Forward-Looking Statements
Statements in the following discussion and throughout this report that are not
historical in nature are "forward-looking statements." You can identify
forward-looking statements by the use of words such as "expect," "anticipate,"
"estimate," "may," "will," "should," "intend," "believe," and similar
expressions. Although we believe the expectations reflected in these
forward-looking statements are reasonable, such statements are inherently
subject to risk and we can give no assurances that our expectations will prove
to be correct. Actual results could differ from those described in this report
because of numerous factors, many of which are beyond our control. These factors
include, without limitation, those described under Item 1A "Risk Factors." We
undertake no obligation to update these forward-looking statements to reflect
events or circumstances after the date of this report or to reflect actual
outcomes.
The following discussion and analysis of our financial condition and results of
operations should be read together with our unaudited financial statements and
the notes to those financial statements appearing elsewhere in this Quarterly
Report on Form 10-Q and the audited financial statements and notes thereto and
management's discussion and analysis of financial condition and results of
operations for the year ended December 31, 2020 included in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 2021.
This discussion contains forward-looking statements that involve significant
risks and uncertainties. As a result of many factors, such as those set forth in
Item 1.A. "Risk Factors" of this Quarterly Report on Form 10-Q and any updates
to those risk factors contained in our subsequent periodic and current reports
filed with the Securities and Exchange Commission, our actual results may differ
materially from those anticipated in these forward-looking statements.
Overview
We are a specialty pharmaceutical company that seeks to develop and
commercialize our product principally for use in the acute/intensive care
hospital setting. Our current product candidate is intravenous (IV) Tramadol,
for the treatment of post-operative acute pain. Under the terms of certain
agreements described herein, we have an exclusive license to develop and
commercialize IV Tramadol in the United States. In 2016, we completed a
pharmacokinetic study for IV Tramadol in healthy volunteers as well as an end of
phase 2 meeting with the U.S. Food and Drug Administration (FDA). In the third
quarter of 2017, we initiated a Phase 3 development program of IV Tramadol for
the management of post-operative pain. In December 2019, we submitted a New Drug
Application (NDA) for IV Tramadol and received a Complete Response Letter (the
First CRL) from the FDA in October 2020. In February 2021, we resubmitted the
NDA for IV Tramadol. The FDA assigned a Prescription Drug User Fee Act (PDUFA)
goal date of April 12, 2021 for the resubmitted NDA for IV Tramadol. On June 14,
2021, we announced that we had received a second Complete Response Letter (the
Second CRL) from the FDA regarding our NDA for IV tramadol. We continue to
pursue regulatory approval for IV Tramadol and had a Type A meeting with the FDA
in July 2021. We submitted a formal dispute resolution request (FDRR) with the
FDA on July 27, 2021. The FDRR has been forwarded to the Office of Neuroscience
for review and a response will be provided by August 26, 2021. To date, we have
not received approval for the sale of our product candidate in any market and,
therefore, have not generated any sales revenue from our product candidate.
Recent Developments
On November 12, 2018, we, InvaGen Pharmaceuticals Inc. (InvaGen), and Madison
Pharmaceuticals, Inc. entered into a Stock Purchase and Merger Agreement (SPMA),
pursuant to which we agreed to our sale in a two-stage transaction. In the first
stage, InvaGen agreed to purchase, for $35 million, common shares representing
33.3% of the fully diluted capitalization of our stock. In the second stage,
InvaGen would acquire the remaining issued and outstanding of our capital stock
for approximately $180 million in a reverse subsidiary merger transaction (the
Merger Transaction). The SPMA was approved by a majority of our stockholders,
including a majority of our non-affiliated stockholders, at our special
shareholder meeting on February 6, 2019. On February 8, 2019, InvaGen acquired
5,833,333 shares of our common stock at $6.00 per share (the Stock Purchase
Transaction) for net proceeds of $31.5 million after deducting commission fees
and other offering costs, representing a 33.3% stake in our capital stock on a
fully diluted basis.
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Consummation of the Merger Transaction is conditioned upon, among other things,
FDA approval of IV Tramadol, its labeling and scheduling, and the absence of
certain other restrictions in effect with respect to IV Tramadol. Pursuant to
the SPMA, if FDA approval of IV Tramadol was not obtained on or before April 30,
2021, InvaGen would not be subject to the mandatory closing obligations set
forth in the SPMA with respect to the Merger Transaction. As we did not receive
approval from the FDA for IV Tramadol on or before April 30, 2021, InvaGen is no
longer subject to the mandatory closing obligations under the SPMA, but retains
an option to complete the Merger Transaction until October 31, 2021 (the time
following which we may choose to terminate the SPMA), and also retains the
option to terminate the SPMA.
In the event that InvaGen does not exercise its right to terminate the SPMA,
certain restrictions relating to our ability to raise capital and explore
strategic alternatives, among other things, could exist through October 31,
2021, the time following which we can choose to terminate the SPMA. In the event
of termination of the SPMA, InvaGen will retain certain other rights pursuant to
the Stockholder's Agreement entered into on November 12, 2018 between us and
InvaGen. These rights exist as long as InvaGen maintains at least 75% of the
common shares acquired in the Stock Purchase Transaction and include among other
things, the right to restrict us from certain equity issuances and changes to
our capital stock without obtaining InvaGen's prior written consent.
On June 14, 2021, we announced that we had received the Second CRL from the FDA
regarding our NDA for IV Tramadol. The Second CRL stated that the delayed and
unpredictable onset of analgesia with IV Tramadol does not support its benefit
as a monotherapy to treat patients in acute pain and that there is insufficient
information to support that IV Tramadol in combination with other analgesics is
safe and effective for the intended patient population. In particular, the
Second CRL stated that, while the primary endpoint was met in two efficacy
studies, meaningful pain relief was delayed (accounting for the use of rescue
medication, e.g., ibuprofen), and some patients never achieved pain relief. We
continue to pursue regulatory approval for IV Tramadol and had a Type A meeting
with the FDA in July 2021. The FDA did not deviate from any of the positions the
FDA previously took in the First CRL and the Second CRL. We submitted a FDRR
with the FDA on July 27, 2021. The FDRR has been forwarded to the Office of
Neuroscience for review and a response will be provided by August 26, 2021.
Background
On June 26, 2017, we completed an initial public offering (IPO) of our common
stock, resulting in net proceeds of approximately $34.2 million after deducting
underwriting discounts, and other offering costs.
We used the proceeds from our IPO to initiate our first Phase 3 trial of IV
Tramadol in patients with moderate-to-severe pain following bunionectomy, which
had its first patient dosed in September 2017. In May 2018, we announced the
study met its primary endpoint and all key secondary endpoints.
In December 2018, we initiated the second Phase 3 trial in patients with
moderate-to-severe pain following abdominoplasty upon successful completion of
the bunionectomy study. In June 2019, we announced the study met its primary
endpoint and all key secondary endpoints.
In December 2017, we initiated an open-label safety study, which was completed
during the second quarter of 2019. The results showed that IV Tramadol is
well-tolerated with a side effect profile consistent with known pharmacology.
In December 2019, we submitted an NDA pursuant to Section 505(b)(2) of the
Federal Food, Drug and Cosmetic Act. In February 2020, the FDA accepted our NDA
submission and set a PDUFA goal date of October 10, 2020. On October 12, 2020,
we announced that we had received the First CRL from the FDA regarding our NDA.
In November 2020, we had a Type A Meeting with the FDA to discuss issues raised
in the First CRL. On February 12, 2021, we resubmitted the NDA to the FDA for IV
Tramadol. The NDA resubmission followed the receipt of official minutes from a
Type A meeting with the FDA, which was conducted following receipt of the First
CRL. The NDA resubmission included revised language relating to the proposed
product label and a report relating to terminal sterilization validation. The
FDA assigned a PDUFA goal date of April 12, 2021 for the resubmitted NDA for IV
Tramadol. On June 14, 2021, we announced that we had received the Second CRL
from the FDA regarding our NDA for IV Tramadol. We continue to pursue regulatory
approval for IV Tramadol and in connection therewith, had a Type A meeting with
the FDA in July 2021. We submitted a FDRR with the FDA on July 27, 2021. The
FDRR has been forwarded to the Office of Neuroscience for review and a response
will be provided by August 26, 2021.
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On November 12, 2018, we entered into the SPMA with InvaGen and Madison
Pharmaceuticals, Inc. Pursuant to the terms and subject to the conditions set
forth in the SPMA, InvaGen will, at second closing, hold 100% of the issued and
outstanding equity interests of Avenue. As described above, the Merger
Transaction was subject to the satisfaction of certain closing conditions,
including a condition pertaining to FDA approval by April 30, 2021. As this
closing condition did not occur, the Merger Transaction is now optional for
InvaGen. InvaGen has the right to terminate the SPMA and has no further
obligation to consummate the Merger Transaction under the SPMA. In the event
that InvaGen does not exercise its right to terminate the SPMA, certain
restrictions relating to financings and strategic alternatives could exist
through October 31, 2021, the time following which we can choose to terminate
the SPMA. In the event of termination of the SPMA, InvaGen will retain certain
other rights pursuant to the Stockholder's Agreement between us and InvaGen.
These rights exist as long as InvaGen maintains at least 75% of the common
shares acquired in the first stage closing. Certain actions relating to equity
issuances and changes to capital stock are restricted without the prior written
consent of InvaGen during this time.
The aggregate consideration to be paid by InvaGen under the SPMA if it completes
the Merger Transaction is $215 million in cash (a portion of which was already
paid in connection with the Stock Purchase Transaction), subject to certain
potential reductions, which InvaGen intends to have sufficient immediately
available funds to pay in the event that payment is required. In addition, we
are subject to certain lock-up restrictions and agreed not to (subject to
customary exceptions), during the period commencing at the signing of the SPMA
until the Merger Transaction, issue, buy, sell, or otherwise subject to a
security interest, pledge, hypothecation, mortgage or lien, any securities of
the Company.
Over the past several months, we have communicated with InvaGen relating to its
assertions that Material Adverse Effects (as defined in the SPMA) have occurred
due to the impact of the COVID-19 pandemic on potential commercialization and
projected sales of IV Tramadol. Additionally, in connection with the
resubmission of our NDA in February 2021, InvaGen communicated to us that it
believes the proposed label for IV Tramadol would also constitute a Material
Adverse Effect (as defined in the SPMA) on the purported basis that the proposed
label under certain circumstances would make the product commercially unviable.
InvaGen has communicated to us its desire to consider all options on the
proposed merger, including the option to not consummate the merger. Since we did
not receive FDA approval for IV Tramadol by April 30, 2021, these assertions
have no impact as to whether InvaGen is obligated to close the SPMA because as
discussed above, InvaGen no longer has such an obligation. As a result, the
possible timing and likelihood of the completion of the merger are uncertain.
There can be no assurance that the Merger Transaction will be completed on the
expected terms, anticipated schedule, or at all. It is also possible InvaGen
could attempt to pursue monetary claims against us.
Our net loss for the six months ended June 30, 2021 and 2020 was approximately
$1.9 million and $3.1 million, respectively. As of June 30, 2021, we had an
accumulated deficit of approximately $75.2 million. Substantially all our net
losses resulted from costs incurred in connection with our research and
development program of IV Tramadol and from general and administrative costs
associated with our operations.
We expect to continue to incur research and development costs and increased
general and administration related costs and incur operating losses for at least
the next several years as we develop and seek regulatory approval for IV
Tramadol in the U.S.
We need to obtain additional capital through the sale of debt or equity
financings or other arrangements to fund our operations, research and
development activity or regulatory approval activity; however, there can be no
assurance that we will be able to raise needed capital under acceptable terms,
if at all. The sale of additional equity may dilute existing stockholders and
newly issued shares may contain senior rights and preferences compared to
currently outstanding shares of common stock. Issued debt securities may contain
covenants and limit our ability to pay dividends or make other distributions to
stockholders. If we are unable to obtain such additional financing, future
operations would need to be scaled back or discontinued.
We are a majority controlled subsidiary of Fortress.
Avenue Therapeutics, Inc. was incorporated in Delaware on February 9, 2015. Our
executive offices are located at 1140 Avenue of the Americas, Floor 9, New York,
NY 10036. Our telephone number is (781) 652-4500, and our email address is
info@avenuetx.com.
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Impact of COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a
novel coronavirus (COVID-19) as a global pandemic, which continues to spread
throughout the United States and around the world. Through the filing date of
this Form 10-Q, we have not experienced a significant impact on our business
resulting from government restrictions on the movement of people, goods, and
services. Management believes any disruption, when and if experienced would be
temporary, however, there is uncertainty around when any disruption might occur,
the duration and the potential impact.
Critical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations
are based on our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP). The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to accrued expenses and stock-based
compensation. We base our estimates on historical experience, known trends and
events and various other factors that are believed to be 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. Actual results may differ from these estimates under different
assumptions or conditions.
Our significant accounting policies are described in more detail in the notes to
our unaudited interim condensed financial statements.
Results of Operations
General
At June 30, 2021, we had an accumulated deficit of $75.2 million, primarily as a
result of expenditures for licenses acquired, for research and development and
for general and administrative purposes. While we may in the future generate
revenue from a variety of sources, including license fees, milestone payments,
research and development payments in connection with strategic partnerships
and/or product sales, our product candidate is still in development and may
never be successfully developed or commercialized. Accordingly, we expect to
continue to incur substantial losses from operations for the foreseeable future,
and there can be no assurance that we will ever generate significant revenues.
Comparison of the Three Months Ended June 30, 2021 and 2020
For The Three Months Ended Change
June 30, June 30,
($ in thousands) 2021 2020 $ %
Operating expenses:
Research and development $ 328 $ 1,219 $ (891) (73) %
General and administrative 623 684 (61) (9) %
Loss from operations (951) (1,903) 952 (50) %
Interest income (2) (15) (13) (87) %
Net Loss $ (949) $ (1,888) $ 939 (50) %
Research and Development Expenses
Research and development expenses primarily consist of personnel related
expenses, including salaries, benefits, travel, and other related expenses,
stock-based compensation, payments made to third parties for license and
milestone costs related to in-licensed products and technology, payments made to
third party contract research organizations for preclinical and clinical
studies, investigative sites for clinical trials, consultants, the cost of
acquiring and manufacturing clinical trial materials, costs associated with
pre-commercialization validation manufacturing, costs associated with regulatory
filings, laboratory costs and other supplies.
For the three months ended June 30, 2021 and 2020, research and development
expenses were $0.3 million and $1.2 million, respectively. The decrease of $0.9
million is primarily due to decreases of $0.6 million associated with NDA
related and advisory committee preparation costs and $0.3 million in commercial
validation manufacturing activities.
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We expect our research and development activities to continue as we attempt to
gain regulatory approval for our existing product candidate, reflecting costs
associated with the following:
? employee-related expenses;
? license fees and milestone payments related to in-licensed product and
technology;
? expenses incurred under agreements with contract research organizations,
investigative sites and consultants that conduct our clinical trials;
? the cost of acquiring and manufacturing clinical trial materials; and
? costs associated with non-clinical activities, and regulatory approvals.
General and Administrative Expenses
General and administrative expenses consist principally of professional fees for
legal and consulting services, market research, personnel-related costs, public
reporting company related costs and other general operating expenses not
otherwise included in research and development expenses. We expect our general
and administrative costs to continue as we seek potential regulatory approval
and potential commercialization of our product candidate.
For the three months ended June 30, 2021 and 2020, general and administrative
expenses were $0.6 million and $0.7 million, respectively. The decrease of $0.1
million is due to $0.1 million in non-cash stock compensation costs.
Interest Income
Interest income was $2,000 and $15,000 for the three months ended June 30, 2021
and 2020, respectively. The decrease in interest income was due to the reduction
in cash and cash equivalents.
Comparison of the Six Months Ended June 30, 2021 and 2020
For The Six Months Ended Change
June 30, June 30,
($ in thousands) 2021 2020 $ %
Operating expenses:
Research and development $ 586 $ 1,916 $ (1,330) (69) %
General and administrative 1,366 1,261 105 8 %
Loss from operations (1,952) (3,177) 1,225 (39) %
Interest income (5) (47) (42) (89) %
Net Loss $ (1,947) $ (3,130) $ 1,183 (38) %
Research and Development Expenses
For the six months ended June 30, 2021 and 2020, research and development
expenses were $0.6 million and $1.9 million, respectively. The decrease of $1.3
million is primarily due to decreases of $0.9 million for NDA related and
advisory committee preparation costs, $0.3 million in commercial validation
manufacturing activities and $0.1 million in stock compensation costs.
General and Administrative Expenses
For the six months ended June 30, 2021 and 2020, general and administrative
expenses were $1.4 million and $1.3 million, respectively. General and
administrative expenses increased by $0.1 million primarily due to an increase
of $0.2 million in legal costs partially offset by a decrease of $0.1 million in
stock compensation costs.
Interest Income
Interest income was $5,000 and $47,000 for the six months ended June 30, 2021
and 2020, respectively. The decrease in interest income was due to the reduction
in cash and cash equivalents and short-term investments and falling interest
rates.
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Liquidity and Capital Resources
We have incurred substantial operating losses since our inception and expect to
continue to incur significant operating losses for the foreseeable future and
may never become profitable. As of June 30, 2021, we had an accumulated deficit
of $75.2 million. We have used the funds from our IPO and from the InvaGen share
purchase to finance our operations and will continue to use the funds primarily
for general corporate purposes, which may include financing our growth and
developing our product candidate.
In the event that IV Tramadol is approved by the FDA, this triggers an
obligation by us to make $5.0 million in milestone payments, for which we
currently do not have sufficient funding. In the event that IV Tramadol is not
approved by the FDA, the Company believes that its cash and cash equivalents
should be sufficient to fund its operating expenses only into the third quarter
of 2021. We need to secure additional funds through equity or debt offerings, or
other potential sources. Furthermore, under the SPMA, any additional debt or
equity funding must be approved by InvaGen. We cannot be certain that additional
funding will be available on acceptable terms, or at all. These factors
individually and collectively raise substantial doubt about our ability to
continue as a going concern.
In addition to the foregoing, based on current assessments, we do not expect any
material impact on our development timeline and our liquidity due to the
worldwide spread of the COVID-19 virus. However, we are continuing to assess the
effect on our operations by monitoring the spread of COVID-19 and the actions
implemented to combat the virus throughout the world.
Recently Adopted and Issued Accounting Pronouncements
See Note 2.
Cash Flows for the Six Months Ended June 30, 2021 and 2020
For The Six Months Ended
March 31,
($ in thousands) 2021 2020
Total cash and cash equivalents used in:
Operating activities $ (2,011) $ (2,488)
Investing activities - (1,000)
Net decrease in cash and cash equivalents $ (2,011) $ (3,488)
Operating Activities
Net cash and cash equivalents used in operating activities was $2.0 million for
the six months ended June 30, 2021, primarily comprised of our $1.9 million net
loss and decreases in operating assets and liabilities of $0.3 million partially
offset by $0.2 million in share based compensation.
Net cash and cash equivalents used in operating activities was $2.5 million for
the six months ended June 30, 2020, primarily comprised of our $3.1 million net
loss partially offset by increases in operating assets and liabilities of $0.2
million and $0.4 million in share based compensation.
Investing Activities
Net cash and cash equivalents used in investing activities for the six months
ended June 30, 2021 and 2020 was $0 and $1.0 million, respectively. Net cash
used in the six months ended June 30, 2020 was the milestone payment due to our
licensor pursuant to our NDA submission.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and
commitments outside the ordinary course of business from those disclosed under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations- Contractual Obligations and Commitments" in our Annual
Report on Form 10-K for the year ended December 31, 2020.
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Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. We have no guarantees or
obligations other than those which arise out of normal business operations.
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