PART I. FINANCIAL INFORMATION
Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission, or SEC, on March 10, 2020.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “aim,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “potential” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
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the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;
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•
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our ability to advance drug candidates into, and successfully complete, clinical trials;
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•
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the anticipated impact of the novel coronavirus disease 2019, or COVID-19, pandemic on our business, preclinical studies and clinical trials;
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the commercialization of our drug candidates;
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•
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the implementation of our business model, strategic plans for our business, drug candidates and technology;
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•
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the scope of protection we are able to establish and maintain for intellectual property rights covering our drug candidates and technology;
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•
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estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
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•
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the timing or likelihood of regulatory filings and approvals, including whether the U.S. Food and Drug Administration, or FDA, will act by the Prescription Drug User Fee Act, or PDUFA, target goal date for a decision of July 7, 2021 for the avacopan New Drug Application, or NDA;
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•
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our ability to maintain and establish collaborations or obtain additional government grant funding;
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our financial performance; and
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•
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developments relating to our competitors and our industry.
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These statements relate 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 included in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 10, 2020.
Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. For all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
ChemoCentryx® and the ChemoCentryx logo are our trademarks in the United States, the European Community, Australia and Japan. EnabaLink® and RAM® are our trademarks in the United States. Each of the other trademarks, trade names or service marks appearing in this Quarterly Report on Form 10-Q belongs to its respective holder.
Unless the context requires otherwise, in this Quarterly Report on Form 10-Q the terms “ChemoCentryx,” “we,” “us” and “our” refer to ChemoCentryx, Inc., a Delaware corporation, and our subsidiaries taken as a whole unless otherwise noted.
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Overview
ChemoCentryx is a biopharmaceutical company focused on the development and commercialization of new medications targeted at inflammatory disorders, autoimmune diseases and cancer. Most of the drug candidates in our pipeline are designed to selectively block a specific chemoattractant receptor, leaving the rest of the immune system intact. Our drug candidates are small molecules, which are orally administered, and, if approved, could address unmet medical needs, including improved efficacy, and offer significant quality of life benefits, since patients swallow a capsule or pill instead of having to visit a clinic for an infusion or undergo an injection.
In November 2019, we announced positive topline data from the pivotal Phase III ADVOCATE trial of avacopan, our lead drug candidate that is an orally-administered selective complement 5a receptor inhibitor, for the treatment of patients with anti-neutrophil cytoplasmic antibody-associated vasculitis, or ANCA vasculitis. The ADVOCATE trial compared avacopan with the currently used standard of care regimen which consists of high doses of glucocorticoid (most commonly prednisone) which is administered to patients for months. The prednisone standard of care, or SOC, was the active comparator (prednisone active comparator SOC) against which avacopan was assessed in a two-arm, randomized, controlled, and blinded trial. Subjects in both study arms received background therapy with rituximab or cyclophosphamide. The trial met both of its primary endpoints, showing that avacopan therapy without the need for daily prednisone could achieve disease remission at 26 weeks and sustained remission at 52 weeks, as assessed by the Birmingham Vasculitis Activity Score, or BVAS. BVAS remission at week 26 in the avacopan treated subjects was numerically superior and statistically non-inferior to the prednisone active comparator SOC control group, where BVAS remission was achieved in 72.3% of the avacopan treated subjects vs. 70.1% of subjects in the prednisone active comparator SOC control group (p<0.0001 for non-inferiority). Sustained remission at 52 weeks was observed in 65.7% of the avacopan treated subjects vs. 54.9% in the prednisone active comparator SOC control group, achieving both non-inferiority and superiority to prednisone active comparator SOC (p=0.0066 for superiority of avacopan). Reduction in overall burden of disease management and improvement in quality of life was also demonstrated through key secondary endpoints, including improved kidney function and reduction of adverse events and illnesses associated with steroids, such as prednisone.
In September 2020, we announced that the FDA had accepted for review the avacopan NDA for the treatment of ANCA vasculitis in the United States and had set July 7, 2021 as the PDUFA target goal date for the avacopan NDA. Following the mid-cycle review meeting with the FDA, the Company intends to provide an update regarding the FDA’s plans to conduct an advisory committee meeting. If the NDA is approved, we plan to commercialize avacopan in the United States on our own and internationally through our kidney health alliance with Vifor Fresenius Medical Care Renal Pharma Ltd. and its affiliates and sublicensees, or collectively, Vifor. We are also developing avacopan in other indications, including complement 3 glomerulopathy, or C3G, and hidradenitis suppurativa, or HS, and plan to expand indications to include lupus nephritis in the first half of 2021.
Avacopan (CCX168)—Inhibition of Complement-Mediated Pathways in Orphan Diseases
Avacopan (formerly CCX168) is our lead drug candidate. It is a potential first-in-class, orally-administered molecule that employs a novel, highly targeted mode of action in the treatment of ANCA vasculitis and other complement-driven autoimmune and inflammatory diseases. ANCA vasculitis is an orphan, severe, and often fatal autoimmune disease that is characterized by elevated levels of autoantibodies called anti-neutrophil cytoplasmic autoantibodies and by inflammation that can affect many different organ systems, and commonly involves the kidneys. ANCA vasculitis affects approximately 40,000 to 75,000 people in the United States, with 4,000 to 9,000 new cases each year; similarly, ANCA vasculitis affects approximately 50,000 to 100,000 people in Europe, with 5,000 to 10,000 new cases each year.
We have successfully completed and reported positive topline clinical data from our pivotal Phase III clinical trial of avacopan for the treatment of ANCA vasculitis, known as the ADVOCATE trial. ADVOCATE was a randomized, double-blind, active-controlled worldwide clinical trial which enrolled 331 patients with newly diagnosed or relapsing ANCA vasculitis at approximately 200 sites in the United States, Canada, Europe, Australia, New Zealand and Japan. The aim of the trial was to assess the safety and efficacy of avacopan in inducing and sustaining remission in patients with ANCA vasculitis.
Avacopan has been granted orphan drug designation by the FDA for the treatment of ANCA vasculitis and by the European Medicines Agency, or EMA, for the treatment of microscopic polyangiitis and granulomatosis with polyangiitis, both forms of ANCA vasculitis. Based on the success of the avacopan clinical studies in ANCA vasculitis, we filed an NDA with the FDA in July 2020, which is currently under review by the FDA. Our alliance partner, Vifor, announced in November 2020 that the Marketing Authorization Application, MAA, was accepted for review (validated) by the EMA. We will further support Vifor with their filing of applications for regulatory approval internationally.
We are building a commercial infrastructure and plan to deploy an appropriately sized specialty field force in the United States to commercialize avacopan in ANCA vasculitis, if approved. We expect that our future field force will focus primarily on a subset of rheumatologists and nephrologists who treat this disease. In territories outside of the United States, our partner Vifor would be responsible for the commercialization of avacopan.
22
Additionally, we launched a registration-supporting clinical trial, the ACCOLADE trial, to study avacopan for the treatment of patients with C3G. C3G is an ultra-rare disease of the kidney that is characterized by deposition of the complement fragment known as C3 in the glomeruli, or filtration units of the kidney, leading to inflammatory cell accumulation, potentially leading to significant kidney damage and eventual renal failure. The incidence of C3G is estimated at one to three per million people in the United States. The prevalence in the United States is estimated to be as low as five cases per million people. We expect to report topline data from the ACCOLADE trial in the fourth quarter of 2020.
We also initiated a large placebo-controlled Phase IIb clinical trial, the AURORA trial, for the treatment of patients with moderate-to-severe HS. HS is a chronic, inflammatory, debilitating skin disease characterized by recurrent, painful, nodules and abscesses, ultimately leading to the formation of draining fistulas (also known as sinus tracts) as well as scarring. The disease originates from inflammation and occlusion of the hair follicle. Apart from pain, the nodules may rupture, and often extrude a purulent, foul-smelling discharge leading to substantial social embarrassment for these patients. Due to its chronic nature and frequently occurring relapses of the skin lesions, HS has a great impact on the patient’s quality of life, deeply affecting social, working, and psychological aspects. In the United States, the estimated prevalence of HS is 0.1%, of which 5% to 15% are severe Hurley Stage III patients. In Europe, the number of affected patients is believed to be greater, with higher prevalence. In October 2020, we announced positive data in the Hurley Stage III patients from the AURORA trial and plan to advance avacopan into Phase III development for the treatment of severe HS.
Kidney Health Alliance with Vifor
In May 2016, we announced a partnership, which we refer to as the Avacopan Agreement, with Vifor. While under this agreement we retained all rights to avacopan in the United States and China, we granted Vifor exclusive commercialization rights to avacopan in Europe and certain other international markets. In December 2016, we entered into an additional agreement with Vifor, which we refer to as the CCX140 Agreement, relating to CCX140, an orally-administered selective inhibitor of the chemokine receptor known as CCR2. Under the CCX140 Agreement, we again retained all rights to CCX140 in the United States and China and we granted Vifor exclusive worldwide commercialization rights to CCX140 outside of the United States and China. In February 2017, we announced a further agreement with Vifor that harmonized the geographic commercialization rights underlying the agreements for both drug candidates, which we refer to as the Avacopan Amendment. In June 2018, we entered into additional agreements with Vifor to further expand Vifor’s exclusive commercialization rights to include China under the Avacopan Agreement and the CCX140 Agreement. In May 2020, we announced topline data from a 46 patient Phase II dose-ranging trial in the orphan kidney disorder, primary Focal Segmental Glomerulosclerosis, or FSGS, called the LUMINA-1 trial. In the study, CCX140 did not demonstrate a meaningful reduction in proteinuria relative to the control group after 12 weeks of blinded treatment. As such, CCX140 will not be further developed in FSGS.
We have secured $215.0 million in upfront cash and milestone payments pursuant to our agreements with Vifor and are eligible for additional substantial milestone payments. Through our alliance, we maintain the commercialization rights to avacopan and CCX140 in the United States, and also retain control of the clinical development programs for orphan renal disease. Vifor gained the exclusive commercialization rights for all other international markets, and is obligated to pay us tiered royalties, with percentage rates ranging from ten to the mid-twenties, on potential net sales.
At a future time defined in the CCX140 Agreement, Vifor has an option to solely develop and commercialize CCX140 in more prevalent forms of chronic kidney disease, or CKD. Should Vifor later exercise the CKD option, we would receive co-promotion rights for CKD in the United States, and we estimate that the clinical development and registration process for CKD would end at approximately the same time as orphan drug exclusivity.
Early Stage Drug Candidates
While we have focused initially on kidney and dermatological diseases, our target-specific and selective approach designed to stop the spread of inflammatory disease-inducing cells shows promise in other disease areas. Over time we plan to bring forward drug candidates to treat a range of inflammatory and autoimmune disorders, as well as cancer, where we plan to advance our orally-available checkpoint (PD-L1/PD-1) inhibitor, CCX559, into clinical development in the first half of 2021. We expect that our ability to advance our drug candidates into clinical development will grow as we increase our scale and to the extent that we start to earn revenues and royalties from the commercialization of avacopan.
We have incurred significant losses since commencing our operations in 1997. We have funded our operations primarily through the sale of convertible preferred and common stock, contract revenue under our collaborations, government contracts and grants and borrowings under loan and equipment financing arrangements.
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As of September 30, 2020, we had an accumulated deficit of $455.5 million. We expect to continue to incur net losses as we develop our drug candidates, expand clinical trials for our drug candidates currently in clinical development, expand our research and development activities, expand our systems and facilities, seek regulatory approvals and engage in commercialization preparation activities in anticipation of FDA approval of our drug candidates. In addition, if a product is approved for commercialization, we will need to expand our organization. Significant capital is required to launch a product and many expenses are incurred before revenues are received. We are unable to predict the extent of any future losses or when we will become profitable, if at all.
Recent Developments
In December 2019, a disease caused by a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus continues to spread globally and, as of November 2020, has spread to nearly every country and region in the world, including those in which we have active clinical trial sites. While the length of the pandemic and its related restrictions and their consequences on the Company remain subject to a number of risks and uncertainties, as a result of the completion of certain clinical work and collection of certain blinded endpoint data prior to the start of the crisis, we are not currently expecting any material delays in when we intend to report topline clinical data from our ongoing clinical trials. Similarly, we do not currently anticipate any material delays in our preparation for commercial readiness to launch avacopan for the treatment of ANCA vasculitis, if approved, nor are we currently anticipating any material disruption in our clinical drug supply as a result of the pandemic.
In October 2020, we announced positive data in the Hurley Stage III patients from the avacopan Phase II AURORA trial in patients with HS. The Phase II AURORA clinical trial randomized 398 patients to one of three treatment arms. The study population included patients with moderate HS (Hurley Stage II) or severe HS (Hurley Stage III), which were stratified evenly across the treatment groups. The primary endpoint of the proportion of all patients (both moderate HS plus severe HS achieving Hidradenitis Suppurativa Clinical Response (HiSCR), as assessed evaluating 10 mg twice-daily (BID) and 30 mg BID dosing regimens of avacopan against placebo after 12 weeks of treatment in the combined study population, was not achieved with statistical significance at either dose level, although a numerical improvement was noted at the 30mg BID dose. Importantly, avacopan 30mg BID demonstrated a statistically significant higher response than placebo in the most severe (Hurley Stage III) HS patients; we plan to advance avacopan into Phase III development for the treatment of severe HS.
In November 2020, Vifor announced that the MAA for avacopan in the treatment of ANCA vasculitis was accepted for review (validated) by the EMA.
Critical Accounting Policies and Significant Judgments and Estimates
There have been no material changes in significant judgments and estimates for our critical accounting policies during the nine months ended September 30, 2020, as compared to those disclosed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 10, 2020.
Results of Operations
Revenue
We have not generated any revenue from product sales. For the periods presented, our revenues were derived from collaboration and license revenue related to the Avacopan Agreement and the CCX140 Agreement, in each case, as amended, and the related letter agreements. Total revenue for the three and nine months ended September 30, 2020, as compared to the same periods in the prior year, was as follows (in thousands):
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2020
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2019
|
|
|
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2020
|
|
|
|
2019
|
|
Collaboration and license revenue from
related party
|
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$
|
5,027
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|
|
$
|
10,581
|
|
|
|
$
|
60,165
|
|
|
|
$
|
26,081
|
|
Grant revenue
|
|
|
58
|
|
|
|
—
|
|
|
|
|
368
|
|
|
|
|
—
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|
Total revenue
|
|
$
|
5,085
|
|
|
$
|
10,581
|
|
|
|
$
|
60,533
|
|
|
|
$
|
26,081
|
|
Dollar increase (decrease)
|
|
$
|
(5,496
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)
|
|
|
|
|
|
|
$
|
34,452
|
|
|
|
|
|
|
Percentage increase (decrease)
|
|
|
(52
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%)
|
|
|
|
|
|
|
|
132
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%
|
|
|
|
|
|
24
We use a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. In applying the cost-based input method of revenue recognition, we measure actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs. Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as we complete our performance obligations. The decrease in total revenue from 2019 to 2020 for the three month period was primarily attributable to lower costs incurred in 2020 due to the completion of the avacopan ADVOCATE Phase III pivotal trial in 2020. The increase in total revenue from 2019 to 2020 for the nine month period was primarily due to the acceleration of revenue recognition of the transaction price associated with the CCX140 Agreement with Vifor. Following the decision to discontinue development of CCX140 in FSGS, $46.7 million of deferred revenue was recognized as contract revenue in the second quarter of 2020. This increase was partially offset by lower costs incurred due to the completion of the avacopan ADVOCATE Phase III pivotal trial in 2020.
Research and development expenses
Research and development expenses represent costs incurred to conduct basic research, discovery and development of novel small molecule therapeutics, development of our suite of proprietary drug discovery technologies, preclinical studies and clinical trials of our drug candidates. We recognize all research and development expenses as they are incurred. These expenses consist primarily of salaries and related benefits, including stock-based compensation, third-party contract costs relating to research, formulation, manufacturing, preclinical study and clinical trial activities, laboratory consumables, and allocated facility costs. Total research and development expenses for the three and nine month periods ended September 30, 2020, as compared to the same periods in the prior year, were as follows (in thousands):
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|
Three Months Ended
September 30,
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|
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Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Research and development expenses
|
|
$
|
18,582
|
|
|
$
|
18,096
|
|
|
$
|
56,655
|
|
|
$
|
51,074
|
|
Dollar increase
|
|
$
|
486
|
|
|
|
|
|
|
$
|
5,581
|
|
|
|
|
|
Percentage increase
|
|
|
3
|
%
|
|
|
|
|
|
|
11
|
%
|
|
|
|
|
The increases from 2019 to 2020 for the three and nine month periods were primarily attributable to patient enrollment of the avacopan AURORA Phase IIb clinical trial in patients with HS, professional fees associated with the preparation of our NDA submission for avacopan for the treatment of ANCA vasculitis and higher research and drug discovery expenses, including those associated with the development of CCX559, our orally-available checkpoint (PD-L1/PD-1) inhibitor. These increases were partially offset by decreases in expenses due to the completion of the avacopan ADVOCATE Phase III pivotal trial in 2020 and the CCX140 LUMINA-1 Phase II clinical trial in 2019.
The following table summarizes our research and development expenses by project (in thousands):
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Three Months Ended
September 30,
|
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Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Phase I
|
|
$
|
25
|
|
|
$
|
116
|
|
|
$
|
455
|
|
|
$
|
444
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|
Phase II
|
|
|
5,335
|
|
|
|
6,997
|
|
|
|
20,160
|
|
|
|
18,273
|
|
Phase III
|
|
|
5,769
|
|
|
|
7,701
|
|
|
|
18,995
|
|
|
|
22,422
|
|
Research and drug discovery
|
|
|
7,453
|
|
|
|
3,282
|
|
|
|
17,045
|
|
|
|
9,935
|
|
Total research and development expenses
|
|
$
|
18,582
|
|
|
$
|
18,096
|
|
|
$
|
56,655
|
|
|
$
|
51,074
|
|
We track development expenses that are directly attributable to our clinical development candidates by phase of clinical development. Such development expenses include third-party contract costs relating to formulation, manufacturing, preclinical studies and clinical trial activities. We allocate research and development salaries, benefits or indirect costs to our development candidates and we have included such costs in research and development expenses. All remaining research and development expenses are reflected in “Research and drug discovery” which represents early stage drug discovery programs. Such expenses include allocated employee salaries and related benefits, stock-based compensation, consulting and contracted services to supplement our in-house laboratory activities, laboratory consumables and allocated facility costs associated with these earlier stage programs.
At any given time, we typically have several active early stage research and drug discovery projects. Our internal resources, employees and infrastructure are not directly tied to any individual research or drug discovery project and are typically deployed across multiple projects. As such, we do not maintain information regarding these costs incurred for our early stage research and drug discovery programs on a project specific basis. We expect our research and development expenses to increase as we advance our
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development programs further and increase the number and size of our clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. We or our partners may never succeed in achieving marketing approval for any of our drug candidates. The probability of success for each drug candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability. Our strategy includes entering into additional partnerships with third parties for the development and commercialization of some of our independent drug candidates.
The successful development of our drug candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each drug candidate and are difficult to predict for each product. Given the uncertainty associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of the current or future clinical trials of our drug candidates or if, or to what extent, we will generate revenues from the commercialization and sale of any of our drug candidates. We anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each drug candidate, as well as ongoing assessment as to each drug candidate’s commercial potential. We may need to raise additional capital or may seek additional strategic alliances in the future in order to complete the development and commercialization of our drug candidates, including avacopan, CCX559 and CCX872.
General and administrative expenses
Total general and administrative expenses for the three and nine months ended September 30, 2020, as compared to the same periods in the prior year, were as follows (in thousands):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
General and administrative expenses
|
|
$
|
10,362
|
|
|
$
|
6,116
|
|
|
$
|
29,474
|
|
|
$
|
17,187
|
|
Dollar increase
|
|
$
|
4,246
|
|
|
|
|
|
|
$
|
12,287
|
|
|
|
|
|
Percentage increase
|
|
|
69
|
%
|
|
|
|
|
|
|
71
|
%
|
|
|
|
|
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation and travel expenses, in executive, finance, business and corporate development and other administrative functions. Other general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses, legal costs of pursuing patent protection of our intellectual property, and professional fees for auditing, tax, and legal services.
The increases from 2019 to 2020 for the three and nine month periods were primarily due to higher employee-related expenses, including those associated with our commercialization planning efforts, and higher professional fees.
We anticipate that our general and administrative expenses will increase substantially in the future primarily due to pre-commercial activities and personnel costs to support the potential launch of avacopan for the treatment of ANCA vasculitis in the United States.
Other income (expense), net
Other income (expense), net primarily consists of interest income earned on our marketable securities and interest expense for our long-term debt. Total other income (expense), net for the three and nine month periods ended September 30, 2020, as compared to the same periods in the prior year, were as follows (in thousands):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Interest income
|
|
$
|
499
|
|
|
$
|
1,311
|
|
|
$
|
2,059
|
|
|
$
|
3,850
|
|
Interest expense
|
|
|
(700
|
)
|
|
|
(542
|
)
|
|
|
(1,943
|
)
|
|
|
(1,631
|
)
|
Total other income (expense), net
|
|
$
|
(201
|
)
|
|
$
|
769
|
|
|
$
|
116
|
|
|
$
|
2,219
|
|
Dollar decrease
|
|
$
|
(970
|
)
|
|
|
|
|
|
$
|
(2,103
|
)
|
|
|
|
|
Percentage decrease
|
|
|
(126
|
%)
|
|
|
|
|
|
|
(95
|
%)
|
|
|
|
|
26
The decreases in total other income (expense), net from 2019 to 2020 for the three and nine month periods were primarily due to decreased interest income earned from our investment portfolio in a low interest rate environment during the current COVID-19 pandemic and increased interest expense due to additional borrowings under the Credit Facility and the Restated Credit Facility (as defined below), partially offset by interest income from higher cash and investment balances.
Liquidity and Capital Resources
As of September 30, 2020, we had approximately $486.9 million in cash, cash equivalents, restricted cash and investments. The following table shows a summary of our cash flows for the nine months ended September 30, 2020 and 2019 (in thousands):
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash provided by (used in)
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(61,919
|
)
|
|
$
|
(49,893
|
)
|
Investing activities
|
|
$
|
(273,858
|
)
|
|
$
|
(19,132
|
)
|
Financing activities
|
|
$
|
352,775
|
|
|
$
|
77,939
|
|
Operating activities. Net cash used in operating activities was $61.9 million for the nine months ended September 30, 2020, compared to $49.9 million for the same period in 2019. This increase was primarily due to higher operating expenses and changes in working capital items.
Investing activities. Net cash used in investing activities for periods presented primarily relate to the purchase, sale and maturity of investments used to fund the day-to-day needs of our business. Following our equity follow-on offering in June 2020, we invested the majority of our net proceeds received in short and long term investments. We expect cash used in investing activities through the end of 2020 and into the first half of 2021 to continue to increase as we build out our new headquarters in San Carlos, California. See “Note 7. Commitments” for a detailed discussion.
Financing activities. Net cash provided by financing activities was $352.8 million for the nine months ended September 30, 2020, compared to $77.9 million for the same period in 2019. Net cash provided by financing activities for the nine months ended September 30, 2020 included net proceeds of $325.7 million from the issuance of common stock from our June 2020 equity follow-on offering and $4.4 million received under the Restated Credit Facility. Net cash provided by financing activities for the nine months ended September 30, 2019 included net proceeds of $73.3 million from the issuance of common stock under an equity distribution agreement. Net cash provided by financing activities for both periods presented included proceeds from the exercise of stock options and stock purchases from contributions to our 2012 Employee Stock Purchase Plan, and cash used for tendered ChemoCentryx, Inc. common stock to satisfy employee tax withholding requirements upon vesting of restricted stock units.
As of September 30, 2020, we had borrowed $20.0 million under the loan and security agreement, or Credit Facility, with Hercules Capital, Inc., or Hercules. In January 2020, we entered into an amended and restated credit facility with Hercules, or the Restated Credit Facility, which provides for borrowings of up to an additional $100.0 million in three tranches, subject to certain terms and conditions. As of September 30, 2020, we had borrowed $5.0 million under the Restated Credit Facility. See “Note 6. Long-term Debt” in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our borrowings.
As of September 30, 2020, we had approximately $486.9 million in cash, cash equivalents, restricted cash and investments. We believe that our available cash, cash equivalents and investments will be sufficient to fund our anticipated level of operations for at least 12 months following our financial statement issuance date, November 9, 2020. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.
Our future capital requirements are difficult to forecast and will depend on many factors, including:
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•
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the terms and timing of any other collaborative, licensing and other arrangements that we may establish;
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•
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the initiation, progress, timing and completion of preclinical studies and clinical trials for our drug candidates and potential drug candidates, including any delays as a result of the COVID-19 pandemic on our business, preclinical studies or clinical trials;
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•
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the number and characteristics of drug candidates that we pursue;
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•
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the progress, costs and results of our clinical trials;
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27
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•
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the outcome, timing and cost of regulatory approvals;
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•
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delays that may be caused by changing regulatory approvals;
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•
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the cost and timing of hiring new employees to support continued growth;
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•
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the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
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|
•
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the cost and timing of procuring clinical and commercial supplies of our drug candidates;
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•
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the cost and timing of establishing sales, marketing and distribution capabilities; and
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•
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the extent to which we acquire or invest in businesses, products or technologies.
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Contractual Obligations and Commitments
There have been no material changes outside the ordinary course of our business to the contractual obligations we reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 10, 2020, other than as set forth below.
In March 2020, we made an additional borrowing of $5.0 million under the Restated Credit Facility. See “Note 6. Long-term Debt” in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our borrowings.
In July 2019, we entered into a ten-year operating lease for a 96,463 square foot facility in San Carlos, California to replace our then-current headquarters located in Mountain View, California. The lease commenced in June 2020 and monthly rent payments are anticipated to begin in March 2021. In July 2020, we entered into a letter agreement to further extend the lease term of the Mountain View, California facility through June 2021. See “Note 7. Commitments” in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information of this lease.
Recent Accounting Pronouncements
See “Note 2. Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for a full description of recently issued accounting pronouncements, including the respective expected dates of adoption and effects on our consolidated financial position and results of operations.