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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, 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: 001-38584

 

CONSTELLATION PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

26-1741721

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

215 First Street, Suite 200

Cambridge, Massachusetts

02142

(Address of principal executive offices)

(Zip code)

(617714-0555

(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, $0.0001 par value per share

 

CNST

 

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, 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 the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No       

As of April 30, 2021, the registrant had 47,914,690 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of management and expected market growth are forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” and include, among other things:

 

our ongoing clinical trials, including our Phase 3 and 2 clinical trials of pelabresib (CPI-0610), MANIFEST-2 and MANIFEST, respectively and our Phase 1/2 clinical trial of CPI-0209;

 

our plans to advance our clinical-stage product candidates into later stage trials;

 

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

 

our plans to develop and, if approved, subsequently commercialize pelabresib, CPI-0209 and any other product candidates, including in combination with other drugs and therapies;

 

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for pelabresib, CPI-0209 and other product candidates;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and marketable securities;

 

the potential advantages of our product candidates;

 

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

 

our manufacturing, commercialization and marketing capabilities and strategy;

 

our intellectual property position;

 

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

 

our estimates regarding expenses, future revenue, timing of any future revenue, capital requirements and needs for additional financing;

 

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 impact of the COVID-19 pandemic on our ability to initiate sites and enroll and monitor patients in our clinical trials, collect data, secure needed supplies, initiate new clinical trials, meet our current milestones and timeline, and continue to successfully execute on our plans and operations.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the section entitled “Risk Factors” that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

2


Risk Factor Summary:

 

We have incurred significant operating losses since our inception. Our net loss was $40.1 million for the three months ended March 31, 2021, $126.4 million for the year ended December 31, 2020. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

 

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we continue our Phase 2 clinical trial of pelabresib, MANIFEST, our Phase 3 clinical trial of pelabresib, MANIFEST-2, our Phase 1/2 clinical trial of CPI-0209, and complete our Phase 1b/2 clinical trial of CPI-1205. We will need substantial additional funding to complete clinical development of our product candidates. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

 

The ongoing COVID-19 pandemic has affected, and may continue to affect, our ability to conduct our clinical trials, including delays in site initiation and patient enrollment as well as incomplete data collection at some sites. It may also disrupt regulatory activities or have other adverse effects on our business and operations.  

 

Our approach to the discovery and development of product candidates based on the inhibition of epigenetic regulators by small molecules is an emerging field and the scientific discoveries that form the basis for our efforts to discover and develop product candidates are relatively new. We do not know whether we will be able to successfully develop any products.

 

We have product candidates in clinical development and preclinical development. The risk of failure for each of our product candidates is high. Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

 

If serious adverse events or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

 

We are currently pursuing the development of pelabresib in combination with ruxolitinib, which is marketed by Incyte, Inc. If the FDA revokes approval of ruxolitinib or any other therapeutic that we develop product candidates in combination with, or if safety, efficacy, manufacturing or supply issues arise with ruxolitinib or any therapeutic that we use in combination with one of our product candidates in the future, we may be unable to further develop and/or market our product candidate or we may experience significant regulatory delays or supply shortages, and our business could be materially harmed.

 

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for any of our product candidates, if approved, may be smaller than we estimate.

 

We face substantial competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, which may result in others discovering, developing or commercializing products before or more successfully than we do.

 

We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates, and those third parties may not perform satisfactorily, which could have a material adverse effect on our ability to complete clinical trials or commercialize our product candidates.

 

We may enter into collaborations with third parties for the development or commercialization of our product candidates. If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates and our business could be adversely affected.

 

If we are unable to obtain, maintain, enforce and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

 

The price of our common stock is volatile and fluctuates substantially, which could result in substantial losses for our stockholders.

 

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gain.

 

3


 

Constellation Pharmaceuticals, Inc.

Table of Contents

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2021 and December 31, 2020

 

5

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2021 and 2020

 

6

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) For the Three Months Ended March 31, 2021 and 2020

                  

7

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2021 and 2020

 

8

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

9

Item 2.

 

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

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

Item 1A.

 

Risk Factors

 

27

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

64

Item 6.

 

Exhibits

 

65

 

 

 

 

 

Signatures

 

66

 

 

4


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

113,983

 

 

$

163,693

 

Marketable securities

 

 

268,097

 

 

 

257,755

 

Prepaid expenses and other current assets

 

 

7,868

 

 

 

7,161

 

Total current assets

 

 

389,948

 

 

 

428,609

 

Property and equipment, net

 

 

1,667

 

 

 

1,497

 

Restricted cash

 

 

3,233

 

 

 

3,233

 

Operating lease, right-of-use assets

 

 

2,811

 

 

 

3,541

 

Other assets

 

 

5,000

 

 

 

4,974

 

Total assets

 

$

402,659

 

 

$

441,854

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,519

 

 

$

9,853

 

Accrued expenses and other current liabilities

 

 

17,456

 

 

 

17,051

 

Current portion of lease liabilities - operating lease

 

 

3,365

 

 

 

3,644

 

Total current liabilities

 

 

25,340

 

 

 

30,548

 

Operating lease liabilities, net of current portion

 

 

 

 

 

582

 

Total liabilities

 

 

25,340

 

 

 

31,130

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued

   or outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized

   at March 31, 2021 and December 31, 2020; 47,913,147

   and 47,744,486 shares issued and outstanding at March 31, 2021 and

   December 31, 2020, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

863,132

 

 

 

856,460

 

Accumulated other comprehensive gain (loss)

 

 

(2

)

 

 

3

 

Accumulated deficit

 

 

(485,816

)

 

 

(445,744

)

Total stockholders' equity

 

 

377,319

 

 

 

410,724

 

Total liabilities and stockholders' equity

 

$

402,659

 

 

$

441,854

 

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

 

5


 

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

30,784

 

 

$

20,075

 

General and administrative

 

 

9,442

 

 

 

5,908

 

Total operating expenses

 

 

40,226

 

 

 

25,983

 

Loss from operations

 

 

(40,226

)

 

 

(25,983

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

154

 

 

 

1,404

 

Interest expense

 

 

 

 

 

(850

)

Total other income (expense), net

 

 

154

 

 

 

554

 

Loss before income taxes

 

 

(40,072

)

 

 

(25,429

)

Income tax expense

 

 

 

 

 

15

 

Net loss

 

$

(40,072

)

 

$

(25,444

)

Net loss per share attributable to common stockholders, basic

   and diluted

 

$

(0.84

)

 

$

(0.61

)

Weighted average number of common shares used in net loss

   per share attributable to common stockholders, basic

   and diluted

 

 

47,838,738

 

 

 

41,765,635

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(40,072

)

 

$

(25,444

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(5

)

 

 

(84

)

Total other comprehensive loss

 

$

(5

)

 

$

(84

)

Comprehensive loss

 

$

(40,077

)

 

$

(25,528

)

 

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

6


CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

 

 

Equity

 

Balances at December 31, 2020

 

 

47,744,486

 

 

$

5

 

 

$

856,460

 

 

$

3

 

 

$

(445,744

)

 

 

 

$

410,724

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,437

 

 

 

 

 

 

 

 

 

 

 

5,437

 

Exercise of common stock warrants

 

 

14,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option exercises

 

 

154,496

 

 

 

 

 

 

1,235

 

 

 

 

 

 

 

 

 

 

 

1,235

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(40,072

)

 

 

 

 

(40,072

)

Balances at March 31, 2021

 

 

47,913,147

 

 

$

5

 

 

$

863,132

 

 

$

(2

)

 

$

(485,816

)

 

 

 

$

377,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

 

 

Equity

 

Balances at December 31, 2019

 

 

41,719,039

 

 

$

4

 

 

$

656,973

 

 

$

(6

)

 

$

(319,387

)

 

 

 

$

337,584

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,559

 

 

 

 

 

 

 

 

 

 

 

2,559

 

Stock option exercises

 

 

103,025

 

 

 

 

 

 

911

 

 

 

 

 

 

 

 

 

 

 

911

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(84

)

 

 

 

 

 

 

 

(84

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,444

)

 

 

 

 

(25,444

)

Balances at March 31, 2020

 

 

41,822,064

 

 

$

4

 

 

$

660,443

 

 

$

(90

)

 

$

(344,831

)

 

 

 

$

315,526

 

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

.

 

7


 

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(40,072

)

 

$

(25,444

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

202

 

 

 

147

 

Stock-based compensation expense

 

 

5,437

 

 

 

2,559

 

Non-cash interest expense

 

 

 

 

 

202

 

Amortization and accretion on marketable securities

 

 

370

 

 

 

(156

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(707

)

 

 

238

 

Operating lease, right-of-use assets

 

 

824

 

 

 

642

 

Accounts payable

 

 

(5,386

)

 

 

(3,720

)

Accrued expenses and other current liabilities

 

 

575

 

 

 

60

 

Operating lease liabilities

 

 

(955

)

 

 

(558

)

Other assets

 

 

(26

)

 

 

 

Net cash used in operating activities

 

 

(39,738

)

 

 

(26,030

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(123,118

)

 

 

(135,161

)

Purchases of property and equipment

 

 

(490

)

 

 

(38

)

Proceeds from maturities and sales of marketable securities

 

 

112,401

 

 

 

16,450

 

Net cash used in investing activities

 

 

(11,207

)

 

 

(118,749

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon stock option exercises

 

 

1,235

 

 

 

911

 

Net cash provided by financing activities

 

 

1,235

 

 

 

911

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(49,710

)

 

 

(143,868

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

166,926

 

 

 

334,757

 

Cash, cash equivalents and restricted cash at end of period

 

$

117,216

 

 

$

190,889

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

 

 

$

648

 

Supplemental disclosure of noncash investing and financing

   information:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and accrued expenses

 

$

106

 

 

$

5

 

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

 

8


 

CONSTELLATION PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. Nature of the Business and Basis of Presentation

Constellation Pharmaceuticals, Inc. (“Constellation” or the “Company”) is a clinical-stage biopharmaceutical company using its expertise in epigenetics to discover and develop novel therapeutics that address serious unmet medical needs in patients with cancers associated with abnormal gene expression or drug resistance. The Company was incorporated in January 2008 as EpiGenetiX, Inc. under the laws of the State of Delaware. On March 31, 2008, the Company changed its name to Constellation Pharmaceuticals, Inc.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations with the proceeds of sales of convertible preferred stock, payments received in connection with collaboration agreements, borrowings under loan agreements, and proceeds from sales of its common stock in public and private offerings.

The Company has incurred losses since inception, including net losses of $40.1 million for the three months ended March 31, 2021, and $126.4 million for the year ended December 31, 2020. As of March 31, 2021, the Company had an accumulated deficit of $485.8 million. The Company expects to continue to generate operating losses in the foreseeable future. Based on the Company’s current operating plan, the Company expects that its cash, cash equivalents and marketable securities at March 31, 2021, will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the interim financial statements. Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding sooner than would otherwise be expected. There can be no assurance that the Company will be able to obtain additional funding on acceptable terms, if at all.

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

2. Summary of Significant Accounting Policies

Unaudited Interim Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim consolidated financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of Constellation Pharmaceuticals, Inc. and its wholly owned subsidiary, Constellation Securities Corporation. All intercompany transactions and balances of the subsidiary have been eliminated in consolidation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2021, and results of operations for the three months ended March 31, 2021 and 2020, stockholders’ equity for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020 have been made. The Company’s results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

9


Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains most of its cash, cash equivalents and marketable securities at two accredited financial institutions in amounts that exceed federally insured limits. Cash equivalents are invested in an institutional money market fund. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in the Annual Report. There have been no material changes to the significant accounting policies previously disclosed in the Annual Report other than as noted below.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consists of highly liquid investments that are readily convertible into cash with original maturities of three months or less from the date of purchase. The Company has a policy of making investments only in government securities or with commercial institutions that have at least an investment grade credit rating.

As of March 31, 2021, the Company classified $3.2 million as restricted cash related to a letter of credit issued as a security deposit in connection with Company's lease of its corporate office facilities (See Note 10). Cash, cash equivalents and restricted cash consists of the following (in thousands):

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Cash and cash equivalents

 

$

113,983

 

 

$

163,693

 

Restricted cash

 

 

3,233

 

 

 

3,233

 

Cash, cash equivalents and restricted cash

 

$

117,216

 

 

$

166,926

 

 

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, or ASU 2019-12, which includes amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, or ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by

10


clarifying and amending existing guidance. The new guidance is effective for the Company for annual periods beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. Early adoption of the amendments was permitted. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial position, results of operations or cash flows.

 

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

March 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

113,983

 

 

$

 

 

$

 

 

$

113,983

 

 

 

$

113,983

 

 

$

 

 

$

 

 

$

113,983

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

 

$

46,342

 

 

$

 

 

$

46,342

 

Commercial paper

 

 

 

 

 

126,185

 

 

 

 

 

 

126,185

 

U.S. Government debt securities

 

 

 

 

 

95,570

 

 

 

 

 

 

95,570

 

Total

 

$

 

 

$

268,097

 

 

$

 

 

$

268,097

 

 

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

163,693

 

 

$

 

 

$

 

 

$

163,693

 

 

 

$

163,693

 

 

$

 

 

$

 

 

$

163,693

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

 

$

52,531

 

 

$

 

 

$

52,531

 

Commercial paper

 

 

 

 

 

99,865

 

 

 

 

 

 

99,865

 

U.S. Government debt securities

 

 

 

 

 

105,359

 

 

 

 

 

 

105,359

 

Total

 

$

 

 

$

257,755

 

 

$

 

 

$

257,755

 

 

Money market funds were valued by the Company using observable inputs that reflect quoted prices for identical assets in active markets. The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments and some cash equivalents within Level 2 of the fair value hierarchy.

During the three months ended March 31, 2021, there were no transfers between Level 1 and Level 2.

4. Marketable Securities

The following table summarizes the Company’s marketable securities as of March 31, 2021, and December 31, 2020, respectively (in thousands):

 

 

 

March 31, 2021

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

46,361

 

 

$

 

 

$

(19

)

 

$

46,342

 

Commercial paper

 

 

126,185

 

 

 

 

 

 

 

 

 

126,185

 

U.S. Government debt securities

 

 

95,553

 

 

 

17

 

 

 

 

 

 

95,570

 

Total marketable securities

 

$

268,099

 

 

$

17

 

 

$

(19

)

 

$

268,097

 

11


 

 

 

 

December 31, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

52,529

 

 

$

6

 

 

$

(4

)

 

$

52,531

 

Commercial paper

 

 

99,865

 

 

 

 

 

 

 

 

 

99,865

 

U.S. Government debt securities

 

 

105,358

 

 

 

6

 

 

 

(5

)

 

 

105,359

 

Total marketable securities

 

$

257,752

 

 

$

12

 

 

$

(9

)

 

$

257,755

 

 

 

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Accrued employee compensation and benefits

 

$

2,278

 

 

$

5,545

 

Accrued external research and development expenses

 

 

14,471

 

 

 

10,698

 

Accrued professional fees

 

 

532

 

 

 

467

 

Other

 

 

175