FRESH TRACKS THERAPEUTICS, INC. Overview
We are a clinical-stage pharmaceutical company striving to transform patient
lives by developing innovative and differentiated prescription therapeutics for
the treatment of dermatologic, autoimmune, and other debilitating diseases. Our
pipeline combines a potential best-in-class, late-stage program for the
treatment of hyperhidrosis with a novel, cutting-edge platform and
development-stage candidates with broad potential in autoimmune and
neuroinflammatory disorders. Our executive management team and board of
directors bring extensive experience in product development and global
commercialization, having served in leadership roles at large global
pharmaceutical companies and biotechs that have developed and/or launched
successful products, including several that were first-in-class and/or achieved
iconic status, such as Cialis®, Taltz®, Gemzar®, Prozac®, Cymbalta®, and
Juvederm®. Our strategy is to leverage this experience to in-license, acquire,
develop, and commercialize innovative pharmaceutical products that we believe
can meaningfully benefit patients who are suffering from chronic, debilitating
diseases that are underserved by available therapies.
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Hyperhidrosis Program
Sofpironium Bromide Overview
Sofpironium bromide is a new chemical entity that belongs to a class of
medications called anticholinergics. Anticholinergics block the action of
acetylcholine, a chemical that transmits signals within the nervous system that
are responsible for a range of bodily functions, including activation of the
sweat glands. Sofpironium bromide was retrometabolically designed.
Retrometabolic drugs are designed to exert their action locally and are
potentially rapidly metabolized into a less active form once absorbed into the
blood. We have developed sofpironium bromide gel, 15% as a potential
best-in-class, self-administered, once daily, topical therapy for the treatment
of primary axillary hyperhidrosis, also known as excessive underarm sweating.
Sofpironium bromide gel, 15% has completed a U.S. Phase 3 pivotal clinical
program (also referred to as our "Cardigan Studies") for the treatment of
primary axillary hyperhidrosis, and sofpironium bromide gel, 5% is approved in
Japan for the same indication under the brand name ECCLOCK®.
Hyperhidrosis is a debilitating, life-altering medical condition of sweating
beyond what is physiologically required for thermoregulation of the body.
Primary axillary hyperhidrosis is believed to be caused by an overactive
cholinergic response of the sweat glands and affects an estimated 15.3 million,
or 4.8%, of the U.S. population, and 12.76% of the population in Japan .
According to a 2016 update on the prevalence and severity of hyperhidrosis in
the U.S. , axillary hyperhidrosis, which is the targeted first potential
indication for sofpironium bromide, is the most common occurrence of
hyperhidrosis, affecting approximately 65% of patients, or an estimated 10
million individuals, in the U.S.
U.S. Phase 3 Pivotal Cardigan Studies
Our U.S. Phase 3 pivotal clinical program for sofpironium bromide gel, 15% was
comprised of two pivotal clinical studies. The Cardigan I and Cardigan II
studies enrolled 350 subjects and 351 subjects, respectively, who were nine
years of age and older with primary axillary hyperhidrosis. The Cardigan Studies
were multicenter, randomized, double-blinded, vehicle (placebo)-controlled,
evaluating the efficacy and safety of topically applied sofpironium bromide gel,
15%. Subjects applied sofpironium bromide gel, 15% or placebo to their underarms
once daily at bedtime for six consecutive weeks, with a two-week post-treatment
follow-up. The co-primary efficacy endpoints of the Cardigan Studies included
the proportion of subjects achieving at least a 2-point improvement on the
Hyperhidrosis Disease Severity Measure-Axillary© (HSDM-Ax) scale, a proprietary
and validated patient-reported outcome measure, and change in gravimetric sweat
production ("GSP"), each from baseline to end of treatment ("EOT").
In October 2021 , we reported positive topline results from both Cardigan
Studies, which achieved statistical significance on all primary and secondary
efficacy endpoints. In the Cardigan I and II Studies, sofpironium bromide gel,
15% was generally well-tolerated. We expect that the results from the Cardigan
Studies, along with all previously completed clinical studies with sofpironium
bromide, will form the basis of a prospective U.S. new drug application ("NDA")
for sofpironium bromide gel, 15%, which we anticipate submitting to the FDA in
mid-2022.
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Cardigan Studies Efficacy Results*
All primary and secondary efficacy endpoints demonstrated statistically
significant differences between sofpironium bromide gel, 15% (SB) and vehicle
(or placebo), as follows:
Cardigan I Cardigan II
Co-Primary Efficacy Endpoints SB Vehicle p-value SB Vehicle p-value
(n=173) (n=177) (n=180) (n=171)
•Proportion of subjects achieving at 49.3% 29.4% p<0.001 63.9% 47.0% p=0.003
least a 2-point improvement in the
HDSM-Ax score from baseline to EOT
•Change in GSP3 from baseline to EOT -129.5 -99.3 p=0.002 -145.9 -131.7 p=0.030
(in mg)
Cardigan I Cardigan II
Secondary Efficacy Endpoints SB Vehicle p-value SB Vehicle p-value
(n=173) (n=177) (n=180) (n=171)
•Proportion of subjects achieving at 82.8% 69.5% p=0.005 89.9% 80.8% p=0.020
least a 1-point improvement in the
HDSM-Ax score from baseline to EOT
•Proportion of subjects achieving at 32.1% 10.2% p<0.0001 35.5% 21.4% p=0.006
least a 2point improvement in the
HDSM-Ax score and at least a 70%
reduction in GSP from baseline to EOT
•Proportion of subjects achieving at 54.3% 33.3% p<0.001 68.7% 54.6% p=0.014
least a 1point improvement in the
HDSM-Ax score and at least a 50%
reduction in GSP from baseline to EOT
* Intent-to-Treat analysis population
Cardigan Studies Safety Results
In the Cardigan Studies, sofpironium bromide gel, 15% was generally
well-tolerated. The Treatment-Emergent Adverse Events ("TEAEs") were mild or
moderate in severity and transient in nature. Overall, 89% of patients who were
randomized to sofpironium gel, 15% in the studies completed the full six weeks
of treatment. Common adverse events (incidence ?2%) observed in the sofpironium
bromide gel, 15% treatment group in the Cardigan I and II studies were dry mouth
(11.6%, 17.2%), blurred vision (5.2%, 11.7%), application site pain (6.4%,
10.0%), application site erythema (5.2%, 7.8%), mydriasis (7.5%, 5.0%),
application site pruritis (6.4%, 2.2%), application site dermatitis (5.8%,
5.6%), urinary retention (1.2%, 3.3%), application site irritation (1.2%, 3.3%),
dry eye (0.6%, 3.3%), headache (1.2%, 2.2%), constipation (0.6%, 2.2%) and
urinary hesitation (0.6%, 2.2%), respectively. Five (2.9%) and nine (5.0%)
subjects who received sofpironium bromide gel, 15%, discontinued the Cardigan I
and II studies, respectively, due to a TEAE. No treatment-related serious
adverse events were reported.
U.S. Phase 3 Open-Label Long-Term Safety Study
In July 2020 , we completed our U.S. Phase 3 open-label long-term safety study
("LTSS") evaluating the safety and efficacy of sofpironium bromide gel, 5% and
15% for 48 weeks of treatment in 300 patients aged nine years or older with
primary axillary hyperhidrosis. Patients were randomized to receive either
sofpironium bromide gel, 5% or 15% in a 1:2 ratio. Subjects applied the assigned
investigational product once daily at bedtime to
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both axillae for 48 weeks, followed by a four-week post-treatment follow-up. A
total of 190 patients completed the full study duration of 52 weeks.
Overall, the safety, tolerability, and efficacy results for sofpironium bromide
gel, 5% and 15% in the LTSS were consistent with prior clinical experience and
no unexpected safety findings were observed. There were no clinically
significant changes in laboratory parameters or vital signs over 48 weeks of
treatment.
Collaboration with Kaken in Asia
Under our License, Development, and Commercialization Agreement with Kaken,
dated March 31, 2015 (as amended, the "Kaken Agreement"), we and Kaken have
completed multiple clinical trials of sofpironium bromide gel involving over
1,690 subjects in the U.S. and Japan . These trials evaluated the potential
safety, tolerability, pharmacokinetics, and efficacy of sofpironium bromide gel
in adult and pediatric patients with primary axillary hyperhidrosis and healthy
adult subjects.
In September 2020 , Kaken received regulatory approval in Japan to manufacture
and market sofpironium bromide gel, 5% under the brand name ECCLOCK for the
once-daily treatment of primary axillary hyperhidrosis. Japan is the first
country to approve sofpironium bromide, which also marks the first approval of a
topical prescription product for the treatment of primary axillary hyperhidrosis
in Japan . This approval was based on the results of Kaken's Japanese pivotal
Phase 3 registration study of sofpironium bromide gel, 5% in 281 patients with
primary axillary hyperhidrosis.
In November 2020 , Kaken launched commercial sales of ECCLOCK in Japan . This
marked the first commercialization of sofpironium bromide for any indication
worldwide. Under the Kaken Agreement, we are entitled to receive commercial
milestone payments, as well as tiered royalties based on a percentage of net
sales of ECCLOCK in Japan . As a result, beginning in the fourth quarter of 2020,
we have recognized royalty revenue earned on a percentage of net sales of
ECCLOCK in Japan . To help ensure patient safety, Japanese law generally
restricts new pharmaceutical products to 14-day prescriptions for one year from
the first day of the month that government-approved pricing for the product to
be launched is listed. This means that in the first year of launch, patients
must return to see their prescribing physician in person to obtain a refill
lasting another two weeks in duration. In addition to Japan , Kaken has rights to
develop and commercialize sofpironium bromide in South Korea , China , and certain
other Asian countries, and we are entitled to receive royalties based on a
percentage of Kaken's net sales in these countries.
In June 2021 , Kaken initiated a Japanese Phase 1 clinical study to assess the
pharmacokinetics, safety, and efficacy of sofpironium bromide gel in patients
with primary palmoplantar hyperhidrosis, or excessive sweating from the palms
and soles, for which there are currently no approved topical prescription
treatment options in Japan (or anywhere else in the world).
Together with Kaken, we were granted by the Japanese Patent Office a composition
of matter patent with claims directed to the novel polymorphic, or crystalline,
forms of sofpironium bromide that are being commercialized by Kaken in Japan and
would be by us in the U.S. subject to our own ongoing development efforts. This
patent is expected to provide additional protection for these newly developed
and distinct forms in certain countries around the world, including Japan ,
potentially through at least 2040.
DYRK1A Inhibitor Platform
Development of DYRK1A Inhibitors
On August 27, 2021 , we entered into a License and Development Agreement (the
"Voronoi License Agreement") with Voronoi Inc. ("Voronoi"), pursuant to which we
acquired exclusive, worldwide rights to research, develop, and commercialize
novel therapeutics generated from a proprietary DYRK1A inhibitor
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platform. These novel DYRK1A inhibitors aim to restore immune balance in
patients whose immune system has become dysregulated. Based on the promising
preclinical efficacy data generated to date on these novel DYRK1A inhibitor
programs, we believe this platform has the potential to offer first-in-class,
new and potent therapies across a wide array of autoimmune and inflammatory
diseases.
The initial lead program that we expect to advance is BBI-02, a Phase 1-ready,
highly selective, and orally bioavailable DYRK1A inhibitor that has demonstrated
promising results in various preclinical models, including atopic dermatitis and
rheumatoid arthritis. In these models, BBI-02 showed encouraging decreases in
disease severity and reduction of pro-inflammatory cytokines compared to current
standard-of-care agents, such as Janus kinase (JAK) inhibitors and anti-tumor
necrosis factor (TNF) biologics. Notably, many current therapies for autoimmune
disorders are broadly immunosuppressant, which may lead to severe side effects,
such as increased infection risk. In contrast, preclinical data have shown
BBI-02 to drive regulatory T-cell differentiation while dampening
pro-inflammatory TH17 cells and MyD88/IRAK4-related signaling pathways.
Regulatory T cells serve to maintain tolerance and keep the autoreactive,
pro-inflammatory T cells in check, thus inhibiting autoimmune disease and
limiting chronic inflammation. The myeloid differentiation primary response 88
("MyD88") protein is normally spliced into a long form and a short form. DYRK1A
inhibition shifts the balance to produce more MyD88 short form, which leads to
IRAK4, a protein kinase involved in signaling immune responses from toll-like
receptors, not being phosphorylated and so appears to deactivate downstream
cascades of certain pro-inflammatory cytokines. Based on current understanding,
this inhibition of the release of excess cytokines can be achieved by
re-establishing the role of MyD88 short form as a negative regulator of this
pathway. Unlike many existing therapies, as well as those currently being
investigated, BBI-02 may have the ability to target both the adaptive and innate
immune imbalance simultaneously, potentially resulting in, or substantially
achieving, restoration of immune homeostasis that, if proven, would represent a
paradigm shift in the treatment of certain autoimmune and inflammatory diseases.
We intend to progress BBI-02 into a Phase 1 clinical study in Canada in the
first half of 2022, with topline results expected by the end of 2022. In
addition, throughout 2022 we expect to conduct formulation development
activities for BBI-03, a topically applied preclinical DYRK1A inhibitor, and to
select and initiate development of a lead next-generation candidate from the
platform for the potential treatment of neuroinflammatory and/or autoimmune
diseases.
BBI-02 and BBI-03 are covered by a composition of matter patent issued in the
U.S. , Japan , China , and other key countries through at least 2038, subject to
patent term extensions that may be available depending on how these early-stage
assets are developed, as well as pending applications for this and other patents
elsewhere.
Significant Financing and Licensing Arrangements
Public Offerings of Common Stock and Warrants
In October 2021 , we completed the sale of 26,316,000 shares of our common stock
(the "October 2021 Offering"). The October 2021 Offering resulted in net
proceeds of approximately $8.9 million , after deducting the underwriting
discount and offering expenses payable by us. In addition, the underwriters have
a 30-day option to purchase 3,947,400 additional shares of common stock on the
same terms. We anticipate using the net proceeds from the October 2021 Offering
for research and development, including clinical trials, working capital,
business development, and general corporate purposes. Pursuant to the October
2021 Offering, we and our directors and officers agreed, for a period of 90
days, subject to certain exceptions, not to offer, sell, pledge, or otherwise
dispose of our common stock and other of our securities that we or they
beneficially own, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable for shares of
common stock, without the prior written consent of William Blair & Company,
L.L.C. ("William Blair").
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In July 2021 , we completed the sale of 12,983,871 shares of our common stock
(the "July 2021 Offering"). The July 2021 Offering resulted in net proceeds of
approximately $7.3 million , after deducting underwriting discounts and
commissions and offering expenses. We are using the net proceeds from the July
2021 Offering for research and development, including clinical trials, working
capital, and general corporate purposes.
In October 2020 , we completed the sale of 19,003,510 shares of our common stock,
and, to certain investors, pre-funded warrants to purchase 1,829,812 shares of
our common stock, and accompanying common stock warrants to purchase up to an
aggregate of 20,833,322 shares of our common stock (the "October 2020
Offering"). The October 2020 Offering resulted in net proceeds of approximately
$13.7 million to us after deducting underwriting commissions and discounts and
other offering expenses of $1.3 million and excluding the proceeds from the
exercise of the warrants. During the nine months ended September 30, 2021 ,
12,427,387 common warrants associated with the October 2020 Offering were
exercised at a weighted-average exercise price of $0.72 per share, resulting in
aggregate proceeds of approximately $8.9 million .
In June 2020 , we completed the sale of 14,790,133 shares of our common stock,
and, to certain investors, pre-funded warrants to purchase 2,709,867 shares of
our common stock, and accompanying common warrants to purchase up to an
aggregate of 17,500,000 shares of our common stock (the "June 2020 Offering")
(and together with the October 2020 Offering, the "2020 Offerings"). The June
2020 Offering resulted in approximately $18.7 million of net proceeds after
deducting underwriting commissions and discounts and other offering expenses of
$1.4 million and excluding the proceeds from the exercise of the warrants.
During the nine months ended September 30, 2021 , 17,500 common warrants
associated with the June 2020 Offering were exercised at a weighted-average
exercise price of $1.25 per share, resulting in aggregate proceeds of
approximately $22 thousand .
We are using the proceeds from the 2020 Offerings for research and development,
including clinical trials, working capital, and general corporate purposes. For
additional information regarding the 2020 Offerings, see Note 6. "Capital Stock"
of the notes to our condensed consolidated financial statements included in this
Quarterly Report.
At Market Issuance Sales Agreements
In March 2021 , we entered into an At Market Issuance Sales Agreement (the "2021
ATM Agreement") with Oppenheimer & Co. Inc. ("Oppenheimer") and William Blair as
our sales agents (the "Agents"). Pursuant to the terms of the 2021 ATM
Agreement, we may sell from time to time through the Agents shares of our common
stock having an aggregate offering price of up to $50.0 million . Such shares are
issued pursuant to our shelf registration statement on Form S-3 (Registration
No. 333-254037). Sales of shares are made by means of ordinary brokers'
transactions on The Nasdaq Capital Market at market prices or as otherwise
agreed by us and the Agents. Under the terms of the 2021 ATM Agreement, we may
also sell the shares from time to time to an Agent as principal for its own
account at a price to be agreed upon at the time of sale. Any sale of the shares
to an Agent as principal would be pursuant to the terms of a separate placement
notice between us and such Agent. During the nine months ended September 30,
2021 , we sold 4,449,828 shares under the 2021 ATM Agreement at a
weighted-average price of $0.89 per share, for aggregate net proceeds of
$3.8 million , after giving effect to a 3% commission to the Agents. As of
September 30, 2021 , approximately $46.0 million of shares of common stock were
remaining, but had not yet been sold under the 2021 ATM Agreement.
In April 2020 , we entered into an At Market Issuance Sales Agreement (the "2020
ATM Agreement" and, together with the 2021 ATM Agreement, the "ATM Agreements")
with Oppenheimer as our sales agent. Pursuant to the terms of the 2020 ATM
Agreement, we may sell from time to time through Oppenheimer shares of our
common stock having an aggregate offering price of up to $8.0 million . Such
shares are issued pursuant to our shelf registration statement on Form S-3
(Registration No. 333-236353). Sales of the shares are made by means of ordinary
brokers' transactions on The Nasdaq Capital Market at market prices or as
otherwise agreed by us and Oppenheimer. Under the terms of the 2020 ATM
Agreement, we may also sell the shares from time
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to time to Oppenheimer as principal for its own account at a price to be agreed
upon at the time of sale. Any sale of the shares to Oppenheimer as principal
would be pursuant to the terms of a separate placement notice between us and
Oppenheimer. During the nine months ended September 30, 2021 , we sold 1,089,048
shares under the 2020 ATM Agreement at a weighted-average price of $1.55 per
share, for aggregate net proceeds of approximately $1.6 million , after giving
effect to a 3% commission to Oppenheimer as agent. As of September 30, 2021 ,
approximately $2.6 million of shares of common stock were remaining, but had not
yet been sold under the 2020 ATM Agreement.
Private Placement Offerings
In February 2020 , we and Lincoln Park Capital Fund, LLC ("Lincoln Park") entered
into (i) a securities purchase agreement (the "Securities Purchase Agreement");
(ii) a purchase agreement (the "Purchase Agreement"); and (iii) a registration
rights agreement (the "Registration Rights Agreement"). Pursuant to the
Securities Purchase Agreement, Lincoln Park purchased, and we sold, (i) an
aggregate of 950,000 shares of common stock (the "Common Shares"), (ii) a
warrant to initially purchase an aggregate of up to 606,420 shares of common
stock at an exercise price of $0.01 per share (the "Series A Warrant"), and
(iii) a warrant to initially purchase an aggregate of up to 1,556,420 shares of
common stock at an exercise price of $1.16 per share (the "Series B Warrant"
and, together with the Series A Warrant, the "Warrants"). The aggregate gross
purchase price for the Common Shares and the Warrants was $2.0 million .
Under the terms and subject to the conditions of the Purchase Agreement, we have
the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is
obligated to purchase, up to $28.0 million in the aggregate of shares of our
common stock. In order to retain maximum flexibility to issue and sell up to the
maximum of $28.0 million of our common stock under the Purchase Agreement, we
sought and, at our annual meeting on April 19, 2021 , received, stockholder
approval for the sale and issuance of common stock in connection with the
Purchase Agreement under Nasdaq Listing Rule 5635(d). Sales of common stock by
us will be subject to certain limitations, and may occur from time to time, at
our sole discretion, over the 36-month period commencing on August 14, 2020 (the
"Commencement Date").
Following the Commencement Date, under the Purchase Agreement, on any business
day selected by us, we may direct Lincoln Park to purchase up to 100,000 shares
of our common stock on such business day (each, a "Regular Purchase"), provided,
however, that (i) the Regular Purchase may be increased to up to 125,000 shares,
provided that the closing sale price of the common stock is not below $3.00 on
the purchase date; and (ii) the Regular Purchase may be increased to up to
150,000 shares, provided that the closing sale price of the common stock is not
below $5.00 on the purchase date. In each case, Lincoln Park's maximum
commitment in any single Regular Purchase may not exceed $1,000,000 . The
purchase price per share for each such Regular Purchase will be based on
prevailing market prices of common stock immediately preceding the time of sale.
In addition to Regular Purchases, we may direct Lincoln Park to purchase other
amounts as accelerated purchases or as additional accelerated purchases if the
closing sale price of the common stock exceeds certain threshold prices as set
forth in the Purchase Agreement. In all instances, we may not sell shares of our
common stock to Lincoln Park under the Purchase Agreement if it would result in
Lincoln Park beneficially owning more than 9.99% of the outstanding shares of
our common stock. During the nine months ended September 30, 2021 , we sold to
Lincoln Park 1,300,000 shares under the Purchase Agreement at a weighted-average
price of $0.81 per share, for aggregate net proceeds of $1.0 million . As of
September 30, 2021 , approximately $26.9 million of shares of common stock were
remaining, but had not yet been sold under the Purchase Agreement.
We agreed with Lincoln Park that we will not enter into any "variable rate"
transactions with any third party, subject to certain exceptions, for a period
defined in the Purchase Agreement. We have the right to terminate the Purchase
Agreement at any time, at no cost or penalty.
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License and Development Agreement with Voronoi
On August 27, 2021 , we entered into the Voronoi License Agreement with Voronoi,
pursuant to which we acquired exclusive, worldwide rights to research, develop,
and commercialize novel therapeutics generated from a proprietary DYRK1A
inhibitor platform. In accordance with the terms of the Voronoi License
Agreement, in exchange for the license rights, we made a one-time payment of
$2.5 million in cash and issued $2.0 million , or 2,816,901 shares, of our common
stock to Voronoi. As a result, we recorded $4.8 million in research and
development expenses during the three and nine months ended September 30, 2021 .
With respect to the first-generation compounds arising from the DYRK1A inhibitor
platform, the Voronoi License Agreement provides that we will make payments to
Voronoi of up to $211.0 million in the aggregate contingent upon achievement of
specified development, regulatory, and commercial milestones. With respect to
the second-generation compounds arising from the DYRK1A inhibitor platform, we
will make payments to Voronoi of up to $107.5 million in the aggregate
contingent upon achievement of specified development, regulatory, and commercial
milestones. Further, the Voronoi License Agreement provides that we will pay
Voronoi tiered royalty payments ranging from low single digits up to 10% of net
sales of products arising from the DYRK1A inhibitor platform. All of the
contingent payments and royalties are payable in cash except for $1.0 million of
the development and regulatory milestone payments, which amount is payable in
shares of our common stock. Under the terms of the Voronoi License Agreement, we
will be responsible for, and bear the future costs of, worldwide development and
commercialization of all the licensed compounds.
Amended and Restated License Agreement with Bodor
In February 2020 , we, together with Brickell Subsidiary and Bodor Laboratories,
Inc. and Dr. Nicholas S. Bodor (collectively, "Bodor") entered into an amended
and restated license agreement (the "Amended and Restated License Agreement"),
which supersedes the License Agreement, dated December 15, 2012 , entered into
between Brickell Subsidiary and Bodor, as amended by Amendment No. 1 to License
Agreement, effective as of October 21, 2013 , and Amendment No. 2 to License
Agreement, effective as of March 31, 2015 .
The Amended and Restated License Agreement retains with us a worldwide,
exclusive license to develop, manufacture, market, sell and sublicense products
containing the proprietary compound sofpironium bromide based upon the patents
referenced in the Amended and Restated License Agreement for a defined field of
use. As of September 30, 2021 , under the original License Agreement and the
Amended and Restated License Agreement, we had remaining obligations to pay
Bodor (i) a royalty on sales of product outside Kaken's territory, including a
low single-digit royalty on sales of certain product not covered by the patent
estate licensed from Bodor; (ii) approximately 50 to 55% of all royalties we
receive from Kaken for sales of product within its territory; (iii) a percentage
of non-royalty sublicensing income we receive from Kaken or other sublicensees;
and (iv) up to an aggregate of $0.8 million (plus an additional $0.1 million for
approvals of additional products) in cash payments and $1.0 million of shares of
our common stock upon the achievement of certain regulatory milestones.
Under the terms of the Amended and Restated License Agreement, we made a $0.5
million milestone payment to Bodor following the closing of a public offering in
June 2020 and accrued an additional $1.0 million related to our plan to initiate
our U.S. Phase 3 pivotal program in the fourth quarter of 2020. As a result, we
recorded $1.5 million as research and development expenses in the condensed
consolidated statements of operations during the nine months ended September 30,
2020 . No similar or associated research and development expense was incurred in
the three or nine months ended September 30, 2021 , but we paid Bodor the
applicable amount with respect to the royalties we received from Kaken for sales
of ECCLOCK in Japan during those periods.
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Financial Overview
Our operations to date have been limited to business planning, raising capital,
developing our pipeline assets (in particular sofpironium bromide), identifying
and in-licensing product candidates, conducting clinical trials, and other
research and development activities.
To date, we have financed operations primarily through funds received from the
sale of common stock and warrants, convertible preferred stock, debt and
convertible notes, payments received under license and collaboration agreements,
and cash and investments acquired in connection with the merger pursuant to
which Private Brickell became a wholly-owned subsidiary of Brickell Biotech,
Inc. (formerly Vical Incorporated ) in 2019 (the "Merger"). Other than through
our sublicense of rights to sofpironium bromide to Kaken in Japan , we do not
have any products approved for sale and have not generated any product sales.
Since inception, we have incurred operating losses. We recorded a net loss of
$33.4 million and $13.5 million for the nine months ended September 30, 2021 and
2020, respectively. As of September 30, 2021 , we had an accumulated deficit of
$139.3 million . We expect to continue incurring significant expenses and
operating losses for at least the next several years as we:
• prepare and submit an NDA for sofpironium bromide gel, 15% to the FDA;
• conduct certain pre-commercialization activities related to sofpironium
bromide gel, 15%;
• initiate a Phase 1 clinical trial for BBI-02;
• advance research and development-related activities to develop and expand our
product pipeline;
• maintain, expand, and protect our intellectual property portfolio for all our
assets;
• hire additional staff, including clinical, regulatory, quality, alliance
management, scientific, and management personnel; and
• add operational and finance personnel to support product and business
development efforts and to support operating as a public company.
We do not expect to generate significant revenue unless and until we
successfully complete development of, obtain marketing approval for, and
commercialize product candidates, either alone or in collaboration with third
parties. We expect these activities may take several years and our success in
these efforts is subject to significant uncertainty. We expect we will need to
raise substantial additional capital prior to the regulatory approval and
commercialization of any of our product candidates. Until such time, if ever,
that we generate substantial product revenues, we expect to finance our
operations through public or private equity or debt financings, collaborations
or licenses, or other available financing transactions. However, we may be
unable to raise additional funds through these or other means when needed.
Key Components of Operations
Revenue
Revenue generally consists of revenue recognized under our strategic
collaboration agreements for the development and commercialization of our
product candidates. Our strategic collaboration agreements generally outline
overall development plans and include payments we receive at signing, payments
for the achievement of certain milestones, and royalties. For these activities
and payments, we utilize judgment to assess the nature of the performance
obligations to determine whether the performance obligations are satisfied over
time or at a point in time and, if over time, the appropriate method of
measuring progress for purposes of recognizing revenue. Prior to 2020, we had
not recognized any royalty revenue from any collaboration arrangement. Beginning
during the three months ended December 31, 2020 , and continuing in the nine
months ended September 30, 2021 , pursuant to the Kaken Agreement, we recognized
royalty revenue earned on a percentage of net sales of ECCLOCK in Japan , and we
expect to continue to recognize such royalties going forward. Other than the
revenue we may generate in connection with this agreement, we do not expect to
generate any revenue
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from any product candidates that we develop unless and until we obtain
regulatory approval and commercialize our products or enter into other
collaboration agreements with third parties.
Research and Development Expenses
Research and development expenses principally consist of payments to third
parties known as CROs and upfront in-licensing fees of development-stage assets.
CROs help plan, organize, and conduct clinical and nonclinical studies under our
direction. Personnel costs, including wages, benefits, and share-based
compensation, related to our research and development staff in support of
product development activities are also included, as well as costs incurred for
supplies, preclinical studies and toxicology tests, consultants, and facility
and related overhead costs.
Below is a summary of our research and development expenses related to
sofpironium bromide and our DYRK1A inhibitor platform by categories of costs for
the periods presented. To date, the expenses associated with our DYRK1A
inhibitor platform primarily relate to upfront in-licensing fees. The other
expenses category includes travel, lab and office supplies, clinical trial
management software, license fees, and other miscellaneous expenses. We expect
our research and development expenses related to sofpironium bromide to decrease
in future periods given the end of our Phase 3 clinical trials for sofpironium
bromide. In the upcoming quarters, we expect to incur research and development
expense related to our DYRK1A inhibitor platform and programs as we initiate our
Phase 1 clinical trial for BBI-02 and begin other research and
development-related activities, though at levels consistent with expenditures
for development of early-stage assets.
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(in thousands)
Direct program expenses related to
Sofpironium bromide $ 4,185 $ 409 $ 17,735 $ 4,140
DYRK1A inhibitor platform 4,827 - 4,827 -
Personnel and other expenses
Salaries, benefits, and stock-based
compensation 637 758 1,573 2,233
Regulatory and compliance 513 79 884 137
Other expenses 60 35 93 147
Total research and development
expenses $ 10,222 $ 1,281 $ 25,112 $ 6,657
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs,
including wages, benefits, and share-based compensation, related to our
executive, sales, marketing, finance, and human resources personnel, as well as
professional fees, including legal, accounting, and sublicensing fees.
Other Income, Net
Other income, net consists primarily of a gain on extinguishment of debt
recognized in June 2021 as a result of the forgiveness of an outstanding loan
that we received under the Paycheck Protection Program (the "PPP Loan"). Other
income, net also consists of interest income, interest expense, and various
income or expense
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items of a non-recurring nature. We earn interest income from interest-bearing
accounts and money market funds. Interest expense is comprised of interest
incurred related to a note payable. Our interest income varies each reporting
period depending on our average cash balances during the period and market
interest rates. We expect interest income to fluctuate in the future with
changes in average cash balances and market interest rates.
Critical Accounting Policies and Estimates
We have prepared the condensed consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America .
The preparation of these condensed consolidated financial statements requires us
to make estimates, assumptions, and judgments that affect the reported amounts
of assets, liabilities, expenses, and related disclosures at the date of the
condensed consolidated financial statements, and the reported amounts of revenue
and expenses during the reporting period. On an ongoing basis, management
evaluates its critical estimates, including those related to revenue
recognition, accrued research and development expenses, warrants, and
stock-based compensation. We base our estimates on our historical experience and
on assumptions that we believe are reasonable; however, actual results may
differ materially from these estimates under different assumptions or
conditions.
There were no changes during the nine months ended September 30, 2021 to our
critical accounting policies as disclosed in the 2020 Form 10-K. For information
on our significant accounting policies, please refer to Note 2 of the notes to
our condensed consolidated financial statements included elsewhere in this
Quarterly Report.
Recent Accounting Pronouncements
Unless otherwise discussed elsewhere in this Quarterly Report, we believe that
the impact of recently issued guidance to be adopted in the future is not
expected to have a material impact on our condensed consolidated financial
statements upon adoption.
Results of Operations
Comparison of the Three Months Ended September 30, 2021 and 2020
Three Months Ended
September 30,
2021 2020
(in thousands)
Revenue $ 132 $ 142 Research and development expenses (10,222) (1,281) General and administrative expenses (3,269) (3,211)
Total other income, net 106 24 Net loss$ (13,253) $ (4,326) Revenue Revenue decreased by$10.0 thousand for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 . Revenue in 2021 consisted of royalty revenue recognized related to sales of ECCLOCK inJapan by Kaken, while revenue in 2020 was driven by collaboration revenue recognized for research and development activities under the Kaken Agreement pursuant to which Kaken provided research and development funding to us. The decrease in collaboration revenue recognized was primarily attributable to our Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were concluded or winding down by the end of the first quarter of 2020. Conducting these studies was the basis for revenue recognition over time, through the third quarter of 2020, of a$15.6 million research and 34 -------------------------------------------------------------------------------- development payment received from Kaken in the second quarter of 2018. Beginning during the three months endedDecember 31, 2020 , and continuing in 2021, pursuant to the Kaken Agreement, we recognized royalty revenue earned on a percentage of net sales of ECCLOCK inJapan , and we expect to continue to recognize such royalties on Kaken's net sales going forward. Research and Development Research and development expenses increased by$8.9 million for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 , which was primarily due to a$4.8 million expense recorded related to the upfront payment in cash and shares of our common stock under the Voronoi License Agreement and an increase of$3.8 million in clinical costs related to ourU.S. Phase 3 pivotal clinical program for sofpironium bromide. General and Administrative Expenses General and administrative expenses increased by$0.1 million for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 , remaining generally consistent with the comparable period. Comparison of the Nine Months EndedSeptember 30, 2021 and 2020 Nine Months Ended September 30, 2021 2020 (in thousands) Revenue$ 300 $ 1,795 Research and development expenses (25,112)
(6,657)
General and administrative expenses (9,127) (8,713) Total other income, net 532 27 Net loss$ (33,407) $ (13,548) Revenue Revenue decreased by$1.5 million for the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . Revenue in 2021 consisted of royalty revenue recognized related to sales of ECCLOCK inJapan by Kaken, while revenue in 2020 was driven by collaboration revenue recognized for research and development activities under the Kaken Agreement pursuant to which Kaken provided research and development funding to us. The decrease in collaboration revenue recognized was primarily attributable to our Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were concluded or winding down by the end of the first quarter of 2020. Conducting these studies was the basis for revenue recognition over time, through the third quarter of 2020, of a$15.6 million research and development payment received from Kaken in the second quarter of 2018. Beginning in late 2020, and continuing in the nine months endedSeptember 30, 2021 , pursuant to the Kaken Agreement, we recognized royalty revenue earned on a percentage of net sales of ECCLOCK inJapan , and we expect to continue to recognize such royalties on Kaken's net sales going forward. Research and Development Expenses Research and development expenses increased by$18.5 million for the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , which was primarily due to an increase of$13.6 million in clinical costs related to ourU.S. Phase 3 pivotal clinical program for sofpironium bromide and 35 -------------------------------------------------------------------------------- a$4.8 million expense recorded related to the upfront payment in cash and shares of our common stock under the Voronoi License Agreement. General and Administrative Expenses General and administrative expenses increased by$0.4 million for the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . The increase was primarily due to higher compensation and administrative expenses. Total Other Income, Net Total other income, net increased by$0.5 million for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . The increase was primarily due to a gain on extinguishment of debt of approximately$0.4 million that resulted from the forgiveness of the PPP Loan inJune 2021 . Liquidity and Capital Resources We have incurred significant operating losses and have an accumulated deficit as a result of ongoing efforts to in-license and develop our product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. For the nine months endedSeptember 30, 2021 and 2020, we had a net loss of$33.4 million and$13.5 million , respectively. As ofSeptember 30, 2021 , we had an accumulated deficit of$139.3 million . As ofSeptember 30, 2021 , we had cash and cash equivalents of$21.4 million compared to$30.1 million as ofDecember 31, 2020 . Since inception, we have financed our operations primarily through funds received from the sale of common stock and warrants, convertible preferred stock, debt, and convertible notes, payments received under license and collaboration agreements, and cash and investments acquired in the Merger. We believe that our cash and cash equivalents as ofSeptember 30, 2021 , combined with the net proceeds of$8.9 million received from the sale of our common stock in a public offering inOctober 2021 , will be sufficient to fund our operations for at least the next 12 months, through the potential sofpironium bromide NDA to the FDA, which is expected to occur in mid-2022, as well as the receipt of the Phase 1 topline results for BBI-02, which are anticipated by year-end 2022. We expect to continue to incur additional substantial losses in the foreseeable future as a result of our research and development activities. Additional funding will be required in the future to continue with our planned development and other activities. Cash Flows Since inception, we have primarily used our available cash to fund expenditures related to product discovery and development activities. The following table sets forth a summary of cash flows for the periods presented: Nine Months Ended September 30, 2021 2020 (in thousands) Net cash provided by (used in): Operating activities$ (31,350) $ (15,283) Investing activities (36) 4,500 Financing activities 22,654 23,725 Total$ (8,732) $ 12,942 36
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Operating Activities Net cash used in operating activities of$31.4 million during the nine months endedSeptember 30, 2021 increased compared to$15.3 million during the nine months endedSeptember 30, 2020 , which was primarily attributable to an increase in cash used to support our operating activities, including but not limited to, our clinical trials, an increase in research and development activities, and general working capital requirements. The$16.1 million increase was impacted by an increase in net loss of$19.9 million , partially offset by the net effect of changes in working capital of$2.0 million and an increase in non-cash operating expenses of$1.8 million , which primarily consisted of$2.0 million in expense for the issuance of our common stock under the Voronoi License Agreement and a$0.4 million gain on extinguishment of the PPP Loan. Investing Activities Net cash provided by investing activities during the nine months endedSeptember 30, 2021 decreased by$4.5 million compared to the nine months endedSeptember 30, 2020 . The decrease in net cash provided by investing activities was primarily the result of a$4.5 million reduction in maturities of marketable securities. Financing Activities Net cash provided by financing activities of$22.7 million during the nine months endedSeptember 30, 2021 decreased compared to$23.7 million during the nine months endedSeptember 30, 2020 . The decrease was primarily related to a reduction of$11.3 million in net proceeds from offerings of common stock and warrants and$0.4 million in proceeds received from the PPP Loan, which was partially offset by higher net proceeds received of$8.9 million from the exercise of warrants and$1.8 million in sales of our common stock under the ATM Agreements and the Purchase Agreement.
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