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 autoimmune, inflammatory, and other debilitating diseases. Our pipeline consists of several development-stage candidates and a cutting-edge platform with broad potential in autoimmune and inflammatory disorders. Our executive management team and board of directors bring extensive experience in product development and global commercialization, having served in senior 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®, Juvederm®, Pluvicto®, and Sofpironium Bromide. 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. We have demonstrated our success with this strategy by developing sofpironium bromide gel, 15%, a novel treatment for primary axillary hyperhidrosis, from an early preclinical stage through a successful Phase 3 program in theU.S. and through marketing approval and commercial launch inJapan with our former partner Kaken, culminating in the sale of our rights in sofpironium bromide to Botanix. 24 --------------------------------------------------------------------------------
Table of Contents The following image summarizes our current pipeline and corresponding development programs:
[[Image Removed: bbi-20220630_g1.jpg]]Research & Development Programs
BBI-02: A Potential First-in-Class Oral DYRK1A Inhibitor for the Treatment of Autoimmune and Inflammatory Diseases
InAugust 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 BBI-02, a novel, clinical-stage, potential first-in-class, highly selective, and orally bioavailable small molecule DYRK1A inhibitor that aims to restore immune balance in patients whose immune systems have become dysregulated. Based on the promising preclinical efficacy data generated to date, we believe BBI-02 has the potential to be a first-in-class, potent therapy for the treatment of a wide array of debilitating autoimmune and inflammatory diseases. BBI-02 is our lead development-stage program and has demonstrated promising results in various preclinical models, including for atopic dermatitis ("AD") 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 immunosuppressive, which may lead to severe side effects, such as increased infection risk. 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. InMay 2022 , we initiated a first-in-human Phase 1 clinical trial for BBI-02 ("BBI-02-101") inCanada , which marks the first time a DYRK1A inhibitor intended for patients with autoimmune diseases has been administered 25 -------------------------------------------------------------------------------- Table of Contents in humans. BBI-02-101 is a randomized, double-blind, placebo-controlled study designed to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of BBI-02 capsules in both healthy subjects and patients with AD. In the first quarter of 2022, we successfully submitted a Clinical Trial Application for BBI-02 toHealth Canada and subsequently received a No Objection Letter, allowing the BBI-02-101 study to proceed as planned. Part 1A of the study is a single ascending dose ("SAD") assessment of BBI-02 capsules or placebo in up to 56 healthy subjects across seven cohorts at one study center. Part 1B of the study will be a multiple ascending dose ("MAD") assessment of BBI-02 capsules or placebo administered once daily for 14 days. The MAD part of the study is expected to enroll a total of 33 healthy subjects across three cohorts at one study center. Part 2 of the study will compare BBI-02 to placebo in AD patients over 28 days of dosing. Part 2 is expected to enroll approximately 40 patients with moderate-to-severe AD at up to 12 study centers and will include a preliminary assessment of efficacy. We continue to enroll and dose patients in BBI-02-101 and plan to initiate the MAD part of the study inSeptember 2022 . We remain on track to report topline results from the Phase 1 SAD and MAD trials (Parts 1A and 1B) by early 2023. Additionally, we plan to prepare and file an investigational new drug (IND) application with the FDA for further research and development of BBI-02 in theU.S. BBI-02 is covered by a composition of matter patent issued in theU.S. ,Japan ,China , and other key countries through at least 2038, subject to patent term extensions and adjustments that may be available depending on how this early-stage asset is developed, as well as a pending Patent Cooperation Treaty ("PCT") application, and other foreign andU.S. applications for BBI-02, as of the date of this Quarterly Report.
BBI-10: A Covalent
InFebruary 2022 , we entered into an Exclusive License Agreement (the "Carna License Agreement") with Carna Biosciences, Inc. ("Carna"), pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize Carna's portfolio of novel, preclinical-stage oral Stimulator of Interferon Genes ("STING") inhibitors.STING is a well-known mediator of innate immune responses. Excessive signaling throughSTING is linked to numerous high unmet need diseases, ranging from autoimmune disorders, such as systemic lupus erythematosus, to interferonopathies, which are a set of rare genetic conditions characterized by interferon overproduction and could have orphan drug potential.STING is a key component of the cyclic GMP-AMP synthase ("cGAS")-STING pathway, which plays an important role in the activation of innate immunity. cGAS acts as a DNA sensor, detecting DNA from sources such as invading bacteria, viruses, and cellular debris that can arise from aging and tissue damage. Upon DNA binding, cGAS produces the secondary messenger molecule cyclic GMP-AMP ("cGAMP"), which binds toSTING .STING then undergoes the post-translational modification called palmitoylation, a step essential to the activation ofSTING . ActivatedSTING then in turn activates the recruitment of kinases that phosphorylate IRF3 and I?B?. Phosphorylated IRF3 leads to activation of the type I interferon response, while phosphorylated I?B? activates NF?B and increases the secretion of pro-inflammatory cytokines such as IL-6 and TNF?, resulting in inflammation. While the innate immune response is an important defense mechanism, a dysregulated type I interferon response and overproduction of pro-inflammatory cytokines also represents a driving cause of multiple autoimmune and inflammatory diseases. As such, targeting the cGAS-STING pathway may be a novel approach to treating these diseases. BBI-10, our lead early-stageSTING inhibitor candidate, is a novel, potent, and orally available covalentSTING inhibitor that specifically targets the palmitoylation site ofSTING . This allows it to inhibit both wild-typeSTING and gain-of-function mutants without competing with cGAMP binding, thus deactivating downstream signaling through IRF3 and I?B? and ultimately suppressing inflammation. BBI-10 has exhibited strong proof-of mechanism and a promising profile in initial pharmacokinetics, toxicology, and safety pharmacology studies. In addition, in vitro studies show that BBI-10 more potently blocks theSTING pathway compared to other knownSTING palmitoylation inhibitors, and that mice treated with BBI-10 demonstrate significant decreases in 26 -------------------------------------------------------------------------------- Table of Contents pro-inflammatory cytokine production following stimulation ofSTING . Preclinical development activities for BBI-10 are currently underway, and we expect to conduct experimental characterization of theSTING inhibitor library throughout 2022. For BBI-10, as of the date of this Quarterly Report, we currently have one pending PCT application and one pending priority patent application. We possess an exclusive license directed to a library of compounds targeting/inhibitingSTING , pharmaceutical compositions containing the same, and methods of their use, which are being evaluated.
Next-Generation Kinase Inhibitors: A Cutting-Edge Platform with Potential to Produce Treatments for Autoimmune, Inflammatory, and Other Debilitating Diseases
As part of the Voronoi License Agreement, inAugust 2021 we acquired exclusive global rights to a cutting-edge platform of next-generation kinase inhibitors. This library of new chemical entities includes next-generation DYRK1A inhibitors, as well as other molecules that specifically inhibit CDC2-like kinase ("CLK"), Leucine-Rich Repeat Kinase 2 ("LRRK2") and TTK protein kinase ("TTK"), also known as Monopolar spindle 1 (Mps1) kinases. A number of these drug candidates have the potential to penetrate the blood brain barrier, presenting an opportunity to address neuroinflammatory conditions of high unmet need such as Down Syndrome, Alzheimer's Disease, and Parkinson's Disease, while other peripherally acting novel LRRK2, TTK, and CLK kinase inhibitors could be developed in additional therapeutic areas within autoimmunity, inflammation, and oncology. We are currently engaged in research to identify both brain penetrant and non-brain penetrant new chemical entities from this next-generation kinase inhibitor platform.
Compounds from the next-generation kinase inhibitor platform are covered by
Strategic, Licensing, and Other Arrangements
Exclusive License and Development Agreement with Carna
InFebruary 2022 , we entered into the Carna License Agreement with Carna, pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize Carna's portfolio of novelSTING inhibitors. In accordance with the terms of the Carna License Agreement, in exchange for the licensed rights, we made a one-time cash payment of$2.0 million , which was recorded as research and development expenses in the condensed consolidated statements of operations during the six months endedJune 30, 2022 . The Carna License Agreement provides that we will make success-based payments to Carna of up to$258.0 million in the aggregate contingent upon achievement of specified development, regulatory, and commercial milestones. Further, the Carna License Agreement provides that we will pay Carna tiered royalty payments ranging from mid-single digits up to 10% of net sales. All of the contingent payments and royalties are payable in cash inU.S. Dollars. Under the terms of the Carna License Agreement, we are responsible for, and bear the future costs of, all development and commercialization activities, including patenting, related to all the licensed compounds. As ofJune 30, 2022 and through the date of this Quarterly Report, we have not yet made any payments or recorded any liabilities related to the specified development, regulatory, and commercial milestones or royalties on net sales pursuant to the Carna License Agreement.
License and Development Agreement with Voronoi
InAugust 2021 , we entered into the Voronoi License Agreement with Voronoi, pursuant to which we acquired exclusive, worldwide rights to research, develop, and commercialize BBI-02, a novel, clinical-stage, potential first-in-class, oral DYRK1A inhibitor, and other next-generation kinase inhibitors. In accordance with the terms 27 -------------------------------------------------------------------------------- Table of Contents of the Voronoi License Agreement, in exchange for the licensed 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. With respect to BBI-02, 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 next-generation compounds arising from the novel kinase 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 programs and next-generation kinase inhibitor platform. All of the contingent payments and royalties are payable in cash inU.S. Dollars, except for$1.0 million of the development and regulatory milestone payments, which amount is payable in equivalent shares of our common stock. Under the terms of the Voronoi License Agreement, we are responsible for, and bear the future costs of, all development and commercialization activities, including patenting, related to all the licensed compounds. As ofJune 30, 2022 and through the date of this Quarterly Report, we have not yet made any payments or recorded any liabilities related to the specified development, regulatory, and commercial milestones or royalties on net sales pursuant to the Voronoi License Agreement.
Asset Purchase Agreement with Botanix
OnMay 3, 2022 (the "Effective Date"), we andBrickell Subsidiary, Inc. ("Brickell Subsidiary") entered into an asset purchase agreement withBotanix and Botanix Pharmaceuticals Limited (the "Asset Purchase Agreement"), pursuant to which Botanix acquired and assumed control of all rights, title, and interests to assets primarily related to the proprietary compound sofpironium bromide that were owned and/or licensed by us or Brickell Subsidiary (the "Assets"). We had previously entered into a License Agreement withBodor Laboratories, Inc. ("Bodor"), datedDecember 15, 2012 (last amended inFebruary 2020 ) that provided us with a worldwide exclusive license to develop, manufacture, market, sell, and sublicense products containing sofpironium bromide through which the Assets were developed (the "Amended and Restated License Agreement"). As a result of the Asset Purchase Agreement, Botanix is now responsible for all further research, development, and commercialization of sofpironium bromide globally and replaced us as the exclusive licensee under the Amended and Restated License Agreement. In accordance with the sublicense rights provided to us under the Amended and Restated License Agreement, we also previously entered into a License, Development, and Commercialization Agreement with Kaken, dated as ofMarch 31, 2015 (as amended inMay 2018 , the "Kaken Agreement"), under which we granted to Kaken an exclusive right to develop, manufacture, and commercialize the sofpironium bromide compound inJapan and certain other Asian countries (the "Territory"). In exchange for the sublicense, we were entitled to receive aggregate payments of up to$10.0 million upon the achievement of specified development milestones, which was earned and received in 2017 and 2018, and up to$19.0 million upon the achievement of sales-based milestones, as well as tiered royalties based on a percentage of net sales of licensed products in the Territory. InSeptember 2020 , Kaken received regulatory approval inJapan to manufacture and market sofpironium bromide gel, 5% (ECCLOCK) for the treatment of primary axillary hyperhidrosis, and as a result, we began recognizing royalty revenue earned on a percentage of net sales of ECCLOCK inJapan . Pursuant to the Asset Purchase Agreement, the Kaken Agreement was also assigned to Botanix, which replaced us as the exclusive sub-licensor to Kaken. During the three and six months endedJune 30, 2022 , prior to entering into the Asset Purchase Agreement, we recognized royalty revenue of$0 and$0.2 million , respectively, under the Kaken Agreement. During the three and six months endedJune 30, 2021 , we recognized royalty revenue of$0.1 million and$0.2 million , respectively. We determined that the development of and ultimate sale and assignment of rights to the Assets is an output of our ordinary activities and Botanix is a customer as it relates to the sale of the Assets and related activities. 28 -------------------------------------------------------------------------------- Table of Contents In accordance with the terms of the Asset Purchase Agreement, in exchange for the Assets, we (i) received an upfront payment at closing in the amount of$3.0 million , (ii) are to be reimbursed for certain recent development expenditures in advancement of the Assets, and (iii) will receive from Botanix contingent milestone payments of (a)$2.0 million upon the acceptance by the FDA of the filing of a new drug application ("NDA") for sofpironium bromide gel, 15%, and (b)$4.0 million if marketing approval in theU.S. for sofpironium bromide gel, 15%, is received on or beforeSeptember 30, 2023 , or$2.5 million if such marketing approval is received afterSeptember 30, 2023 but on or beforeFebruary 17, 2024 . We also are eligible to receive additional success-based regulatory and sales milestone payments of up to$168 million . Further, we will receive tiered earnout payments ranging from high-single digits to mid-teen digits on net sales of sofpironium bromide gel (the "Earnout Payments"). The Asset Purchase Agreement also provides that Botanix will pay to us a portion of the sales-based milestone payments and royalties that Botanix receives from Kaken under the Kaken Agreement (together, the "Sublicense Income"). During the three and six months endedJune 30, 2022 , we recorded contract revenue for the upfront payment we received from Botanix of$3.0 million , reimbursed development expenditures from Botanix under the Asset Purchase Agreement of$0.6 million , and fees for consulting services we provided under theTSA (as defined below) of$0.4 million . Additionally, during the three and six months endedJune 30, 2022 , we recognized contract revenue of$0.3 million related to the Sublicense Income. All other consideration due under the Asset Purchase Agreement is contingent upon certain regulatory approvals and future sales subsequent to such regulatory approvals or is based upon future sales that we determined are not yet probable due to such revenues being highly susceptible to factors outside of our influence and uncertainty about the amount of such consideration that will not be resolved for an extended period of time. Therefore, we determined that such variable consideration amounts are fully constrained as ofJune 30, 2022 , and, as such, have not yet been recognized as contract revenue.
Transition Services Agreement with Botanix
In connection with the sale of the Assets, on the Effective Date, we and Botanix entered into a transition services agreement (the "TSA") whereby we are providing consulting services as an independent contractor to Botanix in support of and through filing and potential approval of theU.S. NDA for sofpironium bromide gel, 15%. In accordance with the terms of theTSA , in exchange for providing these services, we will receive from Botanix, (i) prior to the acceptance of the filing by the FDA of such NDA, a fixed monthly amount of$71 thousand , and (ii) after the acceptance of the filing by the FDA of such NDA, a variable amount based upon actual hours worked, in each case plus related fees and expenses of our advisors (plus a 5% administrative fee) and our out-of-pocket expenses. During the three and six months endedJune 30, 2022 , we recognized contract revenue of$0.4 million related to these services.
Agreements with Bodor
In connection with the sale of the Assets, on the Effective Date, we, Brickell Subsidiary, and Bodor entered into an agreement (the "Rights Agreement") to clarify that we and Brickell Subsidiary have the power and authority under the Amended and Restated License Agreement to enter into the Asset Purchase Agreement and theTSA , and that Botanix would assume the Amended and Restated License Agreement pursuant to the Asset Purchase Agreement. The Rights Agreement includes a general release of claims and no admission of liability between the parties. Pursuant to such Rights Agreement, we have agreed to pay Bodor (i) 18% of the amount of each payment actually received by us from Botanix for upfront and milestone payments under the Asset Purchase Agreement, as well as (ii) certain tiered payments, set as a percentage ranging from mid-single digits to low-teen digits, of the actual amount of each of the applicable Earnout Payments received by us from Botanix. During the three and six months endedJune 30, 2022 , we incurred$0.5 million of general and administrative expenses for payments due to Bodor. 29 -------------------------------------------------------------------------------- Table of Contents Pursuant to the terms of the Asset Purchase Agreement, we retained our obligation under the Amended and Restated License Agreement to issue$1.0 million in shares of our common stock to Bodor upon theFDA's acceptance of an NDA filing for sofpironium bromide gel, 15%. As such regulatory milestone event has not yet been achieved, no research and development expenses associated with milestones were incurred during the three or six months endedJune 30, 2022 and 2021. Prior to the execution of the Rights Agreement, we paid Bodor immaterial amounts with respect to the royalties we received from Kaken for sales of sofpironium bromide gel, 5% (ECCLOCK) inJapan during those periods.
Nasdaq Listing Matter
As previously disclosed, we received notices of noncompliance with the minimum closing bid price requirement for continued listing onThe Nasdaq Capital Market, the most recent of which granted us untilJune 13, 2022 to regain compliance with that requirement. OnJune 14, 2022 , Nasdaq notified us that we did not regain compliance with the minimum closing bid price requirement as ofJune 13, 2022 , and therefore our common stock would be delisted from The Nasdaq Capital Market, unless we appealed the delisting determination by timely requesting a hearing before theNasdaq Hearings Panel . We timely requested the hearing, which request stayed any further delisting action, and a hearing was scheduled forJuly 28, 2022 . OnJune 30, 2022 , our stockholders approved a reverse stock split of our outstanding common stock, which was effected at a split ratio of 1-for-45 onJuly 5, 2022 , at which date each forty-five (45) shares of common stock issued and outstanding immediately prior to the reverse stock split were automatically reclassified, combined and converted into one (1) validly issued, fully paid, and non-assessable share of our common stock, subject to the treatment of fractional share interests. Subsequently, the closing price of our common stock was in excess of$1.00 for 10 consecutive trading days, and onJuly 19, 2022 , we received formal notice from Nasdaq stating that we regained compliance with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market and, accordingly, the previously-scheduled hearing regarding the delisting action was canceled by Nasdaq and our common stock will continue to be listed and traded on Nasdaq.
Significant Financing Arrangements
This section sets forth our recent and ongoing financing arrangements, all of which involve our common stock.
Public Offerings of Common Stock and Warrants
In
InJuly 2021 , we completed the sale of 12,983,871 shares of our common stock (the "July 2021 Offering"). TheJuly 2021 Offering resulted in net proceeds of approximately$7.3 million , after deducting underwriting discounts and commissions and offering expenses payable by us. InOctober 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"). TheOctober 2020 Offering resulted in net proceeds of approximately$13.7 million to us after deducting underwriting commissions and discounts and other offering expenses payable by us of$1.3 million and excluding the proceeds from the exercise of the warrants. During the six months endedMarch 31, 2021 , 12,427,387 common warrants associated with theOctober 2020 Offering were exercised at a weighted-average exercise price of$0.72 per share, resulting in aggregate proceeds of approximately$8.9 million . 30 -------------------------------------------------------------------------------- Table of Contents InJune 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"). TheJune 2020 Offering resulted in approximately$18.7 million of net proceeds after deducting underwriting commissions and discounts and other offering expenses payable by us of$1.4 million and excluding the proceeds from the exercise of the warrants. During the six months endedMarch 31, 2021 , 17,500 common warrants associated with theJune 2020 Offering were exercised at a weighted-average exercise price of$1.25 per share, resulting in aggregate proceeds of approximately$22 thousand . We have used and continue to use the remaining net proceeds from our common stock offerings for research and development, including clinical trials, working capital, and general corporate purposes. For additional information regarding the offerings described above, see Note 7. "Capital Stock" of the notes to our condensed consolidated financial statements included in this Quarterly Report.
At Market Issuance Sales Agreements
InMarch 2021 , we entered into an At Market Issuance Sales Agreement (the "2021 ATM Agreement") withOppenheimer & Co. Inc. ("Oppenheimer") andWilliam Blair & Company, L.L.C. ("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 three and six months endedJune 30, 2022 , we sold 1,419,970 shares of our common stock under the 2021 ATM Agreement at a weighted-average price of$0.12 per share, for aggregate net proceeds of$0.2 million , after giving effect to a 3% commission to the Agents. During the three and six months endedJune 30, 2021 , we sold 3,963,476 shares of our common stock under the 2021 ATM Agreement at a weighted-average price of$0.89 per share, for aggregate net proceeds of$3.4 million , after giving effect to a 3% commission to the Agents. As ofJune 30, 2022 , approximately$45.9 million of shares of common stock were remaining, but had not yet been sold under the 2021 ATM Agreement. Subsequent toJune 30, 2022 and throughAugust 11, 2022 , we sold shares of common stock under the 2021 ATM Agreement for aggregate net proceeds of approximately$0.7 million . InApril 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 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 three and six months endedJune 30, 2022 , no sales of common stock under the 2020 ATM Agreement occurred. During the three months endedJune 30, 2021 , we sold 5,500 shares of our common stock under the 2020 ATM Agreement at a weighted-average price of$1.16 per share, for aggregate net proceeds of approximately$6.2 thousand , after giving effect to a 3% commission to Oppenheimer as agent. During the six months endedJune 30, 2021 , we sold 1,089,048 shares of our common stock 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 ofJune 30 , 31 -------------------------------------------------------------------------------- Table of Contents 2022, approximately$2.6 million of shares of common stock were remaining, but had not yet been sold under the 2020 ATM Agreement. We are subject to theSEC's "baby shelf rules," which prohibit companies with a public float of less than$75 million from issuing securities under a shelf registration statement in excess of one-third of such company's public float in a 12-month period. These rules may limit future issuances of shares by us under the ATM Agreements or other common stock offerings.
Private Placement Offerings
InFebruary 2020 , we andLincoln 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 onApril 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 onAugust 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 inLincoln Park beneficially owning more than 9.99% of the outstanding shares of our common stock. During the three and six months endedJune 30, 2022 , no sales of common stock under the Purchase Agreement occurred. During the three and six months endedJune 30, 2021 , we sold to Lincoln Park 800,000 shares under the Purchase Agreement at a weighted-average price of$0.81 per share, for aggregate net proceeds of$0.6 million . As ofJune 30, 2022 , approximately$26.9 million of shares of common stock were remaining, but had not yet been sold under the Purchase Agreement. However, only 57,751 of such shares (less than$175,000 of shares assuming a sale date ofAugust 11, 2022 ) have been registered by us under the Securities Act of 1933, as amended (the "Securities Act"). 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. 32 -------------------------------------------------------------------------------- Table of Contents Financial Overview Our operations to date have been limited to business planning, raising capital, developing and entering into strategic partnerships for our pipeline assets, 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, and payments received under license, collaboration, and other agreements. Other than through arrangements as they relate to sales of ECCLOCK inJapan , none of our product candidates has been approved for sale and we have not generated any product sales. Since inception, we have incurred operating losses. We recorded a net loss of$10.6 million and$20.2 million for the six months endedJune 30, 2022 and 2021, respectively. As ofJune 30, 2022 , we had an accumulated deficit of$155.9 million . We expect to continue incurring significant expenses and operating losses for at least the next several years as we:
•execute a Phase 1 clinical trial, along with other nonclinical development activities, for BBI-02;
•conduct preclinical development activities for BBI-10 and experimental
characterization of the
•engage in research to identify both brain penetrant and non-brain penetrant kinase inhibitors from the next-generation kinase inhibitor platform;
•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, program and alliance management, scientific, and management personnel; and
•add operational and finance personnel to support product and business development efforts.
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 revenue, 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 agreements
for the development and commercialization of our product candidates. Our
strategic agreements generally outline overall development plans and include
payments we receive at signing, payments for the achievement of certain
milestones, sublicense income, earnout payments on net product sales, and
royalties on net product sales. 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 entering into the Asset
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Purchase Agreement, we recognized royalty revenue earned on a percentage of net
sales of ECCLOCK in Japan . Beginning in the second quarter of 2022, we began
recognizing contract revenue pursuant to the terms of the Asset Purchase
Agreement. Other than the contract revenue we may generate in connection with
the Asset Purchase Agreement, we do not expect to generate any revenue from any
product candidates that we developed or 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 clinical research organizations ("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, clinical and nonclinical
studies, consultants, and facility and related overhead costs.
Below is a summary of our research and development expenses related to our programs by categories of costs for the periods presented.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Direct program expenses related to
Sofpironium bromide (1) $ - $ 8,114 $ 2,090 $ 13,550
DYRK1A inhibitor program (2) 958 - 1,686 -
STING inhibitor program (3) 28 - 2,038 -
Personnel and other expenses (4)
Salaries, benefits, and stock-based
compensation 741 460 1,493 936
Regulatory and compliance 103 244 384 371
Other expenses 35 20 187 33
Total research and development
expenses $ 1,865 $ 8,838 $ 7,878 $ 14,890
____________
(1)Sofpironium bromide. Expenses associated with sofpironium bromide decreased
in the three and six months ended June 30, 2022 compared to the three and six
months ended June 30, 2021 as Phase 3 clinical trials were completed in the
fourth quarter of 2021. We do not expect to incur any additional research and
development expenses related to sofpironium bromide subsequent to the Effective
Date, when we sold the assets primarily related to sofpironium bromide that we
previously owned and/or licensed to Botanix, which is responsible for all
further research, development, and commercialization of sofpironium bromide.
(2)DYRK1A inhibitor program. As part of our potential first-in-class DYRK1A
inhibitor program targeting autoimmune and inflammatory diseases, we initiated a
Phase 1 clinical trial for BBI-02, our lead DYRK1A inhibitor candidate, in
Canada in the second quarter of 2022 that we expect will continue through early
2023. We are also engaged in research to identify new chemical entities from our
next-generation kinase inhibitor platform. As a result, in the following years,
we expect to incur
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research and development expenses for these programs at levels consistent with
expenditures for development of early-stage assets.
(3)STING inhibitor program. In February 2022 , we acquired a portfolio of novel,
potent, and orally available STING inhibitors that has broad potential in
autoinflammatory diseases. To date, the expenses associated with our STING
inhibitor program primarily relate to upfront in-licensing fees. Nonclinical
development activities for our lead early-stage STING inhibitor candidate,
BBI-10, are currently underway, and we expect to conduct experimental
characterization of the STING inhibitor library throughout 2022. As a result, in
the following years, we expect to incur research and development expenses for
this program at levels consistent with expenditures for development of
early-stage assets.
(4)Personnel and other expenses. Personnel and other expenses include
operational expenses related to research and development activities not
specifically attributable to a specific program. Other expenses include travel,
lab and office supplies, clinical trial management software, license fees, and
other miscellaneous expenses.
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.
Critical Accounting Estimates
We have prepared the condensed consolidated financial statements in accordance with accounting principles generally accepted inthe United States of America ("U.S. GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, 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 and accrued research and development expenses. 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. During the three months endedJune 30, 2022 , we identified the following to be an additional critical accounting estimate because it is both important to the portrayal of our financial condition and results of operations and requires critical judgment by management and estimates about matters that are uncertain.
Contract Revenue Recognition
Pursuant to the Asset Purchase Agreement described in Note 3. "Strategic
Agreements," we have rights to receive from Botanix future milestone payments,
sales-based payments, and sublicense income related to sales-based milestones
and royalties earned by Botanix from Kaken under the Kaken Agreement (all of
such payments, "Botanix Payments"). The payments under the Asset Purchase
Agreement vary based on net sales and/or are contingent upon certain regulatory
approvals. Therefore, we are required to estimate the Botanix Payments, which
represent variable consideration, to be achieved and recognize revenue to the
extent it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur. We may use either the most likely amount or
the expected value method in making such estimates based on the nature of the
payment to be received and whether there is a wide range of outcomes or only two
possible outcomes. For any milestone payments, we utilize the most likely amount
method, which represents our best estimate of the single most likely outcome to
be achieved. For any royalty-based payments or other consideration where there
are
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more than two possible outcomes, we utilize the expected value method, which
represents the sum of probability-weighted amounts in a range of possible
consideration amounts.
We base our estimates of variable consideration to be recognized as revenue
using the applicable method described above on factors such as, but not limited
to, required regulatory approvals, historical sales levels, market events and
projections, and others as necessary. We update our estimates at each reporting
period based on actual results and future expectations as necessary. Our
estimates are subject to changes in net sales of sofpironium bromide and the
occurrence of contingent events, such as regulatory approvals. Changes in net
sales could occur due to various risks such as competitors entering the market,
technology changes as to how hyperhidrosis is treated, and foreign exchange
risk.
Except for the critical accounting estimates associated with the contract
revenue recognition described above, there were no changes during the six months
ended June 30, 2022 to our critical accounting estimates as disclosed in our
2021 Annual Report on 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
We believe that the impact of recently issued guidance, whether adopted or 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
Three Months Ended
June 30,
2022 2021
(in thousands)
Revenue $ 4,315 $ 151 Research and development expenses (1,865) (8,838) General and administrative expenses (3,908) (2,891)
Total other income, net 311 429 Net loss$ (1,147) $ (11,149) Revenue Revenue increased by$4.2 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . Revenue for the three months endedJune 30, 2022 consisted of contract revenue recognized under the Asset Purchase Agreement andTSA with Botanix, while revenue for the three months endedJune 30, 2021 was driven by royalty revenue earned on a percentage of net sales of ECCLOCK inJapan under the Kaken Agreement. Upon entering into the Asset Purchase Agreement on the Effective Date, whereby we sold all rights, title, and interests to assets primarily related to sofpironium bromide that were owned and/or licensed by us, and throughJune 30, 2022 , we recognized contract revenue that was associated with the following: an upfront payment from Botanix of$3.0 million ; reimbursed development expenditures from Botanix under the Asset Purchase Agreement of$0.6 million ; fees for consulting services we provided under theTSA of$0.4 million ; and Sublicense Income under the Asset Purchase Agreement of$0.3 million . We expect contract revenue associated with services we provide under theTSA to continue through the date the FDA issues a final decision on the NDA that will be submitted for sofpironium bromide gel. AfterJune 30 , 36 -------------------------------------------------------------------------------- Table of Contents 2022, we expect to continue to recognize contract revenue related to royalties on applicable net sales of sofpironium bromide gel pursuant to the Asset Purchase Agreement, as such estimated sales become probable.
Research and Development
Research and development expenses decreased by$7.0 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , which was driven primarily by lower clinical expenses of$8.1 million related to sofpironium bromide, partially offset by increased clinical costs of$1.0 million for BBI-02. Throughout 2021, we were executing aU.S. Phase 3 pivotal clinical program for sofpironium bromide gel, 15%, which concluded in the fourth quarter of 2021. During the second quarter of 2022, we initiated our Phase 1 clinical trial for BBI-02 and began incurring research and develop expenses related to the clinical trial.
General and Administrative Expenses
General and administrative expenses increased by$1.0 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily related to expenses incurred in the second quarter of 2022 for a$0.5 million payment to Bodor under the Rights Agreement and higher expenses associated with legal and compliance fees of$0.3 million , compensation-related expenses of$0.1 million , and other administrative fees$0.1 million . Total Other Income, Net Total other income, net decreased by$0.1 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The decrease was primarily due to a gain on extinguishment of debt of approximately$0.4 million during the three months endedJune 30, 2021 that resulted from the forgiveness of an outstanding loan that we received under the Paycheck Protection Program (the "PPP Loan") inJune 2021 , partially offset by$0.3 million of liabilities assumed by Botanix related to development costs during the three months endedJune 30, 2022 prior to the Effective Date.
Comparison of the Six Months Ended
Six Months Ended
June 30,
2022 2021
(in thousands)
Revenue $ 4,407 $ 168
Research and development expenses (7,878) (14,890)
General and administrative expenses (7,394) (5,858) Total other income, net 308 426 Net loss$ (10,557) $ (20,154) Revenue Revenue increased by$4.2 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . Revenue for the six months endedJune 30, 2022 primarily consisted of contract revenue recognized under the Asset Purchase Agreement andTSA with Botanix, while revenue for the six months endedJune 30, 2021 was driven by royalty revenue earned on a percentage of net sales of ECCLOCK inJapan under the Kaken Agreement. Upon entering into the Asset Purchase Agreement on the Effective Date, whereby we sold all rights, title, and interests to assets primarily related to sofpironium bromide that were owned and/or licensed by us, and throughJune 30, 2022 , we recognized contract revenue that was associated with the following: an upfront payment from Botanix of$3.0 million ; reimbursed development expenditures from 37 -------------------------------------------------------------------------------- Table of Contents Botanix under the Asset Purchase Agreement of$0.6 million ; fees for consulting services we provided under theTSA of$0.4 million ; and Sublicense Income under the Asset Purchase Agreement of$0.3 million . We expect contract revenue associated with services we provide under theTSA to continue through the date the FDA issues a final decision on the NDA that will be submitted for sofpironium bromide gel. AfterJune 30, 2022 , we expect to continue to recognize contract revenue related to royalties on applicable net sales of sofpironium bromide gel pursuant to the Asset Purchase Agreement, as such estimated sales become probable.
Research and Development Expenses
Research and development expenses decreased by$7.0 million for the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , driven primarily by lower clinical expenses of$11.5 million related to sofpironium bromide, partially offset by upfront costs of$2.0 million incurred for the acquisition of ourSTING inhibitor platform inFebruary 2022 , increased clinical costs of$1.7 million for BBI-02, and increased costs of$0.8 million related to personnel and other expenses. Throughout 2021, we were executing ourU.S. Phase 3 pivotal clinical program for sofpironium bromide gel, 15%, which concluded in the fourth quarter of 2021. During the second quarter of 2022, we initiated our Phase 1 clinical trial for BBI-02 and began incurring research and development expenses related to the clinical trial.
General and Administrative Expenses
General and administrative expenses increased by$1.5 million for the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . The increase was primarily related to expenses incurred in the six months endedJune 30, 2022 for a$0.5 million payment to Bodor under the Rights Agreement and higher expenses associated with legal and compliance fees of$0.5 million , compensation-related expenses of$0.3 million , and other administrative expenses of$0.2 million . Total Other Income, Net Total other income, net decreased by$0.1 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The decrease 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 , partially offset by$0.3 million of liabilities assumed by Botanix related to development costs during the six months endedJune 30, 2022 prior to the Effective Date.
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 six months endedJune 30, 2022 and 2021, we had a net loss of$10.6 million and$20.2 million , respectively. As ofJune 30, 2022 , we had an accumulated deficit of$155.9 million . As ofJune 30, 2022 , we had cash and cash equivalents of$14.5 million compared to$26.9 million as ofDecember 31, 2021 . 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, and payments received under license and strategic agreements. We believe that our cash and cash equivalents as ofJune 30, 2022 , combined with$2.0 million from expected near-term payments under the Asset Purchase Agreement, will be sufficient to fund our operations for at least the next 12 months. However, it is difficult to predict our spending for our product candidates prior to obtaining FDA approval. Moreover, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control. 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 38 -------------------------------------------------------------------------------- Table of Contents with our planned development and other activities. However, we may be unable to raise additional funds, which would have a negative impact on our business, financial condition, and our ability to develop our pipeline. To the extent that additional funds are raised through the sale of equity, the issuance of securities will result in dilution to our stockholders. Additionally, we are subject to theSEC's "baby shelf rules," which prohibit companies with a public float of less than$75 million from issuing securities under a shelf registration statement in excess of one-third of such company's public float in a 12-month period. These rules may limit our future issuances of shares under the ATM Agreements or other common stock offerings.
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:
Six Months Ended
June 30,
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (12,509) $ (20,205)
Investing activities - (36)
Financing activities 105 14,534
Total $ (12,404) $ (5,707)
Operating Activities
Net cash used in operating activities of $12.5 million during the six months
ended June 30, 2022 decreased compared to $20.2 million during the six months
ended June 30, 2021 , which was primarily attributable to a decrease in cash used
to support our operating activities, including but not limited to, our clinical
trials, research and development activities, and general working capital
requirements. The $7.7 million decrease was impacted by the net effect of a
decrease in net loss of $9.6 million and an increase in non-cash operating
expenses of $0.7 million , partially offset by the net effect of changes in
working capital of $2.6 million .
Investing Activities
Net cash used in investing activities during the six months endedJune 30, 2022 decreased by$36 thousand compared to the six months endedJune 30, 2021 , due to the fact that we did not purchase any property and equipment in the current year period. Financing Activities Net cash provided by financing activities during the six months endedJune 30, 2022 decreased by$14.4 million compared to the six months endedJune 30, 2021 . The decrease primarily resulted from net proceeds received during the six months endedJune 30, 2021 of$9.0 million from the exercise of warrants and a reduction during the six months endedJune 30, 2022 of$5.4 million in proceeds from sales of our common stock under the 2020 and 2021 ATM Agreements. 39 --------------------------------------------------------------------------------
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