Pyxis Oncology, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. The unaudited results are for a preclinical-stage oncology company with no product revenue. Unless otherwise stated, financial amounts are in U.S. dollars.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $7.8 million | $2.4 million | $43.8 million | $5.9 million |
| General and administrative expense | $3.8 million | $0.8 million | $9.5 million | $2.4 million |
| Net loss | $14.2 million | $3.2 million | $59.1 million | $8.2 million |
| Net loss per common share, basic and diluted | $8.96 | $2.93 | $40.27 | $8.43 |
Cash and liquidity: Cash and cash equivalents were $133.5 million at September 30, 2021, versus $8.1 million at December 31, 2020. Operating cash used in the first nine months was $23.2 million; investing cash used was $0.6 million; financing provided $149.1 million, principally from Series B preferred stock proceeds. The company reported an accumulated deficit of $74.9 million.
Post-quarter financing: In October 2021, the company completed its IPO, selling 10.5 million shares at $16 per share for approximately $152.2 million in net proceeds. Management estimated the IPO proceeds and September cash balance would fund operating and capital requirements into the second half of 2024, subject to assumptions and potential changes in plans.
Debt and margins: The filing does not report borrowings or a debt balance. With no revenue, profit margins are not meaningful. The filing reports no product sales or other revenue to date.
Material changes versus prior comparable periods
- Q3 net loss increased by $11.0 million year over year; nine-month net loss increased by $50.9 million.
- Nine-month R&D expense rose by $37.9 million, reflecting licensing and development costs, including a $25.0 million Pfizer license expense (partly settled with preferred shares), a $9.0 million LegoChem payment recorded as R&D in the notes, and increased cell-line development and other program spending. The MD&A separately attributes $4.4 million of the increase to LegoChem; investors should reconcile this detail with the notes.
- Nine-month G&A expense increased by $7.1 million, primarily from higher personnel, stock-based compensation, professional fees and costs associated with becoming a public company.
- The company raised $151.6 million net through Series B preferred stock in March 2021. The preferred shares converted into common stock in connection with the IPO; the company also effected a 1-for-6.359 reverse stock split on October 1, 2021.
Outlook, commentary and risks
- PYX-201 and PYX-202 were in IND-enabling studies; management anticipated IND submissions by mid-2022. PYX-203 was in preclinical development, with an IND submission anticipated by 2023. These are stated plans, not assurances.
- All product candidates remained preclinical, and none had been tested in humans. The company expects continued operating losses and substantial R&D spending; profitability depends on successful development, regulatory authorization and commercialization.
- Management identified clinical and preclinical failure or delay, manufacturing and third-party supplier dependence, regulatory uncertainty, competition, intellectual-property and licensing obligations, and the need for future capital as significant risks. COVID-19 had not caused material disruption to date, but could affect facilities, research, suppliers and future trials.
- A new Boston office and laboratory lease signed September 29, 2021 runs through December 2032, with $33.8 million in estimated undiscounted base rent; possession was expected in Q2 2022. The existing leases had $0.3 million of remaining obligations.
- A LegoChem-related derivative liability was valued at $9.2 million at quarter-end; its fair-value remeasurement produced $5.8 million of expense over nine months and $2.6 million in Q3. The liability relates to a potential $9.6 million extra milestone payment triggered by specified events, including an IPO pricing or offer.
- Management stated disclosure controls and procedures were effective at the reasonable-assurance level. No material legal proceedings were reported.
Important facts for investors to verify
- Whether the planned IND timelines for PYX-201, PYX-202 and PYX-203 remain achievable, and what development milestones or delays have since occurred.
- Cash burn, subsequent spending and whether the stated runway into the second half of 2024 remains valid under current operating plans.
- The composition and timing of the $9.2 million derivative liability, potential payment triggers, and the apparent difference in LegoChem expense descriptions between the notes and MD&A.
- The terms and potential financial impact of contingent license milestones, royalties and sublicensing payments, including up to $660 million under the Pfizer agreement and $284.5 million under the LegoChem agreement.
- The cost, timing and operational implications of the long-term Boston lease, and the company’s dependence on third-party manufacturers and suppliers.