MEI Pharma(MEIP) - 2022 Q4 - Annual Report

Part I Business MEI Pharma is a late-stage pharmaceutical company focused on developing and commercializing novel cancer therapies - The company's portfolio consists of three clinical-stage drug candidates: zandelisib (PI3Kδ inhibitor), voruciclib (CDK9 inhibitor), and ME-344 (mitochondrial inhibitor)[18] - MEI Pharma's business model focuses on licensing or acquiring promising cancer agents and then creating value through development, commercialization, and strategic partnerships[16][17] Clinical Development Programs The company's clinical pipeline, led by zandelisib, advances through various phases for B-cell malignancies and solid tumors Clinical Pipeline Overview | Investigational Agent | Therapeutic Area | Status | | :--- | :--- | :--- | | Zandelisib (PI3Kδ Inhibitor) | Follicular & Marginal Zone Lymphomas | Phase 3 (COASTAL Study) | | | Relapsed/refractory FL/MZL | Phase 2 (TIDAL Study) | | | B-Cell Malignancies | Phase 1/1b (Combination Studies) | | Voruciclib (CDK9 Inhibitor) | B-Cell Malignancies & AML | Phase 1 (Dose & Schedule Trial) | | ME-344 (Mitochondrial Inhibitor) | Solid Tumors (Colorectal Cancer) | Planned Phase 1b (with bevacizumab) | - Following FDA feedback discouraging a marketing application based on the single-arm Phase 2 TIDAL study, the company is focusing on the randomized Phase 3 COASTAL study to support global marketing applications for zandelisib[23][25] - Data from the TIDAL study in follicular lymphoma (FL) showed a 70.3% overall response rate (ORR) and a 35.2% complete response rate (CR) in the primary efficacy population of 91 patients[22][47] - Voruciclib is being evaluated in a Phase 1 trial as a monotherapy and in combination with venetoclax for AML and B-cell malignancies, with plans to initiate the combination study by the end of calendar year 2022[59][60] - ME-344 is planned to advance into a Phase 1b study in combination with bevacizumab for relapsed colorectal cancer in the first half of calendar year 2023[71] KKC License, Development and Commercialization Agreement MEI Pharma and KKC have a global agreement for zandelisib, co-developing in the U.S. with profit sharing and KKC holding ex-U.S. rights - MEI and KKC will co-develop and co-promote zandelisib in the U.S., sharing profits and costs on a 50-50 basis; MEI will record all revenue from U.S. sales[31] - KKC has exclusive commercialization rights for zandelisib outside of the U.S.[30] KKC Agreement Financial Terms | Term | Amount/Details | | :--- | :--- | | Upfront Payment | $100 million | | Potential Milestones | Up to ~$582.5 million (development, regulatory, commercial) | | Ex-U.S. Royalties | Tiered, beginning in the teens | | Milestones Received (FY2022) | $20 million (two $10M payments for COASTAL study initiation) | Competition The company faces intense competition from larger, more resourced pharmaceutical and biotechnology companies developing similar drug candidates - The company faces competition from large pharmaceutical and biotechnology companies, universities, and research institutions that may have greater resources and experience[74] - Competitors are developing products for the same indications, and some are more advanced in development, potentially reaching the market sooner[73] Intellectual Property MEI Pharma protects its proprietary technology through a global patent portfolio for its drug candidates, with key patents expiring between 2024 and 2037 Patent Portfolio Summary (as of report date) | Category | U.S. Issued | Foreign Issued | U.S. Pending | Foreign Pending | | :--- | :--- | :--- | :--- | :--- | | Total | ~36 | ~209 | 17 | 137 | - Key U.S. composition of matter patents for zandelisib are projected to expire in January 2031 and December 2032[76] - Key U.S. composition of matter patents for voruciclib are projected to expire between April 2024 and December 2037[77] - Key U.S. composition of matter patents for ME-344 are expected to expire in March 2027 and November 2031[80] Government Regulation The company's operations are subject to extensive FDA and international regulations, covering drug development, clinical trials, and approval processes - The FDA drug approval process is extensive, involving preclinical studies, an Investigational New Drug (IND) application, and three sequential phases of human clinical trials before submitting a New Drug Application (NDA)[88][92][94] - Zandelisib has received Fast Track designation from the FDA for treating adult patients with r/r follicular lymphoma who have received at least two prior systemic therapies[115] - The company has also received orphan-drug designation for zandelisib for the treatment of follicular lymphoma, which may provide financial incentives and a period of market exclusivity if approved[21][125] - The report notes increasing scrutiny on the accelerated approval pathway, with the FDA and public favoring randomized trials over single-arm studies to support approvals, which directly impacted the development strategy for zandelisib[113] Human Capital Management As of June 30, 2022, MEI Pharma had 102 employees and focuses on attracting and retaining talent through competitive compensation and a positive work environment - As of June 30, 2022, the company had 102 employees[133] - The company's human capital strategy includes offering competitive compensation, benefits, and stock options to attract and retain talent[134][135] Risk Factors The company faces significant risks including Nasdaq delisting, geopolitical instability, funding needs, clinical trial uncertainties, regulatory hurdles, and internal control weaknesses - The company is not in compliance with the Nasdaq minimum bid price requirement of $1.00 per share and could be delisted if compliance is not regained[140][144] - The military conflict in Russia and Ukraine has led to the suspension of planned clinical trial sites for the COASTAL trial in those countries, potentially affecting recruitment timelines[140][152] - Final regulatory approval may be delayed or prevented, as highlighted by the FDA's recommendation against filing for zandelisib based on single-arm data and its emphasis on randomized trials for PI3K inhibitors[140][185] - A material weakness was identified in internal control over financial reporting related to revenue recognition, leading to a restatement of prior financial statements; the company is in the process of remediation[142][258] - The company relies heavily on its collaboration with KKC for the development and commercialization of zandelisib; failure by KKC to meet its obligations could materially harm the program[140][167] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None Properties The company leases approximately 45,100 square feet of office space in San Diego, California, under a lease agreement that expires in November 2029 - The company leases approximately 45,100 square feet of office space in San Diego, CA, with the lease expiring in November 2029[287] Legal Proceedings The company reports that there are no legal proceedings - None Mine Safety Disclosures This item is not applicable to the company - Not applicable Part II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities MEI Pharma's common stock trades on Nasdaq under 'MEIP', with 133.3 million shares outstanding as of September 2022, and no plans for cash dividends - The company's common stock is listed on the Nasdaq Capital Market under the symbol 'MEIP'[291] - As of September 6, 2022, there were 133,260,865 shares of common stock outstanding[292] - The company has never paid cash dividends and does not plan to in the foreseeable future[294] [Reserved] This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2022, revenue increased to $40.7 million, R&D expenses rose to $85.6 million, and the net loss was $54.5 million, with $153.3 million in cash and Nasdaq non-compliance noted Financial Highlights (Fiscal Years Ended June 30) | Metric (in millions) | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $40.7 | $34.8 | | Research and Development | $85.6 | $69.4 | | General and Administrative | $30.5 | $24.4 | | Loss from Operations | $(75.5) | $(60.4) | | Net Loss | $(54.5) | $(41.3) | - As of June 30, 2022, the company had $153.3 million in cash, cash equivalents, and short-term investments, which management believes is sufficient to fund operations for at least 12 months[331] - On May 9, 2022, the company received a notice from Nasdaq for failing to meet the minimum $1.00 per share bid price requirement, with a compliance period ending November 7, 2022[303][304] Results of Operations In FY2022, revenue increased by $5.9 million, R&D expenses rose by $16.2 million to $85.6 million, and G&A expenses increased by $6.1 million - Revenue increased by $5.9 million in FY2022, primarily from increased reimbursement of R&D expenses from KKC for the zandelisib program[325] Research and Development Expenses by Program (in thousands) | Program | FY 2022 | FY 2021 | | :--- | :--- | :--- | | zandelisib | $54,764 | $46,052 | | voruciclib | $5,475 | $2,939 | | ME-344 | $2,915 | $960 | | Other | $22,487 | $19,447 | | Total | $85,641 | $69,398 | - General and administrative expenses increased by $6.1 million in FY2022 due to higher personnel costs ($2.5M), professional services ($2.0M), and corporate overhead ($1.6M)[327] Liquidity and Capital Resources As of June 30, 2022, the company had $153.3 million in cash, with net cash used in operations of $48.7 million and $49.1 million provided by financing activities Cash Flow Summary (Year Ended June 30, 2022, in millions) | Cash Flow Category | Amount | | :--- | :--- | | Net Cash Used in Operating Activities | $(48.7) | | Net Cash Provided by Investing Activities | $6.9 | | Net Cash Provided by Financing Activities | $49.1 | - During FY2022, the company raised $48.7 million in net proceeds from an underwritten registered offering of common stock[307][336] - The company has an effective shelf registration statement with $123.4 million available and an At-The-Market (ATM) facility with $60.0 million available as of June 30, 2022[308][309] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rates on its U.S. government securities, which is not considered material, and inflation's impact on clinical trial costs is noted - The company's market risk is primarily related to interest rates on its cash and investments, which are held in U.S. government securities; this risk is not considered material[345][347] - Inflation is acknowledged to increase clinical trial costs but is not believed to have had a material effect on financial results for the fiscal years 2020, 2021, or 2022[348] Financial Statements and Supplementary Data Audited financial statements for FY2020-2022 are presented, with critical audit matters noted for accrued expenses and KKC revenue recognition, showing total assets of $177.8 million and a net loss of $54.5 million in FY2022 - The independent auditor identified two critical audit matters: 1) Estimation of accrued pre-clinical and clinical trial expenses, and 2) Revenue recognition for the KKC License, Development and Commercialization Agreement[356][360] Balance Sheet Summary (as of June 30, in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Cash, cash equivalents and short-term investments | $153,252 | $153,426 | | Total Assets | $177,840 | $174,098 | | Total Liabilities | $125,427 | $124,632 | | Total Stockholders' Equity | $52,413 | $49,466 | Statement of Operations Summary (Year Ended June 30, in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $40,697 | $34,796 | $27,756 | | Total Operating Expenses | $116,181 | $95,220 | $53,453 | | Net Loss | $(54,454) | $(41,314) | $(47,173) | | Net Loss Per Share (Basic) | $(0.44) | $(0.37) | $(0.52) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None Controls and Procedures Management concluded that disclosure controls were ineffective as of June 30, 2022, due to a material weakness in revenue recognition, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2022[466] - A material weakness was identified related to the inadequate design and implementation of controls for revenue recognition concerning the KKC license agreement, which was in the process of remediation as of June 30, 2022[472] - The company is implementing a remediation plan that includes enhanced contract review and more detailed review of its revenue recognition models[473] Other Information The company reports no other information - None Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the proxy statement, and the company has a Code of Business and Ethics - The required information is incorporated by reference from the company's proxy statement[481] - The company has adopted a Code of Business and Ethics policy applicable to all directors and employees[480] Executive Compensation The information required for this item regarding executive compensation is incorporated by reference from the company's definitive proxy statement - The required information is incorporated by reference from the Proxy Statement[482] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item regarding security ownership is incorporated by reference from the company's definitive proxy statement - The required information is incorporated by reference from the Proxy Statement[483] Certain Relationships and Related Transactions, and Director Independence The information required for this item regarding related transactions and director independence is incorporated by reference from the company's definitive proxy statement - The required information is incorporated by reference from the Proxy Statement[484] Principal Accountant Fees and Services The information required for this item regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement - The required information is incorporated by reference from the Proxy Statement[485] Part IV Exhibits, Financial Statement Schedules This section lists financial statements and provides an index of all exhibits filed with the Form 10-K, including key corporate and contractual documents - This section references the Financial Statements under Item 8 and lists all exhibits filed with the report[488][490] Form 10-K Summary The company reports that there is no Form 10-K summary - None