RENOVACOR, INC. The following discussion and analysis of our financial condition and results of operations should be read together with:
•
Our unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q; and
•
Our financial statements and the accompanying notes thereto included in our 2021 Form 10-K, as well as the information contained under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2021 Form 10-K . In addition to historical information, this discussion and analysis includes forward-looking statements that are subject to risks and uncertainties, including those discussed in the section titled "Risk Factors," set forth in Item 1A of our 2021 Form 10-K, that could cause actual results to differ materially from historical results or anticipated results. Prior toSeptember 2, 2021 , we were known asChardan Healthcare Acquisition 2 Corp. OnSeptember 2, 2021 , we completed the Business Combination withRenovacor Holdings, Inc. , a private company. For accounting purposes,Chardan Healthcare Acquisition 2 Corp. was deemed to be the acquired entity. Unless the context indicates otherwise, references in this section to the "Company," "Renovacor ," "we," "us," "our" and similar terms refer toRenovacor, Inc. (f/k/aChardan Healthcare Acquisition 2 Corp. ) and our consolidated subsidiaries. References to "Chardan" refer to our predecessor company prior to the consummation of the Business Combination. References to "Old Renovacor" refer toRenovacor, Inc. prior to the consummation of the Business Combination and toRenovacor Holdings, Inc. (f/k/aRenovacor, Inc. ), now the wholly owned subsidiary ofRenovacor , upon the consummation of the Business Combination.
Overview
We are a biotechnology company focused on delivering innovative precision
therapies to improve the lives of patients and families battling
genetically-driven cardiovascular and mechanistically-related diseases. Our
initial focus is on the treatment of BCL2-associated athanogene 3 (BAG3)
mutation-associated dilated cardiomyopathy ("DCM") ("BAG3 DCM"). BAG3 DCM is a
heritable rare disease that leads to early onset, rapidly progressing heart
failure and significant mortality and morbidity. Our lead product candidate,
REN-001, is a recombinant adeno-associated virus ("AAV") 9-based gene therapy
designed to deliver a fully functional BAG3 gene to augment BAG3 protein levels
in cardiomyocytes and slow or halt progression of BAG3 DCM. We have entered into
and may explore future collaborative alliances to support research, development,
and commercialization of any of our product candidates.
We believe that development of a BAG3 gene replacement therapy for DCM patients
who carry BAG3 gene mutations has the potential to prevent progression of DCM
and heart failure. Diseases caused by monogenic defects are especially tractable
targets for gene therapies. Recently approved therapies have successfully
utilized AAV as a vehicle to deliver genes to patients suffering from these
diseases and there are many additional ongoing clinical development programs
utilizing AAV-based gene therapies to address monogenic diseases.
We believe we are the first company to apply AAV technology to patients with DCM
specifically due to mutations in the BAG3 gene. REN-001 utilizes an AAV9 vector
intended to deliver a healthy version of the BAG3 gene to produce functional
BAG3 protein in patients with genetic mutations that cause insufficient levels
of functional BAG3 protein. This approach has shown promise in multiple
preclinical models, demonstrating production of functional BAG3 protein and
improvement in cardiac function.
We plan to submit an Investigational New Drug ("IND") application in connection
with our lead product candidate, REN-001, in the second half of 2022. If our IND
submission is accepted by the U.S. Food and Drug Administration ("FDA"), we plan
to subsequently initiate a phase I/II clinical trial of REN-001 in patients with
BAG3 DCM.
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Research and Development
Our Pipeline
In addition to our lead product candidate, REN-001, we are currently developing
a pipeline of innovative and proprietary BAG3-associated gene therapies for
diseases with high unmet medical need associated with mutations in the BAG3 gene
and mechanistically linked to BAG3's expression and function. Additionally, we
recently announced that we have expanded our pipeline to advance an AAV gene
therapy program as a potential precision therapy for three genetic segments of
arrhythmogenic cardiomyopathy ("ACM").
Our current pipeline is represented in the diagram below.
[[Image Removed: img88123066_1.jpg]]
RCSI: retrograde coronary sinus infusion; IV: intravenous; CV: Cardiovascular; CNS: Central nervous system; DCM: Dilated Cardiomyopathy; ACM: Arrhythmogenic Cardiomyopathy * The diagram above is representative of the current stage of our development and does not reflect our expectations of the clinical trials needed or an agreed upon pathway with the FDA for commercialization of our product candidates. We acknowledge that the required clinical studies and pathway to commercialization must be agreed upon with the FDA.
REN-001 (AAV9-BAG3): Our Lead Product Candidate
Overview
Our lead product candidate, REN-001, is an AAV9 vector-based gene therapy designed to treat BAG-3 associated DCM through delivery of a human BAG3 gene to express a fully functional human BAG3 protein in transduced cells. After transducing the cardiomyocyte, the vector translocates into the nucleus, where the capsid proteins dissociate, allowing the cell's native expression machinery to initiate transcription of the BAG3 gene. Unlike wild-type AAVs, REN-001 lacks an S1 domain, which significantly limits the potential for the vector genome to integrate into the host chromosome. Instead, the gene has the potential to remain in the nucleus as episomal DNA. Third-party studies have demonstrated that recombinant AAV-delivered episomal DNA persists in the nucleus of transfected non-proliferating cells for up to several years. This suggests that a single dose of REN-001 could provide prolonged BAG3 gene replacement in haploinsufficient cells transduced by the vector. Following transcription and translation of the BAG3 gene, the function of the BAG3 protein is expected to be restored, and disease progression has the potential to be halted or significantly slowed.
We are currently exploring the delivery of REN-001 through RCSI and plan to submit an IND for REN-001 in the second half of 2022.
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--------------------------------------------------------------------------------Preclinical research and development for REN-001
We are currently conducting preclinical studies exploring the ability of a BAG3
gene therapy to treat patients suffering from DCM caused by BAG3
haploinsufficiency. In conducting preclinical research in this field to generate
data validating this novel therapeutic approach, animal studies have been
completed in several heart failure disease models, including studies involving
mice subjected to trans-aortic constriction, mice suffering from left
ventricular dysfunction following a myocardial infarction ("MI"), mice with left
ventricular dysfunction post-ischemia and reperfusion, and large animal studies
in pigs suffering from left ventricular dysfunction following an MI.
We have several preclinical studies of REN-001 currently in progress to further
evaluate AAV9 transduction efficiency, safety, and efficacy in mouse and pig
models. These studies include a dose-ranging efficacy study, a durability of
effect study, and a natural history study (including survival analysis), each in
BAG3 haploinsufficient mice, which continue to progress at the Feldman
laboratory at Temple pursuant to the Temple SRA , as defined below. Preliminary
data from our ongoing natural history study has demonstrated an impaired
survival phenotype, alongside left ventricular dilation and cardiac function
decline, findings that are consistent with several hallmark characteristics of
DCM seen clinically in patients. These new data have been leveraged to optimize
the design of our ongoing dose-ranging study.
Additionally, our good laboratory practice ("GLP") toxicology and
biodistribution study in normal
We anticipate the availability of key data from our ongoing preclinical studies to support the potential IND submission in the second half of 2022.
Clinical Development Plan for REN-001
We completed a Type B Pre-IND meeting with the FDA onJune 16, 2020 to obtain FDA feedback on REN-001. We plan to submit an IND for REN-001 in the second half of 2022. If our IND submission is accepted by the FDA, we plan to subsequently initiate a phase I/II clinical trial of REN-001 in patients with BAG3-associated DCM. We expect the phase I/II clinical trial will be conducted in two sequential parts consisting of dose escalation and dose expansion components. The dose escalation part will enroll cohorts of three to six subjects to identify a preferred dose and be followed by a dose expansion cohort to further explore the safety, tolerability and preliminary evidence of efficacy at the preferred dose. This will be an open label study with the goal of evaluating the safety and efficacy of REN-001. Safety and tolerability will be evaluated based on assessment of frequency and severity measures of adverse events and serious adverse events. Efficacy will be evaluated based on measures of cardiac structure and function, circulating biomarkers, and patient functional capacity and quality of life.
We will consult with the FDA following completion of our planned phase I/II clinical trial to determine the need for, and optimal design of, future clinical trials.
Other Target Indications Our preclinical strategy includes plans to advance earlier stage research programs where we believe our BAG3 gene therapy technology has the potential to provide meaningful clinical benefit for diseases in areas of high unmet medical need. These research and discovery programs include BAG3-mediated diseases associated with the cardiovascular system and the central nervous system. Additionally, we are exploring an AAV gene therapy program as a potential precision therapy for multiple genetic segments of ACM. To accelerate this new program, we have entered into a sponsored research agreement with the Nora Eccles Harrison Cardiovascular Research and Training Institute of theUniversity of Utah ("Utah"). See further information under the heading "License and Sponsored Research Agreements." 30 --------------------------------------------------------------------------------
License and Sponsored Research Agreements
Our current license and sponsored research agreements include theTemple License Agreement andTemple SRA , each described under the caption "Item 1. Business - License and Sponsored Research Agreements" in our 2021 Form 10-K and within Note 9 of the accompanying notes to the condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q, and the Utah SRA, as defined and more fully described below. In addition to our current arrangements, we may seek to enter into additional sponsored research agreements or collaborative alliances to support development and commercialization of REN-001 and/or research additional drug candidates.
InJune 2022 , we entered into a research agreement (the "Utah SRA") withUtah , pursuant to which (i)Utah andRenovacor will conduct a research collaboration focused on a protein discovered byUtah's scientists that has the potential to address multiple genetic segments of ACM, and (ii) we were granted an option for an exclusive license to inventions generated from the collaboration, the terms of which shall be negotiated following notice in writing of exercise of the option. The term of the Utah SRA commenced onJuly 1, 2022 and shall continue untilJune 30, 2027 unless earlier terminated in accordance with the provisions of the Utah SRA (the "Initial Term"); provided, however, the Utah SRA may be extended for additional periods of performance beyond the Initial Term, upon written approval by us andUtah . Pursuant to the terms of the Utah SRA, we are obligated to fundUtah a total of approximately$3.5 million during the five-year Initial Term.
The Business Combination
OnSeptember 2, 2021 , we consummated the previously announced business combination contemplated by that certain Agreement and Plan of Merger, datedMarch 22, 2021 , by and among the Company,CHAQ2 Merger Sub, Inc. , a wholly owned subsidiary of the Company ("Merger Sub"), andRenovacor Holdings, Inc. (f/k/aRenovacor, Inc. ("Old Renovacor")), pursuant to which Merger Sub merged with and into Old Renovacor, with Old Renovacor as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of the Company (the "Business Combination"). OnSeptember 2, 2021 , the Company changed its name fromChardan Healthcare Acquisition 2 Corp. toRenovacor, Inc.
The Business Combination was accounted for as a reverse recapitalization in
accordance with
On
See Note 1, "
COVID-19
We continue to monitor the potential impact of the novel coronavirus disease
("COVID-19") pandemic, including variants thereof such as the delta and omicron
variants, on our business and financial statements. To date, we have not
experienced material business disruptions. We are following, and will continue
to follow, recommendations from the U.S. Centers for Disease Control and
Prevention as well as federal, state, and local governments regarding
working-from-home practices for non-essential employees. For example, the
COVID-19 outbreak in Pennsylvania resulted in a temporary reduction in workforce
presence at the Temple research facility, including the Feldman laboratory,
located in Philadelphia , at which we operate. While the Feldman laboratory is
currently operating at normal capacity, we cannot be certain that the Temple
facility or the Feldman laboratory will not be closed in the future, or
experience labor shortages, as a result of the COVID-19 outbreak. Accordingly,
the full extent to which the COVID-19 pandemic will directly or indirectly
impact our business, results of operations and financial condition, including
expenses and manufacturing, supply chain, labor, preclinical and clinical trials
and research and development costs, will depend on future developments that are
highly uncertain at this time.
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--------------------------------------------------------------------------------Results of Operations
Three and Six Months Ended
Overview
During the three months endedJune 30, 2022 , our loss from operations totaled$9.1 million , a 145% increase compared to a loss from operations of$3.7 million for the three months endedJune 30, 2021 . During the six months endedJune 30, 2022 , our loss from operations totaled$18.0 million , a 233% increase compared to a loss from operations of$5.4 million for the six months endedJune 30, 2021 . Research and development expenses comprised the majority of our total operating expenses, as shown in the table below. Three Months Ended Six Months Ended June 30, June 30, ($ in thousands) 2022 2021 $ Change 2022 2021 $ Change Operating expenses: Research and development$ 6,289 $ 3,333 $ 2,956 $ 12,219 $ 4,488 $ 7,731 General and administrative 2,838 385 2,453 5,763 912 4,851 Total operating expenses$ 9,127 $ 3,718 $ 5,409 $ 17,982 5,400$ 12,582 Loss from operations$ (9,127 ) $ (3,718 ) $ (5,409 ) $ (17,982 ) $ (5,400 ) $ (12,582 )
Research and Development Expenses
Research and development expenses consist of costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:
•
employee-related expenses, including salaries, payroll taxes, related benefits and stock-based compensation expense for employees engaged in research and development functions;
•
expenses incurred in connection with the preclinical development of our product candidates and the development of research programs, including under agreements with third parties, such as consultants, contractors, preclinical laboratories, licensors, CMOs, and CROs; and
•
laboratory supplies and research materials.
We expense research and development costs as incurred. Non-refundable advance
payments that we make for goods or services to be received in the future for use
in research and development activities are recorded as prepaid expenses. The
prepaid amounts are expensed as the related goods are delivered or the services
are performed, or when it is no longer expected that the goods will be delivered
or the services rendered.
Our direct external research and development expenses consist of costs that
include fees, reimbursed materials, and other costs paid to consultants,
contractors, CMOs and other research organizations in connection with our
preclinical activities. We do not allocate employee costs, costs associated with
our discovery efforts, laboratory supplies, facilities expenses, including
depreciation or other indirect costs, to specific product development programs
because these costs are deployed across multiple programs and, as such, are not
separately classified.
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In the table below, research and development expenses are set forth in the following categories: (i) compensation and related benefits and (ii) other external research and development costs.
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands) 2022 2021 $ Change 2022 2021 $ Change
Compensation and related
benefits $ 2,353 $ 462 $ 1,891 $ 4,354 $ 497 $ 3,857
Other external research and
development costs 3,936 2,871 1,065 7,865 3,991 3,874
Total research and
development expenses $ 6,289 $ 3,333 $ 2,956 $ 12,219 $ 4,488 $ 7,731
Total research and development expenses were $6.3 million for the three months
ended June 30, 2022 , a 89% increase compared to total research and development
expenses of $3.3 million for the three months ended June 30, 2021 . Total
research and development expenses for the six months ended June 30, 2022 were
$12.2 million , a 172% increase compared to total research and development
expenses of $4.5 million for the six months ended June 30, 2021 . The increase
during the each of the three and six months ended June 30, 2022 , as compared to
the corresponding prior period, were primarily due to increases in (i)
compensation-related costs associated with the hiring of key personnel and
overall increase in number of employees, (ii) drug supply costs associated with
our preclinical activities, including IND-enabling studies and preparation for
potential clinical trials, and (iii) external costs associated with the
execution of ongoing preclinical studies as we prepare for an IND submission for
REN-001, which is planned for the second half of 2022, and related clinical
activities.
Substantially all research and development expenses incurred by us to date relate to the discovery and preclinical development of REN-001.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and
personnel-related costs, including stock-based compensation, for personnel in
executive, finance and accounting, and other administrative functions. General
and administrative expenses also include legal fees relating to patent and
corporate matters; professional fees paid for accounting, auditing, consulting,
and tax services; insurance costs and travel expenses.
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands) 2022 2021 $ Change 2022 2021 $ Change
Compensation and related
benefits $ 1,162 $ 120 $ 1,042 $ 2,147 $ 219 $ 1,928
Professional and consulting
fees 964 220 744 2,196 627 1,569
Other administrative costs 712 45 667 1,420 66 1,354
Total general and
administrative expenses $ 2,838 $ 385 $ 2,453 $ 5,763 $ 912 $ 4,851
Total general and administrative expenses were $2.8 million for the three months
ended June 30, 2022 , a 637% increase compared to total general and
administrative expenses of $0.4 million for the three months ended June 30,
2021 . Total general and administrative expenses were $5.8 million for the six
months ended June 30, 2022 , a 532% increase compared to total general and
administrative expenses of $0.9 million for the six months ended June 30, 2022 .
The increase during each of the three and six months ended June 30, 2022 , as
compared to the corresponding prior period, were primarily due to increases in
(i) compensation-related costs associated with the hiring of key personnel and
overall increase in number of employees, (ii) professional and consulting fees
due to increases in legal costs, fees incurred with investor/public relations
firms, and contract labor, and (iii) other administrative costs related to
additional spending as a result of our growth and operating as a publicly-traded
company, including board fees and director and officer insurance.
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--------------------------------------------------------------------------------Interest Income
During the three and six months endedJune 30, 2022 , we recorded less than$0.1 million of interest income primarily related to investments in money market funds classified as cash equivalents. No such interest income was recognized during the three and six months endedJune 30, 2021 .
Change in Fair Value of Warrant Liability
During the three and six months endedJune 30, 2022 we recorded a change in the fair value of warrant liability, representing a non-cash warrant revaluation gain of approximately$2.9 million and$10.2 million respectively, related to our liability-classified Private Placement Warrants, as more fully described in Note 10 of the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Due to the nature of and inputs in the model used to assess the fair value of our outstanding Private Placement Warrants, it is not abnormal to experience significant fluctuations during each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock price and changes in estimated stock price volatility over the remaining life of the warrants. Changes in the fair value of the warrant liability and resulting warrant revaluation gains for the three and six months endedJune 30, 2022 was driven primarily by the decrease in our stock price during each period.
Change in Fair Value of Share Earnout Liability
During the three and six months endedJune 30, 2022 we recorded a change in fair value of share earnout liability, representing a non-cash share earnout revaluation gain of approximately$2.2 million and$10.3 million respectively, related to our liability-classified Earnout Shares, as more fully described in Note 4 of the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Due to the nature of and inputs in the model used to assess the fair value of the outstanding Earnout Shares, it is not abnormal to experience significant fluctuations during each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock price and changes in estimated stock price volatility over the remaining life of the warrants. Changes in the fair value of the share earnout liability and resulting share earnout revaluation gains for the three and six months endedJune 30, 2022 was driven primarily by the decrease in our stock price during each period. Net Income (Loss) As a result of the factors discussed above, net loss for the three months endedJune 30, 2022 was$4.0 million , compared to net loss of$3.7 million for the three months endedJune 30, 2021 . Net income for the six months endedJune 30, 2022 was$2.6 million , compared to a net loss of$5.4 million for the six months endedJune 30, 2021 . 34
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Financial Condition, Liquidity and Capital Resources
Financial Condition
As of
Since our inception, we have focused substantially all of our resources on organizing and staffing the company, in-licensing key intellectual property, business planning, raising capital, conducting research and development activities, filing and prosecuting patent applications, and engaging in other preclinical activities. We do not have any products approved for sale and have not generated any revenue from product sales or from any other sources. To date, we have funded our operations with proceeds from the Business Combination and thePIPE Investment , sales of convertible preferred stock, and a convertible note. Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue, and in particular to generate product revenue sufficient to achieve profitability, will depend on the successful development and eventual commercialization of one or more of our product candidates.
Liquidity and Capital Resources
Overview
We require cash to fund our operating expenses and to make capital expenditures. Historically, we have funded our cash requirements primarily through the sale of preferred stock, common stock, pre-funded warrants, common stock warrants and a convertible note. As ofJune 30, 2022 we had$62.0 million of cash and cash equivalents.
Funding Requirements
We believe that, based on our current operating plan, our existing cash and cash equivalents on hand as ofJune 30, 2022 will enable us to fund our operations into the fourth quarter of 2023. Specifically, we believe our available funds will be sufficient to enable us to perform the following:
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complete IND-enabling studies for our REN-001 AAV-based gene therapy program and potentially submit an IND for REN-001;
•
fund our obligations under the
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initiate our phase I/II trial in DCM patients with BAG3 mutation (REN-001); and
•
maintain the necessary level of general and administrative expense in order to support the business.
However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, we could utilize our available capital resources sooner than expected. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect our expenses and capital expenditures to increase substantially in connection with our ongoing activities, particularly if and as we:
•
initiate IND-enabling studies for our REN-001 AAV-based gene therapy program;
•
continue our current research programs and preclinical development of product candidates from our current research programs;
•
advance additional product candidates into preclinical and clinical development;
•
advance our clinical-stage product candidate, if any, into later stage clinical trials;
•
seek to discover, validate, and develop additional product candidates, including carrying out activities related to our discovery stage programs;
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seek regulatory approvals for any product candidates that successfully complete clinical trials;
•
scale up our manufacturing processes and capabilities, or arrange for a third party to do so on our behalf, to support our clinical trials of our product candidates and potential commercialization of any of our product candidates for which we may obtain marketing approval;
•
establish a sales, marketing, and distribution infrastructure or channel to commercialize any product candidate for which we may obtain regulatory approval;
•
acquire or in-license products, product candidates, or technologies;
•
maintain, expand, enforce, defend, and protect our intellectual property portfolio;
35
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hire additional clinical, quality control, and scientific personnel; and
•
add operational, financial, and management information systems and personnel, including personnel to support our product development, planned future commercialization efforts, and our operations as a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, and distribution. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. Additionally, we may receive up to an aggregate of approximately$89.8 million from the exercise of our warrants outstanding as ofJune 30, 2022 , assuming the exercise in full of such warrants for cash. See Note 10 of the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for additional details on our outstanding warrants. However, certain warrants may be exercised on a cashless basis and our warrants may never be exercised. If we fail to raise capital or enter into such agreements or arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates. The timing and amount of our funding requirements will depend on many factors, including:
•
the scope, progress, costs, and results of preclinical and clinical development for our other product candidates and development programs;
•
the number of and development requirements for other product candidates that we pursue;
•
the costs, timing and outcome of regulatory review of our product candidates;
•
the cost and timing of completion of commercial-scale manufacturing activities;
•
our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;
•
the payment or receipt of milestones and receipt of other collaboration-based revenues, if any;
•
our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;
•
the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we receive marketing approval;
•
the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims;
•
the extent to which we acquire or in-license other products, product candidates or technologies;
•
the receptivity of the capital markets to financings by biotechnology companies generally and companies with product candidates and technologies similar to ours specifically;
•
the volatility of capital markets, inflation and other macroeconomic factors, including due to geopolitical tensions or the outbreak of hostilities or war; and
•
the impact of the ongoing coronavirus disease, COVID-19, to global economy and capital markets, and to our supply chain, business and our financial results.
36
--------------------------------------------------------------------------------In addition, increases in expenses or delays in clinical development may adversely impact our cash position and require additional funds or cost reductions.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, it will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce or terminate our operations, or relinquish rights to portions of our technology and/or product candidates. Cash Flows
The following table provides a summary of the primary sources and uses of cash for the periods presented:
Six months ended
June 30,
(In thousands) 2022 2021
Net cash (used in) provided by:
Net cash used in operating activities
$ (16,797 ) $ (4,935 ) Operating Activities. Net cash used in operating activities for each period presented consists primarily of net income (loss) adjusted for non-cash gains or charges and changes in components of working capital. The increase in cash used in operating activities for the six months endedJune 30, 2022 , as compared to the same period in 2021, was primarily due to significant increases in expenditures and corresponding cash outflows related to our REN-001 development program, including payments to consultants and contract research and manufacturing organizations, as we prepare for our potential clinical activities for REN-001. Investing Activities. Net cash used in investing activities for the six months endedJune 30, 2022 consisted of$0.7 million for the purchase of property and equipment. There was no cash used in or provided by investing activities during the six months endedJune 30, 2021 .
Financing Activities. Net cash used in financing activities for each of the six
months ended
Contractual Obligations and Commitments
During the six months endedJune 30, 2022 , there were no material changes outside the ordinary course of our business to our contractual obligations as disclosed in our 2021 Form 10-K, however, during the six months endedJune 30, 2022 , we entered into two lease agreements and the Utah SRA, each as more fully described in Note 9 of the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. 37 --------------------------------------------------------------------------------
Critical Accounting Policies and Significant Judgments and Estimates
This management's discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments which are affected by the application of our accounting policies Management bases its estimates and judgments on historical experience and on various other factors that are believed to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We regard an accounting estimate or assumption underlying our financial statements as a "critical accounting estimate" where:
(i)
the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and
(ii)
the impact of the estimates and assumptions on financial condition or operating performance is material.
Our significant accounting policies are described in Note 2 of the accompanying notes to the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q. Not all of these significant policies, however, fit the definition of critical accounting policies and estimates. We believe that our accounting policies relating to (i) research and development prepayments, accruals and related expenses, (ii) warrant liabilities and related change in fair values (gains / losses), and (iii) share earnout liabilities and related change in fair values (gains / losses), fit the description of critical accounting estimates and judgments.
New Accounting Pronouncements
New accounting pronouncements are discussed in Note 2 in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
As of
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 of (1) the last day of the fiscal year following the fifth anniversary of the closing of the initial public offering of Chardan, (2) the last day of the fiscal year in which we have total annual gross revenue of at least$1.07 billion , (3) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded$700.0 million as of the last business day of the second fiscal quarter of such year, or (4) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. 38
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