Black Diamond Therapeutics, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; comparative period is Q1 2019. The company is a clinical-stage precision oncology biotechnology business developing tumor-agnostic small-molecule therapies using its Mutation-Allostery-Pharmacology (MAP) platform. It had no approved products and generated no revenue.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $7.4 million | $3.0 million |
| General and administrative expense | $5.5 million | $0.8 million |
| Total operating expenses | $12.9 million | $3.8 million |
| Net loss | $12.1 million | $3.8 million |
| Basic and diluted loss per share | $0.51 | $1.87 |
| Net cash used in operating activities | $11.3 million | $6.9 million |
| Cash and cash equivalents at period-end | $357.2 million | $154.7 million at Dec. 31, 2019 |
There were no product-sales margins to report. Interest income was $0.7 million, versus less than $0.1 million in Q1 2019. The filing presents no borrowings; it reports operating lease liabilities of $0.4 million in total at March 31, 2020. Current assets were $362.1 million and current liabilities were $7.3 million.
Material changes and liquidity
- Expenses rose $9.0 million year over year, primarily from increased headcount and external development costs for the MAP platform and product candidates, plus public-company preparation, legal and professional costs.
- The February 3, 2020 IPO sold 12.2 million shares at $19.00 per share, generating $231.3 million gross and $212.1 million net proceeds as described in the filing. Preferred stock converted into 21.5 million common shares. The company reported $213.8 million of financing cash flow for the quarter.
- Operating cash use increased from $6.9 million to $11.3 million. The company reported no investing cash use in Q1 2020.
- Management said cash and cash equivalents were expected to fund operating expenses and capital requirements into 2023, based on assumptions that could prove inaccurate. The company expects losses and expenses to increase as development advances and public-company costs continue.
Outlook, risks and notable items
- BDTX-189 was in the Phase 1 portion of the MasterKey-01 trial; management expected that portion to finish in the first half of 2021. COVID-19 remained a risk to enrollment, clinical-site operations, research timelines and third-party supply; the company had reduced lab presence and relied more on outside providers.
- Key risks include clinical and regulatory uncertainty, patient recruitment, companion-diagnostic development, dependence on third-party research and manufacturing, competition, and the possibility of needing additional capital. Future financing could dilute shareholders or require concessions on product or technology rights.
- Disclosure controls were assessed as ineffective because material weaknesses in financial-reporting controls remained unremediated at March 31, 2020. The company cited insufficient accounting resources and inadequate segregation of duties; remediation work included strengthening procedures and selecting an enterprise resource planning system.
- The company reported no material legal proceedings. Related-party service fees to Ridgeline were $1.9 million in Q1 2020; $1.0 million was due to the related party at quarter-end. The services arrangement was amended in March 2020 to a more limited consulting relationship.
- The company adopted lease-accounting guidance in January 2020, recording a right-of-use asset and lease liabilities; it reported no material effect on results or cash flows.
Investor verification points
- Reconcile the IPO proceeds and issuance costs across the reported $212.1 million net proceeds and $213.8 million financing cash flow.
- Monitor cash burn against management’s “into 2023” runway estimate and the assumptions supporting it.
- Track BDTX-189 enrollment, COVID-19-related trial or research delays, and the stated Phase 1 completion timing.
- Assess whether the company remediates its material weaknesses and establishes effective financial-reporting controls.
- Review related-party fees and the transition of research services from Ridgeline to internal teams and other providers.