ATHIRA PHARMA, INC. You should read the following management's discussion and analysis of financial
condition and results of operations in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included in Part I, Item 1
of this report and with our audited financial statements and related notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in our Annual Report on Form 10-K, filed with the
Special Note Regarding Forward-Looking Statements
This report contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "target", "will," "would" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to, statements about:
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our financial performance;
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the sufficiency of our existing cash, cash equivalents and investments to fund our future operating expenses and capital expenditure requirements;
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our ability to obtain funding for our operations, including funding necessary to develop and commercialize our product candidates;
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the ability of our nonclinical studies and clinical trials to demonstrate safety and efficacy of our product candidates;
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the success, cost and timing of our development activities, nonclinical studies and clinical trials;
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the rate and degree of market acceptance of our product candidates;
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the timing or likelihood of regulatory filings and approvals;
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the potential learnings from our ACT-AD trial and LIFT-AD unblinded interim efficacy and futility analysis and their ability to inform and improve future clinical development plans;
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the potential of LIFT-AD to show clinical benefits of fosgonimeton following the
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the timing and focus of our future clinical trials, and the reporting of data from those trials;
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our plans relating to commercializing our product candidates, if approved;
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our plans and ability to establish sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain approval;
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our ability to attract and retain key managerial, scientific and clinical personnel;
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our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
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the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
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the pricing and reimbursement of our product candidates, if approved;
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our reliance on third parties to conduct clinical trials of our product candidates, and for the manufacture of our product candidates for nonclinical studies and clinical trials;
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our ability to expand our product candidates into additional indications and patient populations;
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the success of competing therapies that are or may become available;
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the beneficial characteristics, safety and efficacy of our product candidates;
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regulatory developments in
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our ability to obtain and maintain regulatory approval of our product candidates
in
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future agreements with third parties in connection with the commercialization of our product candidates;
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our plans relating to the further development and manufacturing of our product candidates, including additional indications for which we may pursue regulatory approval;
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our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;
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the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;
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the outcome of legal proceedings which have been or may in the future be instituted against us and certain of our directors and officers, including the legal proceedings discussed in Part II, Item 1 - "Legal Proceedings," and elsewhere in this report;
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the actions by activist stockholders, which have in the past been, and may in the future be, disruptive and could cause uncertainty about the strategic direction of our business;
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our expectations regarding the continuing impact of COVID-19 on our business;
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the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets;
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the potential benefits of any strategic collaboration agreements we may enter into; and
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our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.
These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in "Part II, Item 1A-Risk Factors," and elsewhere in this report. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
This report includes our trademarks and registered trademarks, including Athira,
In this report, "we," "our," "us," "Athira," and "the Company" refer to
Overview
We are a late clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and slow neurodegeneration. With our product candidates, we aim to provide rapid cognitive improvement and alter
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the course of neurological diseases, leveraging our novel mechanism of action. Our approach is designed to augment neuronal growth factor signaling through the hepatocyte growth factor/MET, or HGF/MET, a naturally occurring, repair and regenerative system. We believe enhancing HGF/MET signaling has the potential to protect existing neurons from damage, reduce inflammation, promote regeneration, and benefit brain physiology. We anticipate that all of these characteristics may improve neuronal health and translate into clinical benefits. Our pipeline is built from our proprietary drug discovery platform, or ATH platform, and consists of a series of small molecules that are designed to target either (1) the central nervous system, or CNS, by crossing the blood brain barrier, or BBB, or (2) the peripheral nervous system.
Our lead candidate, fosgonimeton ("ATH-1017"), is a subcutaneously administered, BBB-penetrating, small molecule HGF/MET positive modulator. The effects of fosgonimeton in its primary target indication, Alzheimer's disease ("AD"), are being evaluated in two clinical trials:
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ACT-AD, a randomized, double-blind, placebo-controlled, parallel-group 26-week
proof-of-concept Phase 2 clinical trial in mild-to-moderate AD, with ERP P300
latency as the primary endpoint. Initiated in
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LIFT-AD, a randomized, double-blind, placebo-controlled, parallel-group 26-week
Phase 2/3 clinical trial with fosgonimeton for the treatment of mild-to-moderate
AD. In
In
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trials for an additional 12 months, enabling eligible patients who have completed either trial, and elect to participate in the ongoing open label extension, to now receive up to 18 months of open-label treatment with fosgonimeton.
The following figure illustrates the current development stage of our ATH compounds and discovery and development programs. In addition, we are expanding our ATH platform to additional indications in the CNS and peripheral nervous system as we aim to improve neuronal health in multiple disorders. Our drug discovery efforts are focused on exploring the potential of ATH technology, which is designed to promote HGF/MET activity for a variety of clinical applications.
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We constantly strive to grow and optimize our portfolio through in-house discovery and plan on additional external business development activities enabled by our innovative internal research and development capabilities.
We were incorporated in
We are focused on the development of small molecule therapeutics which enables us to use well-established and widely available manufacturing processes and infrastructure, formulation compositions and drug administration technologies or devices. We do not currently operate our own facilities for manufacturing, storing, or distributing our product candidates. We utilize third-party contract manufacturing organizations, or CMOs, to manufacture and supply our preclinical and clinical materials during the development of our product candidates. We believe the synthesis of fosgonimeton is reliable and reproducible and the synthetic methods can be further optimized to enable large-scale production that continues to avoid use of toxic materials or specialized equipment or handling during the manufacturing process. We plan to continue to optimize the manufacturing process to support future large-scale and commercial supply. Our goal is to identify and develop small molecule product candidates that are cost-effective to manufacture and easily transferable to third party CMOs. We expect to use similar contract resources for commercialization of our products, at least until our resources and operations are at a scale that justifies investment in internal manufacturing capabilities.
Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to build a commercial infrastructure to support sales of our product candidates. We expect to manage sales, marketing and distribution through internal resources and third-party relationships. While we may commit significant financial and management resources to commercial activities, we will also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities.
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To date, we have funded our operations primarily through proceeds from the sale
of equity securities, including proceeds from the sale and issuance of common
stock in our IPO and in a subsequent follow-on public offering, the sale and
issuance of convertible preferred stock, common stock warrants, and convertible
notes, and to a lesser extent from grant income and stock option exercises. From
inception to
We expect to continue to incur increasing operating losses for the foreseeable future as we:
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continue to advance fosgonimeton and our other product candidates through preclinical studies and clinical trials, and further extend the open label extension of the ACT-AD and LIFT-AD trials;
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expand our pipeline of product candidates;
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continue to grow our discovery organization and invest in the ATH platform;
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ramp up manufacturing activities;
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attract, hire and retain additional personnel;
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obtain, maintain, expand and protect our intellectual property portfolio;
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operate as a public company;
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expand our laboratory and office facilities;
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implement operational, financial and management information systems;
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seek regulatory approval for any product candidates that successfully complete clinical trials;
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establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval; and
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incur legal expenses associated with ongoing litigation, as further described in "Part II, Item 1-Legal Proceedings," and elsewhere in this report.
Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
We will require substantial additional funding to support our continuing
operations and further the development of our product candidates. Until such
time as we can generate significant revenue from product sales, if ever, we
expect to finance our operations through the sale of equity, debt financings, or
other capital sources, which could include income from collaboration, licensing
or similar arrangements, for the foreseeable future. Adequate funding may not be
available when needed or on terms acceptable to us, or at all. If we are unable
to raise additional capital as needed, we may have to significantly delay, scale
back or discontinue development of our product candidates. Our ability to raise
additional funds may be adversely impacted by potential worsening global
economic conditions and the recent disruptions to, and volatility in, the credit
and financial markets in
The global COVID-19 pandemic continues to evolve, and we will continue to
monitor the COVID-19 situation closely. While COVID-19 related restrictions have
been eased in many locations around the globe, including in
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third parties with whom we do business, as well as on regulatory authorities and our key scientific and management personnel. As the situation evolves, we may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the ultimate extent to which the COVID-19 pandemic, any potential resurgence of a variant thereof, or similar health epidemic, may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.
Our Collaboration and Grant Agreements
We are party to certain collaboration and grant agreements, as described in the
section titled "Part I, Item 1 - Business-Our Collaboration and Grant
Agreements" in our Annual Report on Form 10-K filed with the
Components of Operating Results
Operating Expenses
Research and Development
Research and development expenses consist primarily of direct and indirect costs incurred for our research activities, including development of the ATH platform, our drug discovery efforts and the development of our product candidates. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain our research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities, and facilities, including expenses associated with relocating to and building out our new lab space, and other expenses consisting of direct and allocated expenses for rent and depreciation, and lab consumables.
We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. We track direct costs by stage of program, clinical or preclinical. However, we do not track indirect costs on a program specific basis because these costs are deployed across multiple programs and, as such, are not separately classified.
As of the date of this report, we cannot reasonably determine the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. Product candidates in later stages of development generally have higher development costs than those in earlier stages. We expect that our research and development expenses will increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, as we expand our product pipeline, as we maintain, expand, protect and enforce our intellectual property portfolio, and as we incur expenses associated with hiring additional personnel to support our research and development efforts. In particular, we have seen, and expect to continue to see, our research and development expenses increase substantially as we conduct our clinical trials for fosgonimeton, including open-label extensions for those trials. Additionally, we may experience an overall increase in research and development expenses as a result of inflation.
The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. Our research and development expenses may vary significantly based on factors such as:
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the number and scope of preclinical and IND-enabling studies;
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the phases of development of our product candidates;
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the progress and results of our research and development activities;
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• per subject trial costs; •
the number of trials required for regulatory approval, in particular with respect to fosgonimeton for the treatment of mild-to-moderate AD;
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the further extension of the open label extension of the ACT-AD and LIFT-AD trials;
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the number of sites included in the trials;
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the countries in which the trials are conducted;
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the length of time required to enroll eligible subjects and initiate clinical trials;
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the number of subjects that participate in the trials;
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the drop-out and discontinuation rate of subjects;
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potential additional safety monitoring requested by regulatory agencies;
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the duration of subject participation in the trials and follow-up;
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the cost and timing of manufacturing of our product candidates;
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the receipt of regulatory approvals from applicable regulatory authorities;
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the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
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the hiring and retention of research and development personnel;
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the degree to which we obtain, maintain, defend and enforce our intellectual property rights;
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the impact of COVID-19 on timelines and clinical operations, which may lead to increased costs; and
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the extent to which we establish collaboration, licensing or similar arrangements and the performance of any related third parties.
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 and timing associated with the development of that product candidate.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, consisting of employee salaries, related benefits, and stock-based compensation expense for our employees in the executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include third-party costs such as legal costs, insurance costs, accounting, auditing and tax related fees, consulting fees and facilities and other expenses not otherwise included as research and development expenses. We expense general and administrative costs as incurred.
We expect that our general and administrative expenses will increase
substantially for the foreseeable future as we increase our headcount to support
our continued research activities and development of our programs. We also
anticipate that we will incur substantially increased expenses as a result of
operating as a public company, including expenses related to compliance with the
rules and regulations of the
Grant Income
Grant income consists of income related to the
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of grant income, which included recognizing
Other Income, Net
Other income, net consists primarily of interest earned on our cash, cash equivalents and investments. Absent further fundraising, we expect interest earned on our cash, cash equivalents and investments to decrease over the long term as we continue to expend our cash balances to fund our ongoing operations.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
presented:
Three Months Ended September 30,
Dollar %
2022 2021 Change Change
(in thousands)
Operating expenses:
Research and development $ 16,965 $ 10,707 $ 6,258 58 %
General and administrative 7,168 7,119 49 1
Total operating expenses 24,133 17,826 6,307 35
Loss from operations (24,133 ) (17,826 ) (6,307 ) 35
Grant income 2,959 2,079 880 42
Other income, net 985 73 912 1,249
Net loss $ (20,189 ) $ (15,674 ) $ (4,515 ) 29
Research and Development Expenses
The following table shows the primary components of our research and development expenses for the periods presented:
Three Months Ended September 30,
Dollar %
2022 2021 Change Change
(in thousands)
Direct costs:
Fosgonimeton (ATH-1017) $ 10,892 $ 8,359 $ 2,533 30 %
ATH-1020 592 - 592 *
Preclinical programs and other
direct costs 2,078 1,089 989 91
Total direct costs 13,562 9,448 4,114 44
Indirect costs:
Personnel-related costs, including
stock-
based compensation 3,027 1,006 2,021 201
Facilities and other costs 376 253 123 49
Total research and development
expenses $ 16,965 $ 10,707 $ 6,258 58
* Not meaningful
Research and development expenses increased by
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General and Administrative Expenses
General and administrative expenses increased by
Grant Income
Grant income increased by
Other Income, Net
Other income, net increased by
Comparison of the Nine Months Ended
The following table summarizes our results of operations for the periods
presented:
Nine Months Ended September 30,
Dollar %
2022 2021 Change Change
(in thousands)
Operating expenses:
Research and development $ 46,228 $ 30,176 $ 16,052 53 %
General and administrative 24,861 15,068 9,793 65
Total operating expenses 71,089 45,244 25,845 57
Loss from operations (71,089 ) (45,244 ) (25,845 ) 57
Grant income 3,934 6,499 (2,565 ) (39 )
Other income, net 1,651 231 1,420 615
Net loss $ (65,504 ) $ (38,514 ) $ (26,990 ) 70
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Research and Development Expenses
The following table shows the primary components of our research and development expenses for the periods presented:
Nine Months Ended September 30,
Dollar %
2022 2021 Change Change
(in thousands)
Direct costs:
Fosgonimeton (ATH-1017) $ 30,484 $ 24,697 $ 5,787 23 %
ATH-1020 1,611 - 1,611 *Preclinical programs and other direct costs 4,202 1,973 2,229 113 Total direct costs
36,297 26,670 9,627 36
Indirect costs:
Personnel-related costs, including stock-
based compensation 8,827 2,972 5,855 197
Facilities and other costs 1,104 534 570 107
Total research and development expenses $ 46,228 $ 30,176 $ 16,052 53
* Not meaningful
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by
Grant Income
Grant income decreased by
Other Income, Net
Other income, net, increased by
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Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have funded our operations primarily with proceeds from
the sale and issuance of common stock, convertible preferred stock, common stock
warrants, and convertible notes, and to a lesser extent from grant income and
stock option exercises. From our inception through
Recent sales of our common stock were as follows.
Common Net
Shares Price Proceeds
Issued Per Share (in millions)
September 2020 IPO 12,000,000 $ 17.00 $ 186.4
October 2020 overallotment exercise 1,397,712 17.00 22.1
January 2021 follow-on public offering 4,000,000 22.50 84.1
February 2021 overallotment exercise 600,000 22.50 12.7
Total 17,997,712 $ 305.3
As of
Material Cash and Future Funding Requirements
Our material cash requirements include our operating leases for laboratory and
office facilities. As of
Based upon our current operating plan, we estimate that our
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or at all. Our ability to raise additional funds may be adversely impacted by
potential worsening global economic conditions and the recent disruptions to,
and volatility in, the credit and financial markets in
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
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the scope, timing, progress and results of our ongoing preclinical studies and clinical trials of our product candidates;
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the number of trials required for regulatory approval, in particular with respect to fosgonimeton for the treatment of mild-to-moderate AD;
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the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of other product candidates that we may pursue;
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our ability to establish and maintain collaboration, licensing or other similar arrangements, and the financial terms of any such arrangements, including the timing and amount of any future milestone, royalty or other payments due thereunder;
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the costs, timing and outcome of regulatory review of our product candidates;
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
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the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
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the costs related to ongoing legal proceedings;
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any expenses needed to attract, hire and retain skilled personnel;
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the costs of operating as a public company;
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the costs associated with expanding our laboratory and office facilities; and
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the extent to which we acquire or in-license other companies' product candidates and technologies or engage in other strategic transactions.
A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plan may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plan.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended September 30,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (56,802 ) $ (24,921 )
Investing activities 33,017 (25,452 )
Financing activities 507 97,076
Net (decrease) increase in cash, cash equivalents and
restricted cash $ (23,278 ) $ 46,703
Operating Activities
During the nine months ended
During the nine months ended
Investing Activities
During the nine months ended
During the nine months ended
Financing Activities
During the nine months ended
During the nine months ended
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our financial statements have been prepared in accordance with
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which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies and significant judgments and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
During the nine months ended
•
research and development costs;
• stock-based compensation; • income taxes; • grant income.
Recent Accounting Pronouncements
See Note 2 to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
Emerging Growth Company Status
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest to occur of: (1)
the last day of the fiscal year in which we have at least
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