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, 2023
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, 2023, there were 21,380,570 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

     18  

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

     56  

 

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,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “seeks,” “suggests,” “scheduled,” “target,” 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;

 

   

the attributes of, and our ability to develop or commercialize, our product candidates;

 

   

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 and continue as a going concern;

 

   

our ability to maintain compliance with the continued listing requirements of The Nasdaq Capital Market;

 

   

the outcome of any known and unknown litigation and regulatory proceedings;

 

   

our business, expansion 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 and product development 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;

 

   

our ability to raise capital and continue as a going concern;

 

   

the possibility that our business may be adversely affected by other economic, business, political, or competitive factors, including the impact of inflation and the wars in Ukraine and Israel; 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 2023 Annual Meeting of Stockholders, Annual Report on Form 10-K for the year ended December 31, 2022, 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.

 

   

“CDK” means cyclin-dependent kinase.

 

   

“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.

 

   

“DH-DLBCL” means double-hit diffuse large B-cell lymphoma (i.e., DLBCL 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.

 

   

“GAAP” means accounting principles generally accepted in the United States of America.

 

   

“IND” means an investigational new drug application.

 

   

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

 

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“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.

 

   

“MCL” means mantle cell lymphoma.

 

   

“MCL1” means a protein coding gene.

 

   

“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.

 

   

“MYC” means a family of regulator genes and proto-oncogenes that code for transcription factors.

 

   

“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, CellTrapper®, and VersAptx 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 Part II, 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 VIP236, VIP943, VIP924, enitociclib (formerly VIP152), and our other current product candidates, raise capital, or continue our operations.

 

   

We are substantially dependent on the success of VIP236, VIP943, and enitociclib, our lead product candidates. If we are unable to complete development of, obtain approval for, and commercialize these lead product candidates in a timely manner, our business will be harmed.

 

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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.

 

   

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.

 

   

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, or eliminate one or more of our research and drug development programs or future commercialization efforts and may not be able to continue as a going concern.

 

   

We have incurred net losses since inception and expect to continue to incur significant net losses for the foreseeable future, and there can be no assurance we will be able to raise capital and continue as a going concern.

 

   

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 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, target, or indication and fail to capitalize on product candidates, targets, or indications that may be more profitable or for which there is a greater likelihood of success.

 

   

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.

 

   

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 prospects.

 

   

Any product candidates we develop may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations, including those under the Inflation Reduction Act of 2022.

 

   

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.

 

   

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.

 

   

If we are unable to maintain compliance with the continued listing requirements of The Nasdaq Capital Market, our common stock may be delisted, which could negatively impact the liquidity and price of our common stock, our ability to access the capital markets, and the confidence of investors and others.

 

 

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http://fasb.org/us-gaap/2023#MarketableSecuritiesUnrealizedGainLoss
PART I
 
ITEM 1.
Financial Statements.
VINCERX PHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
    
September 30,

2023
   
December 31,

2022
 
    
(Unaudited)
       
ASSETS
    
Current assets:
    
Cash and cash equivalents
   $ 15,078     $ 11,663  
Restricted cash
     70       70  
Short-term marketable securities
     5,724       40,796  
Prepaid expenses
     322       134  
Grant receivable
     1,053       1,372  
Other current assets
     571       1,929  
  
 
 
   
 
 
 
Total current assets
     22,818       55,964  
Right-of-use
 
assets, net
     2,447       3,064  
Property, plant and equipment, net
     137       177  
Other assets
     874       81  
  
 
 
   
 
 
 
Total assets
  
$
26,276
 
 
$
59,286
 
  
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
Current liabilities
    
Accounts payable
   $ 3,062     $ 4,065  
Accrued expenses
     4,526       3,923  
Lease liability
     1,126       1,024  
Common stock warrant liabilities
     132       144  
  
 
 
   
 
 
 
Total current liabilities
     8,846       9,156  
Lease liability, net of current portion
     1,639       2,412  
Other noncurrent liabilities
     50       50  
  
 
 
   
 
 
 
Total liabilities
     10,535       11,618  
  
 
 
   
 
 
 
Commitments and contingencies—Note 6
    
Stockholders’ equity
    
Preferred stock, $0.0001 par value; 30,000,000 shares authorized, none issued or outstanding as of September 30, 2023 and December 31, 2022
            
Common stock, $0.0001 par value; 120,000,000 shares authorized, 21,380,570 shares and 21,242,884 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
     2       2  
Additional
 
paid-in
 
capital
     172,232       169,030  
Accumulated other comprehensive income (loss)
     52       (26
Accumulated deficit
     (156,545     (121,338
  
 
 
   
 
 
 
Total stockholders’ equity
     15,741       47,668  
  
 
 
   
 
 
 
Total liabilities and stockholders’ equity
  
$
26,276
 
 
$
59,286
 
  
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
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Table of Contents
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,
 
    
2023
   
2022
   
2023
   
2022
 
Operating expenses:
        
General and administrative
   $ 3,517     $ 4,525     $ 11,816     $ 14,903  
Research and development
     6,800       11,066       25,260       40,779  
Restructuring
           1,310             2,469  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     10,317       16,901       37,076       58,151  
  
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (10,317     (16,901     (37,076     (58,151
  
 
 
   
 
 
   
 
 
   
 
 
 
Other income (expense)
        
Change in fair value of warrant liabilities
     112       (79     12       6,334  
Interest income
     260       204       1,053       204  
Other income (expense)
     230       (103     804       (111
  
 
 
   
 
 
   
 
 
   
 
 
 
Total other income (expense)
     602       22       1,869       6,427  
  
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
  
 
(9,715
 
 
(16,879
 
 
(35,207
 
 
(51,724
Other comprehensive income:
        
Net foreign currency translation gain (loss)
     (29     14       3       39  
Net unrealized gain (loss) on marketable securities
     12       (81     75       (81
  
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
  
$
(9,732
 
$
(16,946
 
$
(35,129
 
$
(51,766
  
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per common share, basic and diluted
   $ (0.46   $ (0.80   $ (1.66   $ (2.46
  
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares outstanding, basic and diluted
     21,345       21,083       21,269       20,992  
  
 
 
   
 
 
   
 
 
   
 
 
 
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 September 30, 2023
 
    
Common Stock
    
Additional

Paid-in Capital
    
Accumulated Other

Comprehensive

Income (Loss)
   
Accumulated

Deficit
   
Total

Stockholders’

Equity
 
    
Shares
    
Amount
 
Balance as of July 1, 2023
  
 
21,381
 
  
$
2
 
  
$
170,895
 
  
$
69
 
 
$
(146,830
 
$
24,136
 
Stock-based compensation
     —         —         1,337        —        —        1,337  
Cumulative translation adjustment
     —         —         —         (29     —        (29
Unrealized gain on marketable securities
     —         —         —         12       —        12  
Net loss
     —         —      
 
— 
 
     —        (9,715     (9,715
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2023
     21,381     
$
2
 
  
$
172,232
 
  
$
52
 
 
$
(156,545
 
$
15,741
 
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
    
For the Nine Months Ended September 30, 2023
 
    
Common Stock
    
Additional

Paid-in
Capital
    
Accumulated Other

Comprehensive

Income (Loss)
   
Accumulated

Deficit
   
Total

Stockholders’

Equity
 
    
Shares
    
Amount
 
Balance as of January 1, 2023
  
 
21,243
 
  
$
2
 
  
$
169,030
 
  
$
(26
 
$
(121,338
 
$
47,668
 
Issuance of common stock from employee stock plans
     138               96        —        —        96  
Stock-based compensation
     —         —         3,106        —        —        3,106  
Cumulative translation adjustment
     —         —         —         3       —        3  
Unrealized gain on marketable securities
     —         —         —         75       —        75  
Net loss
     —         —         —         —        (35,207     (35,207
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2023
     21,381     
$
2
 
  
$
172,232
 
  
$
52
 
 
$
(156,545
 
$
15,741
 
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
    
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
 
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
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 nine months ended

September 30,
 
    
2023
   
2022
 
Cash flows from operating activities
    
Net loss
   $ (35,207   $ (51,724
Adjustments to reconcile net loss to net cash used in operating activities:
    
Depreciation
     40       40  
Stock-based compensation
     3,106       10,910  
Amortization of
right-of-use
assets
     617       658  
Change in fair value of warrant liabilities
     (12     (6,334
Net amortization of discounts on marketable securities
     (603     (57
Changes in operating assets and liabilities:
    
Prepaid and other current assets
     1,170       (939
Grant r
ec
eivable
     319        
Other assets
     (793     11  
Accounts payable
     (1,003     2,374  
Accrued expenses
     603       (270
Lease liabilities
     (671     (506
Other no
nc
urrent liabilities
           50  
  
 
 
   
 
 
 
Net cash used in operating activities
     (32,434     (45,787
  
 
 
   
 
 
 
Cash Flows from Investing Activities:
    
Purchases of marketable securities
     (11,821     (20,195
Sales and maturities of marketable securities
     47,571        
  
 
 
   
 
 
 
Net cash provided by (used in) investing activities
     35,750       (20,195
  
 
 
   
 
 
 
Cash Flows from Financing Activities:
    
Proceeds from issuance of common stock from employee stock plans
     96       242  
  
 
 
   
 
 
 
Net cash provided by financing activities
     96       242  
  
 
 
   
 
 
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
     3       44  
  
 
 
   
 
 
 
Net increase (decrease) in cash, cash equivalents, and restricted cash
     3,415       (65,696
Cash, cash equivalents, and restricted cash at beginning of the period
     11,733       111,564  
  
 
 
   
 
 
 
Cash, cash equivalents, and restricted cash at end of the period
  
$
15,148
 
 
$
45,868
 
  
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
    
Cash paid for interest
   $     $  
Cash paid for income taxes
   $     $  
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 (i) a bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule-drug conjugates, and (ii) a small molecule drug program, including a
P-TEFb
inhibitor compound. The Company intends to use these product candidates to treat various cancers in a patient-specific, targeted approach.
The Company’s business operations, and those of third parties with whom the Company conducts 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 wars in Ukraine and Israel. The extent to which these factors could continue to impact the Company’s 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 the Company’s 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 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, Vincerx Pharma GmbH, and Vincerx Pharma Australia Pty Limited. 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, 2022 as filed with the SEC on March 28, 2023, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2022 is derived from the audited financial statements presented in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022. The interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future periods.
Liquidity and Going Concern
As of September 30, 2023, the Company had approximately $20.8 million in cash, cash equivalents, and marketable securities. The Company has incurred recurring operating losses and negative cash flows from operating activities since its inception and expects to continue to incur operating losses and negative cash flows in the future. Based on current business plans and assumptions, the Company believes that its existing cash, cash equivalents, and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements into late 2024, although this estimate is based on plans and assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects. Accordingly, the Company will need to raise additional capital through public or private equity offerings, debt financings, collaborations and licensing arrangements, or other sources, and such additional capital may not be available on favorable terms or at all, particularly in light of the current
 
9

economic and market conditions. Market volatility resulting from pandemics or other epidemics, including
COVID-19,
inflation and other economic and market conditions, the wars in Ukraine and Israel, the inability to maintain our listing on The Nasdaq Capital Market, and other factors could also adversely impact the Company’s ability to raise additional capital. The failure to raise additional capital as and when needed or on acceptable terms would have a negative impact on the Company’s financial condition and the ability to pursue its business strategy, and the Company may have to reduce its workforce or delay, reduce the scope of, suspend, or eliminate one or more preclinical programs, clinical trials, or future commercialization efforts, or curtail its business operations.
In accordance with Accounting Standards Update (“ASU”)
2014-15,
 Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
 (Subtopic
205-40),
the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for a period of one year after the date that its unaudited condensed consolidated financial statements are issued. In light of the Company’s existing cash resources and current and expected operating losses and negative cash flows, the Company expects to need additional capital prior to the
one-year
anniversary of the issuance of its unaudited condensed consolidated financial statements, and such additional capital may not be available as and when needed on acceptable terms or at all. As a result, the Company has concluded that these circumstances and the uncertainties associated with its ability to obtain additional capital raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date that its unaudited condensed consolidated financial statements are issued.
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business, and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
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, 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.
Reclassifications
Certain previously reported financial information has been reclassified to conform to the current period presentation. The impact of reclassifications was not significant to the prior year’s overall presentation. These reclassifications had no effect on the reported results of operations.
Significant Accounting Policies
Concentrations of Credit Risk
The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to transition from preclinical manufacturing to commercial production of products.
The Company’s future product candidates will require approvals from the FDA and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company was denied approval, approval was delayed, or the Company was unable to maintain approval for any product candidate, it could have a material adverse impact on the Company.
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.
 
10

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.
German Grant Income
The Company recognizes grant income in the period when the underlying eligible expenses are incurred. The German government grant program provides for tax refunds or direct reimbursements of eligible research expenses of up to 1.0 million euros per year over a period of six years. The grant was approved in 2022 and is retroactive to 2021. Grant income for the three- and nine- months ended September 30, 2023 has been recorded in other income (expense), net on the Company’s condensed consolidated statements of operations and comprehensive loss. The corresponding receivable is included in current assets or other assets, $1.0 million and $0.7 million, respectively, at September 30, 2023, on the Company’s condensed consolidated balance sheet depending upon expectations for collection within 12 months of the balance sheet date.
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.
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 bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule-drug conjugates, and (ii) a small molecule drug program, including a
P-TEFb
inhibitor compound.
Following the closing of the Business Combination, the Company paid Bayer a $5.0 million upfront license fee on January 5, 2021. As of December 31, 2022, the Company recorded a $1.0 million development milestone payable to Bayer, which has subsequently been paid, in connection with the Company’s IND filing for VIP236. As of September 30, 2023, the Company recorded another $1.0 million development milestone in connection with the Company’s IND filing for VIP943. Each of these milestone obligations were expensed as incurred.
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 $1.0 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.
 
11

NOTE 4. 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, 2023
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets:
                                   
Cash Equivalents:
                                   
Money market funds
   $ 5,042      $      $      $ 5,042  
U.S. government treasuries
     6,464                      6,464  
U.S. government agency securities
            1,487               1,487  
Short-term marketable securities:
                                   
U.S. government treasuries
     2,993                      2,993  
U.S. government agency securities
            2,731               2,731  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash equivalents and marketable securities
   $ 14,499      $ 4,218      $      $ 18,717  
    
 
 
    
 
 
    
 
 
    
 
 
 
   
    
Fair Value Measured as of December 31, 2022
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets:
                                   
Cash Equivalents:
                                   
Money market funds
   $ 2,266      $      $      $ 2,266  
Commercial paper
            4,496               4,496  
Corporate debt securities
            3,032               3,032  
Short-term marketable securities:
                                   
Commercial paper
            15,587               15,587  
U.S. government treasuries
     1,005                      1,005  
U.S. government agency securities
            16,069               16,069  
Corporate debt securities
            8,135               8,135  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash equivalents and marketable securities
   $ 3,271      $ 47,319      $      $ 50,590  
    
 
 
    
 
 
    
 
 
    
 
 
 
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, 2023.
 
    
Fair Value Measured as of September 30, 2023
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Liabilities:
                                   
Common stock warrant liabilities
   $      $      $ 132      $ 132  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
   $      $      $ 132      $ 132  
    
 
 
    
 
 
    
 
 
    
 
 
 
   
    
Fair Value Measured as of December 31, 2022
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Liabilities:
                                   
Common stock warrant liabilities
   $      $      $ 144      $ 144  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
   $      $      $ 144      $ 144  
    
 
 
    
 
 
    
 
 
    
 
 
 
The estimated fair value of the warrant liability for the private warrants at September 30, 2023 and December 31, 2022 was determined using Level 3 inputs. Inherent in a Monte Carlo options pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate, and dividend yield. The Company estimates the volatility of its ordinary shares based on its historical volatility for a time period that approximates the expected remaining life of the warrants. The risk-free interest rate is
 
12
based on the U.S.
Treasury zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. There were no changes to the number of private warrants underlying the Level 3 financial instruments during the three- and nine-months ended September 30, 2023. There were no transfers between Level 1, 2, or 3 during the three- and nine-months ended September 30, 2023 and 2022.
The following table presents changes in Level 3 liabilities measured at fair value for the nine-month period ended September 30, 2023. 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, 2023
  
$
144
 
Change in fair value
     (12
    
 
 
 
Balance – September 30, 2023
  
$
132
 
    
 
 
 
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, 2023 and December 31, 2022 is as follows:
 
    
As of

September 30, 2023
   
As of

December 31, 2022
 
Stock price
   $ 1.01     $ 1.02  
Exercise price
   $ 11.50     $ 11.50  
Term
(years)
     2.2       3.0  
Volatility (annual)
     85.2     73.7
Risk-free rate
     4.9     4.1
Dividend yield (per share)
     0     0
NOTE 5.
AVAILABLE-FOR-SALE
SECURITIES
All marketable securities were considered
available-for-sale
at September 30, 2023. 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, 2023 are summarized in the table below (amounts in thousands):
 
    
September 30, 2023
 
    
Amortized Cost
    
Gross Unrealized

Gain
    
Gross

Unrealized Loss
    
Fair Value
 
Assets:
                                   
Short-term marketable securities:
                                   
U.S. government treasuries
   $ 2,993      $      $      $ 2,993  
U.S. government agency securities
     2,730        1               2,731  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total marketable securities
   $ 5,723      $ 1      $      $ 5,724  
    
 
 
    
 
 
    
 
 
    
 
 
 
   
    
December 31, 2022
 
    
Amortized Cost
    
Gross Unrealized

Gain
    
Gross

Unrealized Loss
    
Fair Value
 
Assets:
                                   
Short-term marketable securities:
                                   
Commercial paper
   $ 15,608      $      $ (21    $ 15,587  
U.S. government treasuries
     1,007               (2      1,005  
U.S. government agency securities
     16,105               (36      16,069  
Corporate debt securities
     8,149               (14      8,135  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total marketable securities
   $ 40,869      $      $ (73    $ 40,796  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
13

As of September 30, 2023, none of the Company’s marketable securities wer
e 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, if any, until maturity or recovery, thus there has been no recognition of any other-than-temporary impairment in the three- and nine-months ended September 30, 2023.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Leases
On December 23, 2020, the Company entered into a five-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 $1.2 million.
At September 30, 2023, the Company had operating lease liabilities of approximately $2.8 million and
right-of-use
assets of approximately $2.4 million, which were included in the condensed consolidated balance sheets.
In connection with the Company’s strategic plan and workforce reduction in 2022, the Company consolidated its leased office space at its corporate headquarters location. Effective July 8, 2022, the Company 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, 2023 were $150,000 and $450,000, respectively. The Company also received a $50,000 deposit, recorded as a noncurrent liability in the condensed consolidated balance sheets.
The following summarizes quantitative information about the Company’s operating leases (amounts in thousands):
 
    
For the three

months ended
   
For the nine

months ended
 
    
September

30, 2023
   
September

30, 2022
   
September

30, 2023
   
September

30, 2022
 
Lease cost
                                
Operating lease cost
   $ 299     $ 299     $ 897     $ 897  
Variable lease cost
                        
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating lease expense
   $ 299     $ 299     $ 897     $ 897  
    
 
 
   
 
 
   
 
 
   
 
 
 
Other information
                                
Operating cash flows from operating leases
   $ 318     $ 305     $ 952     $ 743  
Right-of-use
assets obtained in exchange for operating lease liabilities
   $     $     $     $  
Weighted-average remaining lease term – operating leases
     2.3       3.3       2.3       3.3  
Weighted-average discount rate – operating leases
     8     8     8     8
As of September 30, 2023, future minimum payments during the remaining period and the next three years are as follows (in thousands):
 
Remaining period ended December 31, 2023
   $ 316  
Year ended December 31, 2024
     1,320  
Year ended December 31, 2025
     1,372  
Year ended December 31, 2026
     28  
    
 
 
 
Total
     3,036  
Less present value discount
     (271
    
 
 
 
Operating lease liabilities included in the condensed consolidated balance sheet at September 30, 2023
   $ 2,765  
    
 
 
 
 
14

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 September 30, 2023 and December 31, 2022, there were 21,380,570 shares and 21,242,884 shares, respectively, of common stock outstanding, and no shares of preferred stock outstanding.
Restricted Stock
A summary of restricted stock activity for the three- and nine-months ended September 30, 2023 and 2022 is presented below:
 
    
Number of Shares
    
Weighted Average
Grant Date Fair
Value per Share
 
Nonvested at January 1, 2023
  
 
67,002
 
  
$
0.065
 
Vested
     (16,396       
  
 
 
    
 
 
 
Nonvested at March 31, 2023
  
 
50,606
 
  
$
0.074
 
Vested
     (10,848       
  
 
 
    
 
 
 
Nonvested at June 30, 2023
  
 
39,758
 
  
$
0.078
 
Vested
     (10,848       
  
 
 
    
 
 
 
Nonvested at September 30, 2023
  
 
28,910
 
  
$
0.086
 
  
 
 
    
 
 
 
 
    
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
 
  
 
 
    
 
 
 
As of September 30, 2023, there was approximately $2,300 of unrecognized stock-based compensation related to restricted stock that will be amortized in 0.8 years.
Warrants
As of September 30, 2023 and December 31, 2022, there were 3,295,000 private warrants to purchase common stock outstanding. No public warrants remain outstanding at September 30, 2023 and December 31, 2022.
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 pur
chasers or thei
r 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.
 
15

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 4). The remaining private warrants were determined to be liability classified in accordance with ASC 815, “Derivatives and Hedging” (see Note 4).
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 September 30, 2023, the Company had 5,600,152 shares of common stock reserved for issuance, and 278,731 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.
Stock option activity under the 2020 Plan is as follows (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, 2023
     4,353      $ 10.87        8.6      $ 125  
Options granted
     1,131        1.21        —         —   
Options exercised
     (3      0.82        —         —   
Options cancelled
     (160      14.16        —         —   
  
 
 
    
 
 
    
 
 
    
 
 
 
Outstanding at September 30, 2023
     5,321      $ 8.73        8.2      $ 118  
  
 
 
    
 
 
    
 
 
    
 
 
 
Options vested and exercisable at September 30, 2023
     3,272      $ 11.99        7.8      $ 49  
  
 
 
    
 
 
    
 
 
    
 
 
 
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, 2023, the Company had stock-based compensation of approximately $1.3 million related to unvested stock options not yet recognized that are expected to be recognized over an estimated weighted average period of 0.7 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, 2023 and 2022:
 
    
For the nine months

ended September 30,
 
    
2023
   
2022
 
Exercise price
   $ 1.21     $ 4.13  
Expected term (years)
     5.5       5.8  
Volatility (annual)
     89.5     83.6
Risk-free rate
     4.0     2.5
Dividend yield (per share)
     0     0
 
16

Total stock-based compensation expense recognized in the three- and nine- months ended September 30, 2023 and 2022 was as follows (amounts in thousands):
 
    
For the three months ended
    
For the nine months ended
 
    
September

30, 2023
    
September

30, 2022
    
September

30, 2023
    
September

30, 2022
 
Research and development
   $ 930      $ 938      $ 1,543      $ 6,622  
General and administrative
     407        905        1,563        3,841  
Restructuring
            447               447  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total stock-based compensation expense
  
$
1,337
 
  
$
2,290
 
  
$
3,106
 
  
$
10,910
 
  
 
 
    
 
 
    
 
 
    
 
 
 
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.
The following table sets forth the computation of loss per share for the three- and nine- months ended September 30, 2023 and 2022 (amounts in thousands, except per share number):
 
    
For the three months ended
September 30,
    
For the nine months ended
September 30,
 
    
2023
    
2022
    
2023
    
2022
 
Numerator:
           
Net loss
   $ (9,715    $ (16,879    $ (35,207    $ (51,724
  
 
 
    
 
 
    
 
 
    
 
 
 
Denominator:
           
Weighted average common shares outstanding, basic and diluted
     21,345        21,083        21,269        20,992  
  
 
 
    
 
 
    
 
 
    
 
 
 
Net loss per common share, basic and diluted
   $ (0.46    $ (0.80    $ (1.66    $ (2.46
  
 
 
    
 
 
    
 
 
    
 
 
 
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 (amounts in thousands):
 
    
For the three and nine months

ended

September 30,
 
    
2023
    
2022
 
Options outstanding
     5,321        4,324  
Warrants
     3,295        3,295  
Restricted stock
     29        94  
  
 
 
    
 
 
 
Total
     8,645        7,713  
  
 
 
    
 
 
 
 
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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, 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2022 and with the unaudited condensed consolidated 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 bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule-drug conjugates, and (ii) a small molecule drug program, including a P-TEFb inhibitor compound. 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 bioconjugation 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. Our bioconjugation program also includes VIP236, an SMDC for solid tumors. Our small molecule drug program includes enitociclib, which is a highly selective, clinical-stage P-TEFb/CDK9 inhibitor. 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.

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:

 

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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. 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 wars in Ukraine and Israel, 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.

 

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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.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

The following tables set forth our historical operating results for the periods indicated (amounts in thousands):

 

     For the three months ended
September 30
        
     2023      2022      Amount Change  

Operating expenses:

        

General and administrative

   $ 3,517      $ 4,525      $ (1,008

Research and development

     6,800        11,066        (4,266

Restructuring

     —         1,310        (1,310
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     10,317        16,901        (6,584
  

 

 

    

 

 

    

 

 

 

Loss from operations

     (10,317      (16,901      6,584  
  

 

 

    

 

 

    

 

 

 

Other income (expense)

        

Change in fair value of warrant liabilities

     112        (79      191  

Interest income

     260        204        56  

Other income (expense)

     230        (103      333  
  

 

 

    

 

 

    

 

 

 

Total other income (expense)

     602        22        580  
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (9,715    $ (16,879    $ 7,164  
  

 

 

    

 

 

    

 

 

 

 

     For the nine months ended
September 30
        
     2023      2022      Amount Change  

Operating expenses:

        

General and administrative

   $ 11,816      $ 14,903      $ (3,087

Research and development

     25,260        40,779        (15,519

Restructuring

     —         2,469        (2,469
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     37,076        58,151        (21,075
  

 

 

    

 

 

    

 

 

 

Loss from operations

     (37,076      (58,151      21,075  
  

 

 

    

 

 

    

 

 

 

Other income (expense)

        

Change in fair value of warrant liabilities

     12        6,334        (6,322

Interest income

     1,053        204        849  

Other income (expense)

     804        (111      915  
  

 

 

    

 

 

    

 

 

 

Total other income (expense)

     1,869        6,427        (4,558
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (35,207    $ (51,724    $ 16,517  
  

 

 

    

 

 

    

 

 

 

 

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Research and Development

Research and development expenses decreased by approximately $4.3 million and $15.5 million, respectively, for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022. The decrease for the three months ended September 30, 2023 compared with the same period in 2022 is primarily the result of decreases in manufacturing services associated with our ADC program of approximately $4.1 million and clinical services of approximately $0.9 million, partially offset by the $1.0 million development milestone in connection with our IND filing for VIP943. The decrease for the nine months ended September 30, 2023 compared with the same period in 2022 is primarily the result of decreases in manufacturing services associated with our ADC program of approximately $5.5 million, stock-based compensation expense of approximately $5.1 million, clinical services of approximately $2.7 million, and payroll related costs of approximately $1.7 million as a result of our headcount reduction in June 2022.

General and Administrative

General and administrative expenses decreased by approximately $1.0 million and $3.1 million, respectively, for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022. These decreases are primarily due to decreases in stock-based compensation expense of approximately $0.5 million and $2.3 million for the three and nine months ended September 30, 2023, respectively, as well as a decrease in professional services of $0.5 million and $0.8 million for the three and nine months ended September 30, 2023, respectively.

Change in Fair Value of Warrant Liabilities

The change in fair value of warrant liabilities for the three and nine months ended September 30, 2022 is 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, and to $1.38 as of September 30, 2022. For the three and nine months ended September 30, 2023, the change in the stock price was insignificant.

Interest Income

Interest income is primarily comprised of interest income and gains or losses realized on cash, cash equivalents, and marketable securities. The increase in interest income to $0.3 million and $1.1 million for the three and nine months ended September 30, 2023, respectively, is a result of rising interest rates within our portfolio of cash equivalents and short-term marketable securities.

Other Income (Expense)

Other income (expense) is primarily comprised of estimated grant income of approximately $0.2 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, earned in connection with our research activities conducted at our German subsidiary, partially offset by foreign currency transaction gains and 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 operating expenses to decrease over the next 12 months as we have completed significant portions of our manufacturing activities related to our lead programs, VIP236 and VIP943. We intend to prioritize resources towards advancing Phase I studies in these two lead programs and control spending, including discretionary spending, in other areas. We can adjust our operating plan spending levels based on the timing of future clinical trials, which are predicated upon adequate funding to complete the trials. We routinely evaluate the status of our clinical development programs as well as potential strategic options.

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 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

 

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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, 2023, we had approximately $20.8 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. 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 our product candidates, 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 and associated costs;

 

   

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 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

 

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volatility resulting from pandemics or other epidemics, including COVID-19, inflation and other economic and market conditions, the wars in Ukraine and Israel, the inability to maintain our listing on The Nasdaq Capital Market, 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 reduce our workforce or delay, reduce the scope of, suspend, or eliminate one or more of our preclinical programs, clinical trials, or future commercialization efforts, or curtail our operations.

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for a period of one year after the date that our unaudited condensed consolidated financial statements are issued. In light of our existing cash resources and current and expected operating losses and negative cash flows, we expect to need additional capital prior to the one-year anniversary of the issuance of our unaudited condensed consolidated financial statements, and such additional capital may not be available as and when needed on acceptable terms or at all. As a result, we have concluded that these circumstances and the uncertainties associated with our ability to obtain additional capital raise substantial doubt about our ability to continue as a going concern for a period of one year after the date that our unaudited condensed consolidated financial statements are issued.

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 wars in Ukraine and Israel. 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 have a negative effect on our financial position and results of 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,
 
     2023      2022  

Net cash used in operating activities

   $ (32,434    $ (45,787

Net cash provided by (used in) investing activities

   $ 35,750      $ (20,195

Net cash provided by financing activities

   $ 96      $ 242  

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. Although we continue to expand clinical trials of, and seek marketing approval for, our product candidates, we expect our cash used in operating activities to decrease in the near term given our current capital constraints., If additional funding is obtained, our development activities and timelines could accelerate, and cash used in operating activities may begin to increase again before we start to generate any material cash flows from our business.

Net cash used in operating activities was approximately $32.4 million for the nine months ended September 30, 2023, consisting primarily of payments to clinical and manufacturing service providers, internal payroll costs, and third-party professional services as we operate as a public company and prepare for and conduct our clinical trials. Our net loss during the nine months ended September 30, 2023 was approximately $35.2 million, which included approximately $3.1 million related to stock-based compensation.

Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2023 consisted of sales and maturities of marketable securities of approximately $47.6 million, partially offset by purchases of marketable securities of approximately $11.8 million.

Cash Flows from Financing Activities

Net cash provided by financing activities consists solely of proceeds from issuance of common stock from employee stock plans.

 

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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 is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated 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 base 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 based on the risks and uncertainties set forth in Part II, Item 1A of this report, “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, 2022. Other than described in Note 2 to our unaudited condensed consolidated financial statements in this report, 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, 2022.

 

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. As of September 30, 2023, we held cash equivalents and short-term marketable securities. The short-term nature of these investments are not 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 unaudited 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 unaudited 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 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.

 

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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 September 30, 2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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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 VIP236, VIP943, VIP924, enitociclib, 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 VIP236, VIP943, VIP924, enitociclib, 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 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 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 or enter into strategic alliances 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 or that we will be able to enter into strategic alliances at levels sufficient to pay these milestones or at all. If we are unable to raise the necessary additional funding or enter into the necessary strategic alliances, or otherwise pay these milestones, 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 prospects and our ability to develop and commercialize our current product candidates, raise capital, or continue our operations.

We are substantially dependent on the success of VIP236, VIP943, and enitociclib, our lead product candidates. If we are unable to complete development of, obtain approval for, and commercialize these lead product candidates in a timely manner, our business will be harmed.

 

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Our future success is substantially dependent on our ability to timely commence and complete clinical trials, obtain marketing approval for, and successfully commercialize VIP236, VIP943, and enitociclib, our lead product candidates. We are investing significant efforts and financial resources in the research and development of these lead product candidates, which 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 these or any other product candidates before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals.

The success of our lead product candidates will depend on several factors, including the following:

 

   

the initiation, successful patient enrollment, and timely completion of clinical trials;

 

   

establishing and maintaining relationships with contract research organizations and clinical sites for clinical development in the United States and internationally;

 

   

the frequency and severity of adverse events in the clinical trials and additional drug-related adverse events;

 

   

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;

 

   

obtaining and maintaining patent protection, trade secret protection, and regulatory exclusivity, both in the United States and internationally;