You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part 1, Item 1 of this Report and with our audited financial statements and related notes thereto for the year endedDecember 31, 2020 , included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSecurities and Exchange Commission onMarch 17, 2021 , or the Annual Report. This discussion and other parts of this Report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause such differences are discussed in the section of this Report titled "Special Note Regarding Forward-Looking Statements" and under "Item 1A. Risk Factors" in the Annual Report. Overview We are a clinical-stage specialty biopharmaceutical company focused on changing the field of immunotherapy by developing a novel technology platform called Viaskin. Our therapeutic approach is based on epicutaneous immunotherapy, or EPIT TM , our proprietary method of delivering biologically active compounds to the immune system through intact skin using Viaskin. We have generated significant data demonstrating that Viaskin's mechanism of action is novel and differentiated, as it targets specific antigen-presenting immune cells in the skin, called Langerhans cells, that capture the antigen and migrate to the lymph node in order to activate the immune system without passage of the antigen into the bloodstream, minimizing systemic exposure in the body. We are advancing this unique technology to treat patients, including infants and children, suffering from food allergies, for whom safety is paramount, since the introduction of the offending allergen into their bloodstream can cause severe or life-threatening allergic reactions, such as anaphylactic shock. Viaskin Peanut inthe United States OnJanuary 13, 2021 , we received written responses from the FDA to questions provided in the Type A meeting request, we submitted inOctober 2020 following the CRL. We believe the FDA feedback provides a well-defined regulatory path forward. In exchanges with the FDA, we proposed potential resolutions to two main concerns identified by the FDA in the CRL: the impact of patch adhesion and the need for patch modifications. The FDA agreed with our position that a modified Viaskin Peanut patch should not be considered as a new product entity provided the occlusion chamber of the current Viaskin Peanut patch and the peanut protein dose of 250 µg (approximately 1/1000 of a peanut) remains unchanged and performs in the same way it has performed previously. In order to confirm the consistency of efficacy data between the existing and modified patches, the FDA has requested an assessment comparing the uptake of allergen (peanut protein) between the patches in peanut allergic children ages 4 to 11 years. The FDA also recommended conducting a 6-month, well-controlled safety and adhesion trial to assess the modified Viaskin Peanut patch in the intended patient population. In the second quarter of 2021, we completed CHAMP (Comparison of adHesion Among Modified Patches), a trial in healthy adult volunteers to evaluate the adhesion of five modified Viaskin Peanut patches in order to identify the top performers. Based on the adhesion parameters studied, we were pleased to learn that all modified Viaskin Peanut patches demonstrated better adhesion performance as compared to the current Viaskin Peanut patch. We then selected two modified patches that performed best out of the five modified patches studied for further development. The difference between the two selected patches is their shape-one is circular and the other is rectangular with rounded corners. They are both approximately 50% larger than the current patch but maintain the same structure of the occlusion chamber (i.e., foam ring and backing). We also conducted advisory boards with patient caregivers and key opinion leaders to obtain qualitative feedback on the consumer experience with both patches. We submitted the protocol for STAMP (Safety, Tolerability and Adhesion of Modified Patches), the 6-month adhesion and safety study of the modified patch, to theU.S. Food and Drug Administration (FDA) in the second quarter of 2021 and are currently awaiting feedback. Earlier this quarter, we initiated PREQUAL, a Phase 1 study in healthy adult volunteers to optimize the allergen sample collection methodologies and validate the assays DBV intends to use in EQUAL (EQuivalence in the Uptake of ALlergen). We continue to work closely with the FDA on how to best demonstrate the protein transport comparability of the modified patch (mVP) to the reference patch (cVP). ViaskinTM Peanut inEurope During the first quarter of 2021, we received the first set of questions from theEuropean Medicines Agency , or EMA, regarding the Marketing Authorization Application, or MAA, for Viaskin Peanut as a treatment for peanut allergy in children ages 4-11.. The questions were consistent with our expectations and prefiling conversations with the EMA. We did not receive questions about the impact of adhesion on efficacy. TheEMA's Committee for Medicinal Products for Human Use will provide a recommendation to theEuropean Commission , or EC, on whether to grant a marketing authorization when its review of the Viaskin Peanut MAA is complete. TheEuropean Medicines Agency (EMA) review of the Viaskin Peanut Marketing Authorization Application (MAA) is progressing according to established EMA processes and ongoing conversations with the EMA. InJuly 2021 , we received from the EMA Day 180 list of outstanding issues. The review of the Viaskin Peanut MAA is progressing according to established EMA processes and ongoing conversations with the EMA. Many of EMA's Objections and Major Objections have been answered; One Major Objection remains. We will provide a response to address the outstanding issues, including the mentioned Major Objection. Based on the average length of an EMA evaluation of an MAA, we estimate the EMA could issue its decision on potential marketing authorization for Viaskin Peanut in the fourth quarter of 2021 or the first quarter of 2022. Critical Accounting Policies and Significant Judgments and Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States , orU.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the revenue, costs and expenses recognized during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no new policies or significant changes to our critical accounting policies as disclosed in the critical accounting policies described in the Annual Report. Our significant accounting policies are more fully described in Note 1 of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of our Annual Report. 15 -------------------------------------------------------------------------------- Table of Contents Results of Operations Comparison of the Three Months EndedJune 30, 2021 and 2020 The following table summarizes our results of operations, derived from our condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP and presented in thousands ofU.S. Dollars, for the three months endedJune 30, 2021 and 2020. Three months ended June 30, $ change % change 2021 2020 Operating income$ (1,488 ) $ 3,610 (5,098 ) (141 )% Operating expenses Research and development expenses (20,179 ) (21,932 ) 1,753 (8 )% Sales and marketing expenses (1,198 ) 778 (1,976 ) (254 )% General and administrative expenses (8,269 ) (8,862 ) 593 (7 )% Restructuring expenses - (21,288 ) 21,288 (100 )% Total Operating expenses (29,646 ) (51,305 ) 21,658 (42 )% Financial income (expense) 46 (506 ) 552 (109 )% Income tax 434 (3 ) 436 * Net loss$ (30,654 ) $ (48,203 ) 17,549 (36 )% * Percentage not meaningful
Operating Income
The following table summarizes our operating income during the three months
ended
Three months ended June 30, $ change % change 2021 2020 Sales - - - - Other income (1,488 ) 3,610 (5,098 ) (141 )% Research tax credit 1,870 2,899 (1,028 ) (35 )% Other operating income ) (3,358 712 (4,070 ) (572 )% Total operating income (1,488 ) 3,610 (5,098 ) (141 )% Our operating income is primarily generated from the French research tax credit ( Crédit d'Iimpôt Recherche , or "CIR"), and by the revenue recognized under our collaboration agreement with Nestlé Health Science. We generated operating income of$(1.5) million during the three months endedJune 30, 2021 compared to$3.6 million during the three months endedJune 30, 2020 . The decrease in operating income is primarily attributable to the change in the revenue recognized under the Nestlé's collaboration agreement, as we updated the measurement of progress of the Phase II clinical trial conducted as part of the agreement due to delays in new patient enrollment. The decrease in research tax credit is attributable to the decline of eligible expenses in connection with Research and Development costs. 16 -------------------------------------------------------------------------------- Table of Contents Research and Development Expenses The following table summarizes our research and development expenses incurred during the during the three months endedJune 30, 2021 and 2020: Three Months Ended June 30,
$ change % change
2021 2020 Research and Development expenses External clinical-related expenses 9,808 16,211 (6,403 ) (39 )% Employee-related costs 3,206 3,998 (792 ) (20 )% Share-based payment expenses 187 (1,892 ) 2,079 (110 )% Depreciation, amortization and other costs 6,978 3,615 3,363 (93 )%Total Research and Development expenses 20,179 21,932 (1,753 ) (8 )% Research and Development expenses decreased by$1.8 million for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 , primarily due to a decrease in external clinical-related expenses as a result of budget discipline measures . Employee-related costs, excluding share-based payment expenses, decreased by$0.8 million for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 directly related to the workforce reduction we implemented as part of our 2020 global restructuring plan. The shared-based payment income recognized for the three months endedJune 30, 2020 was triggered by the reversal of share-based payment expenses due to employees' departures in the context of our restructuring plan. The increase of depreciation, amortization and other expenses relates primarily to the change in the second quarter of 2021 in the accrual recorded in the amount of the difference between our current best estimates of costs yet to be incurred and revenues yet to be recognized for the completion of the Phase II clinical trial conducted as part of the Nestlé agreement. Sales and Marketing expenses The following table summarizes our sales and marketing expensesincurred during the during the three months endedJune 30, 2021 and 2020: Three Months Ended June 30, $ change % change 2021 2020 Sales and Marketing expenses External professional services 307 479 (172 ) (36 )% Employee-related costs 430 1,105 (676 ) (61 )% Share-based payment expenses 89 (2,470 ) 2,559 104 % Depreciation, amortization and other costs 373 107 265 247 % Total Sales and Marketing expenses 1,198 (778 ) 1,976 254 % Sales and marketing expenses amounted to$1.2 million for the three months endedJune 30, 2021 , compared to$(0.8) million for the three months endedJune 30, 2020 . The shared-based payment income recognized for the three months endedJune 30, 2020 was triggered by the reversal of share-based payment expense due to employees' departures in the context of our 2020 global restructuring plan. The increase in share-based payment expense for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 was partly offset by the decrease in employee-related costs, directly related to the workforce reduction implemented as part of our restructuring plan. The decrease in external professional services for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 is directly related to budget discipline measures taken. 17 -------------------------------------------------------------------------------- Table of Contents General and Administrative expenses The following table summarizes our general and administrative expenses incurred during the during the three months endedJune 30, 2021 and 2020: Three Months Ended June 30,
$ change % change
2021 2020 General and Administrative expenses External professional services 1,922 4,807 (2,884 ) (60 )% Employee-related costs 2,180 2,376 (196 ) (8 )% Share-based payment expenses 819 (1,602 ) 2,421 (151 )%
Depreciation, amortization and other costs 3,348 3,281
67 2 %
Total General and Administrative expenses 8,269 8,862
(593 ) (7 )% General and Administrative expenses decreased by$0.6 million for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 primarly due to cost containment measures and decreased external professional fees. The share-based payment income recognized for the three months endedJune 30, 2020 was triggered by the reversal of share-based payment expense due to employees' departures in the context of our 2020 global restructuring plan. The decrease in employee-related costs, excluding share-based payments expenses, was directly related to the workforce reduction we implemented as part of our restructuring plan. Restructuring We initiated a global restructuring plan inJune 2020 to provide operational latitude to progress in the clinical development and regulatory review of investigational Viaskin ™ Peanut in theUnited States andEuropean Union . For the three months endedJune 30, 2021 , our average headcount was 99, compared to 306 for the three months endedJune 30, 2020 . As ofJune 30, 2021 , we had 97 employees. We expect full implementation of the organization-wide cost reduction measures to be completed in the second half of 2021. The restructuring costs were mainly comprised of payroll expenses, restructuring-related consulting and legal fees, as well as impairment of facilities and right of use assets following resizing of facilities. There were no restructuring costs for three months endedJune 30, 2021 . Financial income (expense) Our financial income was approximately$46,000 for the three months endedJune 30, 2021 compared to a financial expense of$0.5 million for the three months endedJune 30, 2020 . This item mainly includes foreign exchange income and expenses. Income tax Our income tax profit was$0.4 million for the three months endedJune 30, 2021 . This profit mainly resulted fromU.S. tax refunds. Net loss Net loss was$30.7 million for the three months endedJune 30, 2021 , compared to$48.2 million for the three months endedJune 30, 2020 . Net loss per share (based on the weighted average number of shares outstanding over the period) was$0.56 and$0.88 for the three months endedJune 30, 2021 and 2020, respectively. 18 -------------------------------------------------------------------------------- Table of Contents Results of Operations Comparison of the Six Months EndedJune 30, 2021 and 2020 The following table summarizes our results of operations, derived from our condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP and presented in thousands ofU.S. Dollars, for the six months endedJune 30, 2021 and 2020. Six months ended June 30, $ change % change 2021 2020 Operating income$ 1,453 $ 8,330 (6,877 ) (83 )% Operating expenses Research and development expenses (42,343 ) (49,464 ) 7,121 (14 )% Sales and marketing expenses (1,927 ) (6,519 ) 4,592 (70 )% General and administrative expenses (17,951 ) (19,975 ) 2,024 (10 )% Restructuring expenses - (21,288 ) 21,288 (100 )% Total Operating expenses (62,221 ) (97,246 ) 35,025 (36 )% Financial income (expense) 261 (196 ) 457 (233 )% Income tax 404 (3 ) 407 * Net loss$ (60,103 ) $ (89,115 ) 29,013 (33 )% * Percentage not meaningful Operating Income The following table summarizes our operating income during the six months endedJune 30, 2021 and 2020: Six months ended June 30, $ change % change 2021 2020 Sales - - Other income 1,453 8,330 (6,877 ) (83 )% Research tax credit 3,677 5,800 (2,123 ) (37 )% Other operating income (2,225 ) 2,529 (4,754 ) (188 )% Total operating income 1,453 8,330 (6,877 ) (83 )% Our operating income was primarily generated from the French research tax credit ( Crédit d'Impôt Recherche or "CIR") and from revenue recognized under our collaboration agreement with Nestlé Health Science. We generated operating income of$1.5 million during the six months endedJune 30, 2021 , compared to$8.3 million during the six months endedJune 30, 2020 . The decrease in operating income is primarily attributable to the change in the revenue recognized under the Nestlé's collaboration agreement, as we updated the measurement of progress of the Phase II clinical trial conducted as part of the agreement due to delays in new patient enrollment. The decrease in research tax credit is attributable to the decline in eligible expenses in connection with Research and Development costs. Research and Development Expenses The following table summarizes our research and development expenses incurred during the six months endedJune 30, 2021 and 2020: Six Months Ended June 30,
$ change % change
2021 2020 Research and Development expenses External clinical-related expenses 22,686 29,319 (6,633 ) (23 )% Employee-related costs 7,297 12,934 (5,637 ) (44 )% Share-based payment expenses 814 (624 ) 1,438 (231 )%
Depreciation, amortization and other costs 11,546 7,834
3,712 47 %
(7,121 ) (14 )% 19
-------------------------------------------------------------------------------- Table of Contents Research and Development expenses decreased by$7.1 million for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 primarly due to a decrease in external clinical-related expenses as a result of budget discipline measures . Employee-related costs, excluding share-based payments expenses, decreased by$5.6 million for the six months endedJune 30, 2021 , compared to the six months endedJune 30, 2020 directly related to the workforce reduction we implemented as part of our 2020 global restructuring plan. The shared-based payment income recognized for the six months endedJune 30, 2020 was triggered by the reversal of share-based payment expenses due to employees' departures in the context of our restructuring plan. The increase in depreciation, amortization and other expenses relates primarily to the change in the second quarter of 2021 in the accrual recorded in the amount of the difference between our current best estimates of costs yet to be incurred and revenues yet to be recognized for the completion of the Phase II clinical trial conducted as part of the Nestlé agreement. Sales and Marketing expenses The following table summarizes our sales and marketing expenses incurred during the during the six months endedJune 30, 2021 and 2020: Six Months Ended June 30, $ change % change 2021 2020 Sales and Marketing expenses External professional services 391 3,121 (2,729 ) (87 )% Employee-related costs 877 4,702 (3,826 ) (81 )% Share-based payment expenses 159 (1,870 ) 2,029 (109 )% Depreciation, amortization and other costs 500 566 (66 ) (12 )% Total Sales and Marketing expenses 1,927 6,519 (4,592 ) (70 )% Sales and marketing expenses decreased by$4.6 million for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 , primarly due to a decrease in external professional services as a result of budget discipline measures . Employee-related costs, excluding share-based payments expenses, decreased by$3.8 million for the six months endedJune 30, 2021 , compared to the six months endedJune 30, 2020 directly related to the workforce reduction we implemented as part of our 2020 global restructuring plan. The shared-based payment income recognized for the six months endedJune 30, 2020 was triggered by the reversal of share-based payment expenses due to employees' departures in the context of our restructuring plan. General and Administrative expenses The following table summarizes our general and administrative expenses incurred during the during the six months endedJune 30, 2021 and 2020: Six Months Ended June 30,
$ change % change
2021 2020 General and Administrative expenses External professional services 4,210 8,854 (4,644 ) (52 )% Employee-related costs 5,211 5,455 (244 ) (4 )% Share-based payment expenses 1,554 (397 ) 1,951 491 % Depreciation, amortization and other costs 6,977 6,064 913 15 % Total General and Administrative expenses 17,951 19,975
(2,024 ) (10 )%
General and Administrative expenses decreased by$2.0 million for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 , primarily due to cost containment measures and decreased external professional fees. The share-based payment income recognized for the six months endedJune 30, 2020 was triggered by the reversal of share-based payment expense due to employees' departures in the context of our 2020 global restructuring plan. The decrease in employee-related costs, excluding share-based payment expenses, is directly related to the workforce reduction we implemented as part of our restructuring plan. 20
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Table of Contents Restructuring We initiated a global restructuring plan inJune 2020 to provide operational latitude to progress the clinical development and regulatory review of investigational Viaskin ™ Peanut in theUnited States andEuropean Union . For the six months endedJune 30, 2021 , our average headcount was 111 compared to 311 for the six months endedJune 30, 2020 . As ofJune 30, 2021 , we had 97 employees. We expect full implementation of the organization-wide costs reduction measures to be completed in the second half of 2021. The restructuring costs were mainly comprised of payroll expenses, restructuring-related consulting and legal fees, as well as impairment of facilities and right of use assets following resizing of facilities. There were no restructuring costs for six months endedJune 30, 2021 . Financial income (expense) Our financial income was$0.3 million for the six months endedJune 30, 2021 compared to a financial expense of$0.2 million for the six months endedJune 30, 2020 . This item mainly includes foreign exchange income (expense). Income tax Our income tax profit was$0.4 million for the six months endedJune 30, 2021 . This income tax profit mainly resulted from US tax refunds. Net loss Net loss was$60.1 million for the six months endedJune 30, 2021 , compared to$89.1 million for the six months endedJune 30, 2020 . Net loss per share (based on the weighted average number of shares outstanding over the period) was$1.09 and$1.67 for the six months endedJune 30, 2021 and 2020, respectively. Summary Statement of Cash Flows The table below summarizes our sources and uses of cash for the six months endedJune 30, 2021 and 2020.
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