ACURX PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing elsewhere in this Form 10-K and our final prospectus for our
initial public offering filed pursuant to Rule 424(b)(4) under the Securities
Act of 1933, as amended, or the Securities Act, on
Investors and others should note that we routinely use the Investor Relations section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investor Relations section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that it shares on the Investors section of our website, www.acurxpharma.com.
Overview
Our approach is to develop a new class of antibiotic candidates that block the DNA polymerase IIIC ("Pol IIIC"). We believe we are developing the first Pol IIIC inhibitor to enter clinical trials and have clinically validated the bacterial target by demonstrating the efficacy of our lead antibiotic candidate in a Phase 2a clinical trial. Pol IIIC is the primary catalyst for DNA replication of several Gram-positive bacterial cells. Our research and development pipeline includes clinical stage and early stage antibiotic candidates that target Gram-positive bacteria for oral and/or parenteral treatment of infections caused by Clostridium difficile ("C. difficile"), Enterococcus (including vancomycin-resistant strains ("VRE")), Staphylococcus (including methicillin-resistant strains), and Streptococcus (including antibiotic resistant strains).
Pol IIIC is required for the replication of DNA in certain Gram-positive bacterial species. By blocking this enzyme, our antibiotic candidates are believed to be bactericidal and inhibit proliferation of several common Gram-positive bacterial pathogens, including both sensitive and resistant C. difficile, methicillin-resistant Staphylococcus aureus ("MRSA"), vancomycin-resistant Enterococcus, penicillin-resistant Streptococcus pneumonia ("PRSP") and other resistant bacteria.
We intend to "de-risk" this new class of antibiotics through our drug development activities and potentially partner with a fully-integrated pharmaceutical company for late-stage clinical trials and commercialization.
Our lead antibiotic candidate, ibezapolstat (formerly named ACX-362E), has a
novel mechanism of action that targets the Pol IIIC enzyme, a previously
unexploited scientific target. Phase 2a clinical efficacy of our lead antibiotic
validate the Pol IIIC bacterial target. On
58
Table of Contents
randomized (1-to-1), non-inferiority, double-blind, trial of oral ibezapolstat compared to oral vancomycin, a standard of care to treat C. difficile infections ("CDI").
Prior to that, we completed our Phase 2a clinical trial of ibezapolstat to treat
patients with CDI and reported the top-line data in
The
Currently available antibiotics used to treat CDI infections utilize other mechanisms of action. We believe ibezapolstat is the first antibiotic candidate to work by blocking the DNA Pol IIIC enzyme in C. difficile. This enzyme is necessary for replication of the DNA of certain Gram-positive bacteria, like C. difficile.
We also have an early stage pipeline of antibiotic product candidates with the same previously unexploited mechanism of action which has established proof of concept in animal studies. This pipeline includes ACX-375C, a potential oral and parenteral treatment targeting Gram-positive bacteria, including MRSA, VRE and PRSP.
As of
Recent Developments
Based on the blinded observed data from the ongoing Phase 2b clinical trial to
date, in
Referring Physician Program and Trial Site Expansion
In
According to the physician prescribing data available to us from an industry-standard source, identified RPs in the aggregate of just fourteen of our currently activated clinical trial sites treated a total of over 30,000 patients in a recent one-year period, suggesting that a substantial number of subjects could potentially be available for referral to one of
59
Table of Contents
these fourteen clinical trial sites if the patients qualify. The first tranche of this program has been activated with seventeen of our clinical trial sites and any further increases, if any, will follow after the review by IDMC of interim data from the Phase 2b clinical trial.
We believe the Referring Physician Program, which has a number of other supportive elements, will enhance the rate of enrollment potentially mitigating or partially mitigating the countervailing enrollment disruption caused by the COVID-19 pandemic.
Additionally, in
Registered Direct Offering
On
The gross proceeds to us from the registered direct offering were
In a concurrent private placement, we issued to the
On
Initial Public Offering
On
60
Table of Contents
complete the Phase 2b clinical trial of ibezapolstat in patients with CDI,
(ii) to complete pre-clinical development of ACX-375C and (iii) for general
corporate purposes, which may include, without limitation, expenditures relating
to research, development and clinical trials other than those specified above,
manufacturing, capital expenditures, hiring additional personnel, acquisitions
of new technologies or products, the payment, repayment, refinancing, redemption
or repurchase of existing or future indebtedness, obligations or capital stock,
and working capital. Prior to the IPO, we converted from a
Effects of Coronavirus (COVID-19) on Our Business
The
Since the start of the COVID-19 pandemic, we continued to enroll patients in our Phase 2a and Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, although enrollment rates decreased significantly compared to expectations at certain of our clinical trial sites. Other areas of our business experienced no change, including our research and development activities with key vendors. We believe that the COVID-19 pandemic has highlighted the importance of antibiotic development in responding to global health issues particularly because many hospitalized COVID-19 patients were also prescribed antibiotics which only accelerates the current antimicrobial resistance crisis described by several regulatory bodies worldwide.
The extent to which the COVID-19 pandemic will ultimately impact our business, results of operations, financial condition and cash flows depends on future developments that are highly uncertain, rapidly evolving and difficult to predict at this time. While we are not experiencing material adverse impacts at this time, given the global economic slowdown, the overall disruption of global supply chains and distribution systems and the other risks and uncertainties associated with the COVID-19 pandemic, our business, financial condition, results of operations and growth prospects could be materially and adversely affected. While we believe that we are well positioned for the future as we navigate the crisis and prepare for an eventual return to a more normal operating environment, we continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans and response strategy.
In
61
Table of Contents
Components of our Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all.
Research and Development Expenses
To date, our research and development expenses have related primarily to development of ibezapolstat, preclinical studies and other preclinical activities related to our portfolio. Research and development expenses are recognized as incurred and 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.
Research and development expenses include:
external research and development expenses incurred under agreements with
? contract research organizations, or CROs, and consultants to conduct our
preclinical, toxicology and other preclinical studies;
? laboratory supplies;
? costs related to manufacturing product candidates, including fees paid to
third-party manufacturers and raw material suppliers;
? license fees and research funding; and
facilities, depreciation and other allocated expenses, which include direct and
? allocated expenses for rent, maintenance of facilities, insurance, equipment
and other supplies.
Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. We outsource a substantial portion of our clinical trial activities, utilizing external entities such as CROs, independent clinical investigators and other third-party service providers to assist us with the execution of our clinical trials.
We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and seek to discover and develop new product candidates. Due to the inherently unpredictable nature of preclinical and clinical development, we cannot determine with certainty the timing of the initiation, duration or costs of future clinical trials and preclinical studies of product candidates. Clinical and preclinical development timelines, the probability of success and the amount of development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate's commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly based on factors such as:
? per-patient trial costs;
? the number of trials required for regulatory approval;
? the number of sites included in the trials;
? the countries in which the trials are conducted;
? the length of time required to enroll eligible patients;
? the number of patients that participate in the trials;
? the number of doses that patients receive;
? the drop-out or discontinuation rates of patients;
? potential additional safety monitoring requested by regulatory agencies;
62
Table of Contents
? the duration of patient participation in the trials and follow-up;
? the phase of development of the product candidate; and
? the efficacy and safety profile of the product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and
employee-related costs, including stock-based compensation, for personnel in our
executive, finance and other administrative functions. Other significant costs
include facility-related costs, legal fees relating to intellectual property and
corporate matters, professional fees for accounting and consulting services and
insurance costs. We anticipate that our general and administrative expenses will
increase in the future to support our continued research and development
activities, pre-commercialization and, if any product candidates receive
marketing approval, commercialization activities. We also anticipate increased
expenses related to audit, legal, regulatory and tax-related services associated
with maintaining compliance with exchange listing and
Results of Operations
Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, Percentage 2022 2021 Change (in thousands) OPERATING EXPENSES: Research and Development$ 4,754 $ 2,030 134 % General and Administrative 7,340 10,784 (32) % TOTAL OPERATING EXPENSES 12,094 12,814 (6) % Gain on forgiveness of Paycheck Protection Program Loan - 67 (100) % Net Loss$ (12,094) $ (12,747) (5) %
Research and Development Expenses. Research and development expenses were
General and Administrative Expenses. General and administrative expenses were
Net Loss. Net loss was
Liquidity and Capital Resources
Since inception, we have generated no revenue from operations and we have
incurred cumulative losses of approximately
63
Table of Contents
Based upon our lack of revenue expected for the foreseeable future, and because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities.
As of
Sources of Liquidity
To date, we have financed our operations principally through private placements of equity issuances, the IPO, and a registered direct offering.
Class A Membership Financings
We have funded our operations primarily from equity issuances. We received net
cash proceeds of approximately
Paycheck Protection Program Loan
In
Initial Public Offering
In
Registered Direct Offering
In
64
Table of Contents
Cash Flows
The following table sets forth a summary of the net cash flow activity for
the years ended
For the year ended
December 31,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (7,542) $ (5,013)
Financing activities 3,695 14,797
Net (decrease) / increase in cash
Operating Activities
Net cash used in operating activities was
Net cash used in operating activities was
Investing Activities
Net cash provided by investing activities were none for the years ended
Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
Funding Requirements
We believe that our existing cash will not be sufficient to meet our anticipated
cash requirements for at least 12 months from the issuance of our financial
statements for the year ended
Our future capital requirements will depend on many factors, including:
? the timing, progress, and results of our ongoing and planned clinical trials of
our product candidates;
? our ability to manufacture sufficient clinical supply of our product candidates
and the costs thereof;
discussions with regulatory agencies regarding the design and conduct of our
? clinical trials and the costs, timing and outcome of regulatory review of our
product candidates;
the cost 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;
? the costs of any other product candidates or technologies we pursue;
65
Table of Contents
? our ability to establish and maintain strategic partnerships, licensing or
other arrangements and the financial terms of such agreements;
? the revenue, if any, received from commercial sales of any product candidates
for which we receive marketing approval; and
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.
Until such time, if ever, as we can generate substantial product revenues to support our capital requirements, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. 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 terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity 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 funds through collaborations, or other similar arrangements with third parties, we may need to relinquish valuable rights to our product candidates, future revenue streams or research programs or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings as and 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 candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Recent Accounting Pronouncements
The
Critical Accounting Policies and Significant Judgments and Estimates
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Research and Development
The Company expenses research and development costs when incurred. At times, the Company may make cash advances for future research and development services. These amounts are deferred and expensed in the period the service is provided.
Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to the Company by its vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be. The estimates are adjusted to reflect the best information available at the time of the financial statement issuance. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company's estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.
66
Table of Contents
Share-Based Compensation
The Company accounts for the cost of services performed by employees, officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award. The Company recognizes compensation expense based on the requisite service period.
Compensation expense associated with stock option awards is recognized over the
requisite service period based on the fair value of the option at the grant date
determined based on the Black-Scholes option pricing model. Option valuation
models require the input of highly subjective assumptions including the expected
price volatility. The Company's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value computation
using the Black-Scholes option pricing model. Because there is no public market
for the Company's stock options and very little historical experience with the
Company's stock, similar public companies were used for the comparison of
volatility and the dividend yield. The risk-free rate of return was derived from
Share-Based Payments to Vendors
The Company accounts for the cost of services performed by vendors in exchange for an award of Company membership interests, common stock, or stock options, based on the grant-date fair value of the award or the fair value of the services rendered; whichever is more readily determinable. We also use Black-Scholes option pricing model for the purpose of estimating the fair value of options and warrants. Changes in our Black-Scholes assumptions, or if we were to utilize an alternative method for valuing options or warrants issued to our vendors, could impact our expense and our results of operations
© Edgar Online, source
