ETERNA THERAPEUTICS INC. You should read this discussion together with the unaudited interim condensed
consolidated financial statements, related notes, and other financial
information included elsewhere in this Quarterly Report on Form 10-Q together
with our audited consolidated financial statements, related notes, and other
information contained in the Form 10-K/A filed with the
Overview
We are a biopharmaceutical company utilizing our mRNA technology platform,
including mRNA-based cell reprogramming and gene editing technologies, to create
next generation mRNA, gene-editing and cell therapies, including iPSC therapies
for multiple therapeutic indications. Our mRNA technology platform, which
includes novel lipid nanoparticles ("LNPs") for mRNA delivery and targeted
transgene insertion, was acquired through a license with
Acquisition of Novellus
On
Merger with
On
• prior to the Merger, a reverse stock split of its common stock, par value
$0.005 per share, at a ratio of one-for-two; and
• following the Merger, a change in its corporate name from "NTN Buzztime, Inc. "
to "Brooklyn ImmunoTherapeutics, Inc. "
On
The Merger has been accounted for as a reverse acquisition in accordance with
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IRX-2
IRX-2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL2, and other key cytokines. Together, these cytokines are believed to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike many existing cancer therapies, which rely on targeting the cancer directly. IRX-2 is prepared from the supernatant of pooled allogeneic peripheral blood mononuclear cells, known as PBMCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.
Unlike existing recombinant IL2 therapies, IRX-2 is derived from human blood cells. We believe this may promote better tolerance, broader targeting and a natural molecular conformation leading to greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL2 therapies. Enrollment in the ongoing Phase 2b INSPIRE trial, or the INSPIRE trial, has been completed, with top-line data estimated to be available by the third quarter of 2022. Once INSPIRE trial data are released, we plan to use those results in addition to data from the other clinical trials in the program to evaluation our strategy with IRX-2.
Impact of COVID-19 Pandemic
The development of our product candidates has been, and could continue to be,
disrupted and materially adversely affected by past and continuing impacts of
the COVID-19 pandemic. This is largely a result of measures imposed by the
governments and hospitals in affected regions, businesses and schools were
suspended due to quarantines intended to contain this outbreak. The spread of
COVID-19 from
Engineered Cellular and Genetic Medicines
We are advancing our gene-editing and cell therapy technology in oncology, blood
disorders and monogenic disorders through a license with Factor and through the
Acquisition of
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Table of Contents Recent Developments PIPE Transaction
On
Each Pre-Funded Warrant has an exercise price of
Each Common Warrant has an exercise price of
The Common Warrants and Pre-Funded Warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity, as these warrants provide for a cashless settlement provision that fails the requirement of the indexation guidance under ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statement of operations.
The fair values of the Common Warrants and the Pre-Funded Warrants at the
issuance date totaled
In connection with the PIPE Transaction, we and the PIPE Investor also entered
into a registration rights agreement, dated
Pursuant to the registration rights agreement, we are obligated to pay the PIPE Investor liquidated damages equal to 2% of the Subscription Amount per month, with a maximum aggregate payment of 12% of the Subscription Amount, in the event the PIPE Investor is not permitted to use the registration statement to resell the related securities for more than 10 consecutive calendar days or more than an aggregate of fifteen calendar days (which need not be consecutive calendar days) during any 12-month period.
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On
Basis of Presentation
Revenues
We are a development stage company and have had no revenues from product sales to date. We will not have revenues from product sales until such time as we receive regulatory approval of our product candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.
Research and Development Expenses
We expense our research and development costs as incurred. Our research and
development expenses consist of costs incurred for company-sponsored research
and development activities, as well as support for selected
investigator-sponsored research. Upfront payments and milestone payments for the
licensing of technology are expensed as research and development in the period
in which they are incurred if the technology is not expected to have any
alternative future uses other than the specific research and development project
for which it was intended.
The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product development efforts.
In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential products. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. Preclinical and clinical study and trial associated activities such as production and testing of clinical material require significant up-front expenditures. We anticipate paying significant portions of a study's or trial's cost before such begins and incurring additional expenditures as the study or trial progresses and reaches certain milestones.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs.
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Results of Operations
Comparison of Three Months Ended
Three months ended March 31,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 1,782 $ 1,533 249
General and administrative 4,514 1,623 2,891
Transaction costs - 5,765 (5,765 )
Total operating expenses 6,296 8,921 (2,625 )
Loss from operations (6,296 ) (8,921 ) 2,625
Other expense, net:
Loss on sale of NTN assets - (9,598 ) 9,598
Warrant liabilities expense (1,322 ) - (1,322 )
Loss on non-controlling investment (615 ) - (615 )
Other expense, net (1,142 ) (3 ) (1,139 )
Total other expense, net (3,079 ) (9,601 ) 6,522
Loss before income taxes (9,375 ) (18,522 ) 9,147
Provision for income taxes - - -
Net loss $ (9,375 ) $ (18,522 ) $ 9,147
Revenues
We had no revenues for the three months ended
Research and Development Expenses
Three months ended March 31,
2022 2021 Change
(in thousands)
Payroll-related $ 1,383 $ 863 $ 520
Clinical trials 230 435 (205 )
Other expenses, net 169 235 (66 )
Total research and development expenses
For the three months ended
On
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General and Administrative Expenses
Three months ended March 31,
2022 2021 Change
(in thousands)
Stock-based compensation $ 761 $ 17 $ 744
Payroll-related 749 33 716
Insurance 367 33 334
Professional fees 1,198 1,256 (58 )
Loss on disposal of fixed assets 271 - 271
Other expenses, net 1,168 284 884
Total general and administrative expenses
The increase in general and administrative expense for the three months ended
Transaction Costs
The
Loss on Sales of NTN Assets
The
Warrant Liabilities Expense
The
Loss on
The
Other Expense, Net
Three months ended March 31,
2022 2021 Change
(in thousands)
PIPE transaction fees $ (992 ) $ - $ (992 )
Liquidated damages (240 ) - (240 )
Interest expense, net (1 ) (14 ) 13
Other (expense) income , net 91 11 80
Total other expense, net $ (1,142 ) $ (3 ) $ (1,139 )
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For the three months ended
Liquidity and Capital Resources
At
We have to date incurred operating losses, and we expect these losses to increase in the future as we expand our product development programs and operate as a publicly traded company. Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. It will likely be some years before we obtain the necessary regulatory approvals to commercialize one or more of our product candidates. Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we do not have sufficient funds to fund our operations for the next twelve months from the filing of the financial statements contained in this Q1 2022 10-Q. There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other product candidate we may acquire, or that we will obtain any additional financing that we require in the future or, even if such financing is available, that it will be obtainable on terms acceptable to us.
In that regard, our future funding requirements will depend on many factors, including:
• the terms and timing of any collaborative, licensing and other agreements that
we may establish;
• the cost and timing of regulatory approvals;
• the cost and delays in product development as a result of any changes in
regulatory oversight applicable to our products;
• the cost and timing of establishing sales, marketing and distribution
capabilities;
• the effect of competition and market developments;
• the cost of filing and potentially prosecuting, defending and enforcing any
patent claims and other intellectual property rights;
• the scope, rate of progress and cost of our clinical trials and other product
development activities; and
• future clinical trial results.
We plan to raise additional funds to support our product development activities and working capital requirements through the remaining availability under the Second Purchase Agreement (to the extent we are permitted to use such agreement), public or private equity offerings, debt financings, corporate collaborations or other means. We may also seek governmental grants to support our clinical trials and preclinical trials. Further, we may seek to raise capital to fund additional product development efforts even if we have sufficient funds for our planned operations. Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders. There can be no assurance that any such required additional funding will be available to us at all or available on terms acceptable to us.
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Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. If we are not able to secure additional funding when needed, we may have to delay the commercialize of our products, reduce the scope of or eliminate one or more research and development programs, which could have an adverse effect on our business.
Sources of Funds
PIPE Transaction
On
As a condition to the closing of the Merger, we were required to have at least
Disposition.
On
Uses of Funds
Our operations used
Our cash use for operating activities is influenced by the level of our net loss and the amount of cash we invest in personnel and technology development to support anticipated growth in our business.
License Obligations.
We are obligated to pay certain amounts to Factor pursuant to the license
agreement we entered into in
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Lease Obligations.
We are obligated to pay approximately
Critical Accounting Policies and Estimates
There were no significant changes in our critical accounting estimates during
the three months ended
Recent Accounting Pronouncements
There were no recent accounting pronouncements issued during the three months
ended
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