HOOKIPA PHARMA INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
and related notes for the year ended
Overview
We are a clinical-stage biopharmaceutical company developing a new class of immunotherapeutics based on our proprietary arenavirus platform that is designed to target and amplify T cell immune responses to disease. We believe that our technologies can meaningfully leverage the human immune system for prophylactic and therapeutic purposes by inducing CD8+ T cell response levels previously not achieved by other immunotherapy approaches.
We are building a proprietary immuno-oncology pipeline by targeting oncoviral cancer antigens, self-antigens and next-generation antigens. Our oncology portfolio includes three disclosed programs, HB-200, HB-300, and HB-700, which all use our replicating technology. HB-200 is in clinical development for the treatment of Human Papillomavirus 16-positive cancers, or HPV16+, in an ongoing Phase 1/2 clinical trial. HB-300 is in development for the treatment of prostate cancer and expected to move into the clinic after our planned third quarter 2022 filing of an investigational new drug application filing. HB-700 is our newest asset in preclinical development for treatment of KRAS mutated cancers, including, lung, colorectal and pancreatic cancers.
Our HB-200 program is comprised of HB-201 single vector therapy and
HB-201/HB-202 two vector therapy. Both therapies are being evaluated in an
ongoing HB-200 Phase 1/2 clinical trial. In
In
Our non-replicating prophylactic Cytomegalovirus, or CMV, vaccine candidate,
HB-101, is a potential first in-class compound in a Phase 2 clinical trial for
patients awaiting kidney transplantation. In
We have funded our operations to date primarily from public offerings of common stock and convertible preferred stock, including our initial public offering, as well as private placements of our redeemable convertible preferred stock, grant funding and loans from an Austrian government agency, and upfront, milestone and initiation payments from Gilead in connection with a research collaboration and license agreement.
On
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of our common stock, at
We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates, if at all, and commercialize our products or enter into additional collaboration agreements with third parties. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.
All of our product candidates, including our most advanced oncology product candidate, HB-200, will require substantial additional development time and resources before we would be able to apply for and receive regulatory approvals and begin generating revenue from product sales. Before launching our first products, if approved, we plan to establish our own manufacturing facility to reduce or eliminate our reliance on contract manufacturing organizations, or CMOs, which will require substantial capital expenditures and cause additional operating expenses. We currently have no marketing and sales organization and have no experience in marketing products; accordingly, we will incur significant expenses to develop a marketing organization and sales force in advance of generating any commercial product sales. As a result, we will need substantial additional capital to support our operating activities. In addition, we expect to continue to incur legal, accounting and other expenses in operating our business, including the costs associated with operating as a public company.
We currently anticipate that we will seek to fund our operations through equity or debt financings or other sources, such as government grants and additional collaboration agreements with third parties. Adequate funding may not be available to us on acceptable terms, or at all. If sufficient funds on acceptable terms are not available when needed, we will be required to significantly reduce our operating expenses and delay, reduce the scope of, or eliminate one or more of our development programs.
We have incurred net losses each year since our inception in 2011, including net
losses of
Special Note About Coronavirus (COVID-19)
In
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In addition, certain aspects of our supply chain were temporarily impacted as certain of our third-party suppliers and manufacturers had paused their operations in response to the COVID-19 pandemic or had otherwise encountered delays in providing their services. The uncertainties resulting from the COVID-19 pandemic led us to temporarily focus on our core program, HB-200, as well as research and development activities under our collaboration with Gilead. Certain earlier stage programs, including HB-300 were temporarily de-prioritized and only allocated the resources that could be made available without impacting our core programs. While we have resumed activities for these earlier stage programs in 2021, we continue to evaluate the extent to which potential constraints of our third-party suppliers and manufacturers will impact our ability to manufacture our product candidates for our clinical trials and conduct other research and development operations and maintain applicable timelines. The ultimate impact of the coronavirus pandemic on our business operations as well as our preclinical studies and clinical trials remains uncertain and subject to change and will depend on future developments, which cannot be accurately predicted. We will continue to monitor the situation closely.
Furthermore, in order to preserve resources and liquidity during the pandemic,
all of our officers had waived at least 25% of their cash salaries for the three
months ended
Components of Our Results of Operations
Revenue from collaboration and licensing
To date, we have not generated any revenue from product sales and do not expect to do so in the near future, if at all. All of our revenue to date has been derived from a research collaboration and license agreement with Gilead.
On
Under the Collaboration Agreement, we granted Gilead an exclusive,
royalty-bearing license to our technology platform for researching, developing,
manufacturing and commercializing products for HIV or HBV. We received a
non-refundable
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We determined that our performance obligations under the terms of the original Collaboration Agreement included one combined performance obligation for each of the HBV and HIV research programs, comprised of the transfer of intellectual property rights and providing research and development services. Accordingly, we recognized these amounts as revenue over the performance period of the respective services on a percent of completion basis using total estimated research and development labor hours for each of the performance obligations. The terms of the Restated Collaboration Agreement added an additional performance obligation to perform research and development work for the HIV program to the Company. We recognize the amounts of revenue allocated to the performance obligation resulting from the Restated Collaboration Agreement on a percent of completion basis over the performance period, using total estimated research and development costs as the measure of progress.
Operating Expenses
Our operating expenses since inception have only consisted of research and development costs and general administrative costs.
Research and Development Expenses
Since our inception, we have focused significant resources on our research and development activities, including establishing our arenavirus platform, conducting preclinical studies, developing a manufacturing process, conducting a Phase 1 clinical trial and the ongoing Phase 2 clinical trial for HB-101 as well as the ongoing HB-200 Phase 1/2 study, and preparing an investigational new drug, or IND, application for HB-300. Research and development activities account for a significant portion of our operating expenses. Research and development costs are expensed as incurred. These costs include:
? salaries, benefits and other related costs, including stock-based compensation,
for personnel engaged in research and development functions;
expenses incurred in connection with the preclinical development of our
? programs and clinical trials of our product candidates, including under
agreements with third parties, such as consultants, contractors, academic
institutions and contract research organizations (CROs);
? the cost of manufacturing drug products for use in clinical trials, including
under agreements with third parties, such as CMOs, consultants and contractors;
? laboratory costs;
? leased facility costs, equipment depreciation and other expenses, which include
direct and allocated expenses; and
The majority of our research and development costs are external costs, which we track on a program-by-program basis. We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to shared costs deployed across multiple projects under development.
We expect our research and development expenses to increase substantially in the future as we advance our existing and future product candidates into and through clinical trials and pursue regulatory approval. The process of conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming. Clinical trials generally become larger and more costly to conduct as they advance into later stages and, in the future, we will be required to make estimates for expense accruals related to clinical trial expenses.
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any product candidates that we develop from our programs. We are also unable to predict when, if ever, material net cash inflows will commence from sales of product candidates we
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develop, if at all. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
? successful completion of preclinical studies and clinical trials;
? sufficiency of our financial and other resources to complete the necessary
preclinical studies and clinical trials;
? acceptance of INDs for our planned clinical trials or future clinical trials;
? successful enrollment and completion of clinical trials;
? successful data from our clinical program that support an acceptable
risk-benefit profile of our product candidates in the intended populations;
? receipt and maintenance of regulatory and marketing approvals from applicable
regulatory authorities;
? scale-up of our manufacturing processes and formulation of our product
candidates for later stages of development and commercialization;
establishing our own manufacturing capabilities or agreements with third-party
? manufacturers for clinical supply for our clinical trials and commercial
manufacturing, if our product candidate is approved;
? entry into collaborations to further the development of our product candidates;
? obtaining and maintaining patent and trade secret protection or regulatory
exclusivity for our product candidates;
? successfully launching commercial sales of our product candidates, if and when
approved;
? acceptance of the product candidates benefits and uses, if and when approved,
by patients, the medical community and third-party payors;
? the prevalence and severity of adverse events experienced with our product
candidates;
? maintaining a continued acceptable safety profile of the product candidates
following approval;
? effectively competing with other therapies;
? obtaining and maintaining healthcare coverage and adequate reimbursement from
third-party payors; and
? qualifying for, maintaining, enforcing and defending intellectual property
rights and claims.
A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and timing associated with the development of that product candidate. For
example, if the
The following table summarizes our research and development expenses by product candidate or program (in thousands):
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Three months ended March 31,
2022 2021
HB-200 program $ 7,413 $ 9,754
HB-300 program 2,767 1,250
Gilead partnered programs(1) 1,733 4,820
Other and earlier-stage programs 4,089 3,643
Other unallocated research and development expenses 618 697
Total research and development expenses $ 16,620 $ 20,164 (1) Expenses incurred in connection with Gilead partnered programs were fully reimbursed by Gilead in 2021 and partially reimbursed in 2022, and such reimbursements were accounted for as revenue.
Other unallocated research and development expenses include stock-based compensation expense, certain lease expenses and other operating expenses that we do not track on a program-by-program basis, since our research and development employees and infrastructure ressources are utilized across our programs.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs in
our executive, finance and investor relations, business development and
administrative functions. Other general and administrative expenses include
consulting fees and professional service fees for auditing, tax and legal
services, lease expenses related to our offices, premiums for directors and
officers liability insurance, intellectual property costs incurred in connection
with filing and prosecuting patent applications as well as third-party license
fees, depreciation and other costs. We expect our general and administrative
expenses to continue to increase in the future as we expand our operating
activities and prepare for potential commercialization of our current and future
product candidates, increase our headcount and investor relations activities and
maintain compliance with requirements of the Nasdaq Global Select Market and the
Grant Income
Since inception, we have received grants from the
We participate in a research incentive program provided by the Austrian
government under which we are entitled to reimbursement of a percentage of
qualifying research and development expenses and capital expenditures incurred
in
Interest Expense
Interest expense results primarily from loans under funding agreements with the
Income Taxes
Income tax expense results from foreign minimum income tax and profit on a legal
entity basis. The losses that we have incurred since inception result primary
from the losses of our Austrian subsidiary. We have considered that, at this
point in time, it is uncertain whether we will ever be able to realize the
benefits of the deferred tax asset, and accordingly, have established a full
valuation allowance as of
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Results of Operations
Comparison of Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three months ended March 31,
2022 2021
Revenue from collaboration and licensing $ 1,445 $ 5,301
Operating expenses:
Research and development (16,620) (20,164)
General and administrative (4,972) (4,309)
Total operating expenses (21,592) (24,473)
Loss from operations (20,147) (19,172)
Other income (expense):
Grant income 1,887 2,204
Interest income 7 7
Interest expense (243) (219)
Other income and expenses, net 528 (58)
Total other income (expense), net 2,179 1,934
Net loss before tax (17,968) (17,238)
Income tax expense (0) (0)
Net loss $ (17,968) $ (17,238) Revenue from Collaboration and Licensing
Revenue was
The decrease of
For the three months ended
For the three months ended
Research and Development Expenses
For the three months ended
The decrease of
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our HB-101 program. Indirect research and development expenses increased mainly because of an increase in professional and consulting fees, partially offset by a decrease in personnel related costs.
General and Administrative Expenses
General and administrative expenses for the three months ended
Grant Income
In the three months ended
Interest Income and Expense
Interest income was less than
Interest expenses for loans from government agencies were
Other Income and Expenses
Other income was
Liquidity and Capital Resources
Since our inception in 2011, we have funded our operations primarily from public offerings and private placements of common stock and convertible preferred stock, including our initial public offering, as well as private placements of our redeemable convertible preferred stock, grant funding and loans from an Austrian government agency, and upfront, milestone and initiation payments from Gilead in connection with a research collaboration and license agreement.
Prior to our IPO, we raised gross proceeds of approximately
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our common stock, at
We entered into various funding agreements with the
Because the FFG Loans bear interest at below market rates we account for the
imputed benefit arising from the difference between an estimated market rate of
interest and the contractual interest rate as grant funding from FFG, which is
included in grant income. On the date that FFG Loan proceeds are received, we
recognize the portion of the loan proceeds allocated to grant funding as a
discount to the carrying value of the loan and as unearned income. As of
We entered into arrangements with contract manufacturing organizations. As of
We do not expect positive cash flows from operations in the foreseeable future, if at all. Historically, we have incurred operating losses as a result of ongoing efforts to develop our arenavirus technology platform and our product candidates, including conducting ongoing research and development, preclinical studies, clinical trials, providing general and administrative support for these operations and developing our intellectual property portfolio. We expect to continue to incur net operating losses for at least the next several years as we progress clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization of our most advanced oncology product candidate HB-200, continue our research and development efforts relating to our other and future product candidates, and invest in our manufacturing capabilities and our own manufacturing facility.
Future Funding Requirements
We have no products approved for commercial sale. To date, we have devoted
substantially all of our resources to organizing and staffing our company,
business planning, raising capital, undertaking preclinical studies and clinical
trials of our product candidates. As a result, we are not profitable and have
incurred losses in each period since our inception in 2011. As of
? pursue the clinical and preclinical development of our current and future
product candidates;
? leverage our technologies to advance product candidates into preclinical and
clinical development;
? seek regulatory approvals for product candidates that successfully complete
clinical trials, if any;
? attract, hire and retain additional clinical, quality control and scientific
personnel;
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establish our manufacturing capabilities through third parties or by ourselves
? and scale-up manufacturing to provide adequate supply for clinical trials and
commercialization;
expand our operational, financial and management systems and increase
? personnel, including personnel to support our clinical development,
manufacturing and commercialization efforts and our operations as a public
company;
? expand and protect our intellectual property portfolio;
establish a sales, marketing, medical affairs and distribution infrastructure
? to commercialize any products for which we may obtain marketing approval and
intend to commercialize on our own or jointly;
? acquire or in-license other product candidates and technologies; and
incur additional legal, accounting and other expenses in operating our
? business, including ongoing costs associated with operating as a public
company.
Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders' equity and working capital.
We will require substantial additional financing and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.
Since our inception, we have invested a significant portion of our efforts and financial resources in research and development activities for our non-replicating and replicating technologies and our product candidates derived from these technologies. Preclinical studies and clinical trials and additional research and development activities will require substantial funds to complete. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of our current product candidates and programs as well as any future product candidates we may choose to pursue, as well as the gradual gaining of control over our required manufacturing capabilities and other corporate uses. These expenditures will include costs associated with conducting preclinical studies and clinical trials, obtaining regulatory approvals, and manufacturing and supply, as well as marketing and selling any products approved for sale. In addition, other unanticipated costs may arise. Because the outcome of any preclinical study or clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our current or future product candidates.
Our future capital requirements depend on many factors, including:
the scope, progress, results and costs of researching and developing our
? current and future product candidates and programs, and of conducting
preclinical studies and clinical trials;
the number and development requirements of other product candidates that we may
? pursue, and other indications for our current product candidates that we may
pursue;
the stability, scale and yields of our future manufacturing process as we
? scale-up production and formulation of our product candidates for later stages
of development and commercialization;
the timing of, and the costs involved in, obtaining regulatory and marketing
? approvals and developing our ability to establish sales and marketing
capabilities, if any, for our current and future product candidates we develop
if clinical trials are successful;
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? the success of our collaboration with Gilead;
? our ability to establish and maintain collaborations, strategic licensing or
other arrangements and the financial terms of such agreements;
? the cost of commercialization activities for our current and future product
candidates that we may develop, whether alone or with a collaborator;
the costs involved in preparing, filing, prosecuting, maintaining, expanding,
? defending and enforcing patent claims, including litigation costs and the
outcome of such litigation;
? the timing, receipt and amount of sales of, or royalties on, our future
products, if any; and
? the emergence of competing oncology and infectious disease therapies and other
adverse market developments.
A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with such operating plans.
We do not have any committed external source of funds or other support for our development efforts. Until we can generate sufficient product and royalty revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements as well as grant funding. Based on our research and development plans, we expect that our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. These estimates are based on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. Further, to the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, the ownership interest of our shareholders will be diluted. If we raise additional capital through debt financing, we would be subject to fixed payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain additional funding on favorable terms when needed, we may have to delay, reduce the scope of or terminate one or more of our research and development programs or clinical trials.
Cash Flows
The following table sets forth a summary of the primary sources and uses of cash (in thousands):
Three months ended March 31,
2022 2021
Net cash provided by (used in) operating activities
(1,828) (330)
Net cash provided by financing activities 75,293 101
Net increase (decrease) in cash and cash equivalents 75,198 (14,626)
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Cash Provided by (Used in) Operating Activities
During the three months ended
During the three months ended
Cash Used in Investing Activities
During the three months ended
During the three months ended
Cash Provided by Financing Activities
During the three months ended
During the three months ended
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
we have prepared in accordance with the rules and regulations of the
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that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies and the methodologies and assumptions we apply
under them have not materially changed, as compared to those disclosed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Policies" in our Annual Report on Form 10-K for
the year ended
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing in this Form 10-Q.
Emerging Growth Company Status and Smaller Reporting Company
As an "emerging growth company," the Jumpstart Our Business Startups Act of 2012 allows us to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We are also a "smaller reporting company" meaning that the market value of our
stock held by non-affiliates is less than
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