ELEVATION ONCOLOGY, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are an innovative oncology company focused on the discovery and development of selective cancer therapies to treat patients across a range of solid tumors with significant unmet medical needs. We are rethinking drug development by seeking innovative, selective cancer therapies that can be matched to a patient's unique tumor characteristics.
Our lead product candidate, EO-3021 (also known as SYSA1801 or CPO102), is an
antibody-drug conjugate ("ADC") designed to target Claudin 18.2, a clinically
validated molecular target, which can selectively deliver a cytotoxic payload
directly to cancer cells expressing Claudin 18.2. We currently retain worldwide
development and commercialization rights for EO-3021 outside
We are working to rapidly advance EO-3021 into the clinic in
Claudin 18.2 is expressed across several solid tumor types, including many gastrointestinal cancers such as gastric, gastroesophageal junction and pancreatic cancer. Claudin 18.2 is also expressed in ovarian cancer, non-small cell lung cancer ("NSCLC") and other solid tumors. EO-3021 is an anti-Claudin 18.2 ADC that binds to Claudin 18.2 on the cell surface and is internalized, upon which the linker is cleaved in the lysosome to release the monomethyl auristatin E ("MMAE") payload, a potent anti-mitotic agent. This results in microtubule disruption, inhibiting cell division and promoting cancer cell death via apoptosis. MMAE has been clinically validated as an effective anti-tumor payload and is the cytotoxic component of several FDA-approved ADCs.
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Additionally, in
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and oncogenic driver in solid tumors. As a result, further enrollment in the
Phase 2 CRESTONE study of seribantumab has been paused. Long-term follow-up of
all patients
We are exploring opportunities through new or existing partnerships and business
development opportunities to expand our novel oncology pipeline. This includes
leveraging our value-driving partnerships with
We were incorporated in
Since our inception, we have incurred significant operating losses on an
aggregate basis. Our ability to generate product revenue sufficient to achieve
profitability will depend on the successful development and eventual
commercialization of one or more of our product candidates. Our net losses were
Our future capital requirements will depend on many factors, including:
? the progress, timing and results of preclinical studies and clinical trials for
EO-3021 and our other product candidates;
? disruptions or delays in enrollment of our clinical trials, including due to
the COVID-19 pandemic;
? the extent to which we develop, in-license or acquire other pipeline product
candidates or technologies;
the number and development requirements of other future product candidates that
? we may pursue, and other indications for our current product candidates that we
may pursue;
the costs, timing and outcome of obtaining regulatory approvals of EO-3021 and
? our other product candidates and any companion or complementary diagnostics we
may pursue;
the scope and costs of making arrangements with third-party manufacturers, or
? establishing manufacturing capabilities, for both clinical and commercial
supplies of our product candidates;
the costs involved in growing our organization to the size needed to allow for
? the research, development and potential commercialization of our current or
future product candidates;
? the costs associated with commercializing any approved product candidates,
including establishing sales, marketing and distribution capabilities;
? the costs associated with completing any post-marketing studies or trials
required by the FDA or other regulatory authorities;
? the revenue, if any, received from commercial sales of any of our product
candidates that receive marketing approval;
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the costs of preparing, filing and prosecuting patent applications, maintaining
? and enforcing our intellectual property rights and defending intellectual
property-related claims that we may become subject to, including any litigation
costs and the outcome of such litigation;
the costs associated with potential product liability claims, including the
? costs associated with obtaining insurance against such claims and with
defending against such claims; and
to the extent we pursue strategic collaborations, including collaborations to
commercialize seribantumab or to develop any future product candidates, our
? ability to establish and maintain collaborations on favorable terms, if at all,
as well as the timing and amount of any milestone or royalty payments we are
required to make or are eligible to receive under such collaborations, if any.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.
As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on favorable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital or debt when needed or on favorable terms, we could be forced to delay, reduce or eliminate our research and development programs, our commercialization plans or other operations.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of
Impact of COVID-19
Since it was reported to have surfaced in
COVID-19 precautions may directly or indirectly impact the timeline for our clinical trials. We are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future
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developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets.
Components of our Results of Operations
Operating Expenses
Research and Development Expenses
Our operating expenses have consisted solely of research and development costs and general and administrative costs. Research and development expenses consist primarily of costs related to our research activities, including the development of our product candidates, and costs incurred for the in-licensing of EO-3021. Our research and development expenses include:
a one-time, upfront payment of
? License Agreement for the exclusive rights to develop and commercialize EO-3021
in the Territory. Of this amount,
development expense and
employee-related expenses, including salaries, related benefits, and
? stock-based compensation expense for employees engaged in research and
development activities;
external research and development expenses incurred in connection with the
? preclinical and clinical development of seribantumab, as well as the
preclinical development of EO-3021, including expenses incurred under
agreements with contract research organizations and consultants;
costs incurred with contract manufacturing organizations that manufacture drug
? products for use in our preclinical studies and clinical trials of
seribantumab;
? fees paid to consultants for services directly related to our product
development and regulatory efforts; and
? costs related to compliance with regulatory requirements related to conducting
our clinical activity.
Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on our behalf. Research and development costs are expensed as incurred. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimates accordingly.
To date, our research and development expenses have primarily been incurred to advance seribantumab and in-license EO-3021. We expect that significant additional spending will be required to advance EO-3021 and other product candidates through clinical development. These expenses will primarily consist of expenses for the administration of clinical studies as well as manufacturing costs for clinical material supply. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.
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The following table provides a breakout of our research and development expenses by major categories of expense:
Year Ended December 31,
2022 2021 Change
(in thousands)
Seribantumab $ 39,721 $ 17,576 $ 22,145
EO-3021 26,096 - 26,096
Unallocated and other research and development expenses 3,584 2,675 909
Personnel costs (including stock-based compensation) 9,316 3,344 5,972
Total research and development expenses $ 78,717 $ 23,595 $ 55,122 The successful development and commercialization of EO-3021 or our other product candidates is highly uncertain. The success of EO-3021 or any other product candidate will depend on several factors, including the following:
successful completion of preclinical studies and timely and successful
? enrollment of patients in, and completion of, clinical trials with favorable
results;
demonstration of safety, efficacy and acceptable risk-benefit profiles of our
? product candidates to the satisfaction of the FDA and other regulatory
agencies;
acceptance of an IND and a BLA by the FDA or other similar clinical trial
? applications by foreign regulatory authorities for clinical trials for our
product candidates;
our ability, or that of our collaborators, to develop and obtain clearance or
? approval of companion or complementary diagnostics, on a timely basis, or at
all;
receipt and related terms of marketing approvals from applicable regulatory
? authorities for our product candidates, including the completion of any
required post-marketing studies or trials;
? raising additional funds necessary to complete the clinical development of and
commercialization of our product candidates;
? successfully identifying and developing, acquiring or in-licensing additional
product candidates to expand our pipeline;
obtaining and maintaining patent, trade secret and other intellectual property
? protection and regulatory exclusivity for our product candidates, and
protecting and enforcing our rights in our intellectual property portfolio;
making arrangements with third-party manufacturers, or establishing
? manufacturing capabilities, for both clinical and commercial supplies of our
product candidates;
establishing sales, marketing and distribution capabilities and launching
? commercial sales of our products, if approved, whether alone or in
collaboration with third parties;
? acceptance of our products, if approved, by patients, the medical community and
third-party payors;
? effectively competing with other therapies available on the market or in
development;
? obtaining and maintaining third-party payor coverage and adequate
reimbursement; and
? maintaining a continued acceptable safety profile of any products following
regulatory approval.
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Many of these factors are beyond our control, and it is possible that none of our product candidates will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services, and insurance costs.
We anticipate that our general and administrative expenses will increase in the
future as we support our continued research activities and development of our
product candidates. We also expect to incur increased expenses, including costs
of accounting, audit, legal, investor and public relations, directors and
officers insurance, and regulatory and tax related services associated with
maintaining compliance with exchange listings and
Other Income (Expense)
Interest Income
Interest income consists of interest earned on our invested cash balances and associated with our marketable securities.
Interest Expense
Interest expense consists of interest expense on borrowings under the K2HV Loan Agreement, as well as amortization of debt discount and debt issuance costs.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net
losses we have incurred each year or for our research and development tax
credits, as we believe, based upon the weight of available evidence, that it is
more likely than not that all of our net operating loss carryforwards and tax
credits will not be realized. As of
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Results of operations
Comparison of the years ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, 2022 2021 Change (in thousands) Operating expenses: Research and development$ 78,717 $ 23,595 $ 55,122 General and administrative 15,832 8,451 7,381 Total operating expenses 94,549 32,046 62,503 Loss from operations (94,549) (32,046) (62,503) Other income (expenses), net (506) 7 (513) Loss before income taxes (95,055) (32,039) (63,016) Income tax expenses 25 - 25 Net loss$ (95,080) $ (32,039) $ (63,041)
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Other Income (Expense), Net
Other income (expense), net, was
Interest Income
Interest income of
Interest Expense
Interest expense was
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Comparison of the Years Ended
A discussion of changes in our results of operations during the year ended
Liquidity and Capital Resources
Since our inception, we have not generated any revenue from product sales or any other sources and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever.
In
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Year Ended December 31,
2022 2021
(in thousands)
Statement of cash flows data:
Cash used in operating activities $ (85,483) $ (30,167)
Cash used in investing activities (44,398) -
Cash provided by financing activities 29,514 97,051
Net (decrease) increase in cash and cash equivalents
Operating Activities
During the year ended
During the year ended
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Investing Activities
During the year ended
During the year ended
Financing Activities
During the year ended
During the year ended
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for EO-3021 and seek to develop, acquire or in-license additional product candidates. The timing and amount of our operating expenditures will depend largely on:
? the timing and progress of preclinical and clinical development activities;
? successful enrollment in and completion of clinical trials;
? the timing and outcome of regulatory review of our product candidates;
? the cost to develop companion or complementary diagnostics as needed for each
of our product candidates;
our ability to establish agreements with third-party manufacturers for clinical
? supply for our clinical trials and, if any of our product candidates are
approved, commercial manufacturing;
? addition and retention of key research and development personnel;
our efforts to enhance operational, financial and information management
? systems, and hire additional personnel, including personnel to support
development of our product candidates;
the costs and timing of future commercialization activities, including product
? manufacturing, marketing, sales and distribution, for any of our product
candidates for which we obtain marketing approval;
? the legal patent costs involved in prosecuting patent applications and
enforcing patent claims and other intellectual property claims; and
? the terms and timing of any collaboration, license or other arrangement,
including the terms and timing of any milestone payments thereunder.
We believe our cash, cash equivalents and marketable securities of
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Our future capital requirements will depend on many factors, including:
? the progress, timing and results of preclinical studies and clinical trials for
EO-3021 and our other product candidates;
? disruptions or delays in enrollment of our clinical trials, including due to
the COVID-19 pandemic;
? the extent to which we develop, in-license or acquire other pipeline product
candidates or technologies;
the number and development requirements of other future product candidates that
? we may pursue, and other indications for our current product candidates that we
may pursue;
the costs, timing and outcome of obtaining regulatory approvals of EO-3021 and
? our other product candidates and any companion or complementary diagnostics we
may pursue;
the scope and costs of making arrangements with third-party manufacturers, or
? establishing manufacturing capabilities, for both clinical and commercial
supplies of our product candidates;
the costs involved in growing our organization to the size needed to allow for
? the research, development and potential commercialization of our current or
future product candidates;
? the costs associated with commercializing any approved product candidates,
including establishing sales, marketing and distribution capabilities;
? the costs associated with completing any post-marketing studies or trials
required by the FDA or other regulatory authorities;
? the revenue, if any, received from any product candidates that receive
marketing approval;
the costs of preparing, filing and prosecuting patent applications, maintaining
? and enforcing our intellectual property rights and defending intellectual
property-related claims that we may become subject to, including any litigation
costs and the outcome of such litigation;
the costs associated with potential product liability claims, including the
? costs associated with obtaining insurance against such claims and with
defending against such claims; and
to the extent we pursue strategic collaborations, including collaborations to
commercialize seribantumab or to develop any future product candidates, our
? ability to establish and maintain collaborations on favorable terms, if at all,
as well as the timing and amount of any milestone or royalty payments we are
required to make or are eligible to receive under such collaborations, if any.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for EO-3021 or our other product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on favorable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital or debt when needed or on favorable terms, we could be forced to delay, reduce or eliminate our research and development programs, our commercialization plans or other operations.
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Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and provide for termination upon notice.
In
In
The Term Loan will mature on
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
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Research and Development Costs and Accruals
Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on our behalf. Research and development costs are expensed as incurred. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjusts estimates accordingly.
We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the services have been performed or when the goods have been received rather than when the payment is made.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation Expense
We measure stock-based compensation expense at the accounting measurement date based on the fair value of the award and recognize the expense on a straight-line basis over the requisite service period of the award, which is typically the vesting period. Compensation expense is measured using the fair value of the award at the grant date and is adjusted to reflect actual forfeitures as they occur.
We estimate the fair value of stock options using the Black-Scholes option pricing model that takes into account the fair value of our common stock, the exercise price, the expected term of the option, the expected volatility of our common stock, expected dividends on our common stock, and the risk-free interest rate over the expected life of the option.
Expected term - We use the simplified method described in the
Expected volatility - We estimate expected volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price.
Risk-free interest rate - The risk-free rate assumption is based on the
Expected dividend - We have not issued any dividends and do not expect to issue dividends over the life of the options. As a result, we have estimated the dividend yield to be zero.
We classify stock-based compensation expense in our statement of operations in the same manner in which the award recipient's payroll costs or service payments are classified.
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