CONTRAFECT CORPORATION You should read the following discussion and analysis of our financial condition
in conjunction with the information set forth in our financial statements and
the notes to those statements included in this Quarterly Report on Form 10-Q and
the audited financial statements and notes thereto as of and for the year ended
Overview
We are a clinical-stage biotechnology company focused on the discovery and
development of direct lytic agents (DLAs), including lysins and amurin peptides,
as new medical modalities for the treatment of life-threatening,
antibiotic-resistant infections. Antibiotic-resistant infections account for
2,000,000 illnesses in
Lysins are recombinantly-produced enzymes, that when applied to bacteria cleave a key component of the target bacteria's peptidoglycan cell wall, resulting in rapid bacterial cell death. In addition to the speed of action and potent cidality, we believe lysins are differentiated by their other hallmark features, which include the demonstrated ability to eradicate biofilms and synergistically boost the efficacy of conventional antibiotics in animal models. Lysins that target Staph aureus and other gram-positive pathogens tend to have a "targeted spectrum," meaning they kill only specific species of bacteria or closely related bacteria. Amurin peptides are a new class of direct lytic agents, discovered in our laboratories, which disrupt the outer membrane of gram-negative bacteria, resulting in rapid bacterial cell death, offering a distinct mechanism of action from lysins. Amurins have shown potent "broad spectrum" in vitro activity against a wide range of gram-negative pathogens in, including deadly, drug-resistant Pseudomonas aeruginosa ("P. aeruginosa"), Klebsiella pneumoniae, Escherichia coli, Acinetobacter baumannii and Enterobacter cloacae bacteria species as well as difficult to treat pathogens such as Stenotrophomonas, Achromobacter and some Burkholderia species. The highly differentiated properties of DLAs have shown these agents to be complementary to and synergistic with conventional antibiotics enabling the potential use of these agents in addition to traditional antibiotics with the goal of improving clinical outcomes compared to conventional antibiotics alone. The development of these compounds involves a novel clinical and regulatory strategy, using superiority design clinical trials with the goal of delivering significantly improved clinical outcomes for the treatment of serious, antibiotic-resistant bacterial infections, including biofilm-associated infections. This approach affords potential clinical benefits to patients as well as the potential ability to mitigate against further development of antibiotic resistance.
We have not generated any revenues and, to date, have funded our operations
primarily through our initial public offering ("IPO"), our follow-on public
offerings, private placements of securities, and grant funding received. On
On
We have never been profitable and our operating loss for the three months ended
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During 2020 COVID-19 was declared a pandemic and spread to multiple regions
across the globe, including
Financial Operations Overview
Revenue
We have not generated any revenues to date. In the future, we may generate revenues from product sales. In addition, to the extent we enter into licensing or collaboration arrangements, we may have additional sources of revenue. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the amount and timing of payments that we may recognize upon the sale of our products, to the extent that any products are successfully commercialized, and the amount and timing of fees, reimbursements, milestone and other payments received under any future licensing or collaboration arrangements. 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, and our results of operations and financial position, would be materially adversely affected.
Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:
• employee-related expenses, including salaries, performance bonuses,
benefits, travel and non-cash share-based compensation expense;
• external research and development expenses incurred under arrangements
with third parties such as contract research organizations, or CROs,
contract manufacturers, consultants and academic institutions; and
• facilities and laboratory and other supplies.
We expense research and development costs to operations as incurred. We account for non-refundableadvance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.
The following summarizes our most advanced current research and development programs.
Exebacase
Our most advanced clinical candidate, exebacase, is an investigational novel lysin that targets Staphylococcus aureus ("Staph aureus"), including methicillin-resistant ("MRSA") strains, which causes serious infections such as bacteremia, pneumonia and osteomyelitis. Staph aureus is also a common cause of biofilm-associated infections of heart valves (endocarditis), prosthetic joints, indwelling devices and catheters. These infections result in significant morbidity and mortality despite currently available antibiotic therapies.
In
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population, the endpoints and the size of the safety database that would be
needed to support a Biologics License Application ("BLA") for approval of
exebacase, under the
We completed a Phase 2 superiority study of exebacase that evaluated its safety, tolerability, efficacy and pharmacokinetics ("PK") when used in addition to background SOC antibiotics compared to SOC antibiotics alone for the treatment of Staph aureus bacteremia, including endocarditis in adult patients. The results from this study showed clinically meaningful improvement in clinical responder rates among patients treated with exebacase in addition to SOC antibiotics compared to SOC antibiotics alone. In the primary efficacy analysis population of 116 patients with documented Staph aureus bacteremia, including endocarditis, who received a single intravenous ("IV") infusion of blinded study drug, the clinical responder rate at Day 14 was 70.4% for patients treated with exebacase and 60.0% for patients dosed with SOC antibiotics alone (p=0.314). The clinical responder rate at Day 14 in the subset of patients with bacteremia including right-sided endocarditis was 80.0% for patients treated with exebacase compared to 59.5% for patients treated with SOC antibiotics alone, an increase of 20.5% (p=0.028). In the subset of patients with bacteremia alone, the clinical responder rate at Day 14 was 81.8% for patients treated with exebacase compared to 61.5% for patients treated with SOC antibiotics alone, an increase of 20.3% (p=0.035).
In a pre-specified analysis of MRSA-infected patients, the clinical responder rate at Day 14 in patients treated with exebacase was nearly 43-percentage points higher than in patients treated with SOC antibiotics alone (74.1% for patients treated with exebacase compared to 31.3% for patients treated with SOC antibiotics alone (p=0.010)). In addition to the higher rate of clinical response, MRSA-infected patients treated with exebacase showed a 21-percentage point reduction in 30-day all-cause mortality (p=0.056), a four day lower mean length of hospital stay and meaningful reductions in hospital readmission rates. Exebacase was well-tolerated and treatment emergent adverse events, including serious treatment-emergent serious adverse events ("SAEs") were balanced between the treatment groups. There were no SAEs that we determined to be related to exebacase, there were no reports of hypersensitivity related to exebacase and no patients discontinued treatment with study drug in either treatment group.
We also performed a post-hoc Phase 3 simulation analysis using the Phase 2 data
to evaluate the clinical outcomes for the Phase 2 patient population that would
meet the Phase 3 inclusion criteria. In this simulated Phase 3 analysis
population of 84 U.S. patients with documented Staph aureus bacteremia,
including right-sided endocarditis, who received a single IV infusion of blinded
study drug, the clinical responder rate at Day 14 was 83.7% for patients treated
with exebacase and 54.3% for patients dosed with SOC antibiotics alone, an
improvement in the responder rate of over 29-percentage points. The clinical
responder rate at Day 14 in the subset of patients with MRSA bacteremia
including right-sided endocarditis was 82.6% for patients treated with exebacase
compared to 33.3% for patients treated with SOC antibiotics alone, an
improvement in the responder rate of over 49-percentage points. In the subset of
patients with
We believe these data established proof of concept for exebacase and for DLAs as
therapeutic agents. In particular, the data for MRSA-infected patients treated
with exebacase, which, in the Phase 2 superiority study, demonstrated superior
outcomes in clinical response at Day 14 and in 30-day all-cause mortality as
well as health economics benefits, provided the basis for the FDA to grant
Breakthrough Therapy designation to exebacase for the treatment of MRSA
bloodstream infections (bacteremia), including right-sided endocarditis, when
used in addition to SOC anti-staphylococcal antibiotics in adult patients.
Breakthrough Therapy designation is a program designed by the FDA to expedite
the development and review of medicines for serious or life-threatening diseases
where preliminary clinical evidence suggests that the investigational therapy
may demonstrate substantial improvement on at least one clinically significant
endpoint over available therapies. The Breakthrough Therapy designation provides
additional benefits, such as expedited meetings and interactions with the FDA
and the potential for priority review, over the Fast Track designation granted
to exebacase in
On
In addition to the ongoing Phase 3 DISRUPT study of exebacase, we initiated an
expanded access program to provide exebacase for the treatment of persistent
bacteremia caused by methicillin-resistant Staphylococcus aureus (MRSA) in
COVID-19 patients and continued the investigator-initiated early access program
for compassionate use of exebacase for individual named patients with chronic
post-operative prosthetic joint infections ("PJIs") under Temporary
Authorizations for Use from the
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Other Programs
We have made further advancements with our novel lytic agents across our
portfolio. We have developed a novel, engineered variant of exebacase, known as
CF-296, which we believe provides an additional opportunity to advance a
potential targeted therapy for deep-seated, invasive biofilm-associated Staph
aureus infections. We are conducting further in vitro and in vivo
characterization of CF-296 to evaluate the full profile of this compound. In
We have discovered and engineered a new lysin product candidate, CF-370, which
in preclinical studies has demonstrated potent activity against
antibiotic-resistant P. aeruginosa bacteria, a major cause of morbidity and
mortality in patients with hospital acquired pneumonia and a major medical
challenge for patients with cystic fibrosis. In
Beyond our lysin programs, we continue our research to advance potential product
candidates from our amurin peptide platform. We are evaluating our most
promising amurins in preclinical animal studies with the goals of determining
our next product candidate and moving this program towards clinical studies as
soon as possible. In
In addition, we have entered into an initial funding agreement with the
To date, a large portion of our research and development work has related to the
establishment of our platform technologies, the advancement of our research
projects to discovery of clinical candidates, manufacturing and preclinical
testing of our clinical candidates and clinical testing of exebacase. We
currently expect to focus the majority of our resources on the exebacase
program. As our pipeline progresses, we are able to further leverage our
employee and infrastructure resources across multiple development programs as
well as research projects. In the quarters ended
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The following table summarizes our research and development expenses by category
for the three months ended
Three Months Ended
March 31,
2021 2020
Product development $ 5,710 $ 4,254
Personnel related 1,828 1,014
Professional fees 904 691
Laboratory costs 322 317
Share-based compensation 151 164
External research and licensing costs 31 119
Expenses reimbursed by grants (925 ) (1,455 )
Total research and development expense $ 8,021 $ 5,104 The following table summarizes our research and development expenses by program
for the three months ended
Three Months Ended
March 31,
2021 2020
Exebacase $ 5,333 $ 3,696
CF-370 546 233
Other research and development 1,088 1,452
Personnel related and share-based compensation 1,979 1,178
Expenses reimbursed by grants (925 ) (1,455 )
Total research and development expense $ 8,021 $ 5,104 We anticipate that our research and development expenses will increase substantially in connection with the commencement of additional clinical trials for our product candidates. However, the successful development of future product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
• the scope, rate of progress and expense of our research and development
activities;
• clinical trial results;
• the terms and timing of regulatory approvals;
• our ability to market, commercialize and achieve market acceptance for
our product candidates in the future; and
• the expense, filing, prosecuting, defending and enforcing of patent
claims and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of exebacase or any other product candidate that we may develop could mean a significant change in the costs and timing associated with the development of exebacase or any such product candidate. For example, if the FDA or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of exebacase or if we experience significant delays in enrollment in any clinical trials of exebacase, we could be required to expend significant additional financial resources and time on the completion of the clinical development of exebacase.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for personnel, including non-cash share-based compensation expense, in our executive, finance, legal, human resource and business development functions. Other general and administrative expenses include facility costs, insurance expenses and professional fees for legal, consulting and accounting services.
We anticipate that our general and administrative expenses will increase in future periods to support increases in our research and development activities and as a result of increased headcount, expanded infrastructure, increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and increased insurance premiums, among other factors.
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Other Income
Other income consists of changes in the fair values of our warrant liabilities and interest income earned on our cash and cash equivalents and marketable securities.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which we have prepared in
accordance with
During the three-month period ended
Results of Operations
Comparison of Three Months Ended
The following table summarizes key components of our results of operations for the periods indicated (in thousands).
Three Months Ended March 31,
2021 2020 Dollar Change
Operating expenses:
Research and development $ 8,021 $ 5,104 $ 2,917
General and administrative $ 2,765 $ 2,960 $ (195 )
Other income $ 5,591 $ 486 $ 5,105
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Other Income
Other income was
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Liquidity and Capital Resources
Sources of Liquidity
We have financed our operations to date primarily through proceeds from sales of common stock, common stock and warrants, convertible preferred stock and convertible debt and, to a lesser extent, grant funding. To date, we have not generated any revenue from the sale of products. We have incurred losses and generated negative cash flows from operations since inception.
Since the date of our initial public offering, we have funded our operations
through the sale of registered securities for gross proceeds of
As of
On
We have also been successful obtaining grants to supplement our financings with non-dilutive funding, including grants from CARB-X, USAMRDC and our cost-sharing contract with BARDA. We may continue to pursue further non-dilutive funding opportunities. In addition, there can be no assurances that either BARDA, CARB-X or USAMRDC will provide the maximum potential funding to the Company.
Cash Flows
The following table provides information regarding our cash flows for the three
months ended
Three Months Ended March 31,
2021 2020
Net cash (used in) provided by:
Operating activities $ (9,059 ) $ (7,549 )
Investing activities $ 4,913 $ (6,003 )
Financing activities $ 53,907 $ -
Net cash used in operating activities
Net cash used in operating activities resulted primarily from our net losses
adjusted for non-cashcharges and changes in the components of working capital.
Net cash used in operating activities for the three months ended
Net cash provided by (used in) investing activities
Net cash provided by investing activities for the three months ended
Net cash provided by financing activities
Net cash provided by financing activities for the three months ended
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Funding Requirements
All of our product candidates are in clinical or preclinical development. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
• continue our ongoing clinical trials, and initiate the planned clinical
trials of our product candidates;
• continue our ongoing preclinical studies, and initiate additional
preclinical studies, of our product candidates;
• continue the research and development of our other product candidates and
our platform technology;
• seek to identify additional product candidates;
• acquire or in-license other products and technologies;
• seek marketing approvals for our product candidates that successfully
complete clinical trials;
• establish, either on our own or with strategic partners, a sales,
marketing and distribution infrastructure to commercialize any products
for which we may obtain marketing approval;
• maintain, leverage and expand our intellectual property portfolio; and
• add operational, financial and management information systems and
personnel, including personnel to support our product development and
future commercialization efforts.
We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund operations for at least 12 months from the issuance date of these financial statements. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the extent to which we may enter into collaborations with third parties for development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates. We plan to continue to fund our operations through public or private debt and equity financings and grant funding but there can be no assurances that such financing or grants will be available to us on satisfactory terms, or at all. Our future capital requirements will depend on many factors, including:
• the progress and results of the clinical trials of our lead product
candidates;
• the scope, progress, results and costs of compound discovery, preclinical
development, laboratory testing and clinical trials for our other product
candidates;
• the ongoing effects of COVID-19 on, among other things, our clinical
trials, manufacturing and sourcing of raw materials, financial
performance, business and operations;
• the extent to which we acquire or in-license other products and
technologies;
• the timing and amount of actual reimbursements under the BARDA Contract;
• the costs, timing and outcome of regulatory review of our product
candidates;
• the costs of future commercialization activities, including product
sales, marketing, manufacturing and distribution, for any of our product
candidates for which we receive marketing approval;
• revenue, if any, received from commercial sales of our product
candidates, should any of our product candidates receive marketing
approval;
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims; and
• our ability to establish any future collaboration arrangements on
favorable terms, if at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity and debt offerings, collaborations, grants, government contracts, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or other securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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We incur significant costs as a public company, including, but not limited to,
increased personnel costs, increased directors fees, increased directors and
officers insurance premiums, audit and legal fees, investor relations and
external communications fees, expenses for compliance with the Sarbanes-Oxley
Act and rules implemented by the
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 filed with the
Effects of Inflation
We do not believe that inflation or changing prices had a significant impact on our results of operations for any periods presented herein.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we are currently not party to, any off-balance sheet arrangements.
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