PRELUDE THERAPEUTICS INCORPORATED You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and belief. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below. These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, the impact of the COVID-19 pandemic, business strategy, market size, potential growth opportunities, preclinical and clinical development activities, efficacy and safety profile of our product candidates, use of net proceeds from our offerings, our ability to maintain and recognize the benefits of certain designations received by product candidates, the timing and results of preclinical studies and clinical trials, commercial collaborations with third parties and the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "predict," "target," "intend," "could," "would," "should," "project," "plan," "expect," and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical-stage precision oncology company focused on discovering and
developing small molecule therapies optimized to target the key driver
mechanisms in cancers with high unmet need. By leveraging our core competencies
in cancer biology and medicinal chemistry, combined with our target class- and
technology platform-agnostic approach, we have built an efficient,
fully-integrated drug discovery engine to identify compelling biological targets
and create new chemical entities, or NCEs, that we rapidly advance into clinical
development. We believe our approach could result in better targeted cancer
therapies. Our discovery excellence has been validated by our rapid progress in
creating a wholly-owned, internally developed pipeline. Since our inception in
2016, we have received clearance from the
By focusing on developing agents using broad mechanisms that have multiple links to oncogenic driver pathways in select patients, we have developed a diverse pipeline consisting of six distinct programs spanning methyltransferases, kinases, protein-protein interactions and targeted protein degraders. Our pipeline is geared towards serving patients with high unmet medical need where there are limited or no treatment options. We are exploring therapies in both solid tumors and hematological malignancies such as adenoid cystic carcinoma, or ACC, homologous recombination deficient positive, or HRD+, cancers, myelofibrosis, or MF, and glioblastoma multiforme, or GBM, amongst others. We believe we can best address these diseases by developing therapies that target primary and secondary resistance mechanisms.
Our lead product candidates are designed to be oral, potent and selective
inhibitors of protein arginine methyltransferase 5, or PRMT5. The potency and
selectivity of our product candidates is supported by preclinical data
demonstrating nanomolar inhibition of PRMT5 and no inhibition of related enzymes
at 1,000 times higher concentration of our product candidates. We are currently
advancing our first clinical candidate, PRT543, in a Phase 1 clinical trial in
select solid tumors and myeloid malignancies in patients who are refractory to
or intolerant of established therapies. Interim Phase 1 results indicate
dose-dependent increases in exposure and target engagement, and we have observed
early signs of clinical activity, including an ongoing confirmed complete
response, or CR, in a patient with HRD+ high grade serous ovarian cancer through
nine months of therapy. A complete response is defined as the disappearance of
all target lesions. We will need to enroll and demonstrate objective responses
in additional patients to support further development and potential approval by
the FDA or other regulatory authorities, and while such approval is not
guaranteed, we are encouraged by the clinical activity as of the date of this
Quarterly Report on Form 10-
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We are also advancing PRT811, a second PRMT5 inhibitor that we have optimized
for high brain exposure, in a Phase 1 clinical trial in solid tumors, including
GBM. As of the date of this Quarterly Report on Form 10-Q, the trial
has demonstrated early signs of clinical activity and tolerability. The
previously disclosed refractory GBM patient whose tumor had demonstrated a 66%
reduction on monotherapy PRT811 subsequently underwent a follow-up MRI at week
18 and the regression improved to 77% from baseline, confirming a partial
response, or PR, per RANO (response assessment in neuro-oncology) criteria. We
will present data from the dose escalation portion of the Phase 1 trial in
unselected patient populations, including safety, PK and PD data and markers of
target engagement, at the AACR-NCI-EORTC Annual Meeting in
PRT1419, our third clinical candidate, is designed to be a potent and selective
inhibitor of the anti-apoptotic protein, MCL1. The potency and selectivity of
PRT1419 is supported by preclinical data demonstrating nanomolar inhibition of
MCL1 and no inhibition of related enzymes at 200 times higher concentration of
our product candidate. We have begun enrolling patients with hematologic
malignancies, including patients with myelodysplastic syndrome, or MDS, acute
myeloid leukemia, or AML, non-Hodgkin's lymphoma, or NHL, and multiple myeloma,
or MM, into the dose escalation portion of a Phase 1 open-label, multicenter
clinical trial for the oral formulation of PRT1419. We expect to add dose
expansion and combination cohorts to the Phase 1 clinical trial in the second
half of 2021. Additionally, in
We were incorporated in
We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.
As of
COVID-19 Impact
We are continuing to proactively monitor and assess the current coronavirus
disease 2019, or COVID-19, global pandemic. Since early
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Components of Results of Operations
Revenue
To date, we have not recognized any revenue from any sources, including from product sales, and we do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred, including:
• expenses incurred to conduct the necessary discovery-stage laboratory
work, preclinical studies and clinical trials required to obtain
regulatory approval;
• personnel expenses, including salaries, benefits and stock-based
compensation expense for our employees engaged in research and development
functions;
• costs of funding research performed by third parties, including pursuant
to agreements with clinical research organizations, or CROs, that conduct
our clinical trials, as well as investigative sites, consultants and CROs
that conduct our preclinical and nonclinical studies;
• expenses incurred under agreements with contract manufacturing
organizations, or CMOs, including manufacturing scale-up expenses and the
cost of acquiring and manufacturing preclinical study and clinical trial
materials;
• fees paid to consultants who assist with research and development activities;
• expenses related to regulatory activities, including filing fees paid to
regulatory agencies; and
• allocated expenses for facility costs, including rent, utilities,
depreciation and maintenance.
We track outsourced development costs and other external research and development costs to specific product candidates on a program-by-program basis, fees paid to CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, early research and other costs which are deployed across multiple projects under development.
Research and development activities are central to our business model. Product candidates in later 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 later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our clinical trials, including later-stage clinical trials, for current and future product candidates and prepare regulatory filings for our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for employees and consultants in executive, finance and accounting, legal, operations support, information technology and human resource functions. General and administrative expense also includes corporate facility costs not otherwise included in research and development expense, including rent, utilities, depreciation and maintenance, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.
We expect that our general and administrative expense will increase in the
future to support our continued research and development activities, potential
commercialization efforts and increased costs of operating as a public company.
These increases will likely include increased costs related to the hiring of
additional personnel and fees to outside consultants, legal support and
accountants, among other expenses. Additionally, we anticipate increased costs
associated with being a public company, including expenses related to services
associated with maintaining compliance with the requirements of Nasdaq and the
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Other Income, Net
Other income, net consists primarily of interest earned on our cash equivalents
and grant income received from the
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net operating losses, or NOLs, we have incurred 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 NOLs and tax credits will not be realized.
Results of Operations
Comparison of the Three Months Ended
The following table sets forth our results of operations for the three months
ended
Three months ended
June 30, Change
(in thousands) 2021 2020
Operating expenses:
Research and development $ 22,409 $ 9,776 $ 12,633
General and administrative 5,513 1,660 3,853
Total operating expenses 27,922 11,436 16,486
Loss from operations (27,922 ) (11,436 ) (16,486 )
Other income, net 1,057 28 1,029
Net loss $ (26,865 ) $ (11,408 ) $ (15,457 ) Research and Development Expenses
Research and development expenses increased by
Research and development expenses by program are summarized in the table below:
Three months ended
June 30,
(in thousands) 2021 2020
PRT543 $ 4,415 $ 1,886
PRT811 4,550 1,217
PRT1419 (Oral and IV) 1,863 2,109
Discovery programs 4,215 1,442Internal costs, including personnel related 7,366 3,122
$ 22,409 $ 9,776
General and Administrative Expenses
General and administrative expenses increased by
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Other Income, net
Other income, net increased by
Results of Operations
Comparison of the Six Months Ended
The following table sets forth our results of operations for the six months
ended
Six months ended
June 30, Change
(in thousands) 2021 2020
Operating expenses:
Research and development $ 38,879 $ 18,312 $ 20,567
General and administrative 11,010 2,861 8,149
Total operating expenses 49,889 21,173 28,716
Loss from operations (49,889 ) (21,173 ) (28,716 )
Other income, net 1,724 254 1,470
Net loss $ (48,165 ) $ (20,919 ) $ (27,246 ) Research and Development Expenses
Research and development expenses increased by
Research and development expenses by program are summarized in the table below:
Six months ended
June 30,
(in thousands) 2021 2020
PRT543 $ 7,680 $ 4,060
PRT811 6,340 1,566
PRT1419 (Oral and IV) 3,800 4,007
Discovery programs 7,387 1,970Internal costs, including personnel related 13,672 6,709
$ 38,879 $ 18,312
General and Administrative Expenses
General and administrative expenses increased by
Other Income, net
Other income, net increased by
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Liquidity and Capital Resources
Overview
Since our inception, we have not recognized any revenue and have incurred
operating losses and negative cash flows from our operations. We have not yet
commercialized any product and we do not expect to generate revenue from sales
of any products for several years, if at all. Since our inception, we have
funded our operations through the sale of convertible preferred stock and common
stock. As of
Funding Requirements
Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
• the scope, timing, progress and results of discovery, preclinical
development, laboratory testing and clinical trials for our product
candidates;
• the costs of manufacturing our product candidates for clinical trials and
in preparation for marketing approval and commercialization;
• the extent to which we enter into collaborations or other arrangements
with additional third parties in order to further develop our product
candidates;
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims;
• the costs and fees associated with the discovery, acquisition or
in-license of additional product candidates or technologies;
• expenses needed to attract and retain skilled personnel;
• costs associated with being a public company;
• the costs required to scale up our clinical, regulatory and manufacturing
capabilities;
• the costs of future commercialization activities, if any, including
establishing sales, marketing, manufacturing and distribution
capabilities, for any of our product candidates for which we receive
marketing approval; and
• revenue, if any, received from commercial sales of our product candidates,
should any of our product candidates receive marketing approval.
We will need additional funds to meet operational needs and capital requirements for clinical trials, other research and development expenditures, and business development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product 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 or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Six months ended
June 30,
(in thousands) 2021 2020
Cash used in operating activities $ (36,055 ) $ (18,823 )
Cash used in investing activities (1,367 ) (122 )
Cash provided by financing activities 162,232 29,782
Net increase in cash and cash equivalents
Operating Activities
During the six months ended
During the six months ended
Investing Activities
During the six months ended
Financing Activities
During the six months ended
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
Critical Accounting Policies
During the three months ended
JOBS Act Accounting Election
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
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We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest of (1) the last day
of our first fiscal year (a) in which we have total annual gross revenues of at
least
Recent Accounting Pronouncements
See Note 3 to our interim financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.
Emerging Growth Company and Smaller Reporting Company Status
In
We are in the process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements under the JOBS Act, including without
limitation, exemption to the requirements for providing an auditor's attestation
report on our system of internal controls over financial reporting pursuant to
Section 404(b) of the Sarbanes-Oxley Act. We will remain an emerging growth
company until the earlier to occur of (a) the last day of the fiscal year
(i) following the fifth anniversary of the completion of our IPO, (ii) in which
we have total annual gross revenues of at least
We are also a "smaller reporting company," meaning that the market value of our
stock held by non-affiliates is less than
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