Nuvation Bio Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited results; amounts below are in U.S. dollars. Nuvation Bio is a clinical-stage oncology company and reported no product, collaboration, or other revenue.
Business context and outlook
The company is developing oncology drug candidates, including small molecules and candidates using its Drug-Drug Conjugate platform. Its lead candidate, NUV-422, entered a Phase 1/2 trial for high-grade glioma in December 2020. The trial was expanded to additional cancer indications; management expected to report top-line Phase 1 data in 2022, initiate multiple other Phase 1 trials through 2022, and submit up to five additional IND applications over six years.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $17.1m | $8.6m | $47.0m | $23.3m |
| General and administrative expense | $5.7m | $2.9m | $16.7m | $6.5m |
| Operating loss | $22.8m | $11.5m | $63.7m | $29.8m |
| Net loss | $22.0m | $11.0m | $61.7m | $28.4m |
| Basic and diluted loss per share | $0.11 | $0.12 | $0.32 | $0.32 |
| Cash used in operating activities | — | $44.7m | $23.6m |
At September 30, 2021, cash and cash equivalents were $344.6m and available-for-sale marketable securities were $447.2m, totaling $791.8m. Current assets were $796.6m versus current liabilities of $13.3m. Total liabilities were $28.4m, including a $14.9m warrant liability; the balance sheet reports no borrowings. Total stockholders’ equity was $769.4m. The filing does not present a gross margin measure; with no revenue, operating margins are not meaningful. The income tax provision was zero, primarily because of a valuation allowance against deferred tax assets.
For the nine months, investing activities used $265.4m, principally reflecting purchases of marketable securities, while financing activities provided $625.0m, primarily from the February business combination and related financing. Cash and cash equivalents increased by $314.9m over the period.
Changes versus the comparable period and unusual items
- Nine-month operating expenses more than doubled year over year, and net loss increased by $33.3m. Management attributed the R&D increase mainly to higher external research, manufacturing and clinical-trial costs, added personnel and stock-based compensation; G&A growth reflected higher headcount, compensation and insurance, among other costs.
- The February 2021 merger with Panacea and concurrent financing materially strengthened liquidity. The company received approximately $624.8m of merger-related proceeds, net of offering costs paid, as presented in the cash flow statement. The transaction was accounted for as a reverse recapitalization.
- Nine-month R&D expense included $3.8m of common stock issued as consideration for acquired in-process research and development. Stock-based compensation was $6.5m for the period.
- Warrants are classified as liabilities and remeasured at fair value; the company recorded a $0.3m gain for the nine months. This is a non-cash item.
Liquidity, risks and other developments
Management believed existing cash, cash equivalents and marketable securities would fund operating commitments for at least 12 months after issuance of the financial statements. It expects continued operating losses and negative operating cash flows, with expenses rising as clinical development, research, manufacturing and public-company costs increase. Management said additional funding may be required to complete development and commercialization plans; actual cash needs and timing are uncertain.
Key risks include clinical and regulatory uncertainty, reliance on CROs and third-party manufacturers, competition, intellectual-property protection, and possible COVID-19-related disruption to trials, suppliers and operations. COVID-19 had not materially affected operations to date, but future effects were uncertain. The filing reports no pending significant legal proceedings and no off-balance-sheet arrangements. A $0.5m standby letter of credit secures the New York office lease.
On October 22, 2021, the company notified SPARCBIO LLC that it would terminate its collaboration agreement effective January 21, 2022, without penalty, because it no longer required the services. The filing also describes the founder’s concentrated voting rights through the dual-class share structure. Management concluded disclosure controls were effective as of September 30, 2021.
Important facts for investors to verify
- Whether NUV-422 trial progress, enrollment and expected 2022 data timing remain on track, and whether planned additional trials and IND submissions proceed.
- Whether the $791.8m liquidity position and stated 12-month runway remain adequate as R&D, clinical and public-company spending increase.
- How the SPARCBIO termination affects research, intellectual-property arrangements and continuity of outsourced work.
- The potential effects of warrant remeasurement, outstanding warrants and equity awards on reported results and future dilution.
- Whether clinical, regulatory, manufacturing, intellectual-property or COVID-19-related developments materially change the company’s plans or funding needs.