ikna-10q_20210331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2021

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: 001-40287

 

IKENA ONCOLOGY, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

81-1697316

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

645 Summer Street, Suite 101

Boston, MA

 

02210

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (857) 273-8343

 

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, par value $0.001 per share

 

IKNA

 

The Nasdaq Global Market

 

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, 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 April 30, 2021, the registrant had 35,851,241 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder's Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

PART II.

OTHER INFORMATION

23

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

70

Item 3.

Defaults Upon Senior Securities

70

Item 4.

Mine Safety Disclosures

70

Item 5.

Other Information

70

Item 6.

Exhibits

71

Signatures

72

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

 

Forward-looking statements in this prospectus include, but are not limited to, statements about:

 

the initiation, timing, progress, results, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

 

our ability to efficiently discover and develop product candidates;

 

our ability and the potential to successfully manufacture our drug substances and product candidates for preclinical use, for clinical trials and on a larger scale for commercial use, if approved;

 

the ability and willingness of our third-party strategic collaborators to continue research and development activities relating to our development candidates and product candidates;

 

our ability to obtain funding for our operations necessary to complete further development and commercialization of our product candidates;

 

our ability to obtain and maintain regulatory approval of our product candidates

 

our ability to commercialize our products, if approved;

 

the pricing and reimbursement of our product candidates, if approved;

 

the  implementation of our business model, and strategic plans for our business and product candidates;

 

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

 

estimates of our future expenses, revenue, capital requirements, and our needs for additional financing;

 

the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory and commercialization expertise;

 

future agreements with third parties in connection with the commercialization of product candidates and any other approved product;

 

the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

 

our financial performance;

 

the rate and degree of market acceptance of our product candidates;

 

regulatory developments in the United States and foreign countries;

 

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

our ability to produce our products or product candidates with advantages in turnaround times or manufacturing cost;

 

the success of competing therapies that are or may become available;

 

our ability to attract and retain key scientific or management personnel;

 

the impact of laws and regulations;

 

our use of proceeds from our initial public offering;

 

developments relating to our competitors and our industry;

 

the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and clinical trials and any future studies or trials; and

 

other risks and uncertainties, including those under the caption “Risk Factors.”

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or into which we may enter.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

IKENA ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

281,010

 

 

$

162,491

 

Prepaid expenses and other current assets

 

 

2,224

 

 

 

3,478

 

Total current assets

 

 

283,234

 

 

 

165,969

 

Property and equipment, net

 

 

2,118

 

 

 

1,393

 

Right-of-use asset

 

 

7,438

 

 

 

170

 

Other assets

 

 

872

 

 

 

872

 

Total assets

 

$

293,662

 

 

$

168,404

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,528

 

 

$

2,122

 

Accrued expenses and other current liabilities

 

 

3,564

 

 

 

5,402

 

Operating lease liability

 

 

1,584

 

 

 

186

 

Deferred revenue

 

 

22,339

 

 

 

20,622

 

Total current liabilities

 

 

30,015

 

 

 

28,332

 

Long-term portion of lease liabilities

 

 

6,053

 

 

 

 

Deferred revenue, net of current portion

 

 

29,950

 

 

 

35,141

 

Total liabilities

 

$

66,018

 

 

$

63,473

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock (Series A, A-1 and B), $0.001 par value,

   No shares authorized, issued and outstanding as of March 31, 2021; 169,396,576

   shares authorized, issued and outstanding as of December 31, 2020 (liquidation

   preference of $0 as of March 31, 2021 and $202.2 million as of December 31, 2020)

 

 

 

 

 

205,979

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Preferred Stock, $0.001 par value - 10,000,000 shares authorized at March 31, 2021

   and no shares authorized at December 31, 2020; No shares issued and outstanding

   at March 31, 2021 or December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value, 150,000,000 shares authorized, 35,851,241

   issued and outstanding as of March 31, 2021; 230,000,000 shares authorized,

   3,096,903 issued and outstanding as of December 31, 2020

 

 

36

 

 

 

3

 

Additional paid-in capital

 

 

348,663

 

 

 

10,288

 

Accumulated deficit

 

 

(121,055

)

 

 

(111,339

)

Total stockholders’ equity (deficit)

 

 

227,644

 

 

 

(101,048

)

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

 

$

293,662

 

 

$

168,404

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

IKENA ONCOLOGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Research and development revenue under collaboration agreement

 

$

3,474

 

 

$

3,227

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

10,021

 

 

 

7,893

 

General and administrative

 

 

3,173

 

 

 

2,510

 

Total operating expenses

 

 

13,194

 

 

 

10,403

 

Loss from operations

 

 

(9,720

)

 

 

(7,176

)

Other income

 

 

4

 

 

 

231

 

Net loss and comprehensive loss

 

$

(9,716

)

 

$

(6,945

)

Net loss per share attributable to common stockholders basic and diluted

 

$

(2.52

)

 

$

(2.62

)

Weighted-average common stocks outstanding, basic and diluted

 

 

3,850,264

 

 

 

2,655,767

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


IKENA ONCOLOGY, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

Redeemable

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance at December 31, 2019

 

 

75,727,268

 

 

$

78,867

 

 

 

 

2,651,333

 

 

$

3

 

 

$

5,617

 

 

$

(67,083

)

 

$

(61,463

)

Exercise of stock options

 

 

 

 

 

 

 

 

 

7,461

 

 

 

 

 

 

21

 

 

 

 

 

 

21

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

375

 

 

 

 

 

 

375

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,945

)

 

 

(6,945

)

Balance at March 31, 2020

 

 

75,727,268

 

 

$

78,867

 

 

 

 

2,658,794

 

 

$

3

 

 

$

6,013

 

 

$

(74,028

)

 

$

(68,012

)

 

 

 

Redeemable

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance at December 31, 2020

 

 

169,396,576

 

 

$

205,979

 

 

 

 

3,096,903

 

 

$

3

 

 

 

10,288

 

 

$

(111,339

)

 

$

(101,048

)

Initial public offering, net of

   issuance costs of $2.4 million

 

 

 

 

 

 

 

 

 

8,984,375

 

 

 

9

 

 

 

131,293

 

 

 

 

 

 

131,302

 

Conversion of convertible

   preferred stock into

   common stock

 

 

(169,396,576

)

 

 

(205,979

)

 

 

 

23,678,568

 

 

 

24

 

 

 

205,955

 

 

 

 

 

 

205,979

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

885

 

 

 

 

 

 

885

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

91,395

 

 

 

 

 

 

242

 

 

 

 

 

 

242

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,716

)

 

 

(9,716

)

Balance at March 31, 2021

 

 

 

 

 

 

 

 

 

35,851,241

 

 

$

36

 

 

$

348,663

 

 

$

(121,055

)

 

$

227,644

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


IKENA ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(9,716

)

 

$

(6,945

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation

 

 

89

 

 

 

74

 

Stock-based compensation

 

 

885

 

 

 

375

 

Non-cash lease expense

 

 

273

 

 

 

231

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

624

 

 

 

164

 

Accounts payable

 

 

48

 

 

 

155

 

Accrued expenses and other current liabilities

 

 

(1,810

)

 

 

(533

)

Lease liability

 

 

(89

)

 

 

(168

)

Deferred revenue

 

 

(3,474

)

 

 

(3,227

)

Net cash flows used in operating activities

 

 

(13,170

)

 

 

(9,874

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(839

)

 

 

(117

)

Net cash flows used in investing activities

 

 

(839

)

 

 

(117

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from initial public offering, net of offering costs

 

 

132,432

 

 

 

 

Payment of preferred issuance costs

 

 

(146

)

 

 

 

Proceeds from exercise of stock options

 

 

242

 

 

 

21

 

Net cash flows provided by financing activities

 

 

132,528

 

 

 

21

 

Net increase (decrease) in cash and cash equivalents and restricted cash

 

 

118,519

 

 

 

(9,970

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

163,363

 

 

 

82,083

 

Cash, cash equivalents and restricted cash, end of period

 

$

281,882

 

 

$

72,113

 

Cash and cash equivalents

 

$

281,010

 

 

$

72,113

 

Restricted cash included in other assets

 

 

872

 

 

 

0

 

Cash, cash equivalents and restricted cash, end of period

 

$

281,882

 

 

$

72,113

 

Supplemental disclosure of non-cash activities

 

 

 

 

 

 

 

 

Purchases of property and equipment in accrued expense

 

$

157

 

 

 

 

Deferred transaction costs in accounts payable and accrued expenses

 

$

1,130

 

 

 

 

Right-of-use assets recognized upon adoption of ASC 842

 

 

 

 

$

956

 

Right-of-use assets and lease liabilities recognized upon lease inception

 

$

7,541

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


IKENA ONCOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Organization and Basis of Presentation

The Company is a targeted oncology company focused on developing novel cancer therapies targeting key signaling pathways that drive the formation and spread of cancer. The Company’s programs focus on key cancer driver pathways that are well-validated in scientific literature but lack approved or effective therapies and therefore have the potential to address high unmet medical needs. By leveraging the Company’s deep understanding of discovery chemistry, translational science, and patient-centric drug development, it has built a deep pipeline of wholly owned and partnered programs focused on genetically defined or biomarker-driven cancers, which enables it to target specific patient populations that the Company believes are most likely to respond to treatment with its product candidates. Since the Company commenced operations in 2016, it has discovered or developed five oncology programs that include four product candidates in either IND-enabling studies or clinical development.

On March 22, 2021, the Company effected a one-for-7.154 reverse stock split of the Company’s common stock. All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the appropriate securities agreements. Shares of common stock reserved for issuance upon the conversion of the Company’s convertible preferred stock were proportionately reduced and the respective conversion prices were proportionately increased. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares.

On March 25, 2021, the Company’s registration statement on Form S-1 relating to its initial public offering of its common stock was declared effective by the Securities and Exchange Commission (“SEC”). In the IPO, which closed on March 30, 2021, the Company issued and sold 8,984,375 shares of common stock, including full exercise of the underwriters’ over-allotment option to purchase an additional 1,171,875 shares, at a public offering price of $16.00 per share and the aggregate gross proceeds before deducting underwriting discounts and commissions, and other estimated offering expenses payable by the Company, were approximately $143.8 million.

Basis of Presentation: The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the ASC and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The accompanying condensed consolidated financial statements and footnotes to the financial statements have been prepared on the same basis as the most recently audited annual financial statements and, in the opinion of management, reflect all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2021 and the results of its operations and its cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s final prospectus for its IPO filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”), with the Securities and Exchange Commission (the “SEC”) on March 26, 2021.

Liquidity: In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of March 31, 2021, the Company had an accumulated deficit of $121.1 million.  During the three months ended March 31, 2021, the Company incurred a loss of $9.7 million and utilized $13.2 million of cash in operations. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash and cash equivalents of $281.0 million at March 31, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the condensed consolidated financial statements.

5


Note 2. Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Arrys Therapeutics, Inc. (“Arrys”), Ikena Oncology Securities Corporation and Amplify Medicines, Inc, (“Amplify”). All intercompany balances and transactions have been eliminated in consolidation.

Summary of Significant Accounting Policies: The significant accounting policies and estimates used in the preparation of the accompanying consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s final Prospectus for its IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on March 25, 2021. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021.

Use of Estimates: The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and judgments are based on historical information and other market-specific or various relevant assumptions, including in certain circumstances, future projections, that management believes to be reasonable under the circumstances. Actual results could differ materially from estimates. Significant estimates and assumptions are used for, but not limited to the accruals for research and development expenses, research and development revenue under a collaboration agreement, the determination of fair value of equity instruments and intangible assets acquired in an asset acquisition and, for periods prior to the completion of the IPO, stock based compensation expense.

Research and Development Expense: Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, stock-based compensation, facilities costs, depreciation, third-party license fees, acquisition of technology, overhead costs and external costs of outside vendors engaged to conduct preclinical development activities and trials. Research and development expense also includes the write-off of acquired in-process research and development (“IPR&D”) assets with no alternative future use.

Comprehensive Loss: Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. For the three months ended March 31, 2021 and 2020, there were no differences between net loss and comprehensive loss.

Deferred Issuance Costs: Deferred issuance costs consist of legal, accounting and other third-party fees that are directly associated with in-process equity financings and remain deferred issuance costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction to the proceeds generated as a result of the offering. Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss. On March 30, 2021, the Company completed its IPO. Accordingly, the Company recognized offering costs of approximately $2.4 million as a reduction from the gross proceeds associated with the closing of the IPO through additional paid-in capital in the accompanying condensed consolidated balance sheet. The Company incurred deferred offering costs of $0.5 million as of December 31, 2020.

Recent Accounting Pronouncements:

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements and disclosures.

Note 3. Fair Value Measurements

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

Fair Value Measurements as of

March 31, 2021 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

280,810

 

 

$

 

 

$

 

 

$

280,810

 

Total cash equivalents

 

$

280,810

 

 

$

 

 

$

 

 

$

280,810

 

6


 

 

 

 

Fair Value Measurements as of

December 31, 2020 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

162,290

 

 

$

 

 

$

 

 

$

162,290

 

Total cash equivalents

 

$

162,290

 

 

$

 

 

$

 

 

$

162,290

 

 

During the three months ended March 31, 2021 and year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3.

Note 4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Clinical, manufacturing and scientific development

 

$

1,590

 

 

$

1,917

 

Other

 

 

634

 

 

 

1,561

 

 

 

$

2,224

 

 

$

3,478

 

 

The Company did not capitalize any deferred issuance costs as of March 31, 2021 in prepaid expenses and other current assets. As of December 31, 2020, the Company capitalized $0.5 million of deferred issuance costs related to the initial public offering recorded in prepaid expenses and other current assets.

Note 5. Property and Equipment, net

Property and equipment, net consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

 

 

March 31,

2021

 

 

December 30,

2020

 

Property and equipment:

 

 

 

 

 

 

 

 

Lab equipment

 

$

1,156

 

 

$

1,071

 

Leasehold improvements

 

 

860

 

 

 

939

 

Electronic equipment and software

 

 

335

 

 

 

71

 

Furniture and fixtures

 

 

384

 

 

 

-

 

Total property and equipment

 

 

2,735

 

 

 

2,081

 

Less: accumulated depreciation

 

 

(617

)

 

 

(688

)

Property and equipment, net

 

$

2,118

 

 

$

1,393

 

 

Depreciation expense for the three months ended March 31, 2021 and 2020 was $0.1 million and $0.1 million, respectively. There were no impairments for three months ended March 31, 2021 and 2020.

Note 6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at March 31, 2021 and December 31, 2020 (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Employee compensation

 

$

813

 

 

$

1,816

 

Research and development expenses

 

 

1,329

 

 

 

2,251

 

Professional fees

 

 

1,254

 

 

 

955

 

Other current liabilities

 

 

168

 

 

 

380

 

 

 

$

3,564

 

 

$

5,402

 

 

7


 

Note 7. Collaboration Agreement and Stock Purchase Agreement with BMS

In January 2019, the Company entered into the BMS Collaboration Agreement with Celgene Corporation, which was acquired by BMS in November 2019, whereby the Company will carry out initial research and development activities with the goal of identifying and developing drug candidates for certain cancer types. Concurrent with execution of the BMS Collaboration Agreement, the Company entered into a stock purchase agreement with BMS, which resulted in the issuance of 14,545,450 shares of Series A-1 Preferred Stock (the “Stock Purchase Agreement”).

Agreement Structure

Under the BMS Collaboration Agreement, the Company will conduct exploratory and discovery activities, with the goal of identifying product candidates for certain targets, which are the kynurenine, which the Company is developing as IK-412, and the aryl hydrocarbon receptor (“AHR”), which the Company is developing as IK-175. The Company is obligated to complete research and development activities through completion of a Phase 1b clinical trial for each program. BMS has the option to receive a global-development, manufacture and commercialization license for the product candidate. Subsequent to the delivery of a license, BMS is responsible for the worldwide development, manufacturing and commercialization of these product candidates.

BMS paid the Company a total of $95.0 million in aggregate upfront consideration related to the BMS Collaboration Agreement and Stock Purchase Agreement. The Company is eligible to receive $50.0 million, in case of an exercise of its option with respect to IK-175, and $40.0 million, in case of an exercise of its option with respect to IK-412. If the Company does not complete a Phase 1b clinical trial by the end of the research term, the Company may provide a data package to BMS to support the decision to exercise the option for an additional $0.25 million. Upon the exercise of the delivery of each license, the Company becomes eligible to receive up to $450 million in milestone payments as well as a tiered royalty on worldwide sales from the high single to low teen digits.

Accounting Considerations of the Agreement

The BMS Collaboration Agreement and the Stock Purchase Agreement were executed concurrently and in contemplation of each other. The issuance of Series A-1 Preferred Stock was initially accounted for at fair value. The purchase price for the Series A-1 Preferred Stock was considered to be at a discount from fair value, and therefore $1.8 million of the upfront from the BMS Collaboration Agreement was allocated to the equity arrangement.

The Company determined that the BMS Collaboration Agreement represented a contract with a customer and should be accounted for in accordance with ASC 606. The Company identified the two performance obligations, which are research and development services for IK-175 and IK-412. The options to receive worldwide development and commercialization licenses for the two targets and the option to receive manufacturing services in the future were determined to not provide any material rights to the customer and are therefore not considered to be performance obligations. The arrangement also contains certain di minimis items, including participation on joint oversight committees.

The Company identified $78.7 million of total transaction price which represents the upfront consideration allocated to the revenue arrangement. Additional consideration to be paid to the Company upon exercise of a right to receive a license or potential milestone and royalty payments are excluded from the transaction price as they relate to amounts that can only be achieved subsequent to the exercise of an options and are outside of the initial contact term.

Based on the distinct performance obligations identified above, the Company allocated the $78.7 million transaction price based on relative estimated standalone selling prices of each of its performance obligations as follows:

 

$41.2 million for research and development services for IK-175; and

 

$37.5 million for research and development services for IK-412.

The Company determined the estimated standalone selling price for the research and development services based on internal estimates of the costs to perform the services, including expected internal expenses and expenses with third parties, marked up to include a reasonable profit margin. Significant inputs used to determine the total expense of the research and development activities include the length of time required and the number and cost of various studies that will be performed to complete the applicable development plan.

The Company is recognizing revenue related to each of its performance obligations as the research and development services are performed. The Company recognizes revenue related to research and development services performed using an input method by calculating costs incurred at each period end relative to total costs expected to be incurred.

8


During the three months ended March 31, 2021 and 2020, the Company recognized revenue of $3.5 million and $3.2 million, respectively, from the BMS Collaboration Agreement, all of which were previously included in deferred revenue. The condensed consolidated balance sheet at March 31, 2021 includes deferred revenue of $52.3 million related this agreement, of which $22.3 million and $30.0 million were classified as current and non-current, respectively. This amount is expected to be recognized as performance obligations are satisfied through the completion of the research and development services for IK-175 and IK-412.

Note 8. Redeemable Convertible Preferred Stock

In connection with the closing of the Company’s IPO on March 30, 2021, all issued and outstanding Redeemable Convertible Preferred Stock of 169,396,576 were converted to 23,678,568 shares of the Company’s common stock and are no longer issued or outstanding as of March 31, 2021.

Note 9. Stock-Based Compensation

In March 2016, the Company’s board of directors and stockholders adopted the 2016 Stock Incentive Plan which was amended and restated in December 2020, (as so amended and restated, the “2016 Plan”) which permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code, and (2) options that do not so qualify.     

On March 19, 2021, the Company’s board of directors approved, and on March 20, 2021, the Company’s stockholders approved the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective on March 30, 2021.  The 2021 Plan replaced the 2016 Plan as the board of directors had determined it would not to make additional awards under the 2016 Plan following the closing of the initial public offering. However, the 2016 Plan will continue to govern outstanding equity awards granted thereunder. The 2021 Plan allows the Company to make equity-based and cash-based incentive awards to officers, employees, directors and consultants.

As of the effective date of the 2021 Plan, no further awards will be made under the 2016 Plan. Any options or awards outstanding under the 2016 Plan remain outstanding and effective and are governed by their existing terms. The shares of the Company’s common stock subject to outstanding awards under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right will be added back to the shares of common stock available for issuance under the 2021 Plan.  No more than 3,263,664 shares of the Company’s common stock may be granted subject to incentive stock options under the 2021 Plan. In addition, the 2021 Plan contains an “evergreen” provision, which allows for an annual increase in the number of shares of common stock available for issuance under the 2021 Plan on the first day of each fiscal year during the period beginning in fiscal year 2022. The annual increase in the number of shares shall be equal to 4% of the number of shares of common stock outstanding on the immediately preceding December 31; and such lesser number of shares as determined by the Administrator as provided in the 2021 Plan.

As of March 31, 2021, 3,263,664 shares of common stock remain available for future issuance under the 2021 Plan. The Plan provides that equity awards may be granted to employees and nonemployees. The vesting periods for equity awards, which generally is four years, are determined by the Board of Directors. The contractual term for stock option awards is ten years.

Total stock-based compensation expense recorded during the three-month periods ended March 31, 2021 and 2020 was as follows (in thousands):

 

 

 

2021

 

 

2020

 

Research and development

 

$

413

 

 

$

160

 

General and administrative

 

 

472

 

 

 

215

 

Total share-based compensation expense

 

$

885

 

 

$

375

 

 

The weighted-average fair value of the stock options granted during the three months ended March 31, 2021 was $5.02. No shares were granted during the three months ended March 31, 2020. As of March 31, 2021, the total unrecognized stock-based compensation balance for unvested options was $14.4 million which is expected to be recognized over 3.25 years.

9


The following table summarizes stock option activity under the Plan for three months ended March 31, 2021:

 

 

 

Number of

Options

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding as of December 31, 2020

 

 

2,650,396

 

 

$

3.45

 

 

 

8.01

 

 

$

5,463

 

Granted

 

 

2,373,980

 

 

 

7.87

 

 

 

 

 

 

 

 

 

Exercised

 

 

(91,395

)

 

 

2.64

 

 

 

 

 

 

 

 

 

Cancelled or forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2021

 

 

4,932,981

 

 

$

5.59

 

 

 

8.79

 

 

$

111,780

 

Options exercisable as of March 31, 2021

 

 

1,462,882

 

 

$

3.11

 

 

 

7.43

 

 

$

36,781

 

Options unvested as of March 31, 2021

 

 

3,470,099

 

 

$

6.64

 

 

 

9.36

 

 

$

74,999

 

 

The intrinsic value of options exercised for three months ended March 31, 2021 and 2020 was $478 thousand and $13 thousand, respectively.

The fair value of each option award granted during the three months ended March 31, 2021 is estimated on the date of grant using the Black-Scholes option pricing model and the weighted average assumptions. No options were granted during the three months ended March 31, 2020. The following table summarizes the Black-Scholes option pricing model and the weighted average assumptions used:

 

 

 

Three Months

Ended

March 31,

2021

 

Weighted average risk-free interest rate

 

 

0.70

%

Expected dividend yield

 

 

0.00

%

Expected option term (in years)

 

 

6.08

 

Expected stock price volatility

 

 

72.65

%

 

Employee Stock Purchase Plan

On March 20, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on March 30, 2021. The ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 346,613 shares of the Company’s common stock. An annual increase in the number of shares of common stock reserved and available for issuance under the ESPP shall be equal to 1% of the number of shares of common stock outstanding on the immediately preceding December 31; and such lesser number of shares as determined by the Administrator as provided in the ESPP. As of March 31, 2021, no shares have been purchased by employees under the ESPP.

Note 10. Research License Agreements

During 2015, the Company entered into an exclusive patent license agreement (the “UT Austin License”) to license certain technologies and intellectual property rights from the University of Texas at Austin (the “University”), an entity affiliated with a director of the Company at the time of the agreement. The UT Austin License shall remain in effect until the expiration or abandonment of the last to expire technologies and intellectual property rights. The Company shall pay License Maintenance fees annually of $40 thousand. Additionally, the Company shall make additional milestone payments to the University upon meeting certain development milestones in the aggregate of $4.7 million upon meeting certain development milestones during the term of the UT Austin License. The Company will pay the University royalties as defined in the UT Austin License on any commercialized product sales related to the licensed technology in a percentage in the low single digits. The Company will also be responsible for reimbursing the University for certain patent-related costs incurred on its behalf.

In 2018, the Company acquired IPR&D on an Arrys’ immune-oncology candidate based on the intellectual property associated with Arrys’ AskAt License as part of the acquisition of Arrys. Total consideration allocated to the technology was $28.5 million and was recognized as research and development expense upon the acquisition. The AskAt License is intended to be used by the Company in its future development of therapeutic drug candidates for eventual clinical development and commercialization. The Company shall make additional milestone payments to AskAt upon meeting certain development milestones totaling $4 million, as well as certain sales event milestones ranging from $50 million to $250 million contingent on sales in a calendar year, during the term of the AskAt License. The Company will pay the AskAt royalties a percentage in the low single digits as defined in the AskAt License on any commercialized product sales related to the licensed technology.

10


Note 11. Leases

On July 21, 2020, the Company entered into an operating lease agreement for 20,752 square feet of office, lab and animal care facility space located in Boston, Massachusetts for the Company’s new corporate headquarters. The commencement date of the lease was February 19, 2021 and the lease term is 63 months. The lease provides a three-month free rent period, which commenced on the lease commencement date. The base rent at commencement is $145 thousand per month and escalates by 3% annually for total lease payments during the term of $9.3 million. The Company provided a letter of credit to secure their obligations under the lease in the initial amount of $0.9 million. This balance is included in other assets on the accompanying condensed consolidated balance sheets. The Company recognized a right of use asset of $7.5 million and an operating lease liability of $7.5 million upon the commencement of the lease.  

 

The future lease payments for the Company’s operating lease as of March 31, 2021, were as follows (in thousands):

 

Fiscal Year

 

Operating

Leases

 

2021 (excluding the three months ended March 31, 2021)

 

$

1,073

 

2022

 

 

1,774

 

2023

 

 

1,827

 

2024

 

 

1,882

 

2025

 

 

1,938

 

Thereafter

 

 

817

 

Total minimum lease payments

 

 

9,311

 

Less amounts representing interest or imputed interest

 

 

1,770

 

Present value of lease liabilities

 

$

7,541

 

 

Note 12. Commitments and Contingencies

The Company is also party to various agreements, principally relating to licensed technology, that require future payments relating to milestones not met at March 31, 2021 or royalties on future sales of specified products that have not yet occurred as of March 31, 2021.

Note 13. Related Party Transactions

The Company entered into several agreements with a director and an entity affiliated with a director:

 

1)

As discussed in Note 10 above, the Company has entered into a license agreement with the University, which was affiliated with a director of the Company at the time of the agreement.

The Company entered into several agreements with a director and an entity affiliated with a director:

 

1)

Certain entities affiliated with directors purchased shares in the IPO.

11


 

Note 14. Net Loss per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding during the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, convertible preferred stock, restricted common stock, restricted stock units and stock options are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore basic and diluted net loss per share were the same for all periods presented.

 

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive:

 

 

 

As of March 31,

 

 

 

2021

 

 

2020

 

Redeemable Convertible Preferred Stock

 

 

 

 

 

75,727,268

 

Options to purchase Common Stock

 

 

4,932,981

 

 

 

2,437,682

 

Total

 

 

4,932,981

 

 

 

78,164,950

 

 

12


 

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

You should read the following discussion and analysis of our financial condition and results of operations together with the “Selected Consolidated Financial Data” section of this Quarterly Report on Form 10-Q and the Prospectus for our initial public offering filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or SEC, on March 25, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties, such as statements of our plans, strategies, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a targeted oncology company focused on developing novel cancer therapies targeting key signaling pathways that drive the formation and spread of cancer. Our programs focus on key cancer driver pathways that are well-validated in scientific literature but lack approved or effective therapies and therefore have the potential to address high unmet medical needs. By leveraging our deep understanding of discovery chemistry, translational science, and patient-centric drug development, we have built a deep pipeline of wholly owned and partnered programs focused on genetically defined or biomarker-driven cancers, which enables us to target specific patient populations that we believe are most likely to respond to treatment with our product candidates. Since we commenced operations in 2016, we have discovered or developed five oncology programs that include four product candidates in either IND-enabling studies or clinical development.

Our lead targeted oncology product candidate, IK-930, is an oral small molecule inhibitor of the transcriptional enhanced associate domain, or TEAD, transcription factor in the Hippo signaling pathway. The Hippo pathway is widely accepted as a key and prevalent driver of cancer pathogenesis and is genetically altered in approximately 10% of all cancers, and such genetic alterations are generally associated with poor clinical outcomes. We intend to pursue clinical development of IK-930 across a wide range of tumor types with known Hippo pathway mutations, and plan to focus our initial development efforts on indications that provide the potential for rapid clinical development to achieve proof-of-concept, such as NF2 deficient mesothelioma and soft tissue sarcomas associated to YAPI/TAZ fusion gene. We intend to submit an Investigational New Drug application, or IND, to the U.S. Food and Drug Administration, or FDA, for IK-930 in the second half of 2021.

For our second targeted oncology program, we have discovered and plan to develop oral small molecule inhibitors of extracellular signal-related kinase 5, or ERK5, a downstream enzyme in the RAS signaling pathway, which have the potential to bring therapeutic benefit to cancer patients with a mutation in the kirsten rat sarcoma, or KRAS, gene, which is an oncogene implicated in many cancers. We anticipate nominating a development candidate for the ERK5 program and initiating IND-enabling studies in the second half of 2021 with the goal of submitting an IND in the second half of 2022.

In addition to our targeted oncology programs, we have additional product candidates designed to modulate the tumor microenvironment in specific patient populations by leveraging biomarker-driven patient enrichment strategies. Two of these product candidates, IK-175 and IK-412, are partnered with Bristol-Myers Squibb Company, or BMS, which we believe validates our ability to advance internally developed product candidates into clinical development using biomarker-driven patient enrichment strategies.

We were incorporated as a Delaware corporation on March 2, 2016, and our headquarters is located in Boston, Massachusetts. On December 3, 2019, we formally changed our name to Ikena Oncology, previously Kyn Therapeutics. Since our inception, we have devoted substantially all of our efforts to organizing and staffing our company, acquiring intellectual property, business planning, raising capital, conducting discovery, research and development activities, and providing general and administrative support for these operations. On March 30, 2021, we completed an IPO, in which we issued and sold 8,984,375 shares of our common stock at a public offering price of $16.00 per share, including 1,171,875 shares of common stock sold pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock, for aggregate gross proceeds of $143.8 million. We raised approximately $131.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by us. Upon the closing of the IPO, all of the outstanding shares of redeemable convertible preferred stock automatically converted into 23,678,568 shares of common stock. In connection with the closing of the IPO, we filed a Fifth Amended and Restated Certificate of Incorporation to change the authorized capital stock to 160,000,000 shares, of which 142,000,000 are designated as voting common stock, 8,000,000 are designated as non-voting common stock and 10,000,000 are designated as undesignated preferred stock, all with a par value of $0.001 per share.

To date, we have not had any products approved for sale and have not generated any revenue from product sales, and do not expect to do so for several years, if at all.

13


We have incurred significant net losses in every year since our inception and expect to continue to incur significant expenses and increasing net losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $9.7 million and $6.9 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $121.1 million. We anticipate that our expenses will increase significantly as we:

 

advance the development of our product candidate pipeline;

 

initiate and continue research and preclinical and clinical development of potential new product candidates;

 

maintain, expand and protect our intellectual property portfolio;

 

acquire or in-license additional product candidates and technologies;

 

expand our infrastructure and facilities to accommodate our growing employee base and ongoing development activities;

 

establish agreements with contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, in connection with our preclinical studies and clinical trials;

 

require the manufacture of larger quantities of our product candidates for clinical development and potential commercialization;

 

seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

 

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; and

 

add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and our transition to operating as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity instruments, debt financings, or other capital sources, which may include collaborations with other companies or other strategic transactions. We may be unable 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.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain marketing approval for our product candidates. The lengthy process of securing marketing approvals for new drugs requires the expenditure of substantial resources. Any delay or failure to obtain regulatory approvals would materially adversely affect the development efforts of our product candidates and our business overall. 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 revenue from 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.

If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

As of March 31, 2021, we had cash and cash equivalents of $281.0 million. We believe the existing cash and cash equivalents on hand as of March 31, 2021, will enable us to fund our operating expenses and capital expenditure requirements through 2023. To date, we have primarily financed our operations through proceeds from private placements of preferred stock prior to the completion of the IPO, payments from a collaboration agreement, related party revenue and completion of the IPO. We expect to incur substantial operating losses and negative cash flows from operations for the foreseeable future as we continue to invest significantly in research and development of our programs. Our belief with respect to our ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from our estimates, we may need to seek additional funding sooner that would otherwise be expected. There can be no assurance that we will be able to obtain additional funding on acceptable terms, if at all.

14


Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, which continues to spread throughout the United States and worldwide. The ultimate extent of the impact of the COVID-19 pandemic on our business, financial condition and results of operations is highly uncertain and will depend on future developments that cannot be predicted, including new information that may emerge concerning the severity of the COVID-19 pandemic and actions taken by government authorities and businesses to contain or prevent the further spread of COVID-19. For instance, a recurrence or continuation of COVID-19 cases could cause a more widespread or severe impact on commercial activity depending on where infection rates are highest. If we or any of the third parties with whom we engage were to experience any shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially negatively affected, which could have a material adverse impact on our business, results of operations and financial condition.

We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of our employees and their families and to reduce the spread of COVID-19. We have established a work-from-home policy for all employees, other than those performing or supporting business-critical operations, such as certain members of our laboratory and facilities staff. For those employees, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. We have also maintained efficient communication with our partners and clinical sites as the COVID-19 situation has progressed. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs. While we have experienced some delays in enrollment and site closures at certain of our third-party clinical trial sites, these delays have not had a material impact on our development timelines for our product candidates. We will continue to monitor developments as we address the disruptions and uncertainties relating to the COVID-19 pandemic. See “Risk Factors” for a discussion of the potential adverse impact of the COVID-19 pandemic on our business, financial condition and results of operations.

Components of our Results of Operations

Revenue

We have not generated any revenue from product sales and 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 and successful commercialization efforts, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

All of our revenue has been derived from research and development revenue under our BMS Collaboration Agreement.

Collaboration Agreement and Stock Purchase Agreement with BMS

In January 2019, we entered into the BMS Collaboration Agreement with Celgene Corporation (which was acquired by BMS in November 2019), pursuant to which BMS may elect in its sole discretion to exclusively license rights to develop and commercialize compounds (and products and diagnostic products containing such compounds) that modulate the activity of two collaboration targets, kynurenine and aryl hydrocarbon receptor, or AHR, excluding AHR agonists for inverse agonists, which we are developing as IK-175 and IK-412, respectively. On a program-by-program basis, through the completion of a Phase 1b clinical trial for each of IK-175 and IK-412, BMS has the exclusive license to develop, commercialize and manufacture the relevant product candidate worldwide. Concurrent with execution of the BMS Collaboration Agreement, we entered into a stock purchase agreement with Celgene Corporation (now BMS) in November 2019, or the Stock Purchase Agreement, pursuant to which we issued Celgene Corporation 14,545,450 shares of Series A-1 preferred stock.

BMS paid a total of $95.0 million in aggregate upfront consideration related to the BMS Collaboration Agreement and Stock Purchase Agreement. We are eligible to receive $50.0 million, in case of an exercise of its option with respect to IK-175, and $40.0 million, in case of an exercise of its option with respect to IK-412. If we do not complete a Phase 1b clinical trial by the end of the research term, we may elect to provide a data package to BMS upon which BMS may exercise the foregoing option for an additional $0.25 million fee. Upon the exercise of the delivery of each license, we become eligible to receive up to $265.0 million in regulatory milestones and $185.0 million in commercial milestones as well as a tiered royalties at rates ranging from the high single to low teen digits percentages based on worldwide annual net sales by BMS, subject to specified gross sale reductions.

Operating Expenses

Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.

15


Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research and development activities. These efforts and costs include external research costs, personnel costs, consultants, supplies, license fees and facility-related expenses. We expense research and development costs as incurred. These expenses include:

 

employee-related expenses, including salaries, related benefits and stock-based compensation expense, for employees engaged in research and development functions;

 

expenses incurred under agreements with CROs which are primarily engaged to support our clinical trials;

 

expenses incurred under agreements with CMOs, which are primarily engaged to provide drug substance and product for our preclinical research and development programs, nonclinical studies and other scientific development services;

 

the cost of acquiring and manufacturing preclinical study materials, including manufacturing registration and validation batches;

 

facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance;

 

acquisition of in-process research and development assets that have no alternative future use;

 

costs related to compliance with quality and regulatory requirements; and

 

payments made under third-party licensing agreements.

Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

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 expect that our research and development expenses will increase substantially in connection with our planned clinical development activities in the near term and in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of, or obtain regulatory approval for, any of our current or future product candidates. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

 

our ability to add and retain key research and development personnel;

 

our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates;

 

our successful enrollment in and completion of clinical trials, including our ability to generate positive data from any such trials;

 

the size and cost of any future clinical trials for existing or future product candidates in our pipeline;

 

the costs associated with the development of any additional programs we identify in-house or acquire through collaborations and other arrangements and the success of such collaborations;

 

the terms and timing of any additional collaborations, license or other arrangement, including the timing of any payments thereunder;

 

our ability to establish and maintain agreements and operate with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates are approved;

 

costs related to manufacturing of our product candidates or to account for any future changes in our manufacturing plans;

 

our ability to obtain and maintain patents, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates, both in the United States and internationally;

 

our ability to obtain and maintain third-party insurance coverage and adequate reimbursement for our product candidates, if and when approved;

 

the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;

 

effectively competing with other products if our product candidates are approved;

16


 

 

the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from the COVID-19 pandemic or similar public health crisis; and

 

our ability to maintain a continued acceptable safety profile for our therapies following approval.

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, auditing, tax services and insurance costs.

We expect that our general and administrative expenses will increase as our organization and headcount needed in the future to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses. Additionally, we expect to incur increased expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance costs, and investor and public relations costs.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

 

 

 

Three Months Ended

March 31,

 

 

Change

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

(in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development revenue under collaboration

   agreement

 

$

3,474

 

 

$

3,227

 

 

$

247

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,021

 

 

 

7,893

 

 

$

2,128

 

General and administrative

 

 

3,173

 

 

 

2,510

 

 

 

663

 

Total operating expenses

 

 

13,194

 

 

 

10,403

 

 

 

2,791

 

Loss from operations

 

 

(9,720

)

 

 

(7,176

)

 

 

(2,544

)

Other income

 

 

4

 

 

 

231

 

 

 

(227

)

Net loss

 

$

(9,716

)

 

$

(6,945

)

 

$

(2,771

)

 

Revenue

The research and development revenue under collaboration agreement of $3.5 million and $3.2 million for the three months ended March 31, 2021 and 2020, respectively, is related to the BMS Collaboration Agreement for the IK-175 and IK-412 programs which was executed in January 2019. The increase of $0.2 million was attributable to a net increase of program activities related to IK-175 and IK-412 during the three months ended March 31, 2021.

17


Research and Development Expenses

The following table summarizes our general and administrative expenses for each period presented:

 

 

 

Three Months Ended

March 31,

 

 

Change

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

(in thousands)

 

Direct research and development expenses by program:

 

 

 

 

 

 

 

 

 

 

 

 

IK-930

 

$

1,314

 

 

$

1,001

 

 

$

313

 

IK-175

 

 

1,391

 

 

 

1,901

 

 

 

(510

)

IK-412

 

 

1,187

 

 

 

209

 

 

 

978

 

IK-007

 

 

681

 

 

 

1,764

 

 

 

(1,083

)

Other discovery stage programs

 

 

1,968

 

 

 

305

 

 

 

1,663

 

Research and development personnel and overhead

   expenses

 

 

3,480

 

 

 

2,713

 

 

 

767

 

Total research and development expenses

 

$

10,021

 

 

$

7,893

 

 

$

2,128

 

 

Research and development expense was $10.0 million for the three months ended March 31, 2021, compared to $7.9 million for the three months ended March 31, 2020. Included within research and development personnel and overhead expenses is stock-based compensation expense of $0.4 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively. The increase in research and development expense was primarily attributable to the continuation of IND-enabling studies and manufacturing development costs for IK-930 , the continuation of IND-enabling studies and manufacturing development costs for IK-412 , and research activities for other discovery stage programs. In addition, research and development expenses related to personnel and overhead expenses increased due to an increase in headcount. This increase in research and development expenses was offset by a decrease in expense attributable to drug manufacturing of IK-175 and a decrease in clinical activities for IK-007.

General and Administrative Expenses

General and administrative expense was $3.2 million for the three months ended March 31, 2021, as compared to $2.5 million for the three months ended March 31, 2020. General and administrative expense includes $0.5 million and $0.2 million of stock-based compensation expense for the three months ended March 31, 2021 and 2020, respectively. The increase was primarily attributable to an increase in compensation expense due to an increase in headcount, as well as general increases in audit, legal and consulting expenses to support our transition to becoming a public company.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever. To date, we have financed our operations primarily through private placements of preferred stock, from upfront payments from the BMS Collaboration Agreement, and, most recently, common stock in our IPO. We also obtained $11.3 million in cash from our acquisition of Arrys Therapeutics, Inc., or Arrys, and $3.7 million in cash from our acquisition of Amplify. As of March 31, 2021, we had cash and cash equivalents of $281.0 million.

In March 2021, we completed our IPO in which we received net proceeds, inclusive of the exercise by the underwriters of their option of purchase additional shares, of approximately $131.3 million, after deducting underwriting discounts and commissions and estimated offering expenses.

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Cash Flows

The following table summarizes our sources and uses of cash for the three months ended March 31, 2021 and 2020:

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Net cash provided (used in) by operating activities

 

$

(13,170

)

 

$

(9,874

)

Net cash (used in) provided by investing activities

 

 

(839

)

 

 

(117

)

Net cash provided by financing activities

 

 

132,528