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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

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: 001-38327

 

Cue Biopharma, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-3324577

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

21 Erie Street

Cambridge, Massachusetts

 

 

02139

(Address of principal executive offices)

 

(Zip Code)

 

(617) 949-2680

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

CUE

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes      No

 

As of November 1, 2021, the registrant had 31,760,946 shares of Common Stock ($0.001 par value) outstanding.

 

 

 

 

 


 

CUE BIOPHARMA, INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

6

 

Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (Unaudited)

6

 

Consolidated Statements of Operations and Other Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

7

 

Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

8

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)

9

 

Notes to the Consolidated Financial Statements (Unaudited)

10

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

38

 

Item 4. Controls and Procedures

38

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

39

 

Item 1A. Risk Factors

39

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

39

 

Item 3. Defaults Upon Senior Securities

39

 

Item 4. Mine Safety Disclosures

39

 

Item 5. Other Information

39

 

Item 6. Exhibits

40

 

  


2


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or other comparable terms. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

 

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

 

 

our estimates regarding expenses, future revenue, capital requirements and need for additional financing;

 

 

our expectations regarding our ability to fund our projected operating requirements with our existing cash resources and the period in which we expect that such cash resources will enable us to fund such operating requirements;

 

 

our plans to develop our product candidates;

 

 

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for our product candidates;

 

 

the potential advantages of our product candidates;

 

 

the rate and degree of market acceptance and clinical utility of our product candidates, if approved;

 

 

our estimates regarding the potential market opportunity for our product candidates;

 

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

 

our intellectual property position;

 

 

our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

 

 

the impact of government laws and regulations;

 

 

our competitive position;

 

 

developments relating to our competitors and our industry;

 

 

our ability to maintain and establish collaborations or obtain additional funding; and

 

 

the impacts of the COVID-19 pandemic.

 

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include the factors discussed below under the heading “Risk Factor Summary,” and the risk factors detailed further in Item 1A., “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.


3


This report includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our drug candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

RISK FACTOR SUMMARY  

Investment in our securities involves risk.  You should carefully consider the following summary of what we believe to be the principal risks facing our business, in addition to the risks described more fully in Item 1A, “Risk Factors” of Part I of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2021 and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks occurs, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.

 

We are a clinical-stage biopharmaceutical company, have no history of generating commercial revenue, have a history of operating losses, and we may never achieve or maintain profitability.

 

We currently do not have, and may never develop, any FDA-approved or commercialized products.

 

We are substantially dependent on the success of our drug product candidates, only one of which is currently being tested in a clinical trial, and significant additional research and development and clinical testing will be required before we can potentially seek regulatory approval for or commercialize any of our drug product candidates.

 

We have limited experience in conducting clinical trials and no history of commercializing biologic products, which may make it difficult to evaluate the prospects for our future viability.

 

The outbreak of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, could adversely impact our business, including our clinical trials and preclinical studies.

 

We plan to seek collaborations or strategic alliances. However, we may not be able to establish such relationships, and relationships we have established may not provide the expected benefits. Our collaboration agreements with Merck and LG Chem contain exclusivity provisions that restrict our research and development activities.

 

We may not be successful in our efforts to identify additional drug product candidates. Due to our limited resources and access to capital, we must prioritize development of certain drug product candidates; these decisions may prove to be wrong and may adversely affect our business.

 

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

 

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

 

We rely completely on third parties to manufacture our preclinical and clinical drug supplies for our drug product candidates.

 

If we or our licensor is unable to protect our or its intellectual property, then our financial condition, results of operations and the value of our technology and potential products could be adversely affected.

4


 

We will be subject to stringent domestic and foreign regulation in respect of any potential products. The regulatory approval processes of the FDA and other comparable regulatory authorities outside the United States are lengthy, time-consuming and inherently unpredictable. Any unfavorable regulatory action may materially and adversely affect our future financial condition and business operations.

 

Even if a potential therapeutic is ultimately approved by the various regulatory authorities, it may be approved only for narrow indications which may render it commercially less viable.

 

Even if we receive regulatory approval of our drug product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drug product candidates.

 

5


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Cue Biopharma, Inc.

Consolidated Balance Sheets

(Unaudited in thousands, except share amounts)

 

 

 

September 30,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

67,633

 

 

$

74,866

 

Marketable securities

 

 

 

 

 

10,003

 

Accounts receivable

 

 

771

 

 

 

1,417

 

Prepaid expenses and other current assets

 

 

1,851

 

 

 

1,241

 

Total current assets

 

 

70,255

 

 

 

87,527

 

Property and equipment, net

 

 

2,339

 

 

 

2,108

 

Operating lease right-of-use

 

 

3,369

 

 

 

6,774

 

Deposits

 

 

2,619

 

 

 

2,572

 

Restricted cash

 

 

150

 

 

 

150

 

Other long-term assets

 

 

143

 

 

 

402

 

Total assets

 

$

78,875

 

 

$

99,533

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,470

 

 

$

2,070

 

Accrued expenses

 

 

3,989

 

 

 

2,787

 

Research and development contract liability, current portion

 

 

5,263

 

 

 

6,681

 

Operating lease liability, current portion

 

 

3,633

 

 

 

4,777

 

Total current liabilities

 

 

15,355

 

 

 

16,315

 

Research and development contract liability, net of current portion

 

 

 

 

 

1,938

 

Operating lease liability, net of current portion

 

 

 

 

 

2,369

 

Total liabilities

 

$

15,355

 

 

$

20,622

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred Stock, $0.001 par value; 10,000,000 shares authorized and 0 shares issued and

outstanding at September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 31,361,995 and 30,351,366 shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively

 

 

32

 

 

 

30

 

Additional paid in capital

 

 

252,550

 

 

 

232,159

 

Accumulated other comprehensive income

 

 

 

 

 

7

 

Accumulated deficit

 

 

(189,062

)

 

 

(153,285

)

Total stockholders’ equity

 

 

63,520

 

 

 

78,911

 

Total liabilities and stockholders’ equity

 

$

78,875

 

 

$

99,533

 

 

The accompanying notes are an integral part of these consolidated financial statements.

6


Cue Biopharma, Inc.

Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited in thousands, except share and per share amounts)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Collaboration revenue

 

$

2,395

 

 

$

704

 

 

$

6,687

 

 

$

2,679

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

4,125

 

 

 

3,318

 

 

 

12,660

 

 

 

11,205

 

Research and development

 

 

11,288

 

 

 

7,517

 

 

 

29,846

 

 

 

25,542

 

Total operating expenses

 

 

15,413

 

 

 

10,835

 

 

 

42,506

 

 

 

36,747

 

Loss from operations

 

 

(13,018

)

 

 

(10,131

)

 

 

(35,819

)

 

 

(34,068

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

25

 

 

 

100

 

 

 

42

 

 

 

386

 

Total other income

 

 

25

 

 

 

100

 

 

 

42

 

 

 

386

 

Net loss

 

$

(12,993

)

 

$

(10,031

)

 

$

(35,777

)

 

$

(33,682

)

Unrealized (loss) gain from available-for-sale

   securities

 

 

 

 

 

83

 

 

 

(7

)

 

 

82

 

Comprehensive loss

 

$

(12,993

)

 

$

(9,948

)

 

$

(35,784

)

 

$

(33,600

)

Net loss per common share – basic and diluted

 

$

(0.41

)

 

$

(0.34

)

 

$

(1.16

)

 

$

(1.20

)

Weighted average common shares outstanding –

   basic and diluted

 

 

31,515,178

 

 

 

29,650,909

 

 

 

31,064,579

 

 

 

28,151,361

 

 

The accompanying notes are an integral part of these consolidated financial statements.

7


Cue Biopharma, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited in thousands, except share and per share amounts)

 

For the three months ended September 30, 2021 and 2020:

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par

Value

 

 

Paid-in

Capital

 

 

Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Stockholders’

Equity

 

Balance, June 30, 2021

 

 

31,470,216

 

 

$

31

 

 

$

248,948

 

 

$

-

 

 

$

(176,069

)

 

$

72,910

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,252

 

 

 

 

 

 

 

 

 

3,252

 

Exercise of stock options

 

 

113,750

 

 

 

1

 

 

 

833

 

 

 

 

 

 

 

 

 

834

 

Restricted stock awards released

 

 

81,667

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Restricted stock awards withheld at vesting to cover taxes

 

 

(33,638

)

 

 

 

 

 

(482

)

 

 

 

 

 

 

 

 

(482

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,993

)

 

 

(12,993

)

Balance, September 30, 2021

 

 

31,631,995

 

 

$

32

 

 

$

252,550

 

 

$

 

 

$

(189,062

)

 

$

63,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

 

 

29,303,192

 

 

$

29

 

 

$

212,121

 

 

$

155

 

 

$

(132,151

)

 

$

80,154

 

Issuance of common stock from ATM offering, net of

   sales agent commission and fees

 

 

842,000

 

 

 

1

 

 

 

14,328

 

 

 

 

 

 

 

 

 

14,329

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,500

 

 

 

 

 

 

 

 

 

2,500

 

Exercise of stock options

 

 

101,125

 

 

 

 

 

 

719

 

 

 

 

 

 

 

 

 

719

 

Restricted stock awards released

 

 

6,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards withheld at vesting to cover taxes

 

 

(1,900

)

 

 

 

 

 

(35

)

 

 

 

 

 

 

 

 

(35

)

Unrealized losses from available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(83

)

 

 

 

 

 

(83

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,031

)

 

 

(10,031

)

Balance, September 30, 2020

 

 

30,251,083

 

 

$

30

 

 

$

229,633

 

 

$

72

 

 

$

(142,182

)

 

$

87,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2021 and 2020:

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par

Value

 

 

Paid-in

Capital

 

 

Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Stockholders’

Equity

 

Balance, December 31, 2020

 

 

30,351,366

 

 

$

30

 

 

$

232,159

 

 

$

7

 

 

$

(153,285

)

 

$

78,911

 

Issuance of common stock from ATM offering, net of sales

   agent commission and fees

 

 

907,700

 

 

 

1

 

 

 

10,356

 

 

 

 

 

 

 

 

 

10,357

 

Stock-based compensation

 

 

 

 

 

 

 

 

8,541

 

 

 

 

 

 

 

 

 

8,541

 

Exercise of stock options

 

 

307,105

 

 

 

1

 

 

 

2,061

 

 

 

 

 

 

 

 

 

2,062

 

Issuance of common stock upon exercise of warrants, net

 

 

8,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards released

 

 

98,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards withheld at vesting to cover taxes

 

 

(40,557

)

 

 

 

 

 

(567

)

 

 

 

 

 

 

 

 

(567

)

Unrealized losses from available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,777

)

 

 

(35,777

)

Balance, September 30, 2021

 

 

31,631,995

 

 

$

32

 

 

$

252,550

 

 

$

-

 

 

$

(189,062

)

 

$

63,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

 

26,562,178

 

 

$

26

 

 

$

163,068

 

 

$

(10

)

 

$

(108,500

)

 

$

54,584

 

Issuance of common stock from ATM offering, net of sales

   agent commission and fees

 

 

3,016,901

 

 

 

3

 

 

 

56,679

 

 

 

 

 

 

 

 

 

56,682

 

Stock-based compensation

 

 

 

 

 

 

 

 

8,199

 

 

 

 

 

 

 

 

 

8,199

 

Exercise of stock options

 

 

377,747

 

 

 

 

 

 

1,799

 

 

 

 

 

 

 

 

 

1,799

 

Issuance of common stock upon exercise of warrants, net

 

 

278,179

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Restricted stock awards released

 

 

23,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards withheld at vesting to cover taxes

 

 

(7,254

)

 

 

 

 

 

(111

)

 

 

 

 

 

 

 

 

(111

)

Unrealized gains from available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

82

 

 

 

 

 

 

82

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,682

)

 

 

(33,682

)

Balance, September 30, 2020

 

 

30,251,083

 

 

$

30

 

 

$

229,633

 

 

$

72

 

 

$

(142,182

)

 

$

87,553

 

 

The accompanying notes are an integral part of these consolidated financial statements.

8


Cue Biopharma, Inc.

Consolidated Statements of Cash Flows

(Unaudited in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(35,777

)

 

$

(33,682

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

948

 

 

 

804

 

Stock-based compensation

 

 

8,541

 

 

 

8,199

 

Change in operating lease right-of-use asset

 

 

3,405

 

 

 

(2,539

)

Amortization of premium/discount on purchased securities

 

 

(5

)

 

 

77

 

Loss on disposal of fixed asset

 

 

(21

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Account receivable

 

 

646

 

 

 

298

 

Prepaid expenses and other current assets

 

 

(867

)

 

 

(443

)

Other assets

 

 

250

 

 

 

(250

)

Deposits

 

 

(47

)

 

 

 

Accounts payable

 

 

400

 

 

 

225

 

Accrued expenses

 

 

1,202

 

 

 

355

 

Research and development contract liability

 

 

(3,354

)

 

 

(945

)

Operating lease liability

 

 

(3,513

)

 

 

2,406

 

Net cash used in operating activities

 

 

(28,192

)

 

 

(25,495

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(913

)

 

 

(487

)

Cash received from the sale of fixed assets

 

 

21

 

 

 

 

Redemption of short-term investments

 

 

10,000

 

 

 

5,000

 

Purchases of marketable securities

 

 

 

 

 

(9,949

)

Net cash provided by (used in) investing activities

 

 

9,108