S-1/A 1 d664795ds1a.htm S-1/A NO. 3 S-1/A No. 3
Table of Contents

As filed with the U.S. Securities and Exchange Commission on April 16, 2019.

Registration No. 333-230428

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 3

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Turning Point Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   2834   46-3826166

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

10628 Science Center Drive, Ste. 225

San Diego, California 92121

(858) 926-5251

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Athena Countouriotis, M.D.

President and Chief Executive Officer

Turning Point Therapeutics, Inc.

10628 Science Center Drive, Ste. 225

San Diego, California 92121

(858) 926-5251

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

 

Charles J. Bair, Esq.

Karen E. Anderson, Esq.

Cooley LLP

4401 Eastgate Mall

San Diego, California 92121

(858) 550-6000

 

Bruce K. Dallas, Esq.

Sarah K. Solum, Esq.

Davis Polk & Wardwell LLP

1600 El Camino Real

Menlo Park, California 94025

(650) 752-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 7(a)(2)(B) of the Securities Act.  

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount
to be

Registered(1)

  Proposed
Maximum Offering
Price Per Share(2)
  Proposed
Maximum Aggregate
Offering Price(1)(2)
 

Amount of

Registration Fee(3)

Common Stock, $0.0001 par value per share

  10,147,059   $18.00  

$182,647,062

  $22,137

 

 

(1)

Includes an additional 1,323,529 shares that the underwriters have the option to purchase.

(2)

Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as amended.

(3)

Of this amount, $18,448 was previously paid.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED APRIL 16, 2019.

PRELIMINARY PROSPECTUS

8,823,530 Shares

 

 

LOGO

Common Stock

 

 

This is an initial public offering of 8,823,530 shares of common stock of Turning Point Therapeutics, Inc.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $16.00 and $18.00 per share.

Our common stock has been approved for listing on the Nasdaq Global Market under the symbol “TPTX”.

We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.

 

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 13 to read about factors you should consider before buying shares of our common stock.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Initial public offering price

   $                    $                

Underwriting discounts and commissions(1)

   $        $    

Proceeds, before expenses, to us

   $        $    

 

(1)

See the section entitled “Underwriting” for a description of the compensation payable to the underwriters.

We have granted the underwriters an option to purchase up to 1,323,529 additional shares of our common stock. The underwriters can exercise this option at any time within 30 days after the date of this prospectus.

Certain affiliates of our directors and other principal stockholders have indicated an interest in purchasing an aggregate of approximately $50 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any of these stockholders, or any of these stockholders may determine to purchase more, fewer or no shares in this offering.

The underwriters expect to deliver the shares against payment in New York, New York on                 , 2019.

 

 

 

Goldman Sachs & Co. LLC   SVB Leerink   Wells Fargo Securities
  Canaccord Genuity  

 

 

Prospectus dated                 , 2019.


Table of Contents

TABLE OF CONTENTS

 

     Page  

Prospectus Summary

     1  

Risk Factors

     13  

Special Note Regarding Forward-Looking Statements

     69  

Market, Industry and Other Data

     71  

Use of Proceeds

     72  

Dividend Policy

     74  

Capitalization

     75  

Dilution

     77  

Selected Financial Data

     80  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     81  

Business

     93  

Management

     141  

Executive and Director Compensation

     151  

Certain Relationships and Related Party Transactions

     169  

Principal Stockholders

     173  

Description of Capital Stock

     176  

Shares Eligible for Future Sale

     182  

Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of Our Common Stock

     185  

Underwriting

     189  

Legal Matters

     195  

Experts

     195  

Where You Can Find Additional Information

     195  

Index to Financial Statements

     F-1  

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: We have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

 

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PROSPECTUS SUMMARY

This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes, before deciding to buy shares of our common stock. Unless the context requires otherwise, references in this prospectus to “Turning Point Therapeutics,” “the Company,” “we,” “us” and “our” refer to Turning Point Therapeutics, Inc.

Turning Point Therapeutics

We are a clinical-stage biopharmaceutical company designing and developing novel small molecule, targeted oncology therapies to address key limitations of existing therapies and improve the lives of patients. Our internally developed and wholly owned pipeline of next-generation tyrosine kinase inhibitors (TKIs) targets numerous genetic drivers of cancer in both TKI-naïve and TKI-pretreated patients. The pervasive challenges of intrinsic and acquired treatment resistance often limit the response rate and durability of existing therapies. One of these challenges is the emergence of solvent front mutations, which are a common cause of acquired resistance to currently approved therapies for ROS1, TRK and ALK kinases. We have developed a macrocycle platform enabling us to design proprietary small, compact TKIs with rigid three-dimensional structures that potentially bind to their targets with greater precision and affinity than other kinase inhibitors. We believe our macrocycle platform will generate TKIs that are potentially best-in-class. Our lead drug candidate, repotrectinib (TPX-0005), is being evaluated in an ongoing Phase 1/2 trial called TRIDENT-1 for the treatment of patients with ROS1+ advanced non-small-cell lung cancer (NSCLC) and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. We are nearing completion of the Phase 1 portion of TRIDENT-1 and, based on the preliminary proof-of-concept data in a total of 75 patients, we plan to initiate the multi-cohort Phase 2 portion in the second half of 2019. This Phase 2 portion will be a registrational trial for potential approval in ROS1+ advanced NSCLC and NTRK+ advanced solid tumors. In addition to repotrectinib, our pipeline includes two multi-targeted kinase inhibitors: TPX-0046 (a novel RET/SRC inhibitor), and TPX-0022 (a novel MET/CSF1R/SRC inhibitor); and a series of next-generation ALK inhibitors, from which we anticipate selecting a final candidate for IND-enabling studies. We anticipate submitting investigational new drug applications (INDs) and initiating clinical trials for TPX-0046 and TPX-0022 in 2019.

Overview of Kinases and Current Limitations of Kinase Inhibitors

Kinases are enzymes that respond to external stimuli to modulate numerous activities of cells, such as proliferation, survival and migration. TKIs have become an important class of cancer therapies due to their ability to interrupt deregulated kinase signaling that leads to unchecked cell growth and tumor progression. In 2017, TKIs represented approximately $20 billion in worldwide drug sales. Despite the success of this drug class, there remains a significant opportunity for a new generation of TKIs that address the shortcomings of current therapies. These shortcomings include the inability to achieve a response or limited durability of response caused by intrinsic or acquired resistance, and toxicities that limit dosage levels and duration of treatment. Many conventional kinase inhibitors are oversized, with bulky side groups and limited chemical structure diversity, and some are associated with safety issues such as QT prolongation (abnormal electrocardiography) and hepatotoxicity (liver damage). Further, the same class of kinase inhibitors often share many binding similarities and therefore often cannot be sequentially administered to effectively overcome common treatment resistant mutations.



 

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There are multiple types of mutations, including gatekeeper mutations and solvent front mutations, that can emerge with the use of TKIs. A gatekeeper mutation occurs from the substitution of one amino acid residue for another in front of the back pocket of the adenosine triphosphate (ATP) binding site within a kinase. In 2012, a treatment resistant mutation arising from an area of the kinase called the solvent front was first identified in a patient treated with Xalkori (crizotinib), and named as a solvent front mutation. Most of the currently approved or investigational ROS1, ALK and TRK kinase inhibitors have an extra chemical group, or motif, extending to the solvent front that leaves them susceptible to solvent front mutations. The most common solvent front mutation in the ROS1 kinase, G2032R, was reported in 2017 from a single institution in 41% of patients who experienced progressive disease while taking crizotinib. In addition, emerging solvent front mutations, such as TRKA G595R, TRKC G623R and TRKC G623E, have developed in NTRK+ solid tumors after treatment with the approved TKI Vitrakvi (larotrectinib) and current investigational agent entrectinib. Currently, there are no FDA-approved TKIs that can overcome solvent front mutations for the ROS1 or TRK kinases. Additionally, there are no FDA-approved TKIs that can address resistance that may arise after RET targeted agents.

Our Approach

To overcome key limitations of most current TKI therapies and emerging resistance, our strategy is to design small (low molecular weight), compact TKIs with rigid three-dimensional macrocyclic structures that bind inside the ATP pocket of the target kinase. By binding completely inside the ATP pocket, our TKIs can bind to solvent front mutated kinases that sterically exclude conventional TKIs. In addition to potentially addressing resistance that has developed from prior lines of TKI therapy, we believe our TKIs may also prevent or delay the emergence of new resistant mutations. Furthermore, unlike conventional flat, two-dimensional kinase inhibitor structures, we believe a rigid three-dimensional structure enables our TKIs to target the selected kinases in a highly potent, precise and efficient manner, which provides a base for a favorable kinase selectivity profile. The figure below depicts the structure of repotrectinib compared to certain approved and investigational TKIs, overlaid on the structure of ATP. The extra motif present in conventional TKIs at the solvent front area may result in the development of solvent front mutations, as illustrated below.

 

 

LOGO

 

SFM: area that may result in solvent front mutations

MW: molecular weight

Our Pipeline

We are leveraging our macrocycle platform to design a pipeline of highly potent proprietary TKI drug candidates that are structurally different from many existing kinase inhibitors. We believe our TKIs may address the key issues of emerging treatment resistance and toxicities that limit duration of treatment. Our platform allows us to rapidly identify new drug candidates for development. We have global development and commercialization rights to all our drug candidates, including our lead program.



 

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The following chart summarizes our product pipeline, including our lead product candidate, repotrectinib, and our upcoming milestones.

Turning Point Therapeutics Pipeline

 

 

LOGO

Candidate Selection IND Enabling Studies Phase 1 Phase 2 Phase 31 Upcoming Milestones Repotrectinib (ROS1/TRKs/ALK) TPX-0022 (MET/CSF1R/SRC) TPX-0046 (RET/SRC)2 ALK Inhibitor ROS1+ advanced NSCLC in TKI-naive patients ROS1+ advanced NSCLC in TKI-pretreated patients NTRK+ advanced solid tumors in TKI-naive patients NTRK+ advanced solid tumors in TKI-pretreated patients ROS1+ or ALK+ non-NSCLC advanced solid tumors in TKI-naive patients Repotrectinib + Tagrisso in EGFR mutated advanced NSCLC Repotrectinib in pediatric advanced solid tumors Advanced solid tumor patients Advanced solid tumor patients ALK+ NSCLC TRIDENT-1 Registrational cohorts TRIDENT-1 Phase 1 enrollment ongoing2, Initiating registrational Phase 2 portion in 2H 2019 Non-registrational cohort of TRIDENT-1 Initiating trial in 2H 2019 Trial design in development Initiating trial in 2H 2019 Initiating trial in 2H 2019 Candidate selection in 2019

 

1

Not required for Phase 2 registrational clinical trials

2

Phase 1 Portion of TRIDENT-1 ongoing with anticipated data read outs within 2019

3

Including NSCLC, thyroid, and other solid tumors with abnormal RET gene

Repotrectinib

Our lead drug candidate, repotrectinib, is a low molecular weight macrocyclic TKI of ROS1, TRK and ALK that is being evaluated in our ongoing Phase 1/2 clinical trial called TRIDENT-1 for the treatment of patients with ROS1+ advanced NSCLC and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. As of the October 31, 2018 data cut-off date, the preliminary analysis from a total of 75 patients across seven dose escalation cohorts showed repotrectinib was generally well tolerated with the majority of treatment emergent adverse events (TEAEs: related and unrelated to treatment) being Grade 1 or Grade 2. The following table shows the most common TEAEs occurring in >10% of patients in the total of 75 treated patients.

 

Most common (>10%) TEAEs (n=75)

   All Grades
n (%)
     Grade 1
n (%)
     Grade 2
n (%)
     Grade 3
n (%)
     Grade 41
n (%)
 

Dizziness

     43 (57.3)        37 (49.3)        4   (5.3)        2   (2.7)     

Dysgeusia

     36 (48.0)        35 (46.7)        1   (1.3)        

Constipation

     24 (32.0)        15 (20.0)        9 (12.0)        

Dyspnea

     23 (30.7)        7   (9.3)        10 (13.3)        5   (6.7)        1   (1.3)  

Paresthesia

     23 (30.7)        23 (30.7)           

Fatigue

     22 (29.3)        12 (16.0)        8 (10.7)        2   (2.7)     

Anemia

     21 (28.0)        4   (5.3)        8 (10.7)        9 (12.0)     

Nausea

     19 (25.3)        12 (16.0)        5   (6.7)        2   (2.7)     

Cough

     18 (24.0)        11 (14.7)        7   (9.3)        


 

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Most common (>10%) TEAEs (n=75)

   All Grades
n (%)
     Grade 1
n (%)
     Grade 2
n (%)
     Grade 3
n (%)
     Grade 41
n (%)
 

Pyrexia

     16 (21.3)        14 (18.7)        2   (2.7)        

Headache

     13 (17.3)        12 (16.0)           1   (1.3)     

Vomiting

     13 (17.3)        9 (12.0)        4   (5.3)        

Upper respiratory tract infection

     11 (14.7)        7   (9.3)        4   (5.3)        

Muscular weakness

     10 (13.3)        5   (6.7)        3   (4.0)        2   (2.7)     

Pain in extremity

     9 (12.0)        6   (8.0)        2   (2.7)        1   (1.3)     

Abdominal pain

     8 (10.7)        7   (9.3)        1   (1.3)        

Ataxia

     8 (10.7)        6   (8.0)        2   (2.7)        

Pleural effusion

     8 (10.7)        1   (1.3)        6   (8.0)        1   (1.3)     

 

1

Additional Grade 4 TEAEs: cerebrovascular accident, influenza, hyperkalemia, bacterial pneumonia (n=1 each) and respiratory failure (n=2); none were determined to be related to treatment.

Grade 5 TEAEs: respiratory failure, sepsis, sudden death (n=1 each; only the case of sudden death was determined to be possibly related to treatment by Sponsor)

As of the data cut-off date, preliminary efficacy data, including activity within the central nervous system (CNS), across the first five dose escalation cohorts included:

 

   

TKI-naïve ROS1+ advanced NSCLC evaluable population (n=10):

 

  ¡   

Median follow-up time was 16.4 months (range, 5.3 to 16.6+ months)

 

  ¡   

Confirmed objective response rate (ORR) was 90% (9/10) (95% Confidence Interval (CI), 56 to 100)

 

  ¡   

At our likely recommended Phase 2 dose of 160 mg QD (once daily) or above (n=6), five patients (83%) achieved a confirmed ORR

 

  ¡   

Median duration of response for the 9 confirmed responders had not yet been reached, with five of nine patients remaining in response (from 5.5+ to 14.9+ months), with 3 events of progressive disease, and 1 censored patient off treatment prior to progression

 

  ¡   

Confirmed intracranial ORR was 100% (3/3) (95% CI, 29 to 100) in patients with measurable CNS metastases

 

   

TKI-pretreated ROS1+ advanced NSCLC evaluable population (n=18):

 

  ¡   

Median follow-up time was 12.9 months (range, 0.6 to 14.5)

 

  ¡   

Confirmed ORR was 28% (5/18) (95% CI, 10 to 53), with one of five patients remaining in response for 1.9+ months

 

  ¡   

At our likely recommended Phase 2 dose of 160 mg QD (once daily) or above, in patients treated with one prior ROS1 TKI (n=9):

 

  ¡   

44% (4/9) of patients achieved a confirmed partial response (PR)

 

  ¡   

50% (3/6) of patients treated with crizotinib as their prior ROS1 TKI achieved a confirmed PR

 

  ¡   

Confirmed intracranial ORR was 50% (2/4) (95% CI, 7 to 93) in patients with measurable CNS metastases, with 75% (3/4) showing tumor regressions

 

  ¡   

Clinical benefit rate was 78% (14/18) (95% CI, 52 to 94), which is clinically meaningful for patients with limited treatment options

 

  ¡   

Tumor regressions were observed in all four crizotinib-pretreated evaluable patients with a ROS1 G2032R solvent front mutation; one patient previously treated with crizotinib for



 

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13 months who achieved stable disease as the best response achieved a confirmed PR with repotrectinib, had a duration of response of 7.4 months, and remained on treatment for 14.6+ months at the time of the data cut-off

 

   

TKI-naïve NTRK+ advanced solid tumor evaluable population (n=1):

 

  ¡   

One evaluable patient who had glioblastoma and achieved stable disease as the best response

 

  ¡   

In addition, one patient with angiosarcoma who had a dramatic initial response on skin lesions was not evaluable for response due to death from sepsis (not treatment related) within the second cycle

 

   

TKI-pretreated NTRK+ advanced solid tumor evaluable population (n=2):

 

  ¡   

Of the two evaluable patients, one patient with an advanced salivary gland cancer previously treated with multiple prior TKIs including crizotinib and entrectinib and who developed a TRKC G623E solvent front mutation achieved a confirmed PR with repotrectinib with a 9.8 month duration of response; this patient remained on treatment for 17.9 months. The patient discontinued repotrectinib due to further disease progression, and received combination chemotherapy with no response. In January 2019, the patient began a second course of repotrectinib on a compassionate use basis.

We are currently enrolling in our last planned dosing cohort within the Phase 1 portion of TRIDENT-1. We anticipate determining our recommended Phase 2 dose (RP2D) and plan to give an update on our data in ROS1+ NSCLC during an oral presentation at the 2019 annual meeting of the American Society of Clinical Oncology (ASCO), utilizing a March 4, 2019 data cut-off date. We expect the presentation to include a total of eight additional patients evaluated for safety and five evaluated for efficacy:

 

   

120 mg QD: n=2 (one TKI naive and one TKI pretreated) efficacy evaluable by Blinded Independent Central Review (BICR); and

 

   

160 mg QD (our likely RP2D): n=3 (all TKI pretreated) efficacy evaluable by BICR.

 

   

As of the March 4, 2019 data cut-off date, no dose-limiting toxicities (DLTs) have been observed in these additional eight patients yet since the October 31, 2018 data cut-off date, there has been one additional Grade 5 TEAE of respiratory failure reported as related to disease progression and not treatment-related in a ROS1+ NSCLC patient initially treated at 120 mg QD who escalated their dose to 160 mg BID due to disease progression 30 days prior to the event.

The planned Phase 2 portion of TRIDENT-1 will be a registrational trial for potential approval of repotrectinib in both TKI-naïve and TKI-pretreated patients with ROS1+ advanced NSCLC or NTRK+ advanced solid tumors. We are targeting initiation of the Phase 2 portion of TRIDENT-1 in the second half of 2019 pending completion of the Phase 1 portion and agreement by the FDA to proceed with our RP2D. We are planning an interim data read-out for some of the registrational cohorts within the Phase 2 portion of TRIDENT-1 in the second half of 2020.

In parallel to our planned Phase 2 portion of TRIDENT-1, we intend to co-develop repotrectinib with a next-generation sequencing-based companion diagnostic. A prototype companion diagnostic will be developed and used as a clinical trial assay to confirm the presence of ROS1+, NTRK+ or ALK+ gene fusions in patients prior to enrollment into the Phase 2 portion of TRIDENT-1. We have selected a diagnostic partner to support development of the companion diagnostic and filing of a pre-market approval (PMA) application to the FDA.



 

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TPX-0046, TPX-0022 and a Next-Generation ALK Inhibitor

In addition to repotrectinib, our pipeline includes multi-targeted drug candidates we have designed using our macrocycle platform: TPX-0046 (a novel RET/SRC inhibitor), TPX-0022 (a novel MET/CSF1R/SRC inhibitor) and a series of next-generation ALK inhibitors. We anticipate submitting INDs and initiating clinical trials for TPX-0046 and TPX-0022 in 2019. We plan to select an ALK inhibitor candidate for IND-enabling studies in 2019.

Our Team

We believe our internally designed, macrocycle platform and experienced team enable us to advance differentiated TKIs into the clinic, which may provide meaningful benefits to patients with cancer. Our team has extensive experience in the discovery, design and development of cancer therapeutics, with a clear focus on next-generation TKIs. Our scientific founder and the designer of our next-generation TKIs, J. Jean Cui, Ph.D., has more than 20 years of experience, including most recently at Pfizer Inc., where she was the lead inventor of two approved TKIs, Xalkori (crizotinib) and Lorbrena (lorlatinib). In addition, our President and Chief Executive Officer, Athena Countouriotis, M.D., has over 15 years of experience, including senior leadership roles at Ambit Biosciences Corporation and Halozyme Therapeutics, Inc., and has led the development of multiple TKIs through approval, including Sprycel (dasatinib), Sutent (sunitinib) and Bosulif (bosutinib). Nearly half of our employees have Ph.D., Pharm.D. or M.D. degrees. We are supported by our board of directors and scientific advisory board, who have significant experience in drug development, as well as expertise in building public companies and business development. Our key investors include funds managed by Cormorant Asset Management, OrbiMed Advisors, Lilly Asia Ventures, S.R. One, Foresite Capital, venBio Partners, HBM Healthcare Investments and Nextech Invest. We believe that our team is well positioned to leverage our highly differentiated platform to continue to design and develop novel TKIs that will have significant benefit for cancer patients.

Our Strategy

Our strategy is to focus on the design, development and commercialization of novel TKIs to address unmet medical needs, including in the area of treatment resistance. Key elements of our strategy include:

 

   

Rapidly develop and commercialize our lead drug candidate, repotrectinib, for the treatment of patients with ROS1+ advanced NSCLC and NTRK+ advanced solid tumors, including those with CNS disease or CNS metastases.

 

   

Expand the market opportunity for repotrectinib by pursuing pediatric indications, additional indications in ROS1+ or ALK+ advanced non-NSCLC solid tumors, and combination therapies.

 

   

Leverage our extensive expertise and macrocycle platform to develop and expand our pipeline candidates as single agent therapies and/or in combinations.

 

   

Evaluate strategic opportunities to accelerate development timelines and enhance the commercial potential of our drug candidates.

 

   

Establish capabilities to effectively commercialize our drug candidates.



 

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Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” immediately following this prospectus summary. These risks include the following, among others:

 

   

We have incurred significant operating losses since our inception and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.

 

   

Even if this offering is successful, we will require substantial additional funding. If we are unable to raise capital on favorable terms when needed, we could be forced to delay, reduce or eliminate our research or drug development programs or any future commercialization efforts.

 

   

We are early in our development efforts and our lead drug candidate repotrectinib is currently only in a Phase 1 clinical trial. We have not successfully completed late-stage clinical trials or obtained regulatory approval for any drug candidate. We may never obtain approval for any of our drug candidates or achieve or sustain profitability.

 

   

Drug development involves a lengthy and expensive process. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of repotrectinib or our other drug candidates.

 

   

If we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory approval could be delayed or prevented.

 

   

Adverse side effects or other safety risks associated with repotrectinib or our other drug candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon further development, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

 

   

If we are unable to obtain and maintain sufficient patent protection for our drug candidates, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize our drug candidates successfully may be adversely affected.

 

   

The development and commercialization of pharmaceutical products are subject to extensive regulation, and we may not obtain regulatory approvals for repotrectinib or any other drug candidates, on a timely basis or at all.

 

   

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

If we are unable to adequately address these and other risks we face, our business, financial condition, operating results and prospects may be adversely affected.

Corporate and Other Information

We were incorporated in Delaware in October 2013 under the name TP Therapeutics, Inc. In November 2018, we changed our name to Turning Point Therapeutics, Inc. Our principal executive offices are located at 10628 Science Center Drive, Ste. 225, San Diego, CA 92121, and our telephone number is (858) 926-5251. Our corporate website address is www.tptherapeutics.com. Information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.



 

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This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

 

   

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

 

   

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (Sarbanes-Oxley Act);

 

   

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

 

   

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

We may use these provisions until, at latest, the last day of our fiscal year following the fifth anniversary of the completion of this offering. If certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.



 

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The Offering

 

Common stock offered by us

8,823,530 shares.

 

Underwriters’ option to purchase additional shares

The underwriters have a 30-day option to purchase up to a total of 1,323,529 additional shares of our common stock.

 

Common stock to be outstanding immediately after this offering

29,228,240 shares (or 30,551,769 shares if the underwriters exercise their option to purchase additional shares in full).

 

Use of proceeds

We intend to use the net proceeds from this offering to further the clinical development of repotrectinib in our planned Phase 2 portion of TRIDENT-1, including companion diagnostic development, as well as in combination and pediatric studies; to further the development of our preclinical candidates, including TPX-0046 and TPX-0022 and our next generation ALK inhibitor candidate once selected; for the design and development of new drug candidates; and for working capital and other general corporate purposes. See “Use of Proceeds.”

 

Risk factors

See “Risk Factors” beginning on page 13 and other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock.

 

Reserved Share Program

At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5.0% of the shares offered by this prospectus, excluding the additional shares that the underwriters have a 30-day option to purchase, for sale to certain of our directors, officers, employees, business associates and related persons. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.

 

Nasdaq Global Market symbol

“TPTX”


 

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The number of shares of our common stock to be outstanding after this offering is based on 20,404,710 shares of common stock outstanding as of December 31, 2018, after giving effect to the conversion of all our outstanding shares of convertible preferred stock into an aggregate of 16,993,194 shares of common stock in connection with the closing of this offering, and excludes:

 

   

3,597,638 shares of common stock issuable upon the exercise of outstanding stock options as of December 31, 2018, at a weighted-average exercise price of $4.40 per share;

 

   

1,218,354 shares of common stock issuable upon the exercise of outstanding stock options granted after December 31, 2018, at a weighted-average exercise price of $11.05 per share;

 

   

75,000 shares of common stock issuable upon the exercise of stock options that we expect to grant upon the closing of this offering at an exercise price per share equal to the closing price of our common stock as reported on the Nasdaq Global Market on such date;

 

   

3,467,253 shares of common stock reserved for future issuance under our 2019 equity incentive plan (2019 Plan) (including 630,779 shares of common stock reserved for issuance under our 2013 equity incentive plan, as amended (Prior Plan), which shares will be added to the 2019 Plan upon its effectiveness), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering; and

 

   

288,938 shares of common stock reserved for future issuance under our 2019 employee stock purchase plan (ESPP), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering.

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

 

   

the conversion of all our outstanding shares of convertible preferred stock into an aggregate of 16,993,194 shares of common stock in connection with the closing of this offering;

 

   

no exercise of the outstanding options described above;

 

   

no exercise by the underwriters of their option to purchase up to a total of additional 1,323,529 shares of our common stock;

 

   

the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to and upon the completion of this offering, respectively; and

 

   

a 1-for-3.85 reverse stock split of our common stock effected on April 5, 2019.

Certain affiliates of our directors and other principal stockholders have indicated an interest in purchasing an aggregate of approximately $50 million of shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any of these stockholders, or any of these stockholders may determine to purchase more, fewer or no shares in this offering.



 

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Summary Financial Data

The following tables set forth a summary of our financial data as of, and for the periods ended on, the dates indicated. We have derived the summary statement of operations data for the years ended December 31, 2017 and 2018 from our audited financial statements included elsewhere in this prospectus. The summary financial data included in this section is not intended to replace the financial statements and related notes included elsewhere in this prospectus. You should read the following summary financial data in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.

 

     Years Ended December 31,  
           2017                 2018        
     (In thousands, except share
and per share data)
 

Statement of Operations Data:

    

Operating expenses:

    

Research and development

   $ 15,241     $ 21,062  

General and administrative

     1,487       4,578  
  

 

 

   

 

 

 

Total operating expenses

     16,728       25,640  
  

 

 

   

 

 

 

Loss from operations

     (16,728     (25,640

Other income (expense), net

     135       855  
  

 

 

   

 

 

 

Net loss and comprehensive loss(1)

   $ (16,593   $ (24,785
  

 

 

   

 

 

 

Net loss per share, basic and diluted(1)

   $ (4.97   $ (7.31
  

 

 

   

 

 

 

Shares used in computing net loss per share, basic and diluted(1)

     3,337,640       3,388,586  
  

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted (unaudited)(1)

     $ (1.66
    

 

 

 

Shares used in computing pro forma net loss per share, basic and diluted (unaudited)(1)

       14,938,047  
    

 

 

 

 

(1)

See Note 2 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share, pro forma net loss per share, and the weighted-average number of shares used in the computation of the per share amounts.

 

     As of December 31, 2018  
     Actual     Pro Forma(2)     Pro Forma As
Adjusted(3)(4)
 
     (In thousands)  

Balance Sheet Data:

      

Cash and cash equivalents

   $ 101,029   $ 101,029     $ 237,829  

Working capital(1)

     96,201       96,201       233,001  

Total assets

     103,280       103,280       240,080  

Convertible preferred stock

     145,916             —    

Accumulated deficit

     (50,753     (50,753     (50,753

Total stockholders’ (deficit) equity

     (48,406     97,510       234,310  

 

(1)

We define working capital as current assets less current liabilities. See our audited financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and liabilities.

(2)

The pro forma column reflects the automatic conversion of all outstanding shares of our convertible preferred stock into 16,993,194 shares of common stock immediately upon the closing of this offering.



 

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(3)

The pro forma as adjusted column gives effect to the adjustments described in footnote (1) above and the receipt of $136.8 million in net proceeds from our sale of 8,823,530 shares of common stock in this offering at an assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(4)

Each $1.00 increase or decrease in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase or decrease, respectively, the amount of cash and cash equivalents, working capital, total assets and total stockholders’ (deficit) equity by approximately $8.2 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. A 1,000,000 share increase or decrease in the number of shares we are offering would increase or decrease, respectively, the amount of cash and cash equivalents, working capital, total assets and stockholders’ (deficit) equity by approximately $15.8 million, assuming the assumed initial public offering price per share (the midpoint of the price range set forth on the cover page of this prospectus) remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.



 

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RISK FACTORS

Investing in our common stock is speculative and involves a high degree of risk. Before investing in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant operating losses since our inception and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.

Investment in drug development is a highly speculative undertaking and involves a substantial degree of risk. We are a clinical-stage biopharmaceutical company that was formed in 2013 and commenced operations in 2014. We have no approved products for commercial sale and have not generated any revenue from product sales or from licenses or collaborations. We continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we have never been profitable and have incurred losses in each year since inception. For the years ended December 31, 2017 and 2018, we reported a net loss of $16.6 million, and $24.8 million, respectively. As of December 31, 2018, we had an accumulated deficit of $50.8 million.

Since our inception, we have focused substantially all of our efforts and financial resources on the research, preclinical and clinical development of our lead drug candidate, repotrectinib, and our research efforts on other potential drug candidates. To date, we have funded our operations primarily with proceeds from sales of shares of our common and convertible preferred stock. From inception through December 31, 2018, we received an aggregate of $146.7 million in net proceeds from such sales. As of December 31, 2018, our cash and cash equivalents were $101.0 million.

We expect to incur increasing levels of operating losses for the foreseeable future, particularly as we advance repotrectinib through clinical development. Our prior losses, combined with expected future losses, have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to significantly increase in connection with our additional planned clinical trials for repotrectinib, including the Phase 2 portion of TRIDENT-1, and development of our other pipeline drug candidates, and any other future drug candidates we may choose to pursue. In addition, if we obtain marketing approval for repotrectinib, we will incur significant sales, marketing and outsourced manufacturing expenses in connection with the commercialization of repotrectinib. Once we are a public company, we will incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue and we do not know when, or if, we will generate any revenue. We do not

 

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expect to generate significant revenue unless and until we obtain marketing approval for, and begin to sell, repotrectinib or another drug candidate. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:

 

   

initiate and successfully complete the Phase 2 portion of TRIDENT-1;

 

   

initiate and successfully complete all safety, pharmacokinetic and other studies required to obtain U.S. and foreign marketing approval for repotrectinib as a treatment for patients with ROS1+ advanced NSCLC and patients with NTRK+ advanced solid tumors;

 

   

initiate and successfully complete other later-stage clinical trials that meet their clinical endpoints;

 

   

obtain favorable results from our clinical trials and apply for and obtain marketing approval for repotrectinib;

 

   

establish licenses, collaborations or strategic partnerships that may increase the value of our programs;

 

   

successfully manufacture or contract with others to manufacture repotrectinib and our other drug candidates;

 

   

commercialize repotrectinib, if approved, by building a sales force or entering into collaborations with third parties;

 

   

obtain, maintain, protect and defend our intellectual property portfolio; and

 

   

achieve market acceptance of repotrectinib in the medical community and with third-party payors.

To become and remain profitable, we must succeed in designing, developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials for our drug candidates, designing additional drug candidates, establishing arrangements with third parties for the manufacture of clinical supplies of our drug candidates, obtaining marketing approval for our drug candidates and manufacturing, marketing and selling any products for which we may obtain marketing approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

In cases where we are successful in obtaining regulatory approval to market one or more of our drug candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement, and whether we own the commercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses we will incur or when, or if, we will be able to achieve profitability. If we decide to or are required by the FDA or other regulatory authorities to perform studies or clinical trials in addition to those currently expected, or if there are any delays in establishing appropriate manufacturing arrangements for, in initiating or completing our current and planned clinical trials for, or in the development of, any of our drug candidates, our expenses could increase materially and profitability could be further delayed.

 

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Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

Even if this offering is successful, we will require substantial additional funding. If we are unable to raise capital on favorable terms when needed, we could be forced to delay, reduce or eliminate our research or drug development programs or any future commercialization efforts.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our lead drug candidate, repotrectinib, and other pipeline drug candidates through clinical development and seek to design additional drug candidates from our macrocycle platform. We expect increased expenses as we continue our research and development, initiate additional clinical trials, and seek marketing approval for our lead program and our other drug candidates. In addition, if we obtain marketing approval for any of our drug candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

In addition, our drug candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for sale for at least the next several years, if ever, and such funds, if raised, may not be sufficient to enable us to continue to implement our business strategy. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. 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 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. We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses, and capital expenditure requirements through at least the next 18 months from the date of this offering. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Changes beyond our control may occur that would cause us to use our available capital before that time, including changes in and progress of our drug development activities and changes in regulation. Our future capital requirements will depend on many factors, including:

 

   

the progress and results of our ongoing Phase 1 portion of TRIDENT-1;

 

   

the progress and results of our planned Phase 2 portion of TRIDENT-1 and any other additional planned clinical trials evaluating repotrectinib;

 

   

the scope, rate of progress, results and costs of drug design, preclinical development and clinical trials for the other drug candidates in our pipeline;

 

   

the extent to which we develop, in-license or acquire other pipeline drug candidates or technologies;

 

   

the number and development requirements of other drug candidates that we may pursue, and other indications for our current drug candidates that we may pursue;

 

   

the costs, timing and outcome of regulatory review of our drug candidates and any companion diagnostics we may pursue;

 

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the scope and costs of making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our drug candidates;

 

   

the cost associated with commercializing any approved drug candidates, including to establish sales and marketing capabilities;

 

   

the cost 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 repotrectinib, if approved, or our other pipeline drug 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; and

 

   

to the extent we pursue strategic collaborations, including collaborations to commercialize repotrectinib or any of our other pipeline drug candidates, our ability to establish and maintain collaborations on favorable terms, if at all.

Even if this offering is successful, we will require additional capital to complete our planned clinical development programs for our current drug candidates to obtain regulatory approval. Any additional capital-raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future drug candidates, if approved.

Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or drug candidates.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not currently have any committed external source of funds. 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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. 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 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 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 third parties to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

 

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Risks Related to the Design and Development of Our Drug Candidates

We are early in our development efforts and our lead drug candidate, repotrectinib, is currently only in a Phase 1 clinical trial. We have not successfully completed late-stage clinical trials or obtained regulatory approval for any drug candidate. We may never obtain approval for any of our drug candidates or achieve or sustain profitability.

We currently have no products that are approved for sale. We are early in our development efforts and our only clinical-stage drug candidate is currently in a Phase 1 clinical trial. There can be no assurance that repotrectinib or our other drug candidates in development will achieve success in their clinical trials or obtain regulatory approval.

Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of repotrectinib or other drug candidates in development. The success of our drug candidates, including repotrectinib, will depend on several factors, including the following:

 

   

successful completion of preclinical studies and clinical trials;

 

   

acceptance of INDs by the FDA or other clinical trial or similar applications from foreign regulatory authorities for our future clinical trials for our pipeline drug candidates;

 

   

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 drug candidates to the satisfaction of the FDA and foreign regulatory agencies;

 

   

our ability, or that of our collaborators, to develop and obtain clearance or approval of companion diagnostics, on a timely basis, or at all;

 

   

receipt and related terms of marketing approvals from applicable regulatory authorities, including the completion of any required post-marketing studies or trials;

 

   

raising additional funds necessary to complete clinical development of and commercialize our drug candidates;

 

   

obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our drug candidates;

 

   

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our drug candidates;

 

   

developing and implementing marketing and reimbursement strategies;

 

   

establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;

 

   

acceptance of our products, if and when approved, by patients, the medical community and third-party payors;

 

   

effectively competing with other therapies;

 

   

obtaining and maintaining third-party payor coverage and adequate reimbursement;

 

   

protecting and enforcing our rights in our intellectual property portfolio; and

 

   

maintaining a continued acceptable safety profile of the products following approval.

Many of these factors are beyond our control, and it is possible that none of our drug candidates will ever obtain regulatory approval even if we expend substantial time and resources seeking such

 

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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 drug candidates, which would materially harm our business. For example, our business could be harmed if results of our clinical trials of repotrectinib vary adversely from our expectations.

Drug development involves a lengthy and expensive process. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of repotrectinib or our other drug candidates.

We currently have a single drug candidate in clinical development, and the risk of failure is high. We are unable to predict when or if our drug candidates will prove effective or safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of any drug candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our drug candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim or preliminary results of a clinical trial do not necessarily predict final results. In particular, the small number of patients in our early clinical trials may make the results of these trials less predictive of the outcome of later clinical trials. In addition, although we have observed encouraging preliminary overall response rates in the dose escalation stage of the Phase 1 portion of our ongoing TRIDENT-1 clinical trial of repotrectinib, the primary objectives were to determine the safety, tolerability and maximum tolerated dose of repotrectinib and to determine a recommended Phase 2 dose and not to demonstrate efficacy. The assessments of efficacy from this portion of the clinical trial were not designed to demonstrate statistical significance and may not be predictive of the results of further clinical trials of repotrectinib. For example, out of the 20 heavily pretreated evaluable ALK+ patients enrolled in the Phase 1 portion of TRIDENT-1, five achieved stable disease and no partial responses were observed. Based on the lack of responses, we will no longer enroll ALK+ NSCLC patients in the Phase 1c and Phase 2 portions of TRIDENT-1.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to obtain marketing approval or commercialize our drug candidates, including:

 

   

regulators or institutional review boards (IRBs)/ethics committees (ECs) may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

 

   

we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

 

   

clinical trials for our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials, delay clinical trials or abandon product development programs;

 

   

the number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of these clinical trials may be longer than we anticipate;

 

   

competition for clinical trial participants from investigational and approved therapies may make it more difficult to enroll patients in our clinical trials;

 

   

we or third-party collaborators may fail to obtain the clearance or approval of companion diagnostic tests, if required, on a timely basis, or at all;

 

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our third-party contractors may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to comply with regulatory requirements;

 

   

we may have to suspend or terminate clinical trials for our drug candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;

 

   

our drug candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs/ECs to suspend or terminate the trials;

 

   

the cost of clinical trials for our drug candidates may be greater than we anticipate;

 

   

the supply or quality of our drug candidates or other materials necessary to conduct clinical trials for our drug candidates may be insufficient or inadequate and result in delays or suspension of our clinical trials; and

 

   

we or a diagnostic development partner may fail to receive regulatory approval of a companion diagnostic for use in the planned Phase 2 portion of TRIDENT-1, or for use with a marketed product.

Our product development costs will increase if we experience delays in preclinical studies or clinical trials or in obtaining marketing approvals. We do not know whether any of our planned preclinical studies or clinical trials will begin on a timely basis or at all, will need to be restructured or will be completed on schedule, or at all. For example, the FDA may place a partial or full clinical hold on, any of our clinical trials for a variety of reasons. In February 2018, we received a Deficiency–Potential Hold Issues letter from the FDA stating that the number of patients treated in the ongoing Phase 1 portion of our ongoing TRIDENT-1 clinical trial exceeded the protocol-specified dose escalation enrollment plan. Additionally, the Development Safety Update Report (DSUR) and the Investigator’s Brochure (IB) had not been updated with available clinical safety information. Following discussion with the FDA, our IND was placed on partial clinical hold pending the submission of an amended protocol, an updated DSUR and updated IB. The partial clinical hold was removed on June 29, 2018 after the requested documents were revised and TRIDENT-1 resumed patient enrollment.

Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our drug candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our drug candidates and may harm our business and results of operations.

Any delays in the commencement or completion, or termination or suspension, of our ongoing, planned or future clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

Before we can initiate clinical trials of a drug candidate in any indication, we must submit the results of preclinical studies to the FDA along with other information, including information about the drug candidate’s chemistry, manufacturing and controls and our proposed clinical trial protocol, as part of an IND or similar regulatory filing.

Before obtaining marketing approval from the FDA for the sale of repotrectinib or any other drug candidate in any indication, we must conduct extensive clinical studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming and uncertain as to outcome. In addition, we expect to rely in part on preclinical, clinical and quality data generated by our contract research organizations (CROs) and other third parties for regulatory submissions for our drug candidates. While we have or will have agreements governing these third parties’ services, we have limited influence over

 

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their actual performance. If these third parties do not make data available to us, or, if applicable, make regulatory submissions in a timely manner, in each case pursuant to our agreements with them, our development programs may be significantly delayed and we may need to conduct additional studies or collect additional data independently. In either case, our development costs would increase. To date, we have only submitted an IND for the current Phase 1/2 clinical trial of repotrectinib, and we will need to submit an IND for acceptance by the FDA prior to initiating any clinical trials in the United States for our other drug candidates.

The FDA may require us to conduct additional preclinical studies for any drug candidate before it allows us to initiate clinical trials under any IND, which may lead to additional delays and increase the costs of our preclinical development programs. As an example, based on our recent End of Phase 1 meeting with the FDA, we are required to provide the FDA with additional information from the ongoing Phase 1 portion of TRIDENT-1, including dose-exposure analyses for both efficacy and safety to support our recommended Phase 2 dose prior to initiation of the planned Phase 2 portion.

Any delays in the commencement or completion of our ongoing, planned or future clinical trials could significantly affect our product development costs. We do not know whether our planned trials will begin on time or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

 

   

the FDA disagreeing as to the design or implementation of our clinical trials or with our recommended Phase 2 dose for repotrectinib based on the planned dose-exposure analyses that we must complete and submit to the FDA for review and approval prior to initiating the Phase 2 portion of TRIDENT-1;

 

   

obtaining FDA authorization to commence a trial or reaching a consensus with the FDA on trial design;

 

   

failing to obtain regulatory clearance or approval of companion diagnostics we may use to identify patients for enrollment in our clinical trials;

 

   

any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

   

obtaining approval from one or more IRBs/ECs;

 

   

IRBs/ECs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;

 

   

changes to clinical trial protocol;

 

   

clinical sites deviating from trial protocol or dropping out of a trial;

 

   

failing to manufacture or obtain sufficient quantities of drug candidate or, if applicable, combination therapies for use in clinical trials;

 

   

patients failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up;

 

   

patients choosing an alternative treatment, or participating in competing clinical trials;

 

   

lack of adequate funding to continue the clinical trial;

 

   

patients experiencing severe or unexpected drug-related adverse effects;

 

   

occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

 

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selecting or being required to use clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;

 

   

a facility manufacturing our drug candidates or any of their components being ordered by the FDA to temporarily or permanently shut down due to violations of current good manufacturing practice (cGMP) regulations or other applicable requirements, or infections or cross-contaminations of drug candidates in the manufacturing process;

 

   

any changes to our manufacturing process that may be necessary or desired;

 

   

third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices (GCP) or other regulatory requirements;

 

   

us, or our third-party contractors not performing data collection or analysis in a timely or accurate manner or improperly disclosing data prematurely or otherwise in violation of a clinical trial protocol; or

 

   

third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs/ECs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a pharmaceutical, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs/ECs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

Certain of our scientific advisors or consultants who receive compensation from us are investigators for our clinical trial. Under certain circumstances, we may be required to report some of these relationships to the FDA. Although we believe our existing relationships are within the FDA’s guidelines, the FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of repotrectinib. If we experience delays in the completion of, or termination of, any clinical trial of repotrectinib or any other drug candidate, the commercial prospects of such drug candidate will be harmed, and our ability to generate product revenues will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues which may harm our business, financial condition, results of operations and prospects significantly.

If we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory approval could be delayed or prevented.

We may not be able to initiate or continue our ongoing or planned clinical trials for our drug candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in

 

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these trials as required by the FDA. In addition, some of our competitors may have ongoing clinical trials for drug candidates that would treat the same patients as repotrectinib or our other drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ drug candidates. This is acutely relevant for our development of repotrectinib for the treatment of patients with NTRK+ advanced solid tumors, an indication for which the approved TKI larotrectinib is required to complete post-marketing studies, and our development of repotrectinib for the treatment of patients with ROS1+ advanced NSCLC and patients with NTRK+ advanced solid tumors, an indication for which investigational drugs such as entrectinib are competing for clinical trial participants. Patient enrollment is also affected by other factors, including:

 

   

severity of the disease under investigation;

 

   

our ability to recruit clinical trial investigators of appropriate competencies and experience;

 

   

the incidence and prevalence of our target indications;

 

   

clinicians’ and patients’ awareness of, and perceptions as to the potential advantages and risks of our drug candidates in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

 

   

invasive procedures required to enroll patients and to obtain evidence of the drug candidate’s performance during the clinical trial;

 

   

availability and efficacy of approved medications for the disease under investigation;

 

   

eligibility criteria defined in the protocol for the trial in question;

 

   

the size of the patient population required for analysis of the trial’s primary endpoints;

 

   

efforts to facilitate timely enrollment in clinical trials;

 

   

whether we are subject to a partial or full clinical hold on any of our clinical trials;

 

   

reluctance of physicians to encourage patient participation in clinical trials;

 

   

the ability to monitor patients adequately during and after treatment;

 

   

our ability to obtain and maintain patient consents; and

 

   

proximity and availability of clinical trial sites for prospective patients.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs, which would cause the value of our company to decline and limit our ability to obtain additional financing.

Adverse side effects or other safety risks associated with repotrectinib or our other drug candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials or abandon further development, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

As is the case with pharmaceuticals generally, we have observed side effects and adverse events associated with repotrectinib. As of the October 2018 data cut-off date for the Phase 1 portion of our ongoing Phase 1/2 clinical trial of repotrectinib, TRIDENT-1, the most common treatment emergent adverse events were Grade 1 or Grade 2 dizziness, dysgeusia, constipation, dyspnea, paresthesia, fatigue, anemia, nausea, cough, pyrexia, headache, vomiting, upper respiratory tract infection, muscular weakness, pain in extremity, abdominal pain, ataxia, and pleural effusion. Two patients discontinued treatment due to adverse events (one with a Grade 3 pleural effusion, another with Grade 3 hypoxia/dyspnea) that were determined to be related to study treatment. Three Grade 5 TEAEs have occurred, with two, respiratory failure (n=1) and sepsis (n=1), determined to not be related to treatment

 

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and occurring during the 28 day-follow up period after treatment discontinuation. The two Grade 5 TEAEs that were determined to not be treatment related include: one patient with NTRK+ angiosarcoma on the right leg with a pre-existing open wound infection on the left leg who was treated at 40 mg QD and developed Grade 5 sepsis and passed away 7 days after stopping repotrectinib; and one patient with ROS1+ NSCLC treated at 40 mg QD who developed Grade 5 respiratory failure due to disease progression 5 days after repotrectinib discontinuation. The third Grade 5 TEAE involved a patient with ALK+ NSCLC and a past medical history of diabetes, obesity and hypertension who was dosed at 240 mg QD (once daily) of repotrectinib and experienced a Grade 5 event of sudden death on day 10 of cycle 1, which we determined to be possibly related to study treatment. Additionally, since the October 31, 2018 data cut-off date, there has been one additional Grade 5 TEAE of respiratory failure reported as related to disease progression and not treatment-related in a ROS1+ NSCLC patient initially treated at 120 mg QD who escalated their dose to 160 mg BID due to disease progression 30 days prior to the event.

Results of our ongoing and planned clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our drug candidates could result in the delay, suspension or termination of clinical trials by us or the FDA for a number of reasons. Additionally, due to the high mortality rates of the cancers for which we are initially pursuing development and the pretreated nature of many patients in our ongoing and planned clinical trials of repotrectinib, a material percentage of patients in these clinical trials may die during a trial, which could impact development of repotrectinib. If we elect or are required to delay, suspend or terminate any clinical trial, the commercial prospects of our drug candidates will be harmed and our ability to generate product revenues from this drug candidate will be delayed or eliminated. Serious adverse events observed in clinical trials could hinder or prevent market acceptance of our drug candidates. Any of these occurrences may harm our business, prospects, financial condition and results of operations significantly.

Moreover, if our drug candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may elect to abandon or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for our drug candidates, if approved. For example, we are required to conduct an embryo-fetal toxicology study of repotrectinib, and any adverse findings from this study may delay, prevent or adversely impact any marketing approval we may be able to obtain for repotrectinib in humans. We may also be required to modify our study plans based on findings in our clinical trials. Many drugs that initially showed promise in early stage testing have later been found to cause side effects that prevented further development. In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations.

It is possible that as we test our drug candidates in larger, longer and more extensive clinical trials, including with different dosing regimens, or as the use of our drug candidates becomes more widespread following any regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. If such side effects become known later in development or upon approval, if any, such findings may harm our business, financial condition, results of operations and prospects significantly.

In addition, if any of our drug candidates receive marketing approval, and we or others later identify undesirable side effects caused by treatment with such drug, a number of potentially significant negative consequences could result, including:

 

   

regulatory authorities may withdraw approval of the drug;

 

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we may be required to recall a product or change the way the drug is administered to patients;

 

   

regulatory authorities may require additional warnings on the label, such as a “black box” warning or a contraindication, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

 

   

we may be required to implement a Risk Evaluation and Mitigation Strategy (REMS) or create a medication guide outlining the risks of such side effects for distribution to patients;

 

   

additional restrictions may be imposed on the marketing or promotion of the particular product or the manufacturing processes for the product or any component thereof;

 

   

we could be sued and held liable for harm caused to patients;

 

   

the drug could become less competitive; and

 

   

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our drug candidates, if approved, and could significantly harm our business, financial condition, results of operations and prospects.

Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available, and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials, such as the preliminary data analysis for the Phase 1 portion of our TRIDENT-1 trial announced in June and September 2018. These interim updates are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse changes between interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our common stock after this offering. See the description of risks under the heading “Risks Related to our Common Stock and this Offering” for more disclosure related to the risk of volatility in our stock price.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular drug candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information. You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to

 

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future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business. If the preliminary or topline data that we report differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, repotrectinib or any other drug candidates may be harmed, which could harm our business, financial condition, results of operations and prospects.

If we are unable to successfully develop companion diagnostic tests for our drug candidates that require such tests, or experience significant delays in doing so, we may not realize the full commercial potential of these drug candidates.

We plan to develop, either by ourselves or with collaborators, companion diagnostic tests for our drug candidates for certain indications. To be successful, we or our collaborators will need to address a number of scientific, technical, regulatory and logistical challenges. We have no prior experience with medical device or diagnostic test development. If we choose to develop and seek FDA approval for companion diagnostic tests on our own, we will require additional personnel. We may rely on third parties for the design, development and manufacture of companion diagnostic tests for our therapeutic drug candidates that require such tests. If these parties are unable to successfully develop companion diagnostics for these therapeutic drug candidates, or experience delays in doing so, we may be unable to enroll enough patients for our current and planned clinical trials, the development of these therapeutic drug candidates may be adversely affected, these therapeutic drug candidates may not obtain marketing approval, and we may not realize the full commercial potential of any of these therapeutics that obtain marketing approval. We intend to pursue co-development of repotrectinib with a next-generation sequencing-based companion diagnostic, and plan to initially develop a prototype companion diagnostic for use as a clinical trial assay to confirm the presence of ROS1, NTRK or ALK gene fusions in patients prior to enrollment in the Phase 2 portion of TRIDENT-1. Any failure to successfully develop this companion diagnostic may cause or contribute to delayed enrollment of this trial, and may prevent us from initiating the Phase 2 portion of TRIDENT-1 as well as ultimately seek approval for repotrectinib in patients with ROS1+ advanced NSCLC and patients with NTRK+ advanced solid tumors. As a result, our business, results of operations and financial condition could be materially harmed.

The failure to obtain required regulatory clearances or approvals for any companion diagnostic tests that we may pursue may prevent or delay approval of any of our drug candidates. Moreover, the commercial success of any of our drug candidates that require a companion diagnostic will be tied to the receipt of any required regulatory clearances or approvals and the continued availability of such tests.

In connection with the clinical development of our drug candidates for certain indications, we may work with collaborators to develop or obtain access to companion diagnostic tests to identify appropriate patients for our drug candidates. We may rely on third parties for the development, testing and manufacturing of these companion diagnostics, the application for and receipt of any required regulatory clearances or approvals, and the commercial supply of these companion diagnostics. The FDA and foreign regulatory authorities regulate companion diagnostics as medical devices that will likely be subject to clinical trials in conjunction with the clinical trials for drug candidates, and which will require separate regulatory clearance or approval prior to commercialization. This process could include additional meetings with health authorities, such as a pre-submission meeting and the requirement to submit an investigational device exemption. In the case of a companion diagnostic that is designated as “significant risk device,” approval of an investigational device exemption by the FDA and IRB is required before such diagnostic is used in conjunction with the clinical trials for a corresponding drug candidate. We or our third-party collaborators may fail to obtain the required regulatory clearances or approvals, which could prevent or delay approval of our drug candidates. In addition, the commercial success of any of our drug candidates that require a companion diagnostic

 

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will be tied to and dependent upon the receipt of required regulatory clearances or approvals and the continued ability of such third parties to make the companion diagnostic commercially available to us on reasonable terms in the relevant geographies.

We may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and drug candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and drug candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate.

We may not be successful in our efforts to design additional potential drug candidates.

A key element of our strategy is to apply our knowledge and our understanding of the structure, biology and activity of kinase inhibitors to design drug candidates. The therapeutic design and development activities that we are conducting may not be successful in developing drug candidates that are useful in treating cancer or other diseases. Our research programs may initially show promise in identifying potential drug candidates, yet fail to yield drug candidates for clinical development for a number of reasons, including:

 

   

the research methodology used may not be successful in identifying potential drug candidates;

 

   

potential drug candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be drugs that will obtain marketing approval or achieve market acceptance; or

 

   

potential drug candidates may not be effective in treating their targeted diseases.

Research programs to identify and design new drug candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on a potential drug candidate that ultimately proves to be unsuccessful. If we are unable to identify and design suitable drug candidates for preclinical and clinical development, we will not be able to obtain revenues from the sale of products in future periods, which likely would result in significant harm to our financial position and adversely impact our stock price.

We may not be able to obtain or maintain orphan drug designation or exclusivity for our drug candidates.

Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as “orphan drugs.” Under the Orphan Drug Act, the FDA may designate a drug candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or if the disease or condition affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making a drug product available in the United States for the type of disease or condition will be recovered from sales of the product.

 

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Orphan drug designation entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. Additionally, if a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity. This means that the FDA may not approve any other applications to market the same drug or biological product for the same indication for seven years, except in certain circumstances, including proving clinical superiority (i.e., another product is safer, more effective or makes a major contribution to patient care) to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity, or obtain approval for the same product but for a different indication than that for which the orphan product has exclusivity. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective.

We have obtained orphan drug designation in the United States for use of repotrectinib in treatment of NSCLC with adenocarcinoma histology. We may apply for similar designations in other geographies or for our other drug candidates in the future. Orphan drug status does not ensure that we will receive marketing exclusivity in a particular market, and we cannot assure you that any future application for orphan drug designation in any other geography or with respect to any other drug candidate will be granted. Orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process.

Risks Related to Our Dependence on Third Parties

We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.

We do not have the ability to independently conduct all aspects of our preclinical testing or clinical trials ourselves. As a result, we are dependent on third parties to conduct our ongoing and planned clinical trials of repotrectinib and preclinical studies, and any preclinical studies and clinical trials of any other drug candidates. The timing of the initiation and completion of these trials will therefore be partially controlled by such third parties and may result in delays to our development programs. Specifically, we expect CROs, clinical investigators and consultants to play a significant role in the conduct of these trials and the subsequent collection and analysis of data. However, we will not be able to control all aspects of their activities. Nevertheless, we are responsible for ensuring that each clinical trial is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA for drug candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical trial investigators and clinical trial sites. If we or any of our CROs or clinical trial sites fail to comply with applicable GCP requirements, the data generated in our clinical trials may be deemed unreliable, and the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure or the failure of third parties on whom we rely to comply with these regulations may require us to stop and/or repeat clinical trials, which would delay the marketing approval process.

 

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There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If our clinical trial site terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trial unless we are able to transfer those subjects to another qualified clinical trial site, which may be difficult or impossible. In addition, certain of our scientific advisors or consultants who receive compensation from us are clinical trial investigators for our clinical trial. Although we believe our existing relationships are within the FDA’s guidelines, if these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA. Any such delay or rejection could prevent us from commercializing repotrectinib or any other drug candidates.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors for whom they may also be conducting clinical trials or other pharmaceutical product development activities that could harm our competitive position. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for repotrectinib or any other drug candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our products.

Manufacturing pharmaceutical products is complex and subject to product loss for a variety of reasons. We contract with third parties for the manufacture of our drug candidates for preclinical testing and clinical trials and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our drug candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

We do not have any manufacturing facilities. We produce in our laboratory very small quantities of small molecules for evaluation in our research programs. We rely, and expect to continue to rely, on third parties for the manufacture of our drug candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our drug candidates obtain marketing approval. Some of our manufacturers represent our sole source of supply, including the China-based supplier of repotrectinib starting material. This reliance on third parties increases the risk that we will not have sufficient quantities of our drug candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

We may be unable to establish any agreements with third-party manufacturers or to do so on favorable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

 

   

reliance on the third party for regulatory, compliance and quality assurance;

 

   

operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or the issuance of an FDA Form 483 notice or warning letter;

 

   

the possible breach of the manufacturing agreement by the third party;

 

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the possible misappropriation of our proprietary information, including our trade secrets and know how;

 

   

the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us;

 

   

carrier disruptions or increased costs that are beyond our control; and

 

   

failure to deliver our drugs under specified storage conditions and in a timely manner.

We have only limited supply arrangements in place with respect to our drug candidates, and these arrangements do not extend to commercial supply. We acquire many key materials on a purchase order basis. As a result, we do not have long-term committed arrangements with respect to our drug candidates and other materials. If we obtain marketing approval for any of our drug candidates, we will need to establish an agreement for commercial manufacture with a third party.

Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. Our failure, or the failure of our third-party manufacturers and suppliers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of drug candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. In addition, our third-party manufacturers and suppliers are subject to numerous environmental, health and safety laws and regulations, including those governing the handling, use, storage, treatment and disposal of waste products, and failure to comply with such laws and regulations could result in significant costs associated with civil or criminal fines and penalties for such third parties. Based on the severity of regulatory actions that may be brought against these third parties in the future, our clinical or commercial supply of drug and packaging and other services could be interrupted or limited, which could harm our business.

Our drug candidates and any products that we may develop may compete with other drug candidates and products for access to manufacturing facilities. As a result, we may not obtain access to these facilities on a priority basis or at all. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

As we prepare for later-stage clinical trials and potential commercialization, we will need to take steps to increase the scale of production of our drug candidates. We have not yet scaled up the manufacturing process for any of our drug candidates. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in our drug candidates or in the manufacturing facilities in which our drug candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.

Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance. If our current contract manufacturers for preclinical and clinical testing cannot perform as agreed, we may be required to replace such manufacturers. Although we believe that there are several potential alternative manufacturers who could manufacture our drug candidates, we may incur added costs and delays in identifying and qualifying any such replacement manufacturer or be able to reach agreement with any alternative manufacturer.

Our current and anticipated future dependence upon others for the manufacture of our drug candidates or products may adversely affect our future profit margins and our ability to commercialize any products that obtain marketing approval on a timely and competitive basis.

 

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We may enter into collaborations with third parties for the development and commercialization of our drug candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these drug candidates.

We may in the future seek third-party collaborators for the development and commercialization of some of our drug candidates on a selected basis. Our likely collaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our drug candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. Collaborations involving our drug candidates would pose numerous risks to us, including the following:

 

   

collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;

 

   

collaborators may de-emphasize or not pursue development and commercialization of our drug candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, including as a result of a sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;

 

   

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing;

 

   

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or drug candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

 

   

a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products;

 

   

collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property related proceedings that could jeopardize or invalidate our proprietary information and intellectual property or expose us to potential litigation or other intellectual property related proceedings;

 

   

disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or drug candidates or that result in costly litigation or arbitration that diverts management attention and resources;

 

   

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable drug candidates;

 

   

collaboration agreements may not lead to development or commercialization of drug candidates in the most efficient manner or at all; and

 

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if a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.

Risks Related to Regulatory Approval and Marketing of Our Drug Candidates and Other Legal Compliance Matters

The development and commercialization of pharmaceutical products are subject to extensive regulation, and we may not obtain regulatory approvals for repotrectinib or any other drug candidates, on a timely basis or at all.

The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import, marketing, distribution, adverse event reporting, including the submission of safety and other post-marketing information and reports, and other possible activities relating to repotrectinib, currently our only drug candidate in a clinical trial, as well as any other drug candidate that we may develop in the future, are subject to extensive regulation. Marketing approval of drugs in the United States requires the submission of a new drug application (NDA) to the FDA and we are not permitted to market any drug candidate in the United States until we obtain approval from the FDA of the NDA for that product. An NDA must be supported by extensive clinical and preclinical data, as well as extensive information regarding pharmacology, chemistry, manufacturing and controls.

FDA approval of an NDA is not guaranteed, and the review and approval process is an expensive and uncertain process that may take several years. The FDA also has substantial discretion in the approval process. The number and types of preclinical studies and clinical trials that will be required for NDA approval varies depending on the drug candidate, the disease or the condition that the drug candidate is designed to treat and the regulations applicable to any particular drug candidate. For example, if successful, we believe that the Phase 2 portion of TRIDENT-1 may be sufficient to support FDA approval of an NDA for repotrectinib, but the FDA may disagree with the sufficiency of our data and require additional clinical trials. Additionally, depending upon the results of the Phase 2 portion of TRIDENT-1, we may choose to seek Subpart H Accelerated Approval for repotrectinib, which would require completion of a confirmatory trial to validate the clinical benefit of the drug. Despite the time and expense associated with preclinical studies and clinical trials, failure can occur at any stage. The results of preclinical and early clinical trials of repotrectinib or any other drug candidate may not be predictive of the results of our later-stage clinical trials.

Clinical trial failure may result from a multitude of factors including flaws in trial design, dose selection, placebo effect, patient enrollment criteria and failure to demonstrate favorable safety or efficacy traits, and failure in clinical trials can occur at any stage. Companies in the pharmaceutical industry frequently suffer setbacks in the advancement of clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from clinical trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may further delay, limit or prevent marketing approval.

The FDA could delay, limit or deny approval of a drug candidate for many reasons, including because they:

 

   

may not deem our drug candidate to be adequately safe and effective as compared to available therapies;

 

   

may not agree that the data collected from preclinical studies and clinical trials are acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval, and may impose requirements for additional preclinical studies or clinical trials;

 

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may determine that adverse events experienced by participants in our clinical trials represent an unacceptable level of risk;

 

   

may determine that population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;

 

   

may not accept clinical data from trials, which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;

 

   

may disagree regarding the formulation, labeling and/or the specifications;

 

   

may not approve the manufacturing processes or facilities associated with our drug candidate;

 

   

may change approval policies or adopt new regulations; or

 

   

may not accept a submission due to, among other reasons, the content or formatting of the submission.

Generally, public concern regarding the safety of pharmaceutical products could delay or limit our ability to obtain regulatory approval, result in the inclusion of unfavorable information in our labeling, or require us to undertake other activities that may entail additional costs. We have not obtained FDA approval for any product. This lack of experience may impede our ability to obtain FDA approval in a timely manner, if at all, for repotrectinib.

If we experience delays in obtaining approval or if we fail to obtain approval of repotrectinib, our commercial prospects will be harmed and our ability to generate revenues will be materially impaired which would adversely affect our business, prospects, financial condition and results of operations.

Our failure to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being marketed abroad, and any approval we are granted for our drug candidates in the United States would not assure approval of drug candidates in foreign jurisdictions.

In order to market and sell our products in any jurisdiction outside the United States, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to submit for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

Even if we obtain marketing approval for our drug candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

Even if marketing approval of a drug candidate is granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation, which may include the requirement to implement a REMS or to conduct costly post-marketing studies or clinical trials and

 

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surveillance to monitor the safety or efficacy of the product. We must also comply with requirements concerning advertising and promotion for any of our drug candidates for which we obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved. In addition, manufacturers of approved products and those manufacturers’ facilities are required to ensure that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We and our contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.

Accordingly, assuming we obtain marketing approval for one or more of our drug candidates, we and our contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. As a result, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

Any drug candidate for which we obtain marketing approval will be subject to ongoing enforcement of post-marketing requirements and we could be subject to substantial penalties, including withdrawal of our product from the market, if we fail to comply with all regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

Any drug candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include, but are not limited to, restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding drug distribution and the distribution of samples to physicians and recordkeeping.

The FDA and other federal and state agencies, including the Department of Justice, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. Violations of such requirements may lead to investigations alleging violations of the Food, Drug, and Cosmetic Act (FDCA) and other statutes, including the False Claims Act and other federal and state healthcare fraud and abuse laws as well as state consumer protection laws. Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including:

 

   

litigation involving patients taking our products;

 

   

restrictions on such products, manufacturers or manufacturing processes;

 

   

restrictions on the labeling or marketing of a product;

 

   

restrictions on product distribution or use;

 

   

requirements to conduct post-marketing studies or clinical trials;

 

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warning or untitled letters;

 

   

withdrawal of the products from the market;

 

   

refusal to approve pending applications or supplements to approved applications that we submit;

 

   

recall of products;

 

   

fines, restitution or disgorgement of profits or revenues;

 

   

suspension or withdrawal of marketing approvals;

 

   

damage to relationships with any potential collaborators;

 

   

unfavorable press coverage and damage to our reputation;

 

   

refusal to permit the import or export of our products;

 

   

product seizure; or

 

   

injunctions or the imposition of civil or criminal penalties.

Non-compliance by us or any future collaborator with regulatory requirements, including safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population can also result in significant financial penalties.

Our relationships with customers and third-party payors may be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any drug candidates for which we obtain marketing approval. Our current and future arrangements with healthcare providers, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include the following:

 

   

the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

 

   

the federal civil and criminal false claims laws, including the False Claims Act, which can be enforced by civil whistleblower or qui tam actions on behalf of the government, and the civil monetary penalties law, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment by a federal government program, or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government;

 

   

the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and their implementing regulations, impose criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

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the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;

 

   

the federal transparency requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the ACA), requires manufacturers of drugs, devices, biologics and medical supplies to report to the Centers for Medicare & Medicaid Services (CMS) information related to physician payments and other transfers of value and ownership and investment interests held by physicians and their immediate family members; and

 

   

analogous state laws and regulations such as state anti-kickback and false claims laws and analogous non-U.S. fraud and abuse laws and regulations, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance regulations promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing. State and local laws require the registration of pharmaceutical sales and medical representatives. State and non-U.S. laws that also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our drug candidates and decrease the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any drug candidates for which we obtain marketing approval.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this

 

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legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the MMA applies only to drug benefits for Medicare beneficiaries, private third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private third-party payors.

In March 2010, the former U.S. President signed into law the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

Among the provisions of the ACA of importance to our potential drug candidates are the following:

 

   

annual fees and taxes on manufacturers of certain branded prescription drugs;

 

   

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products;

 

   

a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

 

   

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

 

   

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations;

 

   

expansion of healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

 

   

extension of manufacturers’ Medicaid rebate liability;

 

   

expansion of eligibility criteria for Medicaid programs;

 

   

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

 

   

requirements to report financial arrangements with physicians and teaching hospitals;

 

   

a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and

 

   

a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges as well as recent efforts by the current U.S. President’s administration to repeal or replace certain aspects of the ACA. Since January 2017, the current U.S. President has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive

 

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repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance, delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas (Texas District Court Judge) ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. While the Texas District Court Judge, as well as the current U.S. President’s administration and CMS, have stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals for spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction, triggering the legislation’s automatic reduction to several government programs. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013, and due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding.

Further, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the current U.S. President’s administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. For example, in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product. On January 31, 2019, the U.S. Department of Health and Human Services, Office of Inspector General, proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug products to consumers which, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations. Although some of these, and other proposed measures may require additional authorization to become effective, Congress and the current U.S. President’s administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 (the Right to Try Act) was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no

 

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obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Governments outside of the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, particularly the countries of the European Union (EU), the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our drug candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed. In addition, the recent United Kingdom referendum on its membership in the European Union resulted in a majority of United Kingdom voters voting to exit the European Union, often referred to as Brexit. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations, including those related to the pricing of prescription pharmaceuticals, as the United Kingdom determines which EU laws to replicate or replace. If the United Kingdom were to significantly alter its regulations affecting the pricing of prescription pharmaceuticals, we could face significant new costs. As a result, Brexit could impair our ability to transact business in the European Union and the United Kingdom.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain drug candidates and products outside of the United States and require us to develop and implement costly compliance programs.

If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act (FCPA) prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of such third party in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other

 

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hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain drug candidates and products outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous foreign, federal, state and local environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources, including any available insurance.

In addition, our leasing and operation of real property may subject us to liability pursuant to certain of these laws or regulations. Under existing U.S. environmental laws and regulations, current or previous owners or operators of real property and entities that disposed or arranged for the disposal of hazardous substances may be held strictly, jointly and severally liable for the cost of investigating or remediating contamination caused by hazardous substance releases, even if they did not know of and were not responsible for the releases.

We could incur significant costs and liabilities which may adversely affect our financial condition and operating results for failure to comply with such laws and regulations, including, among other things, civil or criminal fines and penalties, property damage and personal injury claims, costs associated with upgrades to our facilities or changes to our operating procedures, or injunctions limiting or altering our operations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations, which are becoming increasingly more stringent, may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

 

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We are subject to certain U.S. and certain foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations. We can face serious consequences for violations.

U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations prohibit, among other things, companies and their employees, agents, CROs, legal counsel, accountants, consultants, contractors and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of these laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We also expect our non-U.S. activities to increase over time. We expect to rely on third parties for research, preclinical studies and clinical trials and/or to obtain necessary permits, licenses, patent registrations and other marketing approvals. We can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.

Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain sufficient patent protection for our drug candidates, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize our drug candidates successfully may be adversely affected.

Our success depends in large part on our ability to protect our proprietary technologies that we believe are important to our business, including pursuing, obtaining and maintaining patent protection in the United States and other countries intended to cover the composition of matter of our drug candidates, for example, repotrectinib, the methods of use, related technologies and other inventions that are important to our business. In addition to patent protection, we also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. If we do not adequately pursue, obtain, maintain, protect or enforce our intellectual property, third parties, including our competitors, may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

To protect our proprietary position, we file patent applications in the United States and abroad related to our drug candidates that we consider important to our business. The patent application and approval process is expensive, time-consuming and complex. We may not be able to file, prosecute and maintain all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, depending on the terms of any future license agreements to which we may become a party, we may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain the patents, covering technology licensed from third parties. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

Furthermore, the patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in biotechnology and

 

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pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. The standards applied by the United States Patent and Trademark Office (USPTO) and foreign patent offices in granting patents are not always applied uniformly or predictably. In addition, the determination of patent rights with respect to biological and pharmaceutical products commonly involves complex legal and factual questions, which have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Thus, we cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents, whether any issued patents will be found invalid and unenforceable or will be threatened by third parties or whether any issued patents will effectively prevent others from commercializing competing technologies and drug candidates. While we have filed patent applications covering aspects of our current drug candidates, we currently have only a single issued U.S. patent covering repotrectinib and we do not yet have issued patents on the majority of our drug candidates.

Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until at least one patent issues from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file or invent (prior to March 16, 2013) any patent application related to our drug candidates. In addition, we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, collaborators, CROs, contract manufacturers, hospitals, independent treatment centers, consultants, independent contractors, suppliers, advisors and other third parties; however, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. Furthermore, if third parties have filed patent applications related to our drug candidates or technology, we may not be able to obtain our own patent rights to those drug candidates or technology.

Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. For example, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in post-grant review procedures, oppositions, derivations, revocation, reexaminations, inter partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability. Such challenges may result in loss of exclusivity or in our patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and products. Such challenges also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

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In addition, given the amount of time required for the development, testing and regulatory review of new drug candidates, our patents protecting such drug candidates might expire before or shortly after such drug candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our patents and patent applications may in the future be co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

Our pending and future patent applications may not result in patents being issued that protect our drug candidates, in whole or in part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent or in the same manner as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does.

Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued and its scope can be reinterpreted after issuance. Consequently, we do not know whether any of our drug candidates will be protectable or remain protected by valid and enforceable patents. Our competitors and other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors and other third parties may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors or other third parties may seek to market generic versions of any approved products by submitting abbreviated NDAs to the FDA during which process they may claim that patents owned by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

Furthermore, future patents may be subject to a reservation of rights by one or more third parties. For example, to the extent the research resulting in future patent rights or technologies is funded in the future in part by the U.S. government, the government could have certain rights in any resulting patents and technology, including a non-exclusive license authorizing the government to use the invention or to have others use the invention on its behalf for non-commercial purposes. If the U.S. government then decides to exercise these rights, it is not required to engage us as its contractor in connection with doing so. These rights may also permit the government to disclose our confidential information to third parties and to exercise march-in rights to use or allow third parties to use our licensed technology. The government may also exercise its march-in rights if it determines that action is necessary because we failed to achieve practical application of the government-funded technology, because action is

 

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necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such government-funded inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of aforementioned proprietary rights could harm our competitive position, business, financial condition, results of operations, and prospects.

Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (the Leahy-Smith Act) signed into law in September 2011, could increase those uncertainties and costs. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. For example, the Leahy-Smith Act allows third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. In addition, the Leahy-Smith Act has transformed the U.S. patent system from a “first-to-invent” system to a “first-to-file” system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The first-to-file provisions, however, only became effective on March 16, 2013. Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could make it more difficult to obtain patent protection for our inventions and increase the uncertainties and costs surrounding the prosecution of our or our collaboration partners’ patent applications and the enforcement or defense of our or our collaboration partners’ issued patents, all of which could harm our business, results of operations, financial condition and prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to enforce our proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may become involved in lawsuits or administrative disputes to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors and other third parties may infringe, misappropriate or otherwise violate our patents, trademarks, copyrights, trade secrets or other intellectual property. To counter infringement,

 

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misappropriation or other violations, we may be required to file infringement, misappropriation or other violation claims, which can be expensive and time consuming and divert the time and attention of our management and business and scientific personnel. In addition, many of our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can.

Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their patents or their other intellectual property, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In patent litigation in the United States, counterclaims challenging the validity, enforceability or scope of asserted patents are commonplace. Similarly, third parties may initiate legal proceedings against us seeking a declaration that certain of our intellectual property is non-infringed, invalid or unenforceable. The outcome of any such proceeding is generally unpredictable.

In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. If a defendant were to prevail on a legal assertion of invalidity or unenforceability of our patents covering one of our drug candidates, we could lose at least a part, and perhaps all, of the patent protection covering such a drug candidate. Competing drugs may also be sold in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign patent lawsuit, alleging our infringement of a competitor’s patents, we could be prevented from marketing our drugs in one or more foreign countries. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Furthermore, third parties may also raise invalidity or unenforceability claims before administrative bodies in the United States or foreign authorities, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation, cancellation or amendment to our patents in such a way that they no longer cover and protect our drug candidates. The outcome

 

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following legal assertions of invalidity and unenforceability is unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or written description. Grounds for an unenforceability assertion could be an allegation that someone connected with the prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution of the patent. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our licensors, our patent counsel and the patent examiner were unaware during prosecution. Moreover, it is possible that prior art may exist that we are aware of but do not believe is relevant to our current or future patents, but that could nevertheless be determined to render our patents invalid. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our drug candidates. Any such loss of patent protection could have a material adverse impact on our business, financial condition, results of operations and prospects.

We may not be able to effectively enforce our intellectual property and proprietary rights throughout the world.

Filing, prosecuting and defending patents with respect to our drug candidates in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. The requirements for patentability may differ in certain countries, particularly in developing countries. In addition, any future intellectual property license agreements may not always include worldwide rights. Consequently, competitors and other third parties may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States and where our ability to enforce our patents to stop infringing activities may be inadequate. These products may compete with our products in such territories and in jurisdictions where we do not have any patent rights or where any future patent claims or other intellectual property or proprietary rights may not be effective or sufficient to prevent them from competing with us, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Moreover, our ability to protect and enforce our intellectual property and proprietary rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, the laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property and proprietary rights in certain foreign jurisdictions. The legal systems of some countries, including, for example, India, China and other developing countries, do not favor the enforcement of patents and other intellectual property or proprietary rights, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement, misappropriation or other violation of our patents or other intellectual property or proprietary rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the United States and Europe. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business, could put our patents, trademarks or other intellectual property and

 

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proprietary rights at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Furthermore, while we intend to protect our intellectual property and proprietary rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property and proprietary rights in such countries may be inadequate.

If we are sued for infringing, misappropriating or otherwise violating intellectual property or proprietary rights of third parties, such litigation or disputes could be costly and time consuming and could prevent or delay us from developing or commercializing our drug candidates.

Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our drug candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. If any third-party patents, patent applications or other proprietary rights are found to cover our drug candidates or any related companion diagnostics or their compositions, methods of use or manufacturing, we may be required to pay damages, which could be substantial, and we would not be free to manufacture or market our drug candidates or to do so without obtaining a license, which may not be available on commercially reasonable terms, or at all.

We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property or proprietary rights with respect to our drug candidates and technologies we use in our business. Our competitors or other third parties may assert infringement claims against us, alleging that our drug candidates are covered by their patents. We cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be granted in the future. Furthermore, because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because patent claims can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use or sale of our drug candidates. If a patent holder believes our drug candidate infringes its patent rights, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect.

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property or proprietary rights with respect to our drug candidates, including interference proceedings before the USPTO. Third parties may assert infringement, misappropriation or other claims against us based on existing or future intellectual property or proprietary rights. The outcome of intellectual property litigation and other disputes is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of using or manufacturing products. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our drug candidates, products or methods of use, manufacturing or other applicable activities either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be successful in doing so. However, proving invalidity or unenforceability is difficult. For example, in the United States, proving invalidity requires a showing of

 

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clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, or enforceability. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and business and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

If we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property or proprietary rights and we are unsuccessful in demonstrating that such intellectual property or proprietary rights are invalid or unenforceable, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing drug candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing drug candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms, thereby giving our competitors and other third parties access to the same technologies licensed to us. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed such third-party patent rights. A finding of infringement could prevent us from commercializing our drug candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

We may be subject to claims by third parties asserting that our employees or consultants or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Some of our employees and consultants are currently or have been previously employed at universities or at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. These employees and consultants may have executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such other current or previous employment. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of third parties. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property or personnel or sustain damages. Such intellectual property could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our management. Any of the foregoing would have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, while it is our policy to require our employees, consultants and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. In addition, such agreements may not be self-executing such that the intellectual property subject to such agreements may not be assigned to us without additional assignments being executed, and we may fail to obtain such assignments. In addition, such agreements may be breached. Accordingly, we may be forced to

 

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bring claims against third parties, or defend claims that they may bring against us to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel, which would have a material adverse effect on our business, financial condition, results of operations and prospects.

Rights to improvements to our drug candidates may be held by third parties.

In the course of testing our drug candidates, we have entered into agreements with third parties to conduct clinical testing, which provide that improvements to our drug candidates may be owned solely by a party or jointly between the parties. If we determine that rights to such improvements owned solely by a third party are necessary to commercialize our drug candidates or maintain our competitive advantage, we may need to obtain a license from such third party in order to use the improvements and continue developing, manufacturing or marketing the drug candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms, thereby giving our competitors and other third parties access to the same technologies licensed to us. Failure to obtain a license on commercially reasonable terms or at all, or to obtain an exclusive license, could prevent us from commercializing our drug candidates or force us to cease some of our business operations, which could materially harm our business. If we determine that rights to improvements jointly owned between us and a third party are necessary to commercialize our drug candidates or maintain our competitive advantage, we may need to obtain an exclusive license from such third party. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such improvements, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our intellectual property in order to enforce such intellectual property against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

The term of our patents may be inadequate to protect our competitive position on our products.

Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Depending upon the timing, duration and other factors relating to any FDA marketing approval we receive for any of our drug candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Action of 1984 (Hatch-Waxman Amendments). We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Hatch-Waxman Amendments permit a patent term extension of up to five years beyond the normal expiration of the patent, limited to the approved indication (or any additional indications approved during the period of extension), as compensation for patent term lost during the regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to an approved drug is eligible for the extension and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended, and the application for the extension must be submitted prior to the expiration of the patent. However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available for our patents, may refuse to grant extensions to our patents, or may grant more limited extensions than we request. We may not be granted an

 

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extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors and other third parties may be able to obtain approval of competing products following our patent expiration and take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Any of the foregoing would have a material adverse effect on our business, financial condition, results of operations and prospects.

Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent offices, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on any issued patent are due to be paid to the USPTO and patent offices in foreign countries in several stages over the lifetime of the patent. The USPTO and patent offices in foreign countries require compliance with a number of procedural, documentary, fee payment and other requirements during the patent application process. In the future, we may rely on licensing partners to pay these fees due to U.S. and non-U.S. patent agencies and to comply with these other requirements with respect to any future licensed patents and patent applications. While an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of a patent or patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors and other third parties might be able to enter the market with similar or identical products of technology, which would have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.

While we have obtained two composition of matter patents with respect to one of our drug candidates, we also rely on proprietary know-how and trade secret protection and confidentiality agreements to protect proprietary know-how or trade secrets that are not patentable or that we elect not to patent. We seek to protect our trade secrets and proprietary know-how in part by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, consultants, independent contractors, advisors, contract manufacturers, CROs, hospitals, independent treatment centers, suppliers, collaborators and other third parties. We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary know-how. Additionally, our confidentiality agreements and other contractual protections may not be adequate to protect our intellectual property from unauthorized disclosure, third-party infringement or misappropriation. Any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the United States and certain foreign jurisdictions are less willing or unwilling to protect

 

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trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our business, financial condition, results of operations and prospects our business and competitive position could be materially harmed.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

 

   

others may be able to make products similar to any drug candidates we may develop or utilize similarly related technologies that are not covered by the claims of the patents that we may license or may own in the future;

 

   

we, or any future license partners or current or future collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future;

 

   

we, or any future license partners or current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

 

   

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating any of our owned or licensed intellectual property rights;

 

   

it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents;

 

   

issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

 

   

our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

 

   

we may not develop additional proprietary technologies that are patentable;

 

   

the patents of others may harm our business; and

 

   

we may choose not to file a patent in order to maintain certain trade secrets or know how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks Related to the Commercialization of Our Drug Candidates

The incidence and prevalence for target patient populations of our drug candidates have not been established with precision. If the market opportunities for our drug candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue potential and ability to achieve profitability will be adversely affected.

The total addressable market opportunity for repotrectinib and any other drug candidates we may develop will ultimately depend upon, among other things, the diagnosis criteria included in the final

 

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label for each such drug candidate if our drug candidates are approved for sale for these indications, acceptance by the medical community and patient access, drug and any related companion diagnostic pricing and their reimbursement. The number of patients in our targeted commercial markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.

Even if any of our drug candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

If any of our drug candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current cancer treatments, such as existing targeted therapies, chemotherapy, and radiation therapy, are well established in the medical community, and doctors may continue to rely on these treatments. If our drug candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our drug candidates, if approved for commercial sale, will depend on a number of factors, including:

 

   

the efficacy and potential advantages compared to alternative treatments;

 

   

the prevalence and severity of any side effects, in particular compared to alternative treatments;

 

   

limitations or warnings contained in the labeling approved for our drug candidates by the FDA;

 

   

the size of the target patient population;

 

   

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

   

our ability to offer our products for sale at competitive prices;

 

   

the convenience and ease of administration compared to alternative treatments;

 

   

the strength of marketing and distribution support;

 

   

publicity for our drug candidates and competing products and treatments;

 

   

the existence of distribution and/or use restrictions, such as through a REMS;

 

   

the availability of third-party payor coverage and adequate reimbursement;

 

   

the timing of any marketing approval in relation to other product approvals;

 

   

support from patient advocacy groups; and

 

   

any restrictions on the use of our products together with other medications.

We currently have no marketing and sales organization and have no experience as a company in commercializing products and we may have to invest significant resources to develop these capabilities. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate revenue.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any product for which we obtain marketing approval, we will need to establish sales, marketing and distribution capabilities, either ourselves or through collaboration or other arrangements with third parties.

 

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There are risks involved with establishing our own sales and marketing capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a drug candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts are expected to be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:

 

   

our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

 

   

our inability to raise financing necessary to build our commercialization infrastructure;

 

   

the inability of sales personnel to obtain access to physicians or educate an adequate number of physicians as to the benefits of our products;

 

   

unfavorable third-party payor coverage and reimbursement in any geography;

 

   

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

 

   

unforeseen costs and expenses associated with creating an independent sales and marketing organization.

As a result of any potential partnerships in markets outside of the United States, or if we are unable to establish our own sales and marketing capabilities in the United States and instead enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to market and sell our drug candidates or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of these third parties may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing any of our drug candidates for which we receive marketing approval.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of pharmaceutical products is highly competitive. We face competition with respect to our current drug candidates, and will face competition with respect to any drug candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our drug candidates. Some of these competitive products and therapies are based on scientific approaches that are similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

There are a large number of pharmaceutical and biotechnology companies developing or marketing targeted treatments for cancer that would be competitive with the drug candidates we are developing, if our drug candidates are approved. Many of these companies are developing cancer

 

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therapeutics that are also kinase inhibitors. Specifically, we expect that repotrectinib will compete against approved drugs, including: crizotinib, which is marketed by Pfizer Inc. under the name Xalkori for the treatment of ROS1+ and ALK+ NSCLC; lorlatinib, which is marketed by Pfizer Inc. under the name Lobrena for the treatment of ALK+ NSCLC; ceritinib, which is marketed by Novartis Pharmaceuticals Corporation under the name Zykadia for the treatment of ALK+ NSCLC; and larotrectinib, which is marketed by Loxo Oncology Inc. and Bayer AG under the trade name Vitrakvi, which was recently approved by the FDA for the treatment of TRK+ solid tumors. We also expect that repotrectinib will compete against other compounds which are currently in late-stage clinical development, including TKIs in Phase 2, or later, clinical development for the treatment of ROS1+ NSCLC at companies including F. Hoffman-La Roche AG (entrectinib), Pfizer Inc. (lorlatinib), Betta Pharmaceuticals Co., Ltd. (ensartinib) and TKIs in Phase 2, or later, clinical development for the treatment of TRK+ solid tumors at companies including F. Hoffman-La Roche AG (entrectinib) and Loxo Oncology Inc. (LOXO-195).

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing approvals and marketing and selling approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management and sales and marketing personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are approved for broader indications or patient populations, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other marketing approval for their products more rapidly than any approval we may obtain for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. Generic products are currently on the market for some of the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our drug candidates achieve marketing approval, we expect that they will be priced at a significant premium over any competitive generic products. The key competitive factors affecting the success of repotrectinib are likely to be its efficacy, safety, scope and limitations of marketing approval, and availability of reimbursement.

Even if we are able to commercialize any drug candidates, the products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our drug candidate to other available therapies. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain

 

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marketing approval for a drug candidate in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues, if any, we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more drug candidates, even if such drug candidates obtain marketing approval.

Our ability to commercialize any drug candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, including government healthcare programs, private health insurers and other organizations. Third-party payors decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand for, or the price of, any drug candidate for which we obtain marketing approval. Obtaining and maintaining coverage and adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any drug candidate for which we obtain marketing approval.

Additionally, we plan to develop, either by ourselves or with collaborators, in vitro companion diagnostic tests for our drug candidates for certain indications. We, or our collaborators, will be required to obtain coverage and reimbursement for these tests separate and apart from the coverage and reimbursement we seek for our product candidates, once approved. While we have not yet developed any companion diagnostic test for our product candidates, if we do, there is significant uncertainty regarding our ability to obtain coverage and adequate reimbursement for the same reasons applicable to our product candidates.

There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their own methods and approval process apart from Medicare determinations. Our inability to promptly obtain coverage and adequate reimbursement rates from third-party payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

 

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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing of our drug candidates in human clinical trials and will face an even greater risk if we commercialize any products that we may develop. If we cannot successfully defend ourselves against any claims that our drug candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

 

   

decreased demand for any drug candidates or products that we may develop;

 

   

injury to our reputation and significant negative media attention;

 

   

withdrawal of clinical trial participants;

 

   

significant costs to defend the related litigation;

 

   

substantial monetary awards to trial participants or patients;

 

   

loss of revenue;

 

   

reduced resources of our management to pursue our business strategy; and

 

   

the inability to commercialize any products that we may develop.

Our current product liability insurance coverage for the United States and certain other jurisdictions may not be adequate to cover all liabilities that we may incur. We likely will need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our drug candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business

Our future success depends on our ability to retain key employees and to attract, retain and motivate qualified personnel.

We are highly dependent on the research expertise of Jingrong Jean Cui, Ph.D., our founder and Chief Scientific Officer, and the development and management expertise of Athena Countouriotis, M.D., our President and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical team. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time.

Our industry has experienced a high rate of turnover in recent years. Our ability to compete in the highly competitive pharmaceuticals industry depends upon our ability to attract, retain and motivate highly skilled and experienced personnel with scientific, clinical, regulatory, manufacturing and management skills and experience. We conduct our operations in the greater San Diego area, a region that is home to many other pharmaceutical companies as well as many academic and research institutions, resulting in fierce competition for qualified personnel. We may not be able to attract or retain qualified personnel in the future due to the intense competition for a limited number of qualified personnel among pharmaceutical companies. Many of the other pharmaceutical companies against which we compete have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Our competitors may provide higher compensation, more diverse opportunities and/or better opportunities for career advancement. Any or all of these competing factors may limit our ability to continue to attract and retain high quality personnel, which could negatively affect our ability to successfully develop and commercialize our drug candidates and to grow our business and operations as currently contemplated.

 

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We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

As of March 18, 2019, we had 50 full-time employees. We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of clinical development, clinical operations, manufacturing, regulatory affairs and, if any of our drug candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth and with developing sales, marketing and distribution infrastructure, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources.

Further, we currently rely, and for the foreseeable future will continue to rely, in substantial part on certain third-party contract organizations, advisors and consultants to provide certain services, including assuming substantial responsibilities for the conduct of our clinical trials and the manufacture of repotrectinib or any future drug candidates. We cannot assure you that the services of such third-party contract organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by our vendors or consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval of repotrectinib or any future drug candidates or otherwise advance our business. We cannot assure you that we will be able to properly manage our existing vendors or consultants or find other competent outside vendors and consultants on economically reasonable terms, or at all.

If we are not able to effectively manage growth and expand our organization, we may not be able to successfully implement the tasks necessary to further develop and commercialize repotrectinib, our other pipeline drug candidates or any future drug candidates and, accordingly, may not achieve our research, development and commercialization goals.

Our employees, clinical trial investigators, CROs, consultants, vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, clinical trial investigators, CROs, consultants, vendors and any potential commercial partners. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA regulations or those of comparable foreign regulatory authorities, including those laws that require the reporting of true, complete and accurate information, (ii) manufacturing standards, (iii) federal and state health and data privacy, security, fraud and abuse, government price reporting, transparency reporting requirements, and other healthcare laws and regulations in the United States and abroad, (iv) sexual harassment and other workplace misconduct, or (v) laws that require the true, complete and accurate reporting of financial information or data. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We intend to adopt a code of conduct applicable to all of our employees prior to completion of this offering, as well as a disclosure program and other applicable policies and procedures, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity

 

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may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Our internal information technology systems, or those of our third-party CROs or other vendors, contractors or consultants, may fail or suffer security breaches, loss or leakage of data and other disruptions, which could result in a material disruption of our development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit confidential information (including but not limited to intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party CROs, vendors, and other contractors and consultants who have access to our confidential information.

Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our third-party CROs, vendors and other contractors and consultants are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, third-party CROs, vendors, contractors, consultants, business partners and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure, or that of our third-party CROs, vendors and other contractors and consultants, or lead to data leakage. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. We may not be able to anticipate all types of security threats, nor may we be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or those of our third-party CROs, vendors and other contractors and consultants, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputational damage and the further development and commercialization of repotrectinib or any future drug candidates could be delayed. The costs related to significant security breaches or disruptions could be material and exceed the limits of the cybersecurity insurance we maintain against such risks. If the information technology systems of our third-party CROs, vendors and other contractors and consultants become subject to disruptions or

 

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security breaches, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.

While we have not experienced any such system failure, accident or security breach to date, and believe that our data protection efforts and our investment in information technology reduce the likelihood of such incidents in the future, we cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems, or those of our third-party CROs, vendors and other contractors and consultants, or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition. For example, if such an event were to occur and cause interruptions in our operations, or those of our third-party CROs, vendors and other contractors and consultants, it could result in a material disruption of our programs and the development of our drug candidates could be delayed. In addition, the loss of clinical trial data for repotrectinib or any other drug candidates could result in delays in our marketing approval efforts and significantly increase our costs to recover or reproduce the data. Furthermore, significant disruptions of our internal information technology systems or those of our third-party CROs, vendors and other contractors and consultants, or security breaches could result in the loss, misappropriation and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information and personal information), which could result in financial, legal, business and reputational harm to us. For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our clinical trial subjects or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

We and any potential collaborators may be subject to federal, state and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under the HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

International data protection laws, including Regulation 2016/679, known as the General Data Protection Regulation (GDPR) may also apply to health-related and other personal information obtained outside of the United States. The GDPR went into effect on May 25, 2018. The GDPR introduced new data protection requirements in the European Union, as well as potential fines for noncompliant companies of up to the greater of 20 million or 4% of annual global revenue. The regulation imposes numerous new requirements for the collection, use and disclosure of personal

 

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information, including more stringent requirements relating to consent and the information that must be shared with data subjects about how their personal information is used, the obligation to notify regulators and affected individuals of personal data breaches, extensive new internal privacy governance obligations and obligations to honor expanded rights of individuals in relation to their personal information (e.g., the right to access, correct and delete their data). In addition, the GDPR includes restrictions on cross-border data transfer. The GDPR will increase our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new EU data protection rules. Further, the United Kingdom’s vote in favor of exiting the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom. In particular, it is unclear whether the United Kingdom will enact data protection legislation equivalent to the GDPR and how data transfers to and from the United Kingdom will be regulated.

In addition, California recently enacted the California Consumer Privacy Act (CPPA), which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling certain personal data of consumers or households. The CCPA will require covered companies to provide new disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or transfers of personal information, and provide consumers with additional causes of action. The CCPA goes into effect on January 1, 2020, and the California Attorney General may bring enforcement actions for violations beginning July 1, 2020. The CCPA was amended on September 23, 2018, and it remains unclear what, if any, further modifications will be made to this legislation or how it will be interpreted. As currently written, the CCPA may impact our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information.

Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include civil, criminal, and administrative penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects about whom we or our potential collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business.

We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Our company is located in San Diego, California, an area prone to wild fires and earthquakes. These and other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. Any disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, could have a material adverse effect on our business.

 

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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. Unused losses for the tax year ended December 31, 2017 will carry forward to offset future taxable income, if any, until such unused losses expire. Unused losses generated after December 31, 2017, under recent U.S. federal tax legislation (H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”, informally titled the Tax Cuts and Jobs Act), will not expire and may be carried forward indefinitely but will be only deductible to the extent of 80% of current year taxable income in any given year. It is uncertain if and to what extent various states will conform to the recent U.S. federal tax legislation. In addition, both our current and our future unused losses and other tax attributes may be subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) if we undergo an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a three-year period. We have not completed a Section 382 study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since our formation due to the complexity and cost associated with such a study and the fact that there may be additional such ownership changes in the future. As a result, if we earn net taxable income our pre-2018 net operating loss carryforwards may expire prior to being used, our net operating loss carryforwards generated in 2018 and thereafter will be subject to a percentage limitation and, if we undergo an ownership change (or if we previously underwent such an ownership change), our ability to use all of our pre-change net operating loss carryforwards (NOLs) and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, even if we attain profitability, we may be unable to use all or a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

From time to time, we may consider strategic transactions, such as acquisitions of companies, businesses or assets and out-licensing or in-licensing of products, drug candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near term or long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:

 

   

exposure to unknown liabilities;

 

   

disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug candidates or technologies;

 

   

incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;

 

   

higher than expected acquisition and integration costs;

 

   

write-downs of assets or goodwill or impairment charges;

 

   

increased amortization expenses;

 

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difficulty and cost in combining the operations, systems and personnel of any acquired businesses with our operations, systems and personnel;

 

   

impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

 

   

inability to retain key employees of any acquired businesses.

Risks Related to Our Common Stock and This Offering

After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to significantly influence all matters submitted to stockholders for approval.

Upon the completion of this offering, based on shares outstanding as of March 15, 2019, our executive officers and directors, combined with our stockholders who owned more than 5% of our outstanding capital stock before this offering will, upon the closing of this offering, in the aggregate, beneficially own shares representing approximately 31.1% of our common stock. This percentage will increase if they purchase shares in the reserved share program or are allocated any of their indications of interest. As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would be able to significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership control may:

 

   

delay, defer or prevent a change in control;

 

   

entrench our management and the board of directors; or

 

   

impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect at the completion of this offering could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to and upon the completion of this offering, respectively, may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will:

 

   

permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control);

 

   

provide that the authorized number of directors may be changed only by resolution of the board of directors;

 

   

provide that our board of directors or any individual director may only be removed with cause and the affirmative vote of the holders of at least 66-2/3% of the voting power of all of our then-outstanding common stock;

 

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provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

 

   

divide our board of directors into three classes;

 

   

require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

 

   

provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice;

 

   

do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

 

   

provide that special meetings of our stockholders may be called only by the chair of our board of directors, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and

 

   

provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (iii) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws; (iv) any action or proceeding to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws; (v) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants; provided these provisions of our amended and restated certificate of incorporation and amended and restated bylaws will apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended (Securities Act), but stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations thereunder; and provided these provisions of our amended and restated certificate of incorporation and amended and restated bylaws will not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction.

The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate any rights, preferences and privileges thereto, would require approval by the holders of at least 66-2/3% of our then-outstanding common stock.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time. A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out of this provision.

 

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These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including delay or impede a merger, tender offer or proxy contest involving our company. The existence of these provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.

For information regarding these and other provisions, see “Description of Capital Stock.”

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action or proceeding asserting a breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders, (iii) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or bylaws; (iv) any action or proceeding to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws; (v) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware and (vi) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine; provided these provisions of our amended and restated certificate of incorporation and amended and restated bylaws will apply to suits brought to enforce a duty or liability created by the Securities Act, but stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations thereunder; and provided, that, this provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

The initial public offering price of our common stock will be substantially higher than the pro forma as adjusted net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma as adjusted net tangible book value per share after this offering. To the extent shares subsequently are issued under outstanding options, you will incur further dilution. Based on an assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $8.98 per share, representing the difference between our pro forma as adjusted net tangible book value per share after

 

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giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 51% of the aggregate price paid by all purchasers of our stock, but will own only approximately 30% of our common stock outstanding after this offering.

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. Although our common stock has been approved for listing on the Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

Our stock price is likely to be volatile. The stock market in general and the market for smaller pharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

 

   

the degree of success of competitive products or technologies;

 

   

the commencement, enrollment or results of clinical trials and preclinical studies of our drug candidates or those of our competitors;

 

   

adverse results from, delays in or termination of clinical trials;

 

   

unanticipated serious safety concerns related to the use of our product candidates;

 

   

regulatory or legal developments in the United States and other countries;

 

   

any delay in our regulatory filings for our drug candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

 

   

receipt of, or failure to obtain, regulatory approvals;

 

   

lower than expected market acceptance of our product candidates following approval, if any, for commercialization;

 

   

developments or disputes concerning patent applications, issued patents or other proprietary rights;

 

   

the recruitment or departure of key personnel;

 

   

the level of expenses related to any of our drug candidates or clinical development programs;

 

   

the results of our efforts to design, develop, acquire or in-license additional technologies or drug candidates;

 

   

actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

 

   

publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

 

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announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

 

   

variations in our financial results or those of companies that are perceived to be similar to us;

 

   

rumors or announcements regarding transactions involving our company or drug candidates;

 

   

proposed changes to healthcare laws in the United States or foreign jurisdictions, or speculation regarding such changes;

 

   

market conditions or trends in the pharmaceutical and biotechnology sectors;

 

   

general economic, industry and market conditions; and

 

   

the other events or factors, including those described in this “Risk Factors” section.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our drug candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no or only very few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have 29,228,240 outstanding shares of common stock based on the number of shares outstanding as of December 31, 2018. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders. Of the remaining shares, 20,404,710 shares are currently restricted as a result of securities laws or lock-up agreements, but will become eligible to be sold after the offering as described in the “Shares Eligible for Future Sale” section of this prospectus. Moreover, after this offering, holders of an aggregate of 16,993,194 shares of our common stock will have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration

 

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statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Underwriting” section of this prospectus.

We and our officers, directors, and holders of substantially all of our capital stock, stock options and other securities convertible into, exercisable or exchangeable for our capital stock outstanding immediately prior to the closing of this offering have agreed with the underwriters, subject to certain exceptions described in the section titled “Underwriting,” not to dispose of or hedge any of common stock or securities convertible into or exchangeable for shares of common stock for a period of 180 days following the date of this prospectus, except with the prior written consent of Goldman Sachs & Co. LLC and SVB Leerink LLC on behalf of the underwriters. We refer to such period as the lock-up period. When the lock-up period expires, we and our securityholders subject to a lock-up agreement or market stand-off agreement will be able to sell our shares in the public market. In addition, Goldman Sachs & Co. LLC and SVB Leerink LLC may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements at any time and for any reason. See “Shares Eligible for Future Sale” for more information. Sales of a substantial number of such shares upon expiration of the lock-up and market stand-off agreements, the perception that such sales may occur, or early release of these agreements, could cause our market price to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon the completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make any related party transaction disclosures. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. In addition, we do not have a risk management program or processes or procedures for identifying and addressing risks to our business in other areas.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company for up to five full fiscal years following this offering. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

 

   

being permitted to provide only two years of audited financial statements in this prospectus, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

 

   

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

   

reduced disclosure obligations regarding executive compensation; and

 

   

exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), we will be required to furnish a report by our management on our internal control over financial reporting. However, while we

 

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remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements we may enter into may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

   

our plans to research, develop and commercialize our drug candidates, including the timing of our planned Phase 2 portion of TRIDENT-1;

 

   

the success, cost and timing of our product development activities and clinical trials, including whether the planned Phase 2 portion of TRIDENT-1 will support the approval of repotrectinib in ROS1+ advanced NSCLC and NTRK+ advanced solid tumors;

 

   

our ability to obtain and maintain regulatory approval for repotrectinib or any of our other current or future drug candidates, and any related restrictions, limitations, and/or warnings in the label of an approved drug candidate;

 

   

our expectations regarding the size of target patient populations for our drug candidates, if approved for commercial use, and any additional drug candidates we may develop;

 

   

our ability to obtain funding for our operations;

 

   

the commercialization of our drug candidates, if approved;

 

   

our ability to attract collaborators with development, regulatory and commercialization expertise;

 

   

our expectations regarding our ability to obtain, maintain, enforce and defend our intellectual property protection for our drug candidates;

 

   

future agreements with third parties in connection with the commercialization of repotrectinib, or any of our other current or future drug candidates;

 

   

the size and growth potential of the markets for our drug candidates, and our ability to serve those markets;

 

   

the rate and degree of market acceptance of our drug candidates, as well as third-party payor coverage and reimbursement for our drug candidates;

 

   

regulatory and legal developments in the United States and foreign countries;

 

   

the performance of our third-party suppliers and manufacturers;

 

   

the success of competing therapies that are or may become available;

 

   

our ability to attract and retain key scientific or management personnel;

 

   

the accuracy of our estimates regarding expenses, capital requirements and needs for additional financing; and

 

   

our use of the proceeds from this offering.

In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty

 

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of future events or outcomes. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, 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. We discuss many of the risks associated with the forward-looking statements in this prospectus in greater detail under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should carefully read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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MARKET, INDUSTRY AND OTHER DATA

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our drug candidates, including data regarding the estimated size of such markets and the incidence of certain medical conditions. Unless otherwise expressly stated, we obtained the market, industry and similar data set forth in this prospectus from our internal estimates and research and from academic and industry research, publications, surveys and studies conducted by third parties, including governmental agencies. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. While we believe that the data we use from third parties are reliable, we have not separately verified these data. Further, while we believe our internal research is reliable, such research has not been verified by any third party. You are cautioned not to give undue weight to any such information, projections and estimates.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of the shares of our common stock in this offering will be approximately $136.8 million, or approximately $157.7 million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $8.2 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each 1,000,000 share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us by approximately $15.8 million, assuming the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We anticipate that we will use the net proceeds of this offering as follows:

 

   

approximately $51.0 million to $59.0 million to further the clinical development of repotrectinib in our planned Phase 2 portion of TRIDENT-1, including companion diagnostic development, as well as in combination and pediatric studies;

 

   

approximately $36.0 million to $48.0 million to further the development of our preclinical candidates, including TPX-0046 and TPX-0022 and our next-generation ALK inhibitor candidate once selected; and

 

   

the remainder for the design and development of new drug candidates and for working capital purposes, including general operating expenses.

We may also use a portion of the net proceeds from this offering to in-license, acquire or invest in complementary businesses, technologies, products or assets. However, we have no current commitments or obligations to do so.

We believe that the expected net proceeds from this offering, together with our existing cash and cash equivalents, will be sufficient to enable us to fund our operating expenses through at least the next 18 months, through our expected initial data release from the planned Phase 2 portion of TRIDENT-1 and early Phase 1 clinical development for TPX-0022 and TPX-0046. It is difficult to predict the cost and timing required to complete our clinical trials due to, among other factors, our lack of experience with initiating and conducting clinical trials, the rate of patient enrollment in our clinical trials, filing requirements with regulatory agencies, clinical trial results, and the actual costs of manufacturing and supplying our drug candidates. The expected net proceeds from this offering, together with our existing cash and cash equivalents, will not be sufficient for us to fund any of our drug candidates through regulatory approval, and we will need to raise additional capital to complete the development and commercialization of our drug candidates. We expect to finance our cash needs primarily through equity offerings and potentially through debt financings, collaborations, license and development agreements. We have based these estimates on assumptions that may prove to be incorrect, and we could expend our available capital resources at a rate greater than we currently expect.

 

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Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including our ability to obtain additional financing, the progress, cost and results of our clinical trials and other development efforts for repotrectinib and other factors described in “Risk Factors”, as well as the amount of cash we use in our operations. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds from this offering. In addition, we might decide to postpone or not pursue clinical trials or preclinical activities if the net proceeds from this offering and the other sources of cash are less than expected.

Pending their use, we plan to invest the net proceeds from this offering in short- and medium-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings, if any, to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2018 as follows:

 

   

on an actual basis;

 

   

on a pro forma basis to reflect (i) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering and (ii) the conversion of all outstanding shares of our convertible preferred stock as of December 31, 2018 into 16,993,194 shares of our common stock immediately upon the closing of this offering; and

 

   

on a pro forma as adjusted basis to give effect to (i) the pro forma adjustments set forth above and (ii) our issuance and sale of 8,823,530 shares of our common stock in this offering at the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this information together with the sections entitled “Selected Financial Data,” “Description of Capital Stock” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

     As of December 31, 2018  
                 Actual                 Pro Forma     Pro Forma
As Adjusted
 
           (unaudited)  
     (In thousands, except share and per share data)  

Cash and cash equivalents

   $ 101,029   $ 101,029   $ 237,829  
  

 

 

   

 

 

   

 

 

 

Convertible preferred stock, par value $0.0001 per share; 65,423,901 shares authorized, issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

   $ 145,916   $ —     $ —    

Stockholders’ (deficit) equity:

      

Preferred stock, par value $0.0001 per share, no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted.

     —         —         —    

Common stock, par value $0.0001 per share, 104,000,000 shares authorized, 3,411,516 shares issued and outstanding, actual; 104,000,000 shares authorized, 20,404,710 shares issued and outstanding, pro forma; and 200,000,000 shares authorized, 29,228,240 shares issued and outstanding, pro forma as adjusted

     1       2       3  

Additional paid-in capital

     2,346       148,261       285,060  

Accumulated deficit

     (50,753     (50,753     (50,753
  

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (48,406     97,510       234,310  
  

 

 

   

 

 

   

 

 

 

Total capitalization

   $ 97,510   $ 97,510     $ 234,310  
  

 

 

   

 

 

   

 

 

 

 

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The outstanding share information in the table above excludes, as of December 31, 2018, the following:

 

   

3,597,638 shares of common stock issuable upon the exercise of outstanding stock options, with a weighted-average exercise price of $4.40 per share;

 

   

1,218,354 shares of common stock issuable upon the exercise of outstanding stock options granted after December 31, 2018, at a weighted-average exercise price of $11.05 per share;

 

   

75,000 shares of common stock issuable upon the exercise of stock options that we expect to grant upon the closing of this offering at an exercise price per share equal to the closing price of our common stock as reported on the Nasdaq Global Market on such date;

 

   

3,467,253 shares of common stock reserved for future issuance under the 2019 Plan (including 630,779 shares of common stock reserved for issuance under the Prior Plan, which shares will be added to the 2019 Plan upon its effectiveness), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement for this offering; and

 

   

288,938 shares of common stock reserved for issuance under the ESPP, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement for this offering.

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

As of December 31, 2018, we had a historical net tangible book value (deficit) of $(48.4) million, or $(14.19) per share of common stock. Our historical net tangible book value (deficit) per share represents the amount of our total tangible assets less total liabilities and convertible preferred stock, divided by the total number of shares of common stock outstanding at December 31, 2018.

After giving effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock into 16,993,194 shares of our common stock immediately upon the completion of this offering, our pro forma net tangible book value as of December 31, 2018 was $97.5 million, or approximately $4.78 per share.

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering. After giving further effect to the sale of 8,823,530 shares of our common stock that we are offering at the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2018 was $234.3 million, or approximately $8.02 per share. This amount represents an immediate increase in pro forma net tangible book value of $3.24 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $8.98 per share to new investors participating in this offering.

Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution:

 

Assumed initial public offering price per share

     $ 17.00  

Historical net tangible book value (deficit) per share at December 31, 2018, before giving effect to this offering

   $ (14.19  

Pro forma increase in historical net tangible book value per share attributable to conversion of all outstanding shares of convertible preferred stock

     18.97    
  

 

 

   

Pro forma net tangible book value per share at December 31, 2018, before giving effect to this offering.

     4.78    

Increase in pro forma net tangible book value per share attributable to new investors participating in this offering

     3.24    
  

 

 

   

Pro forma as adjusted net tangible book value per share after this offering

       8.02  
    

 

 

 

Dilution per share to new investors participating in this offering

     $ 8.98  
    

 

 

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $0.28, and dilution in pro forma net tangible book value per share to new investors by approximately $0.28, assuming that the number of shares offered by us, as set forth on the cover page

 

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of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. Similarly, each 1,000,000 share increase in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $0.26 and decrease the dilution to investors participating in this offering by approximately $0.26 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. Each 1,000,000 share decrease in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by approximately $0.28 and increase the dilution to investors participating in this offering by approximately $0.28 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.

If the underwriters exercise their option to purchase 1,323,529 additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $8.35 per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $0.34 per share and the dilution per share to new investors would be $0.34 per share, in each case assuming an initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus).

To the extent that outstanding options with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share are exercised, new investors will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2018, the number of shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid to us in cash and the average price per share paid by existing stockholders for shares issued prior to this offering and the price to be paid by new investors in this offering. The calculation below is based on the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table below shows, investors participating in this offering will pay an average price per share substantially higher than our existing stockholders paid.

 

     Shares Purchased     Total Consideration
(dollars in thousands)
    Weighted-Average
Price Per Share
 
     Number      Percent     Amount      Percent  

Existing stockholders

     20,404,710        70   $ 146,655        49   $ 7.19  

Investors participating in this offering

     8,823,530        30     150,000        51   $ 17.00  
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

     29,228,240        100   $ 296,655        100  
  

 

 

    

 

 

   

 

 

    

 

 

   

Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) each of the total consideration paid by new investors and the total consideration paid by all stockholders by approximately $8.2 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting

 

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discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) each of the total consideration paid by investors participating in this offering and the total consideration paid by all stockholders by approximately $15.8 million, assuming the assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The foregoing tables and calculations exclude:

 

   

3,597,638 shares of common stock issuable upon the exercise of stock options outstanding as of December 31, 2018, with a weighted-average exercise price of $4.40 per share;

 

   

1,218,354 shares of common stock issuable upon the exercise of outstanding stock options granted after December 31, 2018, at a weighted-average exercise price of $11.05 per share;

 

   

75,000 shares of common stock issuable upon the exercise of stock options that we expect to grant upon the closing of this offering at an exercise price per share equal to the closing price of our common stock as reported on the Nasdaq Global Market on such date;

 

   

3,467,253 shares of common stock reserved for future issuance under the 2019 Plan (including 630,779 shares of common stock reserved for issuance under the Prior Plan, which shares will be added to the 2019 Plan upon its effectiveness), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement for this offering; and

 

   

288,938 shares of common stock reserved for issuance under the ESPP, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement for this offering.

 

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SELECTED FINANCIAL DATA

The following tables summarize our selected financial data as of, and for the periods ended on, the dates indicated. We have derived the selected statement of operations data for the years ended December 31, 2017 and 2018 and the balance sheet data as of December 31, 2017 and 2018 from our audited financial statements included elsewhere in this prospectus. The selected financial data included in this section are not intended to replace the financial statements and related notes included elsewhere in this prospectus. You should read the selected financial data together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.

 

     Years Ended December 31,  
     2017              2018           
     (In thousands, except
share and per share data)
 

Statement of Operations Data:

    

Operating expenses:

    

Research and development

   $ 15,241     $ 21,062  

General and administrative

     1,487       4,578  
  

 

 

   

 

 

 

Total operating expenses

     16,728       25,640  
  

 

 

   

 

 

 

Loss from operations

     (16,728     (25,640

Other income (expense), net

     135       855  
  

 

 

   

 

 

 

Net loss and comprehensive loss(1)

   $ (16,593   $ (24,785 )
  

 

 

   

 

 

 

Net loss per share, basic and diluted(1)

   $ (4.97   $ (7.31
  

 

 

   

 

 

 

Shares used in computing net loss per share, basic and diluted(1)

     3,337,640       3,388,586  
  

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted (unaudited)(1)

     $ (1.66
    

 

 

 

Shares used in computing pro forma net loss per share, basic and diluted (unaudited)(1)

       14,938,047  
    

 

 

 

 

(1)

See Note 2 to our audited financial statements and related notes included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share, pro forma net loss per share and the weighted-average number of shares used in the computation of the per share amounts.

 

     As of December 31,  
     2017     2018  
     (In thousands)  

Balance Sheet Data:

    

Cash and cash equivalents

   $ 45,033     $ 101,029

Working capital(1)

     41,089       96,201  

Total assets

     45,908       103,280  

Convertible preferred stock

     66,161       145,916  

Accumulated deficit

     (25,968     (50,753

Total stockholders’ deficit

     (24,844     (48,406

 

(1)

We define working capital as current assets less current liabilities. See our audited financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and liabilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, 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 section entitled “Risk Factors,” 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. You should carefully read the section entitled “Risk Factors” 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.”

Overview

We are a clinical-stage biopharmaceutical company designing and developing novel small molecule, targeted oncology therapies to address key limitations of existing therapies and improve the lives of patients. Our internally developed and wholly owned pipeline of next-generation tyrosine kinase inhibitors (TKIs) targets numerous genetic drivers of cancer in both TKI-naïve and TKI-pretreated patients. The pervasive challenges of intrinsic and acquired treatment resistance often limit the response rate and durability of existing therapies. One of these challenges is the emergence of solvent front mutations, which are a common cause of acquired resistance to currently approved therapies for ROS1, TRK and ALK kinases. We have developed a macrocycle platform enabling us to design proprietary small, compact TKIs with rigid three-dimensional structures that potentially bind to their targets with greater precision and affinity than other kinase inhibitors. We believe our macrocycle platform will generate TKIs that are potentially best-in-class. Our lead drug candidate, repotrectinib (TPX-0005), is being evaluated in an ongoing Phase 1/2 trial called TRIDENT-1 for the treatment of patients with ROS1+ advanced non-small-cell lung cancer (NSCLC) and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. We are nearing completion of the Phase 1 portion of TRIDENT-1 and, based on the preliminary proof-of-concept data in a total of 75 patients, we plan to initiate the multi-cohort Phase 2 portion in the second half of 2019. This Phase 2 portion will be a registrational trial for potential approval in ROS1+ advanced NSCLC and NTRK+ advanced solid tumors. In addition to repotrectinib, our pipeline includes two multi-targeted kinase inhibitors: TPX-0046 (a novel RET/SRC inhibitor) and TPX-0022 (a novel MET/CSF1R/SRC inhibitor); and a series of next-generation ALK inhibitors, from which we anticipate selecting a final candidate for IND-enabling studies. We anticipate submitting investigational new drug applications (INDs) and initiating clinical trials for TPX-0046 and TPX-0022 in 2019.

Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our drug candidates. Our net losses were $16.6 million and $24.8 million for the years ended December 31, 2017 and 2018, respectively. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities and will depend on several factors including:

 

   

the progress and results of our ongoing Phase 1 portion of TRIDENT-1;

 

   

the progress and results of our planned Phase 2 portion of TRIDENT-1 and any other additional planned clinical trials evaluating repotrectinib;

 

   

the scope, rate of progress, results and costs of drug design, preclinical development and clinical trials for the other drug candidates in our pipeline;

 

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the extent to which we develop, in-license or acquire other pipeline drug candidates or technologies;

 

   

the number and development requirements of other drug candidates that we may pursue, and other indications for our current drug candidates that we may pursue;

 

   

the costs, timing and outcome of regulatory review of our drug candidates and any companion 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 drug candidates;

 

   

the cost associated with commercializing any approved drug candidates, including to establish sales and marketing capabilities;

 

   

the cost 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 repotrectinib, if approved, or our other pipeline drug 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; and

 

   

to the extent we pursue strategic collaborations, including collaborations to commercialize repotrectinib or any of our other pipeline drug candidates our ability to establish and maintain collaborations on favorable terms, if at all.

We will not generate revenue from product sales until we successfully complete clinical development and obtain regulatory approval for our drug candidates. If we obtain regulatory approval for any of our drug candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

As a result, we will need substantial additional funding 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 expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our drug candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately 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 product sales, we may never 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 December 31, 2018, and March 31, 2019, we had cash and cash equivalents of $101.0 million and $90.0 million, respectively. The March 31, 2019 information is preliminary and subject to adjustment. The March 31, 2019 amount reflects approximately $0.2 million paid, out of a total of approximately $0.7 million payable, of general and administrative expenses in connection with a review of preclinical and clinical data in preparation for our public offering.

 

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We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses, and capital expenditure requirements for at least the next 18 months. See “Liquidity and Capital Resources.” In addition, Dr. Li resigned in April 2019, effective May 31, 2019, and accordingly we will become obligated to pay Dr. Li an aggregate of $0.5 million in severance compensation in the second quarter of 2019.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales, licenses or collaborations and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our drug candidates are successful and result in regulatory approval, we may generate revenue from future product sales. If we enter into license or collaboration agreements for any of our drug candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our drug candidates. We may never succeed in obtaining regulatory approval for any of our drug candidates.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our drug candidates, which include:

 

   

employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions;

 

   

expenses incurred in connection with the preclinical and clinical development of our drug candidates, including expenses incurred under agreements with contract research organizations (CROs);

 

   

the cost of consultants and contract manufacturing organizations (CMOs) that manufacture drug products for use in our preclinical studies and clinical trials; and

 

   

facilities, depreciation and other expenses, which include allocated expenses for rent and maintenance of facilities, insurance and supplies.

We expense research and development costs to operations as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, central laboratories, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. We allocate indirect expenses, such as employee salaries, fringe benefits, facilities, travel and other miscellaneous expenses, based on an estimated percentage of time worked on programs.

 

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The table below summarizes our research and development expenses incurred by development program:

 

     Years Ended December 31,  
             2017                      2018          
     (In thousands)  

Research and development expenses

     

Repotrectinib

   $ 13,219      $ 12,214  

Other research programs

     2,022        8,848  
  

 

 

    

 

 

 

Total research and development expenses

   $ 15,241      $ 21,062  
  

 

 

    

 

 

 

Drug 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 that our research and development expenses will increase substantially in connection with our planned clinical and preclinical development activities in the near term and in the future. 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 drug candidates.

The successful development of our drug candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following:

 

   

successful completion of preclinical studies and clinical trials;

 

   

delays in regulators or institutional review boards authorizing us or our investigators to commence our clinical trials or in our ability to negotiate agreements with clinical trial sites or contract research organizations;

 

   

the number and location of clinical sites included in the trials;

 

   

raising additional funds necessary to complete clinical development of our drug candidates;

 

   

obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our drug candidates;

 

   

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for clinical supplies of our drug candidates;

 

   

the ability to obtain clearance or approval of companion diagnostic tests, if required, on a timely basis, or at all;

 

   

the results of our clinical trials;

 

   

protecting and enforcing our rights in our intellectual property portfolio; and

 

   

maintaining a continued acceptable safety profile of the products following approval.

A change in the outcome of any of these variables with respect to the development of our drug candidates may significantly impact the costs and timing associated with the development of our drug candidates. We may never succeed in obtaining regulatory approval for any of our drug candidates.

Research and development activities are central to our business model. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact our clinical development programs.

 

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance and administrative functions, including stock-based compensation. General and administrative expenses also include travel expenses and direct and allocated facility-related costs, as well as professional fees for legal, accounting and tax-related services and insurance costs.

We anticipate that our general and administrative expenses will increase as a result of increased payroll, expanded infrastructure and higher consulting, legal and tax-related services associated with maintaining compliance with stock exchange listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company.

Interest Income

Interest income consists of interest earned on cash and cash equivalent balances including short-term money market funds.

Income Taxes

We are subject to typical corporate U.S. federal and state income taxation. As of December 31, 2018, we had federal and state net operating loss carryforwards of approximately $40.4 million and $47.2 million, respectively. The federal and state tax loss carryforwards will begin expiring in 2033 if not utilized. As of December 31, 2018, we had federal and state research and development tax credits of approximately $0.3 million and $0.6 million, respectively. As of December 31, 2018, we had federal Orphan Drug tax credits of approximately $6.7 million. If not utilized, the federal research tax credit will begin to expire in 2035 and the Orphan Drug credit will begin to expire in 2037. The California research tax credit can be carried forward indefinitely.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. An analysis to determine the limitation of the net operating loss carryforwards has not been performed.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

 

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Research and Development Expenses

Research and development costs are expensed as incurred. These costs consist primarily of salaries and other personnel-related expenses, including stock-based compensation; facility-related expenses; depreciation of facilities and equipment; laboratory consumables; and services performed by clinical research organizations, research institutions, and other outside service providers.

We are required to estimate our expenses resulting from obligations under contract, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and include these costs in accrued liabilities in the balance sheet and within research and development expense in the statement of operations. These costs are a significant component of the Company’s research and development expense. We accrue for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. We make significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, we will adjust our accrued liabilities. We have not experienced any material differences between accrued costs and actual costs incurred.

Stock-Based Compensation Expense

For purposes of calculating stock-based compensation, we estimate the fair value of stock options issued using a Black-Scholes option-pricing model. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

Expected Term—We have opted to use the “simplified method” for estimating the expected term of employee options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years).

Expected Volatility—Due to our limited operating history and a lack of company specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.

Risk-Free Interest Rate—The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of our stock options.

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.

The estimated fair value of stock options granted to employees and non-employee service providers are expensed over the requisite service period (generally the vesting term) on a straight-line basis. We account for the impact of forfeitures as they occur.

In June 2018, the FASB issued Accounting Standards Update No. 2018-07, Compensation—Stock Compensation, which aligns the measurement and classification guidance for share-based payment to non-employees with the guidance for share-based payments to employees. Under this guidance, the measurement period for equity-classified non-employee awards will be fixed at the grant

date. We adopted ASU 2018-07 as of January 1, 2018. The cumulative effect of the change on accumulated deficit was immaterial as of January 1, 2018.

 

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The fair values of the employee stock options granted during 2017 and 2018 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

     Years Ended December 31,  
             2017                     2018          

Risk-free interest rate

     1.94 – 2.22     2.61 – 3.10 %

Volatility

     91.3     80.4 – 82.5

Expected term (in years)

     5.00 – 6.08       5.77 – 6.08  

Dividend yield

     —       —  

Stock-based compensation expense, net of forfeitures, is reflected in the Statements of Operations and Comprehensive Loss as follows:

 

     Years Ended December 31,  
         2017              2018      
     (in thousands)  

Research and development

   $ 160      $ 556  

General and administrative

     184        591  
  

 

 

    

 

 

 

Total stock-based compensation

   $ 344      $ 1,147  
  

 

 

    

 

 

 

As of December 31, 2018, total unamortized stock-based compensation was $10.7 million. We have retrospectively reassessed, solely for financial accounting purposes, the common stock fair value related to stock options granted in the fourth quarter of 2018 to take into account the proximity of such grants to the organizational meeting for our initial public offering and to further take into account the probability of completing a successful initial public offering in 2019. As a result, the additional stock-based compensation expense for the year ended December 31, 2018 would have been approximately $0.5 million. The additional stock-based compensation expense resulting from the reassessment will increase total unamortized stock-based compensation expense by approximately $7.5 million, resulting in approximately $18.2 million of total unamortized stock-based compensation expense as of December 31, 2018 to be amortized as expense over a weighted-average period of 3.6 years.

The intrinsic value of all outstanding stock options as of December 31, 2018 was approximately $45.3 million based on the common stock fair value of $17.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus.

On February 20, 2019, we granted options to purchase 757,031 shares of common stock to employees of the Company. One-fourth of the shares subject to each option grant shall vest on the one-year anniversary of the date of grant with the remainder vesting in equal monthly installments for 36 months thereafter. The total compensation expense for these unvested options is expected to be approximately $10.4 million and recognized over a service term of four years.

Determination of the Fair Value of Common Stock

We are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes option pricing model. Because our common stock is not currently publicly traded, the fair value of the common stock underlying our stock-based awards has been determined on each grant date by our board of directors, with input from management, considering our most recently available third-party valuation of common shares. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant.

 

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In the absence of a public trading market for our common stock, on each grant date, our board of directors made a reasonable determination of the fair value of our common stock based on the information known to us on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock, and timely valuations from an independent third-party valuation in accordance with guidance provided by the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the Practice Aid). In addition, our board of directors considered various objective and subjective factors to determine the fair value of our common stock, including:

 

   

the estimated value of each security both outstanding and anticipated;

 

   

the anticipated capital structure that will directly impact the value of the currently outstanding securities;

 

   

our results of operations and financial position;

 

   

the status of our research and development efforts;

 

   

the composition of, and changes to, our management team and board of directors;

 

   

the lack of liquidity of our common stock as a private company;

 

   

our stage of development and business strategy and the material risks related to our business and industry;

 

   

external market conditions affecting the life sciences and biotechnology industry sectors;

 

   

U.S. and global economic conditions;

 

   

the likelihood of achieving a liquidity event for the holders of our common stock, such as an initial public offering or a sale of our company, given prevailing market conditions; and

 

   

the market value and volatility of comparable companies.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date. In accordance with the Practice Aid, we considered the following methods:

 

   

Option Pricing Method. Under the option pricing method (OPM), shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the preferred and common stock are inferred by analyzing these options.

 

   

Probability-Weighted Expected Return Method. The probability-weighted expected return method (PWERM) is a scenario-based analysis that estimates value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each share class.

Based on our early stage of development and other relevant factors, we determined that an OPM was the most appropriate method for allocating our enterprise value to determine the estimated fair value of our common stock for valuations performed through June 30, 2018. For the valuation performed after this date which valued our common stock as of November 30, 2018, we used a hybrid of the OPM and the PWERM methods to determine the estimated fair value of our common stock. In determining the estimated fair value of our common stock, our board of directors also considered the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we applied discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity.

 

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Following the closing of this offering, the fair value of our common stock will be the closing price of our common stock on the Nasdaq Global Market as reported on the date of the grant.

Results of Operations

Comparison of the Years Ended December 31, 2017 and 2018

The following table summarizes our results of operations for the years ended December 31, 2017 and 2018:

 

     Years Ended December 31,        
             2017                     2018             Change  
     (In thousands)  

Statement of Operations Data:

      

Operating expenses:

      

Research and development

   $ 15,241     $ 21,062     $ 5,821  

General and administrative

     1,487       4,578       3,091  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     16,728       25,640       8,912  
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (16,728     (25,640     8,912  

Other income (expense), net

     135       855       720  
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (16,593   $ (24,785   $ 8,192  
  

 

 

   

 

 

   

 

 

 

Research and Development Expenses

Research and development expenses increased by $5.9 million from $15.2 million during 2017 to $21.1 million during 2018. The increase was primarily attributable to higher personnel-related expenses as a result of additional employee head count and for higher research and development costs associated with developing TPX-0022 and TPX-0046.

General and Administrative Expenses

General and administrative expenses increased by $3.1 million from $1.5 million during 2017 to $4.6 million during 2018. The increase was primarily attributable to higher personnel-related expenses as a result of increased employee head count and professional fees for legal and accounting services.

Other Income (Expense), Net

Other income (expense), net increased by $0.8 million from $0.1 million during 2017 to $0.9 million during 2018. The increase was primarily driven by an increase in interest earned on our higher average money market account balance.

Liquidity and Capital Resources; Plan of Operations

Since our inception, we have incurred significant operating losses, and have not generated any revenue. We have not yet commercialized any of our drug candidates and we do not expect to generate revenue from sales of any drug candidates for several years, if at all. To date, we have funded our operations with proceeds from the sales of shares of our common stock and convertible preferred stock. Through December 31, 2018, we had received net proceeds of $146.7 million from our sales of our common stock and convertible preferred stock. As of December 31, 2018, we had cash and cash equivalents of $101.0 million.

 

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Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

 

     Years Ended December 31,  
           2017                 2018        
     (In thousands)  

Statement of Cash Flows Data:

                     

Cash used in operating activities

   $ (12,640   $ (23,533

Cash used in investing activities

     (88     (302

Cash provided by financing activities

     44,851       79,831  

Operating Activities

Net cash used in operating activities for the year ended December 31, 2017 was $12.6 million as compared to $23.5 million for the year ended December 31, 2018. The increase in cash used in operating activities of $10.9 million was due to increased activities for the development of our product pipeline and general and administrative expenses.

Investing Activities

Cash used in investing activities for the years ended December 31, 2017 and 2018 was related to purchases of property and equipment, primarily laboratory equipment.

Financing Activities

Cash provided by financing activities for the year ended December 31, 2017 was primarily related to net proceeds from the sale and issuance of our Series C convertible preferred stock of $44.8 million. Cash provided by financing activities for the year ended December 31, 2018 was primarily related to net proceeds from the sale and issuance of our Series D convertible preferred stock of $79.8 million.

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 our drug candidates in development. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. 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 drug candidates;

 

   

The cost to develop companion diagnostics as needed for each of our drug candidates;

 

   

Our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and, if any of our drug 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 drug candidates;

 

   

The costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our drug candidates for which we obtain marketing approval;

 

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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 that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through at least the next 18 months. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. 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 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 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 drug candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2018 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

 

     Payments Due By Period  
     Total      Less Than
1 Year
     1 to 3
Years
     4 to 5
Years
     More Than
5 Years
 
     (In thousands)  

Operating lease commitments(1)

   $ 2,593      $ 792      $ 1,801      $   —      $   —  

 

(1)

Payments due for our lease of office and laboratory space in San Diego, California under a single operating lease agreement that expires in 2021.

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 provide for termination upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments are not included in the table of contractual obligations above.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

 

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Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosures about Market Risks

Substantially all of our cash and money market funds are held with a single financial institution. Due to its size, we believe this financial institution represents a minimal credit risk. Cash amounts held at financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At December 31, 2018, we had $2.3 million in excess of the FDIC insured limit. At December 31, 2018, our money market funds totaling $98.3 million were not subject to FDIC insurance. Our money market funds are invested in high grade U.S. Treasuries with maturities of 90 days or less. As a result, we believe our money market fund represent a minimal credit risk.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

 

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BUSINESS

Overview

We are a clinical-stage biopharmaceutical company designing and developing novel small molecule, targeted oncology therapies to address key limitations of existing therapies and improve the lives of patients. Our internally developed and wholly owned pipeline of next-generation tyrosine kinase inhibitors (TKIs) targets numerous genetic drivers of cancer in both TKI-naïve and TKI-pretreated patients. The pervasive challenges of intrinsic and acquired treatment resistance often limit the response rate and durability of existing therapies. One of these challenges is the emergence of solvent front mutations, which are a common cause of acquired resistance to currently approved therapies for ROS1, TRK and ALK kinases. We have developed a macrocycle platform enabling us to design proprietary small, compact TKIs with rigid three-dimensional structures that potentially bind to their targets with greater precision and affinity than other kinase inhibitors. We believe our macrocycle platform will generate TKIs that are potentially best-in-class. Our lead drug candidate, repotrectinib (TPX-0005), is being evaluated in an ongoing Phase 1/2 trial called TRIDENT-1 for the treatment of patients with ROS1+ advanced non-small-cell lung cancer (NSCLC) and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. We are nearing completion of the Phase 1 portion of TRIDENT-1 and, based on the preliminary proof-of-concept data in a total of 75 patients, we plan to initiate the multi-cohort Phase 2 portion in the second half of 2019. This Phase 2 portion will be a registrational trial for potential approval in ROS1+ advanced NSCLC and NTRK+ advanced solid tumors. In addition to repotrectinib, our pipeline includes two multi-targeted kinase inhibitors: TPX-0046 (a novel RET/SRC inhibitor) and TPX-0022 (a novel MET/CSF1R/SRC inhibitor); and a series of next-generation ALK inhibitors, from which we anticipate selecting a final candidate for IND-enabling studies. We anticipate submitting investigational new drug applications (INDs) and initiating clinical trials for TPX-0046 and TPX-0022 in 2019.

Kinases are enzymes that respond to external stimuli to modulate numerous activities of cells, such as proliferation, survival and migration. TKIs have become an important class of cancer therapies due to their ability to interrupt deregulated kinase signaling that leads to unchecked cell growth and tumor progression. Since 2001, the U.S. Food and Drug Administration (FDA) has approved nearly 40 TKIs for the treatment of cancers. In 2017, TKIs represented approximately $20 billion in worldwide drug sales. Despite the success of this drug class, there remains a significant opportunity for a new generation of TKIs that address the shortcomings of current therapies. These shortcomings include the inability to achieve a response or limited durability of response caused by intrinsic or acquired resistance, and toxicities that limit dosage levels and duration of treatment. Many conventional kinase inhibitors are oversized, with bulky side groups and limited chemical structure diversity, and some are associated with safety issues such as QT prolongation (abnormal electrocardiography) and hepatotoxicity (liver damage). Further, the same class of kinase inhibitors often share many binding similarities and therefore often cannot be sequentially administered to effectively overcome common treatment resistant mutations.

There is currently only one approved TKI for each of the primary patient populations targeted by our lead drug candidate, repotrectinib. Xalkori (crizotinib) is approved for patients with metastatic ROS1+ NSCLC, and Vitrakvi (larotrectinib) is approved for patients with metastatic solid tumors that have an NTRK gene fusion (NTRK+ advanced solid tumors) without a known acquired resistant mutation. Both of these currently approved TKIs have shown treatment resistance, including emerging resistant mutations, and toxicities that can limit duration of treatment.

There are multiple types of resistant mutations, including gatekeeper mutations and solvent front mutations, that can emerge with the use of TKIs. A gatekeeper mutation occurs from the substitution of one amino acid residue for another in front of the back pocket of the adenosine triphosphate (ATP) binding site within a kinase. In 2012, a treatment resistant mutation arising from an area of the kinase called the solvent front was first identified in a patient treated with crizotinib, and named as a solvent

 

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front mutation. Most of the currently approved or investigational ROS1, ALK and TRK kinase inhibitors have an extra chemical group, or motif, extending to the solvent front that leaves them susceptible to solvent front mutations. The most common solvent front mutation in the ROS1 kinase, G2032R, was reported in 2017 from a single institution in 41% of patients who experienced progressive disease while taking crizotinib. In addition, emerging solvent front mutations, such as TRKA G595R, TRKC G623R and TRKC G623E, have been reported in NTRK+ solid tumors after treatment with larotrectinib and after current investigational agent entrectinib. Currently, there are no FDA-approved TKIs that can overcome solvent front mutations arising in the ROS1 or TRK kinases. Additionally, there are no FDA-approved TKIs that can address resistance that may arise after RET targeted agents.

To address these challenges, we are using our macrocycle platform to develop a new generation of orally available proprietary TKIs that we believe will have the ability to maintain or enhance inhibition of the targeted kinase in both TKI-naïve and TKI-pretreated patients.

Our lead drug candidate, repotrectinib, is a low molecular weight macrocyclic TKI of ROS1, TRK and ALK that is being evaluated in our ongoing Phase 1/2 clinical trial called TRIDENT-1 for the treatment of patients with ROS1+ advanced NSCLC and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. The primary objective of the Phase 1 portion of TRIDENT-1 is to determine the maximum tolerated dose (MTD) and a recommended Phase 2 dose of repotrectinib. The safety endpoints include evaluating the dose-limiting toxicities (DLTs) and adverse events. The secondary endpoint for the Phase 1 portion is confirmed objective response rate (ORR) by Blinded Independent Central Review (BICR), using RECIST (Response Evaluation Criteria in Solid Tumors) v1.1.

As of the October 31, 2018 data cut-off date for the Phase 1 portion of TRIDENT-1, 75 patients have been dosed with repotrectinib, which was generally well tolerated. A total of seven dose cohorts of repotrectinib were evaluated for safety. The majority of treatment emergent adverse events (TEAEs) were Grade 1 or Grade 2. Dizziness was the most common TEAE, and is likely an on-target side effect of TRK TKIs. There have been four DLT events: Grade 2 dizziness (n=1 at 160 mg BID), Grade 3 dizziness (n=2: 1 at 160 mg BID and 1 at 240 mg QD), and Grade 3 dyspnea and hypoxia (breathing difficulty) (n=1 at 160 mg BID). No cases of dizziness have led to treatment discontinuation. Two patients discontinued treatment due to adverse events (one with a Grade 3 pleural effusion, another with Grade 3 hypoxia/dyspnea) that were determined to be related to study treatment. There have been no Grade 3 or Grade 4 alanine aminotransferase (ALT) or aspartate aminotransferase (AST) elevations (elevated ALT and AST levels indicate liver damage). Three Grade 5 TEAEs have occurred, with two, respiratory failure (n=1) and sepsis (n=1), determined to not be related to treatment and occurring during the 28 day-follow up period after treatment discontinuation. The two Grade 5 TEAEs that were determined to not be treatment related include: one patient with NTRK+ angiosarcoma on the right leg with a pre-existing open wound infection on the left leg who was treated at 40 mg QD and developed Grade 5 sepsis and passed away 7 days after stopping repotrectinib; and one patient with ROS1+ NSCLC treated at 40 mg QD who developed Grade 5 respiratory failure due to disease progression 5 days after repotrectinib discontinuation. The third Grade 5 TEAE involved a patient with ALK+ NSCLC and a past medical history of diabetes, obesity and hypertension who was dosed at 240 mg QD (once daily) of repotrectinib and experienced a Grade 5 event of sudden death on day 10 of cycle 1, which we determined to be possibly related to study treatment. Since the October 31, 2018 data cut-off date, there has been one additional Grade 5 TEAE of respiratory failure reported as related to disease progression and not treatment-related in a ROS1+ NSCLC patient initially treated at 120 mg QD who escalated their dose to 160 mg BID due to disease progression 30 days prior to the event.

As of the October 31, 2018 data cut-off for TRIDENT-1, preliminary efficacy data across the first five dose escalation cohorts included:

 

   

TKI-naïve ROS1+ advanced NSCLC evaluable population (n=10):

 

  ¡   

Median follow-up time was 16.4 months (range, 5.3 to 16.6+ months)

 

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  ¡   

Confirmed objective response rate (ORR) was 90% (9/10) (95% CI, 56 to 100)

 

  ¡   

At our likely recommended Phase 2 dose of 160 mg QD (once daily) or above (n=6), five patients (83%) achieved a confirmed ORR

 

  ¡   

Median duration of response for the 9 confirmed responders had not yet been reached, with five of nine patients remaining in response (range, 5.5+ to 14.9+ months), 3 events of progressive disease, and 1 censored patient off treatment prior to progression

 

  ¡   

Confirmed intracranial ORR was 100% (3/3) (95% CI, 29 to 100) in patients with measurable central nervous system (CNS) metastases

 

   

TKI-pretreated ROS1+ advanced NSCLC evaluable population (n=18):

 

  ¡   

Median follow-up time was 12.9 months (range, 0.6 to 14.5)

 

  ¡   

Confirmed ORR was 28% (5/18) (95% CI, 10 to 53), with one of five patients remaining in response for 1.9+ months

 

  ¡   

At our likely recommended Phase 2 dose of 160 mg QD or above in patients treated with one prior ROS1 TKI (n=9):

   

44% (4/9) of patients achieved a confirmed partial response (PR)

   

50% (3/6) of patients treated with crizotinib as their prior ROS1 TKI achieved a confirmed PR

 

  ¡   

Confirmed intracranial ORR was 50% (2/4) (95% CI, 7 to 93) in patients with measurable CNS metastases, with 75% (3/4) showing tumor regressions

 

  ¡   

Clinical benefit rate was 78% (14/18) (95% CI, 52 to 94), which is clinically meaningful for patients with limited treatment options

 

  ¡   

Tumor regressions were observed in all four crizotinib-pretreated evaluable patients with a ROS1 G2032R solvent front mutation; one patient previously treated with crizotinib for 13 months who achieved stable disease as the best response achieved a confirmed PR with repotrectinib, had a duration of response of 7.4 months, and remained on treatment for 14.6+ months at the time of the data cut-off

 

   

TKI-naïve NTRK+ advanced solid tumor evaluable population (n=1):

 

  ¡   

One evaluable patient who had glioblastoma and achieved stable disease as the best response

 

  ¡   

In addition, one patient with angiosarcoma who had a dramatic initial response on skin lesions was not evaluable for response due to death from sepsis (not treatment related) within the second cycle

 

   

TKI-pretreated NTRK+ advanced solid tumor evaluable population (n=2):

 

  ¡   

Of the two evaluable patients, one patient with an advanced salivary gland cancer previously treated with multiple prior TKIs including crizotinib and entrectinib and who developed a TRKC G623E solvent front mutation achieved a confirmed PR with repotrectinib with a 9.8 month duration of response; this patient remained on treatment for 17.9 months. The patient discontinued repotrectinib due to further disease progression, and received combination chemotherapy with no response. In January 2019, the patient began a second course of repotrectinib on a compassionate use basis.

We are currently enrolling in our last planned dosing cohort within the Phase 1 portion of TRIDENT-1. We anticipate determining our recommended Phase 2 dose (RP2D) and plan to give an update on our data in ROS1+ NSCLC during an oral presentation at the 2019 annual meeting of the

 

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American Society of Clinical Oncology (ASCO). We expect the presentation to include a total of eight additional patients evaluated for safety and five evaluated for efficacy:

 

   

120 mg QD: n=2 (one TKI naive, one TKI pretreated) efficacy evaluable by Blinded Independent Central Review (BICR); and

 

   

160 mg QD (our likely RP2D): n=3 (all TKI pretreated) efficacy evaluable by BICR.

The planned Phase 2 portion of TRIDENT-1 will be a registrational trial for potential approval of repotrectinib in both TKI-naïve and TKI-pretreated patients with ROS1+ advanced NSCLC or NTRK+ advanced solid tumors. In addition, the trial will include an exploratory cohort for patients with ALK+ or ROS1+ advanced solid tumors. We are targeting initiation of the Phase 2 portion of TRIDENT-1 in the second half of 2019 pending completion of the Phase 1 portion and agreement by the FDA to proceed with our recommended Phase 2 dose. We are planning an interim data read-out for some of the registrational cohorts within the Phase 2 portion of TRIDENT-1 in the second half of 2020.

The Phase 2 portion of the trial will be with repotrectinib given as a single agent at the determined Phase 2 dose and will enroll a total of approximately 310 patients across six patient expansion cohorts (EXPs) with ROS1+ advanced NSCLC (EXP-1, EXP-2 and EXP-3), ROS1+ or ALK+ advanced solid tumors (non-NSCLC) (EXP-4), and NTRK+ advanced solid tumors (EXP-5 and EXP-6). All patients in the Phase 2 portion of the trial will receive repotrectinib orally either once daily or twice daily depending on the determined Phase 2 dose and schedule for 28 consecutive days in repeated four-week cycles.

EXP-1, EXP-4 and EXP-5 will each enroll TKI-naïve patients. EXP-2, EXP-3 and EXP-6 will enroll patients who have been previously treated with one or two prior TKIs. The trial design for the Phase 2 portion of TRIDENT-1 is depicted in the figure below.

 

 

 

LOGO

ROS1+ Advanced NSCLC Pivotal Cohorts (up to n=190) EXP-1 ROS1 TKI-naive ROS1+advanced NSCLC (n=50) EXP-2 1 Prior ROS1 TKI ROS1+ advanced NSCLC (n=100) EXP-3 2 Prior ROS1 TKI ROS1+advanced NSCLC (n=40) EXP-1: Could support accelerated or standard approval EXP-2 and EXP-3: Could support accelerated approval NTRK+Advanced Solid Tumors Pivotal Cohorts (up to n=90) EXP-5 TRK TKI-naive NTRK+ advanced solid tumors (n=50) EXP-6 TRK TKI-pretreated NTRK+ advanced solid tumors (n=40) EXP-5 and EXP-6: Could support approval with a minimum of five distinct tumor types & follow up of at least 12 months EXP-4: Exploratory cohort enrolling ROS1 or ALK TKI-naive patients with ROS1+ or ALK+ advanced solid tumors(non-NSCLC) (n= 12-26)

 

In parallel to the planned Phase 2 portion of TRIDENT-1, we intend to co-develop repotrectinib with a next-generation sequencing (NGS)-based companion diagnostic. A prototype companion diagnostic will be developed and used as a clinical trial assay to confirm the presence of ROS1+, NTRK+ or ALK+ gene fusions in patients prior to enrollment into the Phase 2 portion of TRIDENT-1. We have selected a diagnostic partner to support development of the companion diagnostic and filing of a pre-market approval (PMA) application to the FDA.

In addition to repotrectinib, our pipeline includes two multi-targeted drug candidates: TPX-0046 (a novel RET/SRC inhibitor), and TPX-0022 (a novel MET/CSF1R/SRC inhibitor); and a series of next-generation ALK inhibitors, from which we anticipate selecting a final candidate for IND-enabling studies. We anticipate submitting INDs and initiating clinical trials for TPX-0046 and TPX-0022 in 2019. We are planning an interim data read-out for the Phase 1 study of TPX-0022 in patients with advanced solid tumors and MET alterations in the second half of 2020.

 

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We believe our internally designed, macrocycle platform and experienced team enable us to advance differentiated TKIs into the clinic, which may provide meaningful benefits to patients with cancer. Our team has extensive experience in the discovery, design and development of cancer therapeutics, with a clear focus on next-generation TKIs. Our scientific founder and the designer of our next-generation TKIs, J. Jean Cui, Ph.D., has more than 20 years of experience, including most recently at Pfizer Inc., where she was the lead inventor of two approved TKIs, Xalkori (crizotinib) and Lorbrena (lorlatinib). In addition, our President and Chief Executive Officer, Athena Countouriotis, M.D., has over 15 years of experience, including senior leadership roles at Ambit Biosciences Corporation and Halozyme Therapeutics, Inc., and has led the development of multiple TKIs through approval, including Sprycel (dasatinib), Sutent (sunitinib) and Bosulif (bosutinib). Nearly half of our employees have Ph.D., Pharm.D. or M.D. degrees.

We are supported by our board of directors and scientific advisory board, who have significant experience in drug development, as well as expertise in building public companies and business development. Our key investors include funds managed by Cormorant Asset Management, OrbiMed Advisors, Lilly Asia Ventures, S.R. One, Foresite Capital, venBio Partners, HBM Healthcare Investments and Nextech Invest. We believe that our team is well positioned to leverage our highly differentiated platform to continue to design and develop novel TKIs that will have significant benefit for cancer patients.

Our Strategy

Our strategy is to focus on the design, development and commercialization of novel TKIs to address unmet medical needs, including in the area of treatment resistance. Key elements of our strategy include:

 

   

Rapidly develop and commercialize our lead drug candidate, repotrectinib, for the treatment of patients with ROS1+ advanced NSCLC and NTRK+ advanced solid tumors, including those with CNS disease or CNS metastases.    We intend to develop repotrectinib for the treatment of ROS1+ advanced NSCLC and NTRK+ advanced solid tumors in both TKI-pretreated and TKI-naïve patients with and without CNS disease. There are no approved ROS1 or TRK targeted therapies in ROS1 or TRK TKI-pretreated patients, and a high unmet medical need exists due to treatment resistance. In TKI-naïve patients, we believe repotrectinib has the potential to be the best-in-class ROS1 inhibitor and TRK inhibitor based on our preclinical data and preliminary clinical data from TRIDENT-1. We plan to initiate the multi-arm Phase 2 portion of TRIDENT-1 in the second half of 2019 pending completion of the Phase 1 portion and agreement by the FDA to proceed with our recommended Phase 2 dose. We are planning to provide an update to the Phase 1 portion of our Phase 1/2 TRIDENT-1 clinical trial in patients with ROS1+ NSCLC in an oral presentation at the 2019 ASCO annual meeting and an interim data read-out for some of the registrational cohorts within the Phase 2 portion of TRIDENT-1 in the second half of 2020.

 

   

Expand the market opportunity for repotrectinib by pursuing pediatric indications, additional indications in ROS1+ or ALK+ advanced non-NSCLC solid tumors, and combination therapies.    We believe our preliminary safety data and antitumor activity from TRIDENT-1 support pursuing pediatric indications, the indication for ROS1+ and ALK+ advanced non-NSCLC solid tumors, and combination therapies. Our planned Phase 2 portion of TRIDENT-1 includes pediatric patients 12 years of age and older and an exploratory cohort of TKI-naïve patients with ROS1+ or ALK+ advanced solid tumors (non-NSCLC). In addition, we also plan to conduct a separate Phase 1/2 clinical trial of repotrectinib in pediatric patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. Furthermore, preclinical studies have shown that repotrectinib modulates Signal Transducer and Activator of Transcription 3 (STAT3) signaling, one of the major signaling pathways associated with solid tumor growth and acquired treatment resistance. Based on preclinical data, our first planned combination trial will be with

 

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Tagrisso (osimertinib), a third generation EGFR TKI for advanced NSCLC with an EGFR mutation. Treatment resistance with osimertinib is due in part to its upregulation of STAT3 signaling. We plan to initiate our Phase 1/2 pediatric trial in the second half of 2019. In addition, the design of a combination clinical trial of repotrectinib and osimertinib is under development.

 

   

Leverage our extensive expertise and macrocycle platform to develop and expand our pipeline candidates as single agent therapies and/or in combinations.    In addition to repotrectinib, we are developing a pipeline of highly potent multi-targeted drug candidates based on our macrocycle platform that we believe can be best-in-class kinase inhibitors and address areas of unmet medical need. We intend to develop our current and future pipeline candidates as single agent therapies as well as in combinations. Our current pipeline includes:

 

   

TPX-0046, a TKI that can potently inhibit the RET and SRC kinases, which is currently in IND-enabling studies. We plan to submit an IND and initiate a Phase 1 clinical trial of TPX-0046 for the treatment of advanced solid tumors with abnormal RET genes in the second half of 2019.

 

   

TPX-0022, a TKI that can potently inhibit the MET, CSF1R and SRC kinases, which we intend to develop for the treatment of patients with advanced solid tumors that have abnormal hepatocyte growth factor (HGF)/MET or CSF1/CSF1R signaling. We plan to submit an IND in the first half of 2019, and then initiate a Phase 1 trial of TPX-0022 in the second half of 2019 for the treatment of advanced solid tumors with MET alterations. We are planning an interim data read-out for the Phase 1 study of TPX-0022 in patients with advanced solid tumors and MET alterations in the second half of 2020.

 

   

A series of next-generation ALK inhibitors that can potently inhibit wild type (WT) and mutated ALK kinases, which will be focused on addressing treatment resistance arising from currently available ALK inhibitors. We plan to select a candidate for IND-enabling studies in 2019.

We plan to expand our pipeline using our macrocycle platform and our team’s significant drug design and development expertise.

 

   

Evaluate strategic opportunities to accelerate development timelines and enhance the commercial potential of our drug candidates.    We have worldwide rights to all of our drug candidates. We will evaluate partnerships and other strategic opportunities that could increase the value of our programs and allow us to leverage the expertise of collaborators.

 

   

Establish capabilities to effectively commercialize our drug candidates.    We intend to build a targeted, specialty sales force in North America to support the commercialization of repotrectinib and our other drug candidates, if approved.

Overview of Kinases and Current Limitations of Kinase Inhibitors

Kinases are enzymes that respond to external stimuli to modulate numerous activities of cells, such as proliferation, survival and migration. ATP is utilized by kinases for phosphorylation, which triggers a signaling process. This phosphorylation process changes a kinase from an inactive conformation (unphosphorylated kinase) to an active conformation (phosphorylated kinase). A kinase often undergoes substitutions of its original amino acids by other amino acids, also known as a mutation. Kinases maintain a controlled equilibrium between the active and inactive conformations, but activating mutations shift the kinase to favor the active conformation, which can lead to aberrant cell proliferation and thus the development of certain cancers. Aberrant activation of a kinase can also occur if the kinase gene, such as ROS1, NTRK or ALK, undergoes a genomic rearrangement resulting in fusion to another gene, leading to the constitutive phosphorylation of the fusion kinase and the development of certain cancers.

Kinase inhibitors are designed to occupy the ATP binding site, thereby preventing the binding of ATP. Most conventional kinase inhibitors are much larger than ATP and have extra motifs that extend

 

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beyond the ATP pocket of the kinase in order to enable the kinase to have a stronger interaction with the compound than with ATP. During treatment with conventional TKIs, an acquired mutation in the kinase domain often occurs. These mutations change the surface of the kinase and block the occupancy of oversized TKIs at the ATP binding site without impacting the binding of ATP.

Based on the orientation of the extra motif, kinase inhibitors can be grouped into two types:

 

   

Type I kinase inhibitors, such as Xalkori (crizotinib), which often have the extra motif extending to the kinase’s open solvent front area. The most common treatment acquired resistance to these inhibitors are solvent front mutations.

 

   

Type II kinase inhibitors, such as Gleevec (imatinib), which have the extra motif extending to the back pocket of the kinase. The most common treatment acquired resistance to these inhibitors are gatekeeper mutations.

Two or more mutations in the same protein are referred to as compound mutations.

Our Approach

To overcome key limitations of most current TKI therapies and emerging resistance, our strategy is to design small (low molecular weight), compact TKIs with rigid three-dimensional macrocyclic structures that bind inside the ATP pocket of the target kinase. By binding completely inside the ATP pocket, our TKIs can bind to solvent front mutated kinases that sterically exclude conventional TKIs. In addition to potentially addressing resistance that has developed from prior lines of TKI therapy, we believe our TKIs may also prevent or delay the emergence of new resistant mutations. Furthermore, unlike conventional, flat, two-dimensional kinase inhibitor structures, we believe a rigid three-dimensional structure enables our TKIs to target the selected kinases in a highly potent, precise and efficient manner, which provides a base for a favorable kinase selectivity profile. The figure below depicts the binding of conventional oversized TKIs to the ATP pocket in the kinase, the development of resistant mutations (solvent front, gatekeeper), and the binding features of our small, compact TKIs. Our kinase inhibitors bind within the ATP pocket and do not have extra motifs extending beyond the pocket. The compact design of our TKIs enables them to avoid steric interference from acquired mutations, such as solvent front mutations, and allows for potential activity with our kinase inhibitors despite the presence of a resistant mutation.

 

LOGO

ATP pocket Solvent front Back pocket Kinase Kinase inhibitor competes with ATP Development of solvent front mutation Mutation depletes kinase inhibitor, not ATP Development of gatekeeper mutation OUR APPROACH Small and Compact Type I TKI ATP Conventional Oversized Type I TKI Conventional Oversized Type II TKI Solvent Front Mutation Gatekeeper Mutation

 

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Our pipeline candidates will be studied as single agents and in combinations that are supported by strong biologic rationale for synergy between the combined agents, while focusing on key areas of unmet medical need including acquired treatment resistance. The figure below depicts the structure of repotrectinib compared to certain approved and investigational TKIs, overlaid on the structure of ATP. The extra motif present in conventional TKIs at the solvent front area may result in the development of solvent front mutations, as illustrated below.

 

 

LOGO

 

SFM: area that may result in solvent front mutations

MW: molecular weight

Our Pipeline

We are leveraging our macrocycle platform to design a pipeline of highly potent proprietary TKI drug candidates that are structurally different from many existing kinase inhibitors. We believe our TKIs may address the key issues of emerging treatment resistance and toxicities that limit duration of treatment. Our platform allows us to rapidly identify new drug candidates for development. We have global development and commercialization rights to our drug candidates, including our lead program, repotrectinib.

The following chart summarizes our product pipeline, including our lead product candidate, repotrectinib, and our upcoming milestones.

Turning Point Therapeutics Pipeline

 

LOGO

Candidate Selection IND Enabling Studies Phase 1 Phase 2 Phase 31 Upcoming Milestones Repotrectinib (ROS1/TRKs/ALK) TPX-0022 (MET/CSF1R/SRC) TPX-0046 (RET/SRC)2 ALK Inhibitor ROS1+ advanced NSCLC in TKI-naive patients ROS1+ advanced NSCLC in TKI-pretreated patients NTRK+ advanced solid tumors in TKI-naive patients NTRK+ advanced solid tumors in TKI-pretreated patients ROS1+ or ALK+ non-NSCLC advanced solid tumors in TKI-naive patients Repotrectinib + Tagrisso in EGFR mutated advanced NSCLC Repotrectinib in pediatric advanced solid tumors Advanced solid tumor patients Advanced solid tumor patients ALK+ NSCLC TRIDENT-1 Registrational cohorts TRIDENT-1 Phase 1 enrollment ongoing2, Initiating registrational Phase 2 portion in 2H 2019 Non-registrational cohort of TRIDENT-1 Initiating trial in 2H 2019 Trial design in development Initiating trial in 2H 2019 Initiating trial in 2H 2019 Candidate selection in 2019

 

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1

Not required for Phase 2 registrational clinical trials

2

Phase 1 Portion of TRIDENT-1 ongoing with anticipated data read outs within 2019

3

Including NSCLC, thyroid, and other solid tumors with abnormal RET gene

The table below reflects biomarker prevalence of the mutations targeted across the indications related to our current pipeline and the corresponding estimated number of patients in the United States, United Kingdom, France, Germany, Spain and Italy (EU5).

 

    2018 Estimated Annual Number of Patients
  Repotrectinib   TPX-0046     TPX-0022
  Advanced
NSCLC
    Other Advanced
Solid Tumors(1)
  Advanced
NSCLC
    Thyroid(2)     Gastric     Advanced
NSCLC
  EGFR Mutated
TKI-Resistant
Advanced
NSCLC(3)

U.S. Patients(4),(5)

    160,000     520,000     160,000       11,250       17,500     160,000   12,800

EU5 Patients(4)

    117,000     557,900     117,000       11,030       36,680     117,000   6,230

Biomarker Prevalence(6)

   

2%

(ROS1)

 

 

  0.5%

(NTRK)

  0.5%

(ROS1 / ALK)

   

2%

(RET)

 

 

   

16%

(RET)

 

 

   

4%

(MET)

 

 

  3%

(MET Exon 14)

  12.5%

(MET Amplified)

 

(1)

Reflects other solid tumor indications including Brain, Breast, Colon, Melanoma, NSCLC, Pancreas, Sarcoma, and Thyroid, excluding ROS1+ and ALK+ for NSCLC

(2)

Includes papillary and medullary thyroid tumors

(3)

Does not include first line EGFR mutated advanced NSCLC patients; Assumes ~20%, 15%, 11%, 14%, 17% and 12% EGFR mutation prevalence for U.S., France, Germany, Italy, Spain and the U.K., respectively

(4)

Estimates include Stage III unresectable and metastatic patient populations, adjusted for treatable population and those that are tested for the targeted biomarkers. Assumes 85% biomarker testing rate

(5)

Based on SEER 2015 five-year diagnosed prevalence, grown at 0.7% in line with U.S. population growth

(6)

Estimates based on publications and physician and payor interviews in the United States

Repotrectinib

We are developing our lead drug candidate, repotrectinib, an orally administered TKI, for the treatment of both TKI-naïve and TKI-pretreated patients with ROS1+ advanced NSCLC and ROS1+, NTRK+ or ALK+ advanced solid tumors. As of the October 31, 2018 data cut-off date, preliminary data from a total of 75 patients in the ongoing Phase 1 portion of TRIDENT-1 demonstrated clinical proof-of-concept in evaluable patients with ROS1+ advanced NSCLC (n=28) and NTRK+ advanced solid tumors (n=3) at well-tolerated dose levels. Since the prior data cut-off, three additional ROS1+ advanced NSCLC patients were enrolled and have been included in the overall safety data set (n=75). These additional three patients are not yet evaluable for response by BICR as of October 31, 2018 and the number of evaluable patients in the ROS1+ advanced NSCLC efficacy population remains at n=28.

Additionally, we have recently completed an End of Phase 1 meeting with the FDA to gain regulatory clarity related to our TRIDENT-1 Phase 2 design.

Mechanism of Action

Repotrectinib is a small (low molecular weight), macrocyclic TKI of ROS1, TRK and ALK. Repotrectinib was designed to efficiently bind with the active kinase conformation and avoid steric interference from a variety of clinically resistant mutations, especially the solvent front and gatekeeper mutations of the ROS1, TRK and ALK kinases. Repotrectinib has a rigid, three-dimensional structure and is smaller than currently approved or investigational ROS1, TRK and ALK inhibitors. The rigid, three-dimensional structure enables repotrectinib to precisely and efficiently bind to its oncogenic targets with a desirable selectivity profile. We have screened repotrectinib against approximately 400 kinases which indicated repotrectinib is a selective multi-targeted kinase inhibitor that is highly potent against ROS1, TRK and ALK, and inhibits JAK2, SRC and FAK, as depicted below.

 

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LOGO

 

Kinome illustration reproduced courtesy of Cell Signaling Technology, Inc. (CSTI) (www.cellsignal.com). Each branch of the dendogram represents an individual human kinase. The foregoing website is maintained by CSTI.

The selectivity index (SI) is defined as the kinase IC50 value divided by the lowest IC50 value (0.071 nM) from the inhibition against the ROS1 kinase and is depicted by the size of the circles in the figure above. The largest circle is for ROS1 with SI = 1, followed by kinases with 1< SI <10 (TRKA, TRKB and TRKC), 10< SI <20 (ALK, JAK2, and SRC family member FYN), and 20< SI <250 (SRC family members LYN, YES1, FGR and SRC; TXK, ARK5, DDR1 and FAK). Based on the selectivity profile, we believe repotrectinib will be able to target ROS1 and TRK family members with high potency, and target JAK2, some SRC family members and FAK with moderate potency. According to a 2015 review article, selective multi-targeted kinase inhibitors with a favorable safety profile may be more suitable for cancer treatment, which we believe is due to their activity against redundant signaling pathways mediated by different kinases. Repotrectinib inhibits JAK2, SRC and FAK leading to the modulation of STAT3 signaling, one of the major signaling pathways that is common for both intrinsic and acquired resistance. We believe the inhibition of JAK2, SRC and FAK may lead to a longer duration of response for patients treated with repotrectinib.

Market Opportunity

An estimated 1.8 million people are projected to die of lung cancer in 2018, the leading cause of cancer-related death globally. Metastatic NSCLC and advanced solid tumors are serious diseases for which the five-year survival rates range from 5-30% and 3-38%, respectively. While currently approved TKIs have improved the five-year survival rates, there remains a significant opportunity for a new generation of TKIs that address the shortcomings of current therapies. These shortcomings include:

 

   

the inability to achieve a response, or limited durability of response, caused by intrinsic or acquired resistance;

 

   

toxicities that limit dosage levels and duration of treatment; and

 

   

an inability to combine with other anti-cancer agents because of cumulative toxicities.

Crizotinib is the only ROS1 inhibitor approved for the treatment of metastatic ROS1+ NSCLC patients, and larotrectinib is the only TKI approved for patients with metastatic solid tumors that have an NTRK gene fusion without a known acquired resistant mutation. Key limitations of crizotinib are its limited activity within the CNS and its overall safety profile. In addition, the current investigational agent

 

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entrectinib for ROS1+ NSCLC patients has shown to be ineffective in patients who had systemic progression with prior crizotinib treatment. Additionally, Grade 3 or Grade 4 alanine aminotransferase (ALT) or aspartate aminotransferase (AST) elevations have been reported following treatment with many TKIs including crizotinib, entrectinib and larotrectinib.

There continues to be a growing number of acquired resistant mutations in patients previously treated with TKIs. Most of the currently approved or investigational ROS1 and TRK kinase inhibitors have an extra chemical group, or motif, extending to the solvent front that leaves them susceptible to solvent front mutations. The most common solvent front mutation in the ROS1 kinase, G2032R, was reported in 2017 from a single institution in 41% of patients who experienced progressive disease while taking crizotinib. In addition, emerging solvent front mutations, such as TRKA G595R, TRKC G623R and TRKC G623E, have been reported in NTRK+ solid tumors after treatment with larotrectinib and the investigational agent entrectinib. Currently, there are no approved TKIs that can overcome solvent front mutations that arise in the ROS1 or TRK kinases. Given the incidence of these resistant mutations, there continues to be a high unmet medical need to develop novel therapies that can overcome intrinsic and acquired resistance, such as the development of solvent front mutations.

TRIDENT-1 Phase 1/2 Trial

In February 2017, we initiated the Phase 1, dose escalation portion of TRIDENT-1, which includes three parts:

 

   

Phase 1a (completed, n=44);

 

   

Phase 1b (completed, n=28); and

 

   

Phase 1c (currently ongoing, as of March 1, 2019, 11 patients have been enrolled (three patients treated at 120 mg QD are included in the updated safety dataset) and eight additional patients treated since the October 31, 2018 data cut-off not yet included in the safety or efficacy analysis sets.

 

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Repotrectinib is being administered in continuous 28-day cycles across multiple dose levels, as set forth in the table below. In Phase 1a, repotrectinib was given under defined fasting conditions. In Phase 1b, the first dose of repotrectinib was given with either a high-fat, high-calorie meal or under defined fasting conditions and then switched to the opposite on the second dose with repotrectinib given either under defined fasting conditions or with a high-fat, high-calorie meal to evaluate the effect of food on the pharmacokinetics of repotrectinib. After the second dose, all other doses were given under defined fasting conditions. In the ongoing Phase 1c, repotrectinib is being given continuously with a standard meal.

 

     

Dose

       Patients (n)    

Phase 1a

Completed Enrollment

(Fasted Dosing)

   40 mg QD    6
   80 mg QD    6
   160 mg QD    8
   240 mg QD    10
   160 mg BID    12
   200 mg BID    2

Phase 1b

Completed Enrollment

(Single Dose with Food)

 

   40 mg QD    7
   80 mg QD    6
   160 mg QD    15

Phase 1c

Enrolling

(Dosing Continuously with Food)

  

120 mg QD

 

160 mg QD

 

160 mg QD for one week,

160 BID thereafter

   3

 

5(a)

 

3(a)

 

(a)

As of March 4, 2019, enrollment in the Phase 1c is ongoing with eight additional patients enrolled since the October 31, 2018 data cut-off.

Since the last data cut-off in July 2018, as of the October 31, 2018 data cut-off, an additional three ROS1+ advanced NSCLC patients were enrolled in the Phase 1c portion of TRIDENT-1 at a dose of 120 mg QD with food. These three patients are included in the total number of 75 patients evaluated for overall safety as of the October 31, 2018 data cut-off, and no DLTs were observed within these three patients. These three patients are not included in the ROS1+ advanced NSCLC efficacy population (n=28) as they were not yet evaluable for response via BICR.

Since October 31, 2018, eight (seven ROS1+ advanced NSCLC and one NTRK+ thyroid carcinoma) additional patients have been dosed in the Phase 1c portion of TRIDENT-1 including five patients treated at 160 mg QD with food and three patients at 160 mg QD for seven days followed by 160 mg BID dose if repotrectinib is well tolerated within the first week.

We plan to provide an update to our ongoing Phase 1/2 TRIDENT-1 clinical trial in patients with ROS1+ NSCLC in an oral presentation at the 2019 annual meeting of the American Society of Clinical Oncology (ASCO), which will include additional follow-up for patients enrolled into the Phase 1a and Phase 1b portions, as well as preliminary data from the ongoing Phase 1c portion of the Phase 1 study, as of a March 4, 2019 data cut-off.

As of the March 4, 2019 data cut-off, no DLTs have been observed in these additional eight patients yet since the October 31, 2018 data cut-off, there has been one additional Grade 5 TEAE of respiratory failure reported as related to disease progression and not treatment related, in a ROS1+ NSCLC patient initially treated at 120 mg QD who escalated to 160 mg BID due to disease progression 30 days prior to the event. A total of five ROS1+ NSCLC patients are efficacy evaluable via BICR:

 

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120 mg QD (naïve n=1, pre-treated n=1) and 160 mg QD (naïve n=0, pre-treated n=3). At 120 mg QD, the data includes one TKI-naïve evaluable patient who had a maximum change in tumor size from baseline of -16% and remains in stable disease. The patient’s dose was recently escalated to 160 mg QD. Across patients treated at the starting dose of 160 mg QD, we are pleased that the trends we observed are consistent with those previously disclosed from TRIDENT-1.

We anticipate providing an update to our ongoing Phase 1/2 TRIDENT-1 clinical trial in patients with ROS1+ NSCLC at a medical conference in mid-2019 which will include additional follow up for patients enrolled into the Phase 1a and Phase 1b portions, as well as preliminary data from the ongoing Phase 1c portion of the Phase 1 study as outlined above.

The primary objective of the Phase 1 portion of TRIDENT-1 is to determine the maximum tolerated dose (MTD), and a recommended Phase 2 dose of repotrectinib. The safety endpoints of the Phase 1 portion include evaluating the DLTs and adverse events. The secondary endpoint of the Phase 1 portion is confirmed ORR by BICR, using RECIST v1.1.

Key inclusion criteria include: histologically or cytologically confirmed diagnosis of locally advanced or metastatic solid tumors, including non-Hodgkin Lymphoma (Stage IV, as classified by AJCC v.7) that harbor an ALK, ROS1, NTRK1, NTRK2, or NTRK3 gene fusion determined by local testing; Eastern Cooperative Oncology Group (ECOG) Performance Status 0-1 (able to conduct full (0) or light (1) daily activities); Age ³18; prior chemotherapy and/or immunotherapy permitted; at least one measurable target lesion (including central nervous system only) according to RECIST v1.1. Key exclusion criteria include: symptomatic brain metastases; major cardiovascular history in the past six months; or history of prolonged QTc interval.

Solid tumors are measured by CT or MRI scan, as assessed according to RECIST v1.1, at baseline, at the end of the second cycle, after every two cycles up to cycle 18, and then every three cycles up to cycle 36. If an initial response is determined, confirmation of response requires a subsequent CT or MRI scan, generally four weeks later.

As of the October 31, 2018 data cut-off, a total of 75 patients have been treated across seven dose cohorts ranging from 40 mg QD to 240 mg QD, 160 mg BID and 200 mg BID, and the additional Phase 1c cohort of 120 mg QD given continuously with food. Median age was 52.0 years old (range 18 to 79, 16.0% were 65 years old and over), and 65% had ECOG Performance Status of 1. A significant majority (84%) of patients with advanced solid tumors were diagnosed with NSCLC. Other patients with the diagnosis of glioblastoma, renal cell carcinoma, liver cancer, soft tissue sarcoma, melanoma, salivary gland, gallbladder, head and neck, and uterine cancer were also enrolled. All patients with advanced solid tumors had received prior TKIs or chemotherapy treatment without any enrollment restrictions regarding the number of prior therapies. The following table summarizes the disease characteristics of the patients in the Phase 1 portion of TRIDENT-1 as of the October 31, 2018 data cut-off.

 

Disease Characteristics

 

Overall Patient Population

     n=75(1)  

Number of Patients with Baseline CNS Metastases

     n=33(2) (44%)  
     # of Prior TKIs
Median (Min, Max)
     # of Prior Lines
of Chemotherapy
Median (Min, Max)
 

ROS1+ Advanced Solid Tumors (n=36(3))

     1 (0, 3)        1 (0, 6)  

NTRK+ Advanced Solid Tumors (n=8)

     1 (0, 2)        2 (1, 2)

ALK+ Advanced Solid Tumors (n=31)

     2 (0, 4)        1 (0, 6)

 

(1)

Overall patient population includes: 36 (48%) ROS1+ patients; 8 (11%) NTRK+ patients; and 31 (41%) ALK+ patients

 

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(2)

52% (17/33) for ROS1+ advanced NSCLC patients by investigators’ assessments including measurable and non-measurable CNS metastases

(3)

Of the 36 ROS1+ patients, only 33 had prior therapy data entered at time of data cutoff. Results (presented below) are based on n=33 patients (excluding the three patients enrolled into the 120 mg QD with continuous food cohort)

The protocol-defined analysis populations were:

 

   

Safety Analysis Population (n=75): Includes all patients who received at least one dose of repotrectinib; and

 

   

BICR Evaluable Population (n=52): Includes all patients who received at least one dose of repotrectinib; had a baseline tumor assessment with measurable disease; and had at least one post-baseline tumor assessment.

Patient numbers within each of these populations are shown in the following table.

 

     ROS1+      NTRK+      ALK+      Total  

Safety Analysis Population

     36        8        31        75  

Response Evaluation Population (BICR)

     29        3        20        52  

Advanced NSCLC

     28        1        17        46  

Other Advanced Solid Tumors

     1        2        3        6  

Preliminary Clinical Data From TRIDENT-1

In June 2018, we reported preliminary safety, tolerability and efficacy data with repotrectinib in patients with ROS1+ advanced NSCLC and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. Based on the encouraging clinical activity, we are initially pursuing a path to registration for both ROS1+ advanced NSCLC and NTRK+ advanced solid tumors.

As of the October 31, 2018 data cut-off, a total of 75 patients had been dosed, 16 patients were still on treatment, and the MTD had not yet been reached. Of the 75 patients, 28 of 33 with ROS1+ advanced NSCLC and three of 6 with NTRK+ advanced solid tumors were evaluable by BICR. All patients received at least one dose of repotrectinib across five dose cohorts ranging from 40 mg QD to 160 mg BID.

The median age of these 28 ROS1+ advanced NSCLC evaluable patients was 52.0 years (range, 30 to 75), 71% were female, and 61% were Asian. CNS metastases were reported in 16 (57%) at baseline. The median number of prior ROS1 TKIs in the 18 (64%) pretreated patients was 1 (range, 1 to 3). Of the 18 patients, 15 were treated with one prior TKI (of which 11 were treated with crizotinib), and three were treated with two or more prior TKIs. There were 25 (89%) patients treated with at least one prior chemotherapy.

The clinical efficacy data summarized below focuses on the results from the ROS1+ advanced NSCLC patient population and the smaller population of evaluable NTRK+ advanced solid tumor patients.

The median follow-up time for the 28 patients with ROS1+ advanced NSCLC on study was 12.9 months (16.4 months in TKI-naïve; and 12.9 months in TKI-pretreated). All responses observed in this patient population were confirmed PRs by RECIST v1.1 (one patient had a confirmatory scan after 23 days). The median time to response for the 28 patients with ROS1+ advanced NSCLC was 1.7 months (range, 1.5 – 7.0 months) (1.7 months in TKI-naïve; and 1.6 months in TKI-pretreated).

TKI-naïve ROS1+ advanced NSCLC evaluable population (n=10)

In the TKI-naïve ROS1+ advanced NSCLC evaluable population (10/10 evaluable), 10 patients were treated across five dose escalation cohorts. All patients in this population had prior chemotherapy

 

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(ranging from one to three lines of chemotherapy. The confirmed ORR by BICR was 90% (9/10) (95% CI, 56 to 100) across all five dose levels, with five of six (83%) patients achieving a confirmed ORR at our likely recommended Phase 2 dose of 160 mg QD or above. The median duration of response has not yet been reached with five of nine patients remaining in response (range, 5.5+ to 14.9+ months). Of the four patients no longer in response, three had events of progressive disease, and one patient was censored off treatment prior to progression. Of the 10 TKI-naïve patients, three patients had measurable CNS metastases, and of the three patients, the confirmed intracranial objective response rate was 100% (3/3) (95% CI, 29 to 100), with all three patients with measurable CNS metastases also achieving a confirmed extracranial response. The CBR, including those who achieved stable disease for at least two cycles or a confirmed partial or complete response, was 100% (10/10) (95% CI, 69 to 100), as shown below.

 

 

LOGO

 

--At and below dashed -30% line represents a response, at and above dashed 20% line represents PD, and the area between the two dashed lines represents stable disease of target lesions

 

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TKI-pretreated ROS1+ advanced NSCLC evaluable population (n=18)

In the TKI-pretreated ROS1+ advanced NSCLC evaluable population, the confirmed ORR was 28% (5/18) (95% CI, 10 to 53) by BICR. Fifteen of 18 patients (83%) had prior chemotherapy either before or after their ROS1 TKI and prior to starting repotrectinib. Fifteen of 18 patients (83%) had one prior TKI, 11 (61%) of which had crizotinib as their only prior TKI. At our likely recommended Phase 2 dose of 160 mg QD or above, 44% (4/9) of patients previously treated with one prior ROS1 TKI achieved a confirmed PR as shown below. Additionally, 50% (3/6) of patients previously treated with crizotinib as their only prior ROS1 TKI at our likely recommended Phase 2 dose of 160 mg QD or above achieved a confirmed PR. Given crizotinib is currently the only approved ROS1 TKI, and there are no approved TKIs for patients previously treated with crizotinib, this is clinically meaningful despite the small sample size.

 

LOGO

 

 

--At and below dashed -30% line represents a response, at and above dashed 20% line represents PD, and the area between the two dashed lines represents stable disease of target lesions

At the time of the data cut-off, of the five responders, two patients had duration of responses of 7.4 and 13.0 months and despite progression have remained on treatment for 14.6+ and 16.6+ months, respectively. One patient remained on treatment for 10.6+ months with a duration of response of 1.9+ months as the patient achieved a cPR after 7.0 months on treatment with stable disease, and two patients were censored early despite remaining in response at the time of discontinuing treatment (one due to clinical progression and one due to withdrawal of consent). Of the four TKI-pretreated patients with measurable CNS disease at baseline, the confirmed intracranial ORR was 50% (2/4) (95% CI, 7 to 93), with 75% of patients (3/4) showing tumor regressions. The CBR in ROS1 TKI-pretreated ROS1+ advanced NSCLC patients was 78% (14/18) (95% CI, 52 to 94), which is clinically meaningful for patients with limited treatment options.

In the 18 TKI-pretreated ROS1+ advanced NSCLC patients, 17 had plasma cell-free DNA tested by next-generation sequencing (NGS) at baseline. Four of the 14 (29%) evaluable patients who were crizotinib-pretreated were found to have the common ROS1 G2032R solvent front mutation. Tumor

 

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regressions were observed in all four crizotinib-pretreated patients who had a ROS1 G2032R solvent front mutation. One patient previously treated with crizotinib for 13 months who achieved stable disease as the best response achieved a confirmed PR with repotrectinib and had a duration of response of 7.4 months. This patient received repotrectinib for 14.6+ months at the time of the data cut-off.

Given the preliminary antitumor activity of repotrectinib in ROS1+ advanced NSCLC patients and the lack of approved ROS1 targeted therapies in ROS1 TKI-pretreated patients, we believe repotrectinib represents a potential therapeutic option, especially for those patients who have a difficult-to-treat ROS1 G2032R solvent front mutation as shown below.

 

 

LOGO

 

--At and below dashed -30% line represents a response, at and above dashed 20% line represents PD, and the area between the two dashed lines represents stable disease of target lesions

 

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Duration of Treatment with Repotrectinib in ROS1+ Advanced NSCLC Patients

Of the 28 evaluable patients with ROS1+ advanced NSCLC who received treatment with repotrectinib, 43% (12/28) remained on treatment as of the October 31, 2018 data cut-off. Thirteen patients remained at their initial starting dose, 10 had their dose escalated (per protocol), and five underwent dose reductions. The primary reason for treatment discontinuation was radiologic or clinical disease progression (13 patients). Only one patient discontinued repotrectinib due to an adverse event, which was a DLT of Grade 3 hypoxia and dyspnea at a dose of 160 mg BID. The duration of treatment for the ROS1+ advanced NSCLC patient population is shown in the chart below and is supportive of the overall tolerability of repotrectinib given the duration of treatment for many patients (both those who have not yet progressed, and those who continue repotrectinib after progression). Twelve of the 28 (43%) patients remained on treatment including seven of the 10 (70%) TKI-naive patients (range, 8.8+ to 17.0+ months) and five of the 18 (28%) TKI-pretreated patients (range, 10.6+ to 16.6+ months).

 

LOGO

Interim Safety Results

As of the October 31, 2018 data cut-off, repotrectinib was generally well tolerated. The majority of treatment emergent adverse events (TEAEs) were Grade 1 or Grade 2. The following table shows the most common TEAEs (related and unrelated to treatment) occurring in >10% of patients in the total of 75 treated patients.

 

Most common (>10%) TEAEs (n=75)

   All Grades
n (%)
     Grade 1
n (%)
     Grade 2
n (%)
     Grade 3
n (%)
     Grade 4(1)
n (%)
 

Dizziness

     43 (57.3)        37 (49.3)        4   (5.3)        2   (2.7)     

Dysgeusia

     36 (48.0)        35 (46.7)        1   (1.3)        

Constipation

     24 (32.0)        15 (20.0)        9 (12.0)        

Dyspnea

     23 (30.7)        7   (9.3)        10 (13.3)        5   (6.7)        1 (1.3)  

Paresthesia

     23 (30.7)        23 (30.7)           

Fatigue

     22 (29.3)        12 (16.0)        8 (10.7)        2   (2.7)     

Anemia

     21 (28.0)        4   (5.3)        8 (10.7)        9 (12.0)     

Nausea

     19 (25.3)        12 (16.0)        5   (6.7)        2   (2.7)     

Cough

     18 (24.0)        11 (14.7)        7   (9.3)        

Pyrexia

     16 (21.3)        14 (18.7)        2   (2.7)        

Headache

     13 (17.3)        12 (16.0)           1   (1.3)     

Vomiting

     13 (17.3)        9 (12.0)        4   (5.3)        

Upper respiratory tract infection

     11 (14.7)        7   (9.3)        4   (5.3)        

 

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Most common (>10%) TEAEs (n=75)

   All Grades
n (%)
     Grade 1
n (%)
     Grade 2
n (%)
     Grade 3
n (%)
     Grade 4(1)
n (%)
 

Muscular weakness

     10 (13.3)        5   (6.7)        3   (4.0)        2   (2.7)     

Pain in extremity

     9 (12.0)        6   (8.0)        2   (2.7)        1   (1.3)     

Abdominal pain

     8 (10.7)        7   (9.3)        1   (1.3)        

Ataxia

     8 (10.7)        6   (8.0)        2   (2.7)        

Pleural effusion

     8 (10.7)        1   (1.3)        6   (8.0)        1   (1.3)     

 

1

Additional Grade 4 TEAEs: cerebrovascular accident, influenza, hyperkalemia, bacterial pneumonia (n=1 each) and respiratory failure (n=2); none were determined to be related to treatment.

Grade 5 TEAEs: respiratory failure, sepsis, sudden death (n=1 each; only the case of sudden death was determined to be possibly related to treatment by Sponsor)

There have been four DLT events: Grade 2 dizziness (n=1 at 160 mg BID), Grade 3 dizziness (n=2; 1 at 160 mg BID and 1 at 240 mg QD), and Grade 3 dyspnea and hypoxia (breathing difficulty) (n=1 at 160 mg BID). No cases of dizziness have led to treatment discontinuation. There have been no Grade 3 or Grade 4 alanine aminotransferase (ALT) or aspartate aminotransferase (AST) elevations (elevated ALT and AST levels indicate liver damage).

Three Grade 5 TEAEs have occurred, with two, respiratory failure (n=1) and sepsis (n=1), determined to not be related to treatment and occurring during the 28 day-follow up period after treatment discontinuation. The two Grade 5 TEAEs that were determined to not be treatment related include: one patient with NTRK+ angiosarcoma on the right leg with a pre-existing open wound infection on the left leg who was treated at 40 mg QD and developed Grade 5 sepsis and passed away 7 days after stopping repotrectinib; and one patient with ROS1+ NSCLC treated at 40 mg QD who developed Grade 5 respiratory failure due to disease progression 5 days after repotrectinib discontinuation. The third Grade 5 TEAE involved a patient with ALK+ NSCLC and a past medical history of diabetes, obesity and hypertension who was dosed at 240 mg QD and experienced a Grade 5 event of sudden death on day 10 of cycle 1, which we determined to be possibly related to study treatment. Additionally, since the October 31, 2018 data cut-off date, there has been one additional Grade 5 TEAE of respiratory failure reported as related to disease progression and not treatment-related in a ROS1+ NSCLC patient initially treated at 120 mg QD and who escalated their dose to 160 mg BID due to disease progression 30 days prior to the event.

In addition, the table below outlines the overall dose modifications of repotrectinib for both TEAEs and treatment-related AEs, and includes permanent drug discontinuation, dose reductions, and dose interruptions, due to AEs (related and unrelated to treatment) as well as information on Serious Adverse Events (SAEs) in the 75 total treated patients as of the data cut-off. Overall, there is a very low incidence of dose modifications or serious adverse events that have been reported and classified as related to repotrectinib, which is another indication of its overall tolerability.

 

     (n=75)  
Number of Patients with Treatment-Emergent Adverse Events (n (%))   

•  Leading to Discontinuation of Study Drug

     9 (12.0)  

•  Leading to Dose Reduction

     7   (9.3)  

•  Leading to Drug Interruption

     12 (16.0)  
Number of Patients with Treatment-Related Adverse Events   

•  Leading to Discontinuation of Study Drug

     2   (2.7)  

•  Leading to Dose Reduction

     7   (9.3)  

•  Leading to Drug Interruption

     2   (2.7)  
Number of Patients with Treatment-Emergent Serious Adverse Events      26 (34.7)  
Number of Patients with Treatment-Related Serious Adverse Events      2   (2.7)  

 

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Preliminary Efficacy Data in Patients with NTRK+ Advanced Solid Tumors Assessed by BICR

Within the Phase 1 portion of TRIDENT-1, the data for the NTRK+ advanced solid tumor patient population is limited, yet among the two evaluable NTRK+, TRK TKI-pretreated patients, a confirmed PR with a duration of response of 9.8 months was observed in one patient who was diagnosed with advanced salivary gland cancer, and was treated with multiple prior TKIs including crizotinib and entrectinib and developed a TRKC G623E solvent front mutation prior to treatment with repotrectinib. The patient remained on repotrectinib treatment for 17.9 months, and then discontinued treatment due to disease progression and subsequently received additional chemotherapy with no response. In January 2019, the patient began receiving repotrectinib again on a compassionate use basis.

The data within the NTRK+ solid tumor patient population that had not received prior TRK TKIs is limited to one evaluable patient who had glioblastoma and achieved stable disease as the best response, and one patient with angiosarcoma who had a dramatic initial response on skin lesions but was not evaluable for response due to death from sepsis (not related to treatment) within the second cycle.

Preliminary Efficacy Data in ALK+ Patients Assessed by BICR

Of the 20 heavily pretreated evaluable ALK+ patients, six achieved stable disease as their best response and no PRs were observed. Based on the lack of responses at the evaluated dose levels, we will no longer enroll ALK+ NSCLC patients in the Phase 1c and Phase 2 portions of TRIDENT-1.

Repotrectinib Clinical Development Plan

TRIDENT-1 Phase 1/2 Clinical Trial

Repotrectinib is being evaluated in TRIDENT-1, our ongoing Phase 1/2 clinical trial for the treatment of patients with ROS1+ advanced NSCLC and patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. We initiated the clinical trial in February 2017 and it is being conducted at four sites in the United States and three sites in South Korea. A total of 75 patients were enrolled as of the October 31, 2018 data cut-off date. The FDA granted an orphan drug designation in June 2017 for the development of repotrectinib in metastatic NSCLC with adenocarcinoma histology.

Key inclusion criteria for the Phase 2 portion of TRIDENT-1 will be the same as those used in the Phase 1 portion, with the exception of: Age ³12; no ALK+ NSCLC; and confirmation of gene fusion prior to enrollment. Currently, in the Phase 1 portion of TRIDENT-1, patients are being enrolled on the basis of laboratory-developed tests by the local sites. However, a prototype companion diagnostic will be developed, validated, and subsequently used as a clinical trial assay for the Phase 2 portion of the trial. The clinical trial assay will prospectively identify patients harboring a ROS1+, NTRK+ or ALK+ gene fusion and thus determine molecular eligibility prior to enrollment into the Phase 2 portion of TRIDENT-1. We plan to submit an investigational device exemption to the FDA in the second quarter of 2019, which if approved will allow the use of the clinical trial assay as an investigational device in the Phase 2 portion of TRIDENT-1 and support a future PMA application to the FDA.

 

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The Phase 2 portion of TRIDENT-1 is our planned single-arm clinical trial in approximately 310 total patients to support the registration of repotrectinib in patients with ROS1+ advanced NSCLC and NTRK+ advanced solid tumors. The trial will evaluate repotrectinib as a single agent at the recommended Phase 2 dose and will enroll patients across six patient expansion cohorts with ROS1+ advanced NSCLC (EXP-1, EXP-2 and EXP-3), ROS1+ or ALK+ advanced solid tumors (non-NSCLC) (EXP-4), and NTRK+ advanced solid tumors (EXP-5 and EXP-6). The trial design for the Phase 2 portion of TRIDENT-1 is illustrated in the following figure.

 

 

LOGO

ROS1+ Advanced NSCLC Pivotal Cohorts (up to n=190) EXP-1 ROS1 TKI-naive ROS1+advanced NSCLC (n=50) EXP-2 1 Prior ROS1 TKI ROS1+ advanced NSCLC (n=100) EXP-3 2 Prior ROS1 TKI ROS1+advanced NSCLC (n=40) EXP-1: Could support accelerated or standard approval EXP-2 and EXP-3: Could support accelerated approval NTRK+Advanced Solid Tumors Pivotal Cohorts (up to n=90) EXP-5 TRK TKI-naive NTRK+ advanced solid tumors (n=50) EXP-6 TRK TKI-pretreated NTRK+ advanced solid tumors (n=40) EXP-5 and EXP-6: Could support approval with a minimum of five distinct tumor types & follow up of at least 12 months EXP-4: Exploratory cohort enrolling ROS1 or ALK TKI-naive patients with ROS1+ or ALK+ advanced solid tumors(non-NSCLC) (n= 12-26)

 

EXP-1, EXP-4, and EXP-5 will enroll patients who have not been previously treated with a TKI, whereas EXP-2, EXP-3, and EXP-6 will enroll patients who have been previously treated with one or two TKIs. All patients in the Phase 2 portion of TRIDENT-1 will receive repotrectinib orally either once daily or twice daily depending on the Phase 2 dose and schedule for 28 consecutive days in repeated four-week cycles.

The primary objective is to determine the confirmed ORR based on BICR as assessed by RECIST v1.1. Patients will be evaluated by either CT or MRI every two cycles and responses will be confirmed approximately four weeks after initial response determination. A CT or MRI scan will be performed at the end of treatment. Patients are able to continue treatment after documented disease progression, provided the patient is deriving clinical benefit. Patients discontinuing study treatment will enter the survival follow-up period and remain on trial until death, loss of follow-up, or withdrawal of consent, whichever occurs first. The key secondary objectives of the trial include intracranial tumor response and duration of response. In December 2018, we completed an End of Phase 1 Meeting with the FDA during which we received feedback on TRIDENT-1 and guidance on the design of the Phase 2 portion. Based on the FDA’s feedback, prior to initiating the Phase 2 portion of TRIDENT-1, we will provide the FDA with additional information from the ongoing Phase 1 portion, including dose-exposure analyses for both efficacy and safety to support our recommended Phase 2 dose. The current estimated timeline for FDA feedback on this information is mid-2019, which will potentially enable us to initiate the Phase 2 portion of TRIDENT-1 in the second half of 2019. In addition, we received the following FDA feedback on the trial design for the Phase 2 portion of TRIDENT-1:

 

   

EXP-1. The current single-arm design could support either accelerated or standard approval. A minimum duration of follow up of at least 12 months from the onset of response for all responding patients would be required to support standard approval.

 

   

EXP-2 and EXP-3. The current single-arm design could support accelerated approval in the context of available therapy at the time of submission.

 

   

EXP-4. This will be an exploratory cohort.

 

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EXP-5 and EXP-6. The current single-arm design could support approval with a minimum of five distinct tumor types evaluated. A minimum duration of follow up of at least 12 months from the onset of response for all responding patients would be required.

Potential approval by the FDA will be based on the totality of the evidence related to ORR and duration of response, as well as overall risk-benefit assessment.

We are planning an interim data read-out for some of the registrational cohorts within the Phase 2 portion of TRIDENT-1 in the second half of 2020.

Pediatric Strategy

Beyond TRIDENT-1, we plan to conduct a Phase 1/2 single arm, open label, multi-center, dose-escalation, safety, pharmacokinetics and pharmacodynamics clinical trial of repotrectinib in pediatric patients with ROS1+, NTRK+ or ALK+ advanced solid tumors. The Phase 1 portion of this trial will be a dose finding study in patients aged 1 month to 11 years old. The Phase 2 portion will enroll patients from age 1 month to 25 years of age into likely 3 separate cohorts based on the identified oncogenic driver and prior treatment, (1) NTRK+ TKI-naïve, (2) NTRK+ TKI-pretreated and (3) Other TRK, ALK, ROS genetic alterations not otherwise specified. The final design, including sample size and statistical assumptions, is being developed. We plan to initiate this trial in the second half of 2019.

To date, repotrectinib has been administered to a single six-year-old pediatric patient with a retroperitoneal infantile fibrosarcoma harboring an RBPMS-NTRK3 fusion on a single patient use basis. The patient did not respond to initial treatment with multi-agent chemotherapy. He subsequently received larotrectinib and continued on therapy for 8.5 months but was discontinued due to progressive disease and found to have developed a solvent front mutation (TRKC G623R) on re-biopsy. The patient was subsequently treated with the investigational agent LOXO-195 followed by radiation therapy. However, the patient rapidly experienced disease progression. The patient was then treated with repotrectinib beginning December 24, 2018, achieved disease stabilization until late March 2019, but subsequently progressed and passed away in April 2019.

Combination Strategy

Osimertinib is the current standard of care for first-line treatment of patients with metastatic NSCLC whose tumors have an EGFR exon 19 deletion or exon 21 L858R mutation, as well as EGFR T790M mutation-positive NSCLC whose disease has progressed on or after EGFR TKI therapy. STAT3, a key member of the intracellular transcription factor STAT family, has been recognized as a key oncogenic factor that drives tumor development and progression. Growing evidence supports STAT3 signaling as a molecular mediator of resistance to anti-EGFR therapy and a potential biomarker for patient response to EGFR targeted treatment regimens. Oncogenic proteins such as SRC and the Janus family kinases (JAK) are able to drive STAT3 activity. Therefore, targeting STAT3 signaling either directly or indirectly via inhibition of SRC and JAK may help to overcome treatment resistance. We believe these factors support the development of repotrectinib, which targets SFKs and JAK, in combination with EGFR targeted agents such as osimertinib. We are designing a Phase 1/2 clinical trial of the combination of repotrectinib and osimertinib for the treatment of advanced NSCLC with an EGFR activating mutation.

Key Preclinical Data for Repotrectinib

Repotrectinib demonstrated high potency against fusion ROS1 and emerging resistant mutations

ROS1 fusion genes have been identified as oncogenic drivers in many malignancies, especially NSCLC. Crizotinib is the only approved treatment for metastatic ROS1+ NSCLC. The efficacy of

 

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crizotinib varies among different types of ROS1 fusion partners in patients with metastatic ROS1+ NSCLC. The most common fusion, CD74-ROS1, is associated with a higher rate of brain metastases and shorter overall survival. Unfortunately, the emergence of drug resistance to crizotinib and other ROS1-targeted investigational TKIs represents a major treatment limitation. The most common solvent front mutation in the ROS1 kinase, G2032R, was reported in 2017 from a single institution in 41% of patients who experienced progressive disease while taking crizotinib. The ROS1 L2026M gatekeeper mutation has also been reported.

The activity of repotrectinib against multiple ROS1 fusions and corresponding resistant mutations was evaluated using our in-house engineered Ba/F3 cell lines, as shown in the table below. Overall, repotrectinib demonstrated a strong inhibition profile, as reflected by low IC50 values, against wild-type and mutant ROS1 fusions when compared to many other ROS1 TKIs. IC50 represents the concentration needed to inhibit 50% of the activity of targeted tumor cells, with lower numbers reflecting higher potency. These data support the belief that repotrectinib can potentially be a best-in-class ROS1 TKI that effectively targets fusion and mutated fusion ROS1 kinases.

 

     Ba/F3 Cell Proliferation Assay IC50 (nM)  
     No Kinase Domain Mutation      ROS1 G2032R      ROS1 L2026M  

Inhibitor(1)

   CD74-
ROS1
     SDC4-
ROS1
     EZR-
ROS1
     TPM3-
ROS1
     CD74-
ROS1
     SDC4-
ROS1
     EZR-
ROS1
     TPM3-
ROS1
     EZR-
ROS1
     TPM3-
ROS1
 

Repotrectinib

     <0.2        0.2        <0.1        <0.1        3.3        3        5        16.3        <0.2        <0.1  

Crizotinib

     14.6        19.6        19.4        31.1        266.2        4661        660        500.6        95.6        236.2  

Lorlatinib

     0.2        0.3        0.2        0.3        160.7        352.9        190.5        434.9        1.6        1.9  

Entrectinib

     10.5        ND        1.5        9.4        1813        ND        2947        1093        13.3        40.7  

Ceritinib

     42.8        59.8        33.1        105        1391        1883        885.8        543.7        12.6        66.5  

Brigatinib

     21        38.7        25.8        61        1172        1473        360.6        3000        24.4        41.3  

Cabozantinib

     0.5        3        0.4        4.5        11.3        169.4        39.5        60.7        3.4        12.6  

Ensartinib

     39.5        ND        118.6        433.1        371.8        ND        1757        4814        543.3        1463  

 

ND:

Not determined

(1)

Other than repotrectinib, data based on evaluation of comparable proxy chemical reagent purchased from commercial sources rather than obtained from the pharmaceutical company developing the kinase inhibitor

In addition, in xenograft tumor model studies, repotrectinib resulted in tumor regression in tumors carrying ROS1 fusion genes with or without a solvent front mutations, as depicted in the following figures.

 

Antitumor effect of repotrectinib in a patient-derived xenograft model of lung cancer with the CD74-ROS1 fusion gene

 

 

Antitumor effect of repotrectinib in a Ba/F3 cell-derived xenograft model with the
CD74-ROS1 fusion gene

 

  

Antitumor effect of repotrectinib in a
Ba/F3 cell-derived xenograft model with the CD74- ROS1 G2032R mutation

 

LOGO

 

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Repotrectinib demonstrated high potency against TRK resistant mutations

Oncogenic TRKA/B/C fusions are identified in multiple cancer types in adults and children. While TRK inhibitors have demonstrated significant efficacy in patients with these cancers, acquired resistant mutations can occur. Next-generation TRK inhibitors targeting both wildtype and mutant TRK fusions can address this unmet need. Repotrectinib was designed to potently inhibit wildtype TRKs and

 

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overcome resistant mutations. We compared the anti-proliferative activity of first-generation (larotrectinib/entrectinib) and next-generation (LOXO-195) TRK TKIs to repotrectinib in repeat preclinical studies using our in-house engineered Ba/F3 cells expressing wildtype or mutated TRKs, as shown in the table below. In Ba/F3 cells with NTRK fusion genes, repotrectinib was more potent than both larotrectinib and LOXO-195 against wildtype, solvent front mutations, gatekeeper mutations, and the compound mutation TRKA G595R/F589L (the simultaneous presence of two or more mutations in the same TRK kinase can often lead to resistance and is more difficult to treat).

 

    Ba/F3 Cell Proliferation Assay IC50 (nM)  
    LMNA-TRKA     ETV6-TRKB     ETV6-TRKC  

TRK Inhibitor(1)

  WT     G595R     G667C     F589L     G595R/
F589L
    WT     G639R     WT     G623R     G623E     F617I  

Repotrectinib

    <0.1       0.2       9.2       <0.2       13.7       <0.1       1.7       <0.2       1.0       0.6       <0.2  

LOXO-195

    4.6       15.1       94.9       26.5       480.8       1.4       20.8       4.0       23.9       36.1       40.9  

Larotrectinib

    18.9       2817       1863       597       >10000       28.2       2500       41.4       7500       1486       4000  

Entrectinib

    0.4       711       186.7       <0.2       1774       0.6       1577       0.8       1670       1500       54.9  

 

WT:

Wildtype

(1)

Other than repotrectinib, data based on evaluation of each corresponding proxy chemical compound purchased from commercial sources rather than from the pharmaceutical company commercializing or developing the respective TRK inhibitor

 

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As shown in the figures below, in xenograft tumor models, repotrectinib led to a change in tumor volume in tumors carrying wildtype or mutated TRK fusions and demonstrated greater antitumor activity than entrectinib and LOXO-195 when dosed at the same dose level. The difference in the change in tumor volume obtained with 15 mg/kg BID of repotrectinib versus entrectinib at the same dose level was statistically significant (p = 0.01) in the model carrying the wildtype LMNA-TRKA fusion (upper right figure). The change in tumor volume obtained with 30 mg/kg BID of repotrectinib versus LOXO-195 at the same dose level was also statistically significant in the models carrying mutated LMNA-TRKA fusion with the solvent front mutation TRKA G595R or gatekeeper/solvent front compound mutation TRKA F589L/G595R, as shown below (p=0.03, bottom left figure; and p=0.003, bottom right figure).

 

Antitumor effect of repotrectinib in a patient-derived xenograft model with the ETV6-NTRK3 fusion gene

 

 

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Antitumor effect of repotrectinib and entrectinib in an NIH3T3 cell-derived xenograft model with the LMNA-TRKA fusion

 

 

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Antitumor effect of repotrectinib and LOXO-195 in an NIH3T3 cell-derived xenograft model with the LMNA-TRKA fusion harboring the G595R solvent front mutation

 

 

LOGO

 

Antitumor effect of repotrectinib and LOXO-195 in an NIH3T3 cell-derived xenograft model with the LMNA-TRKA fusion harboring the F589L/G595R compound mutation

 

 

LOGO

 

Other than repotrectinib, data based on evaluation of each corresponding proxy chemical compound purchased from commercial sources rather than from the pharmaceutical company developing the respective kinase inhibitor

TPX-0046—A Novel RET/SRC Inhibitor

TPX-0046 is a multi-targeted (see table below) orally bioavailable, Type I TKI with a novel three-dimensional macrocyclic structure that is being developed as a RET and SRC kinase inhibitor. TPX-0046 is currently in IND-enabling studies. We plan to submit an IND and initiate a Phase 1 clinical trial of TPX-0046 for the treatment of advanced solid tumors with abnormal RET genes in the second half of 2019.

RET is a receptor tyrosine kinase (RTK). Constitutive activation of RET through gain-of-function mutations, amplifications and fusions have been found in multiple tumor types, including lung cancer, thyroid cancer and colon cancer. To date, two investigational RET inhibitors, BLU-667 and LOXO-292, have shown efficacy in patients with RET fusion positive NSCLC and thyroid cancer (medullary and papillary). In addition, multi-targeted TKIs that inhibit RET have been approved by the FDA in thyroid cancer. Due to its novel macrocyclic structure, we believe TPX-0046 has the ability to demonstrate

 

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clinical activity in both treatment-naïve patients and in patients that develop solvent front mutations. In addition, TPX-0046 has minimal activity against VEGFR kinases, the inhibition of which is often associated with cardiovascular toxicities such as hypertension.

The inhibition of the SRC kinase has the potential to reduce the recruitment of multiple receptor tyrosine kinases involved in bypass resistance and therefore increase the therapeutic effect seen with RET inhibitors. In addition, SRC family kinases (SFKs) regulate MTC cellular proliferation in vitro and mediate growth signals by increasing DNA synthesis and decreasing apoptosis (programmed cell death). Therefore, a dual inhibitor of RET and SRC represents a novel therapeutic strategy to target abnormal RET signaling in cancers.

The broad spectrum of inhibition by TPX-0046 against wildtype and mutated RETs in enzyme-based assays is summarized in the table below.

 

RET Enzyme

   IC50 (nM)    

RET Enzyme

   IC50 (nM)  

RET-NCOA4

     0.29    

RET (G691S)

     0.941  

RET-CCDC6

     0.691    

RET (S904A)

     1.22  

RET-PRKAR1A

     1.81    

RET (L790F)

     1.31  

RET

     1.01    

RET (M918T)

     1.42  

RET (V778I)

     0.233    

RET (Y806H)

     1.97  

RET (Y791F)

     0.261    

RET (R813Q)

     2.46  

RET (S891A)

     0.303    

RET (A883F)

     3.08  

RET (R749T)

     0.32    

RET (V804M)(1)

     7.95  

RET (S904F)

     0.364    

RET (V804L)(1)

     18.8  

RET (E762Q)

     0.58    

RET (V804E)(1)

     2350  

 

(1)

Gatekeeper mutation

The kinase selectivity profile of TPX-0046 was evaluated against 157 kinases and the IC50s were determined against the hits from the kinase selectivity screen. The kinases with IC50 values less than 10 nM are summarized in the table below.

 

Enzyme

  

IC50 (nM)

 

ABL2/ARG

     1.4  

c-Src

     1.46  

TXK

     1.69  

FYN

     1.94  

LYN

     2.03  

YES/YES1

     2.64  

FGFR2

     2.71  

HCK

     2.71  

TRKC

     2.93  

FGR

     3.1  

BMX/ETK

     3.31  

TRKB

     4.4  

BTK

     4.65  

JAK2

     7.67  

TRKA

     9.34  

 

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In addition, the activity against other selected RTKs are summarized below which indicate TPX-0046 has minimal activity against VEGFR1/2/3.

 

Enzyme

  

IC50 (nM)

 

c-Kit

     >1000  

c-MET

     >1000  

EGFR

     >1000  

FLT1/VEGFR1

     >1000  

KDR/VEGFR2

     >1000  

FLT4/VEGFR3

     513.30  

IGF1R

     >1000  

PDGFRa

     >1000  

PDGFRb

     >1000  

TPX-0046 has also been evaluated in our in-house engineered Ba/F3 cell lines, as well as in commercially available TT and LC2/ad cell lines. In these cell-based assays, the approved RET inhibitor cabozantinib was used as a comparator. TPX-0046 potently inhibited the growth of Ba/F3 cells with the KIF5B-RET fusion gene, TT cells with the C634W mutation and LC2/ad cells with the CCDC6-RET fusion gene, as summarized in the table below. TPX-0046 also potently inhibited the proliferation of our in-house engineered Ba/F3 cells with the mutated KIF5B-RET fusion gene harboring the solvent front mutation RET G810R, but had less activity against the mutated KIF5B-RET fusion gene harboring the gatekeeper mutation RET V804M. Limited data is available regarding resistance mutations to investigational RET inhibitors, such as BLU-667 and LOXO-292. Although the RET G810R solvent front mutation has not yet been observed in the clinic, solvent front resistance (G810A) has been demonstrated and reported in 2016 in cell lines cultured with the RET inhibitor vandetanib. Currently there are no FDA-approved RET TKIs that can address resistance that may arise after these or other RET targeted agents.

 

     Cell Proliferation IC50 (nM)  

Inhibitor

   Ba/F3
KIF5B-RET WT
     Ba/F3
KIF5B-RET G810R
(Solvent front mutation)
     TT(1)
(RET C634W)
     LC2/ad(2)
(CCDC6-RET)
     Ba/F3
KIF5B-RET
V804M

(Gatekeeper
mutation)
 

TPX-0046

     1.2        15.3        0.9        1        444  

Cabozantinib(3)

     142        1344        399        500        3400  

 

(1)

TT is a stable cancer cell line derived from a human medullary thyroid carcinoma with a C634W mutation

(2)

LC2/ad is a stable cancer cell line derived from a human lung adenocarcinoma with the CCDC6-RET fusion gene

(3)

Data based on evaluation of corresponding proxy chemical compound purchased from a commercial source rather than from the pharmaceutical company commercializing or developing the kinase inhibitor

As demonstrated by the enzyme-based and cell-based assay data above, TPX-0046 has shown strong potency against wildtype and many mutated RETs, although TPX-0046 is not as potent against RET gatekeeper mutations when compared to wildtype and the solvent front mutation G810R.

 

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In addition, TPX-0046 has shown dose-dependent inhibition of tumor growth in cancer cell- and patient-derived tumor models, as shown in the figures below.

 

Antitumor effect of TPX-0046 in the CR1520 patient-derived xenograft model of colorectal cancer with the NCOA4-RET fusion gene

 

LOGO

  

Antitumor effect of TPX-0046 in a Ba/F3 cell-derived xenograft tumor model with the KIF5B-RET fusion harboring the G810R mutation

 

LOGO

Antitumor effect of TPX-0046 in a TT cell-derived xenograft tumor model of medullary thyroid carcinoma with the RET C634W mutation

 

LOGO

  

Antitumor effect in a Ba/F3 cell-derived xenograft tumor model of lung cancer with the KIF5B-RET fusion gene

 

LOGO

We expect that our planned Phase 1 clinical trial of TPX-0046 for the treatment of advanced solid tumors with abnormal RET genes will evaluate both RET TKI-pretreated and TKI-naïve patient populations.

TPX-0022—A Novel MET/CSF1R/SRC Inhibitor

TPX-0022 is a multi-targeted (see table below) orally bioavailable Type I TKI with a novel three-dimensional macrocyclic structure that is being developed as a MET, CSF1R, and SRC inhibitor. TPX-0022 has completed IND-enabling studies. We plan to submit an IND in the first half of 2019 and initiate a Phase 1 clinical trial of TPX-0022 in the second half of 2019 for the treatment of advanced solid tumors with MET alterations. We are planning an interim data read-out for the Phase 1 study of TPX-0022 in patients with advanced solid tumors and MET alterations in the second half of 2020.

MET is a receptor tyrosine kinase. Hepatocyte growth factor (HGF) is the high-affinity natural ligand of MET. MET alterations, including point mutations, amplifications, fusions, exon 14 skipping, and the generation of HGF-MET autocrine loops have been reported in many cancers. MET amplification has been detected in up to 20% of NSCLC patients with EGFR mutations who acquired resistance to Iressa (gefitinib), Tarceva (erlotinib) or Tagrisso (osimertinib) treatment. In addition, autocrine and paracrine upregulation of HGF can limit the likelihood of response and duration of response achieved with the current investigational MET inhibitors in the clinic.

SRC and STAT3