Nuvation Bio Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Filed August 12, 2021. Nuvation Bio is a clinical-stage oncology biopharmaceutical company with no approved products and no revenue to date.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $14.0m | $7.3m | $29.9m | $14.6m |
| General and administrative expense | $6.4m | $1.7m | $11.0m | $3.6m |
| Net loss | $19.3m | $8.6m | $39.7m | $17.3m |
| Net loss per share, basic and diluted | $0.09 | $0.10 | $0.21 | $0.20 |
At June 30, cash and cash equivalents were $449.5m and available-for-sale marketable securities were $357.1m, totaling $806.6m in cash, cash equivalents and securities. Current assets were $813.1m; current liabilities were $10.1m. Total liabilities were $25.3m, including a $15.1m warrant liability. The balance sheet reports no conventional debt.
For the first half, operating cash use was $31.6m, investing cash use was $173.7m (primarily purchases of marketable securities), and financing provided $625.0m, mostly from the merger. Cash increased by $419.8m from year-end 2020. Gross margin is not applicable because the company had no revenue.
Changes versus the prior comparable period
- Q2 operating expenses increased $11.4m year over year; first-half operating expenses increased $22.7m. Management attributed the increases mainly to greater research, manufacturing and clinical-development spending, increased headcount and stock-based compensation, and higher public-company costs.
- First-half R&D included $3.8m of stock issued as consideration for acquired in-process research and development. First-half stock-based compensation was $3.7m, versus $0.7m in 2020.
- The February 10, 2021 business combination with Panacea and related PIPE and forward-purchase financing materially strengthened liquidity. The merger was accounted for as a reverse recapitalization, with Legacy Nuvation Bio as the accounting predecessor.
- The reported loss per share improved for Q2 but worsened for the six-month period; weighted-average shares increased substantially following the merger and financing.
Outlook, risks and unusual items
- Management expects continued operating losses and negative operating cash flows. It believes available cash, cash equivalents and marketable securities will fund commitments for at least 12 months after issuance of the financial statements; additional funding may be needed to advance development and commercialization plans.
- NUV-422 is in a Phase 1/2 trial. The company amended the protocol to add recurrent glioblastoma, HR-positive/HER2-negative metastatic breast cancer, and metastatic castration-resistant prostate cancer, and expects top-line Phase 1 data in 2022. It plans multiple other Phase 1 trials through 2022 and up to five additional IND submissions over six years.
- Key risks include clinical and regulatory uncertainty, the possibility of trial delays or failure, reliance on third-party research, clinical and manufacturing providers, limited patent protection, competition, and the potential impact of COVID-19 on trials, suppliers and operations. The company said COVID-19 had not materially affected operations to date, but future impact remained uncertain.
- Warrants are liability-classified and valued using Level 3 inputs; fair-value changes affect earnings. The company recorded a $0.5m warrant fair-value gain in Q2 and a $0.2m gain for the first half.
- No significant pending legal proceedings were reported. Management said disclosure controls were effective at June 30, 2021 and that a predecessor-company weakness in accounting for complex instruments had been remediated following the merger.
Important facts for investors to verify
- Progress, enrollment, safety and timing of NUV-422 trials, including the expected 2022 Phase 1 data.
- Cash burn and investment spending relative to the $806.6m liquidity balance, and whether management’s funding horizon remains achievable as programs expand.
- Drivers and sustainability of rising R&D, G&A and stock-based compensation costs.
- Warrant valuation assumptions and potential earnings volatility, plus dilution from outstanding warrants, options and equity-plan reserves.
- Reliance on external research and manufacturing providers, intellectual-property position, and any effect of COVID-19 or other disruptions on development timelines.