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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
        
    
to
    
        
    
    
Commission file number
001-39244
 
 
Vincerx Pharma, Inc.
(Exact name of Registrant as Specified in Its Charter)
 
 
 
Delaware
 
83-3197402
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
   
260 Sheridan Avenue, Suite 400
Palo Alto,
CA
 
94306
(Address of principal executive offices)
 
(Zip Code)
Registran
t’s
telephone number, including area code: (650)
800-6676
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, $0.0001 par value per share
 
VINC
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large Accelerated Filer      Accelerated Filer  
       
Non-Accelerated Filer  

   Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
As of July 31, 2022, there were 21,189,769 shares of the registrant’s common stock outstanding.
 
 
 


Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial plans or performance. When used in this report, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “forecast,” “goal,” “may,” “might,”
“on-target,”
“plan,” “possible,” “potential,” “predict,” “project,” “should,” “seeks,” “suggests,” “scheduled,” or “will,” and similar expressions are intended to identify forward-looking statements, and include but are not limited to:
 
   
our future financial and business performance;
 
   
strategic plans for our business and product candidates;
 
   
our ability to develop or commercialize products;
 
   
the expected results and timing of clinical trials and nonclinical studies;
 
   
our ability to comply with the terms of the Bayer License Agreement;
 
   
developments and projections relating to our competitors and industry;
 
   
our expectations regarding our ability to obtain, develop and maintain intellectual property protection and not infringe on the rights of others;
 
   
our ability to retain key scientific or management personnel;
 
   
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;
 
   
our future capital requirements and sufficiency of available cash, including our expected cash runway, and the timing of those requirements and sources and uses of cash;
 
   
our ability to obtain funding for our operations;
 
   
the impact of our strategic prioritization and cost reduction measures;
 
   
the outcome of any known and unknown litigation and regulatory proceedings;
 
   
our business, plans and opportunities; and
 
   
changes in applicable laws or regulations.
These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements, including the following:
 
   
risks associated with preclinical or clinical development and trials, including those conducted prior to our
in-licensing;
 
   
risks related to the rollout of our business and the timing of expected business milestones;
 
   
changes in the assumptions underlying our expectations regarding our future business or business model;
 
   
our ability to develop, manufacture and commercialize product candidates;
 
   
general economic, financial, legal, political and business conditions and changes in domestic and foreign markets;
 
   
changes in applicable laws or regulations;
 
   
the impact of natural disasters, including climate change, and the impact of health epidemics, including the
COVID-19
pandemic, on our business;
 
   
the size and growth potential of the markets for our products, and our ability to serve those markets;
 
   
market acceptance of our planned products;
 
   
risks related to our plans and assumptions regarding the availability, use and sufficiency of our cash resources;
 
   
our ability to raise capital;
 
   
our ability to successfully implement our workforce and cost reductions and the impact of such reductions;
 
   
the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and
 
   
other risks and uncertainties set forth in this report in the section entitled “Risk Factors.”
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.
 
1

Table of Contents
Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Item 1A of this report. These forward-looking statements made by us in this report speak only as of the date of this report. Except as required under the federal securities laws and rules and regulations of the Securities and Exchange Commission (the “SEC”), we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. You should, however, review additional disclosures we make in our definitive proxy statement for the 2022 Annual Meeting of Stockholders, Annual Report on Form
10-K
for the year ended December 31, 2021, Quarterly Reports on Form
10-Q,
and Current Reports on Form
8-K
filed with the SEC.
You should read this report completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Frequently Used Terms
Unless the context indicates otherwise, references in this report to the “Company,” “Vincerx,” “we,” “us,” “our” and similar terms refer to Vincerx Pharma, Inc. (f/k/a Vincera Pharma, Inc. f/k/a LifeSci Acquisition Corp.) and its consolidated subsidiaries. References to “LSAC” refer to LifeSci Acquisition Corp., our predecessor company prior to the consummation of the Business Combination (as defined below). Additional terms frequently used in this report include the following:
 
   
“ADC” means antibody-drug conjugate.
 
   
“Affordable Care Act” means the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act.
 
   
“AML” means acute myeloid leukemia.
 
   
“ANDA” means an abbreviated new drug application.
 
   
“Bayer License Agreement” means that certain License Agreement, dated October 7, 2020, by and among Legacy Vincera Pharma, Bayer Aktiengesellschaft and Bayer Intellectual Property GmbH.
 
   
“BLA” means a biologics license application.
 
   
“BPCIA” means the Biologics Price Competition and Innovation Act of 2009.
 
   
“Business Combination” means the Merger and the other transactions described in the Merger Agreement.
 
   
“BTKi” means Bruton tyrosine kinase inhibitor.
 
   
“Bylaws” means our amended and restated bylaws.
 
   
“Certificate of Incorporation” means our second amended and restated certificate of incorporation, as amended.
 
   
“cGMP” means current Good Manufacturing Practice.
 
   
“CLL” means chronic lymphocytic leukemia.
 
   
“common stock” means our common stock, $0.0001 par value per share.
 
   
“double-hit
DLBCL” means diffuse large
B-cell
lymphoma that is characterized by translocations of MYC and
BCL-2.
 
   
“Earnout Shares” means certain rights to common stock after the closing of the Business Combination that Legacy Holders may be entitled to receive pursuant to the Merger Agreement.
 
   
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
   
“FDA” means the U.S. Food and Drug Administration.
 
   
“IND” means an investigational new drug application.
 
   
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.
 
   
“KSPi” means kinesin spindle protein inhibitor.
 
   
“Legacy Holders” means the stockholders of Legacy Vincera Pharma immediately prior to the Business Combination.
 
   
“Legacy Vincera Pharma” means Vincera Pharma, Inc. prior to the consummation of the Business Combination, which changed its name to VNRX Corp. following the Business Combination.
 
2

Table of Contents
   
“Merger” means the merger of Merger Sub with and into Legacy Vincera Pharma, with Legacy Vincera Pharma surviving as the surviving company and as a wholly-owned subsidiary of LSAC, which occurred on December 23, 2020.
 
   
“Merger Agreement” means that certain Merger Agreement, dated September 25, 2020, by and among LSAC, Merger Sub, Legacy Vincera Pharma and Raquel E. Izumi, as the representative of the Legacy Holders.
 
   
“Merger Sub” means LifeSci Acquisition Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of LSAC at the time of the Business Combination.
 
   
“mRNA” means messenger RNA.
 
   
“NDA” means a new drug application.
 
   
“public warrants” means warrants originally issued in the initial public offering of LSAC, which were redeemed in April 2021.
 
   
“private warrants” means the warrants issued simultaneously with the closing of the initial public offering of LSAC in a private placement to LifeSci Holdings LLC and Rosedale Park, LLC and the warrants issued pursuant to Section 8.6 of the Merger Agreement.
 
   
“PTEFb/CDK9” means positive transcription elongation factor beta/cyclin-dependent kinase 9.
 
   
“Securities Act” means the Securities Act of 1933, as amended.
 
   
“SMDC” means small molecule drug conjugate.
 
   
“USPTO” means the United States Patent and Trademark Office.
 
   
“Warrant Agreement” means that certain Warrant Agreement, dated March 5, 2020, between LSAC and the Continental Stock Transfer & Trust Company.
Vincerx
®
, Vincerx Pharma
®
, the Vincerx Wings logo design and CellTrapper
are our trademarks or registered trademarks. This report may also contain trademarks and trade names that are the property of their respective owners.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A of this report, “Risk Factors,” before deciding whether to invest in our company.
 
   
We rely on the Bayer License Agreement to provide rights to the core intellectual property relating to all of our current product candidates, which agreement imposes significant payment and other obligations on us. Any failure by us to perform our obligations under the Bayer License Agreement could give Bayer AG (“Bayer”) the right to terminate or seek other remedies under the agreement, and any termination or loss of important rights under the Bayer License Agreement would significantly and adversely affect our ability to develop and commercialize enitociclib (formerly VIP152), VIP943, VIP924, VIP236 and our other current product candidates, raise capital or continue our operations.
 
   
Our preclinical development, clinical trials, manufacturing, supply chains and other operations and business activities, and the operations and business activities of third parties with whom we conduct business, including our contract manufacturers, contract research organizations, shippers, clinical trial sites and others, have been, and continue to be, adversely affected by the effects of epidemics, including the ongoing
COVID-19
pandemic.
 
   
We are dependent in large part on the success of our lead product candidate, enitociclib, which is currently in clinical trials. If we are unable to complete development of, successfully complete clinical trials, obtain approval for and commercialize enitociclib in a timely manner, our business will be harmed.
 
   
We are at an early stage in development efforts for our product candidates, and we may not be able to successfully develop, manufacture, complete clinical trials and commercialize our product candidates on a timely basis or at all.
 
   
There is currently no CDK9 inhibitor, ADC delivering a KSPi warhead or small molecule drug conjugate delivering an optimized CPT payload that has to date been approved by the FDA, and the development of our product candidates may never lead to a marketable product.
 
   
We rely in part on the preclinical and clinical trial data provided by Bayer in assessing the viability of our product candidates, and such preclinical and clinical trial data has not been verified by us or any independent third parties.
 
3

Table of Contents
   
Our long-term prospects depend in part upon discovering, developing, manufacturing and commercializing additional product candidates, which may fail in development or clinical trials, or suffer delays that adversely affect their commercial viability.
 
   
Results from early-stage clinical trials may not be predictive of results from late-stage or other clinical trials.
 
   
Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
 
   
Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
 
   
If the market opportunity for any product candidate that we or our strategic partners develop is smaller than we believe, our revenue may be adversely affected and our business may suffer.
 
   
We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.
 
   
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
 
   
Our business entails a significant risk of product liability and if we are unable to obtain sufficient insurance coverage such inability could have an adverse effect on our business and financial condition.
 
   
Any product candidates we develop may become subject to unfavorable third party coverage and reimbursement practices, as well as pricing regulations.
 
   
Clinical trials are expensive, time consuming, subject to enrollment and other delays and may be required to continue beyond our available funding, and we cannot be certain that we will be able to raise sufficient funds to successfully complete the development, clinical trials and commercialization of any of our product candidates currently in preclinical and clinical development, should they succeed.
 
   
We are at an early stage of development as a company and our limited operating history may make it difficult to evaluate our ability to succeed.
 
   
We have incurred net losses since inception, and we expect to continue to incur significant net losses for the foreseeable future.
 
   
We recently implemented certain workforce and cost reduction measures in connection with our strategic plan, and there can be no assurance that we will be able to successfully implement these workforce and cost reductions or that such measures will not adversely affect our business.
 
   
We require substantial capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.
 
   
The Bayer License Agreement obligates us to make significant milestone and royalty payments, some of which will be triggered prior to the commercialization of any of our product candidates.
 
   
We may be unable to obtain U.S. or foreign regulatory approvals and, as a result, may be unable to commercialize our product candidates.
 
   
Our current or future product candidates may cause adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
 
4

Table of Contents
PART I
 
ITEM 1.
Financial Statements.
VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
    
June 30,
2022
   
December 31,
2021
 
    
(Unaudited)
       
ASSETS
                
Current assets:
                
Cash
   $ 80,857     $ 111,459  
Restricted cash
     63       105  
Prepaid expenses
     847       182  
Other current assets
     619       95  
    
 
 
   
 
 
 
Total current assets
     82,386       111,841  
Right-of-use
assets
     3,514       3,949  
Property, plant and equipment, net
     202       233  
Other assets
     1,642       1,653  
    
 
 
   
 
 
 
Total assets
  
$
87,744
 
 
$
117,676
 
    
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities
                
Accounts payable
   $ 5,118     $ 2,019  
Accrued expenses
     4,331       4,715  
Lease liability
     968       738  
Common stock warrant liabilities
     34       6,447  
    
 
 
   
 
 
 
Total current liabilities
     10,451       13,919  
Lease liability, net of current portion
     2,930       3,436  
    
 
 
   
 
 
 
Total liabilities
     13,381       17,355  
    
 
 
   
 
 
 
Commitments and contingencies - Note 6
                
Stockholders’ equity
                
Preferred stock, $0.0001 par value; 30,000,000 shares authorized, none issued and outstanding as of June 30, 2022 and December 31, 2021
                  
Common stock, $0.0001 par value; 120,000,000 shares authorized, 21,189,769 shares and 21,057,560 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
     2       2  
Additional
paid-in
capital
     165,173       156,311  
Accumulated other comprehensive income (loss)
     4       (21
Accumulated deficit
     (90,816     (55,971
    
 
 
   
 
 
 
Total stockholders’ equity
     74,363       100,321  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
  
$
87,744
 
 
$
117,676
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
5

VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except per share amounts)
 
    
For the three months ended
   
For the six months ended
 
    
June 30,
   
June 30,
 
    
2022
   
2021
   
2022
   
2021
 
Operating expenses:
                                
General and administrative
   $ 4,722     $ 6,695     $ 10,378     $ 11,486  
Research and development
     13,742       10,698       29,713       15,532  
Restructuring
     1,159       —         1,159       —    
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     19,623       17,393       41,250       27,018  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (19,623     (17,393     (41,250     (27,018
    
 
 
   
 
 
   
 
 
   
 
 
 
Other income (expense)
                                
Change in fair value of warrant liabilities
     1,202       15,359       6,413       18,708  
Other expense
     —         —         (8     —    
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other income (expense)
     1,202       15,359       6,405       18,708  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
  
(18,421
 
(2,034
 
(34,845
 
(8,310
Other comprehensive income:
                                
Net foreign currency translation gain
     10       —         25       —    
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
  
$
(18,411
 
$
(2,034
 
$
(34,820
 
$
(8,310
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per common share, basic and diluted
   $ (0.88   $ (0.12   $ (1.66   $ (0.55
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares outstanding, basic and diluted
     20,995       16,350       20,946       15,050  
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
6

VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(Unaudited)
(
in thousands
)
 
              
              
              
              
              
              
 
  
For the Three Months Ended June 30, 2022
 
 
  
Common Stock
 
  
Additional
 
  
Accumulated
Other
Comprehensive
 
 
Accumulated
 
 
Total
Stockholders’
 
 
  
Shares
 
  
Amount
 
  
Paid-in Capital
 
  
Income (Loss)
 
 
Deficit
 
 
Equity
 
Balance as of April 1, 2022
  
 
21,057
 
  
$
2
 
  
$
161,569
 
  
$
(6
  
$
(72,395
  
$
89,170
 
Issuance of common stock from employee stock plans
     132        —          242        —          —          242  
Stock-based compensation
     —          —          3,362        —          —          3,362  
Cumulative translation adjustment
     —          —          —          10        —          10  
Net loss
     —          —                   —          (18,421      (18,421
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Balance as of June 30, 2022
  
 
21,189
 
  
$
2
 
  
$
165,173
 
  
$
4
 
  
$
(90,816
  
$
74,363
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
     
              
     
              
     
              
     
              
     
              
     
              
 
    
For the Six Months Ended June 30, 2022
       
    
Common Stock
    
Additional
    
Accumulated
Other
Comprehensive
   
Accumulated
   
Total
Stockholders’
 
    
Shares
    
Amount
    
Paid-in Capital
    
Income (Loss)
   
Deficit
   
Equity
 
Balance as of January 1, 2022
  
 
21,057
 
  
$
2
 
  
$
156,311
 
  
$
(21
 
$
(55,971
 
$
100,321
 
Issuance of common stock from employee stock plans
  
 
132
 
  
 
—  
 
  
 
242
 
  
 
—  
 
 
 
—  
 
 
 
242
 
Stock-based compensation
  
 
—  
 
  
 
—  
 
  
 
8,620
 
  
 
—  
 
 
 
—  
 
 
 
8,620
 
Cumulative translation adjustment
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
25
 
 
 
—  
 
 
 
25
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
(34,845
 
 
(34,845
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of June 30, 2022
  
 
21,189
 
  
$
2
 
  
$
165,173
 
  
$
4
 
 
$
(90,816
 
$
74,363
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
     
              
     
              
     
              
     
              
     
              
     
              
 
    
For the Three Months Ended June 30, 2021
 
    
Common Stock
    
Subscription
   
Additional
    
Accumulated
   
Total
Stockholders’
 
    
Shares
    
Amount
    
Receivable
   
Paid-in Capital
    
Deficit
   
Equity
 
Balance as of April 1, 2021
  
 
14,696
 
  
$
1
 
  
$
(8,182
 
$
56,675
 
  
$
(22,941
 
$
25,553
 
Issuance of common stock from warrant exercises
  
 
2,825
 
  
 
—  
 
  
 
8,182
 
 
 
32,489
 
  
 
—  
 
 
 
40,671
 
Reclassification of warrant liabilities to equity due to warrant exercises for cash
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
768
 
  
 
—  
 
 
 
768
 
Stock-based compensation
  
 
—  
 
  
 
—  
 
          
 
6,637
 
  
 
—  
 
 
 
6,637
 
Net loss
  
 
—  
 
  
 
—  
 
          
 
—  
 
  
 
(2,034
 
 
(2,034
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
Balance as of June 30, 2021
  
 
17,521
 
  
$
1
 
  
$
  
 
 
$
96,569
 
  
$
(24,975
 
$
71,595
 
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
 
     
              
     
              
     
              
     
              
     
              
 
    
For the Six Months Ended June 30, 2021
 
    
Common Stock
    
Additional
    
Accumulated
   
Total
Stockholders’
 
    
Shares
    
Amount
    
Paid-in Capital
    
Deficit
   
Equity
 
Balance as of January 1, 2021
  
 
13,984
 
  
$
1
 
  
$
42,043
 
  
$
(16,665
 
$
25,379
 
Issuance of common stock from warrant exercises
  
 
3,537
 
  
 
—  
 
  
 
40,671
 
  
 
—  
 
 
 
40,671
 
Reclassification of warrant liabilities to equity due to warrant exercises for cash
  
 
—  
 
  
 
—  
 
  
 
2,503
 
  
 
—  
 
 
 
2,503
 
Stock-based compensation
  
 
—  
 
  
 
—  
 
  
 
11,352
 
  
 
—  
 
 
 
11,352
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(8,310
 
 
(8,310
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of June 30, 2021
  
 
17,521
 
  
$
1
 
  
$
96,569
 
  
$
(24,975
 
$
71,595
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
7

VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(
in thousands
)
 
    
For the six months ended
June 30,
 
    
2022
   
2021
 
Cash flows from operating activities
                
Net loss
   $ (34,845   $ (8,310
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation
     27           
Stock-based compensation
     8,620       11,352  
Amortization of
right-of-use
assets
     435       (51
Change in fair value of warrant liabilities
     (6,413     (18,708
Changes in operating assets and liabilities:
                
Prepaid and other current assets
     (1,189     436  
Other assets
     11       (105
Accounts payable
     3,099       1,339  
Accrued expenses
     (384     2,397  
Due to related parties
              (14
Lease liabilities
     (276     52  
    
 
 
   
 
 
 
Net cash used in operating activities
     (30,915     (11,612
  
 
 
 
 
 
 
 
Cash Flows from Investing Activities:
  
 
Research and development-acquired license
              (5,000
Capital expenditures
              (228
    
 
 
   
 
 
 
Net cash used in investing activities
              (5,228
  
 
 
 
 
 
 
 
Cash Flows from Financing Activities:
                
Proceeds from issuance of common stock from employee stock plans
     242      
—  

 
Proceeds from warrants exercised for cash, net of redemption cost
              40,671  
    
 
 
   
 
 
 
Net cash provided by financing activities
     242       40,671  
  
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and restricted cash
     29           
  
 
 
 
 
 
 
 
Net increase (decrease) in cash and restricted cash
     (30,644     23,831  
Cash and restricted cash at beginning of the period
     111,564       61,792  
    
 
 
   
 
 
 
Cash and restricted cash at end of the period
  
$
80,920
 
 
$
85,623
 
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
                
Cash paid for income taxes
   $        $     
Cash paid for interest
   $ —       $ 25  
Supplemental schedule of
non-cash
investing and financing activities:
                
Reclassification of warrant liabilities to equity due to warrant exercises for cash
   $ —       $ 2,503  
Right-of-use
assets obtained in exchange for operating lease liabilities
   $ —       $ 4,166  
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
8

VINCERX PHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. NATURE OF BUSINESS
LSAC was initially formed on December 19, 2018 as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. In December 2020, the Merger Sub merged with and into Legacy Vincera Pharma, with Legacy Vincera Pharma surviving the Merger as a wholly- owned subsidiary of LSAC. In connection with the Business Combination, LSAC changed its name to Vincera Pharma, Inc., and subsequently in January 2021, changed its name to Vincerx Pharma, Inc. (together with its consolidated subsidiaries, the “Company”).
The Company is a clinical-stage biopharmaceutical company focused on leveraging its extensive development and oncology expertise to advance new therapies intended to address unmet medical needs for the treatment of cancer. The Company’s current pipeline is entirely derived from the Bayer License Agreement (see Note 3), pursuant to which the Company has been granted an exclusive, royalty-bearing, worldwide license under certain Bayer patents and
know-how
to develop, use, manufacture, commercialize, sublicense and distribute a clinical-stage and
follow-on
small molecule drug program and a preclinical stage bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule drug conjugates. The Company intends to use these product candidates to treat various cancers in a patient-specific, targeted approach.
During the early months of 2020,
COVID-19
emerged and subsequently spread world-wide. The World Health Organization declared
COVID-19
a pandemic resulting in federal, state and local governments and private entities mediating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders, and advisories, quarantining people who may have been exposed to the virus and other measures. Our business operations, and those of third parties with whom we conduct business, have been, and could continue to be, adversely affected by the ongoing
COVID-19
pandemic. The extent to which
COVID-19
could continue to impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as duration of the pandemic, the emergence and severity of new variants of the virus, additional or modified government actions, new information concerning the severity and impact of the virus, the timing, availability, efficacy, adoption and distribution of vaccines or other preventative treatments, travel restrictions, quarantines, social distancing requirements and business closures and other actions taken to contain the virus or address its impact. Management continues to evaluate the impact of the ongoing
COVID-19
pandemic on its current operations and future plans and intends to take appropriate measures to address any such impact, but there can be no assurance that these efforts will be successful and that the pandemic will not continue to have
a
negative effect on the Company’s financial position and results of its operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 of Regulation
S-X
of the rules and regulations of the SEC. They include the accounts of Vincerx and its wholly-owned subsidiaries VNRX Corp and Vincerx Pharma GmbH. All intercompany accounts and transactions have been eliminated. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K
for the year ended December 31, 2021 as filed with the SEC on March 29, 2022, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2021 is derived from the audited financial statements presented in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2021. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements as well as reported amounts of expenses during the reporting periods. Estimates made by the Company include, but are not limited to, those related to our accrued clinical trial and manufacturing expenses, common stock warrant liabilities and stock-based compensation. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.
 
9

Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form
10-K.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2020-06,
Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2021 and adoption must be as of the beginning of the Company’s annual fiscal year. The Company elected to early adopt this guidance on January 1, 2022 without any material impact on its condensed consolidated financial statements.
In May 2021, the FASB issued ASU
2021-04,
“Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic
470-50),
Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40)”.
ASU
2021-04
reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU
2021-04
provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU
2021-04
will be effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. On January 1, 2022, the Company adopted this standard without any material impact on its condensed consolidated financial statements.
NOTE 3. BAYER LICENSE
On October 7, 2020, the Company entered into the Bayer License Agreement, which became effective on December 23, 2020 upon the closing of the Business Combination. Pursuant to the Bayer License Agreement, the Company has an exclusive, worldwide, royalty-bearing license under certain Bayer patents and
know-how
to develop, use, manufacture, commercialize, sublicense and distribute (i) a clinical-stage small molecule drug platform, including a PTEFb inhibitor compound, and (ii) a preclinical stage bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule drug conjugates.
Following the closing of the Business Combination, the Company paid Bayer a $5.0 million upfront license fee on January 5, 2021.
If the Company achieves all of the development and commercial sales milestones for license products under the Bayer License Agreement for each of the countries and disease indications, the Company would be obligated to pay milestone payments that range from $110.0 million to up to $318.0 million per licensed product, and upon successful commercialization of at least five licensed products, the Company could be required to pay aggregate milestone payments in excess of $1 billion. In addition to milestone payments, the Company is also required to pay Bayer under the Bayer License Agreement ongoing royalties in the single digit to low double-digit percentage range on net commercial sales of licensed products. As of June 30, 2022, no development and commercial sales milestones under the Bayer License Agreement have been met.
NOTE 4. RESTRUCTURING
On June 4, 2022, the Board of Directors of the Company approved a strategic plan to prioritize and focus its resources on its ongoing enitociclib clinical studies
for double-hit diffuse
large B-cell lymphoma
and chronic lymphocytic leukemia and its next generation bioconjugation platform and streamline and realign its resources to support these prioritized studies. This plan includes a reduction of the Company’s full-time employees by 33% and other cost reduction measures. Affected employees have been offered separation benefits, including severance payments, payments to cover premiums for continuation of healthcare coverage for a limited period and in some cases vesting acceleration on certain outstanding stock options.
 
10

We expect to incur up to approximately $2.5 million of severance and related expenses during 2022, of which approximately $1.2 million has been incurred through June 30, 2022. The estimate of the costs that the Company expects to incur, and the timing of such costs, are subject to a number of assumptions and actual results may differ. The Company may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the strategic plan.
The activity in the accrued restructuring balance, included within accrued expenses on the condensed consolidated balance sheet, was as follows for the three and six months ended June 30, 2022 (in thousands):
 
     Restructuring
liabilities at
December 31, 2021
     Charges      Cash payments      Restructuring
liabilities at
June 30, 2022
 
Workforce reduction
   $         $
1,159
     $ (528    $ 631  
NOTE 5. FAIR VALUE MEASUREMENT
The Company’s financial liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (amounts in thousands):
 
                                                                     
    
Fair Value Measured as of
June 30, 2022
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Liabilities:
                                   
Common stock warrant liabilities
  
$
  
    
$
  
    
$
34
 
  
$
34
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
  
$
  
    
$
  
    
$
34
 
  
$
34
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
                                                                     
    
Fair Value Measured as of December 31,
2021
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Liabilities:
                                   
Common stock warrant liabilities
  
$
  
    
$
  
    
$
6,447
 
  
$
6,447
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
  
$
  
    
$
  
    
$
6,447
 
  
$
6,447
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The Company performs procedures such as comparing prices obtained from independent sources to ensure that appropriate fair values are recorded. Because the transfer of certain private warrants to anyone outside of a small group of individuals constituting the sponsors of LSAC would result in these private warrants having similar terms as the public warrants, management determined that the fair value of each of these private warrants is approximately double that of a public warrant, with a modest adjustment for short-term marketability restrictions. Accordingly, these private warrants are classified as Level 3 financial instruments. The estimated fair value of the private warrants is determined with Level 3 inputs using Black-Scholes and Monte Carlo simulations. There were no changes to the number of private warrants underlying the Level 3 financial instruments during the three- and
six-month
periods ended June 30, 2022.
There were no transfers between Level 1, 2 or 3 during the three- and
six-month
periods ended June 30, 2022 and June 30, 2021.
The following table presents changes in Level 3 liabilities measured at fair value for the
six-month
period ended June 30, 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs (in thousands).
 
    
Warrant
Liability
 
Balance – January 1, 2022
  
$
6,447
 
Change in fair value
     (6,413
    
 
 
 
Balance – June 30, 2022
  
$
34
 
    
 
 
 
 
11

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of June 30, 2022 and December 31, 2021 is as follows:
 
    
As of
June 30, 2022
   
As of
December 31, 2021
 
Stock price
   $ 1.32     $ 10.19  
Exercise price
   $ 11.50     $ 11.50  
Option term (years)
     3.5       4.0  
Volatility (annual)
     48.6     32.5
Risk-free rate
     3.0     1.1
Dividend yield (per share)
     0     0
NOTE 6. COMMITMENTS AND CONTINGENCIES
Leases
On December 23, 2020, the Company entered into a
5-year
term lease agreement which commenced on January 1, 2021. On April 1, 2021, and again on May 1, 2021, the lease was amended to include additional space. The annual rent expense is approximately $1.1 million.
At June 30, 2022, the Company had operating lease liabilities of approximately $3.9 million and right of use assets of approximately $3.5 million, which were included in the condensed consolidated balance sheets.
The following summarizes quantitative information about the Company’s operating leases (amounts in thousands):
 
    
For the six months
ended June 30,
 
    
2022
   
2021
 
Lease cost
                
Operating lease cost
   $ 598     $ 83  
Variable lease cost
                  
    
 
 
   
 
 
 
Total operating lease expense
   $ 598     $ 83  
    
 
 
   
 
 
 
Other information
                
Operating cash flows from operating leases
   $ 438     $ 70  
Right-of-use
assets obtained in exchange for operating lease liabilities
   $ —       $ 4,166  
Weighted-average remaining lease term – operating leases
     3.5       4.5  
Weighted-average discount rate – operating leases
     8     8
As of June 30, 2022, future minimum payments during the next three years are as follows (in thousands):
 
Remaining period ended December 31, 2022
   $ 608  
Year ended December 31, 2023
     1,261  
Year ended December 31, 2024
     1,284  
Year ended December 31, 2025
     1,336  
    
 
 
 
Total
     4,489  
Less present value discount
     (591
    
 
 
 
Operating lease liabilities included in the Condensed Consolidated Balance Sheet at June 30, 2022
   $ 3,898  
    
 
 
 
 
12

NOTE 7. STOCKHOLDERS’ EQUITY
The Company’s Certificate of Incorporation authorizes the issuance of 120,000,000 shares of common stock, $0.0001 par value per share and 30,000,000 shares of undesignated preferred stock, $0.0001 par value per share. As of June 30, 2022 and December 31, 2021, there were 21,189,769 shares and 21,057,560 shares, respectively, of common stock outstanding, and no shares of preferred stock outstanding.
Restricted Shares
A summary of restricted stock activity for the three- and six-months ended June 30, 2022 and June 30, 2021 is presented below:
 
    
Number of

Shares
    
Weighted Average
Grant Date Fair
Value per Share
 
Nonvested at January 1, 2022
  
 
182,686
 
  
$
0.045
 
Vested
     (33,203          
    
 
 
    
 
 
 
Nonvested at March 31, 2022

 
 
 
149,483
 
 
 
 
0.049
 
Veste
d

 
 
 
(27,493
)

 
 
 
 
Nonvested at June 30, 2022
  
 
121,990
 
  
$
0.052
 
    
 
 
    
 
 
 
 
 
  
Number
of Shares
 
  
Weighted Average
Grant Date Fair
Value per Share
 
Nonvested at January 1, 2021
  
 
361,168
 
  
$
0.036
 
Vested
  
 
(44,621
  
 
  
 
  
 
 
 
  
 
 
 
Nonvested at March 31, 2021
  
 
316,547
 
  
 
0.037
 
Vested
  
 
(44,620
  
 
  
 
  
 
 
 
  
 
 
 
Nonvested at June 30, 2021
  
 
271,927
 
  
$
0.041
 
  
 
 
 
  
 
 
As of June 30, 2022, there was approximately $6,600 of unrecognized stock-based compensation related to restricted stock that will be amortized in 2.0 years.
Warrants
As of June 30, 2022, there were 3,295,000 private warrants to purchase common stock outstanding. No public warrants remain outstanding at June 30, 2022.
Each public warrant entitled the registered holder to purchase
one-half
(1/2) of a share of common stock at a price of $11.50 per whole share of common stock
, subject to adjustment as discussed below, at any time commencing on the later of one year after the closing of the initial public offering of LSAC or the consummation of a business combination.
The private warrants are identical to the previously outstanding public warrants except that (i) each private warrant is exercisable for one share of common stock at an exercise price of $11.50 per share and (ii) such private warrants will be exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such private warrants is not effective) or on a cashless basis, at the holder’s option (except with respect to 500,000 of the private warrants held by Rosedale Park, LLC and 500,000 of the private warrants held by LifeSci Holdings LLC, which were amended to remove the cashless exercise provision), and will not be redeemable by the Company (except with respect to 500,000 of the private warrants held by Rosedale Park, LLC and 500,000 of the private warrants held by LifeSci Holdings LLC, which were amended to include a redemption provision substantially identical to that of the public warrants; provided, however, that such redemption rights may not be exercised during the first 12 months following the closing of the Business Combination unless the last sales price of the Company’s common stock has been equal to or greater than $20.00 per share for any 20 trading days within a 30 trading day period ending on the third business day prior to the date on which notice of redemption is given), in each case so long as they are still held by the initial purchasers or their affiliates. The private warrants purchased by Rosedale Park, LLC, will expire on March 5, 2025, provided that once the private warrants are not beneficially owned by Chardan Capital Markets, LLC or any of its related persons anymore, the private warrants may not be exercised five years following the completion of the Company’s initial business combination.
The previously outstanding public warrants and the private warrants issued to LifeSci Holdings LLC that were amended as described above were determined to be equity classified in accordance with ASC 815, Derivatives and Hedging. The remaining private warrants were determined to be liability classified in accordance with ASC 815, Derivatives and Hedging (see note 5).
NOTE 8. EQUITY INCENTIVE PLANS
In connection with the Business Combination, the stockholders approved the Vincerx Pharma, Inc. 2020 Stock Incentive Plan (the “2020 Plan”), which became effective upon the closing of the Business Combination on December 23, 2020. As of June 30, 2022, the Company had 4,542,924 shares of common stock reserved for issuance
and 599,546 options to acquire common stock that are available to grant, 
under the 2020 Plan.
The 2020 Plan allows for the grant of stock options and rights to acquire restricted stock to employees, directors and consultants of the Company. The terms and conditions of specific awards are set at the discretion of the Company’s board of directors. Options granted under the 2020 Plan expire no later than 10 years from the date of grant. Unvested common shares obtained upon early exercise of options are subject to repurchase by the Company at the original issue price.
 
13

Stock option activity under the 2020 Plan is as follows (amounts in thousands, except per share amounts):
 
    
Stock Options
    
Weighted Average
Exercise Price
    
Weighted
Average
Remaining
Contractual Life
(in years)
    
Aggregate
Intrinsic
Value
 
Outstanding at January 1, 2022
     3,408      $ 18.74        9.2      $ 3  
Options granted
     1,166        5.62        10.0        —    
Options cancelled
     (631      15.58               —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Outstanding at June 30, 2022
     3,943      $ 15.37        8.5      $ —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Options vested and exercisable at June 30, 2022
     1,916      $ 18.84        7.8      $ —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Stock-based compensation expense is based on the grant-date fair value. The Company recognizes compensation expense for all stock-based awards on a straight-line basis over the requisite service period of the awards, which is generally the option vesting term of three years.
As of June 30, 2022, the Company had stock-based compensation of approximately $9.5 million related to unvested stock options not yet recognized that are expected to be recognized over an estimated weighted average period of 1.0 years.
The following weighted average assumptions were used as inputs to the Black-Scholes option valuation model in determining the estimated grant-date fair value of the Company’s stock options granted during the six months ended June 30, 2022 and 2021:
 
    
For the six months
ended June 30,
 
    
2022
   
2021
 
Exercise price
   $ 5.62     $ 19.02  
Expected term (years)
     6.0       5.9  
Volatility (annual)
     83.6     75.5
Risk-free rate
     3.0     0.9
Dividend yield (per share)
     0     0
Total stock-based compensation expense recognized in the three- and
six-months
ended June 30, 2022 and 2021 was as follows (amounts in thousands):
 
     For the three months ended      For the six months ended  
     June 30, 2022      June 30, 2021      June 30, 2022      June 30, 2021  
Research and development
   $ 2,200      $ 4,401      $ 5,684      $ 7,078  
General and administrative
     1,162        2,236        2,936        4,274  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total stock-based compensation expense
  
$
3,362
 
  
$
6,637
 
  
$
8,620
 
  
$
11,352
 
    
 
 
    
 
 
    
 
 
    
 
 
 
NOTE 9. NET LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
 
14

The following table sets forth the computation of loss per share for the three- and
six-months
ended June 30, 2022 and 2021 (amounts in thousands, except per share number):
 
     For the three months ended
June 30,
     For the six months ended
June 30,
 
     2022      2021      2022      2021  
Numerator:
                                   
Net loss
   $ (18,421    $ (2,034    $ (34,845    $ (8,310
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator:
                                   
Weighted average common shares outstanding, basic and diluted
     20,995        16,350        20,946        15,050  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net loss per common share, basic and diluted
   $ (0.88    $ (0.12    $ (1.66    $ (0.55
    
 
 
    
 
 
    
 
 
    
 
 
 
The following table presents the potential common stock outstanding that was excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been antidilutive (amount in thousands):
 
     For the three and six months ended
June 30,
 
     2022      2021  
Options outstanding
     3,943        3,172  
Warrants
     3,295        3,295  
Total
     7,238        6,467  
NOTE 10. SUBSEQUENT EVENT
In connection with our strategic plan and workforce reduction (see note 4), the Company has consolidated its leased office space at its corporate headquarters location. Effective July 8, 2022, the Company has subleased substantially all of its remaining unused office space for a term of 18 months at a base rent of $50,000 per month.
 
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The below discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in our Annual Report on Form
10-K
for the year ended December 31, 2021 and with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a clinical-stage biopharmaceutical company focused on leveraging our extensive development and oncology expertise to advance new therapies intended to address unmet medical needs for the treatment of cancer. Our current pipeline is entirely derived from the Bayer License Agreement, pursuant to which we have been granted an exclusive, royalty-bearing, worldwide license under certain Bayer patents and
know-how
to develop, use, manufacture, commercialize, sublicense and distribute (i) a clinical-stage and
follow-on
small molecule drug program and (ii) a preclinical stage bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule drug conjugates. We intend to use these product candidates to treat various cancers in a patient-specific, targeted approach. We believe that these product candidates are differentiated from current programs targeting similar cancer biology and, if approved, may improve clinical outcomes of patients with cancer.
Despite several decades of advances in targeted therapies, cancer continues to be the second leading cause of death in the United States population per the National Center for Health Statistics. Cancer is not a single disease but rather a constellation of maladies with each requiring a unique approach to vanquish it. Our vision is to address the unmet medical needs of patients with cancer with a diverse pipeline of targeted medicines. Our small molecule drug program includes enitociclib, which is a highly selective, clinical-stage PTEFb/CDK9 inhibitor. Our ADC platform includes VIP943 and VIP924, which are next-generation ADC compounds addressing known and novel oncology targets that we believe could deliver a greater safety and efficacy profile than current ADC compounds. The bioconjugation program also includes VIP236, an SMDC for solid tumors. In addition to our lead products, we acquired the rights to additional product candidates that are still in the preclinical stage.
License Agreement with Bayer
Following the closing of the Business Combination, we paid Bayer a $5.0 million upfront license fee under the Bayer License Agreement. In addition, we will be responsible for significant development and commercial milestone payments to Bayer as well as ongoing royalties on commercial sales. See the discussion below under “Liquidity and Capital Resources.”
Basis of Presentation
We currently conduct our business through one operating segment. As a
pre-revenue
company with no commercial operations, our activities to date have been limited and were conducted primarily in the United States. Our historical results are reported under GAAP and in U.S. dollars.
 
15

Components of Results of Operations
We are a research and development stage company and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations.
Revenue
To date, we have not recognized any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.
Research and Development Expense
Research and development expenses consist or will consist of preclinical development of our product candidates and discovery efforts (including conducting preclinical studies), manufacturing development efforts, preparing for and conducting clinical trials, and activities related to regulatory filings for our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions are charged to research and development expense if the licensed technology has not reached technological feasibility and has no alternative future use. Research and development expenses include or could include:
 
   
employee-related expenses, including salaries, bonuses, benefits, stock-based compensation and other related costs for those employees involved in research and development efforts;
 
   
external research and development expenses incurred under agreements with clinical research organizations, investigative sites and consultants to conduct our preclinical studies;
 
   
costs related to manufacturing material for preclinical studies and clinical trials, including fees paid to contract manufacturing organizations;
 
   
laboratory supplies and research materials;
 
   
costs related to compliance with regulatory requirements; and
 
   
facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance and equipment.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We anticipate that our research and development expenses will increase in the future as we continue to develop our product candidates and manufacturing processes and conduct discovery and research activities for our preclinical and clinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as we commence, continue and expand our clinical trials. Our future expenses may vary significantly each period based on factors such as:
 
   
expenses incurred to conduct preclinical studies required to advance our product candidates into clinical trials, including the impact of factors such as inflation, supply chain disruptions and the ongoing
COVID-19
pandemic;
 
   
per patient clinical trial costs, including based on the number of doses that patients receive and the cost of drug products for combination therapies;
 
   
the number of patients who enroll in each clinical trial;
 
   
the number of clinical trials required for approval;
 
   
the number of sites included in the clinical trials;
 
   
the countries in which the clinical trials are conducted;
 
   
the length of time required to enroll eligible patients;
 
16

   
the
drop-out
or discontinuation rates of patients;
 
   
potential additional safety monitoring requested by regulatory agencies;
 
   
the duration of patient participation in the clinical trials and
follow-up;
 
   
the phase of development of the product candidate;
 
   
third party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
 
   
the cost of insurance, including product liability insurance, in connection with clinical trials;
 
   
regulators or institutional review boards requiring that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; and
 
   
the efficacy and safety profile of our product candidates.
General and Administrative Expenses
General and administrative expenses consist or will consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal, accounting and
tax-related
services and insurance costs.
We anticipate that our general and administrative expenses will increase in the future as we expand our operations and infrastructure to support the initiation, continuation and expansion of our preclinical studies and clinical trials for our product candidates. We also anticipate that our general and administrative expenses will increase as a result of payments for accounting, audit, legal and consulting services, as well as costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer liability insurance, investor and public relations activities and other expenses associated with operating as a public company.
Change in Fair Value of Warrant Liabilities
Certain of our private warrants are classified as liabilities pursuant to ASC
815-40,
Derivatives and Hedging – Contracts in Entity’s Own Equity. The change in fair value of warrant liabilities consists of the change in fair value of these private warrants.
 
17

Table of Contents
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2022 and 2021
The following tables set forth our historical operating results for the periods indicated (amounts in thousands):
 
     For the three months ended
June 30,
        
     2022      2021      Amount Change  
Operating expenses:
        
General and administrative
   $ 4,722      $ 6,695      $ (1,973
Research and development
     13,742        10,698        3,044  
Restructuring
     1,159        —          1,159  
  
 
 
    
 
 
    
 
 
 
Total operating expenses
     19,623        17,393        2,230  
  
 
 
    
 
 
    
 
 
 
Loss from operations
     (19,623      (17,393      (2,230
  
 
 
    
 
 
    
 
 
 
Other income
        
Change in fair value of warrant liabilities
     1,202        15,359        (14,157
  
 
 
    
 
 
    
 
 
 
Total other income
     1,202        15,359        (14,157
  
 
 
    
 
 
    
 
 
 
Net loss
  
$
(18,421
  
$
(2,034
  
$
(16,387
  
 
 
    
 
 
    
 
 
 
 
     For the six months ended
June 30
        
     2022      2021      Amount Change  
Operating expenses:
        
General and administrative
   $ 10,378      $ 11,486      $ (1,108
Research and development
     29,713        15,532        14,181  
Restructuring
     1,159        —          1,159  
  
 
 
    
 
 
    
 
 
 
Total operating expenses
     41,250        27,018        14,232  
  
 
 
    
 
 
    
 
 
 
Loss from operations
     (41,250      (27,018      (14,232
  
 
 
    
 
 
    
 
 
 
Other income (expense)
        
Change in fair value of warrant liabilities
     6,413        18,708        (12,295
Other expense
     (8      —          (8
  
 
 
    
 
 
    
 
 
 
Total other income (expense)
     6,405        18,708        (12,303
  
 
 
    
 
 
    
 
 
 
Net loss
  
$
(34,845
  
$
(8,310
  
$
(26,535
  
 
 
    
 
 
    
 
 
 
Research and Development
Research and development expenses increased by approximately $3.0 million and $14.2 million, respectively, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021. The increase for the six months ended June 30, 2022 compared to the same period in 2021 primarily related to increases in manufacturing services of approximately $5.5 million, including the initiation of manufacturing associated with our ADC program, new employee salaries of approximately $2.4 million, third party research and preclinical work of approximately $4.6 million, and clinical services of approximately $3.1 million, partially offset by a decline in stock-based compensation of approximately $1.4 million.
General and Administrative
General and administrative expenses decreased by approximately $2.0 million and $1.1 million, respectively, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021, primarily as a result of declines in stock-based compensation expense of $1.1 million and $1.3 million for the three- and
six-month
periods, respectively.
Restructuring
On June 4, 2022, the Board of Directors of the Company approved a strategic plan to prioritize and focus its resources on its ongoing enitociclib clinical studies
for double-hit diffuse
large B-cell lymphoma
and chronic lymphocytic leukemia and its next generation bioconjugation platform and streamline and realign its resources to support these prioritized studies. This plan includes a reduction of the Company’s full-time employees by 33% and other cost reduction measures. Affected employees have been offered separation benefits, including severance and reimbursement of healthcare premium payments.
We have incurred approximately $1.2 million of severance and related expenses through June 30, 2022.
 
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Table of Contents
Change in Fair Value of Warrant Liabilities
The change in fair value of warrant liabilities was primarily due to the decrease in the closing price of our common stock from $10.19 as of December 31, 2021 to $1.32 as of June 30, 2022.
Liquidity and Capital Resources
To date, we have not generated any revenue from any source, including the commercial sale of approved drug products, and we do not expect to generate revenue in the foreseeable future. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be adversely affected. We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate revenue unless and until we obtain regulatory approval of, and commercialize, our product candidates.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development and preclinical studies of, initiate, continue and expand clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company.
We will also be responsible for significant payments to Bayer under the Bayer License Agreement. We paid Bayer an upfront license fee of $5.0 million following the closing of the Business Combination. In addition, we will also be responsible to Bayer for significant future contingent payments under the Bayer License Agreement upon the achievement of certain development and commercial sales milestones as well as ongoing royalties on net commercial sales. The size and timing of these milestone payments will vary greatly depending on factors such as the particular licensed product, whether it involves a PTEFb licensed product or a bioconjugation licensed product (and which bioconjugation program), the number of distinct disease indications, the number of different countries with respect to which the milestone is achieved and the level of net commercial sales, and it is therefore difficult to estimate the total payments that could become payable to Bayer and when those payments would be due. If we achieve all of the milestones for each of the countries and disease indications, we would be obligated to pay development and commercial milestone payments that range from $110.0 million to up to $318.0 million per licensed product, and upon successful commercialization of at least five licensed products, we could be required to pay aggregate milestone payments in excess of $1.0 billion. We will be required to pay certain of these milestone payments prior to the time at which we are able to generate sufficient revenue, if any, from commercial sales of any of our product candidates. In addition to milestone payments, we are also required to pay Bayer under the Bayer License Agreement ongoing royalties in the single digit to low double-digit percentage range on net commercial sales of licensed products.
We therefore anticipate that we will need substantial additional funding in connection with our continuing operations. At June 30, 2022, we had approximately $80.9 million in cash. We intend to devote our capital resources to the preclinical and clinical development of our product candidates, our public company compliance costs and certain of the milestone payments under the Bayer License Agreement. In June 2022, our board of directors approved a strategic plan to prioritize and focus our resources on our ongoing enitociclib clinical studies
for double-hit DLBCL
and CLL and our next generation bioconjugation platform and to streamline and realign our resources, including a 33% workforce reduction, to support these prioritized studies and programs and extend our estimated cash runway. Based on our current business plans and assumptions, we believe our existing cash will enable us to fund our operating expenses and capital requirements into late 2024. Our estimate as to how long we expect our capital to be able to fund our operating expenses and capital requirements is based on plans and assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could result in less cash available to us or cause us to consume capital significantly faster than we currently anticipate, and we may need or choose to seek additional funds sooner than planned.
Because of the numerous risks and uncertainties associated with research, development, manufacturing, clinical trials and commercialization of pharmaceutical drug products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
 
   
the extent to which we develop,
in-license
or acquire other product candidates and technologies in our product candidate pipeline;
 
   
the costs and timing of research activities, clinical trials, process development and manufacturing
scale-up
activities associated with our product candidates and other programs as we advance them through preclinical and clinical development;
 
   
the number and development requirements of product candidates that we may pursue;
 
   
the costs, timing and outcome of regulatory review of our product candidates;
 
   
the timing and amount of our milestone payments to Bayer under the Bayer License Agreement;
 
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our headcount growth and associated costs as we expand our research and development capabilities and establish and expand our commercial infrastructure and operations;
 
   
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
 
   
royalty payments to Bayer under the Bayer License Agreement;
 
   
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
 
   
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; and
 
   
the costs of operating as a public company.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available in the near term, if at all.
Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Any future debt financing and equity financing, if available, may involve covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us, or at all, particularly in light of current economic or market conditions. We do not have any committed external source of funds. Market volatility resulting from the
COVID-19
pandemic, current economic and market conditions and the Russian invasion of Ukraine, or other factors, could also adversely impact our ability to access capital as and when needed. Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our research-stage programs, clinical trials or future commercialization efforts.
The
COVID-19
pandemic continues to evolve, and as a result, we are continuing to assess the effect that it could have on our business and operations. The extent to which
COVID-19
may impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as duration of the pandemic, the emergence and severity of new variants of the virus, additional or modified government actions, new information concerning the severity and impact of the virus, the timing, availability, efficacy, adoption and distribution of vaccines or other preventative treatments, travel restrictions, quarantines, social distancing requirements and business closures, and other actions taken to contain the virus or address its impact. We do not yet know the full extent of potential delays or impacts on our business and operations, our clinical trials, our research programs, healthcare systems or the global economy. While the potential economic impact brought by, and the duration of,
COVID-19
may be difficult to assess or predict, it could result in a recession or other significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity, our business and the value of our common stock.
Cash Flows
The following table provides a summary of our cash flow data for the periods indicated (amounts in thousands):
 
     For the six months ended
June 30,
 
     2021      2021  
Net cash used in operating activities
   $ (30,915    $ (11,612
Net cash used in investing activities
   $ —        $ (5,228
Net cash provided by financing activities
   $ 242      $ 40,671  
Cash Flows from Operating Activities
Our cash flows used in operating activities to date have been primarily comprised of payroll and professional service fees related to research and development, clinical trials and general and administrative activities. As we continue to expand clinical trials of, and seek marketing approval for, our product candidates, we expect our cash used in operating activities to increase before we start to generate any material cash flows from our business.
 
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Net cash used in operating activities was approximately $30.9 million for the six months ended June 30, 2022, consisting primarily of payments to clinical and manufacturing service providers, internal payroll costs and third-party professional services as we build our public company infrastructure and prepare for and conduct our clinical trials. Our net loss during the six months ended June 30, 2022 was approximately $34.8 million, which included approximately $8.6 million related to stock-based compensation and offset by approximately $6.4 million related to the change in fair value of warrant liabilities.
Off-Balance
Sheet Arrangements
We are not a party to any
off-balance
sheet arrangements, as defined under SEC rules.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses.
On an ongoing basis, we evaluate our estimates and judgments, including those related to derivative liabilities, accrued expenses and stock-based compensation. We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates, particularly given the significant social and economic disruptions and uncertainties associated with the ongoing
COVID-19
pandemic and the other risks and uncertainties set forth in this report in the section entitled “Risk Factors.”
Our critical accounting policies and significant estimates are detailed in our Annual Report on Form
10-K
for the year ended December 31, 2021. Our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form
10-K
for the year ended December 31, 2021.
 
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and fluctuations in foreign currency exchange rates. Information on quantitative and qualitive disclosures about these market risks is set forth below.
Interest Rate Risk
Cash and restricted cash consist solely of cash held in depository accounts and as such are not affected by either an increase or decrease in interest rates. Furthermore, we consider all highly liquid investments as cash equivalents. Currently, we do not possess any cash equivalents, but if we did, the short-term nature of these investments would also not be significantly impacted by changes in the interest rates. Any interest-bearing instruments carry a degree of risk; however, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
Foreign Currency Risk
Our operations are principally denominated by U.S. dollars and we do not expect our future operating results to be significantly affected by foreign currency transaction risk. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
 
ITEM 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule
13a-15(e)
under the Securities Exchange Act of 1934, or the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
21

Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) for the three months ended June 30, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
22

PART II
 
ITEM 1.
Legal Proceedings.
We are not currently a party to any legal proceedings, and are not aware of any pending or threatened legal proceedings against us that we believe could have a material adverse effect on our business, operating results or financial condition. We may from time to time become involved in legal proceedings arising in the ordinary course of business.
 
ITEM 1A.
Risk Factors.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We rely on the Bayer License Agreement to provide rights to the core intellectual property relating to all of our current product candidates, which agreement imposes significant payment and other obligations on us. Any failure by us to perform our obligations under the Bayer License Agreement could give Bayer the right to terminate or seek other remedies under the agreement, and any termination or loss of important rights under the Bayer License Agreement would significantly and adversely affect our ability to develop and commercialize enitociclib, VIP943, VIP924, VIP236 and our other current product candidates, raise capital or continue our operations.
We have licensed our current core patents and other intellectual property relating to enitociclib, VIP943, VIP924, VIP236 and our other current product candidates from Bayer on an exclusive, worldwide basis under the Bayer License Agreement. The Bayer License Agreement continues in effect on a
country-by-country
and licensed
product-by-licensed
product basis until there are no remaining royalty payment obligations in the relevant country and can be terminated earlier by Bayer in the event that we materially breach our material obligations, that bankruptcy or other insolvency proceedings are instituted against us or that we seek to revoke or challenge the validity of any licensed patents. If, for any reason, the Bayer License Agreement is terminated or we otherwise lose important rights, it would have a significant and adverse effect on our business and our ability to develop and commercialize our current product candidates, raise capital or continue our operations.
The Bayer License Agreement imposes on us obligations relating to development, commercialization, funding, payment, diligence, intellectual property protection and other matters. We paid Bayer an upfront license fee of $5.0 million following the closing of the Business Combination. In addition, we are obligated to make significant future payments to Bayer upon the achievement of certain development and commercial sales milestones involving licensed products. The size and timing of these milestone payments will vary greatly depending on factors such as the particular licensed product, whether it involves a PTEFb licensed product or a bioconjugation licensed product (and which bioconjugation program), the number of distinct disease indications, the number of different countries with respect to which the milestone is achieved and the level of net commercial sales, and it is therefore difficult to estimate the total payments that could become payable to Bayer and when those payments would be due. If we were to achieve all of the milestones for each of the countries and disease indications, we would be obligated to pay development and commercial milestone payments that range from $110.0 million to up to $318.0 million per licensed product, and upon successful commercialization of at least five licensed products, we could be required to pay aggregate milestone payments in excess of $1.0 billion. In addition to milestone payments, we are also required to pay Bayer under the Bayer License Agreement ongoing royalties in the single digit to low double-digit percentage range on net commercial sales of licensed products. To the extent we are able to achieve any of these milestones, many of them would be achieved, and the related milestone payments owed, before we are able to generate sufficient revenues (or any revenues in the case of development milestones). Accordingly, we will need to obtain substantial additional funding in order to pay these milestones, and there can be no assurance that we will be able to obtain the necessary funding on acceptable terms or at all. If we are unable to raise the necessary additional funding, we would be in breach of the Bayer License Agreement, which if not cured would give Bayer the right to terminate the agreement or seek other remedies, which would have a significant and adverse effect on our business and our ability to develop and commercialize our current product candidates, raise capital or continue our operations.
Our preclinical development, clinical trials, manufacturing, supply chains and other operations and business activities, and the operations and business activities of third parties with whom we conduct business, including our contract manufacturers, contract research organizations, shippers, clinical trial sites and others, have been, and continue to be, adversely affected by the effects of epidemics, including the ongoing
COVID-19
pandemic.
Our business has been, and could continue to be, adversely affected by health epidemics, including the ongoing
COVID-19
pandemic, wherever we have clinical trial sites or other business operations. In addition, health epidemics could cause significant disruption in the operations of third-party manufacturers, contract research organizations, shippers, clinical trial sites and other third parties upon whom we rely. For example, the
COVID-19
pandemic has presented a substantial public health and economic challenge around the world and has affected, and may continue to affect, employees, patients, communities and business operations, as well as the U.S. economy and financial markets. Many geographic regions, including those in which we and the third parties on whom we rely conduct operations, imposed, and in the future may again impose,
“shelter-in-place,”
quarantines or similar orders or restrictions to control the spread of
COVID-19.
These measures negatively impacted our productivity, disrupted our business, delayed our preclinical and clinical programs and timelines, and limited our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations, now or in the future, could negatively impact our business, operating results and financial condition.
 
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We are dependent on a worldwide supply chain for products to be used in our clinical trials and, if approved by the regulatory authorities, for commercialization. Quarantines,
shelter-in-place
and similar government orders and restrictions, staffing shortages and other disruptions in operations, whether related to
COVID-19
or other health epidemics, have impacted, and could continue to impact, personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which has impacted, and could continue to impact, our supply chain. For example, any manufacturing supply interruption of any product candidate could adversely affect our ability to conduct ongoing and future clinical trials of such product candidate. In addition, delays, closures and other disruptions of transportation carriers and modal hubs could materially impact our clinical development and any future commercialization timelines.
If our relationships with our suppliers or other vendors are delayed, scaled back or terminated as a result of the
COVID-19
pandemic or other health epidemics, we may not be able to enter into arrangements with alternative suppliers or vendors or do so on commercially reasonable terms or in a timely manner. Switching or adding additional suppliers or vendors involves substantial cost and requires management time and focus. In addition, there is a natural transition period when a new supplier or vendor commences work. As a result, delays could generally occur, which could adversely impact our ability to meet our desired clinical development and any future commercialization timelines. See “Risks Related to Our Dependence on Third Parties.”
In addition, our clinical trials have been, and may continue to be, affected by the
COVID-19
pandemic. Clinical site initiation and patient enrollment have been, and may continue to be, delayed due to staffing shortages, prioritization of hospital resources toward the
COVID-19
pandemic or concerns among patients about participating in clinical trials during a pandemic or public health measures imposed by governmental authorities in the countries and regions in which the clinical sites are located. Some patients may have difficulty following certain aspects of clinical trial protocols if quarantines or other restrictive measures impede patient movement or interrupt healthcare services. Similarly, our inability to successfully recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to
COVID-19
or experience additional restrictions by their institutions, city or state governments could adversely impact our clinical trial operations.
The global pandemic of
COVID-19
continues to evolve rapidly. The ultimate impact of the
COVID-19
pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. However, these effects have impacted, and could continue to impact, our operations.
We are dependent in large part on the success of our lead product candidate, enitociclib, which is currently in clinical trials. If we are unable to complete development of, successfully complete clinical trials, obtain approval for and commercialize enitociclib in a timely manner, our business will be harmed.
Our future success is dependent in large part on our ability to timely complete clinical trials, obtain marketing approval for and successfully commercialize enitociclib, our lead product candidate. We believe our highly selective CDK9 inhibitor, enitociclib, is differentiated from other CDK9 inhibitor technologies being developed by our competitors and are investing significant efforts and financial resources in the research and development of enitociclib. We are conducting a Phase 1 trial of enitociclib as a monotherapy in patients with
double-hit
DLBCL and CLL and in combination with BTKi in patients with CLL. enitociclib will require additional clinical development, evaluation of clinical, preclinical and manufacturing activities, marketing approval from government regulators, substantial investment and significant marketing efforts before we can generate any revenues from product sales. We are not permitted to market or promote enitociclib, or any other product candidate, before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals.
The success of enitociclib will depend on several factors, including the following:
 
   
the efficacy of enitociclib at selectively targeting CDK9;
 
   
the successful and timely completion of our ongoing clinical trials of enitociclib;
 
   
the initiation and successful patient enrollment and completion of additional clinical trials of enitociclib on a timely basis;
 
   
establishing and maintaining relationships with contract research organizations and clinical sites for the clinical development of enitociclib in the United States and internationally;
 
   
the frequency and severity of adverse events in the clinical trials;
 
   
achieving dose selection, efficacy, safety and tolerability profiles that are satisfactory to the FDA or any comparable foreign regulatory authority for marketing approval;
 
   
establishing and maintaining supply arrangements with third-party drug product suppliers, manufacturers and distributors;
 
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obtaining and maintaining patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally;
 
   
a continued acceptable safety profile following any marketing approval; and
 
   
our ability to compete with other therapies.
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator. If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize enitociclib, which would materially harm our business.
We are at an early stage in development efforts for our product candidates, and we may not be able to successfully develop and commercialize our product candidates on a timely basis or at all.
enitociclib is a novel PTEFb/CDK9 inhibitor and its potential therapeutic benefit is unproven. While several CDK9 inhibitor candidates are under development by other companies, there is currently no approved therapy inhibiting CDK9 for the treatment of cancers, and as a result, the regulatory pathway for enitociclib may present novel issues that could cause delays in development or approval. While results from preclinical data and early clinical trials of enitociclib have shown tolerable side effects and a reduction in MCL1 and MYC mRNA, enitociclib may not demonstrate in patients any or all of the pharmacological benefits we believe it may possess. We have not yet succeeded and may never succeed in demonstrating efficacy and safety for enitociclib in pivotal clinical trials or in obtaining marketing approval thereafter. For example, although Bayer has evaluated enitociclib in preclinical studies and in early-stage clinical trials, enitociclib has not yet advanced into a large-scale, pivotal clinical trial for any indication. Positive results from early-stage clinical trials are not necessarily predictive of the results of planned clinical trials of enitociclib. If we cannot replicate the positive results from Bayer’s Phase 1 clinical trials in our clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize enitociclib. As a result, our focus on exploring PTEFb/CDK9 inhibition may fail to result in the identification of viable additional indications for enitociclib. If we are unsuccessful in our development efforts, we may not be able to advance the development of or commercialize enitociclib, raise capital, expand our business or continue our operations.
VIP943, VIP924 and VIP236 are part of a novel bioconjugation platform, and their potential therapeutic benefits are unproven. These product candidates are still in the preclinical phase and we do not anticipate beginning clinical trials any sooner than late 2022 or early 2023, at the earliest. Furthermore, we may never develop any of the product candidates in our bioconjugation platform. While several bioconjugation and ADC candidates are under development by other companies, there is currently no approved bioconjugation therapy using our proprietary cytotoxin (an optimized CPT payload derived from SN38, a well-known cytotoxic drug and active metabolite of irinotecan) or an ADC using KSPi and CellTrapper. We may uncover a previously unknown risk associated with KSPi or our optimized CPT payload, our CellTrapper technology may not be as impermeable as initial testing suggests, our linker technology may not be as effective as initial testing suggests, or other issues that may be more problematic than we currently believe, which may prolong the period of observation required for obtaining, or result in the failure to obtain, regulatory approval or may necessitate additional preclinical and clinical testing. While results from preclinical trials of VIP943, VIP924 and VIP236 in mouse xenograft models have shown
proof-of-concept
for each, VIP943, VIP924 and VIP236 may not demonstrate in patients any or all of the pharmacological benefits we believe they may possess. If the KSPi warhead or optimized CPT payload that we use is not safe in certain product candidates, we would be required to abandon or redesign all of our current lead ADC or SMDC product candidates. We have not yet succeeded and may never succeed in demonstrating efficacy and safety of VIP943, VIP924 and VIP236 in pivotal clinical trials or in obtaining marketing approval thereafter. For example, although Bayer has evaluated VIP943, VIP924 and VIP236 in preclinical studies, VIP943, VIP924 and VIP236 have not yet advanced into clinical-stage trials for any indication. Positive results from preclinical trials are not necessarily predictive of the results of planned clinical trials of VIP943, VIP924 and VIP236.
There is currently no CDK9 inhibitor, ADC delivering a KSPi warhead or small molecule drug conjugate delivering an optimized CPT payload that has to date been approved by the FDA, and the development of our product candidates may never lead to a marketable product.
We have not received regulatory approval for any of our product candidates and cannot be certain that our approach will lead to the development of an approvable or marketable product, alone or in combination with other therapies. We may not succeed in demonstrating safety and efficacy of (i) enitociclib in the ongoing Phase 1 clinical trials or in larger-scale clinical trials or (ii) VIP943, VIP924 or VIP236 in preclinical studies, clinical trials or in large-scale clinical trials. Advancing enitociclib as a PTEFb/CDK9 inhibitor, VIP943 and VIP924 as ADCs delivering a KSPi warhead, or VIP236 as an SMDC delivering an optimized CPT payload creates significant challenges for us, including:
 
   
obtaining marketing approval, as the FDA or other regulatory authorities have never approved a CDK9 inhibitor, KSPi warhead or SMDC delivering an optimized CPT payload;
 
25

   
if any of these product candidates are approved, educating medical personnel regarding the potential efficacy and safety benefits, as well as the challenges, of incorporating such product candidates into existing treatment regimens, including in combination with other treatments for blood and solid cancers; and 
 
   
establishing the sales and marketing capabilities upon obtaining any marketing approvals necessary to gain market acceptance.
We rely in part on the preclinical and clinical trial data provided by Bayer in assessing the viability of our product candidates, and such preclinical and clinical trial data has not been verified by us or any independent third parties.
We currently license all of our product candidates from Bayer pursuant to the Bayer License Agreement. Our present development involving these product candidates relies in part upon previous preclinical and clinical trials conducted by Bayer or other third parties over whom we had no control and before we
in-licensed
the product candidates. We are relying on the results of these preclinical studies and from unaudited clinical trial data from investigator reports that are subject to change. As is typical for Phase 1 studies, such as enitociclib, no independent review committee has reviewed the data. Furthermore, if we are unable to replicate the results from Bayer’s preclinical or clinical trials in our preclinical or clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates. Although we are not currently aware of any such problems, any problems that emerge with preclinical or clinical development conducted prior to our
in-licensing
may affect future results or our ability to document prior development and to conduct clinical trials, which could delay, limit, increase the cost of or prevent regulatory approval for our product candidates.
Our long-term prospects depend in part upon discovering, developing, manufacturing and commercializing additional product candidates, which may fail in development or suffer delays that adversely affect their commercial viability.
Our future operating results are dependent on our ability to successfully discover, develop, obtain regulatory approval for, manufacture and commercialize product candidates beyond those we currently have in preclinical and clinical development. A product candidate can unexpectedly fail at any stage of manufacturing and preclinical and clinical development. The historical failure rate for product candidates is high due to risks relating to safety, efficacy, clinical execution, changing standards of medical care and other unpredictable variables. The results from preclinical testing or early clinical trials of a product candidate may not be predictive of the results that will be obtained in later stage clinical trials of the product candidate.
The success of other product candidates we may develop will depend on many factors, including the following:
 
   
generating sufficient data to support the initiation or continuation of clinical trials;
 
   
obtaining regulatory permission to initiate clinical trials;
 
   
contracting with the necessary parties to conduct clinical trials;
 
   
successful enrollment of patients in, and the completion of, clinical trials on a timely basis;
 
   
the timely manufacture of sufficient quantities of the product candidate for use in clinical trials; and
 
   
adverse events in the clinical trials.
Results from early-stage clinical trials may not be predictive of results from late-stage or other clinical trials.
Positive and promising results from preclinical studies and early-stage clinical trials may not be predictive of results from late-stage clinical trials or from clinical trials of the same product candidates for the treatment of other indications. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Late-stage clinical trials could differ in significant ways from early-stage clinical trials, including changes to inclusion and exclusion criteria, efficacy endpoints, dosing regimen and statistical design. Moreover, success in clinical trials in a particular indication does not guarantee that a product candidate will be successful for the treatment of other indications. Many companies in the biotechnology industry have suffered significant setbacks in late-stage clinical trials after achieving encouraging or positive results in early-stage development. There can be no assurance that we will not face similar setbacks in our ongoing clinical trials or planned late-stage clinical trials, including any subsequent or post-marketing confirmatory clinical trials. Therefore, despite positive results observed in early-stage clinical trials, our product candidates may fail to demonstrate sufficient efficacy in our pivotal or post-marketing confirmatory clinical trials.
Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish preliminary interim or
“top-line”
data from clinical trials. Positive preliminary data may not be predictive of such trial’s subsequent or overall results. Preliminary data are subject to the risk that one or more of the outcomes may materially change as more data become available. Additionally, preliminary data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Therefore, positive
 
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preliminary results in any ongoing clinical trial may not be predictive of such results in the completed trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. As a result, preliminary data that we report may differ from future results from the same clinical trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary data also remains subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to preliminary data could significantly harm our business prospects.
Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
Even if our product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors and others in the medical community. The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:
 
   
timing of market introduction, number and clinical profile of competitive drugs;
 
   
our ability to provide acceptable evidence of safety and efficacy;
 
   
changing standards of medical care;
 
   
relative convenience and ease of administration;
 
   
restrictions on the use of our product candidates, such as boxed warnings or contraindications in labeling, or a Risk Evaluation and Mitigation Strategy, if any, which may not be required of alternative treatments and competitor products;
 
   
pricing and cost-effectiveness, which may be subject to regulatory control;
 
   
availability of coverage, reimbursement and adequate payment from health maintenance organizations and other third-party payors; and
 
   
prevalence and severity of adverse side effects; and other potential advantages over alternative treatment methods.
If any of our product candidates is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate or derive sufficient revenue from that product candidate and our financial results could be negatively impacted.
If the market opportunity for any product candidate that we or our strategic partners develop is smaller than we believe, our revenue may be adversely affected and our business may suffer.
We intend to focus our product candidate development on treatments for various oncology indications. Our projections of addressable patient populations that may benefit from treatment with our product candidates are based on our estimates. These estimates, which have been derived from a variety of sources, may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. Additionally, the potentially addressable patient population for our product candidates may not ultimately be amenable to treatment with our product candidates. Our market opportunity may also be limited by future competitor treatments that enter the market. If any of our estimates prove to be inaccurate, the market opportunity for any product candidate that we or our strategic partners develop could be significantly diminished and have an adverse material impact on our business.
We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.
Our competitors are developing a large number of drug candidates for the treatment of solid tumors, leukemia,
B-cell
malignancies, lymphomas and myelodysplastic syndrome. Any product candidates that we successfully develop and commercialize will compete with these drug candidates, existing therapies and new therapies that may become available in the future. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may attempt to develop product candidates. Several pharmaceutical and biotechnology companies have CDK9 inhibitors, ADCs, SMDCs, immunotherapies or other products on the market or in clinical trials which may be competitive to our drugs in hematological and oncology indications.
 
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Our competitors, either alone or together with collaborators, may have significantly greater financial, manufacturing, marketing, drug development, technical and human resources and commercial expertise than we do and may have begun developing their drug candidates earlier than us. Our competitors may also have more experience:
 
   
developing drug candidates;
 
   
conducting preclinical and clinical trials;
 
   
obtaining regulatory approvals; and
 
   
commercializing product candidates.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe adverse effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors also may obtain marketing approval from the FDA or other comparable foreign regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical. We anticipate that we will face increased competition in the future as new companies enter the markets and as scientific developments progress. If we are unable to compete effectively, our opportunity to generate revenue from the sale of our products we may develop, if approved, could be adversely affected.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on development programs, therapeutic platforms and product candidates that we identify for specific indications. As a result, we may forego or delay the pursuit of opportunities with other therapeutic platforms or product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs, therapeutic platforms and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights. For example, currently we are only developing a limited number of product candidates that we acquired rights to develop under the Bayer License Agreement and the product candidates we are developing may never be commercially viable, whereas, product candidates that we chose not to develop may be more commercially viable.
Our business entails a significant risk of product liability and if we are unable to obtain sufficient insurance coverage such inability could have an adverse effect on our business and financial condition.
Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an FDA or other regulatory authority investigation of the safety and efficacy of our products, our manufacturing processes and facilities or our marketing programs. FDA or other regulatory authority investigations could potentially lead to a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources and substantial monetary awards to clinical trial participants or patients. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive and difficult to obtain. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have an adverse effect on our business and financial condition. In addition, any inability or delay in obtaining such insurance could negatively impact our ability to conduct clinical trials on a timely basis or at all. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics that we or our collaborators may develop.
Any product candidates we develop may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations.
In domestic and foreign markets, sales of any of our product candidates, if approved, will depend, in part, on the extent to which the costs of our products will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors decide which drugs will be covered and establish reimbursement levels for those drugs. The containment of healthcare costs has become a priority of governments as well as private third-party payors. The prices of drugs have been a focus in this effort. Governments and private third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for certain medications, which could affect our ability to sell our product candidates profitably. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues.
 
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Reimbursement by a third-party payor may depend upon several factors, including the third-party payor’s determination that use of a product is:
 
   
a covered benefit under its health plan;
 
   
safe, effective and medically necessary;
 
   
appropriate for the specific patient;
 
   
cost-effective; and
 
   
neither experimental nor investigational
Adverse pricing limitations may hinder our ability to recoup our investment in enitociclib, our lead product candidate or any other current or future product candidates, even if such product candidates obtain marketing approval.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. Further, there is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our products. In addition, in the United States, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new drugs. As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the pricing of drugs.
Clinical trials are expensive, time consuming, subject to enrollment and other delays and may be required to continue beyond our available funding, and we cannot be certain that we will be able to raise sufficient funds to successfully complete the development, clinical trials and commercialization of any of our product candidates currently in preclinical and clinical development, should they succeed.
Clinical trials have uncertain outcomes and may be required to continue beyond our available funding. Failure can occur at any stage of the clinical trials, and we may experience numerous unforeseen events that could delay or prevent commercialization of our current or future product candidates, including, but not limited to:
 
   
delays in securing clinical investigators and trial sites for our clinical trials;
 
   
delays in obtaining Institutional Review Board, and regulatory approvals to commence a clinical trial;
 
   
slower than anticipated rates of patient recruitment and enrollment, or not reaching the targeted number of patients, because of competition for patients from other trials, difficulty identifying patients with our proposed indications, the impact of the
COVID-19
pandemic or other health epidemics or limited or no availability of coverage, reimbursement or adequate payment from health maintenance organizations and other third-party payors for the use of agents used in our clinical trials or other reasons;
 
   
unforeseen safety issues;
 
   
uncertain dosing issues that could arise as a result of incompletely explored pharmacokinetic and pharmacodynamics behaviors or initiatives such as the FDA’s Project Optimus;
 
   
approval and introduction of new therapies or changes in standards of practice or regulatory guidance that render our clinical trial endpoints or the targeting of our proposed indications less attractive;
 
   
inability to monitor patients adequately during or after treatment or problems with investigator or patient compliance with the trial protocols;
 
   
inability to replicate in large controlled studies safety and efficacy data obtained from a limited number of patients in uncontrolled trials;
 
   
inability or unwillingness of medical investigators to follow our clinical protocols; and
 
   
unavailability of clinical trial supplies.
In addition, we had no involvement with or control over the preclinical or clinical development of our product candidates prior to their
in-license
from Bayer. We are dependent on Bayer having conducted such development in accordance with the applicable protocols and legal, regulatory and scientific standards, having accurately reported the results of all preclinical studies and clinical trials and other research they conducted prior to our acquisition of the rights to our product candidates, having correctly collected and interpreted the data from these studies, trials and other research, and having supplied us with complete information, data sets and reports required to adequately demonstrate the results reported through the date of our acquisition of these product candidates. Problems in any of these areas could result in increased costs and delays in the development of our product candidates, which could adversely affect our ability to generate any future revenue from sales of our product candidates, if approved.
 
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If we suffer significant delays, setbacks or negative results in, or termination of, our clinical trials, we may be unable to continue development of our product candidates or generate revenue and our development costs could increase significantly. Adverse or inconclusive results from our clinical trials may substantially delay, or halt entirely, any further development of our product candidates.
Adverse or inconclusive results from our clinical trials may substantially delay, or halt entirely, any further development of our product candidates. Many companies have failed to demonstrate the safety or effectiveness of product candidates in later stage clinical trials notwithstanding favorable results in early-stage clinical trials. Previously unforeseen and unacceptable side effects could interrupt, delay or halt clinical trials of our product candidates and could result in the FDA denying approval of our product candidates. We will need to demonstrate safety and efficacy for specific indications of use, and monitor safety and compliance with clinical trial protocols and other good clinical practice requirements throughout the development process. To date, long-term safety and efficacy has not been demonstrated in clinical trials for any of our product candidates.
Certain toxicity and adverse events have been noted in some of the preclinical and clinical trials involving certain of our product candidates. For example, neutropenia was observed in some patients receiving enitociclib. In addition, we have or may pursue clinical trials for more than one indication, and there is a risk that unacceptable toxicity or adverse events observed in a trial for one indication could result in the delay or suspension of all trials involving the same product candidate. Even if we believe that the data collected from clinical trials of our product candidates are promising with respect to safety and efficacy, such data may not be deemed sufficient by regulatory authorities to warrant product approval. Regulatory officials could interpret such data in different ways than we do, which could delay, limit or prevent regulatory approval. The FDA or we may suspend or terminate clinical trials at any time. Any failure or significant delay in completing clinical trials for our product candidates, or in receiving regulatory approval for the commercialization of our product candidates, may severely harm our business and reputation.
We are making use of biomarkers in certain instances, which are not scientifically validated, and our reliance on biomarker data may thus cause us to direct our resources inefficiently.
We are making use of biomarkers in certain instances to facilitate our drug development and to optimize our clinical trials. Biomarkers are proteins or other substances whose presence in the blood or tumor cells can serve as an indicator of specific cell processes. We believe that these biomarkers serve a useful purpose in helping us to evaluate whether our product candidates are having their intended effects through their assumed mechanisms, and that they may thus enable us to identify more promising product candidates at an early stage and to direct our resources efficiently. We also believe that biomarkers may eventually allow us to improve patient selection in connection with clinical trials and monitor patient compliance with trial protocols.
For most purposes, however, biomarkers have not been scientifically validated. If our understanding and use of biomarkers is inaccurate or flawed, or if our reliance on them is otherwise misplaced, then we will not only fail to realize any benefits from using biomarkers, but may also be led to invest time and financial resources inefficiently in attempting to develop less promising product candidates. Moreover, although the FDA has issued for comment a draft guidance document on the potential use of biomarker data in clinical development, such data are not currently accepted by the FDA or other regulatory agencies in the United States, the European Union or elsewhere in applications for regulatory approval of product candidates, and there is no guarantee that such data will ever be accepted by the relevant authorities in this connection. Our biomarker data should not be interpreted as evidence of efficacy.
As we evolve from a company primarily involved in discovery and development to one also involved in the commercialization of drugs, we may encounter difficulties in managing our growth and expanding our operations successfully.
To execute our business strategy, we will need to expand our development, control and regulatory capabilities and develop financial, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. If our operations expand, we expect that we will need to manage additional relationships with various collaborative partners, suppliers and other third parties. Our ability to manage our operations and any growth will require us to make appropriate changes and upgrades, as necessary, to our operational, financial and management controls, reporting systems and procedures wherever we may operate. Any inability to manage growth could delay the execution of our business plan or disrupt our operations.
Our founders’ success in developing cancer therapies while at other companies does not guarantee that we will be successful in developing or commercializing any of our current or future product candidates.
Drs. Ahmed M. Hamdy and Raquel E. Izumi were the principal
co-founders
of Acerta Pharma BV, the company that developed CALQUENCE
®
and was eventually acquired by AstraZeneca plc. Drs. Hamdy and Izumi’s prior success in licensing a preclinical stage molecule and developing that molecule through clinical trials and to full marketing approval does not guarantee that we will successfully develop or commercialize any of our current or future product candidates. As such, we make no assurance that Drs. Hamdy and Izumi’s past success with Acerta Pharma is indicative of our success or ability to develop and commercialize any of our current or future product candidates.
 
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We recently implemented certain workforce and cost reduction measures in connection with our strategic plan, and there can be no assurance that we will be able to successfully implement these workforce and cost reductions or that such measures will not adversely affect our business.
Our board of directors recently approved a strategic plan to prioritize and focus our resources on our ongoing enitociclib clinical studies for
double-hit
DLBCL and CLL and our next generation bioconjugation platform and streamline and realign our resources to support these prioritized studies and programs. This plan included a reduction in our full-time employees by 33% and other cost reduction measures. There can be no assurance that we will be able to successfully implement these workforce and cost reductions or that such measures will not delay or otherwise negatively impact the execution of our business plan or disrupt our operations, which would adversely affect our business and our ability to achieve our business objectives.
The failure to attract and retain skilled personnel and key relationships could impair our drug development and commercialization efforts.
Our business is highly dependent on our ability to attract and retain our senior management personnel and key clinical, scientific, research, technical and other personnel. There is currently intense competition for executives and employees with these skills and expertise. This competition is likely to continue, and our recently implemented workforce reduction could negatively impact our ability to complete effectively for such personnel. The loss of the services of our key personnel or the inability to attract and retain sufficient managerial, clinical, scientific, technical, research and other personnel may delay or prevent the achievement of our drug development and other business objectives and could have a material adverse effect on our business. We also rely on consultants and advisors to assist us in formulating and implementing our business objectives. Our consultants and advisors are either self-employed or employed by other organizations, and they may have conflicts of interest or other commitments, such as consulting or advisory contracts with other organizations, that may affect their ability to contribute to our business and operations.
We or the third parties upon whom we depend may be adversely affected by natural disasters, health epidemics and other natural or
man-made
accidents or incidents, including the impact of climate change, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Any unplanned event, such as a flood, fire, explosion, earthquake, extreme weather condition, health epidemic (such as the ongoing
COVID-19
pandemic), power shortage, telecommunication failure, war (such as the Russian invasion of Ukraine) or other natural or
man-made
accidents or incidents, including the impact of climate change, that result in us being unable to fully use our facilities, or those of our third-party contract manufacturers, or conduct our preclinical studies or clinical trials, may have a material and adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating condition. Loss of access to these facilities may result in increased costs, delays in the development of our product candidates or the interruption of our business operations.
The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, there can be no assurance that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities, or the manufacturing facilities of our third-party contract manufacturers, are unable to operate because of an accident or incident or for any other reason, even for a short peri