Pliant Therapeutics(PLRX) - 2021 Q4 - Annual Report

Part I Business Pliant Therapeutics is a clinical-stage biopharmaceutical company developing fibrosis therapies by inhibiting TGF-β activation, with lead candidates in Phase 2a for IPF/PSC and a partnered program for NASH Overview - Pliant Therapeutics is a clinical-stage biopharmaceutical company focused on discovering and developing novel therapies for fibrosis and related diseases by inhibiting integrin-mediated activation of TGF-β[22] - The lead product candidate, PLN-74809, is an oral small molecule inhibitor of αvß6 and αvß1 integrins being developed for Idiopathic Pulmonary Fibrosis (IPF) and Primary Sclerosing Cholangitis (PSC)[22] - A second product candidate, PLN-1474, is a selective inhibitor of αvß1 for liver fibrosis associated with NASH, which is partnered with Novartis[22] - Preclinical programs are targeting oncology and muscular dystrophies[22] Our Pipeline Clinical and Preclinical Pipeline Summary | Product Candidate | Target | Indication | Development Stage | | :--- | :--- | :--- | :--- | | PLN-74809 | αvß6 / αvß1 | Idiopathic Pulmonary Fibrosis (IPF) | Phase 2a (INTEGRIS-IPF trial enrollment complete, data expected mid-2022) | | PLN-74809 | αvß6 / αvß1 | Primary Sclerosing Cholangitis (PSC) | Phase 2a (INTEGRIS-PSC trial enrolling, data expected late 2022/early 2023) | | PLN-1474 | αvß1 | Liver Fibrosis (NASH) | Phase 2-ready (Partnered with Novartis; IND transferred Q1 2021) | | Oncology Program | αvβ8 | Solid Tumors | IND-enabling (IND submission expected by end of 2022) | | Muscular Dystrophy Program | Undisclosed Integrin | Muscular Dystrophies (e.g., DMD) | IND-enabling (IND submission expected by end of 2022) | Our Strategy - Rapidly advance PLN-74809 through clinical development and commercialization for IPF and PSC, which are orphan indications the company believes it can commercialize on its own in key geographies[44] - Selectively partner with other companies for larger indications (like NASH with Novartis) and in geographies outside North America to leverage their development and commercial capabilities[45] - Explore additional fibrotic indications for its pipeline assets, leveraging anti-fibrotic activity shown in multiple preclinical models[46] - Leverage proprietary tools and capabilities, including a target expression atlas, a large integrin binding molecule library, and PET-ligand imaging, to expand the pipeline and become a leading fibrosis company[47] Our Product Candidates - The company's lead candidate, PLN-74809, is an oral dual-selective inhibitor of αvß6 and αvß1 integrins, targeting IPF and PSC. It has received Orphan Drug Designation from the FDA for both indications[30][92] - The second clinical candidate, PLN-1474, is a selective inhibitor of αvß1 for NASH-associated liver fibrosis, partnered with Novartis. The IND was transferred to Novartis in Q1 2021[39][137] - The oncology program is developing small molecule inhibitors against αvβ8 to sensitize tumors to checkpoint inhibitors, with an IND submission expected by the end of 2022[146][148] - The muscular dystrophy program is developing an allosteric agonistic monoclonal antibody to enhance a natural compensatory mechanism in muscle cells, with an IND submission expected by the end of 2022[154][156][163] Competition - The company faces substantial competition from large pharmaceutical companies and smaller biotech firms in the development of treatments for fibrosis[167] Competitive Landscape by Indication | Indication | Approved Therapies | Companies with Developing Candidates | | :--- | :--- | :--- | | IPF | Esbriet® (Roche), OFEV® (Boehringer Ingelheim) | AbbVie, Endeavor Biomedicines, FibroGen, Galapagos, Kadmon, Galecto, Roche, Liminal BioSciences | | PSC | None | Gilead Sciences, AbbVie, Dr. Falk Pharma, Intercept Pharmaceuticals | | NASH | None | Intercept, Pfizer, Gilead, AbbVie, Novartis, AstraZeneca, Eli Lilly, and many others | Intellectual Property - As of February 25, 2022, the company owns, co-owns, or licenses over 170 pending patent applications worldwide in over 20 patent families. Four U.S. patents and one Japanese patent have issued, expected to expire between 2037 and 2039[175] - The company owns multiple patent application families for small-molecule integrin modulators, including PLN-74809 and PLN-1474, with potential patent expirations between 2037 and 2042[176] - A key collaboration is with Novartis for PLN-1474, which included a $50.0 million upfront license fee and eligibility for up to $416.0 million in milestones, plus royalties. As of the report date, $391.0 million in contingent payments remain eligible[39][185] - The company has a collaboration with Adimab for the discovery and optimization of proprietary antibodies, with options to license developed antibodies for therapeutic products[187][188] Manufacturing - The company does not own or operate manufacturing facilities and outsources all clinical manufacturing to third-party contract manufacturing organizations (CMOs)[191] - An adequate supply of the drug substance for PLN-74809 has been established from North American, European, and Asian CMOs. The company has qualified two geographically separate CMOs for the active pharmaceutical ingredient to mitigate supply chain risk[192] - Responsibility for the manufacture and supply of PLN-1474 has been transferred to Novartis as per their collaboration agreement[192] Government Regulation - The company's products are subject to substantial regulation by the FDA in the U.S. and comparable authorities in other countries, covering research, development, testing, manufacturing, labeling, approval, and marketing[194] - The FDA approval process is lengthy and involves preclinical studies, an Investigational New Drug (IND) application, and three phases of clinical trials (Phase 1, 2, and 3) to establish safety and efficacy before a New Drug Application (NDA) can be submitted[197][199][200] - The company may seek Orphan Drug Designation, which can provide seven years of marketing exclusivity in the U.S. for a specific indication if it is the first to receive approval for that rare disease[208][209] - Operations are also subject to healthcare laws like the Anti-Kickback Statute and data privacy regulations such as HIPAA in the U.S. and GDPR in Europe, which govern interactions with healthcare providers and the handling of personal data[218][223] Human Capital Resources - As of December 31, 2021, the company had 91 full-time employees, with 64 engaged in research and development activities[262] - The company focuses on a culture of scientific innovation, inclusion, and collaboration to attract and retain skilled personnel in a competitive biotechnology industry[263] - In response to the COVID-19 pandemic, the company implemented flexible work arrangements and provided resources for employees to work from home, including weekly onsite COVID-19 testing[265] Risk Factors The company faces significant financial, R&D, intellectual property, third-party reliance, operational, and stock volatility risks Risks Related to Our Financial Position and Need for Additional Capital - The company has a history of significant net losses, with a net loss of $97.3 million for the year ended December 31, 2021, and an accumulated deficit of $215.1 million[270] - Substantial additional capital will be required to finance operations. Existing cash is expected to fund operations into the second half of 2023, but failure to raise more capital could force delays or elimination of R&D programs[274][275] - The company has a limited operating history since its incorporation in 2015, making it difficult to evaluate its prospects and likelihood of success[284] Risks Related to Research and Development and the Biopharmaceutical Industry - The business is highly dependent on the success of its lead product candidates, PLN-74809 and PLN-1474, which are in early clinical development and require significant additional investment and time before potential regulatory approval[285] - The company's approach of targeting tissue-specific integrin modulation and TGF-β signaling is unproven and may not result in marketable products[289] - Clinical development is a lengthy, complex, and expensive process with an uncertain outcome. Results from early trials may not be predictive of later-stage trials, and most product candidates that begin clinical trials are never approved[292] - Difficulties in enrolling patients in clinical trials, particularly for orphan diseases like IPF and PSC, could delay or adversely affect development activities[304][305] Risks Related to Our Intellectual Property - The company's success depends on its ability to obtain and maintain patent protection for its technology and product candidates, which is a difficult and costly process with an uncertain outcome[370] - The company may face third-party claims of intellectual property infringement, which could be expensive to litigate and may prevent or delay product development and commercialization[389] - If the company is unable to protect the confidentiality of its trade secrets, its business and competitive position could be harmed[385] - Changes in patent law, such as the America Invents Act, could increase uncertainties and costs surrounding patent prosecution and enforcement[377][412] Risks Related to Our Reliance on Third Parties - The company relies on its collaboration with Novartis for the development of PLN-1474. The success of this program depends on Novartis's efforts, and failure to achieve milestones would result in a loss of potential revenue[425][427] - The company depends on third-party contract research organizations (CROs) to conduct preclinical studies and clinical trials. If these CROs do not perform their duties successfully or on time, regulatory approval could be delayed or prevented[429] - The company relies on third-party contract manufacturers for its product supply. Any interruption, quality issues, or failure to comply with cGMP could disrupt development and commercialization[436][437] Risks Related to Managing Our Business and Operations - The COVID-19 pandemic has caused and could continue to cause disruptions to the business, including delays in clinical trial enrollment and potential interruptions in the manufacturing supply chain[450][451] - The company's ability to compete depends on attracting and retaining highly qualified management and scientific personnel in a competitive market[459] - Current operations are concentrated in South San Francisco, California, making the business vulnerable to disruption from earthquakes or other natural disasters[462] Risks Related to Our Common Stock - The trading price of the company's common stock is likely to be highly volatile and could be subject to wide fluctuations[474] - Executive officers, directors, and principal stockholders hold a significant percentage of the stock, allowing them to exert significant control over matters requiring stockholder approval[478] - Anti-takeover provisions in the company's charter documents and under Delaware law could delay or prevent a change of control[482] - The company does not intend to pay dividends, so any returns for stockholders will be limited to the appreciation of the stock's value[477] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[524] Properties The company leases a 32,974 square foot facility in South San Francisco, California, for its operations, with the lease expiring in February 2025 - The company leases a 32,974 square foot facility at 260 Littlefield Avenue, South San Francisco, California, which serves as its corporate headquarters and principal operating facility[525] - The current lease expires on February 28, 2025[525] Legal Proceedings The company is not currently a party to any material legal proceedings or claims - The company is not currently party to any material legal proceedings[526] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[527] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, has 55 stockholders, and does not anticipate paying dividends, having raised capital through its 2020 IPO and a private placement - The company's common stock has been listed on the Nasdaq Global Select Market under the symbol "PLRX" since June 3, 2020[530] - As of February 25, 2022, there were 55 stockholders of record[531] - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[532] - In June 2020, the company sold 10,350,000 shares of common stock in its IPO, raising net proceeds of $148.3 million. Concurrently, Novartis purchased $10.0 million of common stock in a private placement[534][536] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue decreased significantly in 2021 due to lower milestone payments, while operating expenses and net loss increased, with current cash expected to fund operations into mid-2023 Results of Operations Comparison of the Years Ended December 31, 2021 and 2020 (in thousands) | | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $7,572 | $41,817 | $(34,245) | (81.9%) | | Research and development | $(77,549) | $(66,193) | $(11,356) | 17.2% | | General and administrative | $(27,558) | $(17,269) | $(10,289) | 59.6% | | Total operating expenses | $(105,107) | $(83,462) | $(21,645) | 25.9% | | Loss from operations | $(97,535) | $(41,645) | $(55,890) | NM | | Net loss | $(97,263) | $(41,533) | $(55,730) | 134.2% | - Revenue decreased by $34.2 million in 2021 primarily due to the recognition of a $25.0 million milestone payment from Novartis in 2020 and decreased R&D services revenue for PLN-1474[564] - Research & Development expenses increased by $11.4 million in 2021, driven by higher employee-related costs ($5.4 million) and increased clinical trial expenses ($5.4 million) for Phase 2 trials of PLN-74809[566][570] - General & Administrative expenses increased by $10.3 million in 2021, mainly due to a $7.3 million increase in employee-related costs and a $1.1 million increase in professional services from operating as a public company[566] Liquidity and Capital Resources - As of December 31, 2021, the company had cash, cash equivalents, and short-term investments of $200.6 million[575] - Existing capital resources are believed to be sufficient to fund operating requirements into the second half of 2023[576] Summary of Cash Flows (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(75,443) | $(37,271) | $(2,750) | | Net cash provided by (used in) investing activities | $73,699 | $(210,866) | $(17,931) | | Net cash provided by financing activities | $2,527 | $213,212 | $45,539 | - Net cash used in operating activities increased by $38.2 million in 2021 compared to 2020, primarily due to decreased revenues from Novartis and an increase in operating expenses[579] - Net cash provided by financing activities decreased significantly in 2021, as 2020 included $150.8 million from the IPO, $10.0 million from a private placement, and $52.0 million from a Series C preferred stock issuance[583] Critical Accounting Polices and Estimates - The company's critical accounting policies include Revenue Recognition and Accrued and Prepaid Research and Development Expenses[589] - For revenue recognition under ASC 606, the company identifies performance obligations (e.g., licenses, R&D services), determines the transaction price, allocates it, and recognizes revenue as obligations are satisfied. This requires significant judgment, especially for estimating standalone selling prices and variable consideration like milestones[590][592][593] - Accrued R&D expenses are estimated based on the amount of services provided by third parties but not yet invoiced. This requires significant judgment in estimating the work completed based on contracts, timelines, and information from vendors[597][598] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - Not applicable[601] Financial Statements and Supplementary Data This section presents audited financial statements with an unqualified auditor's opinion, highlighting accrued R&D expenses as a critical audit matter Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Current Assets | $209,441 | $290,754 | | Total Assets | $221,215 | $295,526 | | Current Liabilities | $16,831 | $11,599 | | Total Liabilities | $22,156 | $12,465 | | Total Stockholders' Equity | $199,059 | $283,061 | Statement of Operations Data (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenue | $7,572 | $41,817 | $57,052 | | Total operating expenses | $(105,107) | $(83,462) | $(58,283) | | Loss from operations | $(97,535) | $(41,645) | $(1,231) | | Net loss | $(97,263) | $(41,533) | $(631) | - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and on the company's internal control over financial reporting as of December 31, 2021[606][607] - The critical audit matter identified was related to accrued and prepaid research and development expenses, due to the significant judgments made by management in estimating the stage of completion of services from third-party providers[611][612][614] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants on financial disclosure - None[745] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2021[747] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[749] - There were no changes in internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[752] Other Information The company reports no other information for this item - None[753] Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the 2021 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement[756] Executive Compensation Information for this item is incorporated by reference from the 2021 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement[758] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the 2021 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement[759] Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the 2021 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement[760] Principal Accounting Fees and Services Information for this item is incorporated by reference from the 2021 Proxy Statement - The information required by this item is incorporated by reference from the company's definitive Proxy Statement[761] Part IV Exhibits, Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Annual Report on Form 10-K, including corporate and legal documents - This item lists all exhibits filed with the Annual Report, including corporate governance documents, material contracts, and certifications from the CEO and CFO[765] Form 10-K Summary The company indicates there is no Form 10-K summary - None[768]