10-Q: Checkpoint Therapeutics Reports First Quarter 2024 Financial Results and Corporate Update

Checkpoint Therapeutics' first quarter results reflect ongoing losses and reliance on future financing to continue development of its cancer treatment candidates.

Summary

• Checkpoint Therapeutics, a clinical-stage immunotherapy and targeted oncology company, reported its financial results for the first quarter ended March 31, 2024.
• The company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future.
• As of March 31, 2024, Checkpoint had an accumulated deficit of $325.3 million.
• The company's cash and cash equivalents are only sufficient to fund its operating expenses into the third quarter of 2024, assuming no exercises of outstanding cash warrants.
• Checkpoint's independent registered public accounting firm included an explanatory paragraph in its report on the company's financial statements for the year ended December 31, 2023, expressing substantial doubt about the company's ability to continue as a going concern.
• Checkpoint intends to seek to address the issues raised in the complete response letter from the FDA in a potential BLA resubmission for cosibelimab.
• The company is also evaluating olafertinib as a potential new treatment for patients with EGFR mutation-positive non-small cell lung cancer (NSCLC).

Sentiment

Score: 3

Explanation: The document reflects a negative sentiment due to ongoing losses, uncertainty about future funding, and the FDA's complete response letter, indicating significant challenges ahead.

Positives

• The company successfully raised $12.8 million in net proceeds through a registered direct offering in January 2024.
• The company is actively pursuing discussions with third-party pharmaceutical and biotechnology companies to evaluate potential partnerships or other types of corporate development transactions, including a strategic merger.

Negatives

• The company has a history of significant losses and expects continued losses for the foreseeable future.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company's cash reserves are only sufficient to fund operations into the third quarter of 2024.
• The FDA issued a complete response letter for the cosibelimab BLA, delaying potential approval.
• The company faces a consolidated putative stockholder class action lawsuit and a derivative lawsuit.

Risks

• The company will require substantial additional funding, which may not be available on acceptable terms or at all.
• Failure to raise necessary capital may force the company to delay, scale back, or discontinue development programs.
• Raising additional capital may cause dilution to existing stockholders, restrict operations, or require relinquishment of proprietary rights.
• The company is dependent on the success of its product candidates, which may never receive regulatory approval or be successfully commercialized.
• Clinical trials may be delayed or terminated due to various factors, including regulatory issues, enrollment difficulties, and safety concerns.
• The company relies on third-party manufacturers and CROs, and their performance failures could harm the business.
• The company faces intense competition in the biotechnology and pharmaceutical industries.
• The company is subject to extensive government regulation, and changes in regulations could increase costs and impact operations.
• The company may be unable to obtain or maintain sufficient patent protection for its technology and products.
• The company may be subject to product liability claims, which could result in substantial liabilities.
• Fortress Biotech, Inc. controls a voting majority of the company's common stock, which could create conflicts of interest.

Future Outlook

The company expects its cash reserves to fund operations into the third quarter of 2024 and will need to secure additional funding to continue development and commercialization efforts.

Industry Context

The announcement highlights the challenges faced by clinical-stage biotechnology companies, particularly in securing funding and navigating the regulatory approval process. The focus on immunotherapy and targeted oncology reflects broader industry trends toward personalized medicine and novel cancer treatments.

Comparison to Industry Standards

• Checkpoint Therapeutics' reliance on external financing and its ongoing losses are typical for clinical-stage biotechnology companies.
• Many biotech companies face similar challenges in raising capital and advancing product candidates through clinical trials.
• For example, companies like Moderna and BioNTech, while successful, also experienced significant losses during their development phases before achieving profitability.
• Compared to larger pharmaceutical companies with established product portfolios, such as Pfizer or Johnson & Johnson, Checkpoint's financial position is considerably weaker and riskier.
• In the specific area of PD-L1 inhibitors, cosibelimab is entering a competitive market that includes established products like Merck's Keytruda (pembrolizumab) and Bristol Myers Squibb's Opdivo (nivolumab).
• These competitors have achieved significantly higher response rates and longer durations of response in various cancers, setting a high bar for new entrants.
• Similarly, in the EGFR inhibitor space for NSCLC, olafertinib faces competition from AstraZeneca's Tagrisso (osimertinib), which has demonstrated superior efficacy and become a standard of care.
• Checkpoint's strategy of using foreign clinical data to support U.S. regulatory approvals is not unique but carries risks, as seen with other companies like Hutchmed, whose application for surufatinib was rejected by the FDA due to concerns about the applicability of China-only data to the U.S. population.

Legal Proceedings

• The Company and certain of its executive officers have been named as defendants in a consolidated putative stockholder class action lawsuit pending in the United States District Court for the Southern District of New York.
• The action is styled Moore v. Checkpoint Therapeutics, Inc., et al., No. 1:24-cv-02613-PAE (the Securities Class Action).
• The Complaint in the Securities Class Action (the Complaint), which was filed on April 5, 2024, alleges that defendants violated the Securities Exchange Act of 1934, as amended (the Exchange Act), and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions, and the Complaint alleges that the executive officers named as defendants are control persons under Section 20(a) of the Exchange Act.
• The Complaint was filed on behalf of stockholders who purchased shares of the Companys common stock between March 10, 2021 and December 15, 2023, and the Complaint seeks, among other things, monetary damages on behalf of the purported class.
• The Company has been named as a nominal defendant and certain of its current and former directors and executive officers have been named as defendants in a derivative lawsuit pending in the United States District Court for the Southern District of New York.
• The action is styled Geary v. Oliviero, et al., No. 1:24-cv-03471 (the Derivative Action).
• The Complaint in the Derivative Action, which was filed on May 6, 2024, asserts claims against all defendants under Delaware law for, among other things, breach of fiduciary duty, claims against all defendants under Section 14(a) of the Exchange Act, and claims for contribution under the federal securities laws against certain of the defendants.

Related Party Transactions

• The Company has a Founders Agreement and Management Services Agreement with Fortress Biotech, Inc., its majority shareholder.
• Under the Founders Agreement, Fortress is entitled to an annual equity fee and a fee based on equity or debt financings.
• Under the Management Services Agreement, Fortress provides advisory and consulting services to the Company for an annual fee.
• The Company entered into an advisory agreement with Caribe BioAdvisors, LLC, owned by Michael Weiss, the Chairman of the Board, to provide advisory services.
• Effective September 30, 2023, the Company and TGTX agreed to mutually terminate the collaboration agreement and sublicense agreement.

Stakeholder Impact

• Shareholders: Potential dilution from future capital raises and uncertainty about the company's ability to achieve profitability.
• Employees: Potential impact on job security if the company fails to secure additional funding or achieve its development milestones.
• Creditors: Increased risk due to the company's financial condition and uncertainty about its ability to continue as a going concern.
• Suppliers: Potential impact on business relationships if the company scales back or discontinues development programs.

Next Steps

• Seek to address the issues raised in the FDA's complete response letter in a potential BLA resubmission for cosibelimab.
• Pursue additional funding through equity or debt offerings, or other potential sources such as partnerships.
• Continue discussions with third-party pharmaceutical and biotechnology companies to evaluate potential partnerships or other types of corporate development transactions.
• Continue evaluating olafertinib as a potential new treatment for patients with EGFR mutation-positive NSCLC.

Key Dates

Keywords

Checkpoint Therapeutics, immunotherapy, oncology, cancer treatment, cosibelimab, olafertinib, clinical trials, FDA approval, BLA, NSCLC, CSCC, biotechnology, pharmaceutical, capital raise, going concern, stockholder lawsuit