Rain Oncology (RAIN) - 2022 Q1 - Quarterly Report

FORM 10-Q Filing Information This section details the basic filing information for Rain Therapeutics Inc.'s Form 10-Q for Q1 2022, including company and security specifics Filing Details This section outlines the essential filing information for Rain Therapeutics Inc.'s Q1 2022 Form 10-Q, covering company, securities, and compliance status - The report is a Quarterly Report (Form 10-Q) for the period ended March 31, 2022[2] - Rain Therapeutics Inc. is incorporated in Delaware[2] - Common Stock (RAIN) is registered on The Nasdaq Global Select Market[3] - The registrant is classified as a Non-accelerated filer, Smaller reporting company, and Emerging growth company[4] - As of April 28, 2022, 26,529,878 shares of common stock were outstanding, including 18,802,408 voting and 7,727,470 non-voting shares[5] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed financial statements and management's discussion and analysis for the quarter ended March 31, 2022 Item 1. Condensed Financial Statements (Unaudited) This section provides Rain Therapeutics Inc.'s unaudited condensed financial statements for Q1 2022, encompassing balance sheets, income statements, equity, cash flows, and notes Condensed Balance Sheets as of March 31, 2022 and December 31, 2021 This section presents the condensed balance sheets, highlighting key asset, liability, and equity changes between December 31, 2021, and March 31, 2022 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (vs. Dec 31, 2021) (in thousands) | | :-------------------------------- | :--------------- | :---------------- | :------------------------ | | Cash and cash equivalents | $21,505 | $24,780 | $(3,275) | | Short-term investments | $101,668 | $115,438 | $(13,770) | | Total current assets | $126,831 | $146,146 | $(19,315) | | Total assets | $127,778 | $147,140 | $(19,362) | | Total current liabilities | $13,044 | $16,315 | $(3,271) | | Total liabilities | $13,327 | $16,636 | $(3,309) | | Total stockholders' equity | $114,451 | $130,504 | $(16,053) | | Accumulated deficit | $(107,358) | $(89,964) | $(17,394) | Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021 This section presents the condensed statements of operations and comprehensive loss, detailing financial performance for Q1 2022 and Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Research and development | $13,555 | $5,328 | $8,227 | | General and administrative | $3,895 | $1,480 | $2,415 | | Total operating expenses | $17,450 | $6,808 | $10,642 | | Loss from operations | $(17,450) | $(6,808) | $(10,642) | | Net loss | $(17,394) | $(6,800) | $(10,594) | | Net loss per share, basic and diluted | $(0.66) | $(1.93) | $1.27 | | Comprehensive loss | $(17,694) | $(6,800) | $(10,894) | - The weighted-average shares for net loss per share significantly increased from 3,530,975 in Q1 2021 to 26,511,743 in Q1 2022, mainly due to the April 2021 IPO[14] Condensed Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) for the three months ended March 31, 2022 and 2021 This section details changes in convertible preferred stock and stockholders' equity (deficit) for the three months ended March 31, 2022 and 2021 | Item | Balance as of Dec 31, 2021 (in thousands) | Q1 2022 Activity (in thousands) | Balance as of Mar 31, 2022 (in thousands) | | :-------------------------------- | :------------------------- | :----------------- | :------------------------- | | Common Stock Amount | $27 | $0 | $27 | | Additional Paid-in Capital | $220,530 | $1,639 | $222,171 | | Accumulated Other Comprehensive Loss | $(89) | $(300) | $(389) | | Accumulated Deficit | $(89,964) | $(17,394) | $(107,358) | | Total Stockholders' Equity | $130,504 | $(16,053) | $114,451 | - Key Q1 2022 activities included $1.242 million in stock-based compensation, $106 thousand from stock option exercises, $293 thousand from ESPP issuances, and a net loss of $17.394 million[16] - As of March 31, 2022, no convertible preferred stock was outstanding, following conversion to common stock during the April 2021 IPO[16][25][67] Condensed Statements of Cash Flows for the three months ended March 31, 2022 and 2021 This section presents the condensed statements of cash flows, outlining cash movements from operating, investing, and financing activities for Q1 2022 and Q1 2021 | Activity Type | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------------- | | Net cash used in operating activities | $(17,110) | $(4,866) | $(12,244) | | Net cash provided by (used in) investing activities | $13,436 | $(29) | $13,465 | | Net cash provided by (used in) financing activities | $399 | $(858) | $1,257 | | Net decrease in cash and cash equivalents | $(3,275) | $(5,753) | $2,478 | | Cash and cash equivalents at end of period | $21,505 | $53,110 | $(31,605) | - The increase in cash from investing activities in Q1 2022 was primarily due to $22.95 million in short-term investment maturities, partially offset by $9.514 million in new purchases[19] Notes to Condensed Financial Statements (Unaudited) This section provides detailed notes accompanying the unaudited condensed financial statements, offering further context on accounting policies, fair value, and commitments Note 1 – Organization and Nature of Operations Rain Therapeutics Inc. is a late-stage precision oncology company developing milademetan and RAD52 inhibitors, facing significant losses and relying on capital raises - Rain Therapeutics Inc. is a late-stage precision oncology company developing therapies targeting oncogenic drivers via a tumor-agnostic strategy[22] - The lead product candidate, milademetan, is a small molecule, oral inhibitor of mouse double minute 2 (MDM2)[22] - The company is also developing a preclinical program focused on inhibiting RAD52[22] - From inception through March 31, 2022, the company incurred net losses and negative cash flows, with an accumulated deficit of $107.4 million[28][108] - Operations have been funded primarily through net proceeds from its April 2021 IPO, and the issuance of convertible promissory notes and preferred stock[28] - Management believes current cash, cash equivalents, and short-term investments will provide sufficient funds for at least twelve months from the filing date[29] Note 2 – Summary of Significant Accounting Policies This note outlines significant accounting policies for the condensed financial statements, covering estimates, cash, investments, R&D, stock compensation, and net loss per share - The most significant estimate in the condensed financial statements relates to clinical trial expense accruals[30] - Cash equivalents include highly liquid investments with an original maturity of three months or less[31] - Available-for-sale (AFS) securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive loss[33] - Research and development costs are expensed as incurred[36] - Stock-based compensation expense is recognized over the requisite service period using the Black-Scholes option pricing model[38] - Basic and diluted net loss per share are the same because the company's net loss position renders potential dilutive securities anti-dilutive[44] - To date, COVID-19 has not materially impacted expenditures, but future effects remain uncertain[45][46] - The adoption of ASU 2019-12 did not impact financial statements, and ASU 2016-13 (effective January 1, 2023) is not anticipated to have a significant impact[47][48] Note 3 – Fair Value Measurements This note details fair value measurements, classifying financial assets into a three-tier hierarchy, with most cash equivalents and short-term investments using Level 1 or 2 inputs - Fair value hierarchy categorizes inputs as Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[50] | Asset Type | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------- | :------ | :------ | :------ | :------ | | Money market funds | $10,252 | — | — | $10,252 | | Commercial paper | — | $73,558 | — | $73,558 | | U.S. government securities | $27,640 | — | — | $27,640 | | U.S. agency bonds | — | $8,465 | — | $8,465 | | Corporate debt securities | — | $2,001 | — | $2,001 | | Total | $37,892 | $84,024 | $— | $121,916 | - Money market funds and U.S. government securities are Level 1, while commercial paper, corporate debt securities, and U.S. agency bonds are Level 2[53][54] Note 4 – Investments This note details available-for-sale investments, including fair value classification, amortized cost, unrealized gains/losses, and maturities, with losses deemed not other-than-temporary | Investment Type | Amortized Cost (in thousands) | Unrealized Gains (in thousands) | Unrealized Losses (in thousands) | Estimated Fair Value (in thousands) | | :-------------------------- | :------------- | :--------------- | :---------------- | :------------------- | | Money market funds | $10,252 | $— | $— | $10,252 | | Commercial paper | $73,667 | $— | $(108) | $73,559 | | U.S. government securities | $27,838 | $— | $(199) | $27,639 | | U.S. agency bonds | $8,530 | $— | $(65) | $8,465 | | Corporate debt securities | $2,018 | $— | $(17) | $2,001 | | Cash equivalents and investments | $122,305 | $— | $(389) | $121,916 | | Maturity | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :--------------- | :---------------- | | Due within one year | $99,446 | $105,173 | | Due within one to two years | $2,222 | $10,265 | | Total | $101,668 | $115,438 | - As of March 31, 2022, $111.7 million of marketable securities were in gross unrealized loss positions, none exceeding 12 months, and deemed not other-than-temporary[55][56] Note 5 – Condensed Balance Sheet Details This note details specific balance sheet line items, including prepaid and other current assets, and net property and equipment | Item | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :--------------- | :---------------- | | Prepaid research | $2,971 | $4,329 | | FICA tax credit receivable | $367 | $452 | | Other current assets | $157 | $205 | | Prepaid other | $141 | $96 | | Deposits | $19 | $19 | | Prepaid insurance | $3 | $827 | | Prepaid and Other Current Assets | $3,658 | $5,928 | | Item | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :--------------- | :---------------- | | Furniture and equipment | $204 | $204 | | Leasehold improvements | $67 | $67 | | Computer equipment | $50 | $50 | | Less: accumulated depreciation and amortization expense | $(179) | $(156) | | Property and Equipment, net | $142 | $165 | - Depreciation expense for Q1 2022 was $22 thousand, compared to $15 thousand for Q1 2021[58] Note 6 – Convertible Preferred Stock and Stockholders' Equity This note details the capital structure, including common stock, preferred stock conversion during IPO, equity incentive plans, and stock-based compensation expense - The company's capital stock includes 250 million authorized common shares ($0.001 par value), with 200 million voting and 50 million non-voting shares[60] - All Series A and B convertible preferred stock converted to common or non-voting common stock during the April 2021 IPO, leaving no preferred stock outstanding as of March 31, 2022[25][67] - The 2021 Equity Incentive Plan initially reserved 3,246,120 shares, with a 4.0% annual increase, adding 1,059,032 shares on January 1, 2022[70] - The Employee Stock Purchase Plan (ESPP) initially reserved 259,689 shares, with a 1.0% annual increase, adding 264,758 shares on January 1, 2022[72] | Item | Total Options | Weighted Average Exercise Price Per Share | | :-------------------------------- | :------------ | :-------------------------------------- | | Outstanding as of Dec 31, 2021 | 1,734,696 | $8.50 | | Granted | 699,652 | $10.36 | | Exercised | (24,262) | $4.35 | | Forfeited or cancelled | (109,414) | $9.19 | | Outstanding as of Mar 31, 2022 | 2,300,672 | $9.09 | | Item | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $889 | $134 | | General and administrative | $353 | $31 | | Total stock-based compensation expense | $1,242 | $165 | - As of March 31, 2022, unrecognized compensation cost for outstanding options was $13.9 million (over 3.3 years) and for ESPP was $0.3 million (over 1.3 years)[74][75] Note 7 – License Agreements This note details key license agreements for milademetan (Daiichi Sankyo) and RAD52 inhibitors (Drexel), outlining payments, milestones, royalties, and termination clauses - Under the Daiichi Sankyo License Agreement for milademetan, the company paid an initial upfront payment of $5.0 million in September 2020[83] - Future milestone payments under the Daiichi Sankyo License Agreement could aggregate up to $224.5 million, contingent on development, regulatory, and sales milestones, including a $2.0 million increase[85] - The company is reimbursing Daiichi Sankyo $2.0 million for U105 study expenses in four installments, with the first $500 thousand paid in April 2022[84] - The Drexel License Agreement for RAD52 inhibitors includes a $20 thousand initiation fee, potential milestone payments up to $6.25 million, and low single-digit royalties on net sales[91] - Payments under the Drexel License Agreement were $5 thousand for Q1 2022, compared to $19 thousand for Q1 2021[93] - A clinical supply agreement with Roche was entered in December 2021 for atezolizumab supply in planned combination trials with milademetan, with no financial commitments[96] Note 8 – Commitments and Contingencies This note outlines the company's lease obligations for its corporate headquarters and general contingencies - The company has a noncancelable operating lease for its Newark, California corporate headquarters, with a term ending September 2024[97][98] | Year | Amount (in thousands) | | :-------------------------- | :-------------------- | | 2022 - remainder | $125 | | 2023 | $171 | | 2024 | $129 | | Total minimum lease payments | $425 | | Less: amount representing interest | $(45) | | Present value of operating lease liabilities | $380 | - Total operating lease expense was $40 thousand for Q1 2022, compared to $34 thousand for Q1 2021[100] Note 9 – Employee Benefits The company offers a defined contribution 401(k) plan to eligible employees and made matching contributions - The company made matching contributions of $75 thousand to its 401(k) plan for Q1 2022, compared to $78 thousand for Q1 2021[102] Note 10 – Net Loss Per Share This note details the computation of basic and diluted net loss per share, highlighting that potentially dilutive securities are excluded due to the company's net loss position | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(17,394) | $(6,800) | | Weighted-average shares outstanding | 26,511,743 | 3,530,975 | | Net loss per share, basic and diluted | $(0.66) | $(1.93) | - Potentially dilutive securities (stock options, ESPP shares, convertible preferred stock) are excluded from diluted EPS calculation as their inclusion would be anti-dilutive due to net loss[44][103] Note 11 – Subsequent Events The company evaluated subsequent events after March 31, 2022, and determined that no additional material events arose that require disclosure - No material events requiring disclosure were identified after March 31, 2022[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of financial condition and results of operations, covering business, pipeline, performance, liquidity, and accounting policies Overview This overview introduces Rain Therapeutics Inc. as a late-stage precision oncology company, detailing its lead product candidate, clinical trials, and financial position - Rain Therapeutics Inc. is a late-stage precision oncology company developing therapies targeting oncogenic drivers via a tumor-agnostic strategy[106] - The lead product candidate, milademetan (RAIN-32), is an oral MDM2 inhibitor, showing antitumor activity in MDM2-amplified liposarcoma (LPS) and other solid tumors[107] - Clinical trials include the pivotal Phase 3 MANTRA trial in LPS (July 2021), Phase 2 MANTRA-2 basket trial (November 2021), and anticipated Phase 2 MANTRA-3 and Phase 1/2 MANTRA-4 combination trials in Q4 2022[107] - The company had an accumulated deficit of $107.4 million as of March 31, 2022, with net losses of $17.4 million (Q1 2022) and $6.8 million (Q1 2021)[108] - Net proceeds from the April/May 2021 IPO were $121.5 million, contributing to $123.2 million in cash, cash equivalents, and short-term investments as of March 31, 2022[108] - The company expects continued significant expenses and operating losses, necessitating additional capital for future R&D and potential commercialization[108][110] COVID-19 This section discusses the COVID-19 pandemic's impact on the company's operations, clinical development, and potential regulatory delays - The COVID-19 pandemic has not materially impacted expenditures to date, but its ultimate effects on operations, clinical development, and capital raising remain uncertain[112] - Most employees are working remotely, with no negative impact on productivity or the integrity of subject data and clinical trial endpoints[112] - There is a potential risk of regulatory delays if the FDA or other authorities are prevented from conducting routine inspections or reviews[112] Recent Developments This section highlights recent corporate developments, including a clinical supply agreement with Roche for combination trials - In January 2022, the company announced a clinical supply agreement with Roche for atezolizumab supply to evaluate its combination with milademetan in planned clinical trials (MANTRA-4)[113][122] - Rain Therapeutics Inc. will be the sponsor of these anticipated clinical trials, with Roche supplying atezolizumab[113][122] Our Development Pipeline This section outlines the company's development pipeline, focusing on its strategy to target oncogenic drivers with differentiated therapies - The company's development pipeline targets oncogenic drivers through differentiated therapies, genetically selecting patients most likely to benefit[114] - The company currently retains global development and commercialization rights to all its product candidates[114] Milademetan Overview Milademetan, an MDM2 inhibitor, is in pivotal Phase 3 (LPS) and Phase 2 (tumor-agnostic) trials, with further trials planned for Merkel cell carcinoma and combination therapy - Milademetan is a small molecule, oral MDM2 inhibitor, developed with an optimized dosing schedule to reduce toxicities while preserving activity[115] - Phase 1 data showed meaningful antitumor activity in MDM2-amplified liposarcoma (LPS), with a median progression-free survival (mPFS) of approximately seven to eight months in WD/DD LPS patients[107][116] - The pivotal Phase 3 MANTRA trial for de-differentiated LPS commenced in July 2021, with top-line data anticipated in the first half of 2023[116][117] - A Phase 2 tumor-agnostic basket trial (MANTRA-2) for MDM2-amplified advanced solid tumors commenced in November 2021, with an interim analysis anticipated in Q4 2022[120] - A Phase 2 clinical trial in Merkel cell carcinoma (MANTRA-3) is on track to commence in Q4 2022, and a Phase 1/2 clinical trial (MANTRA-4) evaluating milademetan with atezolizumab is also anticipated to start in Q4 2022[107][121][122] - Long-term Phase 1 data showed three WD/DD LPS patients received milademetan monotherapy for over 51 months, with two showing no disease progression for 51 and 57 months, suggesting favorable long-term tolerability[118][119] RAD52 and p53 Overview The company is developing a preclinical RAD52 program for HRD+ and PARP inhibitor-relapsed tumors, while milademetan reactivates p53 by inhibiting MDM2 in cancers with wild-type p53 - The preclinical program focuses on targeting RAD52 in the DNA damage repair pathway to induce synthetic lethality in cancer cells[107][123] - The RAD52 program aims to treat HRD+ patients (e.g., BRCA1/2 mutations) and those relapsed to PARP inhibitor therapy, representing a novel strategy with no currently approved therapies[123][124] - Milademetan reactivates p53 by inhibiting MDM2, preventing MDM2-p53 complex formation and triggering cancer cell cycle arrest or apoptosis[126][128] - MDM2 dependence has been identified in several solid tumors where MDM2 overexpression functionally suppresses wild-type p53[127] Collaboration and License Agreements This section refers to Note 7 for details on the company's various in-license agreements for product candidates and development programs - The company is party to several license agreements for in-licensing product candidates and development programs, with details in Note 7 to the Condensed Financial Statements[129] Components of Our Results of Operations This section outlines the components of the company's results of operations, including revenue, operating expenses, and interest income - The company has not generated any revenue from product sales, licenses, or collaborations to date and does not expect to in the foreseeable future[130] - Operating expenses since inception have consisted solely of research and development costs (including in-process R&D acquisition) and general and administrative costs[131] Revenue The company has not generated revenue from product sales, licenses, or collaborations to date, with future revenue contingent on successful product development and regulatory approval - No revenue has been generated from product sales, licenses, or collaborations to date[130] - Future revenue is uncertain and dependent on successful development, regulatory approval, and potential commercialization or licensing agreements[130] Operating Expenses Operating expenses are categorized into research and development (R&D) and general and administrative (G&A) costs, which are recognized as incurred - Operating expenses consist of research and development costs and general and administrative costs[131] - Expenses are recognized as incurred[132] Research and Development Expenses R&D expenses, recognized as incurred, cover drug discovery, preclinical/clinical development, and are expected to increase significantly as product candidates advance - R&D expenses include salaries, benefits, stock-based compensation for R&D personnel, preclinical/clinical study costs (CROs, consultants), drug manufacturing, regulatory compliance, and license/milestone payments[134] - External development costs are tracked by product candidate, while internal personnel and other costs remain unallocated[133] | Item | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Milademetan | $8,551 | $2,404 | | Other research and clinical candidates | $250 | $1,078 | | Unallocated internal R&D costs | $4,754 | $1,846 | | Total research and development expenses | $13,555 | $5,328 | - R&D expenses are expected to increase substantially as product candidates continue to develop[135] General and Administrative Expenses G&A expenses include salaries, stock-based compensation, legal, accounting, consulting, and facility costs, expected to increase with R&D support, pre-commercial, and public company operations - G&A expenses consist of salaries, employee-related costs (including stock-based compensation) for administrative functions, legal, professional, and facility-related fees[137] - G&A expenses are expected to increase to support continued R&D, pre-commercial preparation, and public company operations (audit, legal, regulatory, D&O insurance, investor relations)[137] Interest Income Interest income for the three months ended March 31, 2022, was derived from money market accounts and short-term investments - Interest income is generated from money market accounts and short-term investments[138] Results of Operations This section provides a detailed comparison of the company's financial performance for the three months ended March 31, 2022, versus 2021 Comparison of Three Months Ended March 31, 2022 Total operating expenses increased by $10.6 million, resulting in a $17.4 million net loss for Q1 2022, compared to $6.8 million in Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Research and development | $13,555 | $5,328 | $8,227 | | General and administrative | $3,895 | $1,480 | $2,415 | | Total operating expenses | $17,450 | $6,808 | $10,642 | | Loss from operations | $(17,450) | $(6,808) | $(10,642) | | Interest income | $56 | $8 | $48 | | Net loss | $(17,394) | $(6,800) | $(10,594) | Research and Development Expenses R&D expenses increased by $8.2 million to $13.6 million in Q1 2022, driven by milademetan and other research, including higher non-cash stock compensation, and are expected to continue rising - R&D expenses increased by $8.2 million, from $5.3 million in Q1 2021 to $13.6 million in Q1 2022[140] - The increase was primarily related to milademetan and other research costs[140] - Non-cash stock-based compensation expenses within R&D increased from $0.1 million in Q1 2021 to $0.9 million in Q1 2022[140] - R&D costs are expected to continue increasing in 2022 with ongoing Phase 3 and Phase 2 trials for milademetan[140] General and Administrative Expenses G&A expenses increased by $2.4 million to $3.9 million in Q1 2022, driven by higher D&O insurance, payroll, third-party G&A costs, and increased stock-based compensation - G&A expenses increased by $2.4 million, from $1.5 million in Q1 2021 to $3.9 million in Q1 2022[141] - The increase was primarily due to director and officer insurance ($0.8 million), payroll-related costs ($1.1 million), and various third-party G&A costs ($2.0 million)[141] - Non-cash stock-based compensation in G&A increased from $31 thousand in Q1 2021 to approximately $0.4 million in Q1 2022[141] - G&A expenses are expected to continue increasing in 2022 due to public company operations and personnel expansion[141] Other (Income) Expense Other income for both periods primarily consisted of interest income from money market and short-term investments - Other income for both Q1 2022 and Q1 2021 primarily represents interest income from money market or short-term investments[142] Liquidity and Capital Resources This section discusses the company's liquidity, capital resources, future funding requirements, and cash flow activities - The company has incurred significant operating losses since inception and expects continued substantial expenses and losses for the foreseeable future[143] - Operations have been financed through convertible promissory notes, preferred stock, and $121.5 million net proceeds from the April 2021 IPO[144][145] - As of March 31, 2022, cash, cash equivalents, and short-term investments totaled $123.2 million, believed sufficient for at least the next twelve months[145] - Additional capital will be required for future R&D activities and public company operations, potentially through equity/debt financings or collaborations[143][149] Future Funding Requirements The company anticipates substantial expense increases for milademetan clinical trials, RAD52 preclinical research, and public company operations, with uncertain timing due to drug development unpredictability - Expenses are expected to increase substantially due to ongoing and new clinical trials for milademetan, preclinical research for RAD52, and other product candidates[146] - Additional costs are anticipated from operating as a public company[146] - The timing and amounts of increased capital outlays and operating expenses are uncertain due to the unpredictable nature of clinical and preclinical development[146] - Future capital requirements depend on factors such as clinical trial scope and costs, regulatory review, commercialization, intellectual property, acquisitions, and headcount growth[147] - Raising additional capital through equity or convertible debt may dilute the ownership interest of existing stockholders[149] Cash Flows The company experienced a net decrease in cash and cash equivalents of $3.3 million in Q1 2022, driven by operating losses, partially offset by investing activities | Activity Type | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(17,110) | $(4,866) | | Net cash provided by (used in) investing activities | $13,436 | $(29) | | Net cash provided by (used in) financing activities | $399 | $(858) | | Net decrease in cash and cash equivalents | $(3,275) | $(5,753) | Operating Activities Net cash used in operating activities significantly increased to $17.1 million in Q1 2022, driven by a $17.4 million net loss and decreased operating assets/liabilities, partially offset by non-cash stock compensation - Net cash used in operating activities was $17.1 million in Q1 2022, primarily due to a $17.4 million net loss and a $1.0 million decrease in operating assets and liabilities[151] - This was partially offset by a non-cash stock compensation adjustment of $1.2 million[151] - In Q1 2021, net cash used in operating activities was $4.9 million, driven by a $6.8 million net loss, partially offset by changes in operating assets/liabilities ($1.8 million) and non-cash adjustments ($0.2 million)[152] Investing Activities Net cash provided by investing activities was $13.4 million in Q1 2022, mainly from short-term investment maturities offsetting purchases; Q1 2021 saw cash used for property and equipment - Net cash provided by investing activities was $13.4 million in Q1 2022, primarily from $23.0 million in short-term investment maturities, partially offset by $9.5 million in purchases[153] - Net cash used in investing activities for Q1 2021 was $29 thousand for property and equipment purchases[153] Financing Activities Net cash provided by financing activities was $0.4 million in Q1 2022, mainly from stock option exercises and ESPP purchases; Q1 2021 saw cash used for IPO offering costs - Net cash provided by financing activities was $0.4 million in Q1 2022, primarily from proceeds from option exercises and ESPP purchases[154] - Net cash used in financing activities for Q1 2021 was $0.9 million, primarily related to payments for deferred IPO offering costs[154] Obligations and other Commitments The company has cancelable license agreements with unestimable future milestone/royalty payments, and cancelable CRO/vendor contracts, with accrued R&D obligations of $5.4 million as of March 31, 2022 - License agreements may require future milestone and royalty payments, which are not estimable and are cancelable by the company[155] - Contracts with CROs and other vendors are generally cancelable and do not contain minimum purchase commitments[156] - Accrued research and development obligations were $5.4 million as of March 31, 2022, compared to $4.3 million as of December 31, 2021[156] - No material changes to contractual obligations occurred during Q1 2022 outside the ordinary course of business[157] Critical Accounting Policies and Use of Estimates This section reviews the company's critical accounting policies and the use of estimates, including accrued liabilities and stock-based compensation - No significant changes to critical accounting policies and estimates from the 2021 Form 10-K, except as described in Note 2[158] Accrued Liabilities The company estimates and accrues expenses for vendor, consultant, CRO, and clinical site contracts based on service progress, with accrued R&D at $5.4 million as of March 31, 2022 - The company estimates expenses for obligations under contracts with vendors, consultants, CROs, and clinical sites, matching expenses with the period services are provided[159][161] - Accrued research and development balances were $5.4 million as of March 31, 2022, compared to $4.3 million as of December 31, 2021[161] - Other accrued liabilities balances were $4.5 million as of March 31, 2022, compared to $5.7 million as of December 31, 2021[161] - To date, no material differences have been experienced between accrued costs and actual costs incurred[161] Stock-Based Compensation Stock-based compensation expense is measured using the Black-Scholes model, requiring volatility and expected term estimates; total expense was $1.2 million in Q1 2022, with $14.2 million in unrecognized costs - Stock-based compensation expense is measured and recognized over the requisite service period using the Black-Scholes option pricing model[162][163][164] - The model requires estimates for assumptions such as expected stock price volatility and the estimated expected term of each award[163] - Stock-based compensation expense was $1.2 million for Q1 2022, compared to $0.2 million for Q1 2021[164] | Item | As of March 31, 2022 | As of December 31, 2021 | | :-------------------------------- | :------------------- | :---------------------- | | Unvested equity compensation costs not yet recognized (in millions) | $14.2 | $9.8 | | Weighted average period over which the unvested awards are expected to be recognized (in years) | 3.2 | 3.1 | Recent Accounting Pronouncements Refers to Note 2 for disclosures on recent accounting pronouncements and their potential impact - A description of recent accounting pronouncements potentially impacting the company's financial position, results of operations, or cash flows is disclosed in Note 2[166] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Rain Therapeutics Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[167] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting identified - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[169] - Management recognizes that controls and procedures provide only reasonable assurance and involve judgment in evaluating cost-benefit relationships[168][170] - No changes in internal control over financial reporting were identified during Q1 2022 that materially affected or are reasonably likely to materially affect internal control[170] PART II. OTHER INFORMATION This part contains other required information, including legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings - There are no legal proceedings to report[173] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes from the risk factors disclosed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2021[174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds - There were no unregistered sales of equity securities and no use of proceeds to report[175] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities to report[176] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - There were no mine safety disclosures to report[177] Item 5. Other Information The company reported no other information - There is no other information to report[178] Item 6. Exhibits This section lists the exhibits filed or furnished as part of the Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL data files - Exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Common Stock Certificate Form, Amended and Restated Investors' Rights Agreement, various certifications (31.1, 31.2, 32.1), and Inline XBRL documents[180] Signatures The report is duly signed on behalf of Rain Therapeutics Inc. by its Chairman and Chief Executive Officer and its Senior Vice President of Finance and Administration - The report is signed by Avanish Vellanki (Chairman and Chief Executive Officer) and Nelson Cabatuan (Senior Vice President of Finance and Administration)[183]