UNICYCIVE THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition
and plan of operations together with and our accompanying financial statements
and the related notes appearing elsewhere in this Annual Report on Form 10-K. In
addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
Our actual results may differ materially from those discussed below. Factors
that could cause or contribute to such differences include, but are not limited
to, those identified below, and those discussed in the section titled "Risk
Factors" included elsewhere in this Annual Report on Form 10-
Overview
We are a biotechnology company dedicated to developing treatments for kidney disease that have the potential to offer medical benefit. Our development programs are focused on the development of two novel therapies: Renazorb, for treatment of hyperphosphatemia in patients with chronic kidney disease, and UNI 494, for treatment of acute kidney injury (AKI).
Chronic kidney disease (CKD) is the gradual loss of kidney function that can get
worse over time leading to lasting damage. Our initial focus is developing drugs
and getting them approved in the US, and then look to partner with the other
global biopharmaceutical companies in the rest of the world. According to
estimates by The
AKI is a sudden episode of kidney failure or kidney damage (within the first 90
days of injury). After 90 days, the patient is considered to have progressed
into CKD. AKI affects over 2 million US patients and costs the healthcare system
over
Our business model is to license technologies and drugs and pursue development, regulatory approval, and commercialization of those products in global markets. Many biotechnology companies utilize similar strategies of in-licensing and then developing and commercializing drugs. We believe, however, that our management team's broad network, expertise in the biopharmaceutical industry, and successful track record gives us an advantage in identifying and bringing these assets into the Company at an attractive price with limited upfront cost.
Since our formation we have devoted substantially all of our resources to
developing our product candidates. We have incurred significant operating losses
to date. Our net losses were
We have funded our operations primarily from the sale and issuance of common stock, convertible promissory notes and from a loan, including cash and deferred salary from our Chief Executive Officer and principal stockholder.
Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of our current product candidates and future product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into agreements to raise capital as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our current product candidates and future product candidates.
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We plan to continue to use third-party service providers, including contract manufacturing organizations, to carry out our pre-clinical and clinical development and to manufacture and supply the materials to be used during the development and commercialization of our product candidates.
Recent Developments
On
Pursuant to the Certificate of Designation of Preferences, Rights and
Limitations of the Series A Convertible Voting Preferred Stock (the "Certificate
of Designation"), each share of Series A-1 Preferred Stock is, subject to the
Stockholder Approval (as defined below), convertible into a unit ("Unit")
consisting of (i) shares of common stock, par value
Subject to the terms and limitations contained in the Certificate of Designation, the Series A-1 Preferred Stock issued in the Offering will not become convertible until our stockholders approve the issuance of the Units upon conversion of the Series A-1 Preferred Stock and the issuance of all Common Stock upon conversion of the Series A Preferred Stock (as defined below), among other items (the "Stockholder Approval"). On the tenth (10th) Trading Day (as defined in the Certificate of Designation) following the announcement of the Stockholder Approval, each share of Series A-1 Preferred Stock shall automatically convert into a Unit. Subject to the limitations set forth in the Certificate of Designation, at the option of the holder, each share of Series A-2 Preferred Stock, Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible Preferred Stock shall be convertible into one share of Common Stock.
In addition, in connection with the Offering, we agreed to modify our dividend policy to state that we intend to pay dividends to all stockholders, including holders of Series A Preferred Stock on an as-if-converted-to-Common-Stock basis, on a quarterly basis in an amount of which the aggregate of all quarterly dividends shall equal at least seventy-five percent (75%) of our annual net cash flow from operations following approval of Renazorb by the FDA, if obtained, and the commencement of commercial sales.
The COVID-19 Pandemic and its Impacts on Our Business
In
Components of Results of Operations
Revenues
We recognize revenue from product sales or services rendered when control of the promised goods are transferred to a counterparty in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as we satisfy a performance obligation. We may earn licensing revenue in the future if we negotiate business development arrangements with third parties.
Research and Development Expenses
Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses include fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees and allocated overheads, including information technology costs and utilities and expenses for the issuance of shares pursuant to the anti-dilution clause in the purchase of in process research and development technology ("IPR&D"). We expense both internal and external research and development expenses as they are incurred.
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We do not allocate our costs by product candidate, as a significant amount of research and development expenses include internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead, and external costs, such as fees paid to third parties to conduct research and development activities on our behalf, are not tracked by product candidate.
We expect our research and development expenses to increase substantially for at least the next few years, as we seek to initiate additional clinical trials for our product candidates, complete our clinical programs, pursue regulatory approval of our product candidates and prepare for the possible commercialization of such product candidates. Predicting the timing or cost to complete our clinical programs or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.
General and Administrative Expenses
General and administrative expenses consist principally of payroll and personnel
expenses, including salaries and bonuses, benefits and stock-based compensation
expenses, professional fees for legal, consulting, accounting and tax services,
including information technology costs and utilities, and other general
operating expenses not otherwise classified as research and development
expenses, as well as services incurred pursuant to a services agreement with
We anticipate that our general and administrative expenses will increase as a
result of increased personnel costs, expanded infrastructure and higher
consulting, legal and accounting services costs associated with complying with
the applicable stock exchange and the
Other Expenses
Other expenses consist primarily of interest expense related to convertible notes and a loss on conversion of convertible notes.
Results of Operations
Comparison of the Years Ended
Years Ended
December 31,
2021 2022 Change % Change
Licensing revenues: $ - $ 951 $ 951 100 %
Operating expenses:
Research and development 6,080 12,436 6,356 105 %
General and administrative 2,897 6,567 3,670 127 %
Total operating expenses 8,977 19,003 10,026 112 %
Loss from operations (8,977 ) (18,052 ) (9,075 ) 101 %
Other income (expenses):
Interest expense (628 ) (6 ) 622 (99 )%
Loss on debt conversion (431 ) - 431 (100 )%
Gain on extinguishment of debt 19 - (19 ) (100 )%
Total other income (expenses) (1,040 ) (6 ) 1,034 (99 )%
Net loss $ (10,017 ) $ (18,058 ) $ (8,041 ) 80 %
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Licensing Revenues
Licensing revenues increased approximately
Research and Development Expenses
Research and development expenses increased by approximately
General and Administrative Expenses
General and administrative expenses increased by approximately
Other Income (Expenses)
Other income (expenses) decreased by approximately
Liquidity and Capital Resources
Sources of Liquidity
Since our formation through
As a result of our initial public offering ("IPO"), on
Future revenue streams may consist of collaboration or licensing revenue as well
as product sales. We have generated approximately
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Future Funding Requirements
We have incurred net losses since our inception. For the year ended
On
We expect to continue incurring losses in the future and will be required to
raise additional capital in the future to complete our clinical trials, pursue
product development initiatives and penetrate markets for the sale of our
products. We believe that we will continue to have access to capital resources
through possible equity offerings, debt financings, corporate collaborations or
other means. There can be no assurance that we will be able to obtain additional
financing on terms acceptable to us, on a timely basis or at all. If we are
unable to secure additional capital, we may be required to curtail any clinical
trials and development of new or existing products and take additional measures
to reduce expenses in order to conserve our cash in amounts sufficient to
sustain operations and meet our obligations. Based on our current level of
expenditures, and after receiving the net proceeds of
We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:
? the scope, timing, rate of progress and costs of our drug discovery
efforts, pre-clinical development activities, laboratory testing and
clinical trials for our current product candidates and future product
candidates;
? the number and scope of clinical programs we decide to pursue;
? the cost, timing and outcome of preparing for and undergoing regulatory
review of our current product candidates and future product candidates;
? the scope and costs of development and commercial manufacturing activities;
? the cost and timing associated with commercializing our current product
candidates and future product candidates, if they receive marketing
approval;
? the extent to which we acquire or in-license other product candidates and
technologies;
? the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims;
? our ability to establish and maintain collaborations on favorable terms,
if at all;
? our efforts to enhance operational systems and our ability to attract,
hire and retain qualified personnel, including personnel to support the
development of our current product candidates and future product
candidates and, ultimately, the sale of our products, following FDA
approval;
? the impact, if any, of the coronavirus pandemic on our business operations;
? our ability to access capital;
? our implementation of operational, financial and management systems; and
? the costs associated with being a public company.
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A change in the outcome of any of these or other variables with respect to the development of any of our current product candidates or future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.
Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.
Related Party Payable
We entered into a Service Agreement with
Convertible Notes
In January through
We accounted for the 2021 Notes as stock-settled debt and we were accreting the carrying amount of the 2021 Notes to the settlement amount through maturity.
In July and through
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We accounted for the 2020 Notes as stock-settled debt and we are accreting the
carrying amount of the 2020 Notes to the settlement amount through maturity. As
of
Interest expense, including discount accretion expense for the 2021 and 2020
Notes was
As a result of our initial public offering on
Private Placement
On
Summary of Cash Flows
The following table sets forth the primary sources and uses of cash for each of the periods presented below (in thousands):
Years Ended
December 31,
2021 2022
Net cash (used in) provided by:
Operating activities $ (5,767 ) $ (15,651 )
Investing activities (29 ) (2 )
Financing activities 22,375 (471 )
Net (decrease) increase in cash
Cash Flows from Operating Activities
Net cash used in operating activities was
Net cash used in operating activities was
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Cash Flows from Investing Activities
Net cash used in investing activities was
Cash Flows from Financing Activities
Net cash used by financing activities was
Net cash provided by financing activities was
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our financial statements have been prepared in accordance with
Revenue Recognition
We implemented ASC 606, Revenue from Contracts with Customers. This included the development of new policies based on the five-step model provided in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures. We recognize revenue from product sales or services rendered when control of the promised goods are transferred to a counterparty in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as we satisfy a performance obligation.
Research and Development
We expense costs when incurred related to the research and development associated with the design, development and testing of product candidates, as well as acquisition of product candidates or compounds. Research and development expenses include fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees and allocated overheads, including information technology costs and utilities and expenses for issuance of shares pursuant to anti-dilution clause in the purchase of IPR&D technology. We expense both internal and external research and development expenses as they are incurred.
Stock-Based Compensation
We account for stock-based compensation for all share-based payments made to employees and non-employees by estimating the fair value on the date of grant and recognizing compensation expense over the requisite service period on a straight-line basis. We recognize forfeitures related to stock-based compensation as they occur. We estimate the fair value of stock options using the Black-Scholes option-pricing model. The Black-Scholes model requires the input of subjective assumptions, including expected common stock volatility, expected dividend yield, expected term, and the risk-free interest rate.
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JOBS Act
On
We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
Subject to certain conditions set forth in the JOBS Act, as an "emerging growth
company," we intend to rely on certain of these exemptions, including, without
limitation, (i) providing an auditor's attestation report on our internal
controls over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act and (ii) complying with the requirement adopted by the
Recent Accounting Pronouncements
See Note 2 to our audited financial statements found elsewhere in this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our financial statements.
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