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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2024

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: 001-39269

 

ORIC PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-1787157

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

240 E. Grand Ave, 2nd Floor

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 388-5600

 

Not applicable

(Former name, former address, and former fiscal year, if changed since last report)

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, $0.0001 par value per share

 

ORIC

 

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, 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

As of April 26, 2024, the registrant had 67,422,307 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

3

Balance Sheets

3

Statements of Operations and Comprehensive Loss

4

 

Statements of Stockholders’ Equity

5

Statements of Cash Flows

6

Notes to Unaudited Financial Statements

7

Item 2.

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

Item 4.

Controls and Procedures

19

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

20

Item 1A.

Risk Factors

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

Item 3.

Defaults Upon Senior Securities

72

Item 4.

Mine Safety Disclosures

72

Item 5.

Other Information

72

Item 6.

Exhibits

73

SIGNATURES

74

 

 

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this quarterly report on Form10-Q, including statements regarding our future results of operations and financial position, business strategy, development plans, planned preclinical studies and clinical trials, future results of clinical trials, expected research and development costs, regulatory strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this quarterly report on Form 10-Q include, but are not limited to, statements about:

the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
the timing, progress and results of preclinical studies and clinical trials for ORIC-114, ORIC-944, ORIC-533 and other product candidates we may develop, 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;
the timing, scope and likelihood of regulatory filings and approvals, including timing of Investigational New Drug (IND), or Clinical Trial Application (CTA), applications and final Food and Drug Administration (FDA), approval of ORIC-114, ORIC-944, ORIC-533 and any other future product candidates;
the potential benefits of and activity under the company’s collaboration, licenses and other third-party agreements;
the timing, scope or likelihood of foreign regulatory filings and approvals;
our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical studies;
our manufacturing, commercialization, and marketing capabilities and strategy;
our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;
the need to hire additional personnel and our ability to attract and retain such personnel;
our expectations regarding the impact of a global pandemic or other public health emergencies on our business;
the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
our expectations regarding the approval and use of our product candidates in combination with other drugs;
our competitive position and the success of competing therapies that are or may become available;
our estimates of the number of patients that we will enroll in our clinical trials;
the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
our ability to obtain and maintain regulatory approval of our product candidates;
our plans relating to the further development of our product candidates, including additional indications we may pursue;
existing regulations and regulatory developments in the United States, Europe and other jurisdictions;
our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering ORIC-114, ORIC-944, ORIC-533 and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;
our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;

1


 

the pricing and reimbursement of ORIC-114, ORIC-944, ORIC-533 and other product candidates we may develop, if approved;
the rate and degree of market acceptance and clinical utility of ORIC-114, ORIC-944, ORIC-533 and other product candidates we may develop;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our financial performance;
the period over which we estimate our existing cash, cash equivalents and investments will be sufficient to fund our operating plan;
the impact of laws and regulations;
our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act); and
our anticipated use of our existing resources.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this quarterly report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk factors” and elsewhere in this quarterly report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

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 quarterly report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

 

2


 

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

ORIC PHARMACEUTICALS, INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(unaudited)

 

 

 

 

Assets

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

56,360

 

 

$

23,384

 

Short-term investments

 

 

260,418

 

 

 

184,803

 

Prepaid expenses and other current assets

 

 

7,305

 

 

 

4,410

 

Total current assets

 

 

324,083

 

 

 

212,597

 

 

 

 

 

 

 

Long-term investments

 

 

14,694

 

 

 

26,852

 

Property and equipment, net

 

 

2,801

 

 

 

2,862

 

Other assets

 

 

9,208

 

 

 

9,696

 

Total assets

 

$

350,786

 

 

$

252,007

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,988

 

 

$

944

 

Accrued liabilities

 

 

12,222

 

 

 

19,514

 

Total current liabilities

 

 

15,210

 

 

 

20,458

 

 

 

 

 

 

 

Other long-term liabilities

 

 

6,931

 

 

 

7,461

 

Total liabilities

 

 

22,141

 

 

 

27,919

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 200,000,000 shares authorized; no shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 67,420,338 and 54,865,553 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

7

 

 

 

6

 

Additional paid-in capital

 

 

788,738

 

 

 

658,751

 

Accumulated deficit

 

 

(459,938

)

 

 

(434,927

)

Accumulated other comprehensive (loss) income

 

 

(162

)

 

 

258

 

Total stockholders' equity

 

 

328,645

 

 

 

224,088

 

Total liabilities and stockholders' equity

 

$

350,786

 

 

$

252,007

 

 

See accompanying notes to unaudited financial statements.

3


 

ORIC PHARMACEUTICALS, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except share and per share amounts)

 

 

Three Months Ended
March 31,

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

Research and development

$

21,960

 

 

$

19,516

 

General and administrative

 

7,030

 

 

 

6,162

 

Total operating expenses

 

28,990

 

 

 

25,678

 

Loss from operations

 

(28,990

)

 

 

(25,678

)

 

 

 

 

 

Other income, net

 

3,979

 

 

 

1,733

 

Net loss

$

(25,011

)

 

$

(23,945

)

Other comprehensive (loss) income:

 

 

 

 

 

 Unrealized (loss) gain on investments

 

(420

)

 

 

792

 

Comprehensive loss

$

(25,431

)

 

$

(23,153

)

Net loss per share, basic and diluted

$

(0.37

)

 

$

(0.53

)

Weighted-average shares outstanding, basic and diluted

 

67,349,551

 

 

 

45,090,166

 

 

 

 

 

 

 

See accompanying notes to unaudited financial statements.

 

4


 

ORIC PHARMACEUTICALS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share amounts)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2023

 

 

54,865,553

 

 

$

6

 

 

$

658,751

 

 

$

(434,927

)

 

$

258

 

 

$

224,088

 

Issuance of common stock, net

 

 

12,500,000

 

 

 

1

 

 

 

124,831

 

 

 

 

 

 

 

 

 

124,832

 

Exercise of common stock options

 

 

51,540

 

 

 

 

 

 

198

 

 

 

 

 

 

 

 

 

198

 

Issuance of common stock upon vesting of RSUs

 

 

3,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,958

 

 

 

 

 

 

 

 

 

4,958

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(420

)

 

 

(420

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(25,011

)

 

 

 

 

 

(25,011

)

Balance at March 31, 2024

 

 

67,420,338

 

 

$

7

 

 

$

788,738

 

 

$

(459,938

)

 

$

(162

)

 

$

328,645

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2022

 

 

45,089,537

 

 

$

5

 

 

$

557,867

 

 

$

(334,230

)

 

$

(1,291

)

 

$

222,351

 

Exercise of common stock options

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon vesting of RSUs

 

 

1,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,614

 

 

 

 

 

 

 

 

 

3,614

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

792

 

 

 

792

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(23,945

)

 

 

 

 

 

(23,945

)

Balance at March 31, 2023

 

 

45,091,215

 

 

$

5

 

 

$

561,481

 

 

$

(358,175

)

 

$

(499

)

 

$

202,812

 

See accompanying notes to unaudited financial statements.

5


 

ORIC PHARMACEUTICALS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(25,011

)

 

$

(23,945

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

261

 

 

 

253

 

Stock-based compensation expense

 

 

4,958

 

 

 

3,614

 

Accretion of discount on investments, net

 

 

(2,227

)

 

 

(861

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(2,409

)

 

 

1,103

 

Accounts payable and accrued other liabilities

 

 

(5,758

)

 

 

(792

)

Net cash used in operating activities

 

 

(30,186

)

 

 

(20,628

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Acquisitions of property and equipment

 

 

(218

)

 

 

(310

)

Purchases of investments

 

 

(114,395

)

 

 

(43,387

)

Maturities of investments

 

 

52,745

 

 

 

56,475

 

Net cash (used in) provided by investing activities

 

 

(61,868

)

 

 

12,778

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

125,000

 

 

 

 

Issuance costs associated with financings

 

 

(168

)

 

 

 

Proceeds from stock option exercises

 

 

198

 

 

 

 

Net cash provided by financing activities

 

 

125,030

 

 

$

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

32,976

 

 

 

(7,850

)

 

 

 

 

 

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

23,875

 

 

 

67,308

 

Cash, cash equivalents and restricted cash at end of period

 

$

56,851

 

 

$

59,458

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash within the balance sheets to the amounts shown in the statements of cash flows above, in thousands:

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

56,360

 

 

$

58,990

 

Restricted cash included in other assets

 

 

491

 

 

 

468

 

Total cash, cash equivalents and restricted cash

 

$

56,851

 

 

$

59,458

 

 

See accompanying notes to unaudited financial statements.

6


 

ORIC PHARMACEUTICALS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

1. Description of the Business

ORIC Pharmaceuticals, Inc. (ORIC or the Company) is a clinical-stage biopharmaceutical company dedicated to improving patients’ lives by Overcoming Resistance In Cancer. The Company was incorporated in Delaware in August 2014 and has offices in South San Francisco and San Diego, California. The Company’s principal operations are in the United States and the Company operates in one segment.

Since inception, the Company has devoted its primary efforts to raising capital, internal research and development activities and business development efforts, and has incurred significant operating losses and negative cash flows from operations. In August 2020, the Company licensed from Mirati Therapeutics, Inc. (Mirati) development and commercialization rights to an allosteric inhibitor program directed towards the polycomb repressive complex 2 (PRC2) and in October 2020, the Company licensed from Voronoi Inc. (Voronoi) development and commercialization rights to a brain penetrant, orally bioavailable, irreversible inhibitor designed to selectively target epidermal growth factor receptor (EGFR) and human epidermal growth factor receptor 2 (HER2) with high potency against exon 20 insertion mutations.

As of March 31, 2024, the Company had an accumulated deficit of $459.9 million. Through March 31, 2024, all of the Company’s financial support has been provided by proceeds from the issuance of common stock and convertible preferred stock.

As the Company continues its expansion, it may seek additional financing and/or strategic investments, however, there can be no assurance that any additional financing or strategic investments will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. The accompanying financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date of the issuance of these financial statements.

At-The-Market Sales Agreement and Offering

The Company previously entered into an “at the market” (ATM) sales agreement with Jefferies LLC as the Company’s sales agent, to sell shares of the Company’s common stock. On March 11, 2024, pursuant to the terms of the ATM sales agreement, the Company filed a Form S-3ASR and prospectus supplement, to allow the Company to sell from time to time up to $200 million of shares of the Company’s common stock in negotiated transactions or transactions deemed to be an ATM offering.

Private Placements

On January 20, 2024, the Company entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 12,500,000 shares of common stock at a price of $10.00 per share, resulting in gross proceeds of $125.0 million. The purchase price per share represents a premium to ORIC's 5-day trailing average stock price at the time of sale. After deducting expenses related to the private placement of $0.2 million, the net proceeds to the Company from the private placement were $124.8 million. The private placement closed on January 23, 2024. On January 26, 2024, the Company filed a Form S-3 registering the shares sold in the private placement. The Form S-3 was declared effective by the SEC on February 2, 2024.

On June 24, 2023, the Company entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 9,285,710 shares of common stock at a price of $7.00 per share and pre-funded warrants to purchase 2,857,142 shares of common stock at a purchase price of $6.9999 per pre-funded warrant, resulting in gross proceeds of $85.0 million. The pre-funded warrants have an exercise price of $0.0001 per share of common stock, were immediately exercisable and will remain exercisable until exercised in full. The purchase price per share represents a premium to the market price at the time of sale. After deducting expenses related to the private placement of $0.2 million, the net proceeds to the Company from the private placement were $84.8 million. The private placement closed on June 27, 2023. On December 15, 2023, the Company filed a Form S-3 registering the shares sold and the shares underlying the pre-funded warrants sold in the private placement. The Form S-3 was declared effective by the SEC on December 28, 2023.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the Securities and Exchange Commission (SEC) on Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP, have been omitted. The accompanying unaudited financial statements include all known adjustments necessary for a fair presentation of the results as required by GAAP. These adjustments consist

7


 

primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Operating results for the interim period are not necessarily indicative of future results.

The accompanying unaudited financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K filed with the SEC. Furthermore, the Company’s significant accounting policies are disclosed in the audited financial statements for the periods ended December 31, 2023 and 2022, included in the Company’s Annual Report on Form 10-K. Since the date of those financial statements, there have been no changes to its significant accounting policies.

Recently Issued Accounting Pronouncements

There are no recently issued accounting pronouncements that would materially impact the Company’s financial statements and related disclosures.

3. License Agreements and Clinical Development Collaboration

Pfizer collaboration

On December 21, 2022, the Company entered into a clinical development collaboration (the Pfizer Collaboration) for a potential Phase 2 study of ORIC-533 in multiple myeloma with Pfizer. Through the Pfizer Collaboration, the Company plans to potentially advance ORIC-533 into a Phase 2 combination study with elranatamab, Pfizer’s investigational B-cell maturation antigen (BCMA) CD3-targeted bispecific antibody in development for the treatment of multiple myeloma. The Company will maintain full economic ownership and control of ORIC-533.

Concurrent with the Pfizer Collaboration, the Company sold 5,376,344 shares of common stock at a price of $4.65 per share to Pfizer for proceeds of $25.0 million. The common shares were sold to Pfizer in a registered direct offering conducted without an underwriter or placement agent. The transaction closed on December 23, 2022.

Voronoi License Agreement

On October 19, 2020, the Company entered into a license and collaboration agreement (Voronoi License Agreement) with Voronoi. The Voronoi License Agreement gives the Company access to Voronoi’s preclinical stage EGFR and HER2 exon 20 insertion mutation program, including a lead product candidate now designated as ORIC-114. Under the Voronoi License Agreement, Voronoi granted the Company an exclusive, sublicensable license under Voronoi’s rights to certain patent applications directed to certain small molecule compounds that bind to EGFR and HER2 with one or more exon 20 insertion mutations and certain related know-how, in each case, to develop and commercialize certain licensed compounds and licensed products incorporating any such compound in the ORIC Territory, defined as worldwide other than in the People’s Republic of China, Hong Kong, Macau and Taiwan. Under the Voronoi License Agreement, Voronoi had the right to perform certain mutually agreed upon development activities. Except for Voronoi's right to participate in such development activities, the Company is wholly responsible for development and commercialization of licensed products in the ORIC Territory. In addition, the Company is obligated to use commercially reasonable efforts to develop and commercialize at least one licensed product in certain major markets in the ORIC Territory.

The Company’s financial obligations under the Voronoi License Agreement included an upfront payment of $5.0 million in cash and the issuance to Voronoi of 283,259 shares of the Company’s common stock, valued at approximately $6.8 million, issued pursuant to a stock issuance agreement entered into between the parties on October 19, 2020. The number of shares issued pursuant to the stock issuance agreement was based on a price of $28.24 per share, representing a premium of 25% to the 30-day trailing volume weighted average trading price of the Company’s common stock. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (Securities Act), for transactions by an issuer not involving any public offering.

Under the Voronoi License Agreement, Voronoi was responsible for certain research and development costs up to a predetermined threshold. Upon achievement of the predetermined threshold in the second quarter of 2022, Voronoi chose to opt out of participation in and funding of future development activities. The Company is also obligated to make milestone payments to Voronoi upon the achievement of certain events. Upon the achievement of certain development and regulatory milestones with respect to the first licensed product, the Company is obligated to pay Voronoi up to a maximum of $111.0 million. Upon the achievement of certain commercial milestones with respect to the first licensed product, the Company is obligated to pay Voronoi up to a maximum of $225.0 million. If the Company pursues a second licensed product, the Company could pay Voronoi up to an additional $272.0 million in success-based milestones. In addition, the Company is obligated to pay royalties on net sales of licensed products in the ORIC Territory. In the third quarter of 2022, the Company made a development milestone payment to Voronoi in the amount of $5.0 million, which was recorded in acquired in-process research and development expense.

Unless earlier terminated, the Voronoi License Agreement will continue in effect until the expiration of all royalty payment obligations. Following the expiration of the Voronoi License Agreement, the Company will retain its licenses under the intellectual property Voronoi licensed to it on a royalty-free basis. The Company and Voronoi may each terminate the Voronoi License Agreement if the other party materially breaches the terms of such agreement, subject to specified notice and cure provisions, or enters into bankruptcy or insolvency proceedings. Voronoi may also terminate the agreement if the Company discontinues development of

8


 

licensed products for a specified period of time. The Company also has the right to terminate the Voronoi License Agreement without cause by providing prior notice to Voronoi.

If Voronoi terminates the Voronoi License Agreement for cause, or if the Company terminates the Voronoi License Agreement without cause, then the Company is obligated to grant a nonexclusive license to Voronoi under certain of the Company’s patents and know-how and to assign to Voronoi certain of its regulatory filings for licensed compounds and licensed products.

Mirati License Agreement

On August 3, 2020, the Company entered into a license agreement (Mirati License Agreement) with Mirati. Under the Mirati License Agreement, Mirati granted the Company a worldwide, exclusive, sublicensable, royalty-free license under Mirati’s rights to certain patents and patent applications directed to certain small molecule compounds that bind to and inhibit PRC2 and certain related know-how, in each case, to develop and commercialize certain licensed compounds and licensed products incorporating any such compounds. Under the Mirati License Agreement, the Company is wholly responsible for development and commercialization of licensed products. In addition, the Company is obligated to use commercially reasonable efforts to develop and commercialize at least one licensed product in certain major markets.

The Company’s financial obligation under the Mirati License Agreement was an upfront payment of 588,235 shares of ORIC common stock, valued at approximately $13.0 million based upon the closing price of the Company’s common stock on the acquisition date. The number of shares issued was based on a price of $34.00 per share, representing a premium of 10% to the 60-day trailing volume-weighted average trading price of the Company’s common stock. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act for transactions by an issuer not involving any public offering. During the eighteen-month period following the date of the agreement, Mirati was subject to certain transfer restrictions, and the parties agreed to negotiate and enter into a registration rights agreement, with respect to the shares. The Company is not obligated to pay Mirati milestones or royalties.

Unless earlier terminated, the Mirati License Agreement will continue in effect on a country-by-country and licensed product-by-licensed product basis until the later of (a) the expiration of the last valid claim of a licensed patent covering such licensed product in such country or (b) ten years after the first commercial sale of such licensed product in such country. Following the expiration of the Mirati License Agreement, the Company will retain its licenses under the intellectual property Mirati licensed to it on a royalty-free basis. ORIC and Mirati may each terminate the Mirati License Agreement if the other party materially breaches the terms of such agreement, subject to specified notice and cure provisions, or enters into bankruptcy or insolvency proceedings. Mirati may terminate the agreement if the Company challenges any of the patent rights licensed to the Company by Mirati or it discontinues development of licensed products for a specified period of time. The Company also has the right to terminate the Mirati License Agreement without cause by providing prior notice to Mirati.

On October 8, 2023, Bristol Myers Squibb (BMS) and Mirati announced that they entered into a definitive merger agreement under which BMS through a subsidiary will acquire all of the outstanding shares of Mirati common stock. The Mirati License Agreement continued in effect upon consummation of the transaction, which closed on January 23, 2024.

4. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Lab equipment

 

$

6,760

 

 

$

6,596

 

Leasehold improvements

 

 

1,967

 

 

 

1,967

 

Computer hardware and software

 

 

248

 

 

 

299

 

Furniture and fixtures

 

 

494

 

 

 

494

 

Total property and equipment, gross

 

 

9,469

 

 

 

9,356

 

Less accumulated depreciation

 

 

(6,668

)

 

 

(6,494

)

Total property and equipment, net

 

$

2,801

 

 

$

2,862

 

 

9


 

5. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Accrued clinical and manufacturing costs

 

$

5,529

 

 

$

9,436

 

Accrued compensation

 

 

3,024

 

 

 

6,529

 

Operating lease liabilities - short-term

 

 

2,775

 

 

 

2,752

 

Other accruals

 

 

894

 

 

 

797

 

Total accrued liabilities

 

$

12,222

 

 

$

19,514

 

 

6. Investments

The Company's available-for-sale investments consisted of the following (in thousands):

 

March 31, 2024

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

Short-term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

260,539

 

 

$

42

 

 

$

(163

)

 

$

260,418

 

Short-term investments

 

$

260,539

 

 

$

42

 

 

$

(163

)

 

$

260,418

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

14,735

 

 

$

 

 

$

(41

)

 

$

14,694

 

Long-term investments

 

$

14,735

 

 

$

 

 

$

(41

)

 

$

14,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Short-term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

181,947

 

 

$

180

 

 

$

(64

)

 

$

182,063

 

U.S. agency bonds

 

 

2,500

 

 

 

 

 

 

(4

)

 

 

2,496

 

Certificates of deposit

 

 

245

 

 

 

 

 

 

(1

)

 

 

244

 

Short-term investments

 

$

184,692

 

 

$

180

 

 

$

(69

)

 

$

184,803

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

26,705

 

 

$

147

 

 

$

 

 

$

26,852

 

Long-term investments

 

$

26,705

 

 

$

147

 

 

$

 

 

$

26,852

 

The Company has determined that there were no material declines in fair value of its investments due to credit-related factors as of March 31, 2024 and December 31, 2023. Credit loss is limited due to the nature of the investments.

7. Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s interest receivable, included in prepaid expenses and other current assets, accounts payable and accrued liabilities are generally considered to be representative of their fair value because of their short-term nature. The Company’s investments, which may include money market funds and available-for-sale investments consisting of U.S. treasury securities, certificates of deposit and high-quality, marketable debt instruments of corporations and government sponsored enterprises, are measured at fair value in accordance with the fair value hierarchy.

10


 

Following are the major categories of assets measured at fair value on a recurring basis (in thousands):

 

 

 

Fair Value Measurements

 

 

 

 

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

 

$

56,360

 

 

$

56,360

 

 

$

 

 

$

 

 

$

56,360

 

U.S. treasury securities

 

 

275,112

 

 

 

275,112

 

 

 

 

 

 

 

 

 

275,112

 

Total

 

$

331,472

 

 

$

331,472

 

 

$

 

 

$

 

 

$

331,472

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

 

$

23,384

 

 

$

23,384

 

 

$

 

 

$

 

 

$

23,384

 

U.S. treasury securities

 

 

208,915

 

 

 

208,915

 

 

 

 

 

 

 

 

 

208,915

 

U.S. agency bonds

 

 

2,496

 

 

 

 

 

 

2,496

 

 

 

 

 

 

2,496

 

Certificates of deposit

 

 

244

 

 

 

244

 

 

 

 

 

 

 

 

 

244

 

Total

 

$

235,039

 

 

$

232,543

 

 

$

2,496

 

 

$

 

 

$

235,039

 

(1) Included in cash and cash equivalents in accompanying balance sheets.

No transfers between levels occurred during either of the reporting periods presented.

8. Stockholders’ Equity and Stock-Based Compensation

As of March 31, 2024, there were 2,485,870 shares available for future issuance under the 2020 Equity Incentive Plan and 770,371 shares available for future issuance under the 2022 Inducement Equity Incentive Plan. The 2020 Equity Incentive Plan provides for the grants of stock options and other equity-based awards to employees, non-employee directors and consultants of the Company. The 2022 Inducement Equity Incentive Plan provides for the grants of equity-based awards to individuals not previously employees or non-employee directors of the Company.

The table below summarizes the total stock-based compensation expense included in the Company’s statements of operations and comprehensive loss for the periods presented (in thousands):

 

 

Three Months Ended
March 31,

 

 

2024

 

 

2023

 

Research and development

$

2,145

 

 

$

1,475

 

General and administrative

 

2,813

 

 

 

2,139

 

Total stock-based compensation expense

$

4,958

 

 

$

3,614

 

Stock Options

On June 21, 2022, the Company filed with the SEC a Tender Offer Statement on Schedule TO defining the terms and conditions of a one-time voluntary stock option exchange of certain eligible options for its employees (the Option Exchange). On July 20, 2022, the completion date of the Option Exchange, stock options covering an aggregate of 4,406,732 shares of common stock were tendered by eligible employees, and the Company granted new options at an exercise price of $4.36, the Company’s closing stock price on July 20, 2022, covering an aggregate of 4,406,732 shares of common stock under the 2020 Equity Incentive Plan in exchange for the tendered options. As a result of the Option Exchange, the Company will recognize incremental stock-based compensation expense of $3.7 million over the requisite service period of the new stock options, which is three or four years. The Company will recognize the sum of the incremental stock-based compensation expense and the remaining unrecognized compensation expense for the original awards on the modification date, over the requisite service period of the new stock options.

The following table summarizes the stock option activity for the three months ended March 31, 2024:

 

 

 

Options

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding at December 31, 2023

 

 

8,715,529

 

 

$

4.70

 

 

 

 

 

 

 

Granted

 

 

2,274,990

 

 

$

9.20

 

 

 

 

 

 

 

Exercised

 

 

(51,540

)

 

$

3.86

 

 

 

 

 

 

 

Forfeited and cancelled

 

 

(123,025

)

 

$

6.21

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

10,815,954

 

 

$

5.63

 

 

 

8.1

 

 

$

89,201

 

Exercisable at March 31, 2024

 

 

4,521,533

 

 

$

4.42

 

 

 

6.9

 

 

$

43,542

 

 

11


 

The fair value of stock option awards to employees, executives, directors, and other service providers was estimated at the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions:

 

 

 

Three Months Ended
March 31,

 

 

2024

 

2023

Risk-free interest rate

 

3.82% - 4.19%

 

3.45%

Expected volatility

 

85.97% - 86.31%

 

87.68%

Expected term (in years)

 

6.08

 

6.08

Expected dividend yield

 

0%

 

0%

 

The Company recognized stock-based compensation expense related to the vesting of stock options of $4.1 million and $3.1 million during the three months ended March 31, 2024 and 2023, respectively. Total unrecognized compensation expense related to outstanding unvested stock-option awards as of March 31, 2024, was $40.3 million, which is expected to be recognized over a weighted-average remaining service period of 2.8 years.

Restricted Stock Units

The following table summarizes the restricted stock unit activity for the three months ended March 31, 2024:

 

 

Number of Shares

 

 

Weighted-
Average
Grant-Date
Fair Value

 

Outstanding at December 31, 2023

 

 

330,631

 

 

$

6.55

 

Granted

 

 

379,267

 

 

$

9.20

 

Vested

 

 

(3,245

)

 

$

7.01

 

Forfeited

 

 

(11,407

)

 

$

8.27

 

Outstanding at March 31, 2024

 

 

695,246

 

 

$

7.97

 

The Company recognized stock-based compensation expense related to the vesting of restricted stock units of $0.6 million and $0.3 million during the three months ended March 31, 2024 and 2023, respectively. Total unrecognized compensation expense related to restricted stock units as of March 31, 2024, was $4.8 million, which is expected to be recognized over a weighted-average remaining service period of 2.2 years.

Employee Stock Purchase Plan

The Company recognized stock-based compensation expense related to the Employee Stock Purchase Plan (ESPP) of $0.3 million and $0.2 million during the three months ended March 31, 2024 and 2023, respectively.

Pre-funded Warrants

In June 2023, the Company completed a private placement, in which it sold 9,285,710 shares of common stock together with pre-funded warrants to purchase 2,857,142 shares of common stock with an exercise price of $0.0001 per share. Each pre-funded warrant was immediately exercisable and will remain exercisable until exercised in full. The Company performed an assessment upon issuance of the pre-funded warrants to determine proper classification in the financial statements based on the specific terms of the pre-funded warrants. The Company determined the pre-funded warrants met all the criteria for equity classification and recorded them in additional paid-in capital. All pre-funded warrants remained outstanding as of March 31, 2024.

Net Loss per Share

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive:

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Options to purchase common stock

 

10,815,954

 

 

 

8,474,399

 

 Non-vested restricted stock units

 

695,246

 

 

 

485,942

 

Total

 

11,511,200

 

 

 

8,960,341

 

 

12


 

Item 2. 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 our unaudited financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and our audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on March 11, 2024. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk factors” included elsewhere in this report.

Overview

ORIC Pharmaceuticals is a clinical-stage biopharmaceutical company dedicated to improving patients’ lives by Overcoming Resistance In Cancer.

Our fully integrated discovery and development team is advancing a diverse pipeline of innovative clinical and discovery stage therapies designed to counter resistance mechanisms in cancer by leveraging our expertise within three specific areas: hormone-dependent cancers, precision oncology and key tumor dependencies.

Our clinical stage product candidates include:

ORIC-114, a brain penetrant, orally bioavailable, irreversible inhibitor designed to selectively target epidermal growth factor receptor (EGFR) and human epidermal growth factor receptor 2 (HER2) with high potency towards exon 20 insertion mutations, for which we licensed development and commercialization rights from Voronoi Inc. (Voronoi) in October 2020 (Voronoi License Agreement). In the fourth quarter of 2021, we filed a Clinical Trial Application (CTA) in South Korea for ORIC-114, which was cleared in the first quarter of 2022. We also filed and cleared an Investigational New Drug Application (IND) with the U.S. Food and Drug Administration (FDA) for ORIC-114 in the third quarter of 2022. We are enrolling a Phase 1b trial of ORIC-114 as a single-agent, in patients with advanced solid tumors with EGFR and HER2 exon 20 alterations, atypical EGFR mutations or HER2 amplifications, and that trial allows patients with CNS metastases that are either treated or untreated but asymptomatic. We reported initial Phase 1b data from this trial at the European Society for Medical Oncology (ESMO) Congress in October 2023, which demonstrated both systemic and intracranial activity across multiple dose levels in a heavily pre-treated patient population. In April 2024, we announced the selection of two provisional recommended Phase 2 dose (RP2D) levels of ORIC-114 at 80 mg and 120 mg QD, which are being further evaluated in three dose expansion cohorts for dose optimization and final RP2D selection. These expansion cohorts have now been initiated in patients with non-small cell lung cancer (NSCLC) with EGFR exon 20 (EGFR exon 20 inhibitor naïve), HER2 exon 20, or atypical EGFR mutations. We also announced the initiation of an extension cohort for the treatment of patients with first-line, treatment-naïve EGFR exon 20 NSCLC. We expect to report updated Phase 1b data in the first half of 2025.
ORIC-944, an allosteric inhibitor of the polycomb repressive complex 2 (PRC2) via the embryonic ectoderm development (EED) subunit, for which we licensed development and commercialization rights from Mirati Therapeutics, Inc. (Mirati) in August 2020 (Mirati License Agreement). We filed and cleared an IND with the FDA for ORIC-944 in the fourth quarter of 2021. We are enrolling a Phase 1b trial of ORIC-944 as a single-agent, in patients with advanced prostate cancer and reported initial Phase 1b data from this trial in January 2024, demonstrating potential best-in-class drug properties, including an approximate 20-hour clinical half-life, robust target engagement and a favorable safety profile. We are proceeding with a combination study of ORIC-944 with AR inhibitor(s) in metastatic prostate cancer and will provide a program update in mid-2024.
ORIC-533, an orally bioavailable small molecule inhibitor of CD73, a key node in the adenosine pathway believed to play a central role in resistance to chemotherapy- and immunotherapy-based treatment regimens. In the second quarter of 2021, the FDA cleared the IND for ORIC-533, and in the first quarter of 2023, a CTA was cleared in Canada for ORIC-533. We are completing a Phase 1b trial of ORIC-533 as a single-agent, in patients with relapsed/refractory multiple myeloma and reported initial Phase 1b data from this trial at the American Society of Hematology (ASH) annual meeting in December 2023. We intend to evaluate strategic partnerships to develop ORIC-533 in combination with other immune-based antimyeloma therapies.

Beyond these clinical stage product candidates, we are developing multiple discovery stage precision medicines targeting other hallmark cancer resistance mechanisms.

13


 

We have incurred significant losses since the commencement of our operations. Our net loss for the three months ended March 31, 2024 was $25.0 million and we had an accumulated deficit of $459.9 million as of March 31, 2024. Our losses and accumulated deficit have resulted primarily from costs incurred in connection with research and development activities including in-licensing and to a lesser extent from general and administrative costs associated with our operations. We expect to incur significant losses for the foreseeable future, and we anticipate these losses will increase significantly as we continue our development of ORIC-114 and ORIC-944 and any future product candidates from discovery through preclinical development and into clinical trials as we seek regulatory approval for these product candidates. Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

We previously entered into an “at the market” (ATM) sales agreement with Jefferies LLC as our sales agent, to sell shares of our common stock. On March 11, 2024, pursuant to the terms of the ATM sales agreement, we filed a Form S-3ASR and prospectus supplement, to allow us to sell from time to time up to $200 million of shares of our common stock in negotiated transactions or transactions deemed to be an ATM offering.

On January 20, 2024, we entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 12,500,000 shares of common stock at a price of $10.00 per share, resulting in gross proceeds of $125.0 million. The purchase price per share represents a premium to ORIC's 5-day trailing average stock price at the time of sale. After deducting expenses related to the private placement of $0.2 million, the net proceeds we received from the private placement were $124.8 million. The private placement closed on January 23, 2024.

On June 24, 2023, we entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 9,285,710 shares of common stock at a price of $7.00 per share and pre-funded warrants to purchase 2,857,142 shares of common stock at a purchase price of $6.9999 per pre-funded warrant, resulting in gross proceeds of $85.0 million. The pre-funded warrants have an exercise price of $0.0001 per share of common stock, were immediately exercisable and will remain exercisable until exercised in full. The purchase price per share represents a premium to the market price at the time of sale. After deducting offering expenses related to the private placement of $0.2 million, the net proceeds we received from the private placement were $84.8 million. The private placement closed on June 27, 2023.

Components of Operating Results

Research and Development Expenses

Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal costs incurred in connection with the discovery and development of our product candidates.

External expenses include:

payments to third parties in connection with the clinical development of our product candidates, including contract research organizations (CROs) and consultants;
the cost of manufacturing products for use in our preclinical studies and clinical trials, including payments to contract manufacturing organizations (CMOs) and consultants;
payments to third parties in connection with the preclinical development of our product candidates, including outsourced professional scientific development services, consulting research fees and sponsored research arrangements with third parties;
laboratory supplies; and
allocated facilities, depreciation and other expenses, which include direct or allocated expenses for IT, rent and maintenance of facilities.

We may also incur in-process research and development expense as we acquire or in-license assets from other parties. Technology acquisitions are expensed or capitalized based upon the asset achieving technological feasibility in accordance with management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. Acquired in-process research and development costs that have no alternative future use are immediately expensed.

Internal expenses include employee-related costs such as salaries, related benefits and non-cash stock-based compensation expense for employees engaged in research and development functions.

We expense research and development costs in the periods in which they are incurred. External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. We track external costs by program, clinical or preclinical. We do not track internal costs by program because these costs are deployed across multiple programs and, as such, are not separately classified.

14


 

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially in the foreseeable future as we advance our product candidates through preclinical studies and clinical trials; continue to discover and develop additional product candidates and expand our pipeline; maintain, expand, protect and enforce our intellectual property portfolio; and hire additional personnel.

The successful development of our product candidates is highly uncertain, and we do not believe it is possible at this time to accurately project the nature, timing and estimated costs of the efforts necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. To the extent our product candidates continue to advance into clinical trials, as well as advance into larger and later-stage clinical trials, our expenses will increase substantially and may become more variable. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

the timing and progress of preclinical and clinical development activities;
the number and scope of preclinical and clinical programs we decide to pursue;
our ability to maintain our current research and development programs and to establish new ones;
establishing an appropriate safety profile with IND-enabling toxicology studies;
successful patient enrollment in, and the initiation and completion of, clinical trials;
the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
the receipt of regulatory approvals from applicable regulatory authorities;
the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
our ability to establish licensing or collaboration arrangements;
the performance of our future collaborators, if any;
obtaining and retaining research and development personnel;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
development and timely delivery of commercial-grade product formulations that can be used in our planned clinical trials and for commercial launch;
obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others; and
maintaining a continued acceptable safety profile of our products following approval.

Any changes in the outcome of any of these factors could significantly impact the costs, timing and viability associated with the development of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, related benefits and stock-based compensation expense for personnel in executive, finance and administrative functions. General and administrative expenses also include allocated facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We expect that our general and administrative expenses will increase substantially in the foreseeable future as we increase our headcount to support the continued research and development of our programs and the growth of our business.

Other Income, Net

Other income, net primarily consists of interest income generated from our interest-bearing money market accounts and investments.

15


 

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations (in thousands):

 

 

Three Months Ended
March 31,

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

$

21,960

 

 

$

19,516

 

 

$

2,444

 

General and administrative

 

7,030

 

 

 

6,162

 

 

 

868

 

Total operating expenses

 

28,990

 

 

 

25,678

 

 

 

3,312

 

Loss from operations

 

(28,990

)

 

 

(25,678

)

 

 

(3,312

)

 

 

 

 

 

 

 

 

Other income, net

 

3,979

 

 

 

1,733

 

 

 

2,246

 

 

 

 

 

 

 

 

 

Net loss

$

(25,011

)

 

$

(23,945

)

 

$

(1,066

)

Research and Development Expenses

Research and development expenses were $22.0 million for the three months ended March 31, 2024, compared to $19.5 million for the same period in 2023, an increase of $2.4 million. The increase was driven by a net increase in external expenses of $0.8 million and higher personnel costs of $1.6 million, including additional non-cash stock-based compensation of $0.7 million. The net increase in external expenses was related to the advancement of ORIC-114 and ORIC-944, offset by lower preclinical, other unallocated and discontinued costs and lower ORIC-533 costs.

The following table summarizes our external and internal costs for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

Three Months Ended
March 31,

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

External costs:

 

 

 

 

 

 

 

 

ORIC-114

$

4,365

 

 

$

1,569

 

 

$

2,796

 

ORIC-944

 

4,641

 

 

 

2,994

 

 

 

1,647

 

ORIC-533

 

998

 

 

 

1,761

 

 

 

(763

)

Preclinical, other unallocated and discontinued costs

 

4,585

 

 

 

7,467

 

 

 

(2,882

)

Total external costs

 

14,589

 

 

 

13,791

 

 

 

798

 

Internal costs

 

7,371

 

 

 

5,725

 

 

 

1,646

 

Total research and development expenses

$

21,960

 

 

$

19,516

 

 

$

2,444

 

 

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and as we conduct additional clinical trials.

General and Administrative Expenses

General and administrative expenses were $7.0 million for the three months ended March 31, 2024, compared to $6.2 million for the same period in 2023, an increase of $0.9 million. The increase was primarily due to higher personnel costs, including additional non-cash stock-based compensation of $0.7 million.

Liquidity and Capital Resources

Sources of Liquidity

We previously entered into an ATM sales agreement with Jefferies LLC as our sales agent, to sell shares of our common stock. On March 11, 2024, pursuant to the terms of the ATM sales agreement, we filed a Form S-3ASR and prospectus supplement, to allow us to sell from time to time up to $200 million of shares of our common stock in negotiated transactions or transactions deemed to be an ATM offering.

On January 20, 2024, we entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 12,500,000 shares of common stock at a price of $10.00 per share, resulting in gross proceeds of $125.0 million. The private placement closed on January 23, 2024.

16


 

On June 24, 2023, we entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 9,285,710 shares of common stock at a price of $7.00 per share and pre-funded warrants to purchase 2,857,142 shares of common stock at a purchase price of $6.9999 per pre-funded warrant, resulting in gross proceeds of $85.0 million. The private placement closed on June 27, 2023.

Future Funding Requirements

To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur. We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Moreover, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates. Further, we are subject to all the risks incident in the development of new pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. Our expenses will increase if, and as, we:

advance our product candidates through preclinical and clinical development;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
seek to discover and develop additional product candidates;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly;
expand our operational, financial and management systems and increase personnel, including personnel to support our development, manufacturing and commercialization efforts and our operations as a public company;
maintain, expand, protect and enforce our intellectual property portfolio; and
acquire or in-license other product candidates and technologies.

We expect our current cash, cash equivalents and investments will be sufficient to fund our current operating plan into late 2026. 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. In order to complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, we may seek to raise any necessary additional capital through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. If we raise funds through collaborations, strategic partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts.

We have based our projections of operating capital requirements on our current operating plan, which is based on several assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including:

 

the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;
the costs, timing and outcome of regulatory review of our product candidates;
the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;

17


 

the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;
the cost and timing of hiring new employees to support our continued growth;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the ability to establish and maintain collaborations on favorable terms, if at all;
the extent to which we acquire or in-license other product candidates and technologies; and
the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.

 

A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plan may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plan.