ARCA BIOPHARMA, INC. This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, and the Private Securities Litigation Reform Act of 1995. Examples of these
statements include, but are not limited to, statements regarding the following:
potential future development plans for rNAPc2 (AB201) and Gencaro, including the
potential for rNAPc2 to treat COVID-19, our ability to secure sufficient
financing to support our anticipated clinical trials of rNAPc2 and Gencaro, the
likelihood that any Phase 3 clinical trial results for Gencaro will satisfy the
requirements of our Special Protocol Assessment agreement, the expected features
and characteristics of Gencaro, including the potential for genetic variations
to predict individual patient response to Gencaro or AB171, Gencaro's potential
to treat atrial fibrillation, or AF, future vaccines and treatment options for
patients with COVID-19, future treatment options for patients with AF, the
potential for Gencaro to be the first genetically-targeted AF prevention
treatment, statements regarding potential Phase 3 development plans for Gencaro,
including the timing and results thereof, the expected features and
characteristics of AB171 as a potential genetically-targeted treatment for
peripheral arterial disease, or PAD, and for heart failure, or HF, the potential
timeline for development of AB171, including any Investigational New Drug, or
IND, application submission related thereto, and the ability of ARCA's financial
resources to support its operations through the end of fiscal year 2022, the
sufficiency of our current capital to reach certain of our corporate objectives,
our ability to obtain additional funding when needed or enter into a strategic
or other transaction, including our ability to raise sufficient capital to fund
any clinical trials for rNAPc2 and Gencaro and our other operations, the extent
to which our issued and pending patents may protect our products and technology,
the potential of such product candidates to lead to the development of safe or
effective therapies, our ability to enter into collaborations, our ability to
maintain listing of our common stock on a national exchange, our future
operating expenses, our future losses, our future expenditures, and the
sufficiency of our cash resources to maintain operations. Actual results and
performance could differ materially from those projected in the forward-looking
statements as a result of many factors discussed herein and elsewhere. These and
other factors are identified and described in more detail in ARCA's filings with
the
The terms "ARCA," "the Company," "we," "us," "our" and similar terms refer to
Overview
We are a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of targeted therapies for cardiovascular diseases. Precision medicine refers to the tailoring of medical treatment to the individual characteristics of patients, using genomic, non-genomic biomarker and other information that extends beyond routine diagnostic categorization. We believe that when implemented correctly precision medicine can enhance therapeutic response, improve patient outcomes, and reduce healthcare costs.
Our lead product candidates are rNAPc2 (AB201) as a potential treatment for
diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on
COVID-19, the disease syndrome caused by the SARS-CoV-2 virus, and Gencaro™
(bucindolol hydrochloride) for the treatment of atrial fibrillation, or AF, in
patients with chronic heart failure, or HF. rNAPc2 targets COVID-19 patients
with biomarker evidence of coagulopathy, while Gencaro is being developed for
patients
rNAPc2 (AB201) for treatment of COVID-19
Recombinant Nematode Anticoagulant Protein c2, or rNAPc2 (AB201), is a protein therapeutic in clinical development as a potential treatment for patients with COVID-19. Based on its unique mechanism of action, development history and the clinical evidence from the SARS-CoV-2 pandemic, we believe rNAPc2 has potential to be a beneficial therapy for patients with this serious viral disease. We initiated a Phase 2 clinical trial of rNAPc2 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020 and are currently enrolling patients.
Certain patients with severe COVID-19 disease exhibit thrombotic complications and other inflammatory responses suggesting potential dysregulation of the coagulation and immune systems. rNAPc2 is a potent inhibitor of tissue factor, a cellular receptor responsible for initiation of the primary coagulation pathway and appears to be the major activator of the coagulation cascade during viral infection. Tissue factor is also implicated in the immune system inflammatory response to viral infections and in the process of viral dissemination during infection. We believe that evidence from the pandemic implicates tissue factor pathways as an important part of the COVID-19 disease process, and provides a rationale to test rNAPc2 as a potential therapeutic for COVID19 for its anticoagulant and potential anti-inflammatory properties.
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rNAPc2 was originally developed for potential use as an anticoagulant due to its inhibition of the TF-initiated coagulation process. It was evaluated for the prevention of thrombosis in Phase 1 and Phase 2 clinical studies involving over 800 subjects and demonstrated both safety and efficacy in these studies. rNAPc2 has also been investigated as a potential therapeutic for severe viral infections other than COVID-19. Research has shown that viral infections can provoke dysregulated activation of the TF pathway, resulting in abnormal systemic coagulation and related inflammation, leading to potential organ failure and mortality. For this reason, rNAPc2 was tested as a therapeutic in non-human primates, or NHPs, in studies against lethal doses of the Ebola and Marburg viruses, where it showed evidence of efficacy in the form of mortality reduction, decreases in inflammatory biomarkers and, evidence of reduced disseminated intravascular coagulation, a serious condition that causes abnormal blood clotting throughout the body's blood vessels.
SARS-CoV-2 is a new coronavirus identified in late 2019 that belongs to a family
of enveloped RNA viruses that include Middle East Respiratory Syndrome (MERS)
and Severe Acute Respiratory Syndrome (SARS-CoV-1), both of which caused serious
human infections of the respiratory system. The disease caused by the SARS-CoV-2
virus has been designated COVID-19. According to the
COVID-19 is associated with a high incidence of both arterial and venous coagulation-related adverse events in large and small blood vessels. These include, stroke, myocardial infarction, or MI, (i.e., heart attack) and pulmonary emboli; as well as, blockage of the smaller peripheral blood vessels in the fingers/toes (COVID-digit). This syndrome is so frequently observed in COVID-19 that it has received the name of COVID-19 Associated Coagulopathy, or CAC. The underlying pathology of CAC is believed to result from thrombo-inflammatory processes triggered by the viral infection. A commonly used biomarker for assessing the presence of abnormal coagulation is a D-dimer test, which is elevated (greater than 0.5) in approximately 40% to 75% of hospitalized COVID-19 patients and is associated with adverse clinical outcomes. Some researchers believe that this and other evidence points to dysregulation of TF pathways in COVID-19 patients that result in the development of thrombotic complications.
As a result of the observed role of coagulation disorders in COVID-19, patients
rNAPc2 has shown potential in addressing the coagulation disorder caused by severe viral infections. In preliminary, non-human studies in NHPs against lethal doses of the Ebola and Marburg virus, rNAPc2 lowered D-dimer levels, reduced mortality and exhibited anti-inflammatory effects. We believe more recent research supports our belief that rNAPc2 has the ability to inhibit the activity of TF in multiple processes that contribute to severe viral disease. Taken together, we believe this evidence suggests that rNAPc2 may have therapeutic benefits for patients with serious COVID-19 infections and the accompanying high risk of thrombosis. To our knowledge, rNAPc2 is the only New Molecular Entity anticoagulant, and the only tissue factor inhibitor, currently under evaluation for COVID-19.
As a therapeutic aimed at a host response to a disease syndrome, we believe rNAPc2 potentially could be used in combination with other antiviral drugs. We believe its potential efficacy is not linked to a specific viral genome and may not be diminished by the development of new strains of the SARS-CoV-2 virus through mutation, such as the Delta variant that is now widespread. As a therapeutic addressing a disease, we believe rNAPc2 may have broad spectrum potential against multiple pathogens that have disease elements in common with COVID19, such as other coronaviruses and other RNA viruses. Therefore, we believe that rNAPc2 has therapeutic potential for future viral outbreaks beyond the current pandemic.
rNAPc2 is a single-chain, 85 amino acid, recombinant protein administered
subcutaneously, that has previously been evaluated under three FDA
Investigational New Drug, or IND, applications in six Phase 1 and three Phase 2
clinical studies in
In
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We are evaluating rNAPc2 as a treatment for patients hospitalized with COVID-19
The clinical trial is being managed in collaboration with the Colorado
Prevention Center, or CPC, the
We have financed the development of rNAPc2 through public equity sales. Our rNAPc2 development plans, including the timeline, depend on our ability to enroll patients during the COVID-19 pandemic, the results of our Phase 2b clinical trial, FDA guidance, and availability of drug product, all of which are currently uncertain.
We own the clinical development program of rNAPc2, including the Phase 2
clinical development. If rNAPc2 is successfully developed, we believe it will
have intellectual property protection, including 12 years of market exclusivity
as an innovative biologic product under FDA law in
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Gencaro™ (bucindolol hydrochloride) for Atrial Fibrillation
Gencaro™ (bucindolol hydrochloride) is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that we are developing for the treatment of atrial fibrillation in patients with heart failure. We believe the pharmacology of Gencaro is unique and its efficacy can be enhanced by prescribing it to patients with a common genotypic variant that is present in approximately 50% of the North American and European general populations. This gene can be detected with a simple genetic test.
We are developing Gencaro to treat atrial fibrillation, or AF, in patients with chronic heart failure, or HF. AF is the most common form of cardiac arrhythmia, a disruption of the heart's normal rhythm or rate. HF is a chronic condition in which the heart is unable to pump enough blood to meet the body's needs. AF and HF commonly occur together. In HF patients, the development of AF leads to worsening symptoms, and increased risk of hospitalization and death. Current treatment options for AF in HF patients are limited, and can be invasive, costly and dangerous.
Our development plan for Gencaro focuses on the treatment of AF in patients with
higher ejection fraction HF, those
Our development plan for Gencaro is based on our recently published analysis of
the Phase 2b clinical trial of Gencaro for the prevention of AF in HF patients,
known as GENETIC-AF. This analysis showed novel results for Gencaro in patients
in the clinical trial with EF's of 40% and higher. The Phase 3 pivotal clinical
trial of Gencaro conducted under an SPA will include secondary endpoints that
are intended to capture some of this new information, such as a reduction in the
need to deploy rhythm control interventions including electrical cardioversion,
catheter ablation and use of anti-arrhythmic drugs and avoidance of drug-related
complications such as bradycardia. Based on these analyses, we were issued a
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We currently have an agreement with the FDA, known as a Special Protocol Assessment, or SPA, for the requirements of a Gencaro Phase 3 clinical trial that would support approval of Gencaro if successful.
We believe that patients with HF and AF represent a major unmet medical need,
and this need is most pronounced in patients with EF values of 40% and above.
This EF range constitutes more than half of all chronic HF in
We believe that Gencaro, if approved, may be a safe and more effective therapy for the treatment of higher ejection fraction HF patients with AF. We believe there are several potentially important attributes that would differentiate Gencaro from existing therapies, including:
• More effective rhythm control compared to the current standard of care;
• Reduction in the need for catheter ablation, electrical cardioversion, or
toxic anti-arrhythmic drugs;
• Maintenance of rhythm control after a successful AF catheter ablation;
• Effective rate control with lower risk of treatment-limiting, adverse event
producing bradycardia;
• Reduction in symptoms and improvement in quality of life;
• Reduced health care burden;
• Foundational beta-blocker benefits for HF and unique evidence of efficacy in
HF patients with AF;
• One of the only drug therapies approved and shown effective for AF in HF
patients with EF ? 40%, and the only one in its drug class.
We have an international patent portfolio for Gencaro in
To support the continued development of rNAPc2 and Gencaro, we will need additional financing to fully fund the planned clinical trials, and our general and administrative costs through the clinical trials' projected completion and potential commercialization. Considering the substantial time and costs associated with the development of rNAPc2 and Gencaro and the risk that we may be unable to raise a significant amount of capital on acceptable terms, we are also pursuing co-development and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions. If we are unable to obtain sufficient financing or are unable to complete a strategic transaction, we may discontinue our development activities on rNAPc2 or Gencaro or discontinue our operations.
We believe our cash and cash equivalents as of
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In 2017, we entered into a sales agreement with a placement agent to sell, from
time to time, our common stock having an aggregate offering price of up to
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Results of Operations
Research and Development Expenses
Research and development, or R&D, expense is comprised primarily of personnel costs, clinical development, manufacturing process development, and regulatory activities and costs. Our R&D expense is almost entirely generated by our activities relating to the development of rNAPc2 (AB201).
R&D expense for the three months ended
Clinical expense increased approximately
R&D personnel costs increased approximately
R&D expense in 2021 is expected to be higher than 2020, as we continue our rNAPc2 (AB201) international Phase 2b clinical trial.
General and Administrative Expenses
General and administrative, or G&A, expenses primarily consist of personnel costs, consulting and professional fees, insurance, facilities and depreciation expenses, and various other administrative costs.
G&A expenses were
G&A expenses in the second half of 2021 are expected to be consistent with the first half of 2021 as we maintain administrative activities to support our ongoing operations.
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Interest and Other Income
Interest and other income was
Interest income for the remainder of 2021 is expected to be negligible.
Interest Expense
Interest expense was
Liquidity and Capital Resources
Cash and Cash Equivalents
June 30 ,December 31, 2021 2020 (in thousands)
Cash and cash equivalents
As of
Cash Flows from Operating, Investing and Financing Activities
Six Months Ended June 30,
2021 2020
(in thousands)
Net cash (used in) provided by:
Operating activities $ (8,945 ) $ (2,728 )
Investing activities (22 ) (6 )
Financing activities 23,093 5,412
Net increase in cash and cash equivalents
Net cash used in operating activities for the six months ended
Net cash used in investing activities for the six months ended
Net cash provided by financing activities was
Sources and Uses of Capital
Our primary sources of liquidity to date have been capital raised from issuances of shares of our preferred and common stock. The primary uses of our capital resources to date have been to fund operating activities, including research, clinical development and drug manufacturing expenses, license payments, and spending on capital items.
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In
Our ability to execute our development programs in accordance with our projected time line depends on a number of factors, including, but not limited to, the following:
• the costs and timing for the potential additional clinical trials in
order to gain possible regulatory approval for rNAPc2, Gencaro or any
other product candidate;
• the market price of our stock and the availability and cost of
additional equity capital from existing and potential new investors;
• our ability to retain the listing of our common stock on the Nasdaq
Capital Market;
• our ability to control costs associated with its operations;
• general economic and industry conditions affecting the availability and
cost of capital, including as a result of the COVID-19 pandemic;
• the costs of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights; and
• the terms and conditions of our existing collaborative and licensing
agreements.
We believe our cash and cash equivalents balance as of
Critical Accounting Policies and Estimates
A critical accounting policy is one that is both important to the portrayal of
our financial condition and results of operation and requires our management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain. Our
significant accounting policies are described in Note 1 of "Notes to Financial
Statements" included within our 2020 Annual Report on Form 10-K filed with the
Accrued Outsourcing Expenses
As part of the process of preparing our financial statements, we are required to estimate accrued outsourcing expenses. This process involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associated cost incurred for these services as of the balance sheet date. Examples of estimated accrued outsourcing expenses include contract service fees, such as fees payable to contract manufacturers in connection with the production of materials related to our drug product, and service fees from clinical research organizations. We develop estimates of liabilities using our judgment based upon the facts and circumstances known at the time.
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Off-Balance Sheet Arrangements
We have not participated in any transactions with unconsolidated entities, such as special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
Indemnifications
In the ordinary course of business, we enter into contractual arrangements under
which we may agree to indemnify certain parties from any losses incurred
relating to the services they perform on our behalf or for losses arising from
certain events as defined within the particular contract. Such indemnification
obligations may not be subject to maximum loss clauses. We have entered into
indemnity agreements with each of our directors, officers and certain employees.
Such indemnity agreements contain provisions, which are in some respects broader
than the specific indemnification provisions contained in
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