ODONATE, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" set forth in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Company Overview
We are a pharmaceutical company dedicated to the development of best-in-class therapeutics that improve and extend the lives of patients with cancer. Our initial focus is on the development of tesetaxel, an investigational, orally administered chemotherapy agent that belongs to a class of drugs known as taxanes, which are widely used in the treatment of cancer. Tesetaxel has several properties that make it unique among taxanes, including:
• oral administration with a low pill burden;
• a long (~8-day) terminal plasma half-life in humans, enabling the
maintenance of adequate drug levels with relatively infrequent dosing;
• no history of hypersensitivity (allergic) reactions; and
• significant activity against chemotherapy-resistant tumors.
In patients with metastatic breast cancer ("MBC"), tesetaxel was shown to have
significant, single-agent antitumor activity in two multicenter, Phase 2
studies. Tesetaxel currently is the subject of three studies in breast cancer,
including a multinational, multicenter, randomized, Phase 3 study in patients
with MBC, known as CONTESSA. Positive results of CONTESSA were presented at the
2020 San Antonio Breast Cancer Symposium. We plan to submit a New Drug
Application for tesetaxel to the
Results of Operations
The following table summarizes our results of operations for each of the periods
below (in thousands):
Year Ended
December 31,
2020 2019
Research and development expense
$ 1,083 $ 3,105
Research and Development Expense
Research and development expense consists of expense associated with the development of tesetaxel and includes non-personnel-related and personnel-related expense. Non-personnel-related expense includes expense related to: (i) clinical study site payments; (ii) acquiring clinical study materials and the clinical study supply chain; (iii) manufacturing development and scale-up, including manufacturing registration and validation batches of tesetaxel; (iv) clinical and quality systems; and (v) regulatory submissions. Personnel-related expense includes expense related to salaries, benefits and equity-based compensation for personnel engaged in research and development functions.
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Research and development expense is charged to operations as incurred when the expenditures relate to our research and development efforts and have no alternative future use. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
All of our research and development expense incurred to date has been incurred in connection with the development of tesetaxel. We do not expect our research and development expense to change significantly in the near term.
The following table summarizes our research and development expense for each of the periods below (in thousands):
Year Ended
December 31,
2020 2019
Non-personnel expense:
Clinical development $ 72,697 $ 63,748
Other 1,966 2,209
Total non-personnel expense 74,663 65,957
Personnel expense:
Salaries, bonuses and benefits 33,673 28,137
Equity-based compensation expense 8,705 9,940
Total personnel expense 42,378 38,077
Total research and development expense
Research and development expense was
General and Administrative Expense
General and administrative expense includes non-personnel and personnel-related expense. Non-personnel-related expense includes expense related to: (i) professional fees for legal, patent, consulting, accounting and audit services; (ii) insurance; and (iii) facilities and information technology. Personnel-related expense includes expense related to salaries, benefits and equity-based compensation for personnel engaged in finance and administrative functions. We do not expect our general and administrative expense to change significantly in the near term.
The following table summarizes our general and administrative expense for each of the periods below (in thousands):
Year Ended
December 31,
2020 2019
Non-personnel expense $ 5,256 $ 5,199
Personnel expense:
Salaries, bonuses and benefits 4,013 4,193
Equity-based compensation expense 1,123 1,504
Total personnel expense 5,136 5,697
Total general and administrative expense
General and administrative expense of
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Other Income, Net
Other income, net consists primarily of interest income generated from cash held in savings accounts. Other income, net also includes losses on disposal of property and equipment and gains and losses on foreign currency transactions.
Other income, net was
Liquidity and Capital Resources
As of
We have incurred losses in each year since our inception. Our net loss was
To date, we have funded our operations through the sale of equity securities.
For a discussion of the underwritten public offerings closed during the years
ended
The following table summarizes our net cash flow activity for each of the periods below (in thousands):
Year Ended
December 31,
2020 2019
Net cash (used in) provided by:
Operating activities $ (113,130 ) $ (96,638 )
Investing activities (432 ) (166 )
Financing activities 90,367 138,677
Net (decrease) increase in cash and restricted cash
Net cash used in operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
Until such time as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic partnerships and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the
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terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, associated intellectual property, our other technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidate even if we would otherwise prefer to develop and market such product candidate ourselves.
Impact of the COVID-19 Pandemic
Although the ongoing Coronavirus Disease 2019 ("COVID-19") pandemic did not have
a material impact on our results of operations, financial condition or clinical
studies during the year ended
Contractual Obligations and Commitments
In
In
In
We enter into contracts in the normal course of business with contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
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In 2013, we licensed rights to tesetaxel in all major markets from Daiichi
Sankyo Company, Limited ("Daiichi Sankyo"), the original inventor of the
product. Under the Daiichi Sankyo license agreement, we are obligated to use
commercially reasonable efforts to develop and commercialize tesetaxel in the
following countries:
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under the rules of the
Jumpstart Our Business Startups Act
We are an emerging growth company, as defined in the Jumpstart Our Business
Startups Act of 2012 (the "JOBS Act"). Under this act, an emerging growth
company can delay the adoption of new or revised accounting standards issued
subsequent to the enactment of the JOBS Act until those standards would
otherwise apply to private companies. We have irrevocably elected not to avail
ourselves of this exemption from new or revised accounting standards and,
therefore, will be subject to the same new or revised accounting standards as
other public companies that are not emerging growth companies. However, we
intend to rely on other exemptions provided by the JOBS Act, including without
limitation, an exemption from the auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended. We will remain an
emerging growth company until
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our audited financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
While our significant accounting policies are more fully described in the notes to our audited financial statements elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies related to accrued expenses and equity-based compensation are most critical to understanding and evaluating our reported financial results.
Accrued Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued 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 cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for
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services performed or when contractual milestones are met. 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. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued expenses include costs associated with conducting our development and regulatory activities, including fees paid to third-party professional consultants and service providers, and costs to develop and manufacture clinical study materials.
We base our accrued expenses on our estimates of the services received and efforts expended pursuant to our contractual arrangements. 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 service providers will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed 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 our estimate, we adjust the accrual or prepayment accordingly.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, there have been no material differences from our estimates to the amount actually incurred.
Equity-based Compensation Expense
We issue stock options and had historically issued incentive units, considered
"profits interests" within the meaning of
Recent Accounting Pronouncements
See Note 2 to the audited financial statements included in Item 8 of this Annual Report on Form 10-K.
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