ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with: (i) our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended March 31, 2023, and (ii) our audited financial statements and notes thereto for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2022. Except as otherwise indicated herein or as the context otherwise requires, references in this Quarterly Report to “Oncternal” “the Company,” “we,” “us” and “our” refer to Oncternal Therapeutics, Inc., a Delaware corporation.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategies and plans, prospective products, product approvals, research and development costs, the expected continued impact of COVID-19, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 9, 2023, and in Part II, Item 1A, “Risk Factors” of this Quarterly Report. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Overview
We are a clinical-stage biopharmaceutical company focused on the development of novel oncology therapies for patients with cancers with critical unmet medical need. Our drug development efforts are focused on promising, yet untapped, biological pathways implicated in cancer generation or progression, primarily in hematological malignancies and prostate cancer. Our pipeline includes:
•ONCT-808, our lead cell therapy product candidate, is an autologous Receptor tyrosine kinase-like Orphan Receptor 1 (ROR1) targeting chimeric antigen receptor T cell (CAR T) therapy using the binding domain from zilovertamab. ONCT-808 has demonstrated activity in preclinical models against multiple hematological malignancies and solid tumors and has been shown to be specific for cancer cells expressing ROR1. We believe our manufacturing process may reduce the time patients must wait for their individual CAR T product to be produced, compared with approved CAR T products. We recently initiated Study ONCT-808-101, a Phase 1/2 dose escalation trial for the treatment of patients with relapsed or refractory aggressive B-cell lymphoma, including patients who have failed previous CD19 CAR T treatment. The study entitled “A Clinical Study of ONCT-808 in Subjects With Relapsed or Refractory B-Cell Malignancies” (NCT05588440) will evaluate the evaluate the safety and tolerability, pharmacokinetics, and anti-tumor activity of ONCT-808 in two distinct phases designated as Phase 1 and Phase 2. After the safety and tolerability of ONCT-808 have been assessed in Phase 1 to select the recommended Phase 2 dose, Phase 2 will commence to further validate the dose and evaluate the safety and efficacy of ONCT-808. The study aims to enroll approximately 57 patients. We expect to present initial clinical data from this study in late 2023 and additional clinical data readouts in 2024. ONCT-808 is being developed utilizing manufacturing services from Lentigen Technology, Inc. (lentivirus manufacturing), Miltenyi Biotec B.V. & Co. KG. (cell processing) and the Dana-Farber Cancer Institute (cGMP cell preparation and manufacturing activities).
•ONCT-534, is a dual-action androgen receptor inhibitor (DAARI) with preclinical activity in prostate cancer models against both unmutated androgen receptor (AR), and against multiple forms of AR mutation. It is a potential treatment for patients with metastatic castrate-resistant prostate cancer (mCRPC). We believe ONCT-534 has the potential to address significant unmet medical needs related to resistance to androgen receptor inhibitors, including those with AR amplification, mutations in the AR ligand binding domain (LBD), or splice variants with loss of the AR LBD. Final investigational new drug (IND)-enabling studies for ONCT-534 have been completed. We expect to submit an IND application in mid-2023 and, assuming the IND becomes effective, initiate a Phase 1/2 clinical trial in patients with castrate resistant prostate cancer by the end of 2023. We anticipate initial clinical data in the first half of 2024.
20
•Zilovertamab is an investigational, humanized, potentially first-in-class, monoclonal antibody designed to: (i) bind to a specific functionally important epitope of ROR1, a growth factor receptor that is widely expressed on many tumor types and that activates pathways leading to increased tumor proliferation, invasiveness, and drug resistance in preclinical models, and (ii) inhibit ROR1 function. Zilovertamab has been evaluated in a Phase 1/2 Study CIRM-0001 in combination with ibrutinib for the treatment of patients with mantle cell lymphoma (MCL), chronic lymphocytic leukemia (CLL) and marginal zone lymphoma (MZL). Zilovertamab is being evaluated in two investigator-initiated studies, a Phase 2 clinical trial of zilovertamab in combination with venetoclax, a Bcl-2 inhibitor, in patients with relapsed/refractory R/R CLL, and a Phase 1b study of zilovertamab in combination with docetaxel in patients with mCRPC. In April 2023, we reprioritized the development of zilovertamab and are in the process of closing the Phase 3 ZILO-301 Study for the treatment of patients with relapsed or refractory MCL and the Phase 1/2 CIRM-0001 Study for the treatment of MCL, CLL and MZL.
Our pipeline previously included ONCT-216, an investigational small molecule designed to inhibit the ETS, or E26 Transformation Specific, family of oncoproteins, which had shown in preclinical studies to alter gene transcription and RNA processing that led to decreased cell proliferation and invasion. In April 2022, we deprioritized the development of ONCT-216 and stopped the enrollment of patients in a Phase 1/2 clinical trial in patients with relapsed or refractory Ewing sarcoma.
Since the inception of Oncternal Therapeutics, Inc. in 2013, we have devoted most of our resources to organizing and staffing, business planning, raising capital, acquiring product candidates and securing related intellectual property rights and advancing our pipeline of development programs, including ONCT-808, ONCT-534, zilovertamab and ONCT-216. Under research subaward agreements between us and UC San Diego, we were eligible to receive $14.6 million in development milestones during the award project period from October 1, 2017 to March 31, 2022. Through March 31, 2023, we have funded our operations primarily through: (i) gross proceeds of $136.3 million from the issuance of common stock, (ii) gross proceeds of $49.0 million from the issuance of convertible preferred stock, (iii) receipt of $14.5 million in subaward grant payments from UC San Diego, and (iv) cash proceeds of $18.3 million received in connection with the closing of the merger with GTx, Inc. in June 2019, or the GTx Merger. As of March 31, 2023, we had cash, cash equivalents and short-term investments of $54.3 million and no debt.
We have incurred net losses in each year since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net loss was $11.5 million for the three months ended March 31, 2023 and we had an accumulated deficit of $169.8 million as of March 31, 2023. Substantially all of our net losses have resulted from costs incurred in connection with: (i) advancing our research and development programs, (ii) general and administrative costs associated with our operations, including the costs associated with operating as a public company, and (iii) in-process research and development costs associated with the GTx Merger. We expect to continue to incur significant and increasing operating losses for at least the next several years. We expect that our expenses and capital funding requirements will increase substantially in connection with our ongoing activities, particularly if and as we:
•advance ONCT-808 through clinical development, initially in hematological malignancies;
•advance ONCT-534 through clinical development, initially in castrate resistant prostate cancer;
•explore zilovertamab with other BTK inhibitors, and in additional ROR1-positive hematologic malignancies and solid tumors preclinically;
•continue to develop additional product candidates; acquire or in-license other product candidates and technologies;
•maintain, expand and protect our intellectual property portfolio;
•establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
•seek regulatory approvals for any product candidates that successfully complete clinical trials;
•respond to the impacts of the COVID-19 pandemic, which has slowed enrollment into our clinical trials and impacted our supply chain activities;
•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
•add operational, financial and management information systems and personnel, including personnel to support our planned product development and future commercialization efforts.
We will not generate product sales revenue unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. In addition, we expect to incur additional costs associated with operating as a public company.
21
As a result, we believe we will need substantial additional funding to support our continuing operations and pursue our business strategy. Until such time as we can generate significant product sales revenue, if ever, we expect to finance our operations through a combination of public or private equity or debt offerings or other sources, including potential collaborations, strategic alliances and other similar arrangements. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in licenses or acquisitions.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We expect that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Beyond that point, we will need to raise additional capital to finance our operations, which cannot be assured.
Business Update Regarding COVID-19
The COVID-19 worldwide pandemic has presented substantial public health and economic challenges and continues to affect economies, financial markets and business operations around the world. The pandemic may continue to directly or indirectly affect the timeline for our manufacturing activities, planned regulatory submissions and clinical trials. 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 are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, the success or failure of ongoing vaccination programs worldwide, the emergence and spread of additional variants of COVID-19, as well as the economic impact on local, regional, national and international markets.
Components of Results of Operations
Grant Revenue
Our grant revenue has been derived from a California Institute for Regenerative Medicine, or CIRM, grant subaward with UC San Diego and research and development grants from the National Institutes of Health, or NIH.
In August 2017, CIRM awarded an $18.3 million grant to researchers at UC San Diego to advance the CIRLL study throughout the award project period from October 1, 2017 through March 31, 2022. We conducted this study in collaboration with UC San Diego and received $14.5 million during the project period related to development milestone payments under research subaward agreements. In addition, we were committed to certain co-funding requirements and we were required to provide UC San Diego progress and financial update reports throughout the award project period. We received no subaward payments and recorded $0.3 million in grant revenue in the three months ended March 31, 2022. As of March 31, 2023, we believe we have met our obligations under the CIRM award and UC San Diego subawards.
In August 2021, the NIH awarded us two research and development grants for up to $2.2 million to support pre-clinical and other research activities for our ONCT-216 and DAARI programs, including $0.7 million payable to subawardees. In March 2023, the NIH awarded us a research and development grant for up to $1.8 million to support pre-clinical and other research activities for our DAARI program, including $0.3 million payable to subawardees. During each of the three months ended March 31, 2023 and 2022, we received $0.1 million in award payments, and recorded $0.2 million and $0.5 million, respectively, in grant revenue and $0.1 million in unbilled grant receivable as of March 31, 2023.
Operating Expenses
Research and Development
Research and development expenses consist primarily of costs incurred for the development of zilovertamab, ONCT-808, ONCT-534 and ONCT-216, which include:
•expenses under agreements with consultants, third-party contract organizations, and investigative clinical trial sites that conduct research and development activities on our behalf;
•costs related to the development and manufacture of preclinical study and clinical trial material;
22
•salaries and employee-related costs, including stock-based compensation;
•costs incurred under our collaboration and third-party licensing agreements; and
•laboratory and vendor expenses related to the execution of preclinical and clinical trials.
We accrue all research and development costs in the period for which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers. Advance payments for goods or services to be received in future periods for use in research and development activities are deferred and then expensed as the related goods are delivered and as services are performed. Any unearned advances would be refunded when known.
As a result of the strategic reprioritization announced in April 2023, we expect our research and development expenses will decrease in future quarters after we close the Phase 3 ZILO-301 Study for the treatment of patients with relapsed or refractory MCL and the Phase 1/2 CIRM-0001 Study for the treatment of MCL, CLL and MZL, and implement other cost reductions. We will continue to invest in: (i) advancing our product candidates into later stages of clinical development, and (ii) further investigation and the development of our other preclinical programs. 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.
Our direct research and development expenses are tracked by product candidate and consist primarily of external costs, such as fees paid under third-party license agreements and to outside consultants, contract research organizations, or CROs, contract manufacturing organizations and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track our costs by product candidate unless we can include them as subaward costs.
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, including any potential expanded dosing beyond the original protocols based in part on ongoing clinical success and the potential effects of the COVID-19 pandemic. 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 of each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, insurance costs, facility costs and professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. Personnel-related costs consist of salaries, benefits and stock-based compensation. We expect our general and administrative expenses will decrease modestly in future quarters as we implement other cost reductions and cost containment measures.
Interest Income
Interest income consists of interest earned on our cash, cash equivalents and short-term investments, which primarily consist of money market funds and U.S. Treasury securities. In a significantly rising interest rates environment, our interest income on our invested balances is expected to increase as rates increase. Historically our interest income has not been significant due to low interest yields earned on invested balances.
23
Results of Operations
Comparison of Three Ended March 31, 2023 and 2022
The following table summarizes our condensed consolidated results of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Grant revenue |
|
$ |
203 |
|
|
$ |
746 |
|
|
$ |
(543 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
9,031 |
|
|
|
6,979 |
|
|
|
2,052 |
|
General and administrative |
|
|
3,315 |
|
|
|
3,679 |
|
|
|
(364 |
) |
Total operating expenses |
|
|
12,346 |
|
|
|
10,658 |
|
|
|
1,688 |
|
Loss from operations |
|
|
(12,143 |
) |
|
|
(9,912 |
) |
|
|
(2,231 |
) |
Interest income |
|
|
656 |
|
|
|
8 |
|
|
|
648 |
|
Net loss |
|
$ |
(11,487 |
) |
|
$ |
(9,904 |
) |
|
$ |
(1,583 |
) |
Grant Revenue
Grant revenue was $0.2 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively. The decrease of $0.5 million was primarily due to the completion of the CIRM subaward in the first quarter of 2022.
Research and Development Expenses
The following table summarizes our research and development expenses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2023 |
|
|
2022 |
|
|
Increase/(Decrease) |
|
Zilovertamab |
|
$ |
3,490 |
|
|
$ |
1,900 |
|
|
$ |
1,590 |
|
ONCT-534 |
|
|
818 |
|
|
|
260 |
|
|
|
558 |
|
ONCT-808 |
|
|
887 |
|
|
|
864 |
|
|
|
23 |
|
ONCT-216 |
|
|
224 |
|
|
|
1,022 |
|
|
|
(798 |
) |
Unallocated research and development expenses |
|
|
3,612 |
|
|
|
2,933 |
|
|
|
679 |
|
Total research and development expenses |
|
$ |
9,031 |
|
|
$ |
6,979 |
|
|
$ |
2,052 |
|
Research and development expenses for the three months ended March 31, 2023 and 2022 were $9.0 million and $7.0 million, respectively, an increase of $2.0 million. The increase was primarily due to a $1.3 million increase in direct product candidate expenses and a $0.7 million increase in unallocated expenses.
Direct expenses for zilovertamab increased $1.6 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to an increase in clinical development costs.
Direct expenses for ONCT-534 increased $0.6 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to an increase in manufacturing activities.
Direct expenses for ONCT-808 for the three months ended March 31, 2023 were consistent with the expenses during the three months ended March 31, 2022. The direct expenses for the three months ended March 31, 2023 included significant spend for clinical development costs, which were offset by decreases in preclinical and manufacturing related costs, as compared to the expenses incurred during the three months ended March 31, 2022.
Direct expenses for ONCT-216 decreased $0.8 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, due primarily to lower clinical trial activity and manufacturing costs associated with the de-prioritization of this program in 2022.
Unallocated expenses increased $0.7 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to higher personnel costs, including non-cash stock-based compensation costs.
24
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2023 and 2022 were $3.3 million and $3.7 million, respectively, a decrease of $0.4 million primarily due to lower legal and consulting expenses.
Liquidity and Capital Resources
As a result of the strategic reprioritization announced in April 2023, we: (i) believe our existing cash, cash equivalents, and short-term investments will be sufficient to fund our operations into 2025, and (ii) expect our research and development expenses will decrease in future quarters after we close two clinical studies and implement other cost reductions. As of March 31, 2023, we had $54.3 million in cash, cash equivalents and short-term investments and no debt. We have incurred losses and negative cash flows from operations since inception. As of March 31, 2023, we had an accumulated deficit of $169.8 million and anticipate that we will continue to incur net losses for the foreseeable future. We expect our operating expenses to continue to be substantial for the foreseeable future and, as a result, we will need additional capital to fund our operations, which we may obtain through a combination of public or private equity or debt offerings or other sources, including potential collaborations, strategic alliances and other similar arrangements.
In December 2021, we entered into an at-the-market Sales Agreement, or the Sales Agreement, with Jefferies LLC, providing for the sale of up $50.0 million of our common stock from time to time in “at-the-market” offerings under an existing shelf registration statement. During the three months ended March 31, 2023, we sold 1,115,480 shares of common stock for net proceeds of $1.2 million.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2023 |
|
|
2022 |
|
Net cash provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
$ |
(10,969 |
) |
|
$ |
(8,606 |
) |
Investing activities |
|
|
(16,048 |
) |
|
|
— |
|
Financing activities |
|
|
1,119 |
|
|
|
— |
|
Net decrease in cash and cash equivalents |
|
$ |
(25,898 |
) |
|
$ |
(8,606 |
) |
Operating Activities
Net cash used in operating activities was $11.0 million and $8.6 million for the three months ended March 31, 2023 and 2022, respectively. The increase in cash used in operations was primarily due to the clinical and manufacturing activities associated with the clinical development programs and higher personnel costs. The net cash used in operating activities during the three months ended March 31, 2023 was primarily due to our net loss of $11.5 million adjusted for $1.5 million of non-cash charges, primarily for stock-based compensation, and a $1.0 million change in operating assets and liabilities. Net cash used in operating activities during the three months ended March 31, 2022 was primarily due to our net loss of $9.9 million adjusted for $2.0 million of non-cash charges, primarily for stock-based compensation, and a $0.7 million change in operating assets and liabilities.
Investing Activities
During the three months ended March 31, 2023, net cash used in investing activities was $16.0 million consisting primarily of net purchases of available-for-sale securities. No cash was used or provided by investing activities for the three months ended March 31, 2022.
Financing Activities
Net cash provided by financing activities was $1.1 million and none for the three months ended March 31, 2023 and 2022, respectively. The net cash provided during 2023 resulted primarily from the proceeds received from the sale of common stock under the “at-the-market” program.
25
Operating Capital Requirements
We anticipate that we will continue to incur losses for the foreseeable future, and we expect the losses to increase as we continue the research and development of, and seek regulatory approvals for, our product candidates and conduct additional research and development activities. Our product candidates have not yet achieved regulatory approval and we may not be successful in achieving commercialization of our product candidates.
We believe that our existing cash and cash equivalents will be sufficient to fund our operations into 2025. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. For example, the FDA or other regulatory authorities may require us to generate additional data or conduct additional preclinical studies or clinical trials, or may impose other requirements beyond those that we currently anticipate. Additionally, it is possible for a product candidate to show promising results in preclinical studies or in clinical trials, but fail to establish the sufficient safety and efficacy data necessary to obtain regulatory approvals. As a result of these and other risks and uncertainties and the probability of success, the duration and the cost of our research and development activities required to advance a product candidate cannot be accurately estimated and are subject to considerable variation. We may encounter difficulties, complications, delays and other unknown factors and unforeseen expenses in the course of our research and development activities, any of which may significantly increase our capital requirements and could adversely affect our liquidity.
We will require additional capital for the research and development of our product candidates, and we may be forced to seek additional funds sooner than expected to pursue our research and development activities. We expect to finance our capital requirements in the foreseeable future through a combination of the sale of public or private equity or debt securities, government funding, or other sources, including potentially collaborations, licenses and other similar arrangements. There can be no assurance that we will be able to obtain any sources of financing on acceptable terms, or at all. To the extent that we can raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. Any of these events could significantly harm our business, operations, financial condition and prospects.
Our forecast of the period of time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties. We have based this forecast on assumptions that may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our capital resources and liquidity. We could utilize our available capital resources sooner than we currently expect. The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:
•the type, number, scope, progress, expansions, results, costs and timing of our preclinical studies and clinical trials of our ROR1, CAR T, and DAARI product candidates or additional indications of our other potential product candidates that we may choose to pursue in the future;
•the costs and timing of manufacturing for our product candidates, including commercial manufacturing if any product candidate is approved;
•the costs and capacity for third-party process development and manufacturing, including for CAR T and lentivirus;
•the costs, timing and outcome of seeking and obtaining worldwide regulatory approvals for our product candidates;
•the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
•the costs associated with hiring additional personnel, CROs and consultants as our preclinical and clinical activities increase;
•our ability to achieve sufficient market acceptance, adequate coverage and reimbursement from third-party payors and adequate market share and revenue for any approved products;
•the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities for, and the pricing and reimbursement of, any products for which we may receive regulatory approval;
•the costs incurred as a result of the COVID-19 pandemic, including preclinical, manufacturing and clinical trial delays;
•the terms and timing of establishing and maintaining potential collaborations, strategic alliances and other similar arrangements, including milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future; and
•costs associated with any products or technologies that we may in-license or acquire.
If we cannot continue or expand our research and development operations, or otherwise capitalize on our business opportunities, because we lack sufficient capital, our business, operations, financial condition and prospects could be materially adversely affected.
26
In April 2021, our Form S-3 registration statement became effective. Future sales of our common stock, if any, will depend on a variety of factors including, but not limited to, the expected timing for achieving key milestones, including announcing the first-in-human dosing of ONCT-808, our lead cell therapy product candidate targeting ROR1, and advancing ONCT-534, our DAARI preclinical product candidate, prevailing market conditions, the trading price of our common stock and our capital needs. There can be no assurance that we will be successful in consummating future sales of our securities based on prevailing market conditions or in the quantities or at the prices that we deem appropriate.
In December 2021, we entered into an Open Market Sales AgreementSM, or the Sales Agreement, pursuant to which we are able to offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million. We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement.
Contractual Obligations and Commitments
We are party to a number of license agreements, pursuant to which we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. As of March 31, 2023, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales. See Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for a description of these agreements.
We enter into contracts in the normal course of business with clinical trial sites and clinical supply manufacturers and with vendors for preclinical studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination after a notice period and, therefore, are cancelable contracts.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.
Our estimates are based on our historical experience, trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We consider our critical accounting policies and estimates to be related to research and development expenses and accruals, and revenue recognition. There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2023, from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies & Estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2022.
27