10-Q
Table of Contents
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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 September 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)
Registrant’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 October 31, 2022, there were 21,189,769 shares of the registrant’s common stock outstanding.
 
 
 


Table of Contents

TABLE OF CONTENTS

 

Forward-Looking Statements

     1  

Frequently Used Terms

     2  

Summary Risk Factors

     3  

Part I

     5  

ITEM 1. Financial Statements

     5  

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     17  

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

     24  

ITEM 4. Controls and Procedures

     24  

Part II

     26  

ITEM 1. Legal Proceedings

     26  

ITEM 1A. Risk Factors

     26  

ITEM 6. Exhibits

     57  

 

 

i


Table of Contents

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 clinical trials 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 pandemics and epidemics, including COVID-19, 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;

 

   

risks related to our strategic prioritization and cost reduction measures;

 

   

the possibility that our business may be adversely affected by other economic, business, political and/or competitive factors, including the impact of inflation and the war in Ukraine; and

 

   

other risks and uncertainties set forth in this report in the section entitled “Risk Factors.”

 

1


Table of Contents

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.

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.

 

   

“CPT” means camptothecin.

 

   

“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.

 

2


Table of Contents
   

“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.

 

   

“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.

 

   

“P-TEFb/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.”

 

   

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, 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 could continue to be, adversely affected by the effects of health pandemics and epidemics, including COVID-19.

 

   

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 and commercialize our product candidates on a timely basis or at all.

 

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We rely in part on the clinical trial data provided by Bayer in assessing the viability of enitociclib, and such clinical trial data has not been verified by us or any independent third parties.

 

   

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.

 

   

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.

 

   

In June 2022, we implemented certain workforce and cost reduction measures in connection with our strategic plan, and there can be no assurance that such measures will not adversely affect our business.

 

   

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 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.

 

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PART I
 
ITEM 1.
Financial Statements.
VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
    
September 30,
2022
   
December 31,
2021
 
    
(Unaudited)
       
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 45,804     $ 111,459  
Restricted cash
     64       105  
Short-term marketable securities
     20,171           
Prepaid expenses
     470       182  
Other current assets
     746       95  
    
 
 
   
 
 
 
Total current assets
     67,255       111,841  
Right-of-use
assets
,
n
et
     3,291       3,949  
Property, plant and equipment, net
     188       233  
Other assets
     1,642       1,653  
    
 
 
   
 
 
 
Total assets
  
$
72,376
 
 
$
 117,676
 
    
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities
                
Accounts payable
   $ 4,393     $ 2,019  
Accrued expenses
     4,445       4,715  
Lease liability
     999       738  
Common stock warrant liabilities
     113       6,447  
    
 
 
   
 
 
 
Total current liabilities
     9,950       13,919  
Lease liability, net of current portion
     2,669       3,436  
Other noncurrent liabilities
     50           
    
 
 
   
 
 
 
Total liabilities
     12,669       17,355  
    
 
 
   
 
 
 
Commitments and contingencies - Note 7
                
Stockholders’ equity
                
Preferred stock, $0.0001 par value; 30,000,000 shares authorized, none issued
or
outstanding as of September 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 September 30, 2022 and December 31, 2021, respectively
     2       2  
Additional
paid-in
capital
     167,463       156,311  
Accumulated other comprehensive
 
loss
     (63     (21
Accumulated deficit
     (107,695     (55,971
    
 
 
   
 
 
 
Total stockholders’ equity
     59,707       100,321  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
  
$
72,376
 
 
$
117,676
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
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VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except per share amounts)
 
    
For the three months ended
September 30,
   
For the nine months ended
September 30,
 
    
2022
   
2021
   
2022
   
2021
 
Operating expenses:
                                
General and administrative
   $ 4,525     $ 5,720     $ 14,903     $ 17,206  
Research and development
     11,066       12,211       40,779       27,743  
Restructuring
     1,310                2,469           
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     16,901       17,931       58,151       44,949  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (16,901     (17,931     (58,151     (44,949
    
 
 
   
 
 
   
 
 
   
 
 
 
Other income (expense)
                                
Change in fair value of warrant liabilities
     (79     (6,606     6,334       12,102  
Interest income
     204                204           
Other income (expense)
     (103     13       (111     13  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other income (expense)
     22       (6,593     6,427       12,115  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
  
(16,879
 
(24,524
 
(51,724
 
(32,834
Other comprehensive income (loss):
                                
Net foreign currency translation gain (loss)
     14       (19     39       (19
Net unrealized loss on marketable securities
     (81              (81         
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
  
$
(16,946
 
$
(24,543
 
$
(51,766
 
$
(32,853
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per common share, basic and diluted
   $ (0.80   $ (1.39   $ (2.46   $ (2.06
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares outstanding, basic and diluted
     21,083       17,694       20,992       15,941  
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
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VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(Unaudited)
(
in thousands
)
 
    
For the Three Months Ended September 30, 2022
 
    
Common Stock
    
Additional

Paid-in Capital
    
Accumulated Other
Comprehensive

Income (Loss)
   
Accumulated

Deficit
   
Total
Stockholders’

Equity
 
    
Shares
    
Amount
 
Balance as of July 1, 2022
  
 
21,189
 
  
$
2
 
  
$
165,173
 
  
$
4
 
 
$
(90,816
 
$
74,363
 
Stock-based compensation
     —          —          2,290        —         —         2,290  
Cumulative translation adjustment
     —          —          —          14       —         14  
Unrealized loss on marketable securities
     —          —          —          (81     —         (81
Net loss
     —          —          —          —         (16,879     (16,879
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2022
  
 
21,189
 
  
$
2
 
  
$
167,463
 
  
$
(63
 
$
(107,695
 
$
59,707
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
    
For the Nine Months Ended September 30, 2022
 
    
Common Stock
    
Additional

Paid-in Capital
    
Accumulated Other
Comprehensive

Income (Loss)
   
Accumulated

Deficit
   
Total
Stockholders’

Equity
 
    
Shares
    
Amount
 
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
     —          —          10,910        —         —         10,910  
Cumulative translation adjustment
     —          —          —          39       —         39  
Unrealized loss on marketable securities
     —          —          —          (81     —         (81
Net loss
     —          —          —          —         (51,724     (51,724
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2022
  
 
21,189
 
  
$
2
 
  
$
167,463
 
  
$
(63
 
$
(107,695
 
$
59,707
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
    
For the Three Months Ended September 30, 2021
 
    
Common Stock
    
Additional

Paid-in Capital
    
Accumulated Other
Comprehensive Loss
   
Accumulated

Deficit
   
Total
Stockholders’

Equity
 
    
Shares
    
Amount
 
Balance as of July 1, 2021
  
 
17,521
 
  
$
1
 
  
$
96,569
 
  
$
  
 
 
$
(24,975
 
$
71,595
 
Issuance of common stock from private placement, net of transaction costs of $3,251
     3,500        1        47,498                 —         47,499  
Stock-based compensation
     —          —          6,075                 —         6,075  
Cumulative translation adjustment
     —          —          —          (19             (19
Net loss
     —          —          —          —         (24,524     (24,524
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2021
  
 
21,021
 
  
$
2
 
  
$
150,142
 
  
$
(19
 
$
(49,499
 
$
 100,626
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
    
For the Nine Months Ended September 30, 2021
 
    
Common Stock
    
Additional

Paid-in Capital
    
Accumulated Other
Comprehensive Loss
   
Accumulated

Deficit
   
Total
Stockholders’

Equity
 
    
Shares
    
Amount
 
Balance as of January 1, 2021
  
 
13,984
 
  
$
1
 
  
$
42,043
 
  
$
—  
 
 
$
(16,665
 
$
25,379
 
Issuance of common stock from private placement, net of transaction costs of $3,251
     3,500        1        47,498        —         —         47,499  
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
     —          —          17,427        —         —         17,427  
Cumulative translation adjustment
     —          —          —          (19     —         (19
Net loss
     —          —          —          —         (32,834     (32,834
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2021
  
 
21,021
 
  
$
2
 
  
$
150,142
 
  
$
(19
 
$
(49,499
 
$
 100,626
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
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VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(
in thousands
)
 
    
For the nine months ended
September 30,
 
    
2022
   
2021
 
Cash flows from operating activities
                
Net loss
   $ (51,724   $ (32,834
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation
     40           
Stock-based compensation
     10,910       17,427  
Amortization of
right-of-use
assets
     658       (3
Change in fair value of warrant liabilities
     (6,334     (12,102
Net amortization of discounts on marketable securities
     (57         
Changes in operating assets and liabilities:
                
Prepaid and other current assets
     (939     866  
Other assets
     11       (1,676
Accounts payable
     2,374       1,749  
Accrued expenses
     (270     4,668  
Due to related parties
              (14
Lease liabilities
     (506     3  
Other noncurrent liabilities
     50           
    
 
 
   
 
 
 
Net cash used in operating activities
     (45,787     (21,916
    
 
 
   
 
 
 
Cash Flows from Investing Activities:
                
Purchases of marketable securities
     (20,195         
Research and development-acquired license
              (5,000
Capital expenditures
              (250
    
 
 
   
 
 
 
Net cash used in investing activities
     (20,195     (5,250
    
 
 
   
 
 
 
Cash Flows from Financing Activities:
                
Proceeds from issuance of common stock from employee stock plans
     242           
Proceeds from private placement, net of transaction costs
              47,499  
Proceeds from warrants exercised for cash, net of redemption cost
              40,671  
    
 
 
   
 
 
 
Net cash provided by financing activities
     242       88,170  
    
 
 
   
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
     44           
    
 
 
   
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
     (65,696     61,004  
Cash, cash equivalents and restricted cash at beginning of the period
     111,564       61,792  
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at end of the period
  
$
45,868
 
 
$
122,796
 
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
                
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
   $        $ 4,169  
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
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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.
Our business operations, and those of third parties with whom we conduct business, have been, and could continue to be, adversely affected by health pandemics and epidemics, including
COVID-19,
and by economic, business and political events, including inflation and the war in Ukraine. The extent to which these factors could continue to impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence. Management continues to evaluate the impact of these factors on our current operations and future plans and intends to take appropriate measures to help alleviate their impact, but there can be no assurance that these efforts will be successful and that these factors 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 nine months ended September 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.
 
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Table of Contents
Significant Accounting Policies

Cash and Cash Equivalents
Management considers all highly liquid investments with an insignificant interest rate risk and original maturities of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 2021.
Marketable Securities
The Company generally invests its excess cash in money market funds and investment grade short-term to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, short-term marketable securities or long-term marketable securities on the condensed consolidated balance sheets. Marketable securities with a maturity date greater than 90 days and less than one year at each condensed consolidated balance sheet date are classified as short-term. Marketable securities with a maturity date greater than one year, if any, are classified as long-term. All of the Company’s marketable securities are considered
available-for-sale
and are reported at fair value with unrealized gains and losses included as a component of stockholders’ equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income, net on the condensed consolidated statements of operations and comprehensive loss. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on marketable securities are included in interest income on the condensed consolidated statements of operations and comprehensive loss. The cost of securities sold is determined using specific identification.
The Company periodically evaluates whether declines in the fair values of its marketable securities below their amortized cost are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as the Company’s ability and intent to hold the marketable security until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the marketable security or it is more likely than not it will be required to sell any marketable securities before recovery of its amortized cost basis. Factors considered include quoted market prices, recent financial results and operating trends, implied values from any recent transactions or offers of investee securities, credit quality of debt instrument issuers, other publicly available information that may affect the value of the marketable security, duration and severity of the decline in value, and the Company’s strategy and intentions for holding the marketable security.
There have been no other 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.
 
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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
P-TEFb
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 September 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 included a reduction of the Company’s full-time employees by 33% and other cost reduction measures. Affected employees were 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.
We have incurred approximately $2.5 million of severance and related expenses during 2022, which includes approximately $0.5 million of stock-based compensation expense related to the acceleration of stock options to certain affected employees. 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 nine months ended September 30, 2022 (in thousands):
 
     Restructuring
liabilities at
December 31, 2021
     Charges      Cash payments      Restructuring
liabilities at
September 30,
2022
 
Workforce reduction
   $         $ 2,022      $ (2,022    $     
 
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NOTE 5. FAIR VALUE MEASUREMENT
The Company’s financial assets and 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 September 30, 2022
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets:
                                   
Cash Equivalents:
                                   
Money market funds
   $ 5,212      $         $         $ 5,212  
Commercial paper
               17,770                  17,770  
U.S. government agency securities
               6,970                  6,970  
Short-term marketable securities:
              —          —          —    
Commercial paper
               9,802                  9,802  
U.S. government treasuries
     996                            996  
U.S. government agency securities
               7,198                  7,198  
Corporate debt securities
               2,175                  2,175  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash equivalents and marketable securities
   $ 6,208      $ 43,915      $         $  50,123  
    
 
 
    
 
 
    
 
 
    
 
 
 
There were no cash equivalents or marketable securities at December 31, 2021. The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or
indirectly.    There
 
were no transfers of assets between Level 1, Level 2 or Level 3 during the three- and nine-month periods ended September 30, 202
2.
 
    
Fair Value Measured as of
September 30, 2022
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Liabilities:
                                   
Common stock warrant liabilities
   $         $         $ 113      $ 113  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
   $         $         $ 113      $ 113  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
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 nine-month periods ended September 30, 2022. There were no transfers between Level 1, 2 or 3 during the three- and nine-month periods ended September 30, 2022 and 2021.
The following table presents changes in Level 3 liabilities measured at fair value for the nine-month period ended September 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
     (6,334
    
 
 
 
Balance – September 30, 2022
  
$
113
 
    
 
 
 
 
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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 September 30, 2022 and December 31, 2021 is as follows:
 
    
As of
September 30, 2022
   
As of
December 31, 2021
 
Stock price
   $ 1.38     $ 10.19  
Exercise price
   $ 11.50     $ 11.50  
Option term (years)
     3.2       4.0  
Volatility (annual)
     58.0     32.5
Risk-free rate
     4.1     1.1
Dividend yield (per share)
     0     0
NOTE 6.
AVAILABLE-FOR-SALE
SECURITIES
All marketable securities were considered
available-for-sale
at September 30, 2022. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type at September 30, 2022 are summarized in the table below (amounts in thousands):
 
    
September 30, 2022
 
    
Amortized Cost
    
Gross Unrealized
Gain
    
Gross
Unrealized Loss
    
Fair Value
 
Assets:
                                   
Cash Equivalents:
                                   
Money market funds
   $ 5,212      $         $         $ 5,212  
Commercial paper
     17,776                  (6      17,770  
U.S. government agency securities
     6,970                            6,970  
Short-term marketable securities:
                                   
Commercial paper
     9,825                  (23      9,802  
U.S. government treasuries
     999                  (3      996  
U.S. government agency securities
     7,229                  (31      7,198  
Corporate debt securities
     2,193                  (18      2,175  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash equivalents and marketable securities
   $ 50,204      $         $ (81    $ 50,123  
    
 
 
    
 
 
    
 
 
    
 
 
 
There were no cash equivalents or marketable securities at December 31, 2021. As of September 30, 2022, some of the Company’s marketable securities were in an unrealized loss position. The Company determined that it did have the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery, thus there has been no recognition of any other-than-temporary impairment in the three-months ended September 30, 2022.
NOTE 7. 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 September 30, 2022, the Company had operating lease liabilities of approximately $3.7 million and
right-of-use 
assets of approximately $3.3 million, which were included in the condensed consolidated balance sheets.
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.
The Company has not been legally released from its primary obligations under the original lease and subsequent amendments and, therefore, continues to account for the original lease according to Accounting Standard Codification (“ASC”) Topic 842, “Leases.” The Company records both fixed and variable payments received from the sublessee in its condensed consolidated statements of operations and comprehensive loss on a straight-line basis as an offset to rent expense. Such payments received in the three and nine months ended September 30, 2022 were
$150,000. The Company also received a $50,000 deposit, recorded as a noncurrent liability
in the condensed consolidated balance sheet at September 30, 2022. 
 
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The following summarizes quantitative information about the Company’s operating leases (amounts in thousands):
 
    
For the nine months
ended September 30,
 
    
2022
   
2021
 
Lease cost
                
Operating lease cost
   $ 897     $ 216  
Variable lease cost
                  
    
 
 
   
 
 
 
Total operating lease expense
   $ 897     $ 216  
    
 
 
   
 
 
 
Other information
                
Operating cash flows from operating leases
   $ 743     $ 216  
Right-of-use
assets obtained in exchange for operating lease liabilities
   $        $ 4,169  
Weighted-average remaining lease term – operating leases
     3.3       4.3  
Weighted-average discount rate – operating leases
     8     8
As of September 30, 2022, future minimum payments during the remaining period and the next three years are as follows (in thousands):
 
Remaining period ended December 31, 2022
   $ 304  
Year ended December 31, 2023
     1,261  
Year ended December 31, 2024
     1,284  
Year ended December 31, 2025
     1,336  
    
 
 
 
Total
     4,185  
Less present value discount
     (517
    
 
 
 
Operating lease liabilities included in the condensed consolidated balance sheet at September 30, 2022
   $ 3,668
 
 
  
 
 
 
NOTE 8. 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 September 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 nine months ended September 30, 2022 and September 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
 
Vested
     (27,493          
    
 
 
    
 
 
 
Nonvested at June 30, 2022
  
 
121,990
 
  
$
0.052
 
Vested
     (27,494          
    
 
 
    
 
 
 
Nonvested at September 30, 2022
  
 
94,496
 
  
$
0.056
 
    
 
 
    
 
 
 
 
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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
 
Vested
     (44,621          
    
 
 
    
 
 
 
Nonvested at September 30, 2021
  
 
227,306
 
  
$
0.047
 
    
 
 
    
 
 
 
As of September 30, 2022, there was approximately $5,600 of unrecognized stock-based compensation related to restricted stock that will be amortized in 1.8 years.
Warrants
As of September 30, 2022, there were 3,295,000 private warrants to purchase common stock outstanding. No public warrants remain outstanding at September 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” (see Note 5). The remaining private warrants were determined to be liability classified in accordance with ASC 815, Derivatives and Hedging (see note 5). 
NOTE 9. 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 September 30, 2022, the Company had 4,542,924 shares of common stock reserved for issuance and 219,013 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.
 
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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
     1,881        4.13        10.0         
Options cancelled
     (965      15.44                
    
 
 
    
 
 
    
 
 
    
 
 
 
Outstanding at September 30, 2022
     4,324      $ 13.12        7.8      $  
    
 
 
    
 
 
    
 
 
    
 
 
 
Options vested and exercisable at September 30, 2022
     2,141      $ 18.08        6.3      $  
    
 
 
    
 
 
    
 
 
    
 
 
 
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 September 30, 2022, the Company had stock-based compensation of approximately $7.2 million related to unvested stock options not yet recognized that are expected to be recognized over an estimated weighted average period of 0.9 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 nine months ended September 30, 2022 and 2021:
 
    
For the nine months
ended September
 
30,
 
    
2022
   
2021
 
Exercise price
   $ 4.13     $ 18.80  
Expected term (years)
     5.8       5.9  
Volatility (annual)
     83.6     77.5
Risk-free rate
     2.5     0.9
Dividend yield (per share)
     0     0
Total stock-based compensation expense recognized in the three and nine months ended September 30, 2022 and 2021 was as follows (amounts in thousands): 
 
     For the three months ended
September 30,
     For the nine months ended
September 30,
 
     2022      2021      2022      2021  
Research and development
   $ 938      $ 4,000      $ 6,622      $ 11,078  
General and administrative
     905        2,075        3,841        6,349  
Restructuring
     447               447         
    
 
 
    
 
 
    
 
 
    
 
 
 
Total stock-based compensation expense
  
$
2,290
 
  
$
6,075
 
  
$
10,910
 
  
$
17,427
 
    
 
 
    
 
 
    
 
 
    
 
 
 
NOTE 10. 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.
 
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The following table sets forth the computation of loss per share for the three and nine months ended September 30, 2022 and 2021 (amounts in thousands, except per share number): 
 
     For the three months ended
September 30,
     For the nine months ended
September 30,
 
     2022      2021      2022      2021  
Numerator:
                                   
Net loss
   $ (16,879    $ (24,524    $ (51,724    $ (32,834
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator:
                                   
Weighted average common shares outstanding, basic and diluted
     21,083        17,694        20,992        15,941  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net loss per common share, basic and diluted
   $ (0.80    $ (1.39    $ (2.46    $ (2.06
    
 
 
    
 
 
    
 
 
    
 
 
 
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 nine months ended
September 30,
 
     2022      2021  
Options outstanding
     4,324        3,371  
Warrants
     3,295        3,295  
    
 
 
    
 
 
 
Total
     7,619        6,666  
    
 
 
    
 
 
 
 
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
P-TEFb/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.
 
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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.

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.

 

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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, the war in Ukraine, supply chain disruptions and health pandemics and epidemics, including COVID-19;

 

   

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;

 

   

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.

 

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Results of Operations

Comparison of the Three and Nine Months Ended September 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
September 30,
        
     2022      2021      Amount Change  

Operating expenses:

        

General and administrative

   $ 4,525      $ 5,720      $ (1,195

Research and development

     11,066        12,211        (1,145

Restructuring

     1,310        —          1,310  
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     16,901        17,931        (1,030
  

 

 

    

 

 

    

 

 

 

Loss from operations

     (16,901      (17,931      1,030  
  

 

 

    

 

 

    

 

 

 

Other income (expense)

        

Change in fair value of warrant liabilities

     (79      (6,606      6,527  

Interest income

     204        —          204  

Other income (expense)

     (103      13        (116
  

 

 

    

 

 

    

 

 

 

Total other income

     22        (6,593      6,615  
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (16,879    $ (24,524    $ 7,645  
  

 

 

    

 

 

    

 

 

 

 

     For the nine months ended
September 30
        
     2022      2021      Amount Change  

Operating expenses:

        

General and administrative

   $ 14,903      $ 17,206      $ (2,303

Research and development

     40,779        27,743        13,036  

Restructuring

     2,469        —          2,469  
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     58,151        44,949        13,202  
  

 

 

    

 

 

    

 

 

 

Loss from operations

     (58,151      (44,949      (13,202
  

 

 

    

 

 

    

 

 

 

Other income (expense)

        

Change in fair value of warrant liabilities

     6,334        12,102        (5,768

Interest income

     204        —          204  

Other income (expense)

     (111      13        (124
  

 

 

    

 

 

    

 

 

 

Total other income (expense)

     6,427        12,115        (5,688
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (51,724    $ (32,834    $ (18,890
  

 

 

    

 

 

    

 

 

 

Research and Development

Research and development expenses decreased by approximately $1.1 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. This decrease is the result of a decline in stock-based compensation expense of approximately $3.1 million. Excluding stock-based compensation expense, research and development expenses increased by approximately $2.0 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily due to an increase in manufacturing services of approximately $1.8 million associated with our ADC program. Research and development expenses increased by approximately $13.0 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase for the nine months ended September 30, 2022 compared to the same period in 2021 primarily relates to increases in manufacturing services of approximately $6.6 million, including the initiation of manufacturing associated with our ADC program, third party research and preclinical work of approximately $5.4 million, new employee salaries of approximately $2.6 million, and clinical services of approximately $1.0 million, partially offset by a decline in stock-based compensation of approximately $4.5 million.

 

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General and Administrative

General and administrative expenses decreased by approximately $1.2 million and $2.3 million, respectively, for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021, primarily as a result of declines in stock-based compensation expense of $1.2 million and $2.5 million for the three- and nine-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 $1.3 million and $2.5 million of severance and related expenses for the three and nine months ended September 30, 2022, respectively. For each period, this includes approximately $0.5 million of stock-based compensation expense related to the acceleration of stock options to certain affected employees.

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 $1.38 as of September 30, 2022.

Interest Income

Interest income is primarily comprised of interest income and gains or losses realized on cash, cash equivalents and marketable securities.

Other Income (Expense)

Other income (expense) is primarily comprised of foreign currency transaction gains or losses related to certain transactions with European third-party vendors.

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 P-TEFb 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

 

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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 September 30, 2022, we had approximately $66.0 million in cash, cash equivalents and marketable securities. 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;

 

   

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

 

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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 COVID-19, inflation and other economic and market conditions, the war in Ukraine and 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.

Our business operations, and those of third parties with whom we conduct business, have been, and could continue to be, adversely affected by health pandemics and epidemics, including COVID-19, and by economic, business and political events, including inflation and the war in Ukraine. The extent to which these factors could continue to impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence. Management continues to evaluate the impact of these factors on our current operations and future plans and intends to take appropriate measures to help alleviate their impact, but there can be no assurance that these efforts will be successful and that these factors will not continue to have a negative effect on our financial position and results of its operations.

Cash Flows

The following table provides a summary of our cash flow data for the periods indicated (amounts in thousands):

 

     For the nine months ended
September 30,
 
     2022      2021  

Net cash used in operating activities

   $ (45