10-Q
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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 June 30, 2022

OR

 

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)

(617) 410-4650

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

CGEM

 

The Nasdaq Global Select Market

 

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 July 31, 2022 was 45,612,205.

 

 


 

Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (unaudited)

 

1

 

Consolidated Balance Sheets

 

1

 

Consolidated Statements of Operations and Comprehensive Income (Loss)

 

2

 

Consolidated Statements of Stockholders’ Equity

 

3

 

Consolidated Statements of Cash Flows

 

5

 

Notes to the Consolidated Financial Statements

 

6

Item 2.

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

 

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

24

Item 4.

Controls and Procedures

 

24

 

 

 

 

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

25

Item 1A.

Risk Factors

 

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

Item 3.

Defaults Upon Senior Securities

 

30

Item 4.

Mine Safety Disclosures

 

30

Item 5.

Other Information

 

30

Item 6.

Exhibits

 

31

 

Signatures

 

32

 

i


 

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 (the “Exchange Act”) that 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.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 10-K") and other filings with the Securities Exchange Commission (the “SEC”), including the following:

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 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; and
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.

ii


 

These factors are discussed more fully in our 2021 10-K and elsewhere in this Quarterly Report on Form 10-Q and other reports we file with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and investors should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.

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” in our 2021 10-K and elsewhere in this Quarterly Report on Form 10-Q.

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CULLINAN ONCOLOGY, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share amounts)

 

 

June 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

353,563

 

 

$

59,774

 

Short-term investments

 

 

257,432

 

 

 

230,692

 

Prepaid expenses and other current assets

 

 

11,846

 

 

 

6,098

 

Total current assets

 

 

622,841

 

 

 

296,564

 

Property and equipment, net

 

 

52

 

 

 

77

 

Operating lease right-of-use assets

 

 

1,074

 

 

 

 

Other assets

 

 

100

 

 

 

147

 

Long-term investments

 

 

43,182

 

 

 

140,397

 

Total assets

 

$

667,249

 

 

$

437,185

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,099

 

 

$

3,169

 

Accrued expenses and other current liabilities

 

 

11,901

 

 

 

8,577

 

Income tax payable

 

 

46,502

 

 

 

 

Operating lease liabilities, current

 

 

533

 

 

 

 

Total current liabilities

 

 

62,035

 

 

 

11,746

 

Long-term liabilities:

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

596

 

 

 

 

Deferred rent

 

 

 

 

 

65

 

Total liabilities

 

 

62,631

 

 

 

11,811

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 45,396,398 and 44,292,102 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

5

 

 

 

4

 

Additional paid-in capital

 

 

604,275

 

 

 

584,714

 

Accumulated other comprehensive loss

 

 

(3,633

)

 

 

(838

)

Retained earnings (accumulated deficit)

 

 

3,891

 

 

 

(158,909

)

Total Cullinan stockholders' equity

 

 

604,538

 

 

 

424,971

 

Noncontrolling interests

 

 

80

 

 

 

403

 

Total stockholders' equity

 

 

604,618

 

 

 

425,374

 

Total liabilities and stockholders' equity

 

$

667,249

 

 

$

437,185

 

See accompanying notes to the unaudited consolidated financial statements.

 

1


 

CULLINAN ONCOLOGY, INC.

Consolidated Statements of Operations and Comprehensive INCOME (LOSS)

(unaudited)

(in thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

License revenue

 

$

 

 

$

 

 

$

 

 

$

18,943

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

26,411

 

 

 

11,778

 

 

 

50,947

 

 

 

24,193

 

General and administrative

 

 

10,695

 

 

 

4,826

 

 

 

18,816

 

 

 

9,982

 

Total operating expenses

 

 

37,106

 

 

 

16,604

 

 

 

69,763

 

 

 

34,175

 

Gain on sale of Cullinan Pearl

 

 

276,785

 

 

 

 

 

 

276,785

 

 

 

 

Income (loss) from operations

 

 

239,679

 

 

 

(16,604

)

 

 

207,022

 

 

 

(15,232

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

697

 

 

173

 

 

894

 

 

222

 

Other income (expense), net

 

 

(241

)

 

 

(8

)

 

 

(241

)

 

 

(10

)

Net income (loss) before income taxes

 

 

240,135

 

 

 

(16,439

)

 

 

207,675

 

 

 

(15,020

)

Income tax expense

 

 

66,070

 

 

 

 

 

 

46,502

 

 

 

 

Net income (loss)

 

 

174,065

 

 

 

(16,439

)

 

 

161,173

 

 

 

(15,020

)

Net income (loss) attributable to noncontrolling interests

 

 

(833

)

 

 

(803

)

 

 

(1,627

)

 

 

686

 

Net income (loss) attributable to common stockholders of Cullinan

 

$

174,898

 

 

$

(15,636

)

 

$

162,800

 

 

$

(15,706

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

174,065

 

 

$

(16,439

)

 

$

161,173

 

 

$

(15,020

)

Unrealized loss on investments

 

 

(499

)

 

 

(55

)

 

 

(2,795

)

 

 

(113

)

Comprehensive income (loss)

 

 

173,566

 

 

 

(16,494

)

 

 

158,378

 

 

 

(15,133

)

Comprehensive income (loss) attributable to noncontrolling interests

 

 

(833

)

 

 

(803

)

 

 

(1,627

)

 

 

686

 

Comprehensive income (loss) attributable to Cullinan

 

$

174,399

 

 

$

(15,691

)

 

$

160,005

 

 

$

(15,819

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (net loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.90

 

 

$

(0.36

)

 

$

3.65

 

 

$

(0.37

)

Diluted

 

$

3.77

 

 

$

(0.36

)

 

$

3.51

 

 

$

(0.37

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used in computing earnings (net loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

44,873

 

 

 

43,295

 

 

 

44,654

 

 

 

42,713

 

Diluted

 

 

46,381

 

 

 

43,295

 

 

 

46,389

 

 

 

42,713

 

See accompanying notes to the unaudited consolidated financial statements.

 

2


 

CULLINAN ONCOLOGY, INC.

Consolidated Statements of STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share amounts)

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Retained Earnings (Accumulated

 

 

Noncontrolling
Interest in

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit)

 

 

Subsidiaries

 

 

Equity

 

Balances at December 31, 2021

 

 

44,292,102

 

 

$

4

 

 

$

584,714

 

 

$

(838

)

 

$

(158,909

)

 

$

403

 

 

$

425,374

 

Issuance of subsidiary preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,153

 

 

 

1,153

 

Net issuance of common stock under equity-based compensation plans

 

 

367,924

 

 

 

 

 

 

1,566

 

 

 

 

 

 

 

 

 

 

 

 

1,566

 

Equity-based compensation

 

 

 

 

 

 

 

 

6,559

 

 

 

 

 

 

 

 

 

6

 

 

 

6,565

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(2,296

)

 

 

 

 

 

 

 

 

(2,296

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,098

)

 

 

(794

)

 

 

(12,892

)

Balances at March 31, 2022

 

 

44,660,026

 

 

 

4

 

 

 

592,839

 

 

 

(3,134

)

 

 

(171,007

)

 

 

768

 

 

 

419,470

 

Issuance of subsidiary common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

139

 

 

 

139

 

Net issuance of common stock under equity-based compensation plans

 

 

736,372

 

 

 

1

 

 

 

2,834

 

 

 

 

 

 

 

 

 

 

 

 

2,835

 

Equity-based compensation

 

 

 

 

 

 

 

 

8,602

 

 

 

 

 

 

 

 

 

6

 

 

 

8,608

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(499

)

 

 

 

 

 

 

 

 

(499

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174,898

 

 

 

(833

)

 

 

174,065

 

Balances at June 30, 2022

 

 

45,396,398

 

 

$

5

 

 

$

604,275

 

 

$

(3,633

)

 

$

3,891

 

 

$

80

 

 

$

604,618

 

See accompanying notes to the unaudited consolidated financial statements.

 

3


 

CULLINAN ONCOLOGY, INC.

Consolidated Statements of STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share amounts)

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Noncontrolling
Interest in

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Subsidiaries

 

 

Equity

 

Balances at December 31, 2020

 

 

29,831,125

 

 

$

3

 

 

$

292,348

 

 

$

(2

)

 

$

(93,339

)

 

$

1,304

 

 

$

200,314

 

Initial public offering, net of issuance costs of $22,870

 

 

13,685,000

 

 

 

1

 

 

 

264,515

 

 

 

 

 

 

 

 

 

 

 

 

264,516

 

Equity-based compensation

 

 

 

 

 

 

 

 

3,503

 

 

 

 

 

 

 

 

 

5

 

 

 

3,508

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(58

)

 

 

 

 

 

 

 

 

(58

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

1,489

 

 

 

1,419

 

Balances at March 31, 2021

 

 

43,516,125

 

 

 

4

 

 

 

560,366

 

 

 

(60

)

 

 

(93,409

)

 

 

2,798

 

 

 

469,699

 

Issuance of subsidiary common
stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67

 

 

 

67

 

Issuance of subsidiary preferred
stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

923

 

 

 

923

 

Net issuance of common stock under equity-based compensation plans

 

 

10,099

 

 

 

 

 

 

180

 

 

 

 

 

 

 

 

 

 

 

 

180

 

Equity-based compensation

 

 

 

 

 

 

 

 

4,159

 

 

 

 

 

 

 

 

 

6

 

 

 

4,165

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

 

 

 

 

 

 

(55

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,636

)

 

 

(803

)

 

 

(16,439

)

Balances at June 30, 2021

 

 

43,526,224

 

 

$

4

 

 

$

564,705

 

 

$

(115

)

 

$

(109,045

)

 

$

2,991

 

 

$

458,540

 

See accompanying notes to the unaudited consolidated financial statements.

4


 

CULLINAN ONCOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

161,173

 

 

$

(15,020

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

Gain on sale of Cullinan Pearl

 

 

(276,785

)

 

 

 

Depreciation and amortization

 

 

25