Nuvation Bio Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet amounts are as of March 31, 2022. Comparative results are for Q1 2021. Amounts below are in U.S. dollars.
Business context
Nuvation Bio is a clinical-stage oncology biopharmaceutical company. It has no approved products and has not generated revenue. Its lead candidate, NUV-422, is in a Phase 1/2 study; the company began a Phase 1 trial of NUV-868 in March 2022. It is also developing candidates using its Drug-Drug Conjugate platform.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $20.7 million | $15.9 million |
| General and administrative expense | $7.5 million | $4.6 million |
| Total operating expenses / operating loss | $28.2 million | $20.5 million |
| Other income, net | $6.9 million | $0.1 million |
| Net loss | $21.3 million | $20.4 million |
| Net loss per share, basic and diluted | $0.10 | $0.12 |
| Cash used in operating activities | $24.9 million | $14.7 million |
With no revenue, gross margin is not meaningful. Q1 2022 comprehensive loss was $26.3 million, including $5.0 million of after-tax unrealized losses on available-for-sale securities.
At March 31, 2022, cash and cash equivalents were $106.2 million and marketable securities were $631.5 million; together with interest receivable, reported cash, cash equivalents and marketable securities totaled $737.7 million. Total assets were $751.8 million, total liabilities $28.2 million, and stockholders’ equity $723.6 million. The balance sheet reports no conventional borrowings; liabilities include $2.8 million of operating lease obligations and a $4.7 million warrant liability. A $4.0 million advance received from a broker appears in current liabilities.
Cash and cash equivalents declined $26.2 million during the quarter. Management said existing cash, cash equivalents and marketable securities were expected to fund commitments for at least 12 months after issuance of the financial statements. The company expects ongoing operating losses and negative operating cash flows.
Changes versus the prior comparable period
- Operating expenses rose $7.7 million, with R&D up $4.9 million and G&A up $2.9 million. Management attributed the R&D increase mainly to third-party research and manufacturing costs and higher personnel costs, partly offset by the absence of $3.7 million of prior-year stock issued for acquired in-process R&D.
- G&A growth reflected higher personnel, insurance, legal and professional costs, partly offset by lower taxes.
- Net loss increased by $0.9 million despite higher operating expenses. Other income improved by $6.8 million, principally because a decrease in the fair value of warrant liabilities generated a $6.3 million noncash gain in Q1 2022, compared with a small warrant-related expense in Q1 2021.
- Operating cash use increased by $10.2 million. Q1 2021 financing included $625.0 million of net merger proceeds; Q1 2022 financing instead included a $4.0 million broker advance and $0.3 million from option exercises.
- Marketable securities had $6.3 million of unrealized losses at quarter-end, primarily attributed by management to interest-rate changes. The company said it did not consider these losses impairments.
Outlook, risks and unusual items
- Management expects expenses and operating losses to increase as it advances clinical and preclinical programs, expands trials, manufactures clinical supplies and operates as a public company. It did not provide specific financial guidance.
- NUV-422 additional trials and trial expansion were planned for 2022 following selection of a recommended Phase 2 dose. NUV-868’s Phase 1 trial began in March 2022; the company intended to nominate a DDC clinical development candidate by year-end 2022.
- The company has no commercially approved products and will need substantial funding for development and potential commercialization. It said future capital needs depend on clinical progress, costs, regulatory review and other factors; financing may dilute shareholders or require concessions of rights.
- Key risks include clinical and regulatory uncertainty, patient-enrollment delays, reliance on third-party research organizations and manufacturers, competition, intellectual-property challenges, and possible COVID-19-related disruption. Management said COVID-19 had not materially affected operations to date, but future impacts remained uncertain.
- The company reported no pending significant legal proceedings expected by management to materially adversely affect its financial position, and no off-balance-sheet arrangements. It maintained a $0.5 million standby letter of credit for its New York lease.
- Warrants are liability-classified and remeasured each quarter, so fair-value changes can materially affect reported earnings without representing operating cash flow. Disclosure controls were reported effective as of March 31, 2022, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether the stated 12-month liquidity runway remains adequate as clinical, manufacturing and operating costs rise; the filing does not establish a longer runway.
- Progress, safety, enrollment and timing for NUV-422 and NUV-868 trials, including whether planned NUV-422 expansions and the DDC candidate nomination occur.
- How much reported earnings are affected by noncash warrant remeasurement versus underlying operating costs and cash burn.
- The value and liquidity of the investment portfolio, including sensitivity to interest rates and the duration of unrealized losses.
- Potential dilution from outstanding options, warrants and equity-plan share reserves, as well as the governance implications of the dual-class share structure.