The following information should be read in conjunction with the unaudited
financial information and the notes thereto included in this Quarterly Report on
Form 10-Q and the audited financial information and notes thereto included in
our Annual Report on Form 10-K, which was filed with the Securities and Exchange
Commission (the "SEC") on March 30, 2022. Some of the information contained in
this discussion and analysis or set forth elsewhere in this Quarterly Report,
including information with respect to our plans and strategy for our business
and related financing, includes forward-looking statements that involve risks
and uncertainties. As a result of many factors, including those factors set
forth in Part 1, Item 1A, "Risk Factors" of our Annual Report on Form 10-K, our
actual results could differ materially from the results described in or implied
by the forward-looking statements contained in the following discussion and
analysis. Dollars in the text and in tabular format are presented in thousands,
except per share data, or as otherwise indicated.
Overview
We are a women's healthcare company dedicated to fulfilling the unmet health
needs of today's women. We are committed to innovating in women's healthcare
where there continues to be unmet needs - not only in contraception - but also
in other meaningful women's health therapeutic areas.
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Our first and only product, Twirla, which was approved in February 2020 and
launched in early December 2020, is a once-weekly prescription combination
hormonal contraceptive patch. It delivers a dose of estrogen consistent with
commonly prescribed combined hormonal contraceptives, or CHCs, and is lower than
the estrogen dose found in other marketed contraceptive patches. We believe
there is a market need for a contraceptive patch that is designed to deliver 30
mcg of estrogen and 120 mcg of progestin in a convenient once-weekly dosage form
that may support compliance in a noninvasive fashion. Twirla leverages our
proprietary transdermal patch technology called Skinfusion®. Skinfusion is
designed to allow drug delivery through the skin while promoting patch adhesion
and patient comfort and wearability, which may help support compliance.
With the approval of Twirla we are now focused on our advancement as a
commercial company. During 2022, we plan to continue implementing our
commercialization plan for Twirla, with the goal of becoming a contraceptive
market leader, and ultimately, pursuing opportunities to broaden our portfolio
to address areas of unmet medical need in women's health.
Our Strategy
Our near-term goal is to establish an initial franchise in the multi-billion
dollar U.S. hormonal contraceptive market built on approval of Twirla in the
U.S. Our resources are currently focused on the commercialization of Twirla. We
also expect to explore possible expansion through business development
activities, such as acquiring access to new products through in-licensing,
co-promotion or other collaborative arrangements.
Our current priorities are as follows:
Continue to implement our commercialization plans for Twirla to increase uptake
? of Twirla in the United States, including increasing targeted digital direct to
consumer advertising;
? Expand coverage and reimbursement for Twirla in the United States from private
and public third-party payors;
Continue to expand access to Twirla through multiple business channels
? including third-party payor contracts, retail and specialty pharmacies,
telemedicine and government contracting, and public health centers;
Maintain and manage the supply chain for Twirla to support increased
? commercialization of Twirla across the United States and working through
existing and future inventory prior to product becoming short-dated;
? Manage our available cash and obtain financing to fund our business plan
without delay;
? Reduce our operating loss and continue to progress towards generating positive
cash flows;
? Evaluate the advancement of our existing pipeline and its possible expansion
through business development activities; and
Complete and submit the final study report for a post-marketing commitment
? study and continue to implement our obligations for the post-marketing
requirement study.
It should be noted that current public health threats could adversely affect our
ongoing or planned business operations. In particular, the ongoing COVID-19
pandemic has resulted in federal, state and local governments and private
entities mandating various restrictions, including travel restrictions, access
restrictions, restrictions on public gatherings, and stay at home orders. The
most significant impacts to our business were encountered by sales
representatives promoting Twirla in the field, as some offices limited
opportunities for face-to-face interactions with healthcare providers. In many
cases COVID-19 restrictions have recently eased, but re-implementation of such
restrictions if necessary in the future may disrupt our business and/or could
adversely affect our commercialization plans and results. We cannot presently
predict the scope and severity of any potential business shutdowns or
disruptions, but if we or any of the third parties with whom we engage,
including personnel at third-party manufacturing facilities and other third
parties with whom we conduct business, were to experience shutdowns or other
business disruptions, our ability to conduct our business in the manner and on
the timeline presently planned could be materially and adversely impacted. It is
unknown how long these conditions will last and what the complete
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effect will be on us. While to date we have been able to continue to execute our
overall business plan, some of our business activities slowed and took longer to
complete as we adjusted to the challenges of operating in a largely remote
setting with our employees. While we have acclimated to a hybrid work model with
our employees, another shut down necessitating work in a completely remote
environment could result in delays to our business activities and
commercialization plan. Overall, we recognize the challenges of commercializing
a new product in a pandemic, will continue to closely monitor events as they
develop and plan for alternative and mitigating measures that we can implement
if needed.
Financial Overview
Since our inception in 1997, we have devoted substantial resources to developing
and seeking regulatory approval for Twirla, building our intellectual property
portfolio, business planning, raising capital and providing general and
administrative support for these operations. While we anticipate that a portion
of our operating expenses will continue to be related to research and
development as we plan our post marketing long-term, prospective observational
safety study, which is apost marketing requirement from the FDA, and evaluate
the development of our pipeline, our operating expenses have substantially
shifted towards commercialization activities for Twirla.
We have funded our operations primarily through sales of common stock,
convertible preferred stock, convertible promissory notes and term loans. As of
March 31, 2022, and December 31, 2021, we had $3.7 million and $19.1 million in
cash and cash equivalents, respectively.
In February 2020, we entered into a Credit Agreement and Guaranty with
Perceptive Credit Holdings III, LP, a related party ("Perceptive"), for a senior
secured term loan credit facility of up to $35.0 million (the "Perceptive Credit
Agreement"). A first tranche of $5.0 million was funded on execution of the
Perceptive Credit Agreement. A second tranche of $15.0 million was funded as a
result of the approval of Twirla by the FDA. Another $15.0 million tranche was
to be available to us based on the achievement of a revenue milestone by
December 31, 2021. We did not achieve that milestone and that tranche is no
longer available to us. On February 26, 2021 the Perceptive Credit Agreement was
amended ("Amended Perceptive Credit Agreement") by creating a fourth tranche of
$10.0 million that will be available based on the achievement of a revenue
milestone. We currently do not believe we will achieve the milestone for the
fourth tranche of $10.0 million. The facility will be interest only until the
third anniversary of the closing date. The interest rate and 1% fee payable upon
the drawing of a tranche set forth in the Perceptive Credit Agreement also
applied to the fourth tranche created by the Amended Perceptive Credit
Agreement. In addition, the Company received a covenant waiver pertaining to
the existence of a "going concern" qualification in the accompanying opinion of
the Company's auditors in the Company's Annual Report on Form 10-K, filed on
March 1, 2021. In connection with the Amended Perceptive Credit Agreement, the
Company issued to Perceptive a warrant to purchase 11,250 shares of the
Company's common stock with an exercise price of $114.80 per share.
On January 7, 2022, we entered into a second amendment to the Perceptive Credit
Agreement (the "Second Amendment"). The Second Amendment waives our obligations
to comply with certain financial covenants relating to minimum revenue
requirements through September 30, 2022 and to file financial statements along
with our Annual Report on Form 10-K that are not subject to any "going concern"
qualification. The effectiveness of the Second Amendment is conditioned upon the
satisfaction of certain conditions, including the Company raising additional
capital and prepaying a portion of its outstanding debt. On March 10, 2022, we
entered into a third amendment to the Perceptive Credit Agreement (the "Third
Amendment"). The Third Amendment waived the Company's obligations to (1) comply
with certain financial covenants relating to minimum revenue requirements
through September 30, 2022, conditioned upon the satisfaction of certain
conditions, including the Company raising additional capital and prepaying a
portion of its outstanding debt by April 30, 2022 and (2) file financial
statements along with its Annual Report on Form 10-K for the fiscal year ended
December 31, 2021 that are not subject to any "going concern" qualification.
In March 2021, we entered into a common stock sales agreement (the "2021 ATM
Agreement") under which we are authorized to sell up to an aggregate of
$50.0 million in gross proceeds through the sale of shares of common stock from
time to time in "at-the-market" equity offerings (as defined in Rule 415
promulgated under the Securities Act of 1933, as amended). We agreed to pay a
commission of up to 3% of the gross proceeds of any common stock sold under this
agreement. During the year ended December 31, 2022, we issued and sold a total
of 172,879 shares of common stock under the 2021 ATM Agreement resulting in net
proceeds of approximately $9.3 million.
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In October 2021, we completed a public offering of 666,666 shares of our common
stock and warrants to purchase 333,333 shares of our common stock at a combined
price of $34.00 per share of common stock and one-half of a warrant to purchase
one share of common stock. Proceeds from the public offering, net of
underwriting discounts, commissions and offering expenses were approximately
$21.1 million.
In January 2022, we entered into a common stock sales agreement (the "2022 ATM")
under which we are authorized to sell up to an aggregate of $50.0 million in
gross proceeds through the sale of shares of common stock from time to time in
"at-the-market" equity offerings (as defined in Rule 415 promulgated under the
Securities Act of 1933, as amended). We agreed to pay a commission of up to 3%
of the gross proceeds of any common stock sold under this agreement. During the
three months ended March 31, 2022 we issued and sold a total of 25,623 shares of
common stock under the 2022 ATM resulting in net proceeds of approximately
$0.3 million. On April 26, 2022, we terminated the 2022 ATM.
On March 13, 2022, we entered into a Securities Purchase Agreement (the
"Purchase Agreement") with a single healthcare-focused institutional investor
(the "Purchaser"), pursuant to which the Company issued, in a registered direct
offering (the "2022 Preferred Stock Offering"), 2,425 shares of Series A
convertible preferred stock (the "Series A Preferred Stock") and 2,425 shares of
Series B convertible preferred stock (the "Series B Preferred Stock") and Series
A warrants (the "Series A Warrants") to purchase up to an aggregate of 606,250
shares of the common stock of the Company (the "Common Stock") and Series B
warrants (the "Series B Warrants") to purchase up to an aggregate of 606,250
shares of Common Stock. Each share of Series A Preferred Stock and Series B
Preferred Stock has a stated value of $1,000 per share and a conversion price of
$8.00 per share. The shares of preferred stock issued in the offering are
convertible into an aggregate of 606,250 shares of Common Stock. The Series A
Warrants have an exercise price of $10.40 per share, will become exercisable six
months following the date of issuance, and will expire 5 years following the
initial exercise date. The Series B Warrants have an exercise price of $10.40
per share, will become exercisable six months following the date of issuance,
and will expire one and one-half years following the initial exercise date. The
Purchase Agreement contains customary representations and warranties and
agreements of the Company and the Purchaser and customary indemnification rights
and obligations of the parties. Total gross proceeds from the 2022 Preferred
Stock Offering, before deducting the placement agent's fees and other estimated
offering expenses, are $4.9 million. The 2022 Preferred Stock Offering closed
on March 14, 2022.
On April 25, 2022, we entered into a letter agreement and waiver ("Letter
Agreement") with Armistice Capital Master Fund Ltd. ("Armistice"), pursuant to
which Armistice consented to us entering into and effecting an at-the-market
("ATM") offering facility. Pursuant to the Letter Agreement, we issued to
Armisitice a new common stock purchase warrant ("New Warrant"), on the same
terms and conditions as the Series A Warrants, provided that such New Warrant
shall be exercisable into 212,188 warrant shares, subject to adjustment
thereunder. The Series A Warrants have an exercise price of $10.40 per share,
and will become exercisable six months following the date of issuance, and will
expire 5 years following the initial exercise date. The New Warrant is
exercisable 6 months after the date of the Letter Agreement.
On April 27, 2022, we entered into a common stock sales agreement (the "April
2022 ATM Agreement") under which we are authorized to sell up to an aggregate of
$12,841,000 in gross proceeds through the sale of shares of common stock from
time to time in "at the market" equity offerings (as defined in Rule 415
promulgated under the Securities Act of 1933, as amended) ("April 2022 ATM"). We
agreed to pay a commission of up to 3% of the gross proceeds of any common stock
sold under this agreement. As of May 9, 2022, we issued and sold a total of
873,564 shares of common stock under the April 2022 ATM Agreement resulting in
net proceeds of approximately $1.9 million.
Moving forward, we plan to monitor our cash and cash equivalents balances, in an
effort to ensure we have adequate liquidity to fund our operations. If the
COVID-19 pandemic or other factors impact our current business plan or our
ability to generate revenue from the launch of Twirla, we believe we have the
ability to revise our commercial plans, including curtailing sales and marketing
spending, to allow us to continue to fund our operations. In addition, we
believe we may have the potential to access additional capital through the April
2022 ATM, selling additional debt or equity securities or obtaining a line of
credit or other loan as required.
We have generated minimal revenue and have never been profitable for any year.
Our net loss was $74.9 million, $51.9 million and $18.6 million for the years
ended December 31, 2021, 2020 and 2019, respectively. Our net loss was $11.8
million and $17.1 million for the three months ended March 31, 2022 and 2021,
respectively.
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We expect to continue to incur significant operating losses for the foreseeable
future as we commercialize Twirla. This includes commercially launching Twirla,
advancing our other potential product candidates and expanding our research and
development programs.
Going Concern
As of March 31, 2022, we had cash and cash equivalents of $3.7 million. On April
8, 2022, we received $4.7 million through the sale of net operating losses
through the State of New Jersey's Technology Business Tax Certificate Transfer
Program. We closely monitor our cash and cash equivalents and expect that our
current cash will fund our planned through May 2022. We plan to raise additional
funds through debt issuances or the issuance and sale of our common stock to
meet our projected operating requirements, including the continued
commercialization of Twirla, the exploration and potential advancement of our
existing pipeline and our possible expansion through business development
activities.
Our future success depends on our ability to raise additional capital and/or
implement various strategic alternatives. Our ability to continue operations
will depend on our ability to obtain additional capital, and there can be no
assurance that any financing can be realized by the Company, or if realized,
what the terms of any such financing may be, or that any amount that the Company
is able to raise will be adequate. Based upon the foregoing, management has
concluded that there is substantial doubt about the Company's ability to
continue as a going concern through the 12 months following the date on which
this Quarterly Report on Form 10-Q is filed.
We continue to analyze various alternatives, including refinancing alternatives,
potential asset sales and mergers and acquisitions. We cannot be certain that
these initiatives or raising additional capital, whether through selling
additional debt or equity securities or obtaining a line of credit or other
loan, will be available to us or, if available, will be on terms acceptable to
us. If we issue additional securities to raise funds, whether through the
issuance of equity or convertible debt securities, or any combination thereof,
these securities may have rights, preferences, or privileges senior to those of
our common stock, and our current stockholders will experience dilution. 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 alliances or licensing
arrangements with pharmaceutical partners, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs or product
candidates, including Twirla, or grant licenses on terms that may not be
favorable to us. If we are unable to obtain funds when needed or on acceptable
terms, we then may be unable to complete the commercialization of Twirla and may
also be required to further cut operating costs, forego future development and
other opportunities and may need to seek bankruptcy protection.
The financial statements as of March 31, 2022 have been prepared under the
assumption that we will continue as a going concern for the next 12 months. Our
ability to continue as a going concern is dependent upon our uncertain ability
to obtain additional capital, reduce expenditures and/or execute on our business
plan and successfully launch Twirla. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
We do not own any manufacturing facilities and rely on our contract
manufacturer, Corium, for all aspects of the manufacturing of Twirla. We will
need to continue to invest in the manufacturing process for Twirla, and incur
significant expenses, in order to be capable of supplying projected commercial
quantities of Twirla. We have incurred significant expenses in order to create
an infrastructure to support the commercialization of Twirla, including sales,
marketing, distribution, medical affairs and compliance functions. We will need
to generate significant revenue to achieve profitability, and we may never do
so.
Financial Operations Overview
Revenue
To date, we have generated minimal revenue from product sales. In the future, in
addition to revenue from product sales, we may generate revenue from license
fees, milestone payments or royalties from the sale of products developed using
our intellectual property. Our ability to generate revenue and become profitable
depends on our ability to successfully commercialize Twirla and any product
candidates that we may advance in the future. If we fail to successfully
commercialize Twirla, or any other product candidates we advance in a timely
manner or obtain
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regulatory approval for them, our ability to generate future revenue, and our
results of operations and financial position, could be adversely affected.
For the three months ended March 31, 2022 and 2021, net sales totaled $1.8
million and $0.1 million, respectively, representing the sale of 16,818 units
and 744 units, respectively.
Cost of Product Revenues
Cost of product revenues include direct and indirect costs related to the
manufacturing of Twirla sold, including packaging services, freight,
obsolescence, and allocation of overhead costs that are primarily fixed such as
depreciation, salaries and benefits, and insurance. We expect these relatively
fixed costs to become less significant as a percentage of sales with anticipated
volume increases. There was no direct cost of product revenue on 744 units sold
in the three months ended March 31, 2021, as those units were validation
inventory which was previously expensed as research and development expense in
the fourth quarter of 2020.
For the three months ended March 31, 2022 and 2021, cost of product revenues
totaled $1.5 million and $1.2 million, respectively.
Research and Development Expenses
Since our inception and through approval of Twirla by the FDA in February 2020,
we focused our resources on our research and development activities. Research
and development expenses consist primarily of costs incurred for the development
of Twirla and other current and future potential product candidates, and
include:
expenses incurred under agreements with contract research organizations, or
? CROs, and investigative sites that conduct our clinical trials and preclinical
studies;
? employee-related expenses, including salaries, benefits, travel and stock-based
compensation expenses;
? the cost of acquiring, developing and manufacturing clinical trial materials,
including the supply of our potential product candidates; and
? costs associated with research, development and regulatory activities.
Research and development costs are expensed as incurred. Costs for certain
development activities, such as clinical trials, are recognized based on an
evaluation of the progress to completion of specific tasks using data such as
subject enrollment, clinical site activations or information provided to us by
our third-party vendors.
Research and development activities are central to our business model and to
date, our research and development expenses have related primarily to the
development of Twirla. Product candidates in later stages of clinical
development generally have higher development costs than those in earlier stages
of clinical development, primarily due to the increased size and duration of
later-stage clinical trials. We do not currently utilize a formal time
allocation system to capture expenses on a project-by-project basis, as the
majority of our past and planned expenses have been and will be in support of
Twirla.
For the three months ended March 31, 2022 and 2021, our research and development
expenses were approximately $1.3 million and $2.1 million, respectively. The
following table summarizes our research and development expenses by functional
area.
Three months ended
March 31,
(In thousands)
2022 2021
Clinical development $ 448 $ 1,251
Regulatory 133 158
Personnel related 573 664
Manufacturing-commercialization - (57)
Stock-based compensation 103 107
Total research and development expenses $ 1,257 $ 2,123
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It is difficult to determine with any certainty the exact duration and
completion costs of any of our future clinical trials of Twirla or our current
and future potential product candidates we may advance. It is also difficult to
determine if, when or to what extent we will generate revenue from the
commercialization and sale of Twirla or our potential product candidates that
obtain regulatory approval.
Future research and development costs incurred for our potential product
candidates and required post-marketing studies will depend on a variety of
factors, including the uncertainties of future clinical trials and preclinical
studies, the rate of subject enrollment, access to additional capital, and
significant and changing government regulation. For the foreseeable future, we
expect the current public health crisis to have a negative effect on the conduct
of clinical trials. In addition, the probability of success for each product
candidate will depend on numerous factors, including competition, manufacturing
capability and commercial viability. A change in the outcome of any of these
variables with respect to the development of a product candidate could mean a
significant change in the costs and timing associated with the development of
that product candidate. For example, if the FDA or another regulatory authority
were to require us to conduct clinical trials beyond those that we currently
anticipate will be required for the completion of clinical development of a
product candidate, or if we experience significant delays in enrollment in any
of our clinical trials, or experience issues with our manufacturing
capabilities, we could be required to expend significant additional financial
resources and time with respect to the development of that product candidate. We
will determine which programs to pursue and how much to fund each program in
response to the scientific and clinical success of each product candidate,
coupled with an assessment of each product candidate's commercial potential.
Substantially all of our resources are currently dedicated to commercializing
Twirla.
Selling and Marketing Expenses
Selling and marketing expenses consist principally of the cost of salaries and
related costs for personnel in sales and marketing, our contract sales force,
brand building, advocacy, market research and consulting. Selling and marketing
expenses are expensed as incurred.
For the three months ended March 31, 2022 and 2021, our selling and marketing
expenses totaled approximately $10.6 million and $9.3 million, respectively. Our
commercial launch of Twirla in the United States utilized a contract sales
force. We anticipate that our selling and marketing expenses will continue to be
significant as our commercialization efforts continue.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related
costs for personnel in executive, finance and administrative functions including
payroll taxes and health insurance, stock-based compensation and travel
expenses. Other general and administrative expenses include facility-related
costs, insurance and professional fees for legal, patent review, consulting and
accounting services. General and administrative expenses are expensed as
incurred.
For the three months ended March 31, 2022 and 2021, our general and
administrative expenses totaled approximately $4.0 million and $3.8 million,
respectively. We anticipate that our general and administrative expenses will
stabilize in the future.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance
with U.S. generally accepted accounting principles, or U.S. GAAP. The
preparation of these financial statements requires us to make significant
estimates and judgments that affect the reported amounts of assets, liabilities
and expenses and related disclosures. On an ongoing basis, our actual results
may differ significantly from our estimates.
There have been no material changes to our critical accounting policies and
estimates from the information discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in our
Annual Report on Form 10-K, as filed with the SEC on March 30, 2022.
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Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
Three Months Ended
March 31,
(In thousands)
2022 2021 Change
Revenues, net $ 1,761 $ 116 $ 1,645
Cost of product revenues 1,527 1,161 366
Gross profit 234 (1,045) 1,279
Operating expenses:
Research and development $ 1,257 $ 2,123 $ (866)
Selling and marketing 10,553 9,253 1,300
General and administrative 3,997 3,801 196
Total operating expenses 15,807 15,177 630
Loss from operations $ (15,573) $ (16,222) 649
Other income (expense)
Interest income 1 16 (15)
Interest expense (872) (922) 50
Total other income (expense), net (871) (906) 35
Loss before benefit from income taxes (16,444) (17,128) 684
Benefit from income taxes
4,675 - 4,675
Net loss $ (11,769) $ (17,128) $ 5,359Revenues. Revenue, net consists of sales of Twirla, which was approved by the
FDA in February 2020 and launched in the US in December 2020, and reflects the
shipment of Twirla to specialty distributors, net of estimates for applicable
variable consideration, which consist primarily of wholesale distribution fees,
prompt pay and other discounts, rebates, chargebacks, product returns and co-pay
assistance programs.
Cost of product revenues. Cost of product revenues totaled $1.5 million and
consist of direct and indirect costs related to the manufacturing of Twirla
sold, including third-party manufacturing costs, packaging services, freight,
and allocation of overhead costs that are primarily fixed such as depreciation,
salaries and benefits, and insurance.
Research and development expenses. Research and development expenses decreased
by $0.9 million, or 41%, from $2.1 million for the three months ended March 31,
2021 to $1.3 million for the three months ended March 31, 2022. This decrease in
research and development expenses was primarily due to a decrease in clinical
development expenses of $0.8 million for the three months ended March 31, 2022
as compared to the three months ended March 31, 2021. This decrease reflects a
reduction in spending related to our pipeline evaluation and development.
Selling and marketing expenses. Selling and marketing expenses increased by $1.3
million, or 14%, from $9.3 million for the three months ended March 31, 2021 to
$10.6 million for the three months ended March 31, 2022. This overall increase
in selling and marketing expenses is due to increased spending on marketing
initiatives and the launch of our first consumer commercial on connected TV in
the first quarter of 2022.
General and administrative expenses. General and administrative expenses
increased by $0.2 million, or 5%, from $3.8 million for the three months ended
March 31, 2021 to $4.0 million for the three months ended March 31, 2022. This
increase in general and administrative expense was primarily due to higher
professional fees.
Interest income. Interest income comprises interest earned on cash and cash
equivalents.
Interest expense. Interest expense is attributable to our term loan with
Perceptive and includes the amortization of the discount associated with
allocating value to the common stock warrants issued to Perceptive and the
amortization of the deferred financing costs associated with the term loan.
Interest expense decreased by $50,000 for the three months ended March 31, 2022
compared to the three months ended March 31, 2021 due to the $5.0 million
principal payment made during the three months ending March 31, 2022.
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Benefit from income taxes. Benefit from income taxes reflects $4.7 million
received under the State of New Jersey's Technology Business Tax Certificate
Transfer Program (the "Program") sponsored by The New Jersey Economic
Development Authority. The Program enables approved biotechnology companies with
unused NOLs and unused research and development credits to sell these tax
benefits for at least 80% of the value of the tax benefits to unaffiliated,
profitable corporate taxpayers in the State of New Jersey. The Program is
administered by The New Jersey Economic Development Authority and the New Jersey
Department of the Treasury's Division of Taxation. The Company has reached the
maximum lifetime benefit $20.0 million.
Liquidity and Capital Resources
At March 31, 2022, we had cash and cash equivalents totaling $3.7 million. We
invest our cash equivalents in short-term highly liquid, interest-bearing
investment-grade and government securities in order to preserve principal.
The following table sets forth the primary sources and uses of cash for the
periods indicated:
Three Months Ended March 31,
(In thousands)
2022 2021
Net cash used in operating activities $ (14,751) $ (14,668)
Net cash (used in) provided by investing activities (126) 16,185
Net cash (used in) provided by financing activities (523) 484
Net (decrease) increase in cash and cash equivalents $ (15,400) $ 2,001
Operating Activities
We incurred significant costs in the area of research and development, including
CRO fees, manufacturing, regulatory and other clinical trial costs, as Twirla
was being developed. With the approval of Twirla early in 2020, our operating
expenses shifted substantially to selling and marketing as we built out our
commercial infrastructure. Net cash used in operating activities was $14.8
million for the three months ended March 31, 2022 and consisted primarily of a
net loss of $11.8 million and a $4.7 million increase in income taxes
receivable, offset by non-cash stock-based compensation expense of $0.8 million,
depreciation expense of $0.5 million, and $0.5 million of other non-cash
charges, primarily interest expense. Net cash used in operating activities was
$14.7 million for the three months ended March 31, 2021 and consisted primarily
of a net loss of $17.1 million, offset by non-cash stock-based compensation
expense of $0.7 million, depreciation expense of $0.5 million, $0.5 million of
other non-cash charges, primarily interest expense, and a net increase from
operating assets and liabilities of $0.7 million.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2022
was $0.1 million and consisted of acquisitions of equipment. Net cash provided
by investing activities for the three months ended March 31, 2021 was $16.2
million and primarily represents the net sales and maturities of marketable
securities.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2022
was $$0.5 million, which consists of a principal payment of long-term debt of
$5.0 million, offset by net proceeds of $4.1 million from the sale of preferred
stock in a registered direct offering and proceeds of $0.3 million from the sale
of 1,024,906 shares of our common stock through an at-the-market, or ATM,
program. Net cash provided by financing activities for the three months ended
March 31, 2021 was $0.5 million, which consists of net proceeds of $0.4 million
from the slae of 207,593 shares of our common stock through an at-the-market, or
ATM, sales program, and stock option proceeds of $0.1 million.
Funding Requirements and Other Liquidity Matters
We closely monitor our cash and cash equivalents balances, in an effort to
ensure we have adequate liquidity to fund the operations of the Company. If the
COVID-19 pandemic or other factors impact our current business plan or our
ability to generate revenue from the launch of Twirla, we believe we have the
ability to revise our commercial
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plans, including curtailing sales and marketing spending, to allow us to
continue to fund our operations. In addition, on October 2, 2020 we filed a
universal shelf registration statement with the SEC for the issuance of common
stock, preferred stock, warrants, rights, debt securities and units up to an
aggregate amount of $200.0 million (the "2020 Shelf Registration Statement"). On
October 14, 2020, the 2020 Shelf Registration Statement was declared effective
by the SEC. Prior to the 2020 Shelf Registration Statement, we had filed a
universal shelf registration statement in November 2018 for the issuance of up
to $100.0 million of securities, which we refer to as the 2018 Shelf
Registration Statement, which was declared effective by the SEC on November 14,
2018.
On March 18, 2021, we filed a prospectus supplement to our 2020 Shelf
Registration Statement registering an at-the-market offering program we entered
into for the sale of up to $50.0 million of shares of our common stock. During
the year ended December 31, 2021, we sold 172,879 shares of our common stock
under the at-the-market program resulting in net proceeds of approximately $9.3
million.
On October 8, 2021, we filed a prospectus supplement to our 2020 Shelf
Registration Statement registering a public offering of 666,666 shares of common
stock sold together with warrants to purchase up to 333,333 shares of our common
stock at a combined offering price of $34.00 per share of common stock and
one-half of a warrant to purchase one share of common stock. The warrants have
an exercise price of $340.00 per share, are exercisable immediately, and will
expire five years from the date of issuance. On October 13, 2021, we completed
the offering and realized proceeds of approximately $21.1 million, net of
underwriting discounts, commissions and offering expenses.
On January 10, 2022, we filed a prospectus supplement to our 2020 Shelf
Registration Statement registering the 2022 ATM we entered into for the sale of
up to $50.0 million of shares of our common stock. During the three months
ending March 31, 2022, we sold and issued 25,623 shares of common stock
resulting in net proceeds of $0.3 million. On April, 26, 2022, we terminated the
2022 ATM Agreement. On April, 26, 2022, we terminated the 2022 ATM.
On March 13, 2022, we entered into a Securities Purchase Agreement (the
"Purchase Agreement") with a single healthcare-focused institutional investor
(the "Purchaser"), pursuant to which the Company issued, in a registered direct
offering (the "2022 Preferred Stock Offering"), 2,425 shares of Series A
convertible preferred stock (the "Series A Preferred Stock") and 2,425 shares of
Series B convertible preferred stock (the "Series B Preferred Stock") and Series
A warrants (the "Series A Warrants") to purchase up to an aggregate of 606,250
shares of the common stock of the Company (the "Common Stock") and Series B
warrants (the "Series B Warrants") to purchase up to an aggregate of 606,250
shares of Common Stock. Each share of Series A Preferred Stock and Series B
Preferred Stock has a stated value of $1,000 per share and a conversion price of
$8.00 per share. The shares of preferred stock issued in the offering are
convertible into an aggregate of 606,250 shares of Common Stock. The Series A
Warrants have an exercise price of $10.40 per share, will become exercisable six
months following the date of issuance, and will expire 5 years following the
initial exercise date. The Series B Warrants have an exercise price of $10.40
per share, will become exercisable six months following the date of issuance,
and will expire one and one-half years following the initial exercise date. The
Purchase Agreement contains customary representations and warranties and
agreements of the Company and the Purchaser and customary indemnification rights
and obligations of the parties. The 2022 Preferred Stock Offering closed on
March 14, 2022 and total net proceeds were approximately $4.1 million.
On April 25, 2022, we entered into the Letter Agreement with the Purchaser,
pursuant to which the Purchases consented to us entering into and effecting an
ATM offering facility. Pursuant to the Letter Agreement, we issued to the
Purchases the New Warrant, on the same terms and conditions as the Series A
Warrants, provided that such New Warrant shall be exercisable into 212,188
warrant shares, subject to adjustment thereunder. The Series A Warrants have an
exercise price of $10.40 per share, will become exercisable six months after the
date of the Letter Agreement, and will expire 5 years following the initial
exercise date.
On April 27, 2022, we entered into the April 2022 ATM Agreement under which we
are authorized to sell up to an aggregate of $12,841,000 in gross proceeds
through the sale of shares of common stock from time to time in the April 2022
ATM. We agreed to pay a commission of up to 3% of the gross proceeds of any
common stock sold under this agreement. As of May 9, 2022 we issued and sold a
total of 873,564 shares of common stock under the April 2022 ATM Agreement
resulting in net proceeds of approximately $1.9 million.
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We believe we may have the potential to access additional capital through the
2022 ATM, selling additional debt or equity securities or obtaining a line of
credit or other loan as required.
We expect to continue to incur significant operating expenses for the
foreseeable future in connection with our ongoing activities as we:
• maintain a sales and marketing infrastructure to support the continued
commercialization of Twirla in the United States;
• continue to evaluate additional line extensions for Twirla and initiate
development of potential product candidates in addition to Twirla;
• maintain, leverage and expand our intellectual property portfolio; and
maintain operational, financial and management information systems and
• personnel, including personnel to support our product development and future
commercialization efforts.
Contractual Obligations and Commitments
In April 2020, we entered into a manufacturing and commercialization agreement
with Corium, Inc., which we refer to as the Corium Agreement, and which replaced
our previous development agreement. Pursuant to the Corium Agreement, Corium
will manufacture and supply all of our product requirements for Twirla at
certain specified rates. Under the terms of the Corium Agreement, Corium is to
be the exclusive supplier of Twirla for ten years. The Corium Agreement includes
a quarterly minimum purchase commitment and a fixed price per unit for two years
from December 2020, the date of the first commercial batch purchase order
invoice, depending on annual purchase volume. During 2021, we did not meet all
of our minimum quantity purchases from Corium, and as a result, paid penalties
as required by our agreement with Corium. The Corium Agreement terminates
automatically after ten years, but may be terminated for any reason upon the
written mutual agreement of both parties; provided, however, that the parties
must confer in good faith regarding possible mutual termination. In the event of
such termination, we may still effect purchase orders after the notice of
termination is given and until the time any such termination becomes effective.
In April 2020, we entered into a project agreement with inVentiv Commercial
Services, LLC, or inVentiv, a Syneos Health Group Company, which we refer to as
the Syneos Agreement, under our Master Services Agreement with inVentiv.
Pursuant to the Syneos Agreement, inVentiv, through its affiliate Syneos Selling
Solutions, will provide a field force of sales representatives to provide
certain detailing services, sales operation services, compliance services and
training services with respect to Twirla to us in exchange for an up-front
implementation fee and a fixed monthly fee. Effective February 1, 2022, we
entered into an amendment to the Syneos Agreement that extended the term until
August 23, 2024. At that time, the Syneos Agreement will terminate automatically
unless extended upon the mutual written agreement of the Parties. We may
terminate the Syneos Agreement for any reason upon timely written notice without
incurring a termination fee. As of March 31, 2022, the minimum amount committed
totals $3.4 million.
Our operating lease commitment relates to our lease of office space in
Princeton, New Jersey. The lease for this space commenced in December 2021, and
the minimum payments over the remaining 36 month term totals $1.1 million as of
March 31, 2022.
Recent Accounting Pronouncements
See Note 2 to our financial statements that discusses new accounting
pronouncements.
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