Cullinan Oncology, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; filed August 10, 2023. The filing identifies the registrant as Cullinan Oncology, Inc. It is a clinical-stage oncology company with no approved products and no product-sales revenue.
Financial results and liquidity
| Metric | Q2 2023 | Six months 2023 | Comparable 2022 period |
|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue reported |
| Research and development expense | $27.4 million | $79.5 million | $26.4 million and $50.9 million |
| General and administrative expense | $10.2 million | $20.9 million | $10.7 million and $18.8 million |
| Net income (loss) | $(32.2) million | $(90.4) million | $174.1 million and $161.2 million |
| Net cash used in operating activities | Not separately stated | $(82.0) million | $(47.3) million |
Margins are not meaningful for this pre-revenue company. Prior-year profits included a $276.8 million gain on the sale of Cullinan Pearl, which held rights to zipalertinib outside specified Asian territories. That one-time gain explains most of the sharp year-over-year change in reported earnings.
At June 30, 2023, cash and cash equivalents were $141.8 million, short-term investments $350.0 million, and long-term investments $18.6 million. The company also reported interest receivable within current assets; it stated that cash, cash equivalents and short-term investments totaled $491.8 million, with long-term investments and interest receivable of $20.3 million. Total assets were $522.0 million and stockholders’ equity $499.6 million. Total liabilities were $22.4 million, including operating lease liabilities; no material conventional borrowing balance is identified, though accrued liabilities included $1.9 million for a convertible note and accrued interest.
Management said available cash and investments were expected to fund operations for at least 12 months from issuance of the financial statements, while cautioning that estimates could prove wrong. The company has no commercial revenue and expects continued operating losses.
Changes, financing and key developments
- Six-month R&D expense rose $28.5 million year over year, mainly due to the $25.0 million upfront fee to license CLN-418 and higher clinical and personnel costs. Q2 R&D increased $1.0 million.
- Six-month G&A expense increased $2.1 million, reflecting personnel, professional fees, equity compensation, occupancy and insurance costs, partly offset by nonrecurring 2022 sale-related expenses.
- Operating cash use increased to $82.0 million from $47.3 million in the first half of 2022. Cash and cash equivalents declined $14.3 million during the first half of 2023.
- The company sold approximately 3.3 million shares through its at-the-market program in Q2, receiving $38.4 million net. It had $85.6 million of capacity remaining under the $125.0 million program at quarter-end.
- In January, holders exchanged 6.5 million common shares for 647,500 preferred shares, each convertible into ten common shares subject to ownership limits. The filing reports 42.7 million common shares and 647,500 preferred shares outstanding at June 30.
Outlook, programs and risks
- Zipalertinib is being co-developed with Taiho: the companies share development costs equally, and Cullinan may co-commercialize it in the U.S. Cullinan is eligible for up to $130 million in regulatory milestones under the prior sale agreement. The program includes a pivotal Phase 2b study and a global Phase 3 study with chemotherapy.
- For CLN-619, the company reported early Phase 1 monotherapy activity: among 22 evaluable patients receiving doses above 1 mg/kg, there was one confirmed complete response, two confirmed partial responses and seven cases of stable disease. No dose-limiting toxicities were reported up to the highest dose tested. Expansion cohorts in endometrial and cervical cancers had begun.
- CLN-418 was licensed for U.S. development, manufacturing and commercialization for a $25.0 million upfront payment; Harbour may receive development and regulatory milestones, sales milestones and royalties. Initial clinical data were expected in 2024.
- The company anticipated initiating a Phase 1 study of CLN-617 in the second half of 2023. It reported that the first patient in the CLN-978 Phase 1 study was dosed in August 2023, after quarter-end.
- Principal risks include clinical and regulatory uncertainty, patient enrollment and trial costs or delays, reliance on third-party manufacturers and research organizations, intellectual-property protection, and the need for additional financing. Future equity financing could dilute shareholders; other funding could require granting rights to programs or technology.
- Potential collaboration milestone and royalty payments are contingent on future events and were not recorded as liabilities. The company reported no material legal proceedings and stated disclosure controls were effective.
Investor facts to verify
- Whether cash burn and clinical spending remain consistent with the stated runway, and whether further financing is needed.
- Enrollment, safety and efficacy updates for zipalertinib and the other clinical programs, especially the early CLN-619 results and planned CLN-418 data.
- Milestone conditions and economics under the Taiho and Harbour agreements, including zipalertinib cost-sharing and potential payments.
- Potential dilution from preferred-stock conversion and future use of the remaining ATM capacity.
- That 2022 comparisons include the one-time Cullinan Pearl sale gain and related tax expense, rather than recurring operating performance.