Nuvectis Pharma(NVCT) - 2023 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements The company's unaudited statements show a decreased cash balance, increased net loss, and a growing accumulated deficit Unaudited Condensed Balance Sheets Total assets and stockholders' equity declined due to a reduction in cash and an increase in the accumulated deficit Condensed Balance Sheet (USD in thousands) | | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $15,468 | $19,993 | | TOTAL CURRENT ASSETS | $16,208 | $20,405 | | TOTAL ASSETS | $16,208 | $20,405 | | Liabilities and Stockholders' Equity | | | | TOTAL CURRENT LIABILITIES | $3,934 | $6,186 | | TOTAL LIABILITIES | $3,934 | $6,186 | | Accumulated deficit | $(36,034) | $(31,985) | | TOTAL STOCKHOLDERS' EQUITY | $12,274 | $14,219 | Unaudited Condensed Statements of Operations The company's net loss widened year-over-year, driven by increased research and general administrative expenses Condensed Statements of Operations (USD in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Research and development | $2,367 | $1,805 | | General and administrative | $1,734 | $1,140 | | OPERATING LOSS | $(4,101) | $(2,945) | | NET LOSS | $(4,049) | $(2,943) | | BASIC AND DILUTED NET LOSS PER COMMON STOCK | $(0.27) | $(0.32) | | Basic and diluted weighted average number of common stock outstanding | 14,724,249 | 9,159,139 | Unaudited Condensed Statements of Cash Flows Net cash used in operations increased while financing cash flows decreased, resulting in a net cash reduction Condensed Statements of Cash Flows (USD in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,777) | $(3,076) | | Net cash provided by financing activities | $252 | $14,027 | | (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | $(4,525) | $10,951 | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $15,468 | $16,693 | Notes to Unaudited Condensed Financial Statements Notes detail the company's financial position, reliance on equity financing, and share-based compensation activities - The company is a biopharmaceutical firm focused on oncology and has incurred net operating losses since inception, with an accumulated deficit of $36 million as of March 31, 2023[21][22] - Management believes existing cash of $15.5 million is sufficient to fund planned operations for at least 12 months, but additional capital will be needed to complete clinical trials[23][24] - In Q1 2023, the company granted 585,499 Restricted Stock Awards (RSAs) and 34,500 stock options, with total unrecognized compensation cost of $4.6 million and $0.7 million, respectively[50][51] - Subsequent to the quarter end, an investor exercised 34,000 Preferred Investment Options, generating gross proceeds of approximately $0.3 million[62] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its oncology pipeline progress, rising operating losses, and capital resource strategy Overview and Pipeline The company is advancing its oncology pipeline with NXP800 in a Phase 1b study and NXP900 pending IND submission - NXP800 (HSF1-Pathway Inhibitor): The Phase 1b portion of the clinical study was initiated in April 2023 to evaluate safety and anti-tumor activity in patients with platinum-resistant, ARID1a-mutated ovarian carcinoma[68] - The FDA granted Fast Track Designation status to the NXP800 development program in December 2022[69] - NXP900 (SRC/YES1 Kinase Inhibitor): The company has completed IND enabling preclinical studies and the IND for NXP900 is currently pending[73] Results of Operations The operating loss increased to $4.1 million in Q1 2023, driven by higher R&D and G&A employee compensation Comparison of Operating Expenses (USD in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Research and Development | $2,367 | $1,805 | $562 | | General and Administrative | $1,734 | $1,140 | $594 | | OPERATING LOSS | $(4,101) | $(2,945) | $(1,156) | - The increase in R&D expenses was primarily driven by a $0.9 million increase in employee compensation and benefits, including $0.4 million in stock-based compensation, and a $0.2 million increase in clinical expenses[81] - The increase in G&A expenses was primarily driven by a $0.3 million increase in employee compensation (including $0.2 million in stock compensation) and a $0.2 million increase in professional and consulting fees[82] Liquidity and Capital Resources With $15.5 million in cash, the company has sufficient funds for 12 months and has filed a $150 million shelf registration - As of March 31, 2023, the company had $15.5 million in cash and cash equivalents and an accumulated deficit of $36 million[84] - The company believes its existing cash will fund operating expenses and capital expenditures for at least the next 12 months from the financial statement issuance date[87] - On March 17, 2023, the company filed a shelf registration statement on Form S-3 to offer and sell up to $150.0 million of securities, which includes an at-the-market (ATM) offering program for up to $40.0 million[88] Contractual Obligations and Other Commitments The company faces significant future milestone payments for its licensed drug candidates NXP800 and NXP900 - Under the NXP800 License Agreement, the company is obligated to pay ICR up to $22.0 million in pre-approval milestones and up to an additional $178 million in sales milestones[101] - Under the NXP900 License Agreement, the company is obligated to pay UoE up to $45.5 million in pre-approval milestones and up to $279.6 million in sales milestones[102] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing market risk disclosures - The company is a "smaller reporting company" and is therefore not required to provide quantitative and qualitative disclosures about market risk[110] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Based on an evaluation as of March 31, 2023, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[112] - No changes in internal controls over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[113] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company reports no involvement in any material legal proceedings or claims as of the report date - As of the date of this report, the company was not a party to any material legal matters or claims[116] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Form 10-K - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022[117] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details the use of proceeds from its 2022 IPO and private placement for pipeline development - The company sold 3,200,000 shares of common stock in its IPO on February 8, 2022, for aggregate net proceeds of approximately $13.1 million[119] - In a private placement closed on July 29, 2022, the company sold shares and pre-funded warrants for aggregate net proceeds of approximately $14.3 million[120] - Net proceeds from these offerings are intended to fund Phase 1/2 development of NXP800, preclinical and clinical development of NXP800 and NXP900, and for other general corporate purposes[121] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None[123] Item 4. Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[124] Item 5. Other Information The company reports no other material information for the period - None[125] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements and officer certifications - Exhibits filed include an At the Market Offering Agreement with H.C. Wainwright & Co., LLC, and various officer certifications[126] Signatures - The report was duly signed on May 10, 2023, by Ron Bentsur, Chairman, Chief Executive Officer and President, and Michael J Carson, Vice President of Finance[128][129]