The following discussion and analysis of our financial condition and results of
operations should be read together with our financial statements and the other
financial information appearing elsewhere in this Quarterly Report on Form 10-Q.
These statements generally relate to future events or to our future financial
performance and involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. The following discussion and analysis
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Our actual results and the timing of events may
differ materially from those discussed in our forward-looking statements as a
result of various factors, including those discussed below and those discussed
in the section entitled "Risk Factors" included in this Quarterly Report on Form
10-
Forward-looking statements include, but are not limited to, statements about:
•
risks related to the COVID-19 pandemic;
•
our plans and ability to manufacture, or have manufactured, sufficient quantities of lirentelimab for preclinical studies and to conduct clinical trials and to eventually commercialize the product, and our reliance on third parties in relation to the foregoing;
•
the impact that the adoption of new accounting pronouncements will have on our financial statements;
•
the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
•
the timing and focus of our future clinical trials, and the reporting of data from those trials;
•
our plans relating to commercializing lirentelimab, if approved, including the geographic areas of focus and sales strategy;
•
the size of the market opportunity for lirentelimab in each of the diseases we are targeting;
•
the number of diseases represented in the patient population enrolled in our clinical trials, and our ability to evaluate response to treatment of lirentelimab in diseases other than the primary indication in our clinical trials;
•
our estimates of the number of patients in
•
the beneficial characteristics, safety, efficacy and therapeutic effects of lirentelimab;
•
the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for lirentelimab or our other product candidates for various diseases;
•
our ability to obtain and maintain regulatory approval of lirentelimab or our other product candidates;
•
our plans relating to the further development of lirentelimab and our other product candidates;
•
existing regulations and regulatory developments in
•
our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;
•
our continued reliance on third-parties to conduct additional clinical trials of lirentelimab and our other product candidates;
•
the need to hire additional personnel and our ability to attract and retain such personnel;
•
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
•
our financial performance;
•
the sufficiency of our existing cash, cash equivalents and investments to fund our future operating expenses and capital expenditure requirements; and
•
our anticipated uses of our existing cash, cash equivalents and investments.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including, but not limited to, those described in "Risk Factors". In some cases, you can identify these statements by terms such as "anticipate," "believe,"
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"could," "estimate," "expects," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report on Form 10-Q and are subject to risks and uncertainties. We discuss many of these risks in greater detail in the section entitled "Risk Factors" included in Part II, Item 1A and elsewhere in this Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We are a clinical stage biotechnology company developing therapeutics which target immunomodulatory receptors present on immune effector cells involved in allergy, inflammatory and proliferative diseases. Our most advanced antibodies are lirentelimab (AK002) and AK006. Lirentelimab targets Siglec-8, an inhibitory receptor expressed selectively on eosinophils and mast cells. Lirentelimab has been studied in a number of human clinical studies and has shown the ability to deplete eosinophils inhibit mast cell activation, and improve patient reported symptoms. We are developing lirentelimab for the treatment of eosinophilic gastritis ("EG") /eosinophilic duodenitis ("EoD"), eosinophilic esophagitis ("EoE"), atopic dermatitis, chronic spontaneous urticaria and potentially additional indications. AK006 targets Siglec-6, an inhibitory receptor selectively expressed on mast cells. AK006 appears to have the potential to provide deeper mast cell inhibition than lirentelimab and, in addition to its inhibitory activity, reduce mast cell numbers. We plan to begin human studies with AK006 in the first half of 2023.
Lirentelimab selectively targets both mast cells and eosinophils, two types of
white blood cells that are widely distributed in the body and play a central
role in the inflammatory response. Inappropriately activated mast cells and
eosinophils have been identified as key drivers in a number of severe diseases
affecting the gastrointestinal tract, eyes, skin, lungs and other organs. To
date, we have completed a randomized, double-blind, placebo-controlled Phase 2
study (ENIGMA 1) and Phase 3 study (ENIGMA 2) of lirentelimab in patients with
EG and/or EoD, a Phase 2/3 study in patients with EoE (KRYPTOS), as well as
proof of concept studies in chronic spontaneous urticaria, severe allergic
conjunctivitis, and indolent systemic mastocytosis. Lirentelimab has received
orphan disease status for EG, EoD, and EoE from the
The Phase 2 EG and/or EoD study with lirentelimab (ENIGMA 1) met all
prespecified primary and secondary endpoints when compared to placebo and
results were published in
Beyond EoE, EG and EoD, additional lirentelimab clinical testing is ongoing or
planned.
Since our inception in 2012, we have devoted substantially all of our resources and efforts towards the research and development of our product candidates. Our lead product candidate, lirentelimab, a monoclonal antibody targeting Siglec-8, entered clinical trials in 2016. In addition to activities conducted internally at our facilities, we have utilized significant financial resources to engage contractors, consultants and other third parties to conduct various preclinical and clinical development activities on our behalf.
To date, we have not had any products approved for sale and have not generated any revenue nor been profitable. Further, we do not expect to generate revenue from product sales until such time, if ever, that we are able to successfully complete the development and obtain marketing approval for one of our product candidates. We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We have incurred significant operating losses to date and expect to incur
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significant operating losses for the foreseeable future. Our net losses were
In
As of
Vendor Termination Agreement
Approximately
As the agreement was terminated on
In addition,
Reorganization Plan
Under the Reorganization Plan, we reduced our workforce by approximately 35%.
Impacted employees received notice that their positions will be eliminated on
In connection with the Reorganization Plan, we recognized restructuring charges
of approximately
In addition, the Board determined that it was in the best interests of us and
our stockholders to put in place arrangements designed to provide that we will
have the continued dedication and commitment of those employees, including
executives, determined to be key to the planned go-forward operations. The Board
approved, and management implemented, a retention program for employees
remaining which includes cash retention bonuses totaling
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Components of Operating Results
Revenue
We have not generated any revenue from product sales or otherwise, and do not expect to generate any revenue for at least the next several years.
Operating Expenses
We classify operating expenses into two categories: (i) research and development and (ii) general and administrative.
Research and Development Expenses
Research and development expenses represent the following costs incurred by us for the discovery, development and manufacturing of our product candidates:
•
consultant and personnel-related costs including consulting fees, employee salaries and benefits, travel and stock-based compensation expense;
•
costs incurred under service agreements with contract research organizations ("CROs") that conduct nonclinical research and development activities on our behalf;
•
costs incurred under service agreements with clinical CROs and clinical investigative sites to conduct our clinical studies;
•
costs incurred under service agreements with contract development and manufacturing organizations ("CDMOs") for the manufacture and fill finish of our product candidates, as well as any costs required to cancel any related purchase obligations;
•
costs related to in-house research and development activities conducted at our facilities including laboratory supplies, non-capital laboratory equipment and depreciation of capital laboratory equipment and leasehold improvements;
•
costs incurred under exclusive and non-exclusive license agreements with third-parties; and
•
allocated facility and other costs including the rent and maintenance of our facilities, insurance premiums, depreciation of shared-use leasehold improvements and general office supplies.
We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as clinical site activations, patient enrollment or information provided to us by our clinical CROs and clinical investigative sites, along with analysis by our in-house clinical operations personnel. Advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized as prepaid expenses, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
Prior to the regulatory approval of our product candidates, we recognize expenses incurred with our CDMOs for the manufacture of product candidates that could potentially be available to support future commercial sales, if approved, in the period in which they have occurred. To date, we have not yet capitalized any costs to inventory as we are unable to determine if these costs will provide a future economic benefit, given the unapproved nature of our product candidates.
The successful development of our product candidates is highly uncertain. Accordingly, it is difficult to estimate the nature, timing and extent of costs necessary to complete the remainder of the development of our product candidates. We are also unable to predict when, if ever, we will be able to generate revenue from our product candidates. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty surrounding:
•
demonstrating sufficient safety and tolerability profiles of product candidates;
•
successful enrollment and completion of clinical trials;
•
requisite clearance and approvals from applicable regulatory authorities;
•
establishing and maintaining commercial manufacturing capabilities with CDMOs;
•
obtaining and maintaining protection of intellectual property; and
•
commercializing product candidates, if and when approved, alone or in collaboration with third-parties.
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A change pertaining to any of these variables would significantly impact the timing and extent of costs incurred with respect to the development and commercialization of our product candidates.
External costs incurred from CDMOs, clinical CROs and clinical investigative sites have comprised a significant portion of our research and development expenses since inception. We track these costs on a program-by-program basis following the advancement of a product candidate into clinical development. Consulting and personnel-related costs, laboratory supplies and non-capital equipment utilized in the conduct of in-house research, in-licensing fees and general overhead, are not tracked on a program-by-program basis, nor are they allocated, as they commonly benefit multiple projects, including those still in our pipeline.
We anticipate that our research and development expenses will fluctuate from quarter-to-quarter in the future, primarily driven by the timing of costs associated with the manufacturing of our lead product candidate, lirentelimab, as we refine the frequency and increase the scale of our manufacturing batches, including raw material costs. Additionally, we expect costs to fluctuate from quarter-to-quarter associated with our ongoing and future early, mid and late-stage clinical trials for various indications.
General and Administrative Expenses
General and administrative expenses consist of fees paid to consultants, salaries, benefits and other personnel-related costs, including stock-based compensation, for our personnel in executive, finance, accounting and other administrative functions, legal costs, fees paid for accounting and tax services, costs associated with pre-commercialization activities and facility costs not otherwise included in research and development expenses. Legal costs include general corporate and patent legal fees and related costs.
We anticipate that our general and administrative expenses will fluctuate from
quarter-to-quarter in the future to support our continued research and
development activities, as well as progress on our preliminary commercial
development activities, including costs related to personnel, outside
consultants, attorneys and accountants, stock-based compensation, among others.
Additionally, we expect to incur costs associated with continuing to operate as
a public company, including expenses related to maintaining compliance with the
rules and regulations of the
Interest Income
Interest income primarily consists of interest and investment income earned on our cash, cash equivalents and investments included on the balance sheets.
Other Expense, Net
Other expense, net, primarily consists of amounts realized from gains and losses related to fluctuations in foreign currencies.
In-Licensing Agreements
We have entered into a number of exclusive and nonexclusive, royalty bearing license agreements with third-parties for certain intellectual property. Under the terms of the license agreements described below, we are obligated to pay milestone payments upon the achievement of specified clinical, regulatory and commercial milestones. Research and development expense associated with our milestone payments are recognized when such milestone has been achieved. Actual amounts due under the license agreements vary depending on factors including, but not limited to, the number of product candidates we develop and our ability to successfully develop and commercialize our product candidates covered under the respective agreements. In addition to milestone payments, we are also subject to future royalty payments based on sales of our product candidates covered under the agreements, as well as certain minimum annual royalty and commercial reservation fees. Because the achievement of milestones and the timing and extent of future royalties is not probable, these contingent amounts have not been included on our balance sheets or as part of Contractual Obligations and Commitments discussion below.
We did not incur any milestone expense for the three and six months ended
Exclusive License Agreement with The
In
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license agreement. In addition to milestone payments, we are also subject to low single-digit royalties to JHU based on future net sales of each licensed therapeutic product candidate by us and our affiliates and sublicensees, with up to a low six-digit dollar minimum annual royalty payment.
Non-exclusive License Agreement with
In
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with
On an ongoing basis, we evaluate our judgments and estimates in light of changes
in circumstances, facts and experience. During the three and six months ended
Recent Accounting Pronouncements
See Note 2 to our unaudited financial statements for recently issued accounting pronouncements, including the respective effective dates of adoption and effects on our results of operations and financial condition.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods indicated (in thousands): Three Months Ended June 30, 2022 2021 Operating expenses Research and development$ 34,448 $ 40,985 General and administrative 14,669 16,210 Total operating expenses 49,117 57,195 Loss from operations (49,117 ) (57,195 ) Interest income 104 103 Other expense, net (90 ) (117 ) Net loss (49,103 ) (57,209 ) Unrealized gain (loss) on investments 209 (56 ) Comprehensive loss$ (48,894 ) $ (57,265 )
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Interest Income
Interest income was
Other Expense, Net
Other expense, net was
Net Loss
Net loss was
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Comparison of the six months ended
The following table summarizes our results of operations for the periods indicated (in thousands): Six Months Ended June 30, 2022 2021 Operating expenses Research and development$ 211,255 $ 79,900 General and administrative 33,513 32,880 Total operating expenses 244,768 112,780 Loss from operations (244,768 ) (112,780 ) Interest income 187 233 Other expense, net (1,545 ) (220 ) Net loss (246,126 ) (112,767 ) Unrealized gain (loss) on investments (107 ) 24 Comprehensive loss$ (246,233 ) $ (112,743 )
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Interest Income
Interest income was
Other Expense, Net
Other expense, net was
Net Loss
Net loss was
Liquidity and Capital Resources
Sources of Liquidity
As of
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We are a clinical stage biotechnology company with a limited operating history. As a result of our significant research and development expenditures, we have generated net losses since our inception. We have financed our operations primarily through equity offerings.
On
In connection with the completion of the
On
On
Summary Cash Flows
Comparison of the six months ended
The following table summarizes the primary sources and uses of our cash, cash equivalents, and restricted cash for the periods indicated (in thousands):
Six Months Ended June 30, 2022 2021 Net cash used in operating activities$ (207,057 ) $ (96,041 ) Net cash provided by investing activities 135,471 87,237 Net cash provided by financing activities 413 5,583 Net increase in cash, cash equivalents and restricted cash$ (71,173 ) $ (3,221 )
Cash Used in Operating Activities
Net cash used in operating activities was
Net cash used in operating activities was
Cash Provided by Investing Activities
Net cash provided by investing activities was
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from the sale of property and equipment, partially offset by
Net cash provided by investing activities was
Cash Provided by Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
Funding Requirements
As of
The timing and amount of our capital expenditures will depend on many factors, including:
•
the number, scope, and timing of clinical indications and clinical trials we decide to pursue;
•
the scope and costs of manufacturing activities;
•
the extent to which we acquire or in-license other product candidates and technologies, if any;
•
the cost, timing and outcome of regulatory review of our product candidates;
•
the cost and timing of establishing sales and marketing capabilities for product candidates receiving marketing approval, if any;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates; and
•
the costs associated with being a public company.
If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development efforts. We may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.
The issuance of additional equity securities may cause our stockholders to experience dilution. Future equity or debt financings may contain terms that are not favorable to us or our stockholders including debt instruments imposing covenants that restrict our operations and limit our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation, licensing or asset sale transactions.
Contractual Obligations and Commitments
Our contractual obligations and commitments relate primarily to our operating leases and non-cancelable purchase obligations under agreements with various research and development organizations and suppliers in the ordinary course of business.
In the normal course of business, we enter into contracts with clinical CROs, clinical investigative sites and other counterparties assisting with our preclinical studies and clinical trials. Such contracts are generally cancellable, with varying provisions regarding termination. In the event of a contract being terminated, we would only be obligated for services received as of the effective date of the
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termination, along with cancellation fees, as applicable. Additionally, we have entered into agreements with certain vendors for the provision of goods and services, which includes development and manufacturing services with CDMOs. These agreements may include certain provisions for purchase obligations and termination obligations that could require payment for the cancellation of committed purchase obligations or for early termination of the agreements. The amounts of the cancellation or termination payments may vary and are based on the timing of the cancellation or termination and the specific terms of the agreements. We expect to enter into additional collaborative research, contract research, clinical and commercial manufacturing, and supplier agreements in the future, which may require significant upfront payments and long-term commitments of capital resources. Additionally, see Note 6, Leases, and Note 7, Contingencies, to our unaudited interim financial statements for further information relating to lease commitments, indemnification obligations and other commitments.
Off-Balance Sheet Arrangements
Since our inception, we have not entered into any off-balance sheet arrangements
as defined in the rules and regulations of the
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