-time employees, with 47 in research and development and 17 in general and administrative roles[242] The company's human capital objectives include recruiting, retaining, and incentivizing employees through competitive pay, benefits, and equity incentive plans[243][244] Item 1A. Risk Factors The company faces numerous risks, including a limited operating history with significant net losses, reliance on raising additional capital, and the inherent uncertainties of early-stage drug development - Financial Risks: The company has a limited operating history, has incurred net losses since inception ($58.3 million in 2023), and will require substantial additional capital to fund development, which may not be available on favorable terms[248][250] - Development Risks: The company's product candidates are based on novel technologies, making it difficult to predict development costs and timelines, and preclinical and early clinical results are not always predictive of future success, with candidates potentially failing in later-stage trials[258][264] - Operational Risks: Janux relies on third parties for manufacturing and conducting clinical trials, and any failure by these third parties to perform adequately could delay or impair development programs[295][299] - Commercial Risks: The company faces substantial competition from larger, more established companies, and even if approved, products may not achieve market acceptance or favorable pricing and reimbursement, which is critical for commercial success[308][310][352] - Regulatory and Legal Risks: The business is subject to extensive government regulation, healthcare fraud and abuse laws, and data privacy laws, with failure to comply potentially resulting in significant penalties, and the company also faces risks related to obtaining and defending its intellectual property[365][382][393] Item 1B. Unresolved Staff Comments Not applicable - The company reports that there are no unresolved staff comments[501] Item 1C. Cybersecurity The company has implemented information security processes to manage cybersecurity risks, overseen by its IT department and the audit committee of the board of directors, integrating cybersecurity into its overall enterprise risk management program and managing associated vendor risks - The company's IT department, IT Director, legal department, and CFO are responsible for identifying, assessing, and managing cybersecurity threats[503] - Cybersecurity risk management is integrated into the company's overall enterprise risk management program, with oversight provided by the audit committee of the board of directors[505][510] - The company employs various measures to mitigate risks, including an incident response policy, vulnerability management, disaster recovery plans, encryption, and employee training[504] - Processes are in place to manage cybersecurity risks associated with the use of third-party service providers, such as CROs and CMOs[507] Item 2. Properties The company's corporate headquarters, including office and laboratory space, is located in San Diego, California, under a lease agreement that commenced in July 2022 and expires in January 2033 - The company leases its corporate headquarters, which includes office and laboratory space, in San Diego, California[515] - The current lease agreement commenced in July 2022 and is set to expire in January 2033[515] Item 3. Legal Proceedings The company is not currently a party to any material legal proceedings and may become involved in claims arising in the ordinary course of business from time to time - As of the filing date, the company is not a party to any material legal proceedings[516] Item 4. Mine Safety Disclosures Not applicable - This item is not applicable to the company[517] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Market under the symbol "JANX" since its IPO on June 11, 2021, with approximately 24 stockholders of record as of February 29, 2024, and no cash dividends paid or intended to be paid, while net IPO proceeds of approximately $204.2 million remain unused and held in cash, cash equivalents, and marketable securities - The company's common stock has been publicly traded on the Nasdaq Global Market under the symbol "JANX" since its IPO on June 11, 2021[520] - The company has never declared or paid cash dividends and intends to retain all future earnings to support operations and business growth[523] - The IPO in June 2021 generated gross proceeds of $222.9 million, with net proceeds of approximately $204.2 million after deducting underwriting discounts and offering costs[526] - As of December 31, 2023, the company has not used any of the proceeds from its IPO, which are held in cash, cash equivalents, and marketable securities[527] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2023, Janux reported a net loss of $58.3 million, primarily due to a $10.7 million increase in interest income offsetting a $5.4 million increase in total operating expenses, with research and development expenses rising to $54.9 million and general and administrative expenses to $26.1 million, funded by cash on hand, Merck collaboration proceeds, and a July 2023 offering that raised $56.5 million, resulting in $344.8 million in cash, cash equivalents, restricted cash, and short-term investments, believed to be sufficient for at least the next 12 months Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 (in thousands) | | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $8,083 | $8,612 | $(529) | | Research and development | $54,922 | $53,441 | $1,481 | | General and administrative | $26,140 | $22,262 | $3,878 | | Total operating expenses | $81,062 | $75,703 | $5,359 | | Loss from operations | $(72,979) | $(67,091) | $(5,888) | | Other income | $14,686 | $4,032 | $10,654 | | Net loss | $(58,293) | $(63,059) | $4,766 | Research and development expenses increased by $1.5 million in 2023, primarily due to higher indirect costs (personnel, facilities) and increased spending on the JANX007 program, offset by decreased spending on JANX008 and other preclinical programs[551] General and administrative expenses increased by $3.8 million in 2023, mainly driven by higher stock-based compensation ($2.2 million) and increased personnel and facilities costs ($2.0 million)[552] Other income increased by $10.7 million, primarily due to higher interest income earned on the company's investments as a result of rising interest rates[553] Liquidity and Capital Resources As of December 31, 2023, the company had $344.8 million in cash, cash equivalents, restricted cash, and short-term investments[554] In July 2023, the company raised net proceeds of $56.5 million from an underwritten offering of common stock and pre-funded warrants[558] In March 2024, subsequent to the reporting period, the company closed another underwritten offering, raising estimated net proceeds of $320.2 million[559] Summary of Cash Flows (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash used in Operating activities | $(50,575) | $(42,922) | | Net cash (used in) provided by Investing activities | $(41,194) | $58,266 | | Net cash provided by Financing activities | $59,548 | $500 | Management believes existing cash, cash equivalents, and short-term investments are sufficient to fund operations and capital expenditures for at least the next 12 months from the report's filing date[565] Critical Accounting Policies and Estimates Collaboration Revenue: Revenue from the Merck agreement is recognized over time based on the progress of research services, measured by the proportion of actual Full-Time Equivalent (FTE) employees utilized against the total estimated FTEs for the project[574][581] Variable consideration, such as development and regulatory milestone payments, is constrained and not included in the transaction price until achievement is probable and a significant revenue reversal would not occur[578] Accrued Research and Development Expenses: The company estimates accrued R&D expenses based on services received and efforts expended, which involves reviewing contracts and communicating with personnel and vendors to determine the level of service performed[584][585] Stock-Based Compensation: Expense is calculated using the Black-Scholes option-pricing model, which requires subjective assumptions for inputs like expected volatility and expected term[587][588] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable as the company is a smaller reporting company - This item is not applicable as the company qualifies as a smaller reporting company[593] Item 8. Financial Statements and Supplementary Data This section contains the company's audited financial statements for the years ended December 31, 2023 and 2022, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows, along with the accompanying notes and the report from the independent registered public accounting firm, Ernst & Young LLP Financial Statements Balance Sheet Highlights (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents, and short-term investments | $344,028 | $327,016 | | Total Assets | $380,407 | $364,010 | | Total Liabilities | $36,058 | $43,270 | | Total Stockholders' Equity | $344,349 | $320,740 | | Accumulated Deficit | $(168,763) | $(110,470) | Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Collaboration revenue | $8,083 | $8,612 | | Total operating expenses | $81,062 | $75,703 | | Net loss | $(58,293) | $(63,059) | | Net loss per share, basic and diluted | $(1.32) | $(1.52) | Notes to Financial Statements The company has incurred net losses since inception, with an accumulated deficit of $168.8 million as of December 31, 2023, but management has concluded that there is sufficient capital to fund operations for at least 12 months from the issuance date of the financial statements[612][613] As of December 31, 2023, the company held $324.8 million in short-term investments, primarily in U.S. Treasury securities, U.S. agency bonds, and commercial paper[619][628] The company has a noncancelable operating lease for its San Diego office and lab space, with total future minimum lease payments of $34.9 million as of December 31, 2023[676][678] As of December 31, 2023, the company had federal and state net operating loss (NOL) carryforwards of $49.9 million and $117.6 million, respectively, and maintains a full valuation allowance against its deferred tax assets[722][723] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable - The company reports no changes in or disagreements with its accountants on accounting and financial disclosure[732] Item 9A. Controls and Procedures Management, including the CEO and Acting CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2023, also assessing and concluding on the effectiveness of internal control over financial reporting, with no material changes made during the fourth quarter of 2023, and an attestation report from the independent registered public accounting firm is not included as the company is an emerging growth company - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2023[733] - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[734] - The company is exempt from providing an auditor's attestation report on internal control over financial reporting because it qualifies as an "emerging growth company" under the JOBS Act[735] Item 9B. Other Information During the fourth quarter of 2023, no director or officer of the company adopted or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2023[736] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable - This item is not applicable to the company[737] PART III Item 10. Directors, Executive Officers and Corporate Governance Information required by this item will be incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The required information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's forthcoming 2024 Proxy Statement[739] Item 11. Executive Compensation Information required by this item will be incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The required information regarding executive compensation is incorporated by reference from the company's forthcoming 2024 Proxy Statement[741] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item will be incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The required information regarding security ownership is incorporated by reference from the company's forthcoming 2024 Proxy Statement[742] Item 13. Certain Relationships and Related Transactions, and Director Independence Information required by this item will be incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The required information regarding related transactions and director independence is incorporated by reference from the company's forthcoming 2024 Proxy Statement[743] Item 14. Principal Accounting Fees and Services Information required by this item will be incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders - The required information regarding principal accounting fees and services is incorporated by reference from the company's forthcoming 2024 Proxy Statement[744] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements filed as part of the report and provides a list of all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications - This item includes the list of financial statements and the report of the independent registered public accounting firm[746] - A list of exhibits filed with the report is provided, including the company's certificate of incorporation, bylaws, material contracts (such as the Merck collaboration and WuXi Biologics license), and executive employment agreements[748][749] Item 16. Form 10-K Summary Not applicable - This item is not applicable to the company[751]