Syndax Pharmaceuticals Inc (SNDX) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion and analysis and other parts of this Annual Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report. You should carefully read the “Risk Factors” section of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”
For the discussion of the financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" and "—Liquidity and Capital Resources" included in the Annual Report on Form 10-K filed with the SEC on February 27, 2024.
Overview
We are a commercial-stage biopharmaceutical company developing an innovative pipeline of cancer therapies. We currently have two commercially approved products, Revuforj® (revumenib) and Niktimvo™ (axatilimab-csfr), and a robust slate of clinical development programs designed to unlock their full potential. Revuforj is our first-in-class menin inhibitor that was approved by the FDA in November 2024 for the treatment of relapsed or refractory, or R/R, acute leukemia with a lysine methyltransferase 2A gene, or KMT2A, translocation in adult and pediatric patients one year old and older. In the second quarter of 2025, we expect to submit a supplemental New Drug Application, or sNDA, for revumenib as a treatment for R/R acute myeloid leukemia, or AML, with a nucleophosmin 1 mutation, or mNPM1, based on the positive pivotal data from our AUGMENT-101 trial. We are also studying revumenib in combination with standard-of-care agents in mNPM1 AML or KMT2A-rearranged acute leukemia across the treatment landscape, including in newly diagnosed patients. Additionally, we are exploring the use of revumenib as a treatment in solid tumors, specifically its activity in metastatic colorectal cancer. Niktimvo™ is our first-in-class colony stimulating factor-1 receptor, or CSF-1R, blocking antibody that was approved by the FDA in August 2024 for the treatment of chronic graft-versus-host disease, or cGVHD, after failure of at least two prior lines of systemic therapy in adult and pediatric patients weighing at least 40 kg. Axatilimab is in development for the treatment of newly diagnosed cGVHD patients in combination with standard of care therapies, as well for the treatment of idiopathic pulmonary fibrosis, or IPF. We plan to continue to leverage the technical and business expertise of our management team and scientific collaborators to license, acquire and develop additional therapeutics to expand our pipeline.
We have begun generating product revenue from sales of Revuforj and Niktimvo. We continue to incur significant research and development and other expenses related to our ongoing operations. Except for 2021, we have not been profitable and have incurred losses in each period since our inception in 2005. For the years ended December 31, 2024, 2023, and 2022, we reported a net loss of $318.8 million and $209.4 million, and $149.3 million, respectively. As of December 31, 2024, we had an accumulated deficit of $1.2 billion, which included non-cash charges for stock-based compensation, preferred stock accretion and extinguishment charges. As of December 31, 2024, we had cash, cash equivalents and short-term and long-term investments of $692.4 million.
Significant Risks and Uncertainties
Ongoing high interest rates could make it more difficult for us to obtain traditional financing on acceptable terms, if at all. Additionally, the ongoing recession risk together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term and, as a result could negatively affect our operations. Furthermore, such economic conditions have produced downward pressure on share prices. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, the return of a high inflationary environment could increase our operating costs, including our labor costs and research and development costs. These costs may also be negatively impacted due to supply chain constraints, global geopolitical tensions as a result of the ongoing wars between Russia and Ukraine and Israel and Hamas as well as
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the conflicts in the Middle East, including between Israel and Hezbollah, worsening macroeconomic conditions and employee availability and wage increases, which may result in additional stress on our working capital.
Additionally, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of our late-stage product candidate; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing our intellectual property rights; and complying with applicable regulatory requirements.
Financial Overview
Net Product Revenue
Our second FDA-approved product, Revuforj, was approved by the FDA for commercial sale in the U.S. on November 15, 2024. Net product revenue from sales of Revuforj was $7.7 million for the twelve months ended December 31, 2024. In accordance with GAAP, we determine net product revenue for Revuforj, with specific assumptions for variable consideration components including, but not limited to, trade discounts and allowances, co-pay assistance programs and payor rebates.
We generated no product revenue during the years ended December 31, 2023 and 2022.
Milestone and License Revenue
We enter into license agreements for the development and commercialization of our product candidates. License agreements may include non-refundable upfront payments, contingent milestone and/or royalty payments based on the occurrence of specified events under our license arrangements, partial or complete reimbursement of research and development expenses, license fees and royalties on sales if they are successfully approved and commercialized. Our performance obligations under the license agreements may include the transfer of intellectual property rights in the form of licenses, obligations to provide research and development services and related materials and participation on certain development and/or commercialization committees.
Revenue is recognized when, or as, performance obligations are satisfied, which occurs when control of the promised products or services is transferred to customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer, or the transaction price. To the extent that the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available.
We assessed the promises to determine if they are distinct performance obligations. Once the performance obligations are determined, the transaction price is allocated based on a relative standalone selling price basis. Milestone payments and royalties are typically considered variable consideration at the outset of the contract and are recognized in the transaction price either upon occurrence or when the constraint of a probable reversal is no longer applicable.
In April 2024, a milestone was achieved under the Eddingpharm license agreement for the marketing approval of entinostat in China. As a result, we recognized $3.5 million of milestone revenue in the second quarter of 2024.
In August 2024, a milestone was achieved under the Incyte Collaboration Agreement for the approval of Niktimvo. As a result, we recognized $12.5 million of milestone revenue in the third quarter of 2024.
We generated no milestone or license revenue during the years ended December 31, 2023 and 2022.
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Research and Development
Since our inception, we have primarily focused on our clinical development programs. Research and development expenses consist primarily of costs incurred for the development of our product candidates and include:
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expenses incurred under agreements related to our clinical trials, including the costs for investigative sites and contract research organizations, or CROs, that conduct our clinical trials;
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employee-related expenses associated with our research and development activities, including salaries, benefits, travel and non-cash stock-based compensation expenses;
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manufacturing process-development, clinical supplies and technology-transfer expenses;
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license fees and milestone payments under our license agreements;
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consulting fees paid to third parties;
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allocated facilities and overhead expenses; and
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costs associated with regulatory operations and regulatory compliance requirements.
Internal and external research and development costs are expensed as they are incurred. Cost-sharing amounts received by us are recorded as reductions to research and development expense. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.
Research and development activities are central to our business model. Product candidates in late stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of late-stage clinical trials. We plan to continue to spend a significant amount of our resources on research and development activities for the foreseeable future as we continue to advance the development of our product candidates. The amount of research and development expenses allocated to external spending will continue to grow, while we expect our internal spending to grow at a slower and more controlled pace.
It is difficult to determine, with certainty, the duration and completion costs of our current or future preclinical programs, research studies and clinical trials of our product candidates. The duration, costs and timing of research studies and clinical trials of our products and product candidates will depend on a variety of factors that include, but are not limited to, the following:
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per patient costs;
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the number of patients that participate;
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the number of clinical trial sites;
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the countries in which the trials are conducted;
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the length of time required to enroll eligible patients;
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the potential additional safety monitoring or other studies requested by regulatory agencies;
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the duration of patient monitoring;
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the efficacy and safety profile of the product candidates; and
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timing and receipt of any regulatory approvals.
In addition, the probability of success for each drug candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. The successful development of our products and additional product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of our products and additional product candidates for the period, if any, in which material net cash inflows from these potential product
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candidates may commence. Clinical development timelines, the probability of success and development costs can differ materially from expectations.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of employee-related expenses, including salaries, benefits, non-cash stock-based compensation and travel expenses, for our employees in executive, finance, human resources, business development and support functions, as well as sales and marketing expenses to support the launch and commercialization of Revuforj and Niktimvo. Other selling, general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses and accounting, tax, legal, information technology and consulting services. We anticipate that our selling, general and administrative expenses will increase in the future as we continue to increase our headcount to support our continued research and development and commercialization of our products.
Interest Expense
Interest expense consists primarily of interest expense related to the purchase and sale agreement with Royalty Pharma Development Funding, LLC, or Royalty Pharma, and our operational and capital leases and in prior years consisted of our term loan, which was paid off in 2022.
Interest Income
Interest income consists of income earned on our cash, cash equivalents and short and long-term investment balances.
Other (Expense) Income, net
Other (expense) income, net includes income (expense), net consisting of revaluation of foreign currency related to trade payables.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed in "Summary of Significant Accounting Policies" (Note 3) to our audited consolidated financial statements included in this Annual Report, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenue and expense and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and assumptions. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies. Other significant accounting policies are outlined in "Summary of Significant Accounting Policies" (Note 3) to our consolidated financial statements included in this Annual Report.
We have listed below our critical accounting estimates that we believe to have the greatest potential impact on our consolidated financial statements. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.
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Product Revenue Recognition
We recognize revenue when our customer obtains control of the promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenue following the five – step model prescribed under FASB Accounting Standards Codification (ASC 606), Revenue from Contracts with Customers: (i) identify contract(s) with customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. We only recognize revenue when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer.
We sell Revuforj to Specialty Distributors and Specialty Pharmacies (collectively, Customers). These Customers subsequently resell Revuforj to healthcare providers, patients and other pharmacies. In addition to agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of Revuforj.
We recognize revenue from product sales at the point Customers obtain control of the product, which generally occurs upon delivery. The transaction price that is recognized as product revenue includes an estimate of variable consideration which is described below. Payment terms with Customers do not exceed one year and, therefore, we do not account for a financing component in its arrangements. We expense incremental costs of obtaining a contract with a Customer (for example, sales commissions) when incurred as the period of benefit is less than one year. Shipping and handling costs for product shipments to Customers are recorded as selling, general and administrative expenses.
Revenue from products is recognized at the estimated net sales price (transaction price), which includes estimates of variable consideration. We include estimated amounts in the transaction price to the extent it is determined probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available. The components of our variable consideration around product revenue include provider chargebacks and discounts, trade discounts and allowances, product returns, government rebates, patient assistance, and distribution and other fees.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing contracts and vendor agreements, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. We make estimates of our accrued and prepaid clinical expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to contract research organizations, or CROs, and investigative sites in connection with clinical studies and to vendors related to product manufacturing and development of clinical supplies.
We base our expenses related to clinical study and trial costs on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition. Payments under some of these contracts depend on factors out of our control, such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, we have not experienced any significant adjustments to our estimates.
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Results of Operations
Comparison of the years ended December 31, 2024 and 2023:
| Years Ended December 31, | 2024 - 2023 Increase (Decrease) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2024 | 2023 | $ | |||||||||
| Revenue: | ||||||||||||
| Net product revenue | $ | 7,680 | $ | — | $ | 7,680 | ||||||
| Milestone revenue | 16,000 | — | 16,000 | |||||||||
| Total revenue | 23,680 | — | 23,680 | |||||||||
| Operating expenses: | ||||||||||||
| Cost of product sales | 826 | — | 826 | |||||||||
| Research and development | 241,647 | 163,032 | 78,615 | |||||||||
| Selling, general and administrative | 120,879 | 66,922 | 53,957 | |||||||||
| Total operating expenses | 363,352 | 229,954 | 133,398 | |||||||||
| Loss from operations | (339,672 | ) | (229,954 | ) | (109,718 | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest expense | (4,929 | ) | (208 | ) | (4,721 | ) | ||||||
| Interest income | 26,090 | 21,163 | 4,927 | |||||||||
| Other expense, net | (247 | ) | (361 | ) | 114 | |||||||
| Total other income | 20,914 | 20,594 | 320 | |||||||||
| Net loss | $ | (318,758 | ) | $ | (209,360 | ) | $ | (109,398 | ) |
Product revenue
In November 2024, we began to generate product revenue from sales of Revuforj in the United States. We record product revenue net of estimated discounts, chargebacks, rebates, product returns, and other gross-to-net revenue deductions.
Milestone revenue
Milestone revenue for the fiscal year ended December 31, 2024 includes milestones achieved as part of our collaboration agreement with Incyte of $12.5 million and $3.5 million achieved as part of our licensing agreement with Eddingpharm Investment company limited
Cost of product sales
Our cost of product sales includes the cost of goods sold for Revuforj and royalties associated with sales in the United States.
Research and Development
The following table summarizes the research and development expenses for the full years ended December 31, 2024 and 2023:
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| Years Ended December 31, | 2024 - 2023 Increase (Decrease) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2024 | 2023 | $ | |||||||||
| Revumenib-related costs | $ | 107,909 | $ | 64,122 | $ | 43,787 | ||||||
| Axatilimab-related costs | 49,638 | 32,114 | 17,524 | |||||||||
| Other R&D programs | 2,564 | 5,441 | (2,877 | ) | ||||||||
| Personnel cost and other expenses | 61,602 | 47,208 | 14,394 | |||||||||
| Stock-based compensation | 19,934 | 14,147 | 5,787 | |||||||||
| Total research and development expenses | $ | 241,647 | $ | 163,032 | $ | 78,615 |
For the year ended December 31, 2024, our total research and development expenses increased by $78.6 million from the prior year. The increase is primarily due to:
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An increase of $43.8 million in revumenib related costs due to start up activities for a pivotal frontline / combo trial, continuation of trials to expand revumenib use across the mNPM1 and KMT2A acute leukemia landscape, pre-commercial manufacturing activities, and medical affairs activities in preparation for commercialization. In addition, $18.0 million of milestone expense was recognized in 2024, comprising an $8.0 million milestone payment to AbbVie in the first quarter of 2024 for the successful completion of the first pivotal trial in the first indication as well as a $10.0 million milestone payment to AbbVie upon the first commercial sale of Revuforj in the U.S.
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An increase of $17.5 million in axatilimab-related costs due to the continuation of the IPF trial, initiation of the co-development combination study of axatilimab and ruxolitinib for the treatment of cGVHD in the frontline, pre-commercial manufacturing activities, and a $15.0 million milestone payment to UCB as a result of the approval of Niktimvo in the third quarter of 2024.
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A decrease in other research and development program related costs of $2.9 million due to the de-prioritization of programs not pertaining to revumenib and axatilimab.
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An increase of $20.2 million in personnel costs and other expenses, including non-cash stock-based compensation which includes salaries, overhead and related expenses, primarily driven by increased support for ongoing clinical trials, and NDA/sNDA activities.
Selling, General and Administrative
The following table summarizes the selling, general and administrative expenses for the full years ended December 31, 2024 and 2023:
| Years Ended December 31, | 2024 - 2023 Increase (Decrease) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2024 | 2023 | $ | ||||||||
| Commercial related expenses | $ | 33,541 | $ | 13,115 | $ | 20,426 | |||||
| Other SG&A expenses | 17,353 | 14,105 | 3,248 | ||||||||
| Personnel cost and other expenses | 46,893 | 22,898 | 23,995 | ||||||||
| Stock-based compensation | 23,092 | 16,804 | 6,288 | ||||||||
| Total selling, general and administrative expenses | $ | 120,879 | $ | 66,922 | $ | 53,957 |
For the year ended December 31, 2024, our total selling, general and administrative expenses increased by $54.0 million from the prior year. The increase primarily is due to:
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An increase of $30.3 million in personnel costs and other expenses, including non-cash stock-based compensation, which includes salaries, overhead and related expenses primarily due to increased headcount to support commercial readiness.
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An increase of $20.4 million in sales and marketing related expenses due to commercial readiness and launch activities for Revuforj and Niktimvo.
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An increase of $3.2 million in other SG&A expenses related to increases in IT related expenses, corporate communications, legal and recruiting costs in support of commercialization and ongoing R&D activities.
Interest Expense and Income
For the year end December 31, 2024, interest income, net of interest expense, increased from the comparable period. The increase of interest income was primarily due to higher interest rates and an increased average balance on cash equivalents and short and long-term investments, partially offset by $4.9 million of interest expense recognized related to the Royalty Pharma Purchase and Sale agreement.
Other (Expense) Income, net
For the year ended December 31, 2024, the total other (expense) income, net decreased from the comparable prior year period primarily due to the decrease in foreign currency losses on short and long-term investments.
Liquidity and Capital Resources
Overview
As of December 31, 2024, we had cash, cash equivalents and short-term and long-term investments totaling $692.4 million. Since our inception, our operations have been primarily financed by net proceeds from our public stock offerings, revenue from our license agreements, and through our purchase and sale agreement with Royalty Pharma. We believe that our cash, cash equivalents and short and long-term investments as of December 31, 2024, will fund our projected operating expenses and capital expenditure requirements for at least the next 12 months. In addition to our existing cash, cash equivalents, short and long-term investments, we are eligible to receive research and development funding and to earn milestone and other contingent payments for the achievement of defined collaboration objectives and certain development, regulatory and commercial milestones, and royalty payments under our collaboration agreements. Our ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our collaborators’ research and development activities and is uncertain at this time.
Loan and Security Agreement
In February 2020, we entered into a loan and security agreement, with Hercules, as amended in December 2021, which we refer to as the Amended Loan Agreement. We terminated the Amended Loan Agreement in September 2022. On September 23, 2022, we made a prepayment of $21.5 million to satisfy in full all of our principal and interest obligations and related fees under the Amended Loan Agreement. The payoff amount paid by us in connection with the termination of the Amended Loan Agreement was pursuant to a payoff letter with Hercules and included payment of (a) $1.0 million as an end-of term fee and (b) $0.4 million as a pre-payment fee. Hercules released all security interests held on our assets.
For additional details on our Amended Loan Agreement, see "Loan Payable" (Note 15) to our consolidated financial statements in this Annual Report.
Purchase and Sale Agreement
In October 2024, we entered into a purchase and sale agreement with Royalty Pharma, pursuant to which Royalty Pharma purchased the right to receive 13.8% on quarterly net sales of Niktimvo in the United States of America and its respective territories, districts, commonwealths and possessions (including Guam and Puerto Rico) in exchange for an upfront payment of $350.0 million (gross) at closing, received in November 2024. Aggregate
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payments to Royalty Pharma pursuant to the Royalty Agreement will be capped at $822.5 million or 2.35 times the funded amount.
For additional details on our purchase and sale agreement with Royalty Pharma, see "Purchase and Sale Agreement" (Note 16) to our consolidated financial statements in this Annual Report.
Future Funding Requirements
We believe that our available cash, cash equivalents, short-term and long-term investments are sufficient to fund existing and planned cash requirements. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses and general overhead costs. We have based our estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect.
Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress in these trials is uncertain. We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability.
Our future capital requirements will depend on many factors, including:
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the initiation, progress, timing, costs and results of clinical trials of our product candidates;
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the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more trials than we currently expect;
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the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights;
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market acceptance of our product candidates;
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the cost and timing of selecting, auditing and developing manufacturing capabilities, and potentially validating manufacturing sites for commercial-scale manufacturing;
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the cost and timing for obtaining pricing and reimbursement, which may require additional trials to address pharmacoeconomic benefit;
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the cost of establishing sales, marketing and distribution capabilities for our product candidates if either candidate receives regulatory approval and we determine, in the case of revumenib to commercialize it ourselves, or in the case of axatilimab to co-commercialize it with Incyte;
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the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
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the interruption of key clinical trial activities, such as clinical trial site monitoring;
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the cost of disruption to our supply chain and operations, and associated delays in the manufacturing and supply of our products, which would adversely impact our ability to continue our clinical trial operations;
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the effect of competing technological and market developments; and
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our need to implement additional internal systems and infrastructure, including financial and reporting systems, as we grow our company.
Although we have two FDA products available for commercial sale, we have not generated substantial product revenue to date. Until such time, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings and additional funding from license and collaboration arrangements. Except for any
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obligations of our collaborators to reimburse us for research and development expenses or to make milestone or royalty payments under our agreements with them, we will not have any committed external source of liquidity.
Our material cash requirements include the following contractual obligations as of December 31, 2024, and the effects that such obligations are expected to have on our liquidity and cash flows in future periods. For additional information, see our consolidated financial statements.
| (in thousands) | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating leases for office space (1) | $ | 3,105 | $ | 657 | $ | 656 | $ | 1,792 | $ | — | |||||||||
| Capital lease for office equipment (2) | 11 | 8 | 3 | — | — | ||||||||||||||
| $ | 3,116 | $ | 665 | $ | 659 | $ | 1,792 | $ | — |
(1)
In August 2022, we signed a 36-month extension of the lease for the office space in New York, NY. In May 2023, we signed a 27-month lease for an additional space in New York, NY. In October 2024, we signed a 36-month extension for the New York, NY office space. The minimum lease payments above do not include any related common area maintenance charges or real estate taxes.
(2)
In January 2022, we entered into two four-year non-cancelable leases for office equipment. In June 2023, we entered into one two-year non-cancelable lease for office equipment. All three leases are accounted for as a capital lease.
We have incurred losses and cumulative negative cash flows from operations since our inception, excluding year ending December 31, 2021. As of December 31, 2024, we had an accumulated deficit of $1.2 billion. We anticipate that we will continue to incur significant losses for at least the next several years. We expect that our research and development and selling, general and administrative expenses will continue to increase. As a result, we will need additional capital to fund our operations, which we may raise through a combination of the sale of equity, debt financings, or other sources, including potential collaborations. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or drug candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.
At-the-Market Offering Program
In March 2021, we entered into a sales agreement with Cowen and Company, LLC, or TD Cowen, under which we could, from time to time, issue and sell shares of our common stock having aggregate sales proceeds of up to $75.0 million, in a series of one or more at-the-market, or ATM, equity offerings, or the 2021 ATM Program. On May 26, 2023, we terminated the 2021 ATM Program. Prior to termination, we sold shares under the 2021 ATM Program for aggregate net proceeds of approximately $25.0 million.
In May 2023, we entered into a new sales agreement with TD Cowen under which we could, from time to time, issue and sell shares of our common stock having aggregate sales proceeds of up to $200.0 million, in a series of one or more ATM equity offerings, or the 2023 ATM Program. TD Cowen is not required to sell any specific share amounts but acts as the Company’s sales agent, using commercially reasonable efforts consistent with its normal trading and sales practices. Pursuant to the sales agreement, shares will be sold under the shelf registration statement on Form S-3ASR (Registration No. 333-254661), which became automatically effective upon the filing on March 24, 2021. Our common stock will be sold at prevailing market prices at the time of the sale, and as a result, prices may vary. As of December 31, 2023, we sold 2,719,744 shares of common stock under the 2023 ATM Program for net proceeds of approximately $42.1 million. There was no ATM equity activity during the twelve months ended December 31, 2024.
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Cash Flows
The following is a summary of cash flows:
| Years Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2024 | 2023 | 2022 | |||||||||
| Net cash (used in) operating activities | $ | (274,903 | ) | $ | (160,601 | ) | $ | (133,675 | ) | |||
| Net cash provided by (used in) investing activities | (219,775 | ) | 117,609 | (186,188 | ) | |||||||
| Net cash provided by financing activities | 353,367 | 264,132 | 172,254 | |||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (141,311 | ) | $ | 221,140 | $ | (147,609 | ) |
Net Cash used in Provided by Operating Activities
Net cash used in operating activities for the year ended December 31, 2024, was $274.9 million and primarily consisted of our net loss of $318.8 million adjusted for non-cash items including stock-based compensation of $43.0 million, an investment increase of $13.5 million, a net increase in operating assets and liabilities of 13.3 million and non-cash operating lease expense of $1.0 million. The significant items in the increase in operating assets and liabilities include an increase in accrued expenses and other liabilities of $19.1 million, an increase in collaboration payable of $12.0 million, an increase in accounts payable of $1.7 million, and an increase in prepaid expenses and other assets of $8.3 million.
Net cash used in operating activities for the year ended December 31, 2023 was $160.6 million and primarily consisted of our net loss of $209.4 million adjusted for non-cash items including stock-based compensation of $31.0 million, an investment increase of $14.8 million, a net increase in operating assets and liabilities of $31.9 million, and non-cash operating lease expense of $0.7 million. The significant items in the increase in operating assets and
liabilities include an increase in accrued expenses and other liabilities of $14.9 million, an increase in collaboration payable of $10.7 million, an increase in accounts payable of $5.7 million, and an increase in prepaid expenses and other assets of $0.7 million.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities for the year ended December 31, 2024 was $219.8 million and was due to $337.3 million in proceeds from the maturities of available-for-sale marketable securities, partially offset by the purchase of $557.1 million of available-for-sale marketable securities.
Net cash used in investing activities for the year ended December 31, 2023 and was due to $472.2 million in proceeds from the maturities of available-for-sale marketable securities, partially offset by the purchase of $354.6 million of available-for-sale marketable securities.
Net Cash Provided by Investing Activities
Net cash provided by financing activities for the year ended December 31, 2024, was $353.4 million and was primarily due to proceeds of $343.7 million from the Royalty Pharma Purchase and Sale agreement and $9.7 million of proceeds from the stock option exercises and ESPP purchases.
Net cash provided by financing activities for the year ended December 31, 2023, was $264.1 million and was primarily due proceeds of $216.0 million from the issuance of common stock in a public offering, $42.1 million of proceeds from at-the-market offerings, and $6.0 million of proceeds from the stock option exercises and ESPP purchases.
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Net Operating Loss and Research and Development Tax Credit Carryforwards
At December 31, 2024, we had federal and state tax net operating loss carryforwards, or NOLs, of approximately $181.0 million and $97.5 million, respectively. We have generated federal NOLs of $158.9 million and state NOLs of $1.9 million which have an indefinite carryforward period. The remaining $22.1 million of federal NOLs and the $95.6 million of state NOLs will begin to expire at various dates starting in 2026. At December 31, 2023, we had available income tax credits of approximately $12.7 million. These income tax credits began to expire in 2024.
Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended. The annual limitation may result in the expiration of our net operating losses and credits before we can use them. We have recorded a valuation allowance on all of our deferred tax assets, including our deferred tax assets related to our net operating loss and research and development tax credit carryforwards.