SEC Filing | Pyxis Oncology

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10-Q

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 June 30, 2022


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

Commission File Number: 001-40881

Pyxis Oncology, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	83-1160910
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
150 Cambridgepark Drive Cambridge, Massachusetts	02140
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 221-9059

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

PYXS

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 August 15, 2022, the registrant had 32,834,561 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
Summary Risk Factors		1
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit for the three and six months ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77
Signatures		78

SUMMARY RISK FACTORS

You should consider carefully the risks described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. References to “Pyxis Oncology,” the “Company,” “we,” “us,” and “our” in this section titled “Summary Risk Factors” refer to Pyxis Oncology, Inc. and its wholly owned subsidiary. A summary of the risks that could materially and adversely affect our business, financial condition, operating results and prospects include the following:

•

We are an oncology focused biopharmaceutical company with a limited operating history and have incurred significant losses since our inception. We expect to incur losses over at least the next several years and may never achieve or maintain profitability.

•

We will require substantial additional capital to finance our operations, obtain regulatory approval for our product candidates, and commercialize our product candidates. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce or eliminate one or more of our research and product development programs or future commercialization efforts.

•

We are heavily dependent on the success of PYX-201 and PYX-106, which are in the early stages of development, and if PYX-201, and/or PYX-106 are not successful in clinical trials or do not receive regulatory approval or licensure or are not successfully commercialized, our business will be materially and adversely affected.

•

All of our product candidates are currently in preclinical development. Our product candidates may fail in development or suffer delays that materially and adversely affect their commercial viability. If we or our existing or future collaborators are unable to initiate and complete clinical development of, obtain regulatory licensure for or commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

•

Our preclinical studies and clinical trials may fail to demonstrate adequately the safety, purity and potency of any of our product candidates, which would prevent or delay development, regulatory licensure and commercialization.

•

Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory licensure or commercialize these programs on a timely basis or at all.

•

We face competition from entities that have developed or may develop product candidates for cancer, including companies developing novel treatments and technology platforms. If these companies develop technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.

•

Clinical testing and product development is a lengthy and expensive process with an uncertain outcome. We may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the clinical testing and the development and commercialization of our product candidates.

•

The regulatory licensure and approval processes of the FDA and other comparable regulatory authorities are lengthy, time-consuming and inherently unpredictable and, if we are ultimately unable to obtain marketing licensure or approval for our product candidates, our business will be substantially harmed.

•

If we fail to attract and retain qualified senior management and key scientific personnel, our business may be materially and adversely affected.

•

We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory licensure or approvals could be delayed or prevented.

•

We rely on third parties to manufacture our product candidates. Any failure by a third-party manufacturer to produce acceptable raw materials or product candidates for us or to obtain authorization from the FDA or comparable foreign regulatory authorities may delay or impair our ability to initiate or complete our clinical trials, obtain regulatory licensure or approvals or commercialize approved products.

•

If we are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, or if our patents are insufficient to protect our product candidates for an adequate amount of time, or if we are unable to obtain adequate protection for our proprietary know-how, we may not be able to compete effectively in our markets.

•

If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product candidates or we could lose certain rights to grant sublicenses.

•

Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. If we breach our University of Chicago, Pfizer, LegoChem, or Biosion license agreements or any of the other agreements under which we acquired, or will acquire, intellectual property rights covering our product candidates, we could lose the ability to continue the development and commercialization of the related product.

•

If the market opportunities for any product that we develop are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PYXIS ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	223,355		$	274,735
Restricted cash		1,472			1,472
Prepaid expenses and other current assets		1,768			2,466
Total current assets		226,595			278,673
Property and equipment, net		965			1,007
Operating lease right-of-use assets		15,003			232
Other assets, noncurrent		—			109
Total assets	$	242,563		$	280,021
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,820		$	11,951
Accrued expenses and other current liabilities		7,096			6,592
Operating lease liabilities, current portion		—			165
Total current liabilities		14,916			18,708
Operating lease liabilities, net of current portion		15,681			—
Total liabilities		30,597			18,708
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, par value $0.001 per share, 10,000,000 shares authorized as of June 30, 2022 and December 31, 2021, zero shares issued and outstanding as of June 30, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value per share; 190,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 32,825,679 and 32,792,867 shares issued as of June 30, 2022 and December 31, 2021, respectively, and 32,483,883 and 32,222,881 shares outstanding as of June 30, 2022 and December 31, 2021, respectively		32			32
Additional paid-in capital		360,594			352,999
Accumulated deficit		(148,660	)		(91,718	)
Total stockholders’ equity		211,966			261,313
Total liabilities and stockholders’ equity	$	242,563		$	280,021

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

PYXIS ONCOLOGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	17,170		$	3,205		$	37,241		$	35,979
General and administrative		8,556			2,736			19,874			5,691
Total operating expenses		25,726			5,941			57,115			41,670
Loss from operations		(25,726	)		(5,941	)		(57,115	)		(41,670	)
Other income (expense):
Interest income		164			6			173			10
Service fee income from related party		—			181			—			181
Change in fair value of derivative liability		—			(2,161	)		—			(3,261	)
Total other income (expense)		164			(1,974	)		173			(3,070	)
Loss from equity method investment in joint venture		—			(231	)		—			(231	)
Net loss and comprehensive loss	$	(25,562	)	$	(8,146	)	$	(56,942	)	$	(44,971	)
Net loss per common share - basic and diluted	$	(0.79	)	$	(5.54	)	$	(1.76	)	$	(31.86	)
Weighted average shares of common stock outstanding - basic and diluted		32,451,610			1,471,447			32,384,522			1,411,428

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

PYXIS ONCOLOGY, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)


	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity (Deficit)
Balance at January 1, 2022		—	$	—		32,222,881	$	32	$	352,999	$	(91,718	)	$	261,313
Stock options exercised		—		—		51,118		—		176		—			176
Vesting of restricted common stock		—		—		100,908		—		1		—			1
Stock-based compensation		—		—		—		—		3,404		—			3,404
Net loss		—		—		—		—		—		(31,380	)		(31,380	)
Balance at March 31, 2022		—	$	—		32,374,907	$	32	$	356,580	$	(123,098	)	$	233,514
Stock options exercised		—		—		13,720		—		1		—			1
Vesting of restricted common stock		—		—		95,256		—		—		—			—
Stock-based compensation		—		—		—		—		4,013		—			4,013
Net loss		—		—		—		—		—		(25,562	)		(25,562	)
Balance at June 30, 2022		—	$	—		32,483,883	$	32	$	360,594	$	(148,660	)	$	211,966

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity (Deficit)
Balance at January 1, 2021		22,724,925	$	21,942		1,289,342	$	1	$	97	$	(15,743	)	$	(15,645	)
Issuance of Series B convertible preferred stock to Pfizer, Inc. (Refer to Note 5)		12,152,145		20,000		—		—		—		—			—
Issuance of Series B convertible preferred stock, net of issuance costs of $419		92,660,103		152,081		—		—		—		—			—
Vesting of restricted common stock		—		—		123,085		—		3		—			3
Stock-based compensation		—		—		—		—		2,450		—			2,450
Net loss		—		—		—		—		—		(36,825	)		(36,825	)
Balance at March 31, 2021		127,537,173	$	194,023		1,412,427	$	1	$	2,550	$	(52,568	)	$	(50,017	)
Vesting of restricted common stock		—		—		106,580		1		2		—			3
Stock-based compensation		—		—		—		—		572		—			572
Net loss		—		—		—		—		—		(8,146	)		(8,146	)
Balance at June 30, 2021		127,537,173	$	194,023		1,519,007	$	2	$	3,124	$	(60,714	)	$	(57,588	)

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

PYXIS ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2022			2021
Operating activities
Net loss	$	(56,942	)	$	(44,971	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		317			330
Stock-based compensation		7,417			3,022
Non-cash research and development expenses		—			20,000
Non-cash lease expense		548			295
Non-cash loss from equity method investment in joint venture		—			50
Changes in fair value of derivative liability		—			3,261
Changes in operating assets and liabilities:
Prepaid expenses and other assets		698			(448	)
Accounts payable		(4,131	)		(364	)
Accrued expenses and other current liabilities		504			(114	)
Operating lease liabilities		198			(299	)
Derivative liability		—			3,369
Net cash used in operating activities		(51,391	)		(15,869	)
Investing activities
Purchase of property and equipment		(275	)		(540	)
Investment in joint venture		—			(50	)
Net cash used in investing activities		(275	)		(590	)
Financing activities
Proceeds from issuance of Series B convertible preferred stock, net of issuance costs		—			151,581
Deferred offering costs		—			(729	)
Proceeds from the exercise of stock options		177			—
Net cash provided by financing activities		177			150,852
Net (decrease) increase in cash, cash equivalents, and restricted cash		(51,489	)		134,393
Cash, cash equivalents and restricted cash at beginning of year		276,316			8,188
Cash, cash equivalents and restricted cash at end of year	$	224,827		$	142,581
Supplemental cash flow information:
Cash received for interest	$	157		$	10
Noncash investing and financing activities:
Deferred offering costs in accounts payable and accrued expenses	$	—		$	1,413
Operating lease right-of-use asset obtained in exchange for operating lease liabilities	$	(15,319	)	$	—
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	223,355		$	142,473
Restricted cash		1,472			108
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	224,827		$	142,581

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

PYXIS ONCOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Nature of Business

Pyxis Oncology, Inc. (the “Company”), a Delaware corporation, was founded in June 2018 and launched its operations in July 2019. The Company is an oncology company focused on developing an arsenal of next-generation therapeutics to target difficult-to-treat cancers and improve quality of life for patients. The Company develops its product candidates with the objective to directly kill tumor cells, and to address the underlying pathologies created by cancer that enable its uncontrollable proliferation and immune evasion. Since the Company’s launch in 2019, the Company has developed a broad portfolio of novel antibody drug conjugate, or ADC, product candidates and monoclonal antibody, or mAb, preclinical discovery programs that the Company is developing as monotherapies and in combination with other therapies.

The Company has determined that it has one operating and reporting segment.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Company’s fiscal year ends on December 31 and its first three fiscal quarters end on March 31, June 30 and September 30. The accompanying condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

In the opinion of management, the unaudited condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods. The results for the three and six months ended June 30, 2022 are not necessarily indicative of those expected for the year ending December 31, 2022 or for any future period. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2022.

Liquidity

As of June 30, 2022, the Company had an accumulated deficit of $148.7 million. The Company has incurred losses and negative cash flows from operations since inception, including net losses of $56.9 million and $45.0 million for the six months ended June 30, 2022 and 2021, respectively.

The Company has not generated any revenues to date and does not anticipate generating any revenues unless and until it successfully completes development and obtains regulatory approval for its current or any future product candidates. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future as the Company continues to expand its research and development programs and develop its product candidates.

The Company currently expects that its existing cash and cash equivalents of $223.4 million as of June 30, 2022 to fund its operating expenses and capital requirements at least twelve months from the date these unaudited condensed consolidated financial statements are issued. Additional funding may be necessary to fund future clinical and preclinical activities.

The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity, convertible or debt financings or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, stock-based compensation, derivative liability, operating leases, and research and development costs. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Actual results could differ from those estimates and there may be changes to management’s estimates in future periods.

Risks and Uncertainties

The Company is subject to risks common to early-stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key suppliers for active ingredients and third-party service providers such as contract research organizations, protection of intellectual property rights and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.

Concentration of Credit Risks

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company’s cash and cash equivalents are held at an accredited financial institution and the Company has not experienced any losses in such accounts. The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company’s cash equivalents consist primarily of short-term money market funds held in accredited financial institutions. The Company believes it is not exposed to any significant risk in cash and cash equivalents.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2022.

Recent Accounting Pronouncements

Recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to, have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

The following tables present the financial instruments carried at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, respectively, in accordance with the FASB ASC 820 hierarchy (in thousands):


	Fair Value Measurements at June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	218,359	$	—	$	—	$	218,359

	Fair Value Measurements at December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	272,210	$	—	$	—	$	272,210

The Company’s cash equivalents represent deposits in a short-term United States Treasury money market fund quoted in an active market and classified as a Level 1 asset. There were no assets or liabilities measured at fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three and six months ended June 30, 2022 and 2021.

The Company recognized initial derivative liability of $3.4 million related to LegoChem Extra Milestone Payment and revalued at each reporting period, with a fair value adjustment to the derivative liability of $2.2 million and $3.3 million for the three months and six months ended June 30, 2021, respectively. The fair value of the derivative liability was initially determined using a probability-weighted income approach and is revalued at each reporting date or more frequently if circumstances dictate. The significant unobservable inputs used in the fair value measurement of the derivative liability include probability of payment factors and the discount rate. Refer to Note 5, Licensing Agreements, for additional information on the derivative liability.

4. Joint Venture

In March 2021, the Company entered into definitive transaction agreements with Alloy Therapeutics, Inc. (“Alloy”) and Voxall Therapeutics, LLC (“Voxall”), to finance and operate Voxall, a joint venture company formed in collaboration with Alloy to leverage the Company’s technology and Alloy’s ATX-Gx™ platform and antibody discovery services. Voxall granted to the Company and Alloy 50% of the voting membership units of Voxall in exchange for certain initial contributions. The Company’s initial contribution included $50 thousand and a non-exclusive fully paid-up license to certain intellectual property owned or controlled by the Company and the execution of the services agreement to enable the collaboration with Voxall. Alloy’s initial contribution included $50 thousand and the execution of the Alloy license agreement and the Alloy services agreement to enable the collaboration with Voxall. Voxall is governed by a board of directors consisting of an equal number of the Company’s representatives and Alloy’s representatives. The protective provisions under Voxall’s operating agreement require the approval of both the Company and Alloy before Voxall may take certain actions.

The Company accounted for investment in Voxall under the equity method of accounting. The initial contribution of $