APTINYX You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled "Risk Factors" included elsewhere in this Annual Report on Form 10-K.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel, proprietary, synthetic small molecules for the treatment of nervous system disorders. We have focused our efforts on targeting and modulating N-methyl-D-aspartate receptors, or NMDArs, which are vital to normal and effective function of the brain and nervous system. We believe leveraging the therapeutic advantages of the differentiated modulatory mechanism of our compounds could drive a paradigm shift in the treatment of disorders of the brain and nervous system.
Our lead compound, NYX-783 is in Phase 1 clinical development for the treatment
of opioid use disorder, or OUD. The development of NYX-783 in OUD is being
supported by a grant from the
Previously, we also sought to develop compounds for the treatment of post-traumatic stress disorder (NYX-783), cognitive impairment associated with Parkinson's disease and dementia with Lewy bodies (NYX-458) and chronic pain (NYX-2925).
In
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In
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Since our inception in
As of
We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, which we expect will take a number of years and the outcome of which is uncertain, or enter into collaborative agreements with third parties, the timing of which is largely beyond our control and may never occur. To fund our current and future operating plans, we will need additional capital, which we may obtain through one or more equity offerings, debt financings, or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed. The amount and timing of our future funding requirements will depend on many factors, including our ability to timely and successfully enroll subjects in the clinical studies of our compounds and the pace and results of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
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Financial operations overview
Revenues
We have not generated any revenue from product sales. We are unable to predict
when, if ever, material net cash inflows will commence from sales any products
we may develop, if approved. Our revenue to date has been primarily derived from
a research collaboration agreement with Allergan (now a subsidiary of AbbVie),
under which the jointly funded research activities and option exercise period,
including the associated payments by Allergan, came to their contractual
conclusion in
Operating expenses
Research and development expenses
Research and development activities account for a significant portion of our operating expenses. We expense research and development costs as incurred. Research and development expenses consist of costs incurred in connection with the development of our product candidates, including:
fees paid to consultants, sponsored researchers, contract manufacturing
organizations, or CMOs, and contract research organizations, or CROs, including
? in connection with our preclinical and clinical studies, and other related
clinical study fees, such as for investigator grants, patient screening,
laboratory work, clinical study database management, and statistical
compilation and analysis;
? costs related to acquiring and maintaining preclinical and clinical study
materials and facilities;
? costs related to compliance with regulatory requirements; and
? costs related to salaries, bonuses, and other compensation, including
stock-based compensation, for employees in research and development functions.
At this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the development of our product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty related to:
? the impacts of COVID-19;
? future clinical study results;
? the scope, rate of progress, and expense of any preclinical studies, clinical
studies and other research and development activities;
? clinical study enrollment rate or design;
? the manufacturing of our product candidates;
? our ability to obtain and maintain intellectual property protection for our
product candidates;
? significant and changing government regulation;
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establishing commercial manufacturing capabilities or making arrangements with
? third-party manufacturers, developing and timely delivery of commercial-grade
drug formulations that can be used in our clinical trials and for commercial
launch;
? the timing and receipt of regulatory approvals, if any; and
? the risks disclosed in the section entitled "Risk Factors" in this Annual
Report.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs, timing, and viability associated with the development of that product candidate.
We expect our research and development expenses to increase over the next several years as we continue to implement our business strategy, which includes advancing our product candidates into and through clinical development, expanding our research and development efforts, seeking regulatory approvals for any product candidates for which we successfully complete clinical studies, accessing and developing additional product candidates, and hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical studies. As such, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation. General and administrative expenses also include rent as well as professional fees for legal, consulting, accounting, and audit services.
Other income (expense), net and interest expense
Other income (expense), net and interest expense consists primarily of the interest income earned on our cash and cash equivalents and interest expense on our Loan Agreement, as well as changes in fair value of the derivative liability associated with our obligation to issue additional warrants in connection with subsequent draws under our Loan Agreement.
Results of operations
Comparison of years ended
The following table summarizes our results of operations for the years ended
Year
ended December 31, Increase
2022 2021 (Decrease)
Collaboration revenue $ - $ 1,000 $ (1,000)
Operating expenses:
Research and development 42,748 55,444 (12,696)
General and administrative 19,819 20,090 (271)
Total operating expenses 62,567 75,534 (12,967)
Loss from operations (62,567) (74,534) (11,967)
Other (income) expense, net (737) (160) 577
Interest expense 3,019 512 2,507
Net loss and comprehensive loss
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Collaboration revenue
Collaboration revenue was
Research and development expenses
The following table summarizes our research and development expenses incurred
during the years ended
Year
ended December 31, Increase
2022 2021 (Decrease)
NYX-2925 $ 10,355 $ 31,500 $ (21,145)
NYX-783 14,354 4,892 9,462
NYX-458 7,072 5,886 1,186Preclinical research and discovery programs 2,856 3,063 (207) Personnel and related costs
8,111 10,103 (1,992)
Total research and development expenses
Research and development expenses were
a decrease of approximately
? enrollment in our Phase 2b clinical trials in patients with painful DPN and in
patients with fibromyalgia in
a decrease of approximately
? related support costs associated with reduction in headcount and lower grant
date fair values for equity awards;
an increase of approximately
? product costs related to the conduct of Phase 2b development of NYX-783 in
patients with PTSD; and
an increase of approximately
? NYX-458 in patients with cognitive impairment associated with Parkinson's
disease and dementia with Lewy bodies.
General and administrative expenses
General and administrative expenses were
Other income (expense), net
We recorded
Interest expense
Interest expense was
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Liquidity and capital resources
From our inception through
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prepayment fee of 3% if the payment occurs on or before 24 months after the initial funding date, 2% if the prepayment occurs more than 24 months after, but on or before 36 months after the initial funding date, or 1% if the prepayment occurs more than 36 months after the initial funding date. We are obligated to pay a loan origination fee of 0.8% of each term loan that is funded under the Loan Agreement. The Loan Agreement also restricts certain activities, such as disposing of our business or certain assets, incurring additional debt or liens or making payments on other debt, making certain investments and declaring dividends, acquiring or merging with another entity, engaging in transactions with affiliates or encumbering intellectual property, among others.
As of
Funding requirements
Our primary uses of capital are, and we expect will continue to be, research and development services, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses, patent prosecution filing and maintenance costs for our licensed intellectual property and general overhead costs. We expect to continue to incur significant expenses and operating losses for the foreseeable future. In addition, since the closing of our IPO, we have incurred, and expect to incur, additional costs associated with operating as a public company. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
? seek to address and recover from impacts of COVID-19;
? advance the clinical development of our lead product candidates;
? continue to improve the manufacturing process for our product candidates; and
manufacture clinical supplies as our development progresses;
? continue the research and development of our preclinical product candidates;
? seek to identify and develop additional product candidates;
? maintain, expand, and protect our intellectual property portfolio; and
? improve our operational, financial, and management systems to support our
clinical development and other operations.
Outlook
We are not able to advance our studies or perform meaningful research or development without obtaining additional sources of financing. These conditions and events raise substantial doubt about our ability to continue as a going concern.
We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, which we expect will take a number of years and the outcome of which is uncertain, or enter into collaborative agreements with third parties, the timing of which is largely beyond our control and may never occur. To fund our current and future operating plans, we will need additional capital, which we may obtain through one or more equity offerings, debt financings, or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all, including as a result of COVID-19. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed. The amount and timing of our future funding requirements will depend on many factors, including the effects of COVID-19, our ability to successfully enroll subjects in a timely way for the clinical studies and the pace and results
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of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Cash flows
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
Year ended
December 31,
2022 2021
Net cash provided by (used in):
Operating activities $ (59,684) $ (63,425)
Investing activities - 121
Financing activities 9,747 28,326
Net decrease in cash, cash equivalents and restricted cash
Operating activities
For the year ended
Investing activities
For the year ended
Financing activities
For the year ended
Critical accounting policies and significant judgments and estimates
We prepare our financial statements in accordance with generally accepted
accounting principles in
While our significant accounting policies are described in more detail in the notes to our financial statements appearing in this Annual Report on Form 10-K, we believe the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
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Research and development
As part of the process of preparing our financial statements, we are required to estimate certain of our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
? CROs in connection with performing research and development services on our
behalf;
? investigative sites or other providers in connection with clinical studies;
? vendors in connection with preclinical development activities; and
? vendors related to product manufacturing, development, and distribution of
clinical supplies.
We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our 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 our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical study milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and 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 our estimate, we adjust the accrual or amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued or prepaid research and development expenses.
Stock-based compensation
We measure stock-based awards granted to our directors and employees at fair value on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue stock options and restricted stock with only service-based vesting conditions and record the expense for these awards using the straight-line method. We have historically granted stock options with exercise prices equivalent to the fair value of our common stock as of the date of grant.
The fair value of our common stock is determined based on the quoted market
price of our common stock. Prior to our IPO, the estimates in determining our
stock-based compensation valuations were highly complex and subjective, and
since our stock was not publicly traded, our board of directors estimated the
fair value of our common stock at various dates, with input from management,
considering our then most recently available third-party valuations of common
stock and its assessment of additional objective and subjective factors that it
believed were relevant and which may have changed from the date of the most
recent valuation through the date of the grant. The grant date fair value of our
options is determined using the Black-Scholes option-pricing model. The expected
volatility for our options granted is based on a weighted-average of the
historical volatility of share values of publicly traded companies within the
biotechnology industry which includes the historical volatility of our stock
since the IPO. The expected term of our options has been determined utilizing
the "simplified method" for awards that qualify as "plain-vanilla" options. The
risk-free interest rate is determined by reference to the
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approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.
JOBS Act
Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the
JOBS Act, an "emerging growth company" can delay the adoption of new or revised
accounting standards until such time as those standards would apply to private
companies. We intend to avail of this exemption. There are other exemptions and
reduced reporting requirements provided by the JOBS Act that we are currently
evaluating. For example, as an "emerging growth company," we are exempt from
Sections 14A(a) and (b) of the Exchange Act which would otherwise require us to
(1) submit certain executive compensation matters to shareholder advisory votes,
such as "say-on-pay," "say-on-frequency," and "golden parachutes;" and
(2) disclose certain executive compensation related items such as the
correlation between executive compensation and performance and comparisons of
our chief executive officer's compensation to our median employee compensation.
We also intend to avail of an exemption from the rule requiring us to provide an
auditor's attestation report on our internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act. We will continue to remain
an "emerging growth company" until the earliest of the following: (1)
Recent accounting pronouncements
See Note 2 to our financial statements appearing in this Annual Report on Form 10-K for a full description of recent accounting pronouncements including the respective expected dates of adoption and estimated effects, if any, on our financial statements.
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