10-Q

Large accelerated filer

Accelerated filer

Non-acc
elerated
filer

Smaller reporting company

Emerging growth company

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 March 31, 2022

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

FOR THE TRANSITION PERIOD FROM

Commission File Number

001-36500

CymaBay Therapeutics, Inc.

(Exact name of registrant as specified in its charter)


Delaware		94-3103561
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
7575 Gateway Blvd, Suite 110 Newark, CA		94560
(Address of principal executive offices)		(Zip Code)

(510)

293-8800

(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	CBAY	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.

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, 2022, there were 84,677,939 shares of the registrant’s common stock outstanding.

Table of Contents

CYMABAY THERAPEUTICS, INC.

QUARTERLY REPORT ON

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION		3
Item 1.	Financial Statements		3
	Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 (unaudited)		3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)		5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited)		6
	Notes to Condensed Consolidated Financial Statements (unaudited)		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		21
Item 4.	Controls and Procedures		21

PART II	OTHER INFORMATION		22
Item 1.	Legal Proceedings		22
Item 1A.	Risk Factors		22
Item 6.	Exhibits		45

Signatures			46

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

CymaBay Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(unaudited)


	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	73,995		$	125,806
Marketable securities		114,564			60,729
Prepaid research and development expenses		1,384			2,371
Other prepaid expenses and current assets		2,103			2,193

Total current assets		192,046			191,099
Property and equipment, net		1,024			1,178
Non-current marketable securities		4,885			8,067
Operating lease right-of-use asset		239			254
Other assets		2,448			1,720

Total assets	$	200,642		$	202,318

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	199		$	2,728
Accrued research and development expenses		9,659			9,752
Other accrued liabilities		4,181			5,886

Total current liabilities		14,039			18,366
Development financing liability		78,685			50,320
Long-term portion of operating lease liability		537			695

Total liabilities		93,261			69,381
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.0001 par value: 200,000,000 shares authorized; 84,677,939 and 84,677,939 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		8			8
Additional paid-in capital		902,217			899,798
Accumulated other comprehensive loss		(219	)		(13	)
Accumulated deficit		(794,625	)		(766,856	)

Total stockholders’ equity		107,381			132,937

Total liabilities and stockholders’ equity	$	200,642		$	202,318

See accompanying notes to the condensed consolidated financial statements.

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CymaBay Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share information)

(unaudited)


	Three Months Ended
	March 31,
	2022			2021
Operating expenses:
Research and development	$	18,415		$	12,382
General and administrative		6,087			5,236

Total operating expenses		24,502			17,618

Loss from operations		(24,502	)		(17,618	)
Other income (expense), net:
Interest income		98			67
Interest expense		(3,365	)		—

Total other income (expense), net		(3,267	)		67

Net loss	$	(27,769	)	$	(17,551	)

Other comprehensive loss:
Unrealized loss on marketable securities		(206	)		(14	)

Total other comprehensive loss		(206	)		(14	)

Comprehensive loss	$	(27,975	)	$	(17,565	)

Basic and diluted net loss per common share	$	(0.32	)	$	(0.25	)
Weighted average common shares outstanding used to calculate basic and diluted net loss per common share		87,802,939			68,946,092

See accompanying notes to the condensed consolidated financial statements.

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CymaBay Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Three Months Ended
	March 31,
	2022			2021
Operating activities
Net loss	$	(27,769	)	$	(17,551	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		169			164
Stock-based compensation expense		2,414			2,505
Accretion of development financing liability		3,365			—
Net accretion and amortization of investments in marketable securities		131			196
Changes in assets and liabilities:
Other prepaid expenses and current assets		1,077			(2,553	)
Other assets		(728	)		(1,239	)
Accounts payable		(2,341	)		1,375
Accrued research and development expenses		(93	)		(1,404	)
Other accrued liabilities		(1,587	)		(2,054	)

Net cash used in operating activities		(25,362	)		(20,561	)
Investing activities
Purchases of property and equipment		—			(94	)
Purchases of marketable securities		(62,485	)		(18,212	)
Proceeds from maturities of marketable securities		11,495			54,000

Net cash (used in) provided by investing activities		(50,990	)		35,694
Financing activities
Proceeds from development financing		25,000			—
Issuance costs paid for issuance of common stock		(459	)		—

Net cash provided by financing activities		24,541			—

Net (decrease) increase in cash and cash equivalents		(51,811	)		15,133
Cash and cash equivalents at beginning of period		125,806			28,193

Cash and cash equivalents at end of period	$	73,995		$	43,326

Supplemental disclosure
Cash paid for amounts included in the measurement of lease liabilities	$	171		$	166

See accompanying notes to the condensed consolidated financial statements.

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CymaBay Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share information)

(unaudited)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances as of December 31, 2021		84,677,939	$	8	$	899,798	$	(13	)	$	(766,856	)	$	132,937
Issuance costs related to issuance of common stock and pre-funded warrants		—		—		5		—			—			5
Stock-based compensation expense		—		—		2,414		—			—			2,414
Net loss		—		—		—		—			(27,769	)		(27,769	)
Net unrealized loss on marketable securities		—		—		—		(206	)		—			(206	)

Balances as of March 31, 2022		84,677,939	$	8	$	902,217	$	(219	)	$	(794,625	)	$	107,381


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances as of December 31, 2020		68,946,092	$	7	$	819,549	$	8		$	(676,858	)	$	142,706
Stock-based compensation expense		—		—		2,505		—			—			2,505
Net loss		—		—		—		—			(17,551	)		(17,551	)
Net unrealized loss on marketable securities		—		—		—		(14	)		—			(14	)

Balances as of March 31, 2021		68,946,092	$	7	$	822,054	$	(6	)	$	(694,409	)	$	127,646

See accompanying notes to the condensed consolidated financial statements.

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CymaBay Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Description of Business

CymaBay Therapeutics, Inc. (the Company or CymaBay) is a clinical-stage biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need. The Company’s key clinical development candidate is seladelpar. Seladelpar has been under development primarily for the treatment of primary biliary cholangitis (PBC), a rare liver disease. The Company was incorporated in Delaware in October 1988 as Transtech Corporation. The Company’s headquarters and operations are located in Newark, California and it operates i

n one segment.

Liquidity

The Company has incurred net operating losses and negative cash flows from operations since its inception. During the three months ended March 31, 2022, the Company incurred a net loss of $27.8 million and used $25.4 million of cash in operations. At March 31, 2022, the Company had an accumulated deficit of $794.6 million.

Historically, the Company has incurred substantial research and development expenses in the course of studying its product candidates in clinical trials. To date, none of the Company’s product candidates have been approved for marketing and sale, and the Company has not recorded any revenue from product sales. Generally, the Company’s ability to achieve profitability is dependent on its ability to successfully develop, acquire or

in-license

additional product candidates, conduct clinical trials for those product candidates, obtain regulatory approvals, and support commercialization activities for those product candidates. Any products developed will require approval of the U.S. Food and Drug Administration (FDA) or a foreign regulatory authority prior to commercial sale. The regulatory approval process is expensive, time-consuming, and uncertain, and any denial or delay of approval could have a material adverse effect on the Company. Even if approved, the Company’s products may not achieve market acceptance and will face competition from both generic and branded pharmaceutical products.

As of March 31, 2022, the Company had cash, cash equivalents and marketable securities totaling $193.4

million, which the Company believes is sufficient to fund its current operating plan for at least twelve months from the issuance date of its financial statements. The Company has historically obtained, and expects to obtain in the future, additional financing to fund its business strategy through: future equity offerings; debt financing; one or more possible licenses, collaborations or other similar arrangements with respect to development and/or commercialization rights of the Company’s product candidates; or a combination of the above. It is unclear if or when any such transactions will occur, on satisfactory terms or at all. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategies. If adequate funds are not available to the Company, it could have a material adverse effect on the Company’s business, results of operations, and financial condition. Market volatility resulting from the global novel coronavirus disease

(COVID-19)

pandemic, geopolitical or other factors could also adversely impact the Company’s ability to access capital when and as needed. Failure to raise sufficient capital when needed could require the Company to significantly delay, scale back or discontinue one or more of its product development programs or commercialization efforts, or other aspects of its business plans, and the Company’s operating results and financial condition would be adversely affected.

2. Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying interim condensed consolidated financial statements are unaudited and are comprised of the accounts of CymaBay and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under the equity method.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), which requires management to make informed estimates and assumptions that impact the amounts and disclosures reported in the condensed consolidated financial statements and accompanying notes, and the requirements of the United States Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted.

In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include normal recurring adjustments necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for the periods presented. These statements do not include all disclosures required by U.S. GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2021, which is contained in the Company’s Annual Report on Form

10-K

as filed with the SEC on March 17, 2022. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the entire year ending December 31, 2022 or future operating periods.

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The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts and disclosures reported in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Actual results could differ materially from those estimates and assumptions. These estimates form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources. Estimates are assessed each reporting period and updated to reflect current information and any changes in estimates will generally be reflected in the period first identified.

Fair Value of Financial Instruments

The Company’s financial instruments during the periods reported consist of cash, cash equivalents, marketable securities, accounts payable, certain accrued liabilities, and the development financing liability.

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 at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs and is as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.

Level 3—Inputs that are significant to the fair value measurement and are unobservable (i.e. supported by little market activity), which requires the reporting entity to develop its own valuation techniques and assumptions.

The carrying amounts of cash, accounts payable, and certain accrued liabilities approximate their related fair values due to the short-term nature of these instruments. Cash is classified as level 1 and accounts payable and accrued liabilities as level 2 under the fair value hierarchy.

The following tables present the Company’s financial assets that are measured at fair value on a recurring basis using the above input categories (in thousands):

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	As of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	34,808	$	—	$	—	$	34,808

Total cash equivalents		34,808		—		—		34,808
Marketable securities:
U.S. and foreign commercial paper		—		31,275		—		31,275
U.S. and foreign corporate debt securities		—		35,805		—		35,805
Supranational debt securities		—		4,518		—		4,518
U.S. treasury securities		—		47,851		—		47,851

Total marketable securities		—		119,449		—		119,449

Total assets measured at fair value	$	34,808	$	119,449	$	—	$	154,257


	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	85,638	$	—	$	—	$	85,638

Total cash equivalents		85,638		—		—		85,638
Marketable securities:
U.S. and foreign commercial paper		—		28,760		—		28,760
U.S. and foreign corporate debt securities		—		23,535		—		23,535
Asset-backed securities		—		8,522		—		8,522
U.S. treasury securities		—		7,979		—		7,979

Total marketable securities		—		68,796		—		68,796

Total assets measured at fair value	$	85,638	$	68,796	$	—	$	154,434

The Company estimates the fair value of its money market funds, corporate debt, asset-backed securities, commercial paper, U.S. treasury securities, and supranational debt securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data, and other observable inputs.

The fair value of the Company’s development financing liability is consistent with its carrying value of $78.7 million, which is recorded at amortized cost. The development financing liability is classified as level 3 under the fair value hierarchy as its valuation is based on a discounted cash flow model that uses unobservable inputs such as the estimated timing of regulatory approval and attainment of certain sales milestones.

Cash, Cash Equivalents, and Marketable Securities

The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits with commercial banks in checking, interest-bearing, and money market funds.

The Company invests excess cash in marketable securities with high credit ratings. These securities consist primarily of corporate debt, commercial paper, asset-backed securities, U.S. treasury securities, and supranational debt securities and are classified as

“available-for-sale.”

The Company considers marketable securities as short-term investments if the maturity date is less than or equal to one year from the balance sheet date. The Company considers marketable securities as long-term investments if the maturity date is in excess of one year from the balance sheet date.

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Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method. Realized gains and losses and declines in value judged to be other-than-temporary are included in interest income or expense in the condensed consolidated statements of operations and comprehensive loss. Unrealized holding gains and losses are reported in accumulated other comprehensive loss in the condensed consolidated balance sheets. To date, the Company has not recorded any impairment charges on its marketable securities related to other-than-temporary declines in market value. In determining whether a decline in market value is other-than-temporary, various factors are considered, including the cause, duration of time and severity of the impairment, any adverse changes in the investees’ financial condition, and the Company’s intent and ability to hold the security for a period of time sufficient to allow for an anticipated recovery in market value.

Unrealized gains and losses of the Company’s

available-for-sale

marketable securities as of March 31, 2022 and December 31, 2021 were not material.

The following table shows the fair value of the Company’s marketable securities, by contractual maturity, as of March 31, 2022 (in thousands):


Due less than 1 year	$	114,564
Due between 1 and 2 years		4,885

Total fair value	$	119,449

Concentration of Risk

Cash, cash equivalents, and marketable securities consist of financial instruments that potentially subject the Company to a concentration of credit risk to the extent of the fair value recorded on the balance sheet. The Company invests cash that is not required for immediate operating needs primarily in highly liquid instruments that bear minimal risk. The Company has established guidelines relating to the quality, diversification, and maturities of securities to enable the Company to manage its credit risk. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and investments and issuers of investments to the extent recorded on the condensed consolidated balance sheets.

Certain materials and key components that the Company utilizes in its operations are obtained through single suppliers. Since the suppliers of key components and materials must be named in a new drug application NDA filed with the FDA for a product, significant delays can occur if the qualification of a new supplier is required. If delivery of material from the Company’s suppliers were interrupted for any reason, the Company may be unable to supply any of its product candidates for clinical trials.

Other Risks and Uncertainties

In March 2020, the World Health Organization declared the global novel coronavirus disease

(COVID-19)

outbreak a pandemic. To date, the Company’s operations have not been significantly impacted by the

COVID-19

outbreak. However, the Company continues to monitor potential risks and uncertainties associated with operating its business during the pandemic. These risks include, but are not limited to, ongoing government advisories and restrictions on travel and workplace access, workforce shortages, and global supply chain delays, all of which could potentially impact the Company’s ability to conduct its critical drug development and regulatory compliance activities. The Company cannot predict the specific extent, duration, or full impact that the

COVID-19

outbreak will have on its consolidated financial condition and operations. The impact of the

COVID-19

coronavirus outbreak on the financial performance of the Company will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. These developments and the impact of

COVID-19

on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be adversely affected.

Research and Development Expenses

Research and development expenses consist of costs incurred in identifying, developing, and testing product candidates. These expenses consist primarily of costs for research and development personnel, including related stock-based compensation; contract research organizations (CRO) and other third parties that assist in managing, monitoring, and analyzing clinical trials; investigator and site fees; laboratory services; consultants; contract manufacturing services;

non-clinical

studies, including materials; and allocated expenses, such as depreciation of assets, and facilities and information technology that support research and development activities. Research and development costs are expensed as incurred, including expenses that may or may not be reimbursed under research and development funding arrangements. Payments made prior to the receipt of goods or services to be used in research and development are recorded as prepaid assets until the goods are received or services are rendered. Such payments are evaluated for current or long-term classification based on when they will be realized. Additionally, if expectations change such that the Company does not expect goods to be delivered or services to be rendered, such prepayments are charged to expense.

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The Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts expended pursuant to contracts with multiple CROs and manufacturing vendors that conduct and manage these activities on its behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical trial milestones. In amortizing or accruing service fees, the Company estimates the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly. To date, there have been no material differences from the Company’s estimates to the amounts actually incurred.

Development Financing Agreement

The Company accounts for the Financing Agreement (see Note 4) as a debt instrument. Accordingly, the Company has recorded payments received under the Financing Agreement as part of a development financing liability in the Company’s consolidated balance sheet. The liability is recorded at amortized cost and accreted to the contractual success fee amounts based on the estimated timing of regulatory approval and attainment of certain sales milestones using an imputed interest rate. Certain transaction fees incurred specifically to complete the Financing Agreement were capitalized and recorded as a reduction to the carrying amount of the development financing liability and are being amortized to interest expense using the effective interest rate method.

There are several factors that could affect the estimated timing of regulatory approval and attainment of sales milestones, some of which are not entirely within the Company’s control. Therefore, the Company periodically reassesses the estimated timing of regulatory approval and attainment of sales milestones, and the expected contractual success fee payments due therefrom. If the timing and/or amount of such expected payments is materially different than original estimates, the Company will prospectively adjust the accretion of the development financing liability and the imputed interest rate.

The Company identified certain contingent repayment features in the Financing Agreement that are required to be bifurcated from the debt host instrument as embedded derivative liabilities; however, the Company determined the fair value of these features, both individually and in the aggregate, was immaterial at inception and as of March 31, 2022. The fair value of these features will be assessed at each reporting date and will be marked to market, if material. To determine the amount to record for the embedded derivative liabilities, the Company must assess the probability of occurrence of various potential future events that could affect the timing and/or amount of future cash flows related to the Financing Agreement.

Stock-Based Compensation

Stock-based compensation is measured at fair value on the grant date of the award. Compensation cost is recognized as expense on a straight-line basis over the vesting period for options with service conditions, and forfeitures are accounted for as they occur. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards. The determination of fair value for stock-based awards using an option-pricing model requires management to make certain assumptions regarding subjective input variables such as expected term, dividends, volatility and risk-free rate. If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s results of operations.

Recently Issued Accounting Pronouncements

ASU

2020-06

In August 2020, the FASB issued ASU

2020-06,

Debt—

Debt with Conversion and Other Options (Subtopic

470-20)

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

, which amends the guidance for accounting for certain financial instruments with characteristics of liabilities and equity. The new guidance simplifies aspects of the accounting for convertible debt instruments and convertible preferred stock by limiting the number of accounting models, which results in fewer embedded conversion features being separately recognized from the host contract as compared with previous GAAP. The guidance is effective for the Company beginning January 1, 2024, and early adoption is permitted. The Company is currently assessing the impact of this standard on its condensed consolidated financial statements and related disclosures.

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ASU

2016-13

In June 2016, the FASB issued ASU

No. 2016-13,

Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

, an amendment which modifies the measurement and recognition of credit losses for most financial assets and certain other instruments. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to

available-for-sale

debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. In November 2019, FASB issued ASU

No. 2019-10,

Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which deferred the adoption deadline for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, and entities are required to use a modified retrospective approach, with certain exceptions. The Company is currently assessing this standard and does not anticipate a material impact to its condensed consolidated financial statements and related disclosures.

3. Other Accrued Liabilities

Other accrued liabilities consist of (in thousands):


	March 31, 2022		December 31, 2021
Accrued compensation	$	2,081	$	3,986
Accrued professional fees and other		1,510		1,333
Current portion of operating lease liability		590		567

Total other accrued liabilities	$	4,181	$	5,886

4. Development Financing Agreement

On July 30, 2021 (the Effective Date), the Company entered into a Development Financing Agreement (the Financing Agreement) with Abingworth to provide funding to the Company to support its development of seladelpar for the treatment of primary biliary cholangitis (PBC). The Financing Agreement provides the Company up to $100.0 million in funding, of which $25.0 million was provided in August 2021, $25.0 million was provided in November 2021, and $25.0 million was provided in January 2022. The Company has an option to receive an additional $25 million (the Optional Funding) within approximately two months of enrollment completion of the Company’s Phase 3 RESPONSE clinical trial. The Optional Funding is subject to certain customary funding conditions. The use of proceeds from the funding is limited to PBC “Development Program” costs incurred or paid as defined in the Financing Agreement. In return, the Company will pay to Abingworth:

(1) contingent upon the first to occur of regulatory approval of seladelpar for the treatment of PBC in the U.S., U.K., Germany, Spain, Italy or France (Regulatory Approval), fixed success payments equal to 2.0x of the funding provided, consisting of $10 million payable in 90 days after the Regulatory Approval and thereafter, payments due on the first six anniversaries of the Regulatory Approval in the amounts of $15.0 million, $22.5 million, $22.5 million, $25.0 million, $27.5 million and $27.5 million, respectively (or if the Optional Funding is provided, 133% of such payments) and

(2) variable success payments equal to 1.1x of the funding provided, consisting of sales milestone payments of (x) $17.5 million and $27.5 million, respectively (or if the Optional Funding is provided, 133% of such payments) upon first reaching certain cumulative U.S. product sales thresholds, and (y) $37.5 million (or if the Optional Funding is provided, 133% of such payment) upon first reaching a specified U.S. product sales run rate.

Promptly following receipt of Regulatory Approval, the Company is required to execute a note agreement and deliver a promissory note to Abingworth within two business days to convert the fixed and variable success payments into a note payable. At the time that Abingworth receives, collectively, an aggregate of 3.1x of the funding provided (approximately $232.5 million (or $310.0 million if the Optional Funding is provided)), the Company’s payment obligations under the Financing Agreement will be fully satisfied. The Company has the option to satisfy its payment obligations to Abingworth upon Regulatory Approval, or a change of control of the Company, by paying an amount equal to the remaining payments payable to Abingworth subject to a

mid-single-digit

discount rate. Upon a change of control of the Company, an acceleration payment of 1.35x of the funding provided is payable, net of payments already made to Abingworth and creditable against future payments to Abingworth.

Pursuant to the Financing Agreement, the Company granted Abingworth a security interest in all its assets (other than intellectual property not related to seladelpar), provided that the Company is permitted to incur certain indebtedness. The security interest will terminate when the Company has paid Abingworth 2.0x of the funding provided or upon certain terminations of the

Financing Agreement.

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The Financing Agreement provides for negative, affirmative and additional covenants, which the Company must comply with for the duration of the Financing Agreement term. As of March 31, 2022, the Company was in compliance with all covenants stipulated in the Financing Agreement.

In certain instances, upon the termination of the Financing Agreement, the Company will be obligated to pay Abingworth a multiple of the amounts paid to the Company under the Financing Agreement, including specifically:

(i) 310% of such amounts in the event that Abingworth terminates the Financing Agreement due to (x) a Fundamental Breach, as defined in the Financing Agreement, (y) the bankruptcy of the Company, or (z) a safety concern resulting from gross negligence on the part of the Company or due to a safety concern that was material on the Effective Date and the material data showing such safety concern was not publicly known, disclosed to Abingworth, or in the diligence room made available to Abingworth,

(ii) 200% of such amounts in the event the Financing Agreement is terminated due to (x) Material Breach, as defined in the Financing Agreement, by the Company or (y) the security interests of Abingworth being invalidated or terminated other than as set forth in the Financing Agreement, and

(iii) 100% of such amounts in the event of certain irresolvable disagreements within the executive review committee overseeing the Company’s development of seladelpar.

In addition, if, following certain terminations, the Company continues to develop seladelpar for the treatment of PBC and obtains regulatory approval, it will make the payments to Abingworth as if the Financing Agreement had not been terminated, less any payments made upon termination.

The Company shall not be obligated to make any payments to Abingworth under certain instances of technical or regulatory failure of the PBC development program as defined in the Financing Agreement.

As part of the arrangement, an executive review committee was established between the Company and Abingworth to discuss the Company’s development of seladelpar.

The Company evaluated the Financing Agreement and determined it to be a research and development funding arrangement with the characteristics of a debt instrument as the transfer of financial risk to Abingworth was not considered substantive and genuine. Accordingly, the Company has recorded payments received under the Financing Agreement as part of a development financing liability in its condensed consolidated balance sheets. The Company accounts for the overall development financing liability at amortized cost based on the estimated timing of regulatory approval and attainment of certain sales milestones and the contractual success fee payments expected to be due therefrom, as discounted using an imputed interest rate. The development financing liability will be accreted as interest expense to its expected future repayment amount over the expected life of the agreement using the effective interest rate method. Certain legal and financial advisory fees incurred specifically to complete the Financing Agreement were capitalized and recorded as a reduction to the carrying amount of the development financing liability and will also be amortized to interest expense using the effective interest method.

The Company identified certain contingent repayment features in the agreement that are required to be bifurcated from the debt host instrument as embedded derivative liabilities; however, the fair value of these features was immaterial at the Effective Date and as of March 31, 2022. The fair value of the embedded derivative liabilities will be assessed at subsequent reporting dates if material.

As of March 31, 2022, the development financing liability was classified as a long-term liability as the Company expects the related repayments to take place between 2024 and 2030 for purposes of the model used to calculate its carrying value. The imputed interest rate on the unamortized portion of the development financing liability was approximately 19% as of March 31, 2022.

5. Stockholders’ Equity

Preferred and Common Stock Authorized

The Company is authorized to issue 10,000,000 shares of preferred stock and 200,000,000 shares of common stock as of March 31, 2022 and December 31, 2021.

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Sale of Common Stock and Prefunded Warrants

Pursuant to the Company’s public equity offering completed in November 2021, the Company issued

pre-funded

warrants to purchase 3,125,000 shares of common stock at a price of $3.9999 per share. These

pre-funded

warrants have an exercise price of $0.0001 per share, were fully exercisable upon issuance, and have no expiration date. A holder will not be entitled to exercise any portion of any

pre-funded

warrant if the holder’s ownership of the Company’s common stock would exceed 4.99% to 14.99% following such exercise. The Company determined that the

pre-funded

warrants should be equity classified because they are freestanding financial instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of shares of common stock upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. In addition, such

pre-funded

warrants do not provide any guarantee of value or return. Accordingly, the proceeds from the issuance of the warrants were recorded as additional

paid-in

capital on the Company’s condensed consolidated balance sheet as of March 31, 2022.

None of the

pre-funded

warrants were exercised since they were issued in November 2021, and therefore remain outstanding as of March 31, 2022.

At-the-Market

(ATM) Facility

In July 2020, the Company filed a $200.0 million registration statement on Form

S-3

with the SEC and entered into an

at-the-market

facility (ATM) to sell up to $75.0 million of common stock under the registration statement. To date, the Company has not sold any shares of common stock under the ATM.

6. Net Loss Per Common Share

Basic net loss per share of common stock is based on the weighted-average number of shares of common stock equivalents outstanding during the period. 3,125,000

pre-funded

warrants to purchase common stock were included in the weighted-average common stock share equivalents outstanding for the three months ended March 31, 2022.

In all periods presented, the Company’s outstanding stock options were excluded from the calculation of net loss per share because their effect would be antidilutive. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share amounts):


	Three Months Ended March 31,
	2022			2021
Numerator:
Net loss	$	(27,769	)	$	(17,551	)
Denominator:
Weighted average number of:
Common stock shares outstanding		84,677,939			68,946,092
Pre-funded warrants outstanding		3,125,000			—
Total		87,802,939			68,946,092
Net loss per share	$	(0.32	)	$	(0.25	)

The following table shows the total outstanding securities considered anti-dilutive and therefore excluded from the computation of net loss per share (in thousands):


	Three Months Ended March 31,
	2022		2021
Common stock options		14,180		10,052
Incentive awards		101		101

Total		14,281		10,153

7. Stock Plans and Stock-Based Compensation

Stock Plans

As of March 31, 2022, there were 2,433,522 shares available for future grants under the Company’s 2013 Equity Incentive Plan and no shares available for grant under the Company’s 2020 New Hire Plan. On January 1, 2022, in accordance with the annual share increase provision in the 2013 Plan, the Company added 4,233,896 shares to the 2013 Plan share reserve. During the three months ended March 31, 2022, the Company granted 3,479,668 stock options, which primarily related to its option grants issued to employees and directors.

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Stock-Based Compensation Expense

Stock-based compensation expense is included in the condensed consolidated statements of operations and comprehensive loss and is as follows (in thousands):


	Three Months Ended March 31,
	2022		2021
Research and development	$	1,098	$	1,077
General and administrative		1,316		1,428

Total stock-based compensation expense	$	2,414	$	2,505

8. Commitments and Contingencies

Genfit Litigation

On January 15, 2021, Genfit S.A. (Genfit) filed a complaint against the Company in the U.S. District Court for the Northern District of California, alleging misappropriation of trade secrets and related causes of action based on the Company’s receipt of a Genfit protocol synopsis for Genfit’s Phase 3 clinical trial of its drug candidate elafibranor in patients with primary biliary cholangitis. An Amended Complaint was filed on April 16, 2021 with substantially the same allegations. Genfit seeks damages in an unspecified amount as well as injunctive relief. On March 12, 2021, the Court granted a Temporary Restraining Order (later converted to a Preliminary Injunction), prohibiting the Company from accessing or disseminating the protocol synopsis, using any Genfit trade secrets contained therein or destroying any evidence related thereto. The Company filed a Motion to Dismiss the Amended Complaint that was granted on September 9, 2021, with leave to amend. Genfit filed a Second Amended Complaint on October 15, 2021 with substantially the same allegations and claims for relief as in the original complaint. The Company filed a Motion to Dismiss most of the Second Amended Complaint that was granted on January 21, 2022, without further leave to amend. What remains in the complaint is an alleged misappropriation of the protocol synopsis as a whole. The Company filed its Answer to what remained of the Second Amended Complaint on February 4, 2022. The Company intends to defend itself vigorously. While the outcome of any litigation is inherently uncertain, based on currently available information, management does not currently believe a loss associated with this matter is probable, nor is any amount reasonably estimable, and accordingly no amounts have been recorded or disclosed.

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Item 2.

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

Operating results for the three months ended March 31, 2022 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

This Quarterly Report on

Form 10-Q

contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, that involve risks and uncertainties. Words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “potential,” “seek,” “target,” “goal,” “intend,” variations of such words, and similar expressions are intended to identify forward-looking statements. These statements appear throughout this Quarterly Report on

Form 10-Q

and are statements regarding our current expectation, belief, or intent, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to, statements regarding our expectations with respect to the following: our business and scientific strategies; the progress of our product development programs, including whether we may resume clinical testing, and the timing of results thereof; regulatory submissions and approvals; the impact of the

COVID-19

pandemic on our company and operations; our drug discovery technologies; our research and development expenses; protection of our intellectual property; sufficiency of our cash and capital resources and the need for additional capital; and our operations and legal risks. You should not place undue reliance on these forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements for many reasons. Factors that might cause such a difference include those discussed under the caption “Risk Factors” and elsewhere in this Quarterly Report on Form

10-Q.

These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this Quarterly Report.

Overview

CymaBay Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need.

Our lead product candidate, seladelpar, is a potent and selective agonist of peroxisome proliferator activated receptor delta (PPAR

), a nuclear receptor that regulates genes directly or indirectly involved in the synthesis of bile acids/sterols, metabolism of lipids and glucose, inflammation, and fibrosis. We have been focused on developing seladelpar for the treatment of primary biliary cholangitis (PBC), an autoimmune disease that causes progressive destruction of the bile ducts in the liver resulting in impaired bile flow (cholestasis) and inflammation.

Seladelpar—Primary Biliary Cholangitis (PBC)

In late 2020, we commenced startup and site feasibility activities for RESPONSE, a new global Phase 3 registration study to evaluate seladelpar in patients with PBC. The RESPONSE trial is actively recruiting and enrolling patients.

In addition to RESPONSE, we also commenced startup activities in late 2020 for ASSURE, a new long-term safety study, which is open to patients who were eligible for our previous long-term extension study that was terminated early in late 2019, including those patients from our previously completed Phase 2 open label study and our Phase 3 ENHANCE study, as well as patients who complete treatment in RESPONSE in the future. The ASSURE trial is actively enrolling patients.

MBX-2982

targets G protein-coupled receptor 119 (GPR119), a receptor that interacts with bioactive lipids known to stimulate glucose-dependent insulin secretion. In November 2020, we announced a study to evaluate the potential for

MBX-2982

to stimulate the release of the hormone glucagon in response to hypoglycemia in patients with type 1 diabetes (T1D). The Phase 2a

proof-of-pharmacology

study will assess whether

MBX-2982

can enhance glucagon secretion during insulin-induced hypoglycemia in subjects with T1D. The study is actively enrolling patients. If successful, studies to evaluate

MBX-2982

as a potential preventive therapy for hypoglycemia in patients with T1D may be warranted. The study is being led by the AdventHealth Translational Research Institute in Orlando, Florida and is fully funded by The Leona M. and Harry B. Helmsley Charitable Trust. CymaBay retains full commercial rights to

MBX-2982.

We believe

MBX-2982

may also have utility in various inflammatory diseases and we are currently exploring potential opportunities to advance development.

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CB-0406

In 2020 we began to evaluate

CB-0406,

the active metabolite of arhalofenate, a

pro-drug

previously studied for chronic metabolic diseases, in a single and multiple ascending dose study in healthy subjects to establish its pharmacokinetics, safety and maximum tolerated dose. While the study showed

CB-0406

had improved pharmacokinetics versus arhalofenate,

CB-0406’s

safety profile did not support continued development as a result of the occurrence of a small number of reversible cases of thrombocytopenia at higher doses. Therefore, in

mid-2021

we discontinued development of

CB-0406.

COVID-19

Pandemic

As a result of the

COVID-19

pandemic, we have experienced and may continue to experience disruptions that could impact aspects of our business, including our progress towards the initiation and completion of certain clinical trials, and other associated drug development activities. The emergence of

COVID-19

variants, such as the Delta, and Omicron variants, have further disrupted, and may continue to disrupt, aspects of our business, in particular in regard to the initiation and operation of clinical trial sites in portions of the United States, in the U.K. and in Europe. Possible future disruptions are currently difficult to foresee. We continue to monitor areas of potential risk which include, but are not limited to, the following:

•

Clinical trial and drug manufacturing operations—In collaboration with our clinical research organization partners, we sponsor clinical trials that take place at investigator sites in the U.S. and internationally. We also partner with contract manufacturing organizations to develop, manufacture, and distribute our product candidate drug supplies. To date, these collective research and development personnel and vendors have adapted to

COVID-19

related travel restrictions and reduced access to work facilities through the use of remote working technologies and other measures as they continue to progress toward completion of our clinical trials. However, as we continue to enroll clinical trials and look to complete the clinical development of seladelpar and initiate other programs, our research and development employees and contractors who support our clinical activities may not be able to sufficiently access their applicable work facilities as a result of continued facility closure orders and the possibility that governmental authorities might further modify such restrictions. Furthermore, although we and our contractors continue to plan for and develop pandemic-related risk mitigation strategies, it is uncertain whether these plans will continue to be sufficient to fully offset the potential impact

COVID-19,

including the emergence of new

COVID-19

variants, travel restrictions and/or facility access restrictions (or other unanticipated impediments) may have on our ability to execute our development activities in a timely and cost-effective manner.

•

Drug regulator interactions—The FDA and comparable foreign regulatory agencies may experience operational interruptions or delays, which could impact timelines for regulatory meetings, submissions, trial initiations, and regulatory approvals. For example,

COVID-19

related regulatory submission issues have created an impediment to clinical site activation in the U.K.

•

Financial reporting and compliance—To date, there has been no adverse impact on our ability to maintain our established financial reporting functions and internal controls over financial reporting. However, our ability to prepare our financial results timely and accurately is partially dependent upon the availability of third-party information systems and other cloud-based services.

•

Remote workforce operations—To date, our workforce has adapted to remotely working to maintain operations. Our operations are currently in a hybrid model with most employees working from our office for a portion of the week and working remotely for the rest of the week. Our continued use of partially-remote operations, however, could increase our cyber-security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations, or delay necessary interactions with regulators, contract manufacturers, contract research organizations, clinical trial sites, and other important agencies and contractors, which may result in increased costs to us.

Overall, we cannot at this time predict the specific extent, duration, or full impact that the continuing

COVID-19

pandemic will have on our future consolidated financial condition and operations. The impact of the

COVID-19

pandemic on our consolidated financial performance will depend on future developments, including emergence of

COVID-19

variants, such as the Delta and Omicron variants, the duration and spread of the pandemic and related governmental advisories and restrictions, which could result in unexpected costs to us. These developments and the impact of

COVID-19

on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other factors which we believe to be materially reasonable under the circumstances, the results of which form our basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources, and evaluate our estimates on an ongoing basis. Actual results may materially differ from those estimates under different assumptions or conditions.

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There have been no changes to our critical accounting policies since we filed our Annual Report on Form

10-K

for the year ended December 31, 2021 with the SEC on March 17, 2022. For a description of our critical accounting policies and estimates, please refer to our Annual Report on Form

10-K.

Recent Accounting Pronouncements

Refer to

Note 2—Summary of Significant Accounting Policies

in the notes to our unaudited interim condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form

10-Q,

for a discussion of recent accounting pronouncements.

Results of Operations

General

To date, we have not generated any income from operations. As of March 31, 2022, we have an accumulated deficit of $794.6 million, primarily as a result of expenditures for research and development and general and administrative expenses from inception to that date. All of our product candidates are at various stages of development and will require additional work and regulatory approval before they can be licensed or commercialized. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate sufficient revenue to achieve and sustain profitability. Until we can generate sufficient product revenue, which we may never do, we will need to finance future cash needs through potential collaborative, partnering or other strategic arrangements, as well as through equity offerings, debt financings or a combination of the foregoing.

Operating Results

Our results of operations for the three months ended March 31, 2022 and 2021 are presented below (in thousands):


	Three Months Ended March 31,						Change Q1
	2022			2021			2022 vs. 2021
($ in thousands)
Operating expenses:
Research and development	$	18,415		$	12,382		$	6,033
General and administrative		6,087			5,236			851

Total operating expenses		24,502			17,618			6,884

Loss from operations		(24,502	)		(17,618	)		(6,884	)
Other income (expense), net:
Interest income		98			67			31
Interest expense		(3,365	)		—			(3,365	)

Total other income (expense), net		(3,267	)		67			(3,334	)

Net loss	$	(27,769	)	$	(17,551	)	$	(10,218)

Research & Development Expenses

Conducting research and development is central to our business model. Research and development expenses increased $6.0 million to $18.4 million from $12.4 million for the three months ended March 31, 2022 and 2021, respectively. This increase was largely due to activities associated with the development of seladelpar focusing primarily on our late-stage PBC program. We expect that our research and development expenses will continue to increase in the future due to costs associated with our ongoing late-stage development of seladelpar.

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Research and development expenses are detailed further in the table below (in thousands):


	Three Months Ended March 31,				Change Q1
	2022		2021		2022 vs. 2021
Project costs:
Seladelpar PBC clinical studies	$	9,273	$	5,903	$	3,370
Seladelpar drug manufacturing & development		2,256		754		1,502
Seladelpar and non-seladelpar other studies		100		1,095		(995	)

Total project costs		11,629		7,752		3,877
Internal research and development costs		6,786		4,630		2,156

Total research and development	$	18,415	$	12,382	$	6,033

Our project costs consist primarily of:

•

expenses incurred under agreements with contract research organizations, investigative sites and consultants that conduct our clinical trials and a substantial portion of our preclinical activities;

•

the cost of acquiring and manufacturing clinical trial and other materials; and

•

other costs associated with development activities, including additional studies.

Internal research and development costs consist primarily of salaries and related fringe benefits costs for our employees (such as workers’ compensation and health insurance premiums), stock-based compensation charges, travel costs, and overhead expenses. Internal costs generally benefit multiple projects and are not separately tracked per project.

Comparison of the three months ended March 31, 2022 and 2021

Total project costs increased by $3.9 million to $11.6 million from $7.8 million for the three months ended March 31, 2022 and 2021, respectively. Project costs for the three months ended March 31, 2022 and 2021 primarily consisted of seladelpar-related clinical trial expenses for PBC. These cost increases were primarily driven by an expansion of our site activation, patient enrollment efforts, and other clinical trial activities. Internal research and development costs increased by $2.2 million to $6.8 million from $4.6 million for the three months ended March 31, 2022 and 2021, respectively, primarily due to higher employee compensation incurred in the first three months of 2022 as compared to the first quarter of 2021 as we continued to hire additional research and development personnel to support our clinical studies. As we continue to progress late-stage development of seladelpar in PBC as well as development activities associated with other product candidates, we expect both total project and internal costs to increase in the future.

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs, professional fees for legal, consulting, and accounting services, rent, and other general operating expenses not otherwise included in research and development.

Comparison of the three months ended March 31, 2022 and 2021

General and administrative expenses increased by $0.9 million to $6.1 million from $5.2 million for the three months ended March 31, 2022 and 2021, respectively. The increase was driven primarily by an increase in headcount in general and administrative personnel in the three months ended March 31, 2022. We expect general and administrative expenses to increase in the future as we continue to add administrative personnel and expand our infrastructure in support of our drug development activities.

Other Income (Expense), Net

Interest income remained flat at $0.1 million earned on our investments compared to the three months ended March 31, 2022 and 2021.

Interest expense is related to the accretion of the development financing liability recorded in connection with the July 2021 Abingworth Development Financing Agreement using the effective interest method, and totaled $3.4 million for the three months ended March 31, 2022. No interest expense was incurred for the three months ended March 31, 2021.

Liquidity and Capital Resources

We have financed our operations primarily through the sale of equity securities, licensing fees, issuance of debt and collaborations with third parties. At March 31, 2022, cash, cash equivalents and marketable securities totaled $193.4 million, compared to $194.6 million at December 31, 2021.

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Development Financing

On July 30, 2021, (the Effective Date) we entered into a Development Financing Agreement (the Financing Agreement) with Abingworth to obtain funding to support our development of seladelpar for the treatment of PBC. The Financing Agreement provides us up to $100.0 million in funding, of which $25 million was received in August 2021, $25 million was received in November 2021 and $25 million was received in January 2022. We also have an option to draw an additional $25 million (the Optional Funding) within approximately two months of the completion of enrollment of our Phase 3 RESPONSE clinical trial. The Optional Funding is subject to certain customary funding conditions. In return, we will pay to Abingworth fixed and variable success payments, as further described in Note 4—Development Financing Agreement in the notes to our consolidated financial statements.

At-the-Market

(ATM) Facility

In July 2020, we filed a $200.0 million registration statement on Form

S-3

with the SEC and entered into an

at-the-market

facility (ATM) to sell up to $75.0 million of common stock under the registration statement. To date, we have not sold any shares of common stock under the ATM.

Cash Flows

The following table sets forth a summary of the net cash flow activity for each of the periods indicated below (in thousands):


	Three Months Ended March 31,
	2022			2021
Net cash used in operating activities	$	(25,362	)	$	(20,561	)
Net cash (used in) provided by investing activities		(50,990	)		35,694
Net cash provided by financing activities		24,541			—

Net (decrease) increase in cash and cash equivalents	$	(51,811	)	$	15,133

Operating Activities

: Net cash used in operating activities for the three months ended March 31, 2022 increased by $4.8 million to $25.4 million as compared to $20.6 million for the same period in the prior year, primarily due to an increase in our net loss to $27.8 million from $17.6 million in the prior year period due to the expansion of late-stage clinical trial activities related to the seladelpar development program. In addition, cash was used to fund changes in our working capital.

Investing Activities:

Net cash used in investing activities was $51.0 million for the three months ended March 31, 2022, compared to $35.7 million provided by investing activities for the same period in the prior year, primarily due to the timing of our investments in marketable securities and portfolio risk management.

Financing Activities:

Net cash provided by financing activities was $24.5 million for the three months ended March 31, 2022, which consisted of a $25.0 million funding payment received from Abingworth under the Development Financing Agreement, which was partially offset by $0.5 million of issuance costs paid for the issuance of common stock from the November 2021 equity financing.

Capital Requirements

We have incurred operating losses since inception and had an accumulated deficit of $794.6 million at March 31, 2022. As of March 31, 2022, we had cash, cash equivalents and marketable securities of approximately $193.4 million, which we believe is sufficient, together with committed capital, to fund our current operating plan through 2023.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we continue product development for seladelpar. Since product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, we expect that our research and development expenses will increase in the future. We will therefore continue to require additional financing to develop our products and fund future operating losses and will seek funds through equity financings, debt, collaborative or other arrangements with corporate sources, or through other sources of financing. It is unclear if or when any such financing transactions will occur, on satisfactory terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If adequate funds are not available to us, it could have a material adverse effect on our business, results of operations, and financial condition.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable to Smaller Reporting Companies.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation as of March 31, 2022 under the supervision and with the participation of our management, including our President and Chief Executive Officer and Vice President, Finance, of the effectiveness of our “disclosure controls and procedures,” which are defined in Rule

13a-15(e)

under the Securities Exchange Act of 1934, as amended (the Exchange Act), as controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and Vice President, Finance, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our President and Chief Executive Officer and Vice President, Finance concluded that our disclosure controls and procedures were effective as of March 31, 2022.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our President and Chief Executive Officer and Vice President, Finance have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the

COVID-19

pandemic. We are continually monitoring and assessing the

COVID-19

situation on our internal controls to minimize the impact on their design and operating effectiveness.

Table of Contents

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

On January 15, 2021, Genfit S.A. (Genfit) filed a complaint against us in the U.S. District Court for the Northern District of California, alleging misappropriation of trade secrets and related causes of action based on our receipt of a Genfit protocol synopsis for Genfit’s Phase 3 clinical trial of its drug candidate elafibranor in patients with primary biliary cholangitis. An Amended Complaint was filed on April 16, 2021 with substantially the same allegations. Genfit seeks damages in an unspecified amount as well as injunctive relief. We have stated in pleadings that we did not request or take any steps to obtain Genfit’s protocol synopsis, have taken diligent steps to remove and quarantine it, and are not using any Genfit trade secrets in our clinical trials. On March 12, 2021, the court granted a Temporary Restraining Order (later converted to a Preliminary Injunction), prohibiting us from accessing or disseminating the protocol synopsis, using any Genfit trade secrets contained therein or destroying any evidence related thereto. We filed a Motion to Dismiss the Amended Complaint that was granted on September 9, 2021,

SEC Form 10-Q filed by CymaBay Therapeutics Inc.