Black Diamond Therapeutics, Inc. — Q3 2020 Form 10-Q
Business context and reporting period
Unaudited results cover the three and nine months ended September 30, 2020; balance-sheet comparisons are with December 31, 2019. Black Diamond is an early-stage precision oncology company developing small-molecule therapies using its Mutation-Allostery-Pharmacology (MAP) platform. It has no approved products and has generated no revenue.
Lead candidate BDTX-189 was in the Phase 1 portion of the MasterKey-01 Phase 1/2 trial. The FDA granted it Fast Track designation in July 2020 for specified solid tumors with HER2 or EGFR/HER2 mutations and no satisfactory treatment options.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $12.9m | $5.6m | $30.5m | $14.3m |
| General and administrative expense | $5.6m | $2.5m | $15.9m | $4.7m |
| Total operating expense | $18.5m | $8.1m | $46.4m | $19.0m |
| Net loss | $17.9m | $9.3m | $44.6m | $25.4m |
| Net loss per share, basic and diluted | $0.50 | $4.50 | $1.42 | $12.36 |
At September 30, 2020, cash and cash equivalents were $56.2m and short-term investments were $276.9m, totaling $333.1m; restricted cash was an additional $1.2m. Total assets were $346.4m, total liabilities $19.1m, and accumulated deficit $95.6m. Liabilities included $8.7m of operating lease obligations; the filing reports no borrowings in the presented balance-sheet liabilities.
For the first nine months, operating cash use was $36.4m, investing cash use was $275.0m (primarily investment purchases), and financing provided $214.1m, principally IPO proceeds. Cash, cash equivalents and restricted cash ended at $57.4m. Gross margin is not applicable because the company had no revenue.
Material changes versus the prior comparable period
- Q3 operating expenses increased $10.3m year over year; R&D rose $7.3m and G&A rose $3.0m. Management attributed the increases primarily to higher headcount and external development costs, as well as public-company legal and professional expenses.
- Nine-month net loss increased $19.2m year over year. Higher operating expenses were partly offset in the comparison by $8.2m of improved net other income, including investment interest and the absence of prior-year derivative-liability remeasurement losses.
- The February 2020 IPO generated $212.1m in net proceeds. Preferred stock converted into common stock at closing; the company reported 35.96m common shares outstanding at September 30, 2020.
- Investments increased from none at year-end 2019 to $276.9m at September 30, 2020. The company also recognized operating lease assets and liabilities following adoption of the new lease accounting standard and entry into a larger Cambridge office lease.
Outlook, risks and unusual items
Management estimated that cash, cash equivalents and investments would fund operating expenses and capital requirements into 2023, based on assumptions that could prove inaccurate. It expected losses and expenses to rise as clinical development, discovery programs, hiring, facilities and public-company costs expand. Management expected to complete the Phase 1 portion of the BDTX-189 trial in the first half of 2021; enrollment, site access and trial timelines remained exposed to COVID-19 disruption.
- Key risks include BDTX-189 clinical safety and efficacy, enrollment of patients with uncommon target mutations, acceptance of the tumor-agnostic strategy by regulators, companion-diagnostic development, third-party manufacturing and CRO execution, competition, and the need for future capital.
- The company stated it did not own or in-license any issued patents covering its candidates or technology; it owned one PCT application covering BDTX-189 that might not issue as a patent.
- Management concluded disclosure controls were ineffective because material weaknesses in financial-reporting controls remained unremediated. Weaknesses involved accounting expertise and segregation of duties; remediation efforts included an ERP system and strengthened processes, but effectiveness had not yet been demonstrated over a sufficient period.
- The filing reported no material legal proceedings and no material COVID-19 business disruption or asset impairment through issuance, while warning that future effects remained uncertain.
Important facts for investors to verify
- Whether the BDTX-189 Phase 1 trial remains on track and what enrollment, safety, dose-finding and efficacy updates show.
- Whether the expected funding runway into 2023 remains supportable as R&D spending, hiring and lease costs increase.
- Progress and scope of remediation of the material weaknesses and whether disclosure controls become effective.
- Status of BDTX-189 patent filings, national-stage applications and resulting intellectual-property protection.
- Potential COVID-19, patient-enrollment, clinical-site, CRO and manufacturing impacts on development timelines.