AMYLYX PHARMACEUTICALS, INC. The following information should be read in conjunction with the condensed consolidated financial information and the notes thereto appearing elsewhere in this Quarterly Report.
This discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in our Annual Report, 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.
Overview
Our mission is to one day end the suffering caused by neurodegenerative diseases. Unlike most other cells in the body that regularly die and are replaced as part of healthy function, mature neurons are normally resistant to cell death and generally cannot regenerate. We believe AMX0035 is the first drug candidate to show both a functional and survival benefit in a large-scale clinical trial of patients with amyotrophic lateral sclerosis, or ALS. InSeptember 2022 , theU.S. Food and Drug Administration , or FDA, approved AMX0035, known as RELYVRIO inthe United States , orU.S. , for the treatment of ALS in adults, and commencedU.S. commercial sales of RELYVRIO in the fourth quarter of 2022. AMX0035 received marketing authorization with conditions as ALBRIOZA byHealth Canada for the treatment of ALS inJune 2022 , and we commenced Canadian commercial sales of ALBRIOZA in the third quarter of 2022. We submitted a Marketing Authorization Application, or MAA, to theEuropean Medicines Agency , or EMA, inEurope in the first quarter of 2022, which was validated in the same quarter. The results of our Phase 2 clinical trial of AMX0035, known as the CENTAUR trial, were published inSeptember 2020 in theNew England Journal of Medicine and inOctober 2020 in theJournal of Muscle and Nerve and demonstrated functional and survival benefits for ALS patients. We believe AMX0035 has the potential to be a foundational therapy, meaning that it could be used alone or in conjunction with other therapies to change the treatment paradigm across a broad range of neurodegenerative diseases. AMX0035 is a dual UPR-Bax apoptosis inhibitor composed of PB and TURSO (also known as TUDCA). Through the resolution of the UPR and by inhibiting translocation of the Bax to the outer mitochondrial membrane, we have shown in multiple models that AMX0035 can keep neurons alive under a variety of different conditions and stresses, including in in vitro models of neurodegeneration, endoplasmic reticulum stress, mitochondrial dysfunction, oxidative stress and disease-specific models of a variety of other conditions, as well as in vivo models of ALS, Alzheimer's disease, or AD, and multiple sclerosis. We are pursuing ALS as our first indication as it is a disease of rapid and profound neurodegeneration, and we are focused on the development and potential commercialization of AMX0035 for ALS globally. We have received marketing authorization with conditions byHealth Canada for ALBRIOZA for the treatment of ALS. We announced commercial availability of the product inJuly 2022 . We have submitted to and received from the national reimbursement authorities, known as theCanadian Agency for Drugs and Technologies in Health , or CADTH, and l'Institut national d'excellence en santé et en services sociaux, or INESSS, recommendations regarding reimbursement for ALBRIOZA by the Canadian provincial governments, and are actively negotiating with the provinces and working with private payers inCanada to obtain reimbursement coverage. We received approval by the FDA for RELYVRIO inSeptember 2022 , and commercial product was first available inOctober 2022 . We are seeing a solid initial bolus of demand from physicians as we see an encouraging number of product enrollment forms and prescriptions coming into our Amylyx Care Team. We cannot yet predict the extent to which this initial interest will translate into revenue. We are also actively pursuing regulatory approval of AMX0035 for the treatment of ALS inEurope . Our MAA remains under review by the Committee for Medicinal Products for Human Use, or CHMP, of the EMA. We are now in possession of the Rapporteurs Day 150 Joint Assessment Report, which is provided to applicants as a reference as the CHMP collects comments to responses made to the Day 120 List of Questions, which we previously received. While we have resolved several major objections from the Day 120 List of Questions, some major objections still remain, and we will work to continue to address them as part of the MAA review process. The next step in the process is the Day 180 List of Outstanding Issues, which we will respond to accordingly. OnNovember 9, 2022 , the CHMP informed us that it intends to hold aScientific Advisory Group of Neurology meeting as part of the regulatory review process. We expect a decision on our pending MAA in the first half of next year. InNovember 2021 , we initiated a Phase 3 clinical trial of AMX0035 for the treatment of ALS, known asPHOENIX trial, at clinical trial sites in theU.S. andEurope . Enrollment in thePHOENIX trial was completed inMarch 2022 in theU.S. and remains ongoing inEurope . We anticipate topline results from thePHOENIX trial in 2024. This trial is designed to provide further data 25 -------------------------------------------------------------------------------- evaluating the safety and efficacy of AMX0035 for the treatment of ALS to further support our global regulatory efforts. InJuly 2022 , we announced a planned open label extension, or OLE, for thePHOENIX trial. InMarch 2022 , we announced the launch of an expanded access program, or EAP, in theU.S. that the FDA has authorized for people with ALS who meet eligibility criteria for participation. TheU.S. EAP for AMX0035 was running parallel with thePHOENIX trial. People living with ALS who are eligible forPHOENIX were not eligible for theU.S. EAP as the criteria for entry do not overlap. The EAP is being wound down alongside the commercial launch of RELYVRIO in theU.S. The FDA approval inSeptember 2022 of AMX0035 as RELYVRIO for the treatment of ALS in adults was granted following the second virtual meeting of theFDA's Peripheral and Central Nervous System Drugs Advisory Committee , or the Advisory Committee, held onSeptember 7, 2022 . The Advisory Committee initially met onMarch 30, 2022 and voted 4 (yes) and 6 (no) on the question of whether the data from our randomized, controlled Phase 2 CENTAUR trial and OLE established a conclusion that AMX0035 is effective in the treatment of patients with ALS. At the second meeting of the Advisory Committee, the Advisory Committee voted 7 (yes) to 2 (no) in response to the question of whether available evidence of effectiveness is sufficient to support approval of AMX0035 for the treatment of ALS, taking into account the unmet need in ALS, the status of the ongoingPHOENIX trial and the seriousness of ALS. At this meeting and the previous Advisory Committee meeting, the FDA presented concerns regarding choices of statistical models for the prespecified primary analysis and the interpretability of the survival results. In both Advisory Committee meetings, we presented scientific arguments and analyses, together with experts in the field, which we believe sufficiently addressed these concerns. At the second meeting of the Advisory Committee, we stated that if ourPHOENIX trial is not successful then we will do what is right for patients, which includes voluntarily removing the product from the market. We will work in consultation with regulatory authorities when thePHOENIX data are available. We could also be required by regulatory authorities to withdraw AMX0035 from the marketplace. As a result of theFDA's approval of AMX0035, we launched RELYVRIO in theU.S. in the fourth quarter of 2022. We are also developing AMX0035 for other neurodegenerative diseases by leveraging our deep knowledge of and relationships in the neurodegenerative space. We believe the approach of a dual UPR-Bax apoptosis inhibitor designed to help keep neurons alive could be clinically meaningful for the treatment of other neurodegenerative disease indications in addition to ALS. Many common and rare neurodegenerative diseases are characterized by substantial neuronal cellular loss, including AD and Wolfram syndrome, as well as Parkinson's Disease, Huntington's Disease, Progressive Supranuclear Palsy, Multi-System Atrophy, and others. We conducted a Phase 2 clinical trial in AD, known as the PEGASUS trial, to obtain safety data along with initial efficacy and biomarker data which could help us prioritize additional indications to pursue with AMX0035. We believe the topline results from the PEGASUS trial, reported inNovember 2021 , provide further biological knowledge about AMX0035 which will help inform future clinical development of AMX0035 for the treatment of AD and in other potential indications. Based on these topline results, AMX0035 met the PEGASUS trial's primary endpoint of safety and tolerability. The 6-month trial was not powered to evaluate differences between groups in efficacy outcomes and no differences were seen in a newly developed composite outcome of cognitive, functional, and imaging measures, or secondary efficacy endpoints of cognition, function, and imaging. In this trial, AMX0035 showed significant effects on biomarkers including neurogranin, YKL-40 or Chitinase 3-like 1 (CHI3L1), and fatty acid binding protein 3 (FABP3). These results build on previously reported findings that AMX0035 exhibited significant effects on the tau protein, tau phosphorylated at threonine 181, 8-hydroxy-2'-deoxyguanosine, or 8-OHdG, and the amyloid beta 42 to 40 (amyloid-ß1-42, amyloid-ß1-40) ratio in cerebrospinal fluid. We will continue to evaluate these data and discuss the results of the PEGASUS trial with scientific advisors as we consider potential next steps for the development of AMX0035 for the treatment of AD within our clinical development strategy. Based on preclinical evidence, we are continuing to evaluate plans to explore the use of AMX0035 in patients with Wolfram syndrome. We also intend to prioritize our development efforts around neurodegenerative diseases that result in substantial disability, and ultimately death, and where unmet medical needs are greatest. For example, we recently presented initial in vitro data from our new, internally developed compound, AMX0114, targeting Calpain-2, a critical effector of axonal degeneration. Since inception in 2013, we have devoted substantially all of our efforts to research and development and pre-commercialization activities, including recruiting management and technical staff, raising capital, producing materials for preclinical and clinical studies, planning for potential commercialization and building infrastructure to support such activities. Other than RELYVRIO in theU.S. and ALBRIOZA inCanada , we do not have any products approved for sale and as ofSeptember 30, 2022 . As ofSeptember 30, 2022 , we have funded our operations primarily through the public offering of our common stock, private sales of preferred stock, and convertible notes. We have also generated grant revenues through five grants fromALS Association , ALS Finding aCure Foundation , Cure Alzheimer's Fund,Alzheimer's Drug Discovery Foundation andAlzheimer's Association , or Grantors.
We have incurred operating losses since inception, including a net loss of
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operations. We expect to incur significant commercialization expenses related to
product sales, marketing, manufacturing and distribution of our approved
products. We may continue to incur significant losses and our financial results
will be highly dependent upon the successful launch of RELYVRIO in the U.S. We
will continue to incur significant expenses as we advance AMX0035 and any future
product candidates through preclinical and clinical development, hire additional
clinical, scientific, management and administrative personnel, seek regulatory
approval and pursue commercialization of any approved product candidates. To
date, we have primarily developed AMX0035 internally, with assistance from our
network of contract research organizations, or CROs, and other advisors. This
has resulted in increased research and development spending but has enabled us
to manage AMX0035 efficiently through the development and manufacturing process.
We also expect to continue to incur additional costs associated with operating
as a public company, including significant legal, accounting, investor relations
and other expenses that we did not incur as a private company. As a result, we
may 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
the sale of equity, debt financings or other capital sources, including
potential collaborations with other companies, royalty financings, or other
strategic transactions. Our inability to raise capital as and when needed could
have a negative impact on our financial condition and ability to pursue our
business strategies. There can be no assurances, however, that our current
operating plan will be achieved or that additional funding, if required, will be
available on terms acceptable to us, or at all.
As of September 30, 2022 , we had cash, cash equivalents and short-term
investments of $162.6 million . On October 11, 2022 , we completed the sale of
7,697,812 shares of our common stock in an underwritten public offering,
pursuant to which we received net proceeds of approximately $230.8 million ,
including exercise in full of the underwriters' option to purchase additional
shares, and after deducting underwriting discounts and commissions and other
offering costs. We believe that our existing cash, cash equivalents and
short-term investments as of September 30, 2022 , together with the net proceeds
from our follow-on public offering, and product revenue from RELYVRIO and
ALBRIOZA sales, will be sufficient to meet our anticipated operating and capital
expenditure requirements for at least one year from the date of this filing. We
have based this estimate on assumptions that may prove to be wrong, and we could
exhaust our available capital resources sooner than we expect. See "-Liquidity
and Capital Resources-Funding Requirements" below.
Impact of COVID-19 and Other Macroeconomic Factors
The development of AMX0035 and any future product candidates could be disrupted and materially adversely affected in the future by COVID-19 pandemic or any future pandemic or calamity. The spread of COVID-19 and identification of new variants of the virus has impacted the global economy and our operations, including requiring us to make certain alterations to our preclinical and clinical trial activities, such as scheduling certain work off-site and performing off-site assessments. If the disruption due to the ongoing COVID-19 pandemic continues, our ongoing global Phase 3 PHOENIX clinical trial for AMX0035 for the treatment of ALS could be delayed due to government orders and site policies on account of the pandemic. Additionally, some patients may be unwilling or unable to travel to study sites, enroll in our trials or be unable to comply with clinical trial protocols, which would delay our ability to conduct preclinical studies and clinical trials or release clinical trial results, as well as delay our ability to obtain regulatory approval for and commercialize AMX0035. Furthermore, the COVID-19 pandemic could continue to affect our employees or the employees of research sites and service providers on whom we rely as well as those of companies with which we do business, including our suppliers, thereby disrupting our business operations. Existing or renewed quarantines and travel restrictions imposed by governments in the jurisdictions in which we and the companies with which we do business operate could materially impact the ability of employees to access preclinical and clinical sites, laboratories, manufacturing sites and offices. We have implemented and continue to follow work-at-home policies and may experience limitations in employee resources. Our continued reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business. Economic uncertainty in various global markets, including theU.S. andEurope , caused by political instability and conflict, such asRussia's invasion ofUkraine , and economic challenges caused by the COVID-19 pandemic, have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. Our business, financial condition and results of operations could be materially and adversely affected by further negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen. Although, to date, our business has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such instability could impact our business and results of operations. The extent and duration of these market disruptions, whether as a result 27 --------------------------------------------------------------------------------
of the military conflict between
Components of Our Results of Operations
Product revenue, net
InJune 2022 , AMX0035 received marketing authorization with conditions as ALBRIOZA byHealth Canada for the treatment of ALS, and we began commercially selling ALBRIOZA withinCanada inJuly 2022 . InSeptember 2022 , AMX0035 received regulatory approval as RELYVRIO by the FDA for the treatment of ALS, and we launched RELYVRIO in theU.S. in the fourth quarter of 2022. All product revenue net, recognized during the period relates to units of ALBRIOZA sold inCanada . Operating Expenses Cost of Sales
Cost of sales consists primarily of costs associated with the manufacturing of ALBRIOZA and certain period costs, which include:
• Direct materials costs; • Packaging services; • Transportation costs; • Manufacturing overhead costs; • Royalties related to grants provided to us for the purpose of furthering the research and development of AMX0035 as a therapeutic benefit for ALS disease and Alzheimer's disease. For additional information refer to Note 13 in the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report; As a result of global macroeconomic conditions, we may experience some disruption and volatility in our global supply chain network, and we may in the future experience disruptions in availability and delays in shipments of raw materials and packaging, as well as related cost inflation.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the research and development of AMX0035. We expense research and development costs as incurred. These expenses include:
•
expenses incurred under agreements with CROs, contract manufacturing organizations, or CMOs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•
manufacturing scale-up expenses and the cost of acquiring and manufacturing drug product for our preclinical studies and clinical trials, including manufacturing registration and validation batches, as well as pre-commercial manufacturing activities;
•
expenses to acquire technologies to be used in research and development;
•
employee-related expenses, including salaries, payroll taxes, related benefits and stock-based compensation expense for employees engaged in research and development functions; and
•
costs related to compliance with quality and regulatory requirements.
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.
Such amounts are recognized as an expense as the goods are delivered or the
related services are performed, or until it is no longer expected that the goods
will be delivered, or the services rendered.
Certain of our indirect research and development expenses are not tracked on an
indication-by-indication basis for AMX0035. We do not allocate employee costs
and facilities, including depreciation or other indirect costs, to specific
indications because these costs are deployed across multiple indications and, as
such, are not separately classified. We use internal resources to oversee the
research and discovery as well as to manage our preclinical development, process
development, manufacturing and
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--------------------------------------------------------------------------------clinical development activities. These employees work across multiple indications and, therefore, we do not track their costs by indication.
Research and development activities are central to our business model. Product candidates such as AMX0035 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 and related product manufacturing expenses. We expect that our research and development expenses will continue to increase substantially in connection with our planned clinical development activities in the near term and in the future and to fund commercialization activities inCanada and any other jurisdictions in which AMX0035 is approved. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of AMX0035 and any future product candidates. Our clinical development costs may vary significantly based on factors such as: • per patient trial costs; •
the number of trials required for 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;
•
the duration of patient participation in the trials and follow-up periods;
•
the cost and timing of manufacturing our current or future product candidates;
•
the phase of development of our current or future product candidates;
•
the efficacy and safety profile from clinical trials and preclinical studies of our current or future product candidates; and
•
the number of product candidates we are developing.
The successful development and commercialization of AMX0035 and any future product candidates is highly uncertain, due to the numerous risks and uncertainties associated with product development and commercialization, including the following:
•
the timing and progress of preclinical and clinical development activities;
•
the number and scope of preclinical and clinical trials for separate indications we decide to pursue;
•
raising necessary additional funds;
•
the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
•
our ability to maintain our current development activities and to establish new ones;
•
our ability to establish new licensing or collaboration arrangements;
•
the successful initiation and completion of clinical trials with safety,
tolerability and efficacy profiles that are satisfactory to
•
the receipt and related terms of regulatory approvals from applicable regulatory authorities, including our marketing authorization with conditions fromHealth Canada for ALBRIOZA and the post-marketing requirements from the FDA for RELYVRIO;
•
the availability of drug substance and drug product for use in production of AMX0035;
•
establishing and maintaining agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing;
•
our ability to obtain and maintain patents, trade secret protection and
regulatory exclusivity, both in the
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our ability to protect our rights in our intellectual property portfolio;
•
the commercialization inCanada and theU.S. of AMX0035 (known as ALBRIOZA inCanada and RELYVRIO in theU.S. ) and in other potential jurisdictions, if and when approved;
•
obtaining and maintaining third-party insurance coverage and adequate reimbursement;
•
the acceptance of AMX0035, if approved, by patients, the medical community and third-party payors;
•
competition with other product; and
•
a continued acceptable safety profile of our therapies in pre-approval market access programs or in commercial access following approval.
A change in the outcome of any of these variables with respect to the development of AMX0035 or any future product candidates could have a significant impact on the cost and timing associated with the development of our product candidates. We may never succeed in obtaining or maintaining regulatory approval for AMX0035 or any future product candidates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, sales, marketing, as well as administrative functions. Selling, general and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; administrative travel expenses; sales and marketing expenses; information technology; facility-related and other operating costs. We anticipate that our selling, general and administrative expenses will continue to increase in the future as we further increase our headcount to support our continued research activities and development of AMX0035 and as we continue to increase headcount and incur other significant costs related to our pre-commercialization activities as we prepare for potential near term regulatory approvals. We also anticipate that we will continue to incur increased accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with being a public company. We have received marketing authorization with conditions for ALBRIOZA for the treatment of ALS inCanada and marketing authorization for RELYVRIO for the treatment of ALS in adults in theU.S. and are pursuing regulatory approval of AMX0035 for the treatment of ALS inEurope . As we implement our commercialization plans inCanada and theU.S. and prepare for a potential approval inEurope , we have been incurring a substantial increase, and anticipate further increases in, payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of AMX0035. Other Income (Expense), Net Interest Income
Interest income consists of interest income earned on our cash and cash equivalents, and short-term investments.
Other (Expense) Income, Net
Other (expense) income, net consists primarily of realized and unrealized gains and losses on foreign exchange transactions.
Change in Fair Value of Convertible Notes
Change in fair value of convertible notes is comprised of adjustments to the fair value of our 2021 Notes. As permitted under ASC Topic 825, Financial Instruments (ASC 825), we elected the fair value option to account for our 2021 Notes, and as a result, we measured our 2021 Notes at fair value at each financial reporting period and immediately before conversion inJuly 2021 . All changes to the fair value of our 2021 Notes for the nine months endedSeptember 30, 2021 resulted in a loss. Our 2021 Notes converted into shares of Series C-2 redeemable convertible preferred stock concurrently with the issuance of our Series C-1 redeemable convertible preferred stock. Immediately prior to the conversion, we determined the fair value of our 2021 Notes based on the fair value of the Series C-1 redeemable convertible preferred stock and the conversion price at which these notes converted, which was at 85% of the fair value of the Series C-1 redeemable convertible preferred stock.
Income Taxes
The provision for income taxes primarily consists of provisions for foreign taxes payable.
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--------------------------------------------------------------------------------Results of Operations
Comparison of the three months ended
The following table summarizes our results of operations for the periods
presented:
Three Months Ended September 30,
2022 2021 $ Change % Change
(in thousands)
Revenues:
Product revenue, net $ 345 $ - $ 345 *NM
Grant revenue - 285 (285 ) (100 )%
Total revenues 345 285 60 21 %
Operating expenses:
Cost of sales 172 - 172 *NM
Research and development 24,914 12,853 12,061 94 %Selling, general and administrative 29,940 10,350 19,590
189 %
Total operating expenses 55,026 23,203 31,823 137 %
Loss from operations (54,681 ) (22,918 ) (31,763 ) 139 %
Other income (expense), net:
Interest income 601 3 598 19,933 %
Other income (expense), net 199 (227 ) 426 (188 )%
Other income (expense), net 800 (224 ) 1,024 (457 )%
Loss before income taxes (53,881 ) (23,142 ) (30,739 ) 133 %
Benefit for income taxes (125 ) - (125 ) *NM
Net loss $ 53,756 $ 23,142 $ 30,614 132 %
* NM - not meaningful
Product revenue, net
We began commercially selling ALBRIOZA within Canada in July 2022 , following
receipt of marketing authorization with conditions by Health Canada . For the
three months ended September 30, 2022 , we recorded approximately $0.3 million of
product revenue, net. For further discussion regarding our revenue recognition
policy, see Note 2, Summary of Significant Accounting Policies, in the Notes to
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
Quarterly Report.
Cost of sales
Cost of sales of $0.2 million for the three months ended September 30, 2022 ,
consisted of costs to procure, manufacture and distribute our marketed product,
ALBRIOZA. In addition, included in cost of sales are costs to manufacture
ALBRIOZA which has been provided to patients at no cost to them while insurance
reimbursement is established. We expect these costs to continue into the fourth
quarter. ALBRIOZA given to patients at no cost to them is not included in
product revenue, net. Based on our policy to expense costs associated with the
manufacture of our products prior to regulatory approval, certain of the costs
of units recognized as revenue during the three months ended September 30, 2022 ,
or less than $0.1 million , were expensed prior to obtaining regulatory approvals
and, therefore, are not included in cost of sales during this period. We expect
cost of sales to increase and gross margin to decrease as
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--------------------------------------------------------------------------------we deplete these inventories and we expect to use the remaining pre-commercialization inventory for product sales through the third quarter of 2023.
Research and Development Expenses
The following table summarizes our research and development expenses for the three months endedSeptember 30, 2022 and 2021 (certain prior year amounts have been reclassified to conform with current year presentation): Three Months Ended September 30, 2022 2021 $ Change % Change (in thousands) AMX0035 - ALS$ 16,658 $ 6,709 $ 9,949 148 % Payroll and personnel-related 7,503 2,313 5,190 224 % Other 753 3,831 (3,078 ) (80 )%$ 24,914 $ 12,853 $ 12,061 94 % Research and development expenses were$24.9 million for the three months endedSeptember 30, 2022 , compared to$12.9 million for the three months endedSeptember 30, 2021 . During these periods, most our research and development expenses were related to the development of and clinical trials of AMX0035. The increase of$12.1 million was primarily due to a$9.9 million increase in spending on AMX0035 for the treatment of ALS, a$5.2 million increase in payroll and personnel-related costs, and a$3.1 million decrease in all other costs. The increases in spending on AMX0035 were primarily related to costs associated with our global Phase 3 PHOENIX trial of AMX0035 in ALS that was initiated inNovember 2021 and consulting and manufacturing development expenses in anticipation of potential commercialization, which includes inventory raw material purchases made in anticipation of the lead time necessary to have it available to meet our clinical trial and potential commercialization needs. The increase in payroll and personnel-related costs was primarily due to an increase in the number of employees supporting research and development efforts. The decreases in other costs were primarily due to a decrease in costs associated with research and development for AMX0035 in other indications, as we focused our efforts on ALS leading up to our approvals. We expect to increase research and development for AMX0035 in other indications in future periods.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$29.9 million for the three months endedSeptember 30, 2022 compared to$10.4 million for the three months endedSeptember 30, 2021 . The increase of$19.6 million was primarily due to increases of$14.3 million in payroll and personnel-related costs, including stock-based compensation,$1.2 million in professional services,$1.3 million in insurance expense and$1.1 million in facilities and computer-related expenses. The increase in payroll and personnel-related costs was primarily due to hiring additional personnel in commercial and general and administrative functions to support our growth, as well as commercialization and launch preparation initiatives. The increase in professional services, insurance expenses and facilities and computer-related expenses were primarily due to an increase in spending for commercial readiness activities and operations as a public company. Other Income (Expense), Net Interest Income Interest income for the three months endedSeptember 30, 2022 was$0.6 million compared to less than$0.1 million for the three months endedSeptember 30, 2021 . The increase is primarily attributable to higher investment balances driven by our proceeds received from ourJanuary 2022 initial public offering, resulting in higher interest earned.
Other Income (Expense), Net
Other income (expense), net was
Income Taxes
Benefit for income taxes was$0.1 million for the three months endedSeptember 30, 2022 compared to zero for the three months endedSeptember 30, 2021 , and consists of current income tax benefit from activities of our foreign subsidiaries. 32 --------------------------------------------------------------------------------
Comparison of the nine months ended
The following table summarizes our results of operations for the periods
presented:
Nine Months Ended September 30,
2022 2021 $ Change % Change
(in thousands)
Revenues:
Product revenue, net $ 345 $ - $ 345 *NM
Grant revenue - 285 (285 ) (100 )%
Total revenues 345 285 60 21 %
Operating expenses:
Cost of sales 172 - 172 *NM
Research and development 70,637 30,646 39,991 130 %
Selling, general and administrative 86,284 24,012 62,272 259 %
Total operating expenses 157,093 54,658 102,435 187 %
Loss from operations (156,748 ) (54,373 ) (102,375 ) 188 %
Other income (expense), net:
Interest income 1,134 6 1,128 18,800 %
Change in fair value of convertible notes - (5,228 ) 5,228 (100 )%
Other income, net 138 8 130 1,625 %
Other income (expense), net 1,272 (5,214 ) 6,486 (124 )%
Loss before income taxes (155,476 ) (59,587 ) (95,889 ) 161 %
Provision for income taxes 195 - 195 *NM
Net loss $ 155,671 $ 59,587 $ 96,084 161 %
* NM - not meaningful
Product revenue, net
We began commercially selling ALBRIOZA within Canada in July 2022 , following
receipt of marketing authorization with conditions by Health Canada . For the
nine months ended September 30, 2022 , we recorded approximately $0.3 million of
product revenue, net. For further discussion regarding our revenue recognition
policy, see Note 2, Summary of Significant Accounting Policies, in the Notes to
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
Quarterly Report.
Cost of sales
Cost of sales of $0.2 million for the nine months ended September 30, 2022 ,
consisted of costs to procure, manufacture and distribute our marketed product
ALBRIOZA. In addition, included in cost of sales are costs to manufacture
ALBRIOZA which has been provided to patients at no cost to them while insurance
reimbursement is established. We expect these costs to continue into the fourth
quarter. ALBRIOZA given to patients at no cost to them is not included in
product revenue, net. Based on our policy to expense costs associated with the
manufacture of our products prior to regulatory approval, certain of the costs
of units recognized as revenue during the nine months ended September 30, 2022 ,
or less than $0.1 million , were expensed prior to obtaining regulatory approvals
and, therefore, are not included in cost of sales during this period. We expect
cost of sales to increase and gross margin to decrease as we deplete these
inventories and we expect to use the remaining pre-commercialization inventory
for product sales through the third quarter of 2023.
Research and Development Expenses
The following table summarizes our research and development expenses for the nine months endedSeptember 30, 2022 and 2021 (certain prior year amounts have been reclassified to conform with current year presentation): Nine Months Ended September 30, 2022 2021 $ Change % Change (in thousands) AMX0035 - ALS$ 47,376 $ 18,958 $ 28,418 150 % Payroll and personnel-related 20,019 5,502 14,517 264 % Other 3,242 6,186 (2,944 ) (48 )%$ 70,637 $ 30,646 $ 39,991 130 % 33
-------------------------------------------------------------------------------- Research and development expenses were$70.6 million for the nine months endedSeptember 30, 2022 , compared to$30.6 million for the nine months endedSeptember 30, 2021 . During these periods, most of our research and development expenses were related to the development of and clinical trials of AMX0035. The increase of$40.0 million was primarily due to a$28.4 million increase in spending on AMX0035 for the treatment of ALS, a$14.5 million increase in payroll and personnel-related costs, and a$2.9 million decrease in all other costs. The increases in spending on AMX0035 were primarily related to costs associated with our global Phase 3 PHOENIX trial of AMX0035 in ALS that was initiated inNovember 2021 and consulting and manufacturing development expenses in anticipation of potential commercialization, which includes inventory raw material purchases made in anticipation of the lead time necessary to have it available to meet our clinical trial and potential commercialization needs. The increase in payroll and personnel-related costs was primarily due to an increase in the number of employees supporting research and development efforts. The decreases in other costs were primarily due to a decrease in costs associated with research and development spend for AMX0035 in other indications, as we focused our efforts on ALS leading up to our approvals. We expect to increase research and development for AMX0035 in other indications in future periods.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$86.3 million for the nine months endedSeptember 30, 2022 compared to$24.0 million for the nine months endedSeptember 30, 2021 . The increase of$62.3 million was primarily due to increases of$39.3 million in payroll and personnel-related costs, including stock-based compensation,$7.5 million in consulting expense,$5.6 million in professional services,$3.8 million in insurance expense and$3.3 million in facilities and computer-related expenses. The increase in payroll and personnel-related costs was primarily due to hiring additional personnel in commercial and general and administrative functions to support our growth, as well as commercialization and launch preparation initiatives. The increases in professional services, consulting expenses, insurance expenses and facilities and computer-related expenses were primarily due to an increase in spending for commercial readiness activities and operations as a public company.
Other Income (Expense), Net
Interest Income
Interest income for the nine months endedSeptember 30, 2022 was$1.1 million compared to less than$0.1 million for the nine months endedSeptember 30, 2021 . The increase was primarily attributable to higher investment balances driven by our proceeds received from ourJanuary 2022 initial public offering, resulting in higher interest earned.
Change in Fair Value of Convertible Notes
The change in fair value of convertible notes was zero for the nine months endedSeptember 30, 2022 due to conversion to preferred stock inJuly 2021 , compared to$5.2 million for the nine months endedSeptember 30, 2021 . The$5.2 million recorded for the nine months endedSeptember 30, 2021 represented a loss in fair value related to our 2021 Notes.
Other Income, Net
Other income, net was$0.1 million for the nine months endedSeptember 30, 2022 , compared to less than$0.1 million for the nine months endedSeptember 30, 2021 . Other income, net in the nine months endedSeptember 30, 2022 and 2021 was primarily related to realized and unrealized gains and losses.
Income Taxes
Provision for income taxes was$0.2 million for the nine months endedSeptember 30, 2022 compared to zero for the nine months endedSeptember 30, 2021 , and consists of current income tax expense arising from activities of our foreign subsidiaries.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant operating losses and generated revenues through five grants from the Grantors. To date, we have financed our operations primarily through the sale and issuance of common stock, convertible preferred stock, convertible notes, grant agreements with the Grantors and, to a lesser extent, a government loan. As ofSeptember 30, 2022 , we had cash, cash equivalents and short-term investments of$162.6 million . 34 -------------------------------------------------------------------------------- From inception throughSeptember 30, 2022 , we have raised$431.2 million in aggregate proceeds, net of issuance costs, primarily from the issuance of common stock, convertible preferred stock, convertible notes and grant agreements. InJuly 2021 , we issued and sold shares of Series C-1 preferred stock for an aggregate purchase price of approximately$135.0 million . The 2021 Notes automatically converted into shares of Series C-2 preferred stock pursuant to their original terms inJuly 2021 in connection with our sale of Series C-1 preferred stock. OnJanuary 11, 2022 , we completed our initial public offering, pursuant to which we received aggregate net proceeds of$196.4 million , including the partial exercise by the underwriters of their option to purchase additional shares, and after deducting underwriting discounts and commissions and other offering costs. OnOctober 11, 2022 , we completed the sale of 7,697,812 shares of our common stock in an underwritten public offering, pursuant to which we received net proceeds of approximately$230.8 million , including exercise in full of the underwriters' option to purchase additional shares, and after deducting underwriting discounts and commissions and other offering costs. Based on our current operational plans and assumptions, we believe that our existing cash, cash equivalents and short-term investments as ofSeptember 30, 2022 , together with the net proceeds from our follow-on public offering, and product revenue from RELYVRIO and ALBRIOZA sales, will be sufficient to meet our anticipated operating and capital expenditure requirements for at least twelve months after the date of the filing of this Quarterly Report. Capital Resources We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities, manufacturing and clinical trials of AMX0035 and any future product candidates, implement our commercialization plans for ALBRIOZA inCanada and RELYVRIO in theU.S. , and prepare for the commercial launch of AMX0035 in other jurisdictions, if approved. In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our expenses will also increase as we:
•
continue our research and development efforts, including our ongoing global Phase 3 PHOENIX trial of AMX0035 for the treatment of ALS;
•
continue to commercialize AMX0035 (also known as ALBRIOZA inCanada and RELYVRIO in theU.S. ) for the treatment of ALS inCanada and theU.S. , and pursue launch of AMX0035 inEurope , if approved;
•
pursue investigational new drug applications, or INDs, of AMX0035 for the treatment of Wolfram syndrome and potentially for other indications;
•
conduct preclinical studies and clinical trials for AMX0035 for additional indications and for potential future product candidates;
•
seek to identify and develop, acquire or in-license additional product candidates;
•
experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues, or other regulatory challenges;
•
develop the necessary processes, controls and manufacturing data to obtain additional marketing approval for AMX0035 or approval for any future product candidates and to support manufacturing on a commercial scale;
•
seek additional regulatory approvals for AMX0035 or approvals for any future product candidates that successfully complete clinical trials, if any;
•
hire and retain additional personnel, such as preclinical, clinical, quality assurance, regulatory affairs, manufacturing, distribution, legal, compliance, finance, general and administrative, commercial and scientific personnel;
•
develop, maintain, expand and protect our intellectual property portfolio; and
•
continue to transition our organization to being a public company.
We are a publicly traded company and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by theSEC and the Nasdaq Global Select Market, require public companies to implement specified corporate governance practices that are currently not applicable to us as a private company. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will first be required to furnish a report by our management on our internal control over financial reporting for the year endingDecember 31, 2022 . However, while we remain an emerging growth company and/or a smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as 35 --------------------------------------------------------------------------------
documented and implement a continuous reporting and improvement process for internal control over financial reporting. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
Based on our current operational plans and assumptions, we expect that our current cash, cash equivalents and short-term investments as ofSeptember 30, 2022 , combined with the net proceeds from our follow-on offering, and product revenue from RELYVRIO and ALBRIOZA sales, will be sufficient to fund operations for at least twelve months after the date of filing of this Quarterly Report. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. As we progress with our development activities and the regulatory review process, we expect to incur significant commercialization expenses related to product manufacturing, pre-commercial activities and commercialization. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates and programs, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:
•
the scope, progress, results and costs of drug discovery, laboratory testing, preclinical and clinical development for AMX0035 and any future product candidates;
•
the costs, timing and outcome of commercialization activities, including
manufacturing, marketing, sales and distribution for ALBRIOZA in
•
the costs, timing and outcome of regulatory review of AMX0035 and any future product candidates;
•
our ability to establish and maintain collaborations, marketing, distribution and license agreements on favorable terms, if at all;
•
our ability to enroll clinical trials in a timely manner and to quickly resolve any delays or clinical holds that may be imposed on our development activities;
•
timing delays with respect to preclinical and clinical development of AMX0035 and any future product candidates, including as result of the ongoing COVID-19 pandemic or other pandemics or disruptions;
•
the costs of expanding our facilities to accommodate our expected growth in personnel, and the costs of such additional personnel;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
the extent to which we acquire technologies or other assets;
•
the sales price and availability of adequate third-party coverage and reimbursement for AMX0035 and any future product candidates, if and when approved; and
•
the costs of operating as a public company.
Until such time, if ever, that we can generate product revenue sufficient to
achieve profitability, we expect to finance our cash needs through equity
offerings, debt financings, government or other third-party funding, marketing
and distribution arrangements and other collaborations, strategic alliances and
licensing arrangements. To the extent that we raise additional capital through
the sale of common stock, convertible securities or other equity securities,
current ownership interests will be diluted. If we raise additional funds
through collaborations or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies,
future revenue streams or product candidates or grant licenses on terms that may
not be favorable to us. In addition, debt financing, if available, may result in
fixed payment obligations and may involve agreements that include restrictive
covenants that limit our ability to take specific actions, such as incurring
additional debt, making capital expenditures, creating liens, redeeming stock or
declaring dividends, that could adversely impact our ability to conduct our
business. If we are unable to raise additional funds 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 product
candidates that we would otherwise prefer to develop and market ourselves.
36
--------------------------------------------------------------------------------Cash Flows
Comparison of the Nine Months Ended
The following table summarizes our sources and uses of cash for the periods
presented:
Nine Months Ended September 30,
2022 2021 $ Change % Change
(in thousands)
Net cash used in operating activities
(78 )%
Net cash provided by financing
activities 199,627 159,571 40,056 25 %
Effect of exchange rate changes on cash,
cash equivalents and
restricted cash (572 ) 4 (576 ) (14,400 )%
Net increase in cash, cash equivalents
and
restricted cash $ 58,073 $ 63,800 $ (5,727 ) (9 )%
Operating Activities
During the nine months ended September 30, 2022 , operating activities used
$130.2 million of cash, primarily resulting from our net loss of $155.7 million ,
offset by $15.6 million of non-cash stock-based compensation expense, $0.3
million of depreciation expense, $0.2 million net amortization of premiums and
discounts on investments, and $9.8 million of net cash provided by changes in
our operating assets and liabilities.
Net cash used in our operating assets and liabilities primarily consisted of a
$2.9 million increase in prepaid expenses and other current assets primarily due
to timing of recognition of prepaid insurance, an increase of $0.6 million in
inventory capitalized during the quarter, offset by a $2.7 million increase in
accounts payable, a $10.4 million increase in accrued expenses and deferred rent
due to increased spending for external research and development to support our
growth, and $1.2 million decrease in operating lease right-of use assets.
During the nine months ended September 30, 2021 , operating activities used $46.6
million of cash, primarily resulting from our net loss of $59.6 million , $5.7
million of net cash provided by changes in our operating assets and liabilities,
offset by $5.2 million of change in fair value of convertible notes and $2.0
million of non-cash stock compensation expense.
Net cash provided by changes in our operating assets and liabilities primarily
consisted of $1.8 million increase in prepaid expenses and other current assets
and a $0.7 million decrease in accounts payable, offset by $8.1 million increase
in accrued expenses and deferred rent due to increased spending for external
research and development to support our growth.
Investing Activities
During the nine months ended
During the nine months ended
Financing Activities During the nine months endedSeptember 30, 2022 , net cash provided by financing activities was$199.6 million . This amount consisted of$216.0 million of gross proceeds from sale of common stock from our initial public offering, offset by$15.1 million of underwriters' discounts and$1.5 million of offering costs paid during the period. Offering costs remaining to be paid as ofSeptember 30, 2022 totaled$0.5 million , coupled with offering costs paid in prior periods, results in total net proceeds from the initial public offering of$196.4 million .
During the nine months ended
37
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consisted of $134.8 million of net proceeds from the issuance of our Series C-1
redeemable convertible preferred stock, $14.3 million of net proceeds from the
issuance of convertible notes to related parties, $11.9 million of net proceeds
from the issuance of the convertible notes and $0.2 million of proceeds from
exercises of stock options, offset by a $1.5 million payment of deferred
offering costs.
Critical Accounting Policies, Recent Accounting Pronouncements and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in theU.S. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes to our critical accounting policies from those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations," disclosed in our most recent Annual Report with the exception of significant accounting policies related to revenue and inventory, as well as significant accounting policies related to the adoption of FASB ASC Topic 842, Leases, effectiveJanuary 1, 2022 . Refer to Note 2 and Note 5 to the condensed consolidated financial statements contained in this Quarterly Report for a discussion new significant accounting policies over revenue and inventory, and FASB ASC Topic 842, Leases, respectively.
Emerging Growth Company and Smaller Reporting Company Status
The Jumpstart Our Business Startups Act of 2012, or JOBS Act, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have 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 we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies, and our condensed consolidated financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of$1.235 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of our initial public offering, (iii) the date on which we have issued more than$1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large, accelerated filer under the rules of theSecurities and Exchange Commission . We are also a "smaller reporting company", and we will continue to be a smaller reporting company until the first quarter of the fiscal year following the determination that the market value of our stock held by non-affiliates is more than$250 million measured on the last business day of our second fiscal quarter, or our annual revenue are more than$100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is more than$700 million measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosure and have certain other reduced disclosure obligations, including, among other things, being required to provide only the two most recent fiscal years of audited financial statements. 38
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