IDEAYA Biosciences, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. IDEAYA is a clinical-stage oncology precision-medicine company with no products approved for sale and no commercial product revenue. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $9.0m | — | $9.0m | — |
| Research and development expense | $10.0m | $8.9m | $27.6m | $25.8m |
| General and administrative expense | $3.9m | $2.7m | $11.4m | $7.2m |
| Operating loss | $5.0m | $11.6m | $30.1m | $33.0m |
| Net loss | $4.9m | $11.0m | $29.4m | $31.2m |
| Basic and diluted loss per share | $0.17 | $0.54 | $1.26 | $3.15 |
Revenue was collaboration revenue under the GSK agreement, not product sales. Gross margin is not separately reported. Q3 operating loss was 56.9% of collaboration revenue; this is not a reported gross-margin measure.
- Balance sheet at September 30: Cash and equivalents of $81.2m; short- and long-term marketable securities of $207.6m; total cash, equivalents and securities of $288.8m. Total assets were $301.4m and stockholders’ equity $195.4m.
- Liabilities: Total liabilities were $106.0m, including $91.0m of current and long-term contract liabilities and $7.1m of operating lease liabilities. The filing reports no borrowings or other financial debt.
- Cash flows, nine months: Operating cash flow was positive $67.1m, investing cash flow was negative $141.7m, and financing cash flow was positive $121.8m. Operating cash flow was boosted by the $91.0m increase in contract liabilities from GSK’s upfront payment; it should not be read as cash generation from profitable operations.
- Management said existing cash, equivalents and marketable securities were expected to fund planned operations for at least 12 months from issuance of the statements. The company had an accumulated deficit of $121.9m and expected losses to continue and increase.
Changes versus the prior comparable period
- Q3 revenue rose from zero to $9.0m following commencement of the GSK collaboration; nine-month revenue likewise rose from zero to $9.0m.
- Q3 net loss narrowed to $4.9m from $11.0m, and nine-month net loss narrowed to $29.4m from $31.2m. Collaboration revenue more than offset higher operating expenses, while lower interest yields reduced interest income.
- R&D expense increased 12% in Q3 and 7% for the nine-month period, mainly reflecting CRO and contractor costs. G&A increased 46% in Q3 and 59% year to date, including higher personnel, public-company, insurance and professional costs.
- Cash and equivalents plus marketable securities increased from $100.5m at December 31, 2019 to $288.8m at September 30, 2020. The increase reflected the GSK upfront payment and equity financings, alongside investment of cash in marketable securities.
- Shares outstanding increased from 20.34m at year-end 2019 to 29.07m at September 30, 2020, principally from the follow-on offering and GSK-affiliate private placement.
Outlook, business developments and risks
- GSK collaboration: GSK paid a $100m upfront fee in July. IDEAYA recognized $9.0m of collaboration revenue through September and reported $91.0m of contract liabilities. The agreement covers MAT2A, POLQ and WRN programs. Potential option, milestone, profit-share and royalty amounts are contingent on future development, regulatory, commercial or sales events and are not guaranteed.
- GSK has an option to license MAT2A after receiving a Phase 1 monotherapy data package; exercise would trigger a $50m payment. IDEAYA’s stated potential MAT2A, POLQ and WRN milestones are substantial but depend on successful development and applicable agreement terms. GSK can terminate the agreement or programs on notice.
- Pipeline: IDEAYA targeted an IDE397 IND submission in December 2020, subject to toxicology and CMC requirements, and anticipated a Phase 1 monotherapy trial in the first half of 2021. PARG and POLQ development-candidate selection was targeted for 2021. The filing contains an inconsistent statement elsewhere suggesting IDE397 clinical initiation in the first half of 2020; the timeline should be verified.
- IDE196: The company continued a Phase 1/2 trial and planned combination studies with Pfizer-supplied binimetinib and crizotinib. In a small preliminary skin-melanoma group, the filing reported one confirmed partial response among four evaluable patients and a 100% disease-control rate as of August 1, 2020; the company was expanding enrollment. Interim data were anticipated in 2021. These early findings are not conclusive and may change with additional data.
- COVID-19 and execution: Management reported no material supply-chain or development-schedule impact to date, but warned that pandemic-related site restrictions, patient monitoring and enrollment, manufacturing or supply disruptions, and regulatory delays could affect programs. The actual impact was uncertain.
- Other risks: Drug development and regulatory approval are uncertain; IDEAYA relies on third parties for clinical trials and manufacturing and depends on GSK for partnered programs and Pfizer for combination-drug supply. The company may need substantial additional capital; financing could dilute shareholders or be unavailable on acceptable terms. No material litigation was reported. Management concluded disclosure controls were effective as of September 30, 2020.
- An ATM facility allowing up to $50m of share sales was activated in August; no shares were sold under it during Q3.
Important facts for investors to verify
- Reconcile the IDE397 timing discrepancy and confirm subsequent IND and trial milestones.
- Track cash burn excluding the GSK upfront payment and other collaboration-related timing effects; assess whether the stated runway remains current.
- Review the GSK contract-liability revenue recognition, remaining performance obligations, cost reimbursements and conditions for the MAT2A option and future payments.
- Evaluate full, updated IDE196 trial data, patient counts and COVID-19-related enrollment or monitoring effects; distinguish preliminary results from confirmed outcomes.
- Monitor dilution from equity compensation, the ATM facility and any future financing, as well as GSK’s decisions to exercise its option or continue partnered programs.