AXSOME THERAPEUTICS, INC. The following discussion and analysis contain forward-looking statements about our plans and expectations of what may happen in the future. You should read the following discussion and analysis in conjunction with "Item 8. Financial Statements and Supplementary Data," and our consolidated financial statements beginning on page F-1 of this report. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in "Item 1A. Risk Factors." See also the "Special Cautionary Notice Regarding Forward-Looking Statements" set forth at the beginning of this report. InJuly 2019 , theFinancial Accounting Standards Board (which we refer to as "FASB") issued Accounting Standards Update 2019-07, "Codification Updates toSEC Sections-Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification", which changes were meant to simplify certain disclosures in financial condition and results of operations, particularly by eliminating year-to-year comparisons between prior periods previously disclosed. This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 .
Overview
We are a commercial-stage biopharmaceutical company developing and delivering
novel therapies for central nervous system ("CNS") conditions that have limited
treatment options. By focusing on this therapeutic area, we are addressing
significant and growing markets where current treatment options are limited or
inadequate. The Company's CNS portfolio includes three not yet approved product
candidates, AXS-07, AXS-12, and AXS-14, which are being developed for multiple
indications, and two approved products - Auvelity® (sometimes also referred to
as "AXS-05") and Sunosi® - both of which are also being developed for further
indications. In May 2022 , the Company completed the U.S. acquisition of Sunosi
from Jazz Pharmaceuticals ("Jazz") and in November 2022 , the Company acquired
the ex-U.S. assets of Sunosi from Jazz for certain international markets (the
"Acquisition"). Sunosi is a product approved by the FDA and marketed in the U.S.
to improve wakefulness in adult patients with excessive daytime sleepiness
("EDS") associated with narcolepsy or obstructive sleep apnea, and also approved
in Europe in January 2020 by the European Commission . In August 2022 , the
Company announced the FDA approval, and in October 2022 , the U.S. commercial
availability, of Auvelity. Auvelity is an indication for the treatment of major
depressive disorder in adults. Refer to Part I, Item 1. "Business" for a summary
of our clinical programs.
Since our incorporation in January 2012 , our operations to date have included
organizing and staffing our company, business planning, raising capital,
developing our compounds, engaging in other discovery and preclinical
activities, and the commercial launches of Sunosi and Auvelity. Subsequent to
our IPO, we financed our operations primarily through proceeds from sales of our
common stock to equity investors and debt borrowings. For a further discussion,
see the section entitled "Liquidity and Capital Resources" below.
Our ability to become profitable depends on our ability to generate revenue. We
have recently begun commercial sales of Sunosi and Auvelity but we have limited
experience with commercializing these, or any, products.
109--------------------------------------------------------------------------------
Table of Contents
We have incurred significant operating and net losses since inception. We incurred net losses of$187.1 million and$130.4 million for the years endedDecember 31, 2022 and 2021, respectively. Our accumulated deficit as ofDecember 31, 2022 was$596.3 million , and we expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, as we continue the commercialization of our on-market products and the development and clinical trials of, and seek regulatory approval for, our current product candidates and any other product candidates that we develop or in-license and advance to clinical development. Further, we have incurred and will continue to incur additional costs associated with operating as a public company. Accordingly, we may need additional financing to support our continuing operations. We may seek to fund our operations through public or private equity, debt financings, or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
Financial Overview
Product sales, net
Net revenues from product sales consist of Sunosi, which, subsequent to our
acquisition from Jazz, we began selling in the
We expect that Sunosi and Auvelity revenues are likely to fluctuate based on demand quarter to quarter. We will not generate revenue from other products unless and until we successfully develop, obtain regulatory approval of, and commercialize one of our current or future product candidates. We have incurred significant operating losses since inception. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue from such product candidates, and our results of operations and financial position, would be materially and adversely affected. If we enter into licensing or collaboration arrangements, such agreements may not generate revenue in the future.
Cost of product sales
Cost of product sales include direct costs of formulating, manufacturing and packaging drug product, overhead costs consisting of labor, customs, stock-based compensation, shipping, outside inventory management, royalty expense, and other miscellaneous operating costs.
Research and Development Expenses
Research and development expenses primarily include preclinical studies,
clinical trials, manufacturing costs, employee salaries and benefits,
stockbased compensation expense, contract services, including external research
and development expenses incurred under arrangements with third parties, such as
contract research organizations, or CROs, facilities costs, overhead costs,
depreciation, and other related costs.
Research and development activities are central to our business model. We will
incur substantial costs beyond our present and planned clinical trials in order
to file a new drug application, or NDA, for any of our product candidates. It is
difficult to determine with certainty the costs and duration of our current or
future clinical trials and preclinical studies, or if, when, or to what extent
we will generate revenue from the commercialization and sale of our product
candidates if we obtain regulatory approval. We may never succeed in achieving
regulatory approval. The duration, costs, and timing of clinical trials and
development of our product candidates will depend on a variety of factors,
including the uncertainties of future clinical trials and preclinical studies,
uncertainties in clinical trial enrollment rate, and significant and changing
government regulation. In addition, the probability of success for each product
candidate will depend on numerous factors, including competition, manufacturing
capability, and commercial viability. We will determine which programs to pursue
and how much to fund each program in response to the scientific and clinical
success of each product candidate, as well as an assessment of each product
candidate's commercial potential.
110--------------------------------------------------------------------------------
Table of Contents
The following table summarizes our research and development expenses by program
for the years ended
Year Ended
December 31,
2022 2021
Sunosi $ 2,834,120 $ -
AXS-05 23,949,287 24,525,561
AXS-07 9,060,693 14,787,625
AXS-12 7,091,036 4,862,688
AXS-14 2,330,131 235,933
Other research and development 4,077,772 6,192,869
Stock-based compensation 8,604,408 7,456,049
Total research and development expenses
Other research and development expenses primarily consist of employee salaries
and benefits, facilities and overhead costs. Beginning
Selling, general and administrative expenses
Selling, general and administrative expenses were primarily consist of salaries and related costs for personnel in executive, commercial, finance, and operational functions, and include stock-based compensation and travel expenses. Also included in selling, general and administrative expenses are commercial costs, marketing, pre-commercialization costs, facility-related costs, insurance expense, professional fees for legal and accounting services, and patent filing and prosecution costs. Selling, general and administrative expenses are expensed when incurred. Interest expense, net Interest expense, net, primarily consists of cash interest and non-cash costs related to our term loans (see "Liquidity and Capital Resources" below for a further discussion). We amortize these costs over the term of our debt agreements as interest expense in our consolidated statement of operations. Interest expense, net also includes interest income earned on cash.
Intangible Assets
Intangible assets are amortized using the straight-line method over their estimated period of benefit of ten years. We evaluate the recoverability of intangible assets periodically by considering events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.
Fair value in contingent consideration
Consideration paid in a business combination may include potential future
payments that are contingent upon the acquired business achieving certain
milestones in the future ("contingent consideration"). The royalty payments due
to Jazz are a high single-digit royalty on our U.S. net sales of Sunosi in the
current indication and a mid single-digit royalty on our U.S. net sales of
Sunosi for future indications. Contingent consideration liabilities are measured
at their estimated fair value as of the date of acquisition, with subsequent
changes in fair value recorded in the consolidated statements of operations
during such period a change is recognized. The Company estimates the fair value
of the contingent consideration as of the acquisition date and reporting periods
thereafter using the estimated future cash outflows based on future sales.
111--------------------------------------------------------------------------------
Table of Contents
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States of America , or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are more fully described in Note 2 to our audited consolidated financial statements appearing elsewhere in this report, we believe the following accounting policies are critical to the judgments and estimates we use in the preparation of our consolidated financial statements. Revenue Recognition Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration that result from: invoice discounts for prompt payment and distribution service fees, government rebates, Pharmacy Benefit Managers ("PBMs") andManaged Care Organization rebates, chargebacks, discounts and fees, product returns and costs of co-pay assistance programs for patients. Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales. The reserves are classified as reductions to Accounts receivable, net or accrued expenses and other current liabilities. The Company's estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance and all information (historical, current, and forecasted) that is reasonably available. These reserves reflect our best estimate of the amount of consideration to which the Company is entitled based on the terms of the contracts. We make significant estimates and judgments that materially affect our recognition of net product revenue. Claims by third parties for rebates, chargebacks and discounts frequently are submitted to us significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known. We will adjust our estimates based on new information, including information regarding actual rebates, chargebacks and discounts for our products, as it becomes available. 112
--------------------------------------------------------------------------------
Table of Contents
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses consist primarily of personnel costs for our research and development employees, costs incurred to third-party service providers for the conduct of research, preclinical and clinical studies, laboratory supplies, product license fees, consulting and other related expenses. We estimate research, preclinical and clinical study expenses based on services performed, pursuant to contracts with third-party research and development organizations that conduct and manage research, preclinical and clinical activities on our behalf. We estimate these expenses based on discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments associated with licensing agreements to acquire licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternative future use are expensed as incurred. Payments made to third parties under these arrangements in advance of the performance of the related services by the third parties are recorded as prepaid expenses until the services are rendered.
Goodwill is deemed to have an indefinite life and therefore not amortized. We test the carrying amounts of goodwill for recoverability on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. We perform a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit's fair value, and a charge is reported in impairment of goodwill in our consolidated statements of operations. As ofDecember 31, 2022 , the Company has determined that it has one reporting unit. The Company has not identified any events or changes in circumstances that indicate the existence of potential impairment of goodwill during the year endedDecember 31, 2022 .
Intangible Assets
Intangible assets are amortized using the straight-line method over their estimated period of benefit of ten years. We evaluate the recoverability of intangible assets periodically by considering events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. We have not identified any events or changes in circumstances that indicate the existence of potential impairment of intangible assets during the year endedDecember 31, 2022 .
Contingent Consideration
Consideration paid in a business combination may include potential future
payments that are contingent upon the acquired business achieving certain
milestones in the future ("contingent consideration"). The royalty payments due
to Jazz are a high single-digit royalty on the Company's U.S. net sales of
Sunosi in the current indication and a mid single-digit royalty on the Company's
U.S. net sales of Sunosi for future indications. Contingent consideration
liabilities are measured at their estimated fair value as of the date of
acquisition, with subsequent changes in fair value recorded in the consolidated
statements of operations during such period a change is recognized. We estimate
the fair value of the contingent consideration as of the acquisition date and
reporting periods thereafter using the estimated future cash outflows based on
future sales. Contingent consideration liabilities expected to be settled within
12 months after the balance sheet date are presented in current liabilities,
with the non-current portion recorded within total liabilities in the
consolidated balance sheets.
113--------------------------------------------------------------------------------
Table of Contents
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We recognize the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position as well as consideration of the available facts and circumstances. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. As ofDecember 31, 2022 , we do not believe any material uncertain tax positions are present. As ofDecember 31, 2022 , we hadU.S. federal net operating loss, or NOL carryforwards of approximately$458 million and foreign NOL carryforwads of$7.8 million .U.S. federal NOLs amounting to$60 million generated before the 2018 tax year will start expiring beginning 2032, and the NOLs of approximately$398 million generated in 2018 and later have an indefinite carryforward period. Utilization of the NOLs may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended. The annual limitation for net operating losses incurred before the 2018 tax year may result in expiration before we can use them. We have recorded a valuation allowance on all of our deferred tax assets.
Stockbased compensation
For issued stock options, we estimate the grant date fair value of each option using the BlackScholes option pricing model. The Black-Scholes model takes into account the expected volatility of our common stock, the risk-free interest rate, the estimated life of the option, the closing market price of our common stock, expected dividend yield and the exercise price. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment. In addition, we recognize expense for equity award forfeitures as they occur. For awards subject to service-based vesting conditions, we recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term. For awards subject to performance-based vesting conditions, we recognize stock-based compensation expense using the accelerated attribution method when it is probable that the performance condition will be achieved. The expense related to the stock-based compensation is recorded within the financial statement line item the grantee's cash compensation is recorded in. Our policy upon exercise of stock options is that shares will be issued as new shares drawing on our 2015 Omnibus Incentive Compensation Plan share pool that was adopted by the stockholders inNovember 2015 . 114
--------------------------------------------------------------------------------
Table of Contents
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year ended December 31, 2022 2021 Revenues: Product sales, net$ 50,037,106 $ - Operating expenses: Cost of product sales (excluding amortization and depreciation) 5,197,595 - Research and development 57,947,447
58,060,725
Selling, general and administrative 159,253,663
66,646,205
Loss in fair value of contingent consideration 3,298,230 - Intangible asset amortization 4,139,228 - Total operating expenses 229,836,163 124,706,930 Loss from operations (179,799,057 ) (124,706,930 ) Interest expense, net (7,334,596 ) (5,696,062 ) Net loss$ (187,133,653 ) $ (130,402,992 ) Net loss per common share, basic and diluted$ (4.60 ) $ (3.47 ) Weighted average common shares outstanding, basic and diluted 40,655,941 37,618,599 Product sales, net. Auvelity was launched onOctober 19, 2022 and hadU.S. net sales of$5.2 million for the year endedDecember 31, 2022 . No Auvelity sales were reported by Axsome for the 2021 comparable period reflecting the timing of the Auvelity approval and launch. Additionally, we began selling Sunosi in theU.S. inMay 2022 and in certain international markets inNovember 2022 , and recorded net sales of$44.8 million for the year endedDecember 31, 2022 , which included$0.9 million in ex-U.S. market net sales. No Sunosi sales were reported by us for the 2021 comparable periods, reflecting the acquisition of Sunosi.
Cost of product sales. Total cost of product sales was
Research and Development Expenses. Our research and development expenses for the year endedDecember 31, 2022 , were$57.9 million , compared to$58.1 million for the year endedDecember 31, 2021 , a decrease of$0.2 million . See "Research and Development" section in the "Overview" section above for more further information.
Selling, general and administrative expenses. Our selling, general and
administrative expenses for the year ended
Loss in Fair Value of Contingent Consideration. The change in fair value of contingent consideration was primarily due to the change in discount rates due to market changes.
Intangible asset amortization. As part of the Sunosi acquisition preliminary purchase price allocation, we determined the identifiable intangible asset is developed technology. We amortize the intangible asset over its useful life of 10 years. Interest expense, net. Interest expense, net for the year endedDecember 31, 2022 , was$7.3 million , compared to$5.7 million for the year endedDecember 31, 2021 , an increase of$1.6 million . The increase is mainly due to a higher debt balance compared to the prior comparable period due to the execution of the Second Amendment to the 2020 Term Loan inMay 2022 . 115
--------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources
Since our inception throughDecember 31, 2022 , we have financed our operations primarily through equity offerings, debt borrowings and proceeds from product sales. See discussion below.
Equity
OnDecember 2, 2022 , we filed an automatic shelf registration statement with theSEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an unlimited amount, which we refer to as the 2022 Shelf Registration Statement. It was declared effective by theSEC upon filing. In the future, we may conduct additional offerings of one or more of these securities utilizing the 2022 Shelf Registration Statement in such amounts, prices and terms to be announced when and if the securities are offered. At the time any of our securities covered by the 2022 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with theSEC containing specific information about the terms of any such offering. InDecember 2019 , we entered into a sales agreement, or theDecember 2019 Sales Agreement, withSVB Leerink , pursuant to which we may sell up to$80 million in shares of our common stock from time to time throughSVB Leerink , acting as our sales agent, in one or more at-the-market offerings utilizing the automatic shelf registration statement we previously filed with theSEC onDecember 5, 2019 , which we refer to as the 2019 Shelf Registration Statement.SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under theDecember 2019 Sales Agreement. InMarch 2022 , we entered into a sales agreement, or theMarch 2022 Sales Agreement, withSVB Securities , pursuant to which we may sell up to$200 million in shares of our common stock from time to time throughSVB Securities , acting as our sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement.SVB Securities is entitled to receive a commission of up to 3.0% of the gross proceeds for any shares sold under theMarch 2022 Sales Agreement. TheMarch 2022 Sales Agreement supersedes theDecember 2019 Sales Agreement, by and between the Company andSVB Securities . The Company exhausted sales of its shares of the Company's common stock under its prior at-the-market offering program. InAugust 2022 , we filed a prospectus supplement to the 2019 Shelf Registration Statement for the issuance and sale, if any, of up to an additional$250 million in shares of our common stock under theMarch 2022 Sales Agreement. We will paySVB Securities a commission of up to 3.0% of the gross sales proceeds of any shares sold throughSVB Securities , acting as sales agent, under theMarch 2022 Sales Agreement. InDecember 2022 , in connection with the 2022 Shelf Registration Statement, we filed a new sales agreement prospectus to replace the prior prospectus supplement filed inAugust 2022 associated with the expired 2019 Shelf Registration Statement. The new sales agreement prospectus covered the issuance and sale by us of up to the same$250 million of our common stock that may be issued and sold from time to time throughSVB Securities , as our sales agent, under theMarch 2022 Sales Agreement. Under theDecember 2019 Sales Agreement andMarch 2022 Sales Agreement, for the year endedDecember 31, 2022 , we received approximately$238.8 million in gross proceeds through the sale of 5,167,973 shares, of which net proceeds were approximately$231.8 million . 116
--------------------------------------------------------------------------------
Table of Contents
Debt
InMarch 2022 , we entered into a Second Amendment to the Loan Agreement with Hercules. The Second Amendment amends the terms of that certain Loan and Security Agreement, dated as ofSeptember 25, 2020 , by and among us, Hercules and the Lenders (as amended by that certain First Amendment to Loan and Security Agreement, dated as ofOctober 14, 2021 , and as further amended by the Second Amendment). In connection with the Second Amendment, the parties also clarified certain terms of the Warrant Agreement previously issued to Hercules. The Second Amendment was effective upon the closing of the Acquisition onMay 9, 2022 . See "Contractual Obligations and Commitments -March 2022 Second Amendment to the Loan and Security Agreement - Hercules'" section below for more information. InJanuary 2023 , we entered into a Third Amendment to the Loan Agreement with Hercules. The Third Amendment amends the terms of that certain Loan and Security Agreement, dated as ofSeptember 25, 2020 , by and among us, Hercules and the Lenders (as amended by that certain First Amendment to Loan and Security Agreement, dated as ofOctober 14, 2021 , and as further amended by the Second Amendment to Loan and Security Agreement, dated as ofMarch 27, 2022 ). The Third Amendment, among other things, increased the size of the aggregate principal amount of the 2020 Term Loan from$300,000,000 to$350,000,000 , reduced the interest rate, and extended the maturity and interest-only period of the Loan Agreement. See "Contractual Obligations and Commitments -January 2023 Third Amendment to the Loan and Security Agreement - Hercules" section below for more information. In the future, we may conduct additional offerings of one or more of the securities covered by the 2022 Shelf Registration Statement in such amounts, prices and terms to be announced when and if the securities are offered. At the time any of our securities covered by the 2022 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with theSEC containing specific information about the terms of any such offering. We believe that our current cash, along with the remaining committed capital from the$350 million term loan facility, is sufficient to fund anticipated operations into cash flow positivity, based on the current operating plan, which includes the continued commercialization of Sunosi and Auvelity. Because the process of commercializing products and evaluating product candidates in clinical trials is costly and the timing of progress in these trials is uncertain, it is possible that the assumptions upon which we have based this estimate may prove to be wrong, and we could use our capital resources sooner than we currently expect. Cash Flows
The following table summarizes our primary sources and uses of cash for the periods indicated:
Year Ended December 31,
2022 2021
Net cash (used in) provided by:
Operating activities $ (116,510,798 ) $ (108,225,764 )
Investing activities (53,702,109 ) (307,549 )
Financing activities 284,582,008 11,129,714
Net increase (decrease) in cash
Operating Activities. Net cash used in operating activities for the year endedDecember 31, 2022 , was$116.5 million as compared to$108.2 million for the year endedDecember 31, 2021 . The increase of$8.3 million in net cash used was mainly due to commercialization activities.
Investing Activities. Cash used in investing activities for the year ended
117--------------------------------------------------------------------------------
Table of Contents
Financing Activities. Net cash provided by financing activities for the year endedDecember 31, 2022 , was$284.6 million , which included net proceeds of the sale of common stock through ourDecember 2019 andMarch 2022 Sales Agreement withSVB Securities of$231.8 million , net proceeds from Tranche 1B related to the Second Amendment of the Loan and Security Agreement with Hercules of$45.0 million along with the purchase of 152,487 shares of our common stock for a total consideration of$5.0 million by Hercules, and proceeds from the issuance of common stock upon exercise of employee stock options of$6.3 million , offset by payment of contingent consideration and tax withholdings on stock awards for a total of$3.0 million . Funding requirements We have not achieved profitability since our inception, and we expect to continue to incur significant losses for the foreseeable future. We expect our losses to decrease over time if we are able to successfully commercialize Auvelity and Sunosi. We are subject to all of the risks pertinent to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may harm our business. We may need to raise additional financing in the future to fund our operations. In the event that we need additional financing, we may incur additional debt, license certain intellectual property, and seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of equity or convertible securities, these securities could have rights or preferences senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. Our future capital requirements will depend on many factors, including:
•
the commercial success of our products;
•
the scope, rate of progress, results, and cost of our clinical studies and other related activities;
•
our ability to enter into collaborative agreements for the development and commercialization of our product candidates;
•
the number and development requirements of any other product candidates that we pursue;
•
the costs, timing, and outcome of regulatory reviews of our product candidates;
•
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval;
•
any product liability or other lawsuits related to our product candidates;
•
the expenses needed to attract and retain skilled personnel;
•
the general and administrative expenses related to being a public company;
•
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; and
•
the costs involved in preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending our intellectual propertyrelated claims.
Please see "Risk Factors" for additional risks associated with our substantial capital requirements.
118--------------------------------------------------------------------------------
Table of Contents
Contractual Obligations and Commitments
The following is a summary of our contractual obligations as ofDecember 31, 2022 : Less than More than Total one year 1 - 3 years 3 - 5 years 5 years Term loan$ 133,947,600 $ 10,306,181 $ 43,329,631 $ 80,311,788 $ - Lease commitments$ 427,875 427,875 - - - Total contractual obligations$ 134,375,475 $ 10,734,056 $ 43,329,631 $ 80,311,788 $ - License agreement with Pfizer InJanuary 2020 , we entered into a license agreement with Pfizer. Under the terms of our exclusive license agreement with Pfizer, Pfizer received 82,019 shares of our common stock having a value of$8.0 million , based on the average closing price of the Company's common stock for the 10 prior trading days of$97.538 , in consideration for the license and rights. Pfizer also received an upfront cash payment of$3.0 million and will also receive up to$323 million upon the achievement of certain regulatory and sales milestones, and tiered mid-single to low double-digit royalties on future sales. Pfizer will also have a right of first negotiation on any potential future strategic transactions involving AXS-12 and AXS-14. For a more detailed description of these agreements, please see "Business-Material License Agreements."
License agreements with Antecip Bioventures
Under three exclusive license agreements withAntecip Bioventures II LLC , or Antecip, an entity owned by our Chief Executive Officer and Chairman of the Board,Herriot Tabuteau , M.D., we are obligated to make specified royalty payments ranging from 1.5% to 4.5%, subject to up to a 50% reduction depending on required payments to third parties, on net sales of licensed products. For a more detailed description of these agreements, please see "Business-Material License Agreements." Due to the commercial launch of Auvelity in the fourth quarter of 2022, we recorded an accrual for royalty payments due to Antecip equal to 3.0% of net sales.
InMarch 2022 , we entered into a Second Amendment to Loan and Security Agreement with Hercules Capital, Inc. The Second Amendment amends the terms of that certain Loan and Security Agreement, dated as ofSeptember 25, 2020 , by and among us, Hercules and the Lenders (as amended by that certain First Amendment to Loan and Security Agreement, dated as ofOctober 14, 2021 , and as further amended by the Second Amendment). In connection with the Second Amendment, the parties also clarified certain terms of the Warrant Agreement previously issued to Hercules. The Second Amendment was effective upon the closing of the Acquisition onMay 9, 2022 . The Second Amendment changed the Term Loan Advance (as defined in the Loan Agreement) amounts and dates available under Tranche 1 through Tranche 5, including increasing the Tranche 1 Advance (as defined in the Loan Agreement) from$60.0 million to$95.0 million , changing the Tranche 2 Advances (as defined in the Loan Agreement) from two sub-tranches of$50.0 million each to three sub-tranches of$35.0 million ,$35.0 million and$30.0 million , respectively, changing the Tranche 3 Advance (as defined in the Loan Agreement) from one tranche of$20.0 million to two sub-tranches of$15.0 million and$5.0 million , respectively, decreasing the Tranche 4 Advance (as defined in the Loan Agreement) from$55.0 million to$50.0 million , and decreasing the Tranche 5 Advance (as defined in the Loan Agreement) from$75.0 million to$35.0 million ; (iii) modified the interest rate (a floating rate based on the greater of (a) 8.95% or (b) US WSJ Prime + 5.70%) to not exceed 10.70%; and (iv) changed the minimum cash requirement of the Company from$15,000,000 (plus certain accounts payable amounts) to$40,000,000 (plus certain accounts payable amounts), provided that uponU.S. Food and Drug Administration (the "FDA") approval of the Company's AXS-05 product candidate for the treatment of major depressive disorder, the minimum cash requirement shall be$25.0 million (plus certain accounts payable amounts). The$40.0 million threshold decreased to$25.0 million upon achievement of the AXS-05 milestone. 119
--------------------------------------------------------------------------------
Table of Contents
InJanuary 2023 , we entered into a Third Amendment to the Loan Agreement with Hercules. The Third Amendment amends the terms of that certain Loan and Security Agreement, dated as ofSeptember 25, 2020 , by and among us, Hercules and the Lenders (as amended by that certain First Amendment to Loan and Security Agreement, dated as ofOctober 14, 2021 , and as further amended by the Second Amendment to Loan and Security Agreement, dated as ofMarch 27, 2022 ). The Third Amendment amended the terms of the Loan Agreement to, among other things, (i) extend the maturity date toJanuary 1, 2028 , unless the Company meets certain revenue targets as described in the Loan Agreement, in which case the Company can extend the maturity date toJanuary 1, 2029 ; (ii) increase the aggregate principal amount under the Loan Agreement from$300,000,000 to$350,000,000 ; (iii) subject to the terms and conditions in the Loan Agreement, change the Term Loan Advance amounts and dates available under the Tranche 1 Advance (as defined in the Loan Agreement) through Tranche 5 Advance (as defined in the Loan Agreement), including increasing the Tranche 1 Advance from one tranche of$95,000,000 to five sub-tranches of$95,000,000 ,$55,000,000 ,$30,000,000 ,$35,000,000 and$35,000,000 , respectively, changing the Tranche 2 Advance (as defined in the Loan Agreement) from three sub-tranches of$35,000,000 ,$35,000,000 and$30,000,000 to one tranche of$25,000,000 , changing the Tranche 3 Advance (as defined in the Loan Agreement) from two sub-tranches of$15,000,000 and$5,000,000 to one tranche of$75,000,000 , and removing the Tranche 4 Advance (as defined in the Loan Agreement) and Tranche 5 Advance entirely; (iv) revise the interest rate applicable to extensions of credit under the Loan Agreement to equal the greater of 9.95% per annum or the prime rate plus 2.20% per annum, (v) increase the minimum cash requirement of the Company to$30,000,000 ; and (vi) require the Company to pay a facility fee equal to 0.75% of the amount of principal actually funded pursuant to the Tranche 1B Advance (as defined in the Loan Agreement), Tranche 1C Advance (as defined in the Term Loan), Tranche 1D Advance (as defined in the Loan Agreement), Tranche 1E Advance (as defined in the Term Loan), Tranche 2 Advance and Tranche 3 Advance.
Royalty Agreements
OnMarch 25, 2022 , the Company entered into an Asset Purchase Agreement (the "Purchase Agreement") with Jazz, pursuant to which the Company was to acquire commercial and development rights with respect Sunosi from Jazz (the "Acquisition") in certainU.S. and ex-U.S. markets. Pursuant to the Purchase Agreement, we agreed to make non-refundable, non-creditable royalty payments to Jazz equal to a (A) high-single digit royalty for any Current Indication or (B) mid-single digit royalty for any Future Indication, ofNet Sales in theU.S. Territory made during the applicable Royalty Term (in each case, as those terms are defined in the Purchase Agreement). There are no royalty payments due to Jazz forNet Sales outside of theU.S. Territory. At the initial closing, we assumed all of the commitments of Jazz to SK and Aerial. SK is the originator of Sunosi and retains rights in 12 Asian markets, includingChina ,Korea , andJapan . In 2014, Jazz acquired from Aerial worldwide rights to Sunosi excluding those Asian markets stated previously. The assumed commitments to SK and Aerial include single-digit tiered royalties based on our sales of Sunosi, and we are committed to pay up to$165 million based on revenue milestones and$1 million based on development milestones. 120
--------------------------------------------------------------------------------
Table of Contents
In 2012, we entered into three exclusive license agreements withAntecip Bioventures II LLC , or Antecip, an entity owned by our Chief Executive Officer and Chairman of the Board,Herriot Tabuteau , M.D., in which we were granted exclusive licenses to develop, manufacture, and commercialize Antecip's patents and applications related to the development of AXS-05 anywhere in the world for veterinary and human therapeutic and diagnostic use, and additional patents and applications that are not relevant to our current programs in development. The agreements were amended inAugust 2015 to update the schedule of patents and applications subject to the license agreements. Pursuant to the agreements, we are required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize AXS-05. Under the terms of the agreements, we are required to pay to Antecip a royalty equal to 3.0% for AXS-05, of net sales of products containing the licensed technology by us, our affiliates, or permitted sublicensees. These royalty payments are subject to reduction by an amount up to 50.0% of any required payments to third parties. Unless earlier terminated by a party for cause or by us for convenience, the agreements remain in effect on a product by product and country by country basis until the later to occur of (1) the applicable product is no longer covered by a valid claim in that country or (2) 10 years from the first commercial sale of the applicable product in that country. Upon expiration of the agreements with respect to a product in a country, our license grant for that product in that country will become a fully paid up, royalty free, perpetual non exclusive license. If Antecip terminates any of the agreements for cause, or if we exercise our right to terminate any of the agreements for convenience, the rights granted to us under such terminated agreement will revert to Antecip. Due to the commercial launch of Auvelity in the fourth quarter of 2022, we recorded an accrual for royalty payments due to Antecip equal to 3.0% of net sales.
License Agreement with Pharmanovia
OnFebruary 21, 2023 ,Axsome Malta Ltd. , aMalta limited company ("AxsomeMalta "), a wholly-owned subsidiary of the Company, entered into a License Agreement (the "License Agreement") withAtnahs Pharma UK Limited (Pharmanovia), a company organized and existing under the laws ofEngland andWales (the "Licensee"), pursuant to which Axsome Malta will license certain Licensed Intellectual Property (as defined in the License Agreement) to the Licensee and grant an exclusive license to Licensee in the Territory (as defined in the License Agreement and which includesEurope and certain countries in theMiddle East andAfrica ) for use of the Licensed Intellectual property for the development and commercialization of the Company's Licensed Products (as defined in the License Agreement and which includes the Company's product Sunosi).
Shelf Registration Statement
OnDecember 2, 2022 , we filed a Form S-3ASR (File No. 333-235372) with theSEC , or the 2022 Shelf Registration Statement, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which became effective immediately upon filing. At the time any of the securities covered by the 2022 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with theSEC containing specific information about the terms of any such offering.
OffBalance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
offbalance sheet arrangements, as defined by applicable
Recent Accounting Pronouncements
Refer to Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in Part IV, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.
121--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
