IMARA The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K filed with the
Business Overview
We are a biopharmaceutical company that has been dedicated to developing and
commercializing novel therapeutics to treat patients suffering from serious
diseases.
In
Following an extensive process of evaluating strategic alternatives, including
identifying and reviewing potential candidates for a strategic acquisition or
other transaction, on
• Dissolve and liquidate our assets. If, for any reason, the Asset Sale or the
Merger does not close, our Board may conclude that it is in the best
interest of stockholders to dissolve the Company and liquidate our assets.
In that event, we would be required to pay all of our debts and contractual
obligations, and to set aside certain reserves for potential future claims.
There would be no assurances as to the amount or timing of available cash
remaining to distribute to stockholders after paying our obligations and
setting aside funds for reserves.
• Pursue another strategic transaction. We may resume the process of
evaluating a potential strategic transaction in order to attempt another
strategic transaction like the Asset Sale or the Merger.
• Operate our business. Although less likely than the alternatives above, our
Board may elect to seek new product candidates for development.
17--------------------------------------------------------------------------------
Asset Purchase Agreement
Pursuant to the terms of the Asset Purchase Agreement, in addition to
Merger Agreement
Subject to the terms and conditions of the Merger Agreement, at the effective
time of the Merger, or the Effective Time, (a) each then-outstanding share of
Enliven common stock (including shares of Enliven common stock issued upon
conversion of Enliven preferred stock, which conversion will occur immediately
prior to the Effective Time and shares of Enliven common stock issued in the
Financing Transaction (as defined below)) will be converted into the right to
receive a number of shares of our common stock (subject to the payment of cash
in lieu of fractional shares and after giving effect to the Reverse Stock Split
(as defined below)) calculated in accordance with the Merger Agreement (the
ratio of such conversion, the Exchange Ratio); and (b) each then-outstanding
Enliven stock option to purchase Enliven common stock will be assumed by us,
subject to adjustment as set forth in the Merger Agreement.
Subject to the terms and conditions of, and the calculation of the Exchange
Ratio pursuant to, the Merger Agreement, it is currently anticipated that upon
the closing of the Merger, our pre-Merger stockholders will own approximately
16% of the combined company and pre-Merger Enliven stockholders (including those
purchasing Enliven shares in the Financing Transaction) will own approximately
84% of the combined company on a pro forma basis, based on the number of shares
of our common stock expected to be issued in connection with the Merger.
The provisions for calculating the Exchange Ratio are set forth in the Merger
Agreement, and assume a valuation for Enliven equal to
18
--------------------------------------------------------------------------------
or theSEC , and causing to become effective a registration statement to register the shares of our common stock to be issued in connection with the Merger, or the Registration Statement, and (6) each of us and Enliven filing a pre-merger notification requirement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act. Consummation of the Merger is subject to certain closing conditions, including, among other things, (1) approval by our stockholders of the Required Voting Proposal, (2) approval by the Enliven stockholders of the adoption of the Merger Agreement, (3) Nasdaq's approval of the listing of the shares of our common stock to be issued in connection with the Merger, (4) the effectiveness of the Registration Statement, (5) our net cash as determined in accordance with the Merger Agreement being between$75 million and$95 million , (6) the waiting period under the HSR Act having expired or been terminated and (7) our closing of the previously announced Asset Sale. Each party's obligation to consummate the Merger is also subject to other specified customary conditions, including the representations and warranties of the other party being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, generally subject to an overall material adverse effect qualification, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the Merger. Enliven's obligation to consummate the Merger is also subject to the completion of the Financing Transaction such that Enliven receives gross proceeds of at least$131.6 million and our obligation to consummate the Merger is subject to the completion of the Financing Transaction such that Enliven receives gross proceeds of at least$75.0 million . The Merger Agreement contains certain termination rights of each of us and Enliven, including, subject to compliance with the applicable terms of the Merger Agreement, the right of each party to terminate the Merger Agreement to enter into a definitive agreement for a superior proposal. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay Enliven a termination fee of$3.0 million and Enliven may be required to pay us a termination fee of$9.75 million . In addition, Enliven will be required to pay us a termination fee of$3.0 million if Enliven or we terminate the Merger Agreement at specified times with all conditions to closing of the Merger satisfied other than completion of the Financing Transaction such that Enliven receives gross proceeds of at least$131.6 million or$75 million , respectively. At the Effective Time, the board of directors of the combined company is expected to consist of nine members, eight of whom will be designated by Enliven and one of whom will be designated by us. Enliven's designees are expected to be the current members of the board of directors of Enliven. Our designee is expected to beRahul Ballal , our President and Chief Executive Officer. Concurrently with the execution and delivery of the Merger Agreement, Enliven entered into a common stock purchase agreement, or the Purchase Agreement with certain new and existing Enliven investors, pursuant to which Enliven agreed to issue and sell to such investors, and such investors agreed to purchase from Enliven, shares of Enliven common stock for an aggregate purchase price of approximately$164.5 million , or the Financing Transaction. The closing of the Financing Transaction is conditioned on the satisfaction or waiver of the closing conditions to the Merger as set forth in the Merger Agreement and other customary closing conditions, and is expected to occur immediately prior to the closing of the Merger, in accordance with the terms of the Purchase Agreement. The shares of Enliven common stock to be issued in connection with the Financing Transaction will be converted into the right to receive a number of shares of our common stock in the Merger in accordance with the Exchange Ratio, or the Converted Financing Stock (subject to the payment of cash in lieu of fractional shares and after giving effect to the Reverse Stock Split). At or prior to the Effective Time, we will enter into a Contingent Value Rights Agreement, or the CVR Agreement, with a rights agent, or the Rights Agent, pursuant to which our pre-Merger common stockholders will receive one contingent value right (each, a CVR) for each outstanding share of our common stock held by such stockholder on such date. Each CVR will represent the contractual right to receive payments upon the occurrence of certain events related to the Asset Sale or a potential sale or license involving IMR-261, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement. The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. In the event that no such proceeds are received, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that holders of CVRs will receive any amounts with respect thereto. The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with theSEC . The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in us or any of our affiliates. No interest will accrue on any amounts payable in respect of the CVRs. 19
--------------------------------------------------------------------------------
Financial Overview
Since our inception in 2016, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of tovinontrine. To date, we have funded our operations primarily through the sale of common stock and the sale of convertible preferred stock.
On
On
We have incurred significant operating losses since inception. Our losses from
operations were
We are not currently developing any product candidates and we do not have any products approved for sale. If the Asset Sale or Merger does not close, although less likely than pursuing a dissolution and liquidation or other potential strategic alternatives, if we decide to pursue any future product development efforts, we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for any future product candidate. In addition, if we obtain regulatory approval for any product candidate and to the extent that we engage in commercialization activities on our own, we expect we will incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities.
Moreover, if we decide to pursue any future product development efforts, we will need substantial additional funding to support our continuing operations and develop a growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we would expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into other arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when, needed, could have a material adverse effect on our business, results of operations, and financial condition. We will need to generate significant revenue to achieve profitability, and we may never do so.
As of
Impact of COVID-19 Pandemic
In
20
--------------------------------------------------------------------------------
Although we have not experienced any significant adverse impact from the COVID-19 pandemic on our financial condition, results of operations or liquidity as of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic has resulted in disruptions to our prior clinical trial operations. In addition, our employees are currently working remotely.
Our financial condition, results of operations and liquidity could be negatively impacted by the COVID-19 pandemic in future periods. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which remain uncertain and cannot be predicted, including new information that may emerge concerning the continued severity of COVID-19 and variants of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. As the impact of the COVID-19 pandemic continues, it may have an adverse effect on our results of future operations, financial position and liquidity, and on our ability to access capital. Even after the impact of the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of an economic recession or depression that may occur in the future.
Lundbeck License Agreement
In
In connection with the Asset Sale, our license agreement with Lundbeck will be assigned to Cardurion.
Financial Operations Overview Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If we decide to pursue any future product development efforts and such efforts are successful and result in marketing approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Operating Expenses
Research and Development. Research and development expenses consist primarily of
costs incurred in connection with the preclinical and clinical development and
manufacture of our products. We expect our research and development expenses to
continue to decrease significantly, as a result of our
• costs related to the impact of the COVID-19 pandemic;
• personnel-related expenses, including salaries, benefits and stock-based
compensation expenses, for individuals involved in research and development
activities;
• external research and development expenses incurred under agreements with
contract research organizations, or CROs, investigative sites, and
consultants that conducted our preclinical studies and clinical trials and
other scientific development services;
21--------------------------------------------------------------------------------
• costs incurred under agreements with contract manufacturing organizations,
or CMOs, who developed and manufactured material for our preclinical studies
and clinical trials;
• costs related to compliance with regulatory requirements; and
• milestone fees incurred in connection with our current license agreement
with Lundbeck;
Research and development expense for the three months ended
Historically, we expensed research and development costs as incurred. We recognized external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities were based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our unaudited condensed consolidated financial statements as prepaid expenses or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities were deferred and capitalized, even when there was no alternative future use for the research and development. The capitalized amounts were expensed as the related goods are delivered or the services are performed.
A significant portion of our research and development costs have been external costs, which we tracked after a clinical product candidate had been identified. Our internal research and development costs are primarily personnel-related costs and other indirect costs. Our research and development expenses to-date have been incurred in connection with our development of tovinontrine in SCD and ?-thalassemia. We did not track our internal research and development expenses on a program-by-program basis as our personnel were deployed across multiple projects under development.
The following table summarizes our research and development expenses for the
three and nine months ended
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands)
IMR-687 $ 99 $ 8,291 $ 13,450 $ 21,407
Personnel expenses (including
stock-based compensation) 13 1,780 4,511 5,400
Other expenses 70 326 799 779
Total research and development expenses
If we were to decide to pursue any future product development efforts, the successful development of any product candidates is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that would be necessary to complete the potential development and commercialization of any future product candidates. We are also unable to predict when, if ever, material net cash inflows would commence from the sale of potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
• the impact of the COVID-19 pandemic and our response to it;
• the timing and progress of preclinical and clinical development activities;
• the number and scope of preclinical and clinical programs we decide to
pursue;
• our ability to maintain research and development programs or to establish
new ones;
• establishing an appropriate safety profile with investigational new drug
application, or IND, enabling studies;
• successful patient enrollment in, and the initiation of, clinical trials;
• the successful completion of clinical trials with safety, tolerability and
efficacy profiles that are satisfactory to the U.S. Food and Drug
Administration , or FDA, or any comparable foreign regulatory authority;
• the timing, receipt and terms of any regulatory approvals from applicable
regulatory authorities;
• our ability to establish new licensing or collaboration arrangements;
• the performance of our future collaborators, if any;
• establishing commercial manufacturing capabilities or making arrangements
with third-party manufacturers;
22--------------------------------------------------------------------------------
• obtaining, maintaining, defending and enforcing patent claims and other
intellectual property rights;
• launching commercial sales of our product candidates, if approved, whether
alone or in collaboration with others; and
• maintaining a continued acceptable safety profile of the product candidates
following approval.
Any changes in the outcome of any of these variables with respect to the potential development of any future product candidates could mean a significant change in the costs and timing associated with the development of these product candidates. If we were to decide to pursue any future product development efforts, we may never obtain regulatory approval for any product candidates. Drug commercialization takes several years and millions of dollars in development costs and the potential success of such programs is difficult to predict and are often not successful.
General and Administrative. General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits, and stock-based compensation expenses for personnel in executive, finance, accounting, human resources, legal and other administrative functions. Other significant general and administrative expenses include the cost of director and officer insurance premiums, legal fees relating to patent, intellectual property and corporate matters, and fees paid for accounting, consulting and other professional services.
We anticipate that our general and administrative expenses will decrease
following our
Total Other Income, Net
Total other income, net primarily consisted of interest earned on our cash, cash equivalents and investments.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
September 30, Change
2022 2021 $
(in thousands)
Operating expenses:
Research and development $ 182 $ 10,397 $ (10,215 )
General and administrative 4,649 3,262 1,387
Total operating expenses 4,831 13,659 (8,828 )
Loss from operations (4,831 ) (13,659 ) 8,828
Total other income, net 222 12 210
Net loss $ (4,609 ) $ (13,647 ) $ 9,038 Research and Development Expenses
Research and development expenses decreased by approximately
• a$8.2 million decrease in costs related to the development and manufacturing of clinical materials, clinical research and oversight of our clinical trials and investigative fees for tovinontrine following discontinuation of clinical development; • a$1.8 million decrease in personnel-related costs; and 23
--------------------------------------------------------------------------------
• a
General and Administrative Expenses
General and administrative expenses increased by approximately
• a$1.9 million increase in consulting and professional fees, including legal, business development, accounting and audit fees; • a$0.4 million decrease in personnel-related costs; and • a$0.1 million decrease in other general and administrative operational costs. Total Other Income, Net
Total other income, net for the three months ended
Comparison of the Nine months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended
September 30, Change
2022 2021 $
(in thousands)
Operating expenses:
Research and development $ 18,760 $ 27,586 $ (8,826 )
General and administrative 12,253 9,522 2,731
Total operating expenses 31,013 37,108 (6,095 )
Loss from operations (31,013 ) (37,108 ) 6,095
Total other income, net 316 43 273
Net loss $ (30,697 ) $ (37,065 ) $ 6,368 Research and Development Expenses
Research and development expenses decreased by approximately
• a$7.9 million decrease in costs related to the development and manufacturing of clinical materials, clinical research and oversight of our clinical trials and investigative fees for tovinontrine; and • a$0.9 million decrease in personnel-related costs.
General and Administrative Expenses
General and administrative expenses increased by approximately
• a$2.0 million increase in consulting and professional fees, including legal, business development, accounting and audit fees; • a$0.4 million increase in depreciation expense due to a revision of the useful lives of our leasehold improvements and furniture related to our lease termination, which became effective onAugust 7, 2022 ; and 24
--------------------------------------------------------------------------------
• a
Total Other Income, Net
Total other income, net for the nine months ended
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant losses in each period and on
an aggregate basis. We have not yet commercialized or generated revenue from
sales of any product candidate. Through
On
On
As of
While we do not currently expect that the COVID-19 pandemic will have a material adverse impact on our short-term or long-term liquidity, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. See "Impact of COVID-19 Pandemic."
Cash Flows
The following table provides information regarding our cash flows for the nine
months ended
Nine Months Ended
September 30,
2022 2021
(in thousands)
Net cash used in operating activities $ (33,688 ) $ (34,286 )
Net cash provided by investing activities 34,695 12,859
Net cash provided by financing activities - 49,111
Net increase in cash, cash equivalents, and restricted cash
Net cash used in operating activities for the nine months ended
25
--------------------------------------------------------------------------------
Net cash used in operating activities for the nine months ended
Net Cash Provided by Investing Activities
Net cash provided by investing activities for the nine months ended
Net cash provided by investing activities for the nine months ended
Net Cash Provided by Financing Activities
We did not incur any financing cash outflow or inflow activities for the nine
months ended
Net cash provided by financing activities for the nine months ended
Funding Requirements
We expect our operating expenses to continue to decrease significantly following
our
Based on our current operating plan, we expect our existing cash, cash equivalents and investments will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q without giving effect to the Asset Sale. However, we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
Our future capital requirements will depend on the results of our ongoing strategic evaluation, including whether we complete the Asset Sale or the Merger. If the Asset Sale of the Merger is not completed, we will reconsider our strategic alternatives which may include a dissolution of the company, pursuit of another strategic transaction or the continued operation of product development. If the Asset Sale or Merger does not close, although less likely than pursuing a dissolution and liquidation or other potential strategic alternatives, if we decide to pursue any future product development efforts, our future funding requirements would depend on, and could increase significantly as a result of, many factors, including:
• whether we realize the anticipated cost savings in connection with our April
2022 workforce reduction;
• our ability to consummate a strategic transaction and the nature and type of
such transaction;
• our ability to bring any product candidates through preclinical and clinical
development, and the timing and scope of these research and development
activities;
• the costs of obtaining clinical and commercial supplies of any product
candidates we may seek to develop;
• our ability to successfully commercialize any product candidates we may
develop;
• the manufacturing, selling and marketing costs associated with any product
candidates we may develop, including the cost and timing of establishing our
sales and marketing capabilities;
• the amount and timing of sales and other revenues from any product
candidates we may develop, including the sales price and the availability of
adequate third-party reimbursement;
• the time and cost necessary to respond to technological and market
developments;
• the extent to which we may acquire or in-license other product candidates
and technologies;
26
--------------------------------------------------------------------------------
• our ability to attract, hire and retain qualified personnel;
• the impact of the COVID-19 pandemic and our response to it;
• the costs of maintaining, expanding and protecting our intellectual property
portfolio; and
• the costs associated with operating as a public company and maintaining
compliance with exchange listing and
A change in the outcome of any of these or other variables with respect to the development of any product candidate we may develop in the future could significantly change the costs and timing associated with the development of that product candidate. Further, our need for additional funds is heavily dependent on the outcome of our ability to consummate a strategic transaction, including the Asset Sale and the Merger.
Moreover, if we decide to pursue future product development, until such time, if ever, as we can generate substantial revenues, we would expect to finance our cash needs through a combination of cash-on-hand, equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of such stockholders. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research program or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate any product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
In the normal course of business, we enter into agreements that contain contractual obligations, of which the most significant to date include our licensing agreement with Lundbeck.
Our license agreement with Lundbeck, as well as certain other agreements, requires us to pay third parties upon achievement of certain development, regulatory or commercial milestones. Amounts related to contingent payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory and commercial milestones that may not be achieved. We have not included payments contingent upon the achievement of certain development, regulatory or commercial milestones on our consolidated balance sheets. For further information regarding certain of our license agreement with Lundbeck and amounts that could become payable in the future under that agreement, please see Note 6 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
In addition, we are party to certain agreements with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. Such contracts are generally cancellable by us for convenience with a specified amount of notice. We may be subject to certain termination fees or wind-down costs upon termination of these agreements. The exact amount of such costs are generally not fixed or estimable.
Further, on
27
--------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
This management's discussion and analysis is based on our unaudited condensed
consolidated financial statements, which have been prepared in accordance with
Recent 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 unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Emerging Growth Company Status
We are an "emerging growth company," or EGC, under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities.
As an EGC, we may take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:
• we may present only two years of audited financial statements and only two
years of related Management's Discussion and Analysis of Financial Condition
and Results of Operations within registration statements;
• we may avail ourselves of the exemption from providing an auditor's
attestation report on our system of internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
• we may avail ourselves of the exemption from complying with any requirement
that may be adopted by the Public Company Accounting Oversight Board , or
PCAOB, regarding mandatory audit firm rotation or a supplement to the
auditor's report providing additional information about the audit and the
financial statements, known as the auditor discussion and analysis;
• we may provide reduced disclosure about our executive compensation
arrangements; and
• we may not require nonbinding advisory votes on executive compensation or
stockholder approval of any golden parachute payments.
We will remain an EGC until the earliest of (i)
28
--------------------------------------------------------------------------------
© Edgar Online, source
