MEI Pharma(MEIP) - 2024 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the period Condensed Consolidated Financial Statements (Unaudited) The unaudited financial statements for Q3 2023 reflect increased revenues and net income, driven by deferred revenue recognition, alongside decreased assets and liabilities, and higher stockholders' equity Condensed Consolidated Balance Sheets The balance sheet shows a significant decrease in total liabilities and an increase in stockholders' equity, primarily due to deferred revenue recognition Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 (in thousands) | June 30, 2023 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $3,372 | $16,906 | ($13,534) | | Short-term investments | $78,830 | $83,787 | ($4,957) | | Total Assets | $101,251 | $120,809 | ($19,558) | | Total current liabilities | $8,564 | $20,340 | ($11,776) | | Deferred revenue, long-term | $0 | $64,545 | ($64,545) | | Total Liabilities | $19,890 | $96,185 | ($76,295) | | Total Stockholders' Equity | $81,361 | $24,624 | $56,737 | - The significant decrease in total liabilities and corresponding increase in stockholders' equity is primarily due to the recognition of $64.5 million in long-term deferred revenue following the termination of the KKC Commercialization Agreement[10][70] Condensed Consolidated Statements of Operations The statement of operations shows a significant shift to net income driven by substantial revenue recognition and reduced operating expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $65,297 | $8,730 | | Research and development | $3,485 | $19,463 | | General and administrative | $6,531 | $7,486 | | Income (loss) from operations | $55,281 | ($18,219) | | Net income (loss) | $56,374 | ($16,624) | | Net income (loss) per share | $8.46 | ($2.49) | - The company reported a net income of $56.4 million for the quarter, a stark contrast to the $16.6 million net loss in the prior-year period, driven by the recognition of $64.5 million in revenue from the terminated KKC collaboration agreement[13][70] - Operating expenses decreased significantly to $10.0 million from $26.9 million year-over-year, primarily due to a sharp reduction in research and development expenses from $19.5 million to $3.5 million[13] Condensed Consolidated Statements of Cash Flows Cash flow from operations increased due to non-cash revenue recognition, leading to a net decrease in cash and equivalents Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,491) | ($14,782) | | Net cash provided by investing activities | $4,957 | $13,735 | | Net cash (used in) provided by financing activities | $0 | ($40) | | Net decrease in cash and cash equivalents | ($13,534) | ($1,087) | | Cash and cash equivalents at end of period | $3,372 | $14,653 | - Net cash used in operating activities was $18.5 million, an increase from $14.8 million in the prior year, primarily driven by operating expenses as the large reported net income included a $64.9 million non-cash recognition of deferred revenue[19][145] Notes to Condensed Consolidated Financial Statements Key notes include a Cooperation Agreement with investors, the company's liquidity position, and the termination of the KKC collaboration agreement - On October 31, 2023, the company entered a Cooperation Agreement with Anson Funds and Cable Car Capital, which includes a special cash dividend of $1.75 per share, a potential second return of capital, and board changes[23][90] - As of September 30, 2023, the company had $82.2 million in cash, cash equivalents, and short-term investments, which management believes is sufficient to fund operations for at least the next 12 months[26] - The global License, Development and Commercialization Agreement with Kyowa Kirin Co., Ltd. (KKC) for zandelisib was terminated on July 14, 2023, resulting in the recognition of the remaining long-term deferred revenue of $64.5 million as revenue from collaboration agreements in the quarter[67][70] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic realignment to focus on clinical assets voruciclib and ME-344, significant capital return to shareholders, and the financial impact of the terminated KKC agreement and reduced R&D expenses Overview The company, a clinical-stage pharmaceutical firm, realigned its focus on two key cancer therapies and entered a Cooperation Agreement with investors - The company is a clinical-stage pharmaceutical firm focused on developing cancer therapies, with a pipeline including voruciclib (CDK9 inhibitor) and ME-344 (mitochondrial inhibitor)[98] - Following a realignment in December 2022, the company reduced its workforce by 61% to focus on its two clinical assets, voruciclib and ME-344[98] - A Cooperation Agreement was signed on October 31, 2023, with Anson Funds and Cable Car Capital, resulting in a $1.75 per share dividend, board changes, and the formation of a Capital Allocation Committee[99][103] Clinical Development Programs The company is advancing voruciclib and ME-344 in clinical trials, while discontinuing the zandelisib program - Voruciclib (CDK9 Inhibitor): Currently in a Phase 1 trial for AML and B-cell malignancies, both as a single agent and in combination with venetoclax, with clinical data expected in early calendar 2024[103][110] - ME-344 (Mitochondrial Inhibitor): Being advanced in a Phase 1b study in combination with bevacizumab for relapsed colorectal cancer, with safety and efficacy data from the first cohort expected in the first half of calendar 2024[115][126] - Zandelisib (PI3Kδ Inhibitor): Global development was discontinued following FDA guidance discouraging a filing based on single-arm trial data, and the development and commercialization agreement with KKC was formally terminated on July 14, 2023[131][133] Results of Operations The company's operations show a significant revenue increase due to deferred revenue recognition and a substantial decrease in R&D expenses Revenue Comparison (in millions) | Period | Revenue (in millions) | Change (in millions) | Reason | | :--- | :--- | :--- | :--- | | Q3 2023 | $65.3 | +$56.6 | Recognition of deferred revenue from terminated U.S. License with KKC | | Q3 2022 | $8.7 | | Cost sharing from KKC agreement | Research & Development Expenses (in thousands) | Program | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | zandelisib | $449 | $11,606 | ($11,157) | | voruciclib | ($335) | $733 | ($1,068) | | ME-344 | $1,220 | $785 | $435 | | Other | $2,151 | $6,339 | ($4,188) | | Total R&D | $3,485 | $19,463 | ($15,978) | - The decrease in R&D expenses was primarily driven by an $11.2 million reduction in zandelisib costs due to the program's discontinuation[139] - General and administrative expenses decreased by $1.0 million, mainly due to lower personnel costs from reduced headcount, partially offset by increased professional fees related to stockholder activities[140] Liquidity and Capital Resources The company maintains sufficient liquidity to fund operations for at least 12 months, with future capital requirements impacted by the Cooperation Agreement - As of September 30, 2023, the company had $82.2 million in cash, cash equivalents, and short-term investments[142] - Management believes current resources are sufficient to fund operations for at least 12 months from the report's issuance date[142] - Future capital requirements will be impacted by the Cooperation Agreement, which mandates a dividend payment of $1.75 per share, reimbursement of up to $1.2 million in legal fees, and a potential second capital return of approximately $9.33 million[148] Quantitative and Qualitative Disclosures about Market Risk The company's market risk primarily stems from interest rate fluctuations on U.S. government securities, mitigated by high-credit-quality institutions, and is not considered material - The company's market risk is primarily related to interest rates on its cash and short-term investments[156] - Investments are limited to U.S. government securities, and deposits are held with high-credit-quality financial institutions to mitigate default risk[156][157] - The company does not consider the effects of interest rate movements to be a material risk[158] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[159][160] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[161] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Legal Proceedings The company reported no legal proceedings during the period - None[164] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2023 Annual Report - There have been no material changes in risk factors from those included in the 2023 Annual Report[165] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[165] Defaults upon Senior Securities The company reported no defaults upon senior securities - None[166] Mine Safety Disclosures This item is not applicable to the company - Not applicable[167] Other Information The company reported no other information - None[168] Exhibits This section lists key exhibits filed with the Form 10-Q, including the KKC Termination Agreement and the Cooperation Agreement with investors - Key exhibits filed include the Termination Agreement with Kyowa Kirin Co., Ltd. and the Cooperation Agreement dated October 31, 2023[171]