Filing and business context
This is Leap Therapeutics, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2019—not a filing identified in its text as Cypherpunk Technologies Inc. Leap is a clinical-stage biopharmaceutical company developing DKN-01 and TRX518; neither candidate was FDA-approved, and the company reported no product revenue.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $6.79 million | $4.23 million |
| General and administrative expense | $2.01 million | $2.11 million |
| Operating loss | $8.80 million | $6.34 million |
| Net loss | $8.60 million | $10.62 million |
| Net loss attributable to common stockholders / diluted and basic loss per share | $8.96 million / $0.47 | $10.62 million / $0.85 |
| Cash used in operating activities | $6.87 million | $5.48 million |
| Cash and cash equivalents, quarter-end | $21.71 million | $35.38 million |
Cash increased $5.43 million during Q1, primarily because the February 2019 public offering generated approximately $12.12 million net proceeds; operating cash use was $6.87 million. The filing reports no investing cash flows. There are no product margins to report. At March 31, total liabilities were $9.02 million, including $1.57 million of operating lease liabilities; the company reported no conventional borrowings in the presented balance sheet. Current assets were $22.71 million and current liabilities $8.19 million. Accumulated deficit was $170.87 million.
Material changes and unusual items
- R&D expense rose $2.56 million year over year, mainly from increased clinical-trial costs associated with enrollment, consulting, and personnel; DKN-01 spending increased $2.18 million and TRX518 spending $0.38 million.
- Net loss narrowed year over year, partly because Q1 2018 included a $4.85 million noncash loss from remeasuring warrant liabilities. After adopting ASU 2017-11, Leap reclassified the 2017 warrants to equity; the February offering triggered repricing and a $0.36 million deemed dividend, included in the loss attributable to common stockholders.
- The February offering issued 7.56 million shares and warrants to buy an additional 7.56 million shares at $1.95 each. Common shares outstanding were 22.26 million at quarter-end, versus 14.70 million at December 31, 2018.
- Adoption of the new lease standard brought a right-of-use asset and lease liability onto the balance sheet; quarter-end balances were $1.58 million and $1.57 million, respectively.
Outlook, risks, and contingencies
Management expects operating losses and R&D spending to continue and expects expenses to increase as it advances its programs. It gave no quantified earnings or revenue guidance and said the timing and cost of development, approvals, and any future revenue cannot be reasonably estimated. Management concluded substantial doubt exists about Leap’s ability to continue as a going concern for one year after issuance of the financial statements. The company plans to seek additional equity or other funding, government support, or collaboration and licensing cost-sharing; without funding it may delay, reduce, or eliminate trials and R&D programs.
Clinical updates included completed enrollment in a DKN-01/pembrolizumab esophagogastric study, ongoing enrollment in a gynecological cancer study and TRX518/pembrolizumab expansion cohort, and initial enrollment in a DKN-01 prostate cancer study. The reported response and disease-control observations are preliminary clinical findings, not evidence of approval or commercial success. Key risks include clinical and regulatory failure or delay, financing and dilution, competition, and manufacturing and commercialization uncertainty. A TRX518 patent covering combination treatment was revoked by the EPO Opposition Division; Leap appealed, with grounds due May 23, 2019. A separate TRX518 patent had narrowed claims maintained by the EPO and was also under appeal. The filing reported no other legal proceedings and no noncancelable manufacturing commitments at quarter-end.
Important facts for investors to verify
- Confirm the issuer identity: the filing’s registrant is Leap Therapeutics, Inc. (Nasdaq: LPTX), despite the request metadata naming another company.
- Assess the cash runway and financing needs in light of $21.71 million quarter-end cash, $6.87 million quarterly operating cash use, and management’s going-concern warning.
- Review potential dilution from the offering warrants and other outstanding warrants and options; the filing lists 10.37 million warrants and 2.91 million options outstanding.
- Track clinical-trial progress and the EPO patent appeals, including the stated May 23, 2019 appeal-ground deadline.