MEI Pharma(MEIP) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Condensed Consolidated Financial Statements The company's financial statements for the nine months ended March 31, 2024, reflect a shift to net income primarily from deferred revenue recognition and a decrease in total assets due to cash reductions Condensed Consolidated Balance Sheets The balance sheet reflects a decrease in total assets and a significant reduction in total liabilities, primarily due to the recognition of deferred revenue Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2024 (Unaudited) | June 30, 2023 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $2,368 | $16,906 | | Short-term investments | $54,184 | $83,787 | | Total current assets | $59,366 | $107,528 | | Total Assets | $71,260 | $120,809 | | Liabilities | | | | Total current liabilities | $9,616 | $20,340 | | Deferred revenue, long-term | $0 | $64,545 | | Total liabilities | $20,231 | $96,185 | | Total Stockholders' Equity | $51,029 | $24,624 | - The significant decrease in total liabilities is primarily due to the recognition of long-term deferred revenue related to the terminated KKC agreement[10] - Cash, cash equivalents, and short-term investments decreased from $100.7 million at June 30, 2023, to $56.6 million at March 31, 2024, reflecting operational spending and an $11.7 million dividend payment[10][22] Condensed Consolidated Statements of Operations The statements of operations show a significant increase in nine-month revenue due to deferred revenue recognition and a substantial decrease in operating expenses, particularly R&D Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $0 | $5,894 | $65,297 | $47,359 | | Research and development | $5,220 | $15,104 | $12,617 | $49,880 | | General and administrative | $4,609 | $7,181 | $19,158 | $23,163 | | Net (loss) income | $(9,127) | $(15,438) | $36,184 | $(21,809) | | Net (loss) income per share | $(1.37) | $(2.32) | $5.43 | $(3.27) | - The significant revenue of $65.3 million for the nine months ended March 31, 2024, is primarily due to the one-time recognition of $64.5 million in deferred revenue from the terminated KKC collaboration agreement[12][70] - Operating expenses decreased significantly year-over-year, with R&D expenses for the nine-month period dropping by 74.7% from $49.9 million to $12.6 million, largely due to the discontinuation of the zandelisib program[12][157] Condensed Consolidated Statements of Cash Flows Cash flow analysis indicates a net decrease in cash and cash equivalents, primarily driven by operating activities and a significant dividend payment Cash Flow Summary for Nine Months Ended March 31 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(32,474) | $(41,182) | | Net cash provided by investing activities | $29,596 | $34,294 | | Net cash used in financing activities | $(11,660) | $(40) | | Net decrease in cash and cash equivalents | $(14,538) | $(6,928) | - Net cash used in operating activities for the nine months ended March 31, 2024, was $32.5 million, primarily driven by net income of $36.2 million offset by non-cash revenue recognition of $64.9 million[17][165] - Financing activities in the nine months ended March 31, 2024, consisted almost entirely of an $11.7 million cash dividend payment to stockholders, as per the Cooperation Agreement[17][22] Notes to Condensed Consolidated Financial Statements Key notes detail the company's pipeline focus, recent corporate agreements including a special dividend, the impact of the zandelisib program termination, and the sufficiency of current cash reserves for future operations - The company's pipeline focuses on voruciclib (CDK9 inhibitor) and ME-344 (OXPHOS inhibitor)[18] - On October 31, 2023, the company entered a Cooperation Agreement with Anson Funds and Cable Car Capital, which included a special cash dividend of $1.75 per share ($11.7 million total) paid on December 6, 2023[19][22] - In April 2024, the Board decided not to proceed with a potential second return of capital to conserve resources and extend the company's operational runway[20] - As of March 31, 2024, the company had $56.6 million in cash, cash equivalents, and short-term investments, which management believes is sufficient to fund operations for at least the next 12 months[23] - The global license agreement with Kyowa Kirin (KKC) for zandelisib was mutually terminated on July 14, 2023, consequently, the remaining $64.5 million in long-term deferred revenue was recognized as revenue from collaboration agreements in the quarter ended September 30, 2023[67][70] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift towards voruciclib and ME-344 development, the financial impact of the zandelisib program termination, and the company's liquidity position Overview The overview highlights the company's focus on cancer therapies, the impact of a Cooperation Agreement, and strategic decisions regarding pipeline prioritization and capital allocation - The company is a clinical-stage pharmaceutical company focused on developing cancer therapies, with a pipeline including voruciclib (CDK9 inhibitor) and ME-344 (OXPHOS inhibitor)[95] - A Cooperation Agreement with Anson Funds and Cable Car Capital resulted in an $11.7 million dividend payment, board changes, and the formation of a Capital Allocation Committee[96] - In April 2024, the Board decided to prioritize voruciclib development and a new ME-344 formulation, while also deciding against a potential second capital return to extend the operational runway[99] Clinical Development Programs This section details the progress and strategic decisions for voruciclib, ME-344, and the discontinuation of the zandelisib program - Voruciclib (CDK9 Inhibitor): Currently in a Phase 1 trial in combination with venetoclax for patients with relapsed/refractory (R/R) Acute Myeloid Leukemia (AML), where the combination was well tolerated with no dose-limiting toxicities observed up to 300 mg, and three out of 20 patients treated at doses of 100 mg or more achieved a response (2 CRi, 1 MLFS)[102][115][117] - ME-344 (OXPHOS Inhibitor): The company is developing a new formulation to increase biological activity and improve patient convenience, following encouraging data from a Phase 1b study in metastatic colorectal cancer, where the combination with bevacizumab exceeded a predetermined progression-free survival threshold[121][134][136] - Zandelisib (PI3Kδ Inhibitor): Global development was discontinued as a business decision following FDA guidance that made the ongoing Phase 3 COASTAL trial unfeasible, leading to the termination of the global license agreement with KKC in July 2023 and MEI regaining full global rights[140][142] Results of Operations This section provides a detailed comparison of revenues and expenses, highlighting the impact of the zandelisib program discontinuation on R&D spending Comparison of Three Months Ended March 31, 2024 and 2023 (in thousands) | Metric | Q3 2024 | Q3 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $0 | $5,894 | $(5,894) | (100.0)% | | Research and development | $5,220 | $15,104 | $(9,884) | (65.4)% | | General and administrative | $4,609 | $7,181 | $(2,572) | (35.8)% | Comparison of Nine Months Ended March 31, 2024 and 2023 (in thousands) | Metric | YTD 2024 | YTD 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $65,297 | $47,359 | $17,938 | 37.9% | | Research and development | $12,617 | $49,880 | $(37,263) | (74.7)% | | General and administrative | $19,158 | $23,163 | $(4,005) | (17.3)% | R&D Expense Breakdown by Program (Nine Months Ended March 31, in thousands) | Program | 2024 | 2023 | | :--- | :--- | :--- | | zandelisib | $417 | $27,634 | | voruciclib | $1,570 | $1,859 | | ME-344 | $4,396 | $1,053 | | Other | $6,234 | $19,334 | | Total R&D | $12,617 | $49,880 | - The increase in nine-month revenue was due to recognizing all remaining deferred revenue from the terminated KKC agreement, while the sharp decrease in R&D expenses reflects the discontinuation of the zandelisib program, with spending now focused on ME-344 and voruciclib[157][159] Liquidity and Capital Resources The company's liquidity position is discussed, including current cash reserves and future capital requirements for ongoing operations and clinical development - As of March 31, 2024, the company had $56.6 million in cash, cash equivalents, and short-term investments[163] - Management believes current resources are sufficient to fund operations for at least 12 months from the report's issuance date[163] - Net cash used in operating activities for the nine months ended March 31, 2024 was $32.5 million[165] - Future capital requirements will depend on the progress of clinical trials, regulatory outcomes, and potential new collaborations[164][170] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuations on its cash and investments, which is mitigated by a conservative investment strategy focused on capital preservation - The company's market risk is primarily related to interest rates on its cash and short-term investments, which consist of U.S. government securities[173] - The company does not consider the effects of interest rate movements to be a material risk to its financial condition[175] - Risk is mitigated by investing in high-credit-quality financial instruments and limiting exposure to any one institution[174] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[176] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[177] PART II OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings during the period - None[180] Item 1A. Risk Factors There have been no material changes in risk factors from those included in the 2023 Annual Report on Form 10-K - There have been no material changes in risk factors from those included in the 2023 Annual Report[181] Other Part II Items The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no other material information under Item 5 for the quarter - Item 2: No unregistered sales of equity securities[182] - Item 3: No defaults upon senior securities[183] - Item 5: No director or officer adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter[186] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL documents[188]