MEI Pharma(MEIP) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Condensed Financial Statements (Unaudited) The company's quarterly financials show decreased assets and equity, with higher revenue but a continued net loss and increased cash burn Condensed Balance Sheets Total assets and stockholders' equity declined quarter-over-quarter, driven by a reduction in cash and short-term investments Condensed Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Jun 30, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents and short-term investments | $138,367 | $153,252 | | Total current assets | $148,907 | $167,126 | | Total assets | $163,583 | $177,840 | | Total current liabilities | $23,435 | $24,443 | | Total liabilities | $126,275 | $125,427 | | Total stockholders' equity | $37,308 | $52,413 | Condensed Statements of Operations Quarterly revenue increased year-over-year while operating expenses decreased, resulting in a slightly narrowed net loss Condensed Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue | $8,730 | $7,757 | | Research and development | $19,463 | $19,953 | | General and administrative | $7,486 | $7,909 | | Loss from operations | $(18,219) | $(20,105) | | Net loss | $(16,624) | $(17,510) | | Net loss per share (Basic & Diluted) | $(0.12) | $(0.16) / $(0.18) | Condensed Statements of Cash Flows Net cash used in operating activities increased significantly year-over-year, leading to a net decrease in cash for the quarter Condensed Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,782) | $(7,721) | | Net cash provided by investing activities | $13,735 | $14,993 | | Net cash used in financing activities | $(40) | $(194) | | Net (decrease) increase in cash and cash equivalents | $(1,087) | $7,078 | Notes to Condensed Financial Statements Notes detail the clinical pipeline, liquidity, revenue sources from the KKC agreement, and a Nasdaq bid price deficiency - The company is a late-stage pharmaceutical firm with a portfolio of three clinical-stage cancer therapies: zandelisib, voruciclib, and ME-344[20][24] - As of September 30, 2022, the company had $138.4 million in cash, cash equivalents, and short-term investments, which management believes is sufficient to fund operations for at least the next 12 months[22] - Quarterly revenue of $8.7 million was primarily derived from the license agreement with Kyowa Kirin Co, Ltd (KKC)[37] - The company received a Nasdaq deficiency notice for its stock price falling below the $1.00 minimum bid requirement, with compliance extended to May 8, 2023[75][76] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical program shifts due to FDA guidance, financial results, liquidity, and a temporary supply chain issue Clinical Development Programs The clinical pipeline strategy has shifted for zandelisib due to FDA feedback, while other programs continue to advance - Zandelisib: Following FDA feedback discouraging a filing based on the single-arm Phase 2 TIDAL study, the company is focusing on the ongoing randomized Phase 3 COASTAL study for potential marketing applications[111][113] - Zandelisib Supply Chain Issue: A temporary issue with zandelisib blister pack labeling has paused new patient enrollment, expected to delay COASTAL enrollment by approximately three months[141] - Voruciclib: A Phase 1 study is evaluating voruciclib in combination with venetoclax in patients with Acute Myeloid Leukemia (AML), expected to start by the end of calendar year 2022[148][149] - ME-344: The company plans to advance ME-344 in a Phase 1b study for relapsed colorectal cancer in the first half of calendar year 2023[161] Results of Operations Quarterly revenue grew year-over-year while both R&D and G&A expenses decreased, driven by lower study and compensation costs Comparison of Operations (in thousands) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue | $8,730 | $7,757 | | Research and development expenses | $19,463 | $19,953 | | General and administrative expenses | $7,486 | $7,909 | - The decrease in R&D costs was primarily due to lower costs for the zandelisib TIDAL study, as enrollment was completed before the quarter[165] - The decrease in G&A expenses was mainly due to a $1.0 million decrease in share-based compensation and a $0.4 million decrease in external professional services and legal costs[167] Liquidity and Capital Resources The company holds sufficient cash for the next 12 months despite an increased operating cash burn and a history of losses - The company has accumulated losses of $390.8 million since inception and expects to incur future operating losses[169] - The increase in net cash used in operating activities from $7.7 million in Q3 2021 to $14.8 million in Q3 2022 primarily reflects the non-recurrence of a $10.0 million milestone payment received in the prior year[171] - Future funding will likely be pursued through equity or debt financing, license agreements, or strategic partnerships[170] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk from interest rate fluctuations on its investments is not considered material - Market risk is primarily related to interest rates on cash and short-term investments[185] - The company mitigates default risk by using high-credit-quality financial institutions and investing in U.S. government securities[186] - The company does not consider the effects of interest rate movements to be a material risk[187] Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in revenue recognition, with a remediation plan underway - Disclosure controls and procedures were deemed not effective due to a material weakness in internal control over financial reporting[189] - The material weakness is related to inadequate controls for evaluating and monitoring revenue recognition from license agreements[189] - A remediation plan is being implemented, which includes enhanced contract review and quarterly evaluation of revenue balances[191] PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings for the period - None[195] Risk Factors No material changes to risk factors were reported since the last Annual Report - There have been no material changes in our risk factors from those included in our 2022 Annual Report[196] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities - None[197] Exhibits The report lists all exhibits filed with the SEC, including officer certifications and XBRL data - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL data files (101 series)[203]