This management's discussion and analysis of financial condition as of
September 30, 2022and results of operations for the three and nine months ended September 30, 2022and 2021, respectively, should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission, or SEC, on March 31, 2022, or our 2021 Annual Report, and our other public reports filed with the SEC. Overview
We are a late-stage clinical-stage biopharmaceutical company focused on the development of novel cancer therapies across a broad range of indications. Our product development candidates currently include Galinpepimut-S or GPS and GFH009.
Galinpepimut-S, or GPS Our lead product candidate, GPS, is a cancer immunotherapeutic agent licensed from
Memorial Sloan Kettering Cancer Center, or MSK, that targets the Wilmstumor 1, or WT1, protein, which is present in 20 or more cancer types. Based on its mechanism of action as a directly immunizing agent, GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications. In January 2020, we commenced in the United Statesa Phase 3 open-label randomized clinical trial, the REGAL study, for GPS monotherapy in patients with acute myeloid leukemia, or AML, in the maintenance setting after achievement of second complete remission, or CR2, following successful completion of second-line antileukemic therapy. Patients are randomized to receive either GPS or best available treatment, or BAT. We expect this study will be used as the basis for submission of a Biologics License Application, or BLA, subject to a statistically significant and clinically meaningful data outcome and agreement with the U.S. Food & Drug Administration, or the FDA. The primary endpoint of the clinical trial is overall survival, or OS. Following review of preliminary data to date from the REGAL study, which was pooled (i.e., GPS arm plus BAT, or control, arm) and which remained blinded as to treatment arm, we observed that the median OS in the pooled study population is likely considerably longer, by approximately twofold, than that originally anticipated and upon which the protocol and statistical analysis plan, or SAP, for the study were based. Accordingly, the overall duration of the REGAL study is now expected to be longer than initially predicted. Following consultation with members of the Independent Data Monitoring Committee for the study and AML key opinion leaders, as well as the recommendations of our biostatistics experts, we are implementing changes to the SAP and protocol for the REGAL study as follows:
•The target total enrollment for the study will be increased from 116 patients to a range of 125 to 140 patients
•The target number of events (deaths) for the interim analysis is reduced from 80 to 60 and is expected to occur in late 2023 or early 2024
•The target number of events (death) for the final analysis is reduced from 105 to 80 and is expected to occur by the end of 2024
•Statistical significance would be achieved by an estimated hazard ratio (HR) for OS of 0.636, corresponding to an OS of 12.6 months vs. 8 months for GPS vs. BAT, respectively.
As the interim and final analyzes are event driven, they may occur at times other than those listed above.
19 -------------------------------------------------------------------------------- In
December 2020, we entered into an exclusive license agreement with 3D Medicines Inc., or 3DMed, a China-based biopharmaceutical company developing next-generation immuno-oncology drugs, for the development and commercialization of GPS, as well as our next generation heptavalent immunotherapeutic GPS Plus, which is at preclinical stage, across all therapeutic and diagnostic uses in the Greater Chinaterritory (mainland China, Hong Kong, Macauand Taiwan). We have retained sole rights to GPS and GPS Plus outside of the Greater Chinaarea. On March 30, 2022, an investigational new drug, or IND, application filed by 3DMed to initiate the first clinical trial in Chinafor 3D189, also known as GPS, was approved by China's National Medical Products Administration, or NMPA. The IND is for a small Phase 1 clinical trial investigating safety. The approval by the NMPA triggered a $1.0 millionmilestone payment to the Company which we recognized as license revenue in the first quarter of 2022 and payment was received in the second quarter of 2022. We have agreed with 3DMed for 3DMed to participate in the REGAL study through the inclusion of approximately 20 patients from the Greater Chinaterritory. Such participation by 3DMed is possible due to the increase in the target patient enrollment in the study and will trigger two development milestone payments totaling $13.0 million, which we expect to receive in the first half of 2023. If the REGAL study meets its primary endpoint for efficacy and the Chinese regulatory authorities determine that the REGAL data is sufficient for approval in China(which cannot be guaranteed), GPS could potentially reach the market in Greater Chinamuch earlier than we and 3DMed had been anticipated when we entered into the license agreement providing rights to 3DMed. In December 2018, pursuant to a Clinical Trial Collaboration and Supply Agreement, we initiated a Phase 1/2 multi-arm "basket" type clinical study of GPS in combination with Merck & Co., Inc.'s, or Merck, anti-PD-1 therapy, pembrolizumab (Keytruda®). In 2020, we and Merck determined to focus on ovarian cancer (second or third line WT1+ relapsed or refractory metastatic ovarian cancer). On November 10, 2022, we reported the following confirmatory topline data from 17 evaluable patients in the study: •Median OS was 18.4 months compared to 13.8 months with pembrolizumab alone in a in a checkpoint inhibitor single agent study in a similar patient population treated with checkpoint inhibitor alone. •Median progression-free survival, or PFS, was 12 weeks compared to 8 weeks in a checkpoint inhibitor single agent study in a similar patient population treated with checkpoint inhibitor alone. •The overall response rate of the trial is 6.3 percent with a disease control rate, or DCR, which is the sum of overall response rate and rate of stable disease, of 50.1 percent at a median follow-up of 14.4 months. In a checkpoint inhibitor single agent study in a similar platinum-resistant ovarian cancer patient population treated with a checkpoint inhibitor alone, the observed DCR was 37.2 percent, consistent with a DCR rate increase of approximately 45 percent in the GPS combination with pembrolizumab over that seen for checkpoint inhibitors alone. •Survival and disease control benefits were observed in patients harboring tumors with any level of detectable PD-L1 expression, i.e., those with Combined Positive Score, or CPS, of 1 or higher. The DCR is 63.6% in patients with a CPS of 1 or higher. Patients with a CPS score of less than 1 showed a median OS of 3.2 months vs. patients with a CPS greater than or equal to 1 who had a median OS of 18.4 months and, as it relates to time to progression, patients with a CPS score of less than 1 had a median PFS of 1.9 months and patients with a CPS score of greater than or equal than 1 showed a median PFS of 3.8 months. •In 16 evaluable patients in whom serial peripheral blood samples were available, a correlation was observed between PFS and OS and WT1-specific immune response after GPS vaccination across more than 1 channel with intracellular cytokine flow-cytometry assays in peripheral blood lymphocytes assaying reactivity against the four pooled WT1 antigens comprising GPS. The data were consistent with those seen in previous studies of GPS. •The safety profile of GPS in combination with pembrolizumab was similar to pembrolizumab alone, with only the addition of low-grade rapidly resolving local reactions at the GPS injection site, consistent with observations from other GPS clinical studies.
20 -------------------------------------------------------------------------------- the second half of 2022. In
June 2022, we announced the following updated data from eight evaluable patients in this study, seven of which received at least three doses of GPS, the last given in combination with nivolumab: •Of the eight evaluable patients, 75 percent of the patients entered the study as Stage III or IV patients, with 50 percent of patients entering as Stage IV. Initial tumor stages were II (two patients), III and IIIB (two patients) and IV (four patients). All patients had the MPM epithelioid and/or sarcomatoid variant, a tumor which is universally expressing WT1. •Median OS calculated as the time from the cessation of the most recent previous therapy until confirmed death or most recent data update for patients who are still alive (50 percent of patients) was 40.9 weeks (9.4 months) for all eight patients and 45.7 weeks (10.5 months) in patients who received the combination therapy (seven out of eight patients). The median PFS was 11.1 weeks for all eight patients and 11.9 weeks in patients who received the combination therapy. •The safety profile of the GPS-nivolumab combination was similar to that seen with nivolumab alone, with the addition of only low-grade, temporary local reactions at the GPS injection site, consistent with previously performed clinical studies with GPS. No Grade 3/4 toxicities were observed for GPS and there were no dose-limiting toxicities. GPS was granted Orphan Drug Product Designations from the FDA, as well as Orphan Medicinal Product Designations from the European Medicines Agency, or EMA, for GPS in AML, MPM, and multiple myeloma, or MM, as well as Fast Track designation for AML, MPM, and MM from the FDA.
March 31, 2022, we entered into an exclusive license agreement, or the GFH009 Agreement, with GenFleet Therapeutics (Shanghai), Inc., or GenFleet, a clinical-stage biotechnology company developing cutting-edge therapeutics in oncology and immunology, that grants rights to us for the development and commercialization of GFH009, a highly selective small molecule cyclin-dependent kinase 9, or CDK9, inhibitor, across all therapeutic and diagnostic uses worldwide outside of mainland China, Hong Kong, Macauand Taiwan. CDK9 activity has been shown to correlate negatively with overall survival in a number of cancer types, including hematologic cancers, such as AML and lymphomas, as well as solid cancers, such as osteosarcoma, pediatric soft tissue sarcomas, and melanoma, and endometrial, lung, prostate, breast and ovarian cancer. As demonstrated in pre-clinical and clinical data, to date, GFH009's high selectivity has the potential to reduce toxicity as compared to older CDK9 inhibitors and other next-generation CDK9 inhibitors currently in clinical development. GFH009 is currently in a Phase 1 dose-escalating clinical trial in the United Statesand China. We are evaluating both twice-a-week and once-a-week dosing, and the indications are relapsed/refractory AML, chronic lymphocytic leukemia, or CLL, small lymphocytic leukemia, or SLL, and lymphoma. The primary goal of the trial is to establish the recommended Phase 2 dose and to assess safety. We expect enrollment in the planned twice-a-week dosing cohorts in the trial to be completed by the end of 2022 and the once-a-week cohorts in early 2023. Following completion of the Phase 1 clinical trial and determination of the recommended Phase 2 dose, we intend to commence a Phase 2 clinical trial of GFH009 in combination with venetoclax and azacitidine in AML patients who failed or did not respond to treatment with venetoclax and azacitidine. The primary endpoint of the Phase 2 clinical trial, which we expect to initiate by the end of the first quarter of 2023, will be complete remission (CR) rate and secondary endpoints will include progression free survival, OS and proportion of patients proceeding to transplant. We are also planning a Phase 2 clinical trial of GFH009 in certain solid tumors which will likely commence in the first quarter of 2023 and are exploring various options with respect to clinical development for GFH009 in several pediatric indications which we expect to finalize by the end of 2022. 21 --------------------------------------------------------------------------------
Effects of COVID-19
The ongoing global COVID-19 pandemic, including the surges of cases from the Delta and Omicron variants, continues to disrupt our business operations and those of our collaborators, including 3D Med and GenFleet, contractors, contract research organizations, or CROs, suppliers, clinical sites, contract manufacturing organizations, or CMOs, and other partners. The COVID-19 pandemic has affected and may continue to affect the health and availability of our workforce and that of the third-parties we rely on, such as our CROs, clinical sites, CMOs, and other contractors as well as the governmental agencies, such as the FDA and health authorities in other countries which could delay or otherwise adversely impact the ability of such parties to fulfill their obligations. We have implemented a return-to-work policy in compliance with federal, state and local requirements and guidance, which provides for a hybrid of remote and in-office work. We are continuously monitoring the impact of the pandemic on our clinical development programs and on those of our partners, 3DMed and GenFleet. Our Phase 3 REGAL study is progressing, with the necessary work to activate additional sites in
the United States, Europeand Asiacontinuing. However, since the onset of the COVID-19 pandemic, we have observed that, at certain times and in certain instances, clinical site initiations, patient screening and patient enrollment have been delayed. These delays are likely due to many reasons, which have been changing and evolving as the COVID-19 pandemic itself has evolved, including the prioritization of hospital resources towards the care of patients with COVID-19, delays in reviews and approvals by independent institutional review boards, or IRBs, and/or ethics committees at clinical sites, the challenges for clinicians and patients to comply with clinical trial protocols due to quarantines impeding patient movement or interrupting operations at sites, restrictions on travel and, most recently, inadequate staffing at clinical sites, supply chain-related delays, materials shortages and, most recently, lockdowns in China. Throughout the United States, Europeand Asia, newly initiated sites have taken longer than expected to become fully operational and begin enrolling patients. We are continuing to monitor each clinical site through our CROs as well as conducting direct outreach to investigators and study staff through site visits investigator meetings and other modes of communication. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our business, results of operations and financial condition will depend on future developments that, despite progress in vaccination efforts, remain highly uncertain, subject to change and cannot be predicted with confidence, including the duration of the outbreak, the continued availability and efficacy of vaccines and booster shots, developments or perceptions regarding safety of vaccines, new information which may emerge concerning the severity of COVID-19, the emergence of new strains of COVID-19, including any future variants that may emerge, the actions to contain COVID-19 or treat its impact, including continuing or new lockdowns, among others, and the direct and indirect economic effects of the pandemic, including as a result of inflation, supply chain disruptions, shifting demand and labor shortages. The estimates of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets. 22 --------------------------------------------------------------------------------
Components of the earnings situation
License revenue consists of revenue recognized pursuant to our Exclusive License Agreement with 3DMed dated
December 7, 2020, or the 3DMed License Agreement. In the future, we may generate revenue from a combination of reimbursements, up-front payments, milestone payments and royalties in connection with the 3DMed License Agreement. Cost of License Revenue
The cost of royalty income consists of sub-license fees incurred under our license from MSK in connection with the 3DMed License Agreement.
research and development costs
Research and development costs consist of costs associated with the discovery and development of our product candidates. We record research and development costs as they are incurred. These expenses include:
• expenses incurred as part of arrangements with CROs, sites and consultants conducting our pre-clinical studies and clinical studies;
• manufacturing costs;
• quality control and quality assurance services;
•outsourced professional scientific development services;
• Employee-related expenses, which include salaries, benefits and stock-based compensation;
•Payments under our license agreements under which we acquired certain intellectual property;
• expenses related to certain regulatory activities, including filing fees paid to regulators;
•Laboratory materials and supplies to support our research activities; and
• Associated expenses, incidental expenses and other facility-related costs.
The successful development of our current and future product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from, any current or future product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of our clinical trials, which vary significantly over the life of a project as a result of many factors, including, but not limited to:
•the number of clinical centers and participating countries involved in the studies;
• the length of time required to accommodate suitable patients;
•the number of patients who ultimately participate in the studies;
•the number of doses patients receive;
• the length of patient follow-up;
•the results of clinical studies;
•the costs associated with production;
•obtaining marketing approvals;
•the commercialization of current and future product candidates; and
•the impact of the COVID-19 pandemic.
23 -------------------------------------------------------------------------------- Research and development activities are central to our business model. Oncology product candidates in the later stages of clinical development generally have higher development costs than those in the earlier stages of clinical development, primarily due to the increased size and duration of the later-stage clinical trials. We expect our research and development expenses to increase for the foreseeable future as we conduct and complete our ongoing early and late stage clinical trials and initiate additional clinical trials. Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals. We may never succeed in achieving regulatory approval for any of our current or future product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or target indications or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials due to the COVID-19 pandemic or otherwise, we could be required to expend significant additional financial resources and time on the completion of clinical development.
Acquired in-process research and development consists of costs of acquiring or licensing product candidates from third parties for development with no alternative future use.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses, fees for outside legal counsel, amortization of contract acquisition costs (commissions), and director and officer insurance premiums. Other general and administrative expenses include facility related costs, patent filing and prosecution costs, professional fees for business development, accounting, consulting, legal and tax-related services associated with maintaining compliance with our Nasdaq listing and
SECreporting requirements, investor relations costs, and other expenses associated with being a public company. If and when we believe that regulatory approval of a product candidate appears likely, we anticipate that an increase in general and administrative expenses will occur as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of such product candidate. Oncology product commercialization may take several years and millions of dollars in development costs.
Non-operating income (expense), net
Non-operating income (expense), net consists of changes in fair value of our warrant liability, changes in fair value of our contingent consideration, and interest income. Interest income primarily reflects interest earned from our cash and cash equivalents.
Critical Accounting Policies and Estimates
In the 2021 Annual Report, we disclosed our critical accounting policies and estimates upon which our financial statements are derived. There have been no material changes to these policies since
December 31, 2021that are not included in Note 3 of the accompanying consolidated financial statements for the nine months ended September 30, 2022. Readers are encouraged to read the 2021 Annual Report in conjunction with this Quarterly Report on Form 10-Q. 24 --------------------------------------------------------------------------------
Operating results for the past three and nine months
The table below summarizes our operating results for the past three and nine months
Three Months Ended September 30, 2022 2021 Change Licensing revenue $ - $ - $ - Operating expenses: Cost of license revenue - - - Research and development 4,282 4,541 (259) Acquired in-process research and development - - - General and administrative 2,864 2,436 428 Total operating expenses 7,146 6,977 169 Operating loss (7,146) (6,977) (169) Non-operating income (expense), net 124 (108) 232 Net loss $ (7,022)
$ (7,085)$ 63 Nine Months Ended September 30, 2022 2021 Change Licensing revenue $ 1,000 $ 7,600 $ (6,600)Operating expenses: Cost of license revenue 100 200 (100) Research and development 14,422 12,281 2,141 Acquired in-process research and development 10,000 - 10,000 General and administrative 8,982 8,794 188 Total operating expenses 33,504 21,275 12,229 Operating loss (32,504) (13,675) (18,829) Non-operating income (expense), net 324 (426) 750 Net loss $ (32,180) $ (14,101) $ (18,079)
A further analysis of the changes and trends in our results of operations is discussed below.
There was no license income in the past three months
Licensing revenue was
$1.0 millionfor the nine months ended September 30, 2022related to an approval by the NMPA of an IND application for a small Phase 1 clinical trial investigating safety of GPS in China, which triggered a development milestone under the 3DMed License Agreement. Licensing revenue was $7.6 millionfor the nine months ended September 30, 2021related to the initial transaction price of $9.5 millionunder the 3DMed License Agreement, which was recognized over a period of time to satisfy the out-licensing of intellectual property rights and transfer of technical know-how.
Cost of Licensing Revenue
In the past three months, no costs for license income were incurred
25 -------------------------------------------------------------------------------- We incurred
$0.1 millionand $0.2 millionof sublicensing fees payable under our license from MSK in connection with the 3DMed License Agreement during the nine months ended September 30, 2022and 2021, respectively. Research and Development Research and development expenses were $4.3 millionfor the three months ended September 30, 2022compared to $4.5 millionfor the three months ended September 30, 2021. The $0.2 milliondecrease was primarily attributable to a $0.5 milliondecrease in clinical expenses due to the timing of start-up fees in the prior year related to our ongoing Phase 3 REGAL clinical trial of GPS in AML, a $0.4 milliondecrease in manufacturing expenses due to the timing of drug supply purchases and manufacturing of a registration batch of GPS in the prior year. These decreases were partially offset by a $0.3 millionincrease in personnel related expenses due to increased headcount and a $0.4 millionincrease in other clinical and regulatory consulting expenses. We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS and GFH009, including our Phase 3 clinical trial of GPS in AML and the planned Phase 2 clinical trials of GFH009. Research and development expenses were $14.4 millionfor the nine months ended September 30, 2022compared to $12.3 millionfor the nine months ended September 30, 2021. The $2.1 millionincrease was primarily attributable to a $1.4 millionincrease in clinical trial expenses primarily related to our ongoing Phase 3 REGAL clinical trial of GPS in AML, a $1.1 millionincrease in personnel related expenses due to increased headcount, and a $0.2 millionincrease in other research and development expenses. These increases were partially offset by a $0.6 milliondecrease in manufacturing expenses due to the timing of drug supply purchases and manufacturing of a registration batch of GPS in the prior year. We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS and GFH009, including our Phase 3 clinical trial of GPS in AML, and the planned Phase 2 clinical trials of GFH009.
There was no acquired in-process research and development expense during the three months ended
September 30, 2022. During the nine months ended September 30, 2022, we recognized $10.0 millionfor the acquisition of in-process research and development related to the in-licensing of GFH009, $4.5 millionof which was paid in April 2022and the remaining $5.5 millionwhich was deemed probable to occur and expected to be paid by the end of the second quarter of 2023. There was no acquired in-process research and development during the three and nine months ended September 30, 2021.
General and administrative
General and administrative expenses were
$2.9 millionfor the three months ended September 30, 2022compared to $2.4 millionfor the three months ended September 30, 2021. The $0.5 millionincrease was primarily due to a $0.5 millionincrease in personnel expenses due to increased headcount, including a $0.1 millionincrease in non-cash stock-based compensation. General and administrative expenses were $9.0 millionfor the nine months ended September 30, 2022compared to $8.8 millionfor the nine months ended September 30, 2021. The $0.2 millionincrease was primarily due to a $1.4 millionincrease in personnel related expenses due to increased headcount, including a $0.4 millionincrease in non-cash stock-based compensation, and a $0.3 millionincrease in outside services and public company costs. These increases were partially offset by a $1.1 milliondecrease related to the amortization of contract asset costs associated with the 3DMed License Agreement in the prior year with no comparable expense in the current year, and a $0.4 milliondecrease in legal, accounting, and other general and administrative fees.
Non-operating income (expense), net
Non-operating income (expense), net for the past three and nine months
26 -------------------------------------------------------------------------------- Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 Change 2022 2021 Change Change in fair value of warrant liability
$ 2 $ 30 $ (28) $ 39 $ (29) $ 68Change in fair value of contingent consideration 11 (140) 151 126 (403) 529 Interest income 111 2 109 159 6 153 Total non-operating income (expense), net $ 124 $ (108) $ 232 $ 324 $ (426) $ 750
Non-operating net income of
Net non-operating expense of
$0.1 millionfor the three months ended September 30, 2021was primarily due to an increase in the fair value of the contingent consideration liability partially offset by a slight decrease in the change in the fair value of the warrant liability. Net non-operating income of $0.3 millionduring the nine months ended September 30, 2022was primarily due to interest income earned from our cash and cash equivalents, and a decrease in the fair value of the contingent consideration liability driven by an increase in discount rates. Net non-operating expense of $0.4 millionduring the nine months ended September 30, 2021was primarily due to the increase in the change in the fair value of the contingent consideration liability and a slight increase in the change in the fair value of the warrant liability partially offset by nominal interest income.
The change in the fair value of the option liability and the change in the fair value of the contingent consideration are non-cash.
income tax expense
There was no income tax expense for the three and nine months ended
September 30, 2022and 2021. We continue to maintain a full valuation allowance against our net deferred tax assets.
Liquidity, capital resources and financing needs
We did not generate any revenue from product sales during the nine months ended
September 30, 2022and 2021. Through September 30, 2022, the Company has only generated licensing revenue from the 3DMed License Agreement. Since inception, we have incurred net losses, used net cash in our operations, and have funded substantially all of our operations through proceeds of the sale of equity securities and convertible notes. To date, the Company has received $10.5 millionin upfront payments and certain technology transfer and regulatory milestones from 3DMed, pursuant to its Exclusive License Agreement for GPS. The participation of 3DMed in the REGAL Phase 3 clinical trial in Chinawill trigger significant milestone payments to us, which we expect to receive in the first half of 2023. A total of $191.5 millionin potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of September 30, 2022, which milestones are variable in nature and not under our control. On April 5, 2022, we consummated an underwritten public offering, or the April 2022Offering, issuing 4,629,630 shares of common stock and accompanying common stock warrants to purchase an aggregate of 4,629,630 shares of common stock. The shares of common stock and accompanying common stock warrants were sold at a combined price of $5.40per share and accompanying common stock warrant. Each common stock warrant sold with the shares of common stock represents the right to purchase one share of our common stock at an exercise price of $5.40per share. The common stock warrants are exercisable immediately and will expire on April 5, 2027, five years from the date of issuance. The net proceeds to us from the April 2022Offering, after deducting the underwriting discounts and commissions and other offering expenses, and excluding the exercise of any warrants, were approximately $23.0 million. On March 31, 2022, we entered into the GFH009 Agreement with GenFleet pursuant to which GenFleet granted to us a sublicensable, royalty-bearing license, to certain of its intellectual property, to develop, manufacture, and commercialize a small molecule CDK9 inhibitor, GFH009, for the treatment, diagnosis or prevention of disease 27 -------------------------------------------------------------------------------- in humans and animals in all countries and territories of the world other than mainland China, Hong Kong, Macauand Taiwan, or the GFH009 Territory. GFH009 is currently in a Phase 1 clinical trial in the United Statesand China. In consideration for the exclusive license, we agreed to pay GenFleet (i) an upfront and technology transfer fee of $10.0 million, of which $4.5 millionwas paid in April 2022, and $5.5 millionis due upon the first day of the 15th calendar month following the effective date of the GFH009 Agreement, (ii) development and regulatory milestone payments for up to three indications totaling up to $48.0 millionin the aggregate, and (iii) sales milestone payments totaling up to $92.0 millionin the aggregate upon the achievement of certain net sales thresholds in a given calendar year. We have also agreed to pay GenFleet single-digit tiered royalties based upon a percentage of annual net sales, with the royalty rate escalating based on the level of annual net sales of GFH009 in the GFH009 Territory ranging from the low to high single digits. On April 16, 2021, we entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co.(the "Agent"). From time to time during the term of the Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 millionin gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to our registration statement on Form S-3, which was filed with the SECon April 16, 2021and declared effective on April 29, 2021. During the year ended December 31, 2021, we sold a total of 786,927 shares of common stock pursuant to the Sales Agreement at an average price of $12.04per share for aggregate net proceeds of approximately $9.0 million. During the nine months ended September 30, 2022, we sold an additional 37,891 shares of common stock pursuant to the Sales Agreement at an average price of $3.25per share for aggregate net proceeds of approximately $0.1 million. There remains approximately $40.4 millionavailable for future sales of shares of common stock under the Sales Agreement. Other than the Sales Agreement, we currently do not have any commitments to obtain additional funds. As of September 30, 2022, we had an accumulated deficit of $170.8 million, cash and cash equivalents of $21.3 millionand restricted cash and cash equivalents of $0.1 million. In addition, we had current liabilities of $12.6 millionas of September 30, 2022. We expect that our cash and cash equivalents will not be sufficient to fund our current planned operations for at least the next twelve months from the date of issuance of these financial statements. These conditions give rise to a substantial doubt over our ability to continue as a going concern. We will require substantial additional financing to commercially develop any current or future product candidates. If we are unable to obtain additional funding on a timely basis, we will be required to scale back our plans and place certain activities on hold. Other than the Sales Agreement, we currently do not have any commitments to obtain additional funds. Our management continues to evaluate different strategies to obtain the required funding for future operations. These strategies may include utilizing the Sales Agreement, public and private placements of equity and/or debt securities, payments from potential strategic research and development collaborations, and licensing and/or marketing arrangements with pharmaceutical companies. Additionally, we continue to pursue discussions with global and regional pharmaceutical companies for licensing and/or co-development rights to its product candidates. There can be no assurance that these future funding efforts will be successful. Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of any additional financings, (ii) our ability to complete revenue-generating partnerships with pharmaceutical and biotechnology companies, (iii) the success of our research and development activities, (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies, and, ultimately, (v) regulatory approval and market acceptance of our proposed future products. 28 --------------------------------------------------------------------------------
The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended
September 30, 2022and 2021 (in thousands): Nine Months Ended September 30, 2022 2021 Net cash (used in) provided by: Operating activities $ (18,657) $ (21,045)Investing activities (4,500) - Financing activities 23,150 12,024
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
Net cash used in operating activities of
$18.7 millionduring the nine months ended September 30, 2022was primarily attributable to our net loss of $32.2 million, which was partially offset by various net non-cash charges of $11.4 millionand the net change in our operating assets and liabilities of approximately $2.1 million. Net non-cash charges were driven by $10.0 millionin expense related to the acquired in-process research and development, $1.3 millionin non-cash stock compensation expense, and $0.1 millionin other net non-cash charges. The net change in our operating assets and liabilities of $2.1 millionis primarily attributable to an increase in accrued expenses and other current liabilities of $1.9 million, and a decrease in prepaid expenses and other current assets of $0.5 million, which were partially offset by a decrease in operating lease liabilities of $0.3 million. Net cash used in operating activities of $21.0 millionduring the nine months ended September 30, 2021was primarily attributable to an $8.1 millionchange in our operating assets and liabilities and our net loss of $14.1 million, which was offset by various net non-cash charges of $1.2 million. The net change in our operating assets and liabilities of $8.1 millionis primarily attributable to a decrease in deferred revenue of $5.6 million, a $2.2 millionincrease in prepaid expenses and other assets primarily for prepaid insurance premiums and clinical trial costs and a $1.4 milliondecrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $1.1 milliondecrease in contract acquisition costs related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed License Agreement.
Net cash used in investing activities of
$4.5 millionduring the nine months ended September 30, 2022related to license payments made for the acquisition of in-process research and development under the GFH009 Agreement.
No funds were used for investment activities in the past nine months
Net Cash Provided by Financing Activities
$23.2 millionin net cash from financing activities during the nine months ended September 30, 2022that was due to $23.0 millionin aggregate net proceeds received from our underwritten public offering, which closed in April 2022, $0.1 millionin aggregate net proceeds received from the issuance of common stock under the Sale Agreement, and $0.1 millionin aggregate net proceeds received from the issuance of common stock under the employee stock purchase plan. We generated $12.0 millionof net cash from financing activities for the nine months ended September 30, 2021. We received $9.0 millionin net proceeds from the issuance of common stock under the Sales Agreement, as well as $3.0 millionfrom the exercise of warrants to acquire shares of common stock.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financing arrangements to date
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