BETTER THERAPEUTICS, INC. Overview
Better Therapeutics, Inc. ("we", "us", "the Company", or "Better") is a prescription digital therapeutics company developing nutritional cognitive behavioral therapy ("nCBT") to address the root causes of cardiometabolic diseases. Our mission is to address unmet needs for treatment of cardiometabolic diseases such as diabetes, liver disease and heart disease, which share lifestyle behaviors as common root causes. TheU.S. spends approximately$4.0 trillion per year on healthcare, and approximately 90% of that spending is for the treatment of chronic diseases. Most chronic cardiometabolic diseases are caused predominantly by behaviors relating to diet, physical activity, and other lifestyle factors, yet current treatments are focused on reducing the effects of those diseases rather than addressing the root causes. In response to addressing the root causes of cardiometabolic diseases, we are building a proprietary platform for the development ofU.S. Food and Drug Administration ("FDA") regulated, software-based, prescription digital therapeutics ("PDTs"). Our investigational PDTs are designed to deliver a novel form of nCBT to enable changes in neural pathways of the brain so that lasting changes in behavior can become possible. Our lead prescription digital therapeutic product candidate for the treatment of patients with type 2 diabetes ("T2D"), BT-001, completed a first-in-class open label, randomized, controlled, parallel group clinical trial for the treatment of T2D inJuly 2022 and successfully met its primary and secondary endpoints as well as exploratory endpoints. The clinical trial for BT-001 included a diverse, nationally representative population of 668 patients with T2D and a mean baseline A1c of 8.1%. Participants in the trial had long standing (mean 11 years), poorly controlled T2D, high cardiovascular risk, multiple comorbidities, multiple blood sugar lowering medications, representing a difficult to treat patient population. Prior to the start of the study, we discussed core aspects of the design of the trial with the FDA during several formal meeting interactions. During these formal meeting interactions, we aligned with the FDA that an appropriate endpoint is a clinically meaningful change in A1c as determined by the mean change in A1c in the BT-001 group compared to the mean change in the control group. Following these discussions, we determined that participants would be randomized to receive standard of care with or without BT-001and that the primary and secondary efficacy endpoints would be the difference in mean change from baseline in A1c at 90 and 180 days. The study was powered to detect a 0.4% or greater change in A1c at 90 days, between BT-001 and control and a statistically significant change (p<0.05) in A1c at 180 days. The study also assessed a safety endpoint (the occurrence, relatedness and severity of Adverse Events) at day 90 and 180. Our clinical trial of BT-001 achieved statistically significant and clinically meaningful changes in both the primary and secondary endpoints. The primary efficacy endpoint was the difference in mean change from baseline in A1c after 90 days of treatment between the two groups and showed highly statistically significant improvement in A1c between the intervention and control groups (-0.4%, p <0.001). The secondary efficacy endpoint was the difference in mean change from baseline in A1c after 180 days of treatment between the two groups and showed statistically significant improvement in A1c between the intervention and control groups (-0.3%, p <0.01). The difference in A1c levels after 180 days of treatment between BT-001 treated patients and Standard of Care control group patients remained statistically significant even as more SOC patients increased blood sugar lowering medications. BT-001 also demonstrated sustained and improved A1c levels at 180 days with absolute A1c reduction improving from 0.3% at 90 days to 0.4% at 180 days, while half of the BT-001 patients achieved clinically meaningful improvements, with a mean A1c reduction of 1.3%. The improved A1c reduction from 90 days to 180 days suggests that BT-001 was durable. The clinical trial also provided evidence that beyond reductions in A1c: (1) there was a clear dose-response between greater engagement in nCBT and greater reductions in A1c, supporting nCBT as a mechanism of action, (2) measures of patient engagement, adherence, persistence, and satisfaction were all positive, (3) no meaningful differences in safety events were observed between groups and (4) exploratory endpoint data revealed a additional cardiometabolic improvements as well as lower medication utilization compared to the control group, supporting the potential for BT-001 to improve overall health of patients with T2D and potentially reduce the usage of increasingly costly T2D medication associated with the progression of the disease. We will use the data from this study to submit a de novo classification request to the FDA in Q3 2022, seeking marketing authorization of BT-001 for the treatment of patients with T2D. We believe the successful clinical trial of BT-001, if viewed favorably by the FDA, will be sufficient for the FDA to grant marketing authorization of BT-001 for the treatment of T2D. We will also use the data from this study to inform the initiation of pivotal trials for the treatment of hypertension and hyperlipidemia. 17 -------------------------------------------------------------------------------- We initiated a first-ever clinical study evaluating the feasibility of nCBT to reduce liver fat and improve liver disease biomarkers as a potential treatment for NAFLD and NASH. The study is being conducted in collaboration withArizona Liver Health , a leading liver clinical research center. This single arm interventional cohort study is expected to enroll approximately 20 patients for a treatment period of 90 days. The primary endpoint is the mean change in percent liver fat, as measured by Magnetic Resonance Imaging Proton DensityFat Fraction (MRI-PDFF). The study is expected to be completed in the fourth quarter of 2022. NAFLD/NASH affects over 64 million adults in theU.S. , resulting in over$100 billion in direct healthcare costs annually. There are currently no FDA approved therapeutics for treating NASH/NAFLD. We initiated a real world evidence study to evaluate the long-term effectiveness and healthcare utilization changes associated with the use of BT-001 for the treatment of T2D with Catalyst Heath Network,Mass General Brigham ,Colorado Prevention Center Clinical Research , andDurham Veterans Administration Medical Center . The randomized, controlled, multi-site study is expected to enroll approximately 1,000 patients for a treatment period of at least 12 months. Change in A1c and healthcare resource utilization will be evaluated and compared to usual care. Interim study results are expected to be reported in 2023, once a sufficient number of patients has completed an incremental 90 days of treatment. The study is expected to generate evidence supporting payer coverage and reimbursement. The unique characteristics of prescription digital therapeutics and cardiometabolic diseases ("CMDx") may make it possible for us to launch multiple products now in development for the treatment of other CMDx over the next few years. We are building a fully integrated PDTs company focused on treating the root causes of cardiometabolic diseases. Our therapeutics are being developed to fill a known gap in the treatment of cardiometabolic diseases and integrate within the existing healthcare system. We expect primary care providers to prescribe our therapeutics and insurers to reimburse them, if authorized for marketing by the FDA, much like they would a drug, and for the patient to remain in the care of their provider while using them.
Impact of COVID-19
InMarch 2020 , theWorld Health Organization declared COVID-19 a global pandemic. The ongoing COVID-19 pandemic has not had a significant impact on our operations. The ultimate impact of the ongoing COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trial, healthcare systems or the global economy as a whole. However, these effects could harm our operations, and we will continue to monitor the ongoing COVID-19 pandemic closely. Management is unable to estimate the future financial effects, if any, to our business as a result of COVID-19 because of the high level of uncertainties and unpredictable outcomes of this disease.
Components of Results of Operations
Revenue
We expect that our primary sources of revenue will be through reimbursement coverage for our treatments by commercial insurers, Medicare, and Medicaid in theU.S. and our near-term plan is to obtain broad reimbursement coverage for our first PDT for treating T2D, BT-001, if authorized for marketing by the FDA. We expect to be successful in obtaining a broad reimbursement coverage through demonstrating and generating a comprehensive set of evidence to substantiate the value of BT-001 based on its impact on clinical outcomes, total cost of care, and durability of effect. Obtaining a broad reimbursement coverage and timing of obtaining such coverage for BT-001, if authorized for marketing by the FDA, and our other product candidates is highly uncertain. As a result, the timing and the amount of revenue we expect to recognize from monetizing our product candidates may vary based on various factors. 18 --------------------------------------------------------------------------------
We also may explore opportunities to partner with pharmaceutical companies marketing traditional drug therapies for cardiometabolic diseases that may benefit from an increase in efficacy and durability when combined with our prescription digital therapeutic.
Operating Expenses
We classify operating expenses into three main categories: (i) research and development, (ii) sales and marketing and (iii) general and administrative.
Research and Development
Our research and development expenses consist of external and internal expenses incurred in connection with our research activities and development programs. These expenses include external expenses, including expenses associated with contract research organizations engaged to manage and conduct clinical trials; and other research and development expenses associated with software development and licenses, and other external development spend. Additionally, our research and development expenses include internal personnel expenses, including expenses for salaries, benefits and stock-based compensation, and allocation of certain overhead expenses. We capitalize our research and development internal use software costs related to our digital therapeutic platform incurred during the application development stage and separately present these costs on the balance sheet as capitalized software development costs. Research and development costs incurred during the preliminary planning and evaluation stage of the project were expensed as incurred. To date, the majority of these expenses have been incurred to advance our lead product candidate, BT-001. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our platform and our product candidates, as our product candidates advance into later stages of development, and as we continue to conduct clinical trials. The successful development of our platform and our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
Sales and Marketing
Sales and marketing expenses consist primarily of advertising and public relations costs and consulting services. We expect our sales and marketing expenses to increase for the foreseeable future as we prepare to prepare for commercialization of BT-001. Our sales and marketing efforts are expected to focus on targeting patients and primary care physicians through general awareness and branded promotional activities. We expect to incur significant investments in building a primary care sales force, and our plan and expectation is to have recruited and deployed such sales force during the first year of commercialization of our initial product candidate.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs and professional services including legal, audit and accounting services. Personnel-related costs consist of salaries, benefits, and stock-based compensation. We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in headcount to advance our product candidates and as a result of operating as a public company, including expenses related to compliance with the rules and regulations of theSEC , additional insurance expenses, investor relations activities and other administrative and professional services.
Interest Expense, Net
Interest expense, net primarily consists of interest expense related to long-term debt entered into in 2021.
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--------------------------------------------------------------------------------Results of Operations
Comparisons of the three and six months ended
The following table summarizes our results of operations for the periods presented (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change % Change 2022 2021 Change % Change
Operating expenses:
Research and development $ 4,241 $ 5,038 $ (797 ) (16 )% $ 7,914 $ 6,416 $ 1,498 23 %
Sales and marketing 1,683 564 1,119 198 % 3,727 607 3,120 N/MGeneral and administrative 3,675 872 2,803 321 % 7,303 2,439 4,864
199 %
Total operating expenses 9,599 6,474 3,125 48 % 18,944 9,462 9,482 100 %
Loss from operations (9,599 ) (6,474 ) (3,125 ) 48 % (18,944 ) (9,462 ) (9,482 ) 100 %
Interest expense, net (329 ) (1 ) (328 ) N/M (646 ) (2 ) (644 ) N/M
Change in fair value of
SAFEs - (2,821 ) 2,821 N/M - (5,313 ) 5,313 N/M
Gain on loan forgiveness - 647 (647 ) N/M - 647 (647 ) N/M
Loss before provision
(benefit) from income
taxes (9,928 ) (8,649 ) (1,279 ) 15 % (19,590 ) (14,130 ) (5,460 ) 39 % Provision (benefit) from income taxes
- 1 (1 ) N/M - (150 ) 150 N/M
Net loss $ (9,928 ) $ (8,650 ) $ (1,278 ) 15 %
N/M - The percentage change is not meaningful
Research and Development Expenses
Research and development expenses were$4.2 million for the three months endedJune 30, 2022 , compared to$5.0 million for the three months endedJune 30, 2021 . The decrease was primarily due to a$2.0 million decrease in clinical trial related costs as we are winding down the trial related to BT-001, offset by a$1.2 million increase in personnel and consulting costs related preparing the de novo submission for BT-001 and expanding our clinical research and software development capabilities. Research and development expenses were$7.9 million for the six months endedJune 30, 2022 compared to$6.4 million for the six months endedJune 30, 2021 . The increase was primarily due to a$3.3 million increase in personnel and consulting costs related to preparing the de novo submission for BT-001 and expanding our clinical research and software development capabilities. This was offset by a$2.3 million decrease in clinical trial related costs as we are winding down the pivotal trial related to BT-001.
Sales and Marketing Expenses
Sales and marketing expenses were$1.7 million for the three months endedJune 30, 2022 , compared to$564 thousand for the three months endedJune 30, 2021 . The increase was primarily due to an increase in personnel, marketing and consulting expenses associated with commercial readiness activities to support he potential launch of BT-001. Sales and marketing expenses were$3.7 million for the six months endedJune 30, 2022 , compared to$607 thousand for the six months endedJune 30, 2021 . The increase was primarily due to an increase in personnel, marketing and consulting expenses associated with commercial readiness activities to support the potential launch of BT-001.
General and Administrative Expenses
General and administrative expenses were$3.7 million for the three months endedJune 30, 2022 , compared to$872 thousand for the three months endedJune 30, 2021 . The overall increase in general and administrative expenses was primarily related to an increase of$1.0 million in personnel related costs and$1.1 million in business insurance related to the cost of being a public company. General and administrative expenses were$7.3 million for the six months endedJune 30, 2022 , compared to$2.4 million for the six months endedJune 30, 2021 . The overall increase in general and administrative expenses was primarily related to an increase of$2.1 million in personnel related costs and$2.3 million in business insurance related to the cost of being a public company. 20 --------------------------------------------------------------------------------
Interest Expense, Net
Interest expense, net was$329 thousand for the three months endedJune 30, 2022 compared to$1 thousand for the three months endedJune 30, 2021 . The increase in interest expense, net was the result of the interest incurred on our secured term loan agreement with Hercules Capital. Interest expense, net was$646 thousand for the six months endedJune 30, 2022 compared to$2 thousand for the six months endedJune 30, 2021 . The increase in interest expense, net was the result of the interest incurred on our secured term loan agreement with Hercules Capital, Inc. ("Hercules Capital ").
Change in Fair Value of SAFEs
The expense related to the change in fair value of our SAFEs was zero for the three and six months endedJune 30, 2022 , compared to a loss of$2.8 million and$5.3 million for the three and six months endedJune 30, 2021 , respectively. The change was a result of the business combination and the conversion of SAFEs to common stock. Gain on Loan Forgiveness OnMay 9, 2020 (the "Origination Date"), the Company received$640 thousand in aggregate loan proceeds (the "PPP Loan") fromCeltic Bank Corporation (the "Lender") pursuant to the Paycheck Protection Program established under the CARES Act (the Coronavirus Aid, Relief, and Economic Security Act) of 2020. InMay 2021 , the Company received approval of loan forgiveness and recorded a gain on loan forgiveness of$647 thousand .
Liquidity and Capital Resources
We have primarily funded our operations through the sale of preferred stock,
convertible notes, SAFEs and funding from the merger with
OnApril 6, 2021 , we entered into a merger agreement with MCAD. In connection with the merger agreement, MCAD entered into Subscription Agreements with certain institutional and accredited investors, pursuant to which, among other things, MCAD agreed to issue and sell, in a private placement immediately prior to the closing of the Business Combination, an aggregate of 5.0 million PIPE Shares. OnOctober 28, 2021 , we completed the merger with MCAD. We raised$59.0 million in funding upon the completion of the merger with MCAD. Under the merger Agreement, MCAD acquired all of the outstanding shares of Legacy BTX in exchange for 15.2 million shares of MCAD. OnAugust 18, 2021 , we entered into a$50.0 million secured term loan agreement with Hercules Capital. The term loan has a maturity date ofAugust 1, 2025 , which can be extended toFebruary 1, 2026 , and is secured by substantially all of our assets. Payments due for the term loan are interest-only untilMarch 1, 2023 (subject to extension toSeptember 1, 2023 orSeptember 1, 2024 upon the achievement of certain milestones), after which principal shall be repaid in equal monthly installments. Interest is payable monthly in arrears. The outstanding principal bears interest at the greater of (a) 8.95% or (b) 8.95% plus the prime rate minus 3.25%. Prepayment of the outstanding principal is permitted under the secured term loan agreement and subject to certain prepayment fees. The Company incurred$518 thousand of debt issuance costs related to the borrowings under the secured term loan agreement. Debt issuance costs are being amortized through the maturity date of the secured term loan and are reported as a direct reduction of long-term debt on the balance sheet. Amortization expense, included in interest expense, net on the accompanying statements of operations and comprehensive loss totaled$186 thousand and zero for the six months endedJune 30, 2022 and 2021, respectively. In addition, we will be required to pay an end of term charge of the greater of (a)$893 thousand or (b) 5.95% of the aggregate outstanding principal upon repayment of the loan. The secured term loan agreement contains customary representations, warranties, non-financial covenants, and events of default. We are permitted to borrow the loans in four tranches based on the completion of certain milestones which include, as set forth more fully in the secured term loan agreement: (i)$15.0 million upon the closing of the Business Combination, (ii)$10.0 million when we achieve certain positive clinical trial results sufficient to submit a de-novo classification request with respect to BT-001 and have initiated a second pivotal trial prior toSeptember 15, 2022 , (iii)$10.0 million when we have received FDA approval for such marketing of BT-001 for the improvement of glycemic control and initiated a pivotal trial for a new indication in people with T2D and received, prior toMarch 15, 2023 , net cash proceeds of at least$40.0 million from equity financings, and (iv)$15.0 million on or beforeJune 15, 2023 , subject to Hercules Capital's approval. InOctober 2021 , we borrowed$10.0 million under the secured term loan agreement. InMay 2022 , we borrowed$5.0 million under the term loan agreement. 21
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As ofJune 30, 2022 , we had$29.7 million in cash, and an accumulated deficit of$91.3 million . Our primary use of cash is to fund operating expenses, which consist of research and development expenses related to our lead product candidate, BT-001, and preclinical programs and general and administrative expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We have incurred negative cash flows from operating activities and investing activities and significant losses from operations in the past. We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our product candidates and ongoing internal research and development programs. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs. However, in order to complete our planned product development, and to complete the process of obtaining regulatory authorization or clearance for our product candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding in the future. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected. Under our current operating plan, we believe we have sufficient capital to fund our operations into the first quarter of 2023. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.
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