SEC Filing | Cullinan Oncology, Inc.

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cgem-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-39856

CULLINAN ONCOLOGY, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	81-3879991
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Main Street Suite 520 Cambridge, MA	02142
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 410-4650

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		CGEM		The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐

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 elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The number of shares of the Registrant’s common stock outstanding as of November 2, 2021 was 43,684,540.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Loss	4
	Consolidated Statements of Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	7
	Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96
Item 3.	Defaults Upon Senior Securities	96
Item 4.	Mine Safety Disclosures	96
Item 5.	Other Information	96
Item 6.	Exhibits	96
	Signatures	98

Summary of the Material and Other Risks Associated with Our Business

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, are summarized in “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission, before making an investment decision regarding our common stock.

•

We are early in our development efforts and are substantially dependent on our lead targeted oncology product candidate, CLN-081, and our most advanced product candidates, CLN-049 and CLN-619. If we are unable to advance CLN-081, CLN-049, CLN-619 or any of our other product candidates through clinical development, or to obtain regulatory approval and ultimately commercialize CLN-081, CLN-049 or CLN-619, or any of our other product candidates, either by ourselves or with or by third parties, or if we experience significant delays in doing so, our business will be materially harmed.

•

Difficulty in enrolling patients could delay or prevent clinical trials of our product candidates, and ultimately delay or prevent regulatory approval.

•

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

•

Our product candidates may cause undesirable side effects or have other properties that delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.

•

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

•

We have incurred significant losses since inception and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.

•

We will require substantial additional funding to develop and commercialize our product candidates and identify and invest in new product candidates. If we are unable to raise capital when needed, we would be compelled to delay, reduce or eliminate our product development programs or other operations.

•

We may not be successful in our efforts to use our differentiated hub-and-spoke business model to build a pipeline of product candidates with commercial value.

•

Our subsidiaries are party to certain agreements that provide our licensors, collaborators or other shareholders in our subsidiaries with rights that could delay or impact the potential sale of our subsidiaries or could impact the ability of our subsidiaries to sell assets or enter into strategic alliances, collaborations, or licensing arrangements with other third parties.

•

Our ability to realize value from our subsidiaries may be impacted if we reduce our ownership to a minority interest or otherwise cede control to other investors through contractual agreements or otherwise.

•

A single or limited number of subsidiaries may comprise a large proportion of our value.

•

Our reliance on a central team consisting of a limited number of employees who provide various administrative, research and development and other services across our organization presents operational challenges that may adversely affect our business.

•

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 obtain and maintain patent and other intellectual property protection for our current product candidates and technology, or any other product candidates or technology we may develop, or if the scope of intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize CLN-081, CLN-049, CLN-619, or any other product candidates or technology may be adversely affected.

•

We currently rely and expect to continue to rely on the outsourcing of the majority of our development functions to third parties to conduct our preclinical studies and clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

•

The manufacture of drug products, and particularly biologics, is complex and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our current product candidates or any future product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented.

•

The novel coronavirus, COVID-19, has and may continue to adversely impact our business, including our preclinical studies and clinical trials and our ability to source drug supply.

•

We are highly dependent on our key personnel and anticipate hiring new key personnel. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

iii

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•

the success, cost and timing of our clinical development of our product candidates, including CLN-081, CLN-049 and CLN-619;

•

the initiation, timing, progress, results and cost of our research and development programs and our current and future preclinical and clinical studies, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

•

our ability to initiate, recruit and enroll patients in and conduct our clinical trials at the pace that we project;

•

our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;

•

our ability to compete with companies currently marketing or engaged in the development of treatments that our product candidates are designed to target;

•

our reliance on third parties to conduct our clinical trials and to manufacture drug substance for use in our clinical trials;

•

the size and growth potential of the markets for oncology, immuno-oncologic diseases and any of our current product candidates or other product candidates we may identify and pursue, and our ability to serve those markets;

•

our ability to identify and advance through clinical development any additional product candidates;

•

the commercialization of our current product candidates and any other product candidates we may identify and pursue, if approved, including our ability to successfully build a specialty sales force and commercial infrastructure to market our current product candidates and any other product candidates we may identify and pursue;

•

the expected benefits of our hub-and-spoke business model, including our ability to identify research priorities and apply a risk-mitigated strategy to efficiently discover and develop product candidates;

•

our ability to retain and recruit key personnel;

•

our ability to obtain and maintain adequate intellectual property rights;

•

our expectations regarding government and third-party payor coverage and reimbursement;

•

our estimates of our expenses, ongoing losses, capital requirements and our needs for or ability to obtain additional financing;

•

the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory and commercialization expertise;

•

our financial performance;

•

developments and projections relating to our competitors or our industry;

•

the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and future clinical trials; and

•

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment and 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 or implied by any forward-looking statements we may make. No forward-looking statement is a guarantee of future performance.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. 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. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research, as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CULLINAN ONCOLOGY, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)

	December 31, 2020 ⁽¹⁾			September 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	168,198		$	88,105
Short-term investments		42,008			232,939
Prepaid expenses and other current assets		2,072			7,794
Total current assets		212,278			328,838
Property and equipment, net		130			89
Other assets		2,300			147
Long-term investments		—			124,330
Total assets	$	214,708		$	453,404
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	9,679		$	2,024
Accrued expenses and other current liabilities		4,641			5,839
Total current liabilities		14,320			7,863
Long-term liabilities:
Deferred rent		74			67
Total liabilities		14,394			7,930
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.0001 par value, 34,900,878 and 150,000,000 shares authorized as of December 31, 2020 and September 30, 2021, respectively; 29,831,125 and 43,660,909 shares issued and outstanding as of December 31, 2020 and September 30, 2021, respectively.		3			4
Additional paid-in capital		292,348			569,835
Accumulated other comprehensive loss		(2	)		(58	)
Accumulated deficit		(93,339	)		(126,395	)
Total Cullinan stockholders' equity		199,010			443,386
Noncontrolling interests		1,304			2,088
Total stockholders' equity		200,314			445,474
Total liabilities and stockholders' equity	$	214,708		$	453,404

See accompanying notes to the unaudited consolidated financial statements.

(1) The consolidated balance sheet as of December 31, 2020 is derived from the audited consolidated financial statements as of that date and was retroactively adjusted, including shares and per share amounts, as a result of the Reorganization and Reverse Stock Split. See Note 3 to the unaudited consolidated financial statements for additional details.

CULLINAN ONCOLOGY, INC.

Consolidated Statements of Operations and Comprehensive LOSS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2021			2020 ⁽¹⁾			2021
License revenue	$	—		$	—		$	—		$	18,943
Operating expenses:
Research and development		9,913			12,680			26,582			36,873
General and administrative		1,586			5,695			4,580			15,677
Total operating expenses		11,499			18,375			31,162			52,550
Loss from operations		(11,499	)		(18,375	)		(31,162	)		(33,607	)
Other income (expense):
Interest income	185			118			809			340
Other income (expense), net		—			(2	)		1			(12	)
Net loss		(11,314	)		(18,259	)		(30,352	)		(33,279	)
Net loss attributable to noncontrolling interest		(1,456	)		(909	)		(6,899	)		(223	)
Net loss attributable to common stockholders of Cullinan	$	(9,858	)	$	(17,350	)	$	(23,453	)	$	(33,056	)
Net loss per share, basic and diluted	$	(0.50	)	$	(0.40	)	$	(1.21	)	$	(0.76	)
Total weighted-average shares used in computing net loss per share, basic and diluted		19,721,992			43,438,861			19,453,479			43,254,230
Comprehensive loss:
Net loss	$	(11,314	)	$	(18,259	)	$	(30,352	)	$	(33,279	)
Unrealized gain/(loss) on investments		(144	)		57		63				(56	)
Comprehensive loss		(11,458	)		(18,202	)		(30,289	)		(33,335	)
Comprehensive loss attributable to noncontrolling interest		(1,456	)		(909	)		(6,899	)		(223	)
Comprehensive loss attributable to Cullinan	$	(10,002	)	$	(17,293	)	$	(23,390	)	$	(33,112	)

See accompanying notes to the unaudited consolidated financial statements.

(1) The shares and per share amounts for the nine months ended September 30, 2020 were derived from the unaudited consolidated financial statements as of that date and were retroactively adjusted as a result of the Reorganization and Reverse Stock Split. See Note 3 to the unaudited consolidated financial statements for additional details.

CULLINAN ONCOLOGY, INC.

Consolidated Statements of STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share amounts)

	Common Stock				Noncontrolling Interest in			Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Subsidiaries			Capital		(Loss)/Income			Deficit			Equity
Balances at December 31, 2019 ⁽¹⁾		18,738,734	$	2	$	864		$	138,543	$	(4	)	$	(41,540	)	$	97,865
Issuance of common stock equivalents ⁽¹⁾ net of issuance costs of $213		1,297,700		—		—			14,037		—			—			14,037
Unrealized gain on investments		—		—		—			—		30			—			30
Net loss		—		—		(190	)		—		—			(4,973	)		(5,163	)
Balances at March 31, 2020		20,036,434		2		674			152,580		26			(46,513	)		106,769
Issuance of subsidiary common stock		—		—		175			—		—			—			175
Noncontrolling interest acquired in MICA		—		—		5,673			—		—			—			5,673
Unrealized gain on investments		—		—		—			—		177			—			177
Net loss		—		—		(5,253	)		—		—			(8,622	)		(13,875	)
Balances at June 30, 2020		20,036,434		2		1,269			152,580		203			(55,135	)		98,919
Issuance of subsidiary common stock		—		—		844			—		—			—			844
Issuance of subsidiary preferred stock		—		—		1,206			—		—			—			1,206
Unrealized (loss) on investments		—		—		—			—		(144	)		—			(144	)
Net loss		—		—		(1,456	)		—		—			(9,858	)		(11,314	)
Balances at September 30, 2020		20,036,434	$	2	$	1,863		$	152,580	$	59		$	(64,993	)	$	89,511

See accompanying notes to the unaudited consolidated financial statements.

(1) The consolidated balance sheet as of December 31, 2019 is derived from the audited consolidated financial statements as of such date and was retroactively adjusted, including shares and per share amounts, as a result of the Reorganization and Reverse Stock Split. Changes in stockholders’ equity for the three months ended March 31, 2020, June 30, 2020 and September 30, 2020 were also retroactively adjusted, including shares and per share amounts, as a result of the Reorganization and Reverse Stock Split. See Note 3 to the unaudited consolidated financial statements for additional details.

CULLINAN ONCOLOGY, INC.

Consolidated Statements of STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share amounts)

	Common Stock				Noncontrolling Interest in			Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Subsidiaries			Capital		(Loss)			Deficit			Equity
Balances at December 31, 2020 ⁽¹⁾		29,831,125	$	3	$	1,304		$	292,348	$	(2	)	$	(93,339	)	$	200,314
Initial public offering net of issuance costs of $22,870		13,685,000		1		—			264,515		—			—			264,516
Equity-based compensation		—		—		5			3,503		—			—			3,508
Unrealized loss on investments		—		—		—			—		(58	)		—			(58	)
Net income/(loss)		—		—		1,489			—		—			(70	)		1,419
Balances at March 31, 2021		43,516,125		4		2,798			560,366		(60	)		(93,409	)		469,699
Issuance of subsidiary common stock		—		—		67			—		—			—			67
Issuance of subsidiary preferred stock		—		—		923			—		—			—			923
Issuance of common stock under employee stock purchase plan		10,099		—		—			180		—			—			180
Equity-based compensation		—		—		6			4,159		—			—			4,165
Unrealized loss on investments		—		—		—			—		(55	)		—			(55	)
Net loss		—		—		(803	)		—		—			(15,636	)		(16,439	)
Balances at June 30, 2021		43,526,224		4		2,991			564,705		(115	)		(109,045	)		458,540
Equity-based compensation		—		—		6			4,551		—			—			4,557
Stock option exercises		134,685		—		—			579		—			—			579
Unrealized gain on investments		—		—		—			—		57