MEI Pharma(US:MEIP)2024-02-13 22:00PART I FINANCIAL INFORMATION Condensed Consolidated Financial Statements Unaudited financial statements detail the company's financial position, operations, equity, and cash flows, highlighting the KKC agreement termination, expense reductions, and a special dividend Condensed Consolidated Balance Sheets Total assets decreased, liabilities significantly reduced due to deferred revenue recognition, and stockholders' equity increased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 (Unaudited) | June 30, 2023 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $5,174 | $16,906 | | Short-term investments | $54,306 | $83,787 | | Total current assets | $66,172 | $107,528 | | Total Assets | $78,538 | $120,809 | | Current Liabilities | | | | Total current liabilities | $8,038 | $20,340 | | Deferred revenue, long-term | $— | $64,545 | | Total Liabilities | $19,050 | $96,185 | | Total Stockholders' Equity | $59,488 | $24,624 | Condensed Consolidated Statements of Operations Net loss for three months due to zero revenue, while six-month net income increased from one-time deferred revenue recognition, with R&D and G&A expenses significantly decreasing in both periods Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $— | $32,735 | $65,297 | $41,465 | | Research and Development | $3,912 | $15,313 | $7,397 | $34,776 | | General and Administrative | $8,018 | $8,496 | $14,549 | $15,982 | | (Loss) Income from Operations | $(11,930) | $8,926 | $43,351 | $(9,293) | | Net (Loss) Income | $(11,063) | $10,253 | $45,311 | $(6,371) | | Net (Loss) Income per Share | $(1.66) | $1.54 | $6.80 | $(0.96) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $59.5 million, driven by net income, partially offset by an $11.7 million special cash dividend - A special cash dividend of $1.75 per share, totaling $11.7 million, was declared and paid during the quarter ended December 31, 20231422 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $29.5 million, offset by investing activities, with financing activities using $11.7 million for dividends, resulting in a net cash decrease Cash Flow Summary for the Six Months Ended December 31 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(29,546) | $(29,052) | | Net cash provided by investing activities | $29,474 | $24,269 | | Net cash used in financing activities | $(11,660) | $(40) | | Net decrease in cash and cash equivalents | $(11,732) | $(4,823) | | Cash and cash equivalents at end of period | $5,174 | $10,917 | Notes to Condensed Consolidated Financial Statements Notes detail significant events and accounting policies, including the Cooperation Agreement, KKC agreement termination, workforce reduction, and sufficient liquidity for the next 12 months - Entered into a Cooperation Agreement with Anson Funds and Cable Car Capital, resulting in a special cash dividend of $1.75 per share ($11.7 million total) paid on December 6, 20232022 - The company believes its cash, cash equivalents, and short-term investments of $59.5 million as of December 31, 2023, are sufficient to fund operations for at least the next 12 months23 - The global license agreement with Kyowa Kirin (KKC) for zandelisib was mutually terminated on July 14, 2023. This resulted in the recognition of the remaining $64.5 million in long-term deferred revenue during the quarter ended September 30, 20236972 - A staggered workforce reduction affecting an aggregate of 51% of employees was implemented, resulting in one-time employee termination benefit charges61 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results, highlighting the clinical pipeline, strategic shifts, and the financial impact of the KKC agreement termination Overview MEI Pharma, a clinical-stage company, focuses on cancer therapies with a pipeline including voruciclib and ME-344, and believes current cash is sufficient for at least 12 months following a Cooperation Agreement - The company's pipeline is focused on voruciclib (oral CDK9 inhibitor) and ME-344 (intravenous OXPHOS inhibitor)98 - A Cooperation Agreement was executed with activist investors, leading to a $1.75 per share dividend, appointment of new directors, and formation of a Capital Allocation Committee100104 - Management asserts that cash on hand is sufficient to fund operations for at least 12 months and through key clinical data readouts for voruciclib and ME-34499 Clinical Development Programs Clinical development focuses on voruciclib (Phase 1, data expected Q1 2024) and ME-344 (Phase 1b, data expected H1 2024), following the discontinuation of the zandelisib program - Voruciclib (CDK9 Inhibitor): Currently in a Phase 1 trial for AML and B-cell malignancies, both as a monotherapy and in combination with venetoclax. Clinical data from the dose escalation portion is expected in Q1 2024103111 - ME-344 (OXPHOS Inhibitor): Being evaluated in a Phase 1b study in combination with bevacizumab for relapsed colorectal cancer. Safety and efficacy data from the first cohort is expected in H1 2024101129 - Zandelisib (PI3Kδ Inhibitor): Global development was discontinued following FDA guidance discouraging filings based on single-arm trial data. The development and commercialization agreement with KKC was terminated on July 14, 2023132134 Results of Operations Three-month revenue was zero due to KKC termination, while six-month revenue increased from one-time deferred revenue recognition, with R&D and G&A expenses significantly decreasing in both periods R&D Expenses by Program (in thousands) | Program | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | zandelisib | $(58) | $8,265 | $391 | $19,871 | | voruciclib | $523 | $428 | $188 | $1,161 | | ME-344 | $1,385 | $64 | $2,605 | $849 | | Other | $2,062 | $6,556 | $4,213 | $12,895 | | Total R&D | $3,912 | $15,313 | $7,397 | $34,776 | - The decrease in R&D and G&A expenses was primarily due to the discontinuation of the zandelisib program and significant reductions in workforce140141145146 - The increase in revenue for the six-month period was due to the recognition of all remaining deferred revenue ($64.5 million) associated with the terminated KKC Commercialization Agreement143 Liquidity and Capital Resources The company held $59.5 million in cash and investments, deemed sufficient for the next 12 months, with net cash used in operations at $29.5 million, and a potential second capital return - The company held $59.5 million in cash, cash equivalents, and short-term investments as of December 31, 2023148 - Net cash used in operating activities for the six months ended December 31, 2023, was $29.5 million150 - A potential second return of capital, not to exceed $9.33 million, may be authorized by the Board depending on the outcome of the ME-344 Phase 1b trial153 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on cash and short-term investments, which management does not consider material - The company's market risk is primarily from interest rate fluctuations on its cash and short-term investments160 - The company mitigates risk by investing in high-credit-quality financial institutions and U.S. government securities, and does not consider interest rate risk to be material161162 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2023, with no material changes in internal control over financial reporting - As of December 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective163 - No changes occurred during the fiscal quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting164 PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - There are no legal proceedings to report167 Risk Factors No material changes to risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K were reported - No material changes in risk factors from the 2023 Annual Report on Form 10-K were reported168 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities169 Defaults upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities170 Other Information The company reported no other information required to be disclosed under this item - There is no other information to report172 Exhibits Exhibits filed with the Form 10-Q include certifications by the CEO and CFO, and various agreements such as the Termination Agreement with Kyowa Kirin and the Cooperation Agreement - Exhibits filed include the Termination Agreement with Kyowa Kirin, the Cooperation Agreement, and officer certifications175