IMMUNOVANT, INC.
You should read the following discussion and analysis of our financial condition
and results of operations together with our (1) unaudited condensed consolidated
financial statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q ("Quarterly Report"), and (2) audited consolidated
financial statements and the related notes thereto and management's discussion
and analysis of financial condition and results of operations for the fiscal
year ended March 31, 2021 , included in our Annual Report on Form 10-K ("Annual
Report"), filed with the Securities and Exchange Commission (the "SEC") on June
1, 2021 . Unless the context requires otherwise, references in this Quarterly
Report to "Immunovant ," the "Company," "we," "us," and "our" refer to
Immunovant, Inc. and its wholly owned subsidiaries.
Prior to December 18, 2019 , we were known as Health Sciences Acquisitions
Corporation ("HSAC"). On December 18, 2019 , we completed the Business
Combination (as defined in "Note 1 - Description of Business and Liquidity" in
our unaudited condensed consolidated financial statements in Part I, Item 1 of
this Quarterly Report) with Immunovant Sciences Ltd. ("ISL"), a private company.
For accounting purposes, HSAC was deemed to be the acquired entity.
Forward-Looking Statements
This Quarterly Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are often identified by the use of words such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "forecast," "goal," "hope," "intend," "likely," "may," "might," "objective," "ongoing," "plan," "potential," "predict," "project," "should," "target," "to be," "will," "would," or the negative or plural of these words, or similar expressions or variations, although not all forward-looking statements contain these words. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled "Risk Factors" set forth in Part II, Item 1A. of this Quarterly Report and in our other filings with theSEC . These risks are not exhaustive. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We are a clinical-stage biopharmaceutical company focused on enabling normal
lives for people with autoimmune diseases. We are developing a novel, fully
human monoclonal antibody, IMVT-1401, formerly referred to as RVT-1401
("batoclimab") that selectively binds to and inhibits the neonatal fragment
crystallizable receptor ("FcRn"). Batoclimab is the product of a multi-step,
multi-year research program conducted by HanAll Biopharma Co., Ltd. ("HanAll"),
to design a highly potent anti-FcRn antibody optimized for subcutaneous
delivery. Our product candidate has been dosed in small volumes (e.g., 2 mL) and
with a 27-gauge needle, while still generating therapeutically relevant
pharmacodynamic activity, important attributes that we believe will drive
patient preference and market adoption. In nonclinical studies and in clinical
trials conducted to date, batoclimab has been observed to reduce immunoglobulin
G ("IgG") antibody levels. High levels of pathogenic IgG antibodies drive a
variety of autoimmune diseases and, as a result, we believe batoclimab has the
potential for broad application in these disease areas. We intend to develop
batoclimab in autoimmune diseases for which there is robust evidence that
pathogenic IgG antibodies drive disease manifestation and for which reduction of
IgG antibodies should lead to clinical benefit.
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We are developing batoclimab as a fixed-dose, self-administered subcutaneous
injection on a convenient weekly, or less frequent, dosing schedule as discussed
below. As a result of our rational design and current outlook on potential
opportunities, we believe that batoclimab, if developed and approved for
commercial sale, would be differentiated from currently available, more invasive
treatments for advanced IgG-mediated autoimmune diseases. Examples of
indications for which trials for anti-FcRn assets have been announced are:
Myasthenia Gravis ("MG"), Warm Autoimmune Hemolytic Anemia ("WAIHA"), Thyroid
Eye Disease ("TED", formerly referred to as Graves' Ophthalmopathy, or "GO"),
Idiopathic Thrombocytopenic Purpura, Pemphigus Vulgaris, Chronic Inflammatory
Demyelinating Polyneuropathy, Bullous Pemphigoid, Pemphigus Foliaceus, Myositis,
Autoimmune Encephalitis (LGI1+), Myelin Oligodendrocyte Glycoprotein Antibody
Disorders, moderate-to-severe Primary Sjögrens Syndrome, Lupus Nephritis,
Systemic Lupus Erythematosus, refractory Rheumatoid Arthritis, Hemolytic Disease
of the Fetus and Newborn and moderate-to-severe Cutaneous Lupus Erythematosus.
In 2021, we estimate these diseases had an aggregate prevalence of approximately
1,200,000 patients in the United States of America (the "U.S.") and 1,530,000
patients in Europe . To the extent we choose to develop batoclimab as a treatment
for certain of these rare diseases, we plan to seek orphan drug designation in
the U.S. and Europe , where applicable. Such designations would primarily provide
financial and exclusivity incentives intended to make the development of orphan
drugs financially viable. In July 2021 , we have been granted orphan drug
designation by the FDA for batoclimab for the potential treatment of MG and we
plan to seek orphan drug designation from the FDA for batoclimab for the
treatment of WAIHA and TED and potentially in other orphan indications in which
there is a medically plausible basis for its use, and we may seek orphan drug
designation for batoclimab in Europe .
We are developing batoclimab as a fixed-dose subcutaneous injection, and have
focused our initial development efforts on the treatment of MG, WAIHA and TED.
We are also pursuing a series of other indications. MG is an autoimmune disease
associated with muscle weakness. WAIHA is a rare hematologic disease in which
autoantibodies mediate hemolysis, or the destruction of red blood cells. TED is
an autoimmune inflammatory disorder that affects the muscles and other tissues
around the eyes, which can be sight-threatening.
As previously disclosed in our Annual Report, in February 2021 , we voluntarily
paused dosing in our clinical trials for batoclimab due to elevated total
cholesterol and low-density lipoprotein ("LDL") levels observed in some trial
subjects treated with batoclimab. No major adverse cardiovascular events have
been reported to date in batoclimab clinical trials. In order to better
characterize the observed lipid findings, we conducted from February 2021
through May 2021 a program-wide data review with input from external scientific
and medical experts.
It is our intent to resume clinical studies with batoclimab and we are currently
drafting study protocols across multiple indications. Utilizing pharmacokinetic
("PK") and pharmacodynamic ("PD") data obtained from our Phase 1 and Phase 2
studies, we are selecting dosing regimens for batoclimab which optimize
reductions in total IgG levels while minimizing the impact on albumin and LDL
cholesterol levels. Protocols that contain long-term treatment extensions will
likely include protocol-directed guidelines for the management of any observed
lipid abnormalities. While increases in LDL over a short-term treatment duration
would not be expected to pose a safety concern for patients, the risk-benefit
profile of long-term administration of batoclimab will need to incorporate any
unfavorable effects on lipid profiles.
We have initiated discussions with the FDA and plan to initiate discussions with
other regulatory agencies during the remainder of the calendar year 2021.
Specifically, we have communicated with the FDA regarding a meeting in the
fourth quarter of the calendar year 2021 to review modifications to our pivotal
Phase 3 study in MG. These modifications are based on the FDA's advice obtained
during our previous end of Phase 2 meeting. Contingent upon feedback from the
neurology division of the FDA, we plan to initiate a pivotal study in MG in the
early part of the calendar year 2022. We recently closed the ASCEND WAIHA study,
our open-label trial in warm autoimmune hemolytic anemia, in order to initiate
planning for a randomized, controlled study with a long-term extension in this
indication, contingent upon achieving alignment with the hematology division of
the FDA. For TED, we also intend to re-initiate a placebo-controlled trial
contingent upon achieving alignment with the ophthalmology division of the FDA.
We continue to evaluate potential new indications for batoclimab and we remain
on track to announce at least two new indications by August 2022 . For
competitive reasons, we will likely announce these indications only after we
have agreement with the FDA that we may proceed with a planned protocol. We
expect at least one of the four indications beyond MG to be initiated as a
pivotal trial in the calendar year 2022.
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COVID-19 Business Update
We have been actively monitoring the impact of the COVID-19 pandemic on our
employees and our business. Based on guidance issued by federal, state and local
authorities, we transitioned to a remote work model for our employees in
mid-March 2020 and our workforce has continued to work remotely. Our operations
continue as we seek to comply with guidance from governmental authorities and
adjust our activities as appropriate. To date, the COVID-19 pandemic has not had
significant effects on the progression of our clinical trials, though it did
slow enrollment of our clinical trials prior to our voluntary pause of clinical
dosing in February 2021 , as previously disclosed. Further, the COVID-19 pandemic
has not had significant manufacturing supply interruptions of batoclimab, and we
intend to continue to advance the research and development of batoclimab.
We have not experienced material financial impacts as a result of the COVID-19
pandemic. However, the impact of the COVID-19 pandemic on our future results
will largely depend on future developments related to the COVID-19 pandemic,
which are highly uncertain and cannot be predicted with confidence, such as the
ultimate duration of the pandemic, the spread of its variants and the full
impact on our enrolling clinical sites, financial markets and the global
economy, travel restrictions and social distancing in the U.S. and other
countries, and business closures or business disruptions, as well as the
effectiveness of actions taken in the U.S. and other countries to contain and
treat the disease, including the effectiveness of vaccines and vaccine
distribution efforts.
For additional information about risks and uncertainties related to the COVID-19
pandemic that may impact our business, financial condition and results of
operations, see the section titled "Risk Factors" under Part II, Item 1A in this
Quarterly Report.
Our Key Agreements
License Agreement with HanAll ("HanAll Agreement")
InDecember 2017 ,Roivant Sciences GmbH ("RSG") entered into the HanAll Agreement. Under the HanAll Agreement, RSG, a wholly owned subsidiary of Roivant Sciences Ltd. ("RSL"), received (1) the non-exclusive right to manufacture and (2) the exclusive, royalty-bearing right to develop, import and use the antibody referred to as batoclimab and certain back-up and next-generation antibodies, and products containing such antibodies, and to commercialize such products, in theU.S. ,Canada ,Mexico , the E.U., theU.K. ,Switzerland , theMiddle East ,North Africa andLatin America (the "Licensed Territory"), for all human and animal uses, during the term of the agreement. InDecember 2018 , we obtained and assumed all rights, title, interest and obligations under the HanAll Agreement from RSG, including all rights to batoclimab from RSG in the Licensed Territory, pursuant to an assignment and assumption agreement between RSG and its wholly owned subsidiary,Immunovant Sciences GmbH ("ISG"), for an aggregate purchase price of$37.8 million . Under the HanAll Agreement, the parties may choose to collaborate on a research program directed to the research and development of next generation FcRn inhibitors in accordance with an agreed plan and budget. We are obligated to reimburse HanAll for half of such research and development expenses incurred by HanAll, up to an aggregate reimbursement amount of$20.0 million . Intellectual property created by HanAll pursuant to this research program will be included in our license; intellectual property created by us pursuant to this research program will be included in HanAll's license. Since the acquisition of batoclimab, we, along with RSL, have performed all the development associated with batoclimab and no amounts were incurred by HanAll and reported to the Company for further research or development of the technology for the three and six months endedSeptember 30, 2021 and 2020. Pursuant to the HanAll Agreement, RSG made an upfront payment of$30.0 million to HanAll. InMay 2019 , we achieved our first development and regulatory milestone which resulted in a$10.0 million milestone payment that we subsequently paid inAugust 2019 . We will be responsible for future contingent payments and royalties, including up to an aggregate of$442.5 million upon the achievement of certain development, regulatory and sales milestone events. We are also obligated to pay HanAll tiered royalties ranging from the mid-single digits to mid-teens on net sales of licensed products, subject to standard offsets and reductions as set forth in the HanAll Agreement. These royalty obligations apply on a product-by-product and country-by-country basis and end upon the latest of: (A) the date on which the last valid claim of the licensed patents expire, (B) the date on which the data or market exclusivity expires or (C) 11 years after the first commercial sale of the licensed product, in each case, with respect to a given product in a given country. 20
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Services Agreements with
InAugust 2018 , we entered into Services Agreements with RSI and RSG, under which RSI and RSG agreed to provide services related to development, administrative and financial activities to us during our formative period. Under each Services Agreement, we will pay or reimburse RSI or RSG, as applicable, for any expenses they, or third parties acting on our behalf, incur. For any general and administrative and research and development activities performed by RSI or RSG employees, RSI or RSG, as applicable, will charge back the employee compensation expense plus a pre-determined markup. RSI and RSG also provided such services prior to the formalization of the Services Agreements, and such costs have been recognized by us in the period in which the services were rendered. Employee compensation expense, inclusive of base salary and fringe benefits, is determined based upon the relative percentage of time utilized on our matters. All other costs will be billed back at cost. The term of the Services Agreements will continue until terminated by us, RSI or RSG, as applicable, upon 90 days' written notice.
RSL Information Sharing and Cooperation Agreement
InDecember 2018 , we entered into an amended and restated information sharing and cooperation agreement (the "Cooperation Agreement") with RSL, which, among other things: (1) obligates us to deliver to RSL periodic financial statements and other information upon reasonable request and to comply with other specified financial reporting requirements; (2) requires us to supply certain material information to RSL to assist it in preparing any futureSEC filings; and (3) requires us to implement and observe certain policies and procedures related to applicable laws and regulations. We have agreed to indemnify RSL and its affiliates and their respective officers, employees and directors against all losses arising out of, due to or in connection with RSL's status as a stockholder under the Cooperation Agreement and the operations of or services provided by RSL or its affiliates or their respective officers, employees or directors to us or any of our subsidiaries, subject to certain limitations set forth in the Cooperation Agreement. No amounts have been paid or received under this agreement; however, we believe this agreement is material to our business and operations. Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of (1) the mutual written consent of the parties or (2) the later of when RSL no longer (a) is required by generally accepted accounting principles inthe United States ("U.S. GAAP") to consolidate our results of operations and financial position, account for its investment in us under the equity method of accounting or, by any rule of theSEC , include our separate financial statements in any filings it may make with theSEC and (b) has the right to elect directors constituting a majority of our board of directors.
RSL Share Purchase Agreement
OnAugust 2, 2021 , we entered into a share purchase agreement with RSL pursuant to which we issued 17,021,276 shares of our common stock, par value$0.0001 per share, to RSL at a per share price of$11.75 (the "Equity Investment ") and received aggregate net proceeds of$200.0 million .
Financial Operations Overview
Revenue
We have not generated any revenue and have incurred significant operating losses since inception, and we do not expect to generate any revenue from the sale of any products unless or until we obtain regulatory approval of and commercialize batoclimab or any future product candidates. Our ability to generate revenue sufficient to achieve profitability will depend completely on the successful development and eventual commercialization of batoclimab and any future product candidates.
Research and Development Expenses
We have been primarily engaged in preparing for and conducting clinical trials.
Research and development expenses include program-specific costs, as well as
unallocated costs.
Program-specific costs include direct third-party costs, which include expenses
incurred under agreements with contract research organizations ("CROs") and the
cost of consultants who assist with the development of the Company's product
candidate on a program-specific basis, investigator grants, sponsored research,
and any other third-party expenses directly attributable to the development of
the product candidate.
21-------------------------------------------------------------------------------- Table of Contents Unallocated costs include: •costs related to contract manufacturing operations including manufacturing costs in connection with producing materials for use in conducting preclinical and clinical studies;
•personnel-related expenses for research and development personnel, which includes employee-related expenses such as salaries, benefits and other staff-related costs;
•stock-based compensation expenses for research and development personnel;
•payments upon the achievement of certain development and regulatory milestones under the HanAll Agreement;
•costs allocated to us under our services agreements with RSI and RSG (the "Services Agreements"); and
•other expenses, which include the cost of consultants who assist with our research and development, but are not allocated to a specific program.
Research and development activities will continue to be central to our business model. We expect our research and development expenses to increase significantly over the next several years as we increase personnel and compensation costs, commence additional clinical trials for batoclimab and prepare to seek regulatory approval for our product candidate. It is not possible to determine with certainty the duration and completion costs of any clinical trial we may conduct. The duration, costs and timing of clinical trials of batoclimab and any future product candidates will depend on a variety of factors that include, but are not limited to:
•the number of trials required for approval;
•the per patient trial costs;
•the number of patients that participate in the trials;
•the number of sites included in the trials;
•the countries in which the trial is conducted;
•the length of time required to enroll eligible patients;
•the number of doses that patients receive;
•the drop-out or discontinuation rates of patients;
•the potential additional safety monitoring or other studies requested by regulatory agencies;
•the duration of patient follow-up;
•the timing and receipt of regulatory approvals;
•the potential impact of the ongoing COVID-19 pandemic;
•the efficacy and safety profile of the product candidate; and
•the cost of manufacturing.
In addition, the probability of success for batoclimab will depend on numerous
factors, including our product's efficacy, safety, ease of use, competition,
manufacturing capability and commercial viability.
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General and Administrative Expenses
General and administrative expenses consist primarily of employee salaries and
related benefits, costs allocated under the Services Agreements and stock-based
compensation for general and administrative personnel, legal and accounting
fees, consulting services and other operating costs relating to corporate
matters and daily operations.
We anticipate that our general and administrative expenses will continue to
increase in the future to support our continued research and development
activities and increased costs of operating as a public company. These increases
will likely include patent-related costs, including legal and professional fees
for filing, prosecution and maintenance of our product candidate, increased
costs related to the hiring of additional personnel and fees to outside
consultants for professional services. In addition, whenever batoclimab obtains
regulatory approval, we expect that we would incur significant additional
expenses associated with building medical affairs and commercial teams.
Results of Operations
The following table sets forth our results of operations for the three months
ended
Three Months Ended September 30,
2021 2020 Change
Operating expenses:
Research and development $ 21,361 $ 11,976 $ 9,385
General and administrative 16,289 8,998 7,291
Total operating expenses 37,650 20,974 16,676
Other expense (income), net 84 (225) 309
Loss before (benefit) provision for income taxes (37,734) (20,749) (16,985)
(Benefit) provision for income taxes (31) 40 (71)
Net loss $ (37,703) $ (20,789) $ (16,914) Research and Development Expenses for the Three Months Ended
The following table summarizes the period-over-period changes in research and development expenses for the three months endedSeptember 30, 2021 and 2020 (in thousands): Three Months Ended September 30, Change 2021 2020 $ Program-specific costs: Neurology diseases$ 303 $ 569 $ (266) Endocrine diseases 1,125 1,400 (275) Hematology diseases 286 1,094 (808) Unallocated costs: Contract manufacturing costs 8,067 3,005 5,062 Personnel-related expenses including stock-based compensation 7,762 3,387 4,375 Other 3,818 2,521 1,297 Total research and development expenses$ 21,361
Research and development expenses increased by$9.4 million , from$12.0 million for the three months endedSeptember 30, 2020 to$21.4 million for the three months endedSeptember 30, 2021 . Program-specific research and development costs decreased by$1.3 million , from$3.1 million for the three months endedSeptember 30, 2020 to$1.7 million for the three months endedSeptember 30, 2021 , primarily reflecting lower clinical activities due to the continued voluntary pause in our clinical trials. 23 -------------------------------------------------------------------------------- Table of Contents Unallocated research and development costs increased by$10.7 million , from$8.9 million for the three months endedSeptember 30, 2020 to$19.7 million for the three months endedSeptember 30, 2021 . This increase reflected higher contract manufacturing costs of$5.1 million , higher personnel-related expenses of$4.4 million and other increases related to clinical studies and clinical research of$1.3 million . The increases in contract manufacturing for process development and drug substance manufacturing combined with personnel costs primarily reflected investment spending to support our strategic objectives as we prepare to re-initiate our clinical activities.
General and Administrative Expenses for the Three Months Ended
General and administrative expenses increased by$7.3 million , from$9.0 million for the three months endedSeptember 30, 2020 to$16.3 million for the three months endedSeptember 30, 2021 . This increase was primarily due to financial advisory, legal and other professional costs of$4.8 million , and higher personnel-related costs (including stock-based compensation) of$2.4 million .
The following table sets forth our results of operations for the six months
ended
Six Months Ended September 30,
2021 2020 Change
Operating expenses:
Research and development $ 40,066 $ 28,898 $ 11,168
General and administrative 27,469 18,662 8,807
Total operating expenses 67,535 47,560 19,975
Other expense (income), net 711 (151) 862
Loss before (benefit) provision for income taxes (68,246) (47,409) (20,837)
(Benefit) provision for income taxes (72) 88 (160)
Net loss $ (68,174) $ (47,497) $ (20,677) Research and Development Expenses for the Six Months Ended
The following table summarizes the period-over-period changes in research and development expenses for the six months endedSeptember 30, 2021 and 2020 (in thousands): Six Months Ended September 30, Change 2021 2020 $ Program-specific costs: Neurology diseases$ 548 $ 1,575 $ (1,027) Endocrine diseases 3,574 3,024 550 Hematology diseases 975 1,755 (780) Unallocated costs: - Contract manufacturing costs 15,212 12,892 2,320 Personnel-related expenses including stock-based compensation 12,559 5,716 6,843 Other 7,198 3,936 3,262 Total research and development expenses$ 40,066
Research and development expenses increased by$11.2 million , from$28.9 million for the six months endedSeptember 30, 2020 to$40.1 million for the six months endedSeptember 30, 2021 . Program-specific research and development costs decreased by$1.3 million , from$6.4 million for the six months endedSeptember 30, 2020 to$5.1 million for the six months endedSeptember 30, 2021 , primarily reflecting lower clinical activities due to the continued voluntary pause in our clinical trials, partially offset by costs related to clinical activities for analyzing data and the program-wide data review. 24
-------------------------------------------------------------------------------- Table of Contents Unallocated research and development costs increased by$12.5 million , from$22.5 million for the six months endedSeptember 30, 2020 to$35.0 million for the six months endedSeptember 30, 2021 . This increase was primarily due to higher personnel-related expenses of$6.8 million , increases related to clinical studies and clinical research of$3.3 million and higher contract manufacturing costs of$2.3 million , primarily due to drug substance manufacturing. The increases in contract manufacturing and personnel costs primarily reflected investment spending to support our strategic objectives as we prepare to re-initiate our clinical activities.
General and Administrative Expenses for the Six Months Ended
General and administrative expenses increased by$8.8 million , from$18.7 million for the six months endedSeptember 30, 2020 to$27.5 million for the six months endedSeptember 30, 2021 . This increase was primarily due to financial advisory, legal and other professional costs of$4.7 million , and higher personnel-related costs (including stock-based compensation) of$3.7 million .
Liquidity and Capital Resources
Overview
We had cash of$559.0 million and$400.1 million as ofSeptember 30, 2021 andMarch 31, 2021 , respectively. For the three months endedSeptember 30, 2021 and 2020, we had net losses of$37.7 million and$20.8 million , respectively. For the six months endedSeptember 30, 2021 and 2020, we had net losses of$68.2 million and$47.5 million , respectively. OnAugust 2, 2021 , we received aggregate net proceeds of$200.0 million from RSL pursuant to theEquity Investment . We are using the proceeds from theEquity Investment to advance the development of batoclimab in multiple indications and for general corporate purposes. We expect to continue to incur significant expenses and increasing operating losses at least for the next several years. We have never generated any revenue and we do not expect to generate product revenue unless and until we successfully complete development and obtain regulatory approval for batoclimab or any future product candidate. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our planned clinical trials, timing of batoclimab manufacturing, HanAll milestone payments and our expenditures on other research and development activities. We anticipate that our expenses will increase substantially as we:
•fund our clinical trials of batoclimab;
•fund our clinical development programs;
•launch any potential Phase 2 proof-of-concept studies of batoclimab in additional indications;
•incur costs associated with the pause, analysis and safety review of the clinical trials of batoclimab;
•achieve milestones under our agreements with third parties, including the HanAll Agreement, that will require us to make substantial payments to those parties;
•seek to identify, acquire, develop and commercialize additional product candidates;
•integrate acquired technologies into a comprehensive regulatory and product development strategy;
•maintain, expand and protect our intellectual property portfolio;
•hire scientific, clinical, quality control and administrative personnel;
•add operational, financial and management information systems and personnel, including personnel to support our drug development efforts;
•commence the number of trials required for approval;
•seek regulatory approvals for any product candidates that successfully complete clinical trials;
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•ultimately establish a sales, marketing and distribution infrastructure and
scale up external manufacturing capabilities to commercialize any drug
candidates for which we may obtain regulatory approval; and
•incur insurance, legal and other regulatory compliance expenses to operate as a public company.
Our primary use of cash is to fund our clinical trials and clinical development activities. Our current funds will not be sufficient to enable us to complete all necessary development and commercially launch batoclimab. We anticipate that we will continue to incur net losses for the foreseeable future. Until such time, if ever, as we can generate substantial product revenue from sales of batoclimab or any future product candidate, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license or development agreements. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in theU.S. and worldwide resulting from the ongoing COVID-19 pandemic. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital in sufficient amounts or on terms acceptable to us, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves or potentially discontinue operations.
Cash Flows
The following table sets forth a summary of our cash flows for the six months
ended
Six Months Ended
2021 2020
Net cash used in operating activities$ (41,261) $ (38,016) Net cash used in investing activities (62)
(86)
Net cash provided by financing activities 200,129 381,903 Operating Activities For the six months endedSeptember 30, 2021 ,$41.3 million of cash was used in operating activities. This was primarily attributable to a net loss from operations for the year of$68.2 million , partially offset by non-cash charges of$13.6 million and a net change in operating assets and liabilities of$13.3 million . The non-cash charges consisted mainly of stock-based compensation of$12.2 million , reflecting the higher headcount and incentive equity awards as compared with the prior-year period. The change in our operating assets and liabilities was primarily due to an increase of$9.7 million in accounts payable and accrued expenses, driven by accrued financial advisory fees, as well as the timing and level of payments related to contract manufacturing and other research and development costs. The change in operating assets and liabilities also reflected$4.0 million of lower prepaid expenses and other current assets, driven by the timing of payments related to clinical research and contract manufacturing activities. For the six months endedSeptember 30, 2020 ,$38.0 million of cash was used in operating activities. This was primarily attributable to a net loss from operations of$47.5 million , non-cash charges of$7.6 million and a net change in operating assets and liabilities of$1.9 million . The non-cash charges consisted mainly of stock-based compensation of$7.3 million . The change in our operating assets and liabilities was primarily due to a decrease of$3.0 million in prepaid expenses and other current assets due to the settlement of a value-added tax receivable inApril 2020 . 26 -------------------------------------------------------------------------------- Table of Contents Investing Activities
For the six months ended
Financing Activities
For the six months endedSeptember 30, 2021 ,$200.1 million of cash provided by financing activities primarily consisted of$200.0 million in proceeds from theEquity Investment . For the six months endedSeptember 30, 2020 ,$381.9 million of cash provided by financing activities consisted of$319.8 million in proceeds from the two issuances of common stock in an underwritten public offering,$65.8 million in proceeds from the issuance of common stock upon warrant redemptions, partially offset by repayment of the note payable to RSL of$3.1 million and the payment of offering costs for two issuances of$1.0 million .
Outlook
Based on our existing cash balance as ofSeptember 30, 2021 of$559.0 million , our research and development plans and our timing expectations related to our development programs for batoclimab, we expect to be able to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this Quarterly Report. However, we have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.
Contractual Obligations and Commitments
As ofSeptember 30, 2021 , other than contingent payments pursuant to the HanAll Agreement and sublease agreements (as discussed below), we did not have any ongoing material financial commitments, such as lines of credit or guarantees, that we expect to affect our liquidity over the next several years. In the normal course of business, we enter into agreements with CROs for clinical trials and with vendors for nonclinical studies, manufacturing and other services and products for operating purposes, which agreements are generally cancellable by us at any time, subject to payment of remaining obligations under binding purchase orders and, in certain cases, nominal early-termination fees. These commitments are not deemed significant. There are certain contracts wherein we have a minimum purchase commitment, however, most of it is due and payable within one year. We have not included potential future payments due under the HanAll Agreement in a table of contractual obligations because the payment obligations under this agreement are contingent upon future events. As ofSeptember 30, 2021 , the aggregate maximum amount of milestone payments we could be required to make under the HanAll Agreement is$442.5 million upon the achievement of certain development, regulatory and sales milestone events. We are also required to reimburse HanAll for half of budgeted research and development costs incurred by HanAll with respect to batoclimab, up to an aggregate of$20.0 million .
Sublease Agreements
InJune 2020 , we entered into two sublease agreements with RSI, for the two floors of the building that serves as our headquarters inNew York . The subleases will expire onFebruary 27, 2024 andApril 29, 2024 , respectively, and have scheduled rent increases each year. The future fixed operating lease payments under both sublease agreements are$2.9 million over a lease period of approximately 2.5 years. InApril 2020 , we entered into a sublease agreement with an unrelated party for one floor of a building inNorth Carolina . The sublease will expire onFebruary 28, 2022 and has no scheduled rent increases. The future fixed operating lease payments under the sublease agreement are less than$0.1 million over the remaining lease period of 5 months.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any off-balance sheet
arrangements, as defined under
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Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these consolidated
financial statements requires us to make estimates, judgments and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities as of the date of the balance sheet, and the
reported amounts of expenses during the reporting period. In accordance with
U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. We base
our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We define our critical accounting policies as those under U.S. GAAP that require
us to make subjective estimates and judgments about matters that are uncertain
and are likely to have a material impact on our financial condition and results
of operations, as well as the specific manner in which we apply those
principles. During the three and six months ended September 30, 2021 , there were
no material changes to our critical accounting policies and use of estimates
from those disclosed in the audited consolidated financial statements for the
year ended March 31, 2021 included in our Annual Report.
Recent Accounting Pronouncements
For information with respect to recently issued accounting standards and the impact of these standards on our unaudited condensed consolidated financial statements, refer to "Note 2 - Summary of Significant Accounting Policies" in our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.
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