Nuvectis Pharma(NVCT) - 2021 Q4 - Annual Report

Part I Business Nuvectis Pharma is a clinical-stage biopharmaceutical company developing precision oncology medicines, with lead candidates NXP800 and NXP900, relying on third-party manufacturing and a small team - The company is a biopharmaceutical entity specializing in the development of innovative precision medicines for treating significant unmet medical needs in oncology[24] - The company's strategy includes establishing a leadership position in HSF1 pathway inhibition, advancing NXP800 and NXP900 through clinical development, maximizing their therapeutic potential, and expanding the oncology pipeline through business development[51] - Nuvectis relies entirely on third-party manufacturers (CMOs) for its product candidates, including a single-source manufacturer for both the NXP800 drug substance and drug product[71] - As of March 22, 2022, the company had 8 full-time employees and relies on expert consultants and vendors for various business functions[89] Product Pipeline Overview | Product Candidate | Target Pathway | Development Stage | Initial Indications | | :--- | :--- | :--- | :--- | | NXP800 | HSF1 Pathway Inhibitor | Phase 1a (initiated Dec 2021) | Ovarian Clear Cell Carcinoma (OCCC), Endometrioid Ovarian Carcinoma with ARID1a mutations | | NXP900 | SRC/YES1 Kinase Inhibitor | Preclinical (IND-enabling studies started Q4 2021) | Solid Tumors with SRC/YES1 overactivation | License Agreement Financial Terms (in millions) | Agreement | Upfront Payment | Pre-Approval Milestones (Max) | Commercial Milestones (Max) | Royalties | | :--- | :--- | :--- | :--- | :--- | | NXP800 (CRT) | $3.5M (paid) | ~$26.5M | $178M | Mid-single digit to 10% | | NXP900 (UoE) | $3.5M (paid) | ~$49.5M | $279.5M | Mid-single digit to 8% | Risk Factors The company faces substantial risks from its limited operating history, accumulated losses, dependence on lead product NXP800, need for future capital, reliance on third parties, and intellectual property challenges - The company has a limited operating history, has incurred losses since inception, and has an accumulated deficit of $12.9 million as of December 31, 2021 It has not generated any revenue and expects to incur continued losses[93][96] - Nuvectis is substantially dependent on the success of its lead product candidate, NXP800, which only commenced its first Phase 1 clinical trial in December 2021 Its second candidate, NXP900, is in the preclinical stage[19][109] - The company will require substantial additional funding to finance operations Raising capital may cause dilution or require relinquishing rights Failure to raise capital could force delays or elimination of development programs[101] - Nuvectis relies on third parties for critical functions, including single-source CMOs for manufacturing NXP800 and CROs for conducting clinical trials This reliance introduces risks of delays, quality issues, and lack of control[201][207] - The company's success depends on maintaining its in-licensed patent protection for NXP800 and NXP900 The patent for NXP800's composition of matter expires in October 2034, and for NXP900 in April 2036, subject to potential extensions[170][175][179] - As of March 22, 2022, principal stockholders and management beneficially owned approximately 66.8% of the company's voting stock, allowing them to exert significant influence over stockholder matters[233] Unresolved Staff Comments The company reports no unresolved staff comments - None[241] Properties The company leases its principal executive offices in Fort Lee, NJ, under a one-year agreement, deeming its current facilities adequate - The company leases its principal executive offices in Fort Lee, NJ, under a one-year agreement that commenced on May 3, 2021[242] Legal Proceedings As of the report date, Nuvectis Pharma was not a party to any material legal proceedings or claims - The company was not a party to any material legal matters or claims as of the date of this report[243] Mine Safety Disclosures This item is not applicable to the company - Not applicable[244] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Nuvectis's common stock began trading on NASDAQ in February 2022 after its IPO, with the company raising $15.3 million in 2021 and $13.6 million from the IPO, while retaining earnings for growth - The company's common stock is listed on the NASDAQ Capital Market under the symbol 'NVCT', with trading commencing on February 4, 2022[245] - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain earnings for business development[250] - In June and July 2021, the company sold 128,520 shares of Series A Preferred Stock for total proceeds of approximately $15.3 million in a private placement[252] - Following its IPO on February 8, 2022, the company sold 3,200,000 shares of common stock at $5.00 per share, generating aggregate net proceeds of approximately $13.6 million[253] Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2021, Nuvectis reported a net loss of $12.9 million with no revenue, driven by R&D and G&A expenses, but subsequent IPO proceeds of $13.6 million are expected to fund operations for at least the next 12 months - R&D expenses in 2021 were primarily driven by one-time upfront payments totaling $7.0 million for the exclusive license agreements for NXP800 and NXP900[260] - Management believes that proceeds from the IPO will fund operating expenses and capital expenditures for at least the next 12 months from the financial statement issuance date[268] - The company has significant future contingent payment obligations under its license agreements, including up to $201 million in milestones for NXP800 and up to $329 million for NXP900, plus royalties[278][279] Results of Operations (in millions) | | For the year ended Dec 31, 2021 | For the period from Jul 27, 2020 to Dec 31, 2020 | | :--- | :--- | :--- | | Revenue | $0 | $0 | | Research and Development | $9.6 | $0 | | General and Administrative | $3.3 | $0.01 | | Operating Loss | ($12.9) | ($0.01) | Liquidity and Capital Resources | Metric | As of Dec 31, 2021 | | :--- | :--- | | Cash and cash equivalents | $5.7 million | | 2021 Capital Raise (Preferred Stock) | $15.3 million | | Feb 2022 IPO (Net Proceeds) | $13.6 million | Quantitative and Qualitative Disclosures About Market Risk This disclosure is not applicable as the company is a smaller reporting company - The company is a smaller reporting company, and therefore this disclosure is not applicable[291] Financial Statements and Supplementary Data This section refers to the company's audited financial statements and supplementary data, located starting at page F-1 of the Annual Report - The required financial statements and notes are located starting at page F-1 of the Annual Report[292] 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[293] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of December 31, 2021, with no management report or auditor attestation on internal control over financial reporting required for newly public companies - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[294] - The annual report does not include a management assessment or auditor attestation on internal control over financial reporting, as permitted for newly public companies[295][296] Other Information The company reports no other information - None[297] Part III Directors, Executive Officers and Corporate Governance The company's governance is led by Ron Bentsur, with a four-member board including three independent directors, and established Audit and Compensation Committees, while a majority of independent directors recommend nominees - The executive team includes Ron Bentsur (Chairman, CEO & President), Enrique Poradosu (EVP, Chief Scientific & Business Officer), and Shay Shemesh (EVP, Chief Development & Operations Officer)[303] - The Board of Directors has determined that Kenneth Hoberman, Matthew Kaplan, and James Oliviero are independent directors[316] - The Audit Committee consists of the three independent directors, with James Oliviero serving as chair and designated audit committee financial expert[323] - The Compensation Committee consists of the three independent directors, with Kenneth Hoberman serving as chair[325] Executive Compensation Executive compensation for 2021 primarily involved stock awards, with post-IPO 2022 salaries set at $575,000 for the CEO and $400,000 for other NEOs, alongside equity awards and director retainers - Effective February 4, 2022, CEO Ron Bentsur's annual base salary is $575,000 with a 75% target bonus, while other NEOs have base salaries of $400,000 with a 50% target bonus[334][335][342][344] - Executive officers were granted restricted stock awards that vest upon the one-year anniversary of a qualifying financing event in July 2021, and are eligible for fully vested shares if the company's 30-day average market capitalization reaches $350 million or higher[337][345][353] - Non-employee directors receive an annual cash retainer of $40,000, plus committee fees, and an initial option grant of 29,250 options, with subsequent annual option grants valued at approximately $150,000[366] 2021 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Ron Bentsur, Chairman & CEO | 2021 | -- | 384,018 | 384,018 | | Enrique Poradosu, Chief Scientific & Business Officer | 2021 | 27,083 | 192,056 | 219,139 | | Shay Shemesh, Chief Development and Operations Officer | 2021 | 27,083 | 192,056 | 219,139 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 17, 2022, executive officers and directors collectively owned approximately 40.08% of the company's common stock, indicating significant insider influence Security Ownership of Major Holders (as of March 17, 2022) | Name of Beneficial Owner | Percentage of Shares Beneficially Owned | | :--- | :--- | | 5% and Greater Stockholders: | | | Pontifax VI LP | 10.85% | | Charles Mosseri Marlio | 9.95% | | Thomas P. Peters 2012 Family Trust | 5.94% | | Named Executive Officers and Directors: | | | Ron Bentsur (CEO) | 21.42% | | Enrique Poradosu (CSO) | 9.04% | | Shay Shemesh (CDO) | 8.89% | | All executive officers and directors as a group (7 persons) | 40.08% | Certain Relationships and Related Transactions, and Director Independence The company has not engaged in material related party transactions since inception, and its board has adopted a review policy for such transactions, with three of its four directors deemed independent - The company has not been involved in any related party transaction where the amount involved exceeded $120,000 or 1% of the average of its total assets[378] - The board of directors has adopted a written policy for reviewing and approving related person transactions[378] - The board has determined that directors Kenneth Hoberman, Matthew Kaplan, and James Oliviero are independent[379] Principal Accountant Fees and Services The company's principal accountant, Kesselman & Kesselman (PwC), billed $195,000 and $200,000 for audit services in 2021 and 2020 respectively, with no other fees for audit-related, tax, or other services Accountant Fees (in thousands) | Fee Category | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees | $195 | $200 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | Part IV Exhibits and Financial Statement Schedules This section lists the exhibits filed as part of the report and indicates that the financial statements begin on page F-1 - This section lists the exhibits filed as part of the report and indicates that the financial statements begin on page F-2[388] Form 10-K Summary The company has elected not to provide a summary of the Form 10-K - The Company has elected not to provide summary information[557] Financial Statements Financial Statements and Notes The audited financial statements for 2021 show a $12.9 million net loss and $5.7 million cash, with a subsequent $13.6 million IPO providing sufficient capital for over 12 months of operations - The company's R&D expenses for 2021 included $7.1 million in license fees for its drug candidates[470] - Subsequent to the reporting period, on February 8, 2022, the company completed its IPO, selling 3,200,000 shares of common stock and receiving net proceeds of $13.6 million[553] - Management believes that cash on hand as of December 31, 2021, along with the net proceeds from the IPO, is sufficient to fund planned operations for more than 12 months from the issuance date of the financial statements[423] Balance Sheet Highlights (as of Dec 31, 2021, in thousands) | | Amount | | :--- | :--- | | Cash and cash equivalents | $5,742 | | Total Assets | $6,657 | | Total Liabilities | $2,419 | | Accumulated Deficit | ($12,900) | | Total Stockholders' Deficit | ($11,008) | Statement of Operations Highlights (Year ended Dec 31, 2021, in thousands) | | Amount | | :--- | :--- | | Research and Development | $9,545 | | General and Administrative | $3,349 | | Operating Loss | ($12,894) | | Net Loss | ($12,890) | | Basic and Diluted Net Loss Per Share | $3.02 |