INHIBIKASE THERAPEUTICS, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Report") (including but not limited to this
Item 2, "Management's Discussion and Analysis of Financial Condition and Results
of Operations") 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"), that are intended to qualify for the "safe harbor" created by
those sections. In addition, we may make forward-looking statements in other
documents filed with or furnished to the SEC , and our management and other
representatives may make forward-looking statements orally or in writing to
analysts, investors, representatives of the media and others. You should read
the following discussion and analysis of our financial condition and results of
operations together with our financial statements and the related notes to those
statements included elsewhere in this Report. This discussion and analysis and
other parts of this Report contain forward-looking statements based upon current
beliefs, plans and expectations related to future events and our future
financial performance that involve risks, uncertainties and assumptions, such as
statements regarding our intentions, plans, objectives, expectations, forecasts
and projections. Our actual results and the timing of selected events could
differ materially from those anticipated in these forward-looking statements as
a result of several factors.
All statements included or incorporated by reference in this Report, other than
statements or characterizations of historical fact, are forward-looking
statements. Forward-looking statements can generally be identified by the fact
that they do not relate strictly to historical or current facts and include, but
are not limited to, statements using terminology such as "can", "may", "could",
"should", "assume", "forecasts", "believe", "designed to", "will", "expect",
"plan", "anticipate", "estimate", "potential", "position", "predicts",
"strategy", "guidance", "intend", "seek", "budget", "project" or "continue", or
the negative thereof or other comparable terminology regarding beliefs, plans,
expectations or intentions regarding the future. You should read statements that
contain these words carefully because they:
? discuss our future expectations;
? contain projections of our clinical trials, future results of operations or
of our financial condition; and
? state other "forward-looking" information.
We believe it is important to communicate our expectations. However,
forward-looking statements are based on our current expectations, assumptions,
estimates, approximations and projections about our business and our industry
and management's beliefs, all of which are subject to change. Forward-looking
statements are not guarantees of future performance and are subject to known and
unknown risks, uncertainties and other factors. Accordingly, our actual results
and the timing of certain events may differ materially and adversely from those
expressed or implied in such forward-looking statements due to a variety of
factors and risks, including, but not limited to, those set forth in this Item
2, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in our unaudited condensed consolidated financial statements and
notes thereto included in this Report, those set forth from time to time in our
other filings with the SEC , including our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021 , as amended, and the following factors and
risks:
? The initiation, timing, progress and results of our current and future
preclinical studies and clinical trials and related preparatory work and the
period during which the results of the trials will become available, as well
as our research and development programs, including our ability to resolve
the
? We have received notice from
to satisfy their continued listing requirements, and as a result, we may not
be able to maintain the listing of our common stock on Nasdaq;
? We are a clinical stage drug development company with limited resources, a
limited operating history and have no products approved for commercial sale,
which may make it difficult to evaluate our current business and predict our
future success and viability. We cannot give any assurance that any of our
product candidates will receive regulatory approval, which is necessary
before they can be commercialized;
? If we are unable to successfully raise additional capital, our future
clinical trials and product development could be limited and our long-term
viability may be threatened;
? Drug development is a highly uncertain undertaking and involves a
substantial degree of risk. We have never generated any revenue from product
sales, we may never generate any revenue from product sales, and we may fail
to generate further revenue from grants or contracts or to be profitable;
and
? Positive results from early preclinical studies of our product candidates
are not necessarily predictive of the results of later preclinical studies
and any current and future clinical trials of our product candidates. If we
cannot show positive results or replicate any positive results from our
earlier preclinical studies of our product candidates in our later
preclinical studies and current and future clinical trials, we may be unable
to successfully develop, obtain regulatory approval for and commercialize
our product candidates.
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Any or all of our forward-looking statements may turn out to be wrong. They may
be affected by inaccurate assumptions that we might make or by known or unknown
risks and uncertainties. Actual outcomes and results may differ materially from
what is expressed or implied in our forward-looking statements.
All forward-looking statements and risk factors included in this Report are made
as of the date hereof, in each case based on information available to us as of
the date hereof, and we assume no obligations to update any forward-looking
statement or risk factor, unless we are required to do so by law. If we do
update one or more forward-looking statements, no inference should be drawn that
we will make updates with respect to other forward-looking statements or that we
will make any further updates to those forward-looking statements at any future
time.
Forward-looking statements may include our plans and objectives for future
operations, including plans and objectives relating to our product candidates
and our future economic performance, projections, business strategy and timing
and likelihood of success. Assumptions relating to the forward-looking
statements included in this Report involve judgments with respect to, among
other things, future economic, competitive and market conditions, future
business decisions, and the time and money required to successfully complete
development and commercialization of our product candidates, all of which are
difficult or impossible to predict accurately and many of which are beyond our
control.
Any of the assumptions underlying the forward-looking statements contained in
this Report could prove inaccurate and, therefore, we cannot assure you that any
of the results or events contemplated in any of such forward-looking statements
will be realized. Based on the significant uncertainties inherent in these
forward-looking statements, the inclusion of any such statement should not be
regarded as a representation or as a guarantee by us that our objectives or
plans will be achieved, and we caution you against relying on any of the
forward-looking statements contained herein.
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--------------------------------------------------------------------------------Overview
We are a clinical-stage pharmaceutical company developing therapeutics for Parkinson's disease, or PD, and related disorders. Our multi-therapeutic pipeline has a primary focus on neurodegeneration and our lead program IkT-148009, an Abelson Tyrosine Kinase (c-Abl) inhibitor, targets the treatment of Parkinson's disease inside and outside the brain as well as other diseases that arise from Abelson Tyrosine Kinases. In 2021, we commenced clinical development of IkT-148009, a small molecule Abelson Tyrosine Kinase inhibitor we believe can modify the course of Parkinson's disease including its manifestation in the gastrointestinal tract, or GI. Results to date of our completed Phase 1/1b Single and Multiple Ascending Dose escalation study (SAD and MAD, respectively) in older and elderly healthy volunteers and in mild to moderately advanced Parkinson's patients have revealed important insights into the safety, tolerability and pharmacokinetics of IkT-148009 in human subjects and patients. Results from the 88 older and elderly healthy Phase 1 subjects and 14 Phase 1b Parkinson's patients have shown that IkT-148009 has a half-life of greater than 24 hours and just a 25 mg once-daily oral dose reached exposures that are consistent with the exposures to the drug that resulted in therapeutic efficacy in animal models of progressive Parkinson's disease. In addition, review of unblinded adverse event data revealed that just nine adverse events of any grade were observed in subjects or patients on IkT-148009, and at least four of these adverse events could not be attributed to IkT-148009. The remaining five adverse events were of Grade 1 with no clinical significance. FDA review of the Phase 1/1b data and the protocol for the Phase 2a three-month dosing study resulted in the FDA agreeing with our view that it was appropriate for the Phase 2a study to begin, prompting us to close the Phase 1b study after two dosing cohorts. The Phase 2a '201' study beganMay 23, 2022 with the opening of the first site; we have opened 16 of 34 selected sites as ofNovember 1, 2022 and 11 patients have randomized into the trial as ofNovember 1, 2022 . 120 treatment naïve patients are planned to be enrolled in this study which will dose patients with one of three planned doses of IkT-148009 or placebo once daily for three months. In addition to primary endpoints of safety/tolerability/pharmacokinetics, a hierarchy of 15 secondary endpoints measuring drug impact on motor and non-motor features of Parkinson's disease in the brain or GI tract will be evaluated with descriptive statistics. InNovember 2022 , following review of the IND application to expand the use of IkT-148009 for the Parkinson's-related disorder Multiple System Atrophy, the FDA placed studies of IkT-148009 in Parkinson's and MSA on clinical hold. There have been no serious adverse events in the 201 trial and only two adverse events have been recorded, both graded mild and only one possibly related to the study drug. We are awaiting a detailed description of the basis for the clinical hold from the FDA and plan to work cooperatively with the FDA on resolving their concerns. Once we resolve the basis of the clinical hold for the IkT-148009 programs, and if we are able to have the clinical hold lifted, the 201 trial will have to enroll all 120 patients planned for the study. InJuly 2022 , we filed our IND with the FDA in preparation to initiate clinical development of IkT-001Pro, our prodrug of imatinib mesylate to treat Stable-phase Chronic Myelogenous Leukemia (SP-CML). IkT-001Pro will be evaluated in a two-part dose finding/dose equivalence study in up to 56 healthy volunteers. The study is designed to evaluate the steady-state pharmacokinetics of IkT-001Pro and determine the dose of IkT-001Pro equivalent to 400 mg imatinib mesylate, the standard-of-care dose for SP-CML. Following clearance of the IND by the FDA onAugust 26, 2022 , the two-part study, now known as the '501' study, was initiated with first patient dosing anticipated by the beginning of December, completion of the first cohort anticipated by year end 2022 and completion of the pharmacokinetic analysis anticipated in early first quarter 2023. Following completion of both parts of this study and assuming the equivalent dose of IkT-001Pro relative to 400 mg imatinib mesylate is established, we will confer with the FDA to begin the NDA process following the proposed approval path for IkT-001Pro und the 505(b)(2) statute. We will simultaneously pursue a superiority study comparing the selected doses of IkT-001Pro to standard-of-care 400 mg imatinib mesylate in SP-CML patients using a novel two-period wait list crossover switching study. Our programs utilize small molecule, oral protein kinase inhibitors to treat neurodegenerative diseases and cancer. In PD, we have shown in animal models of progressive disease that our lead clinical candidate, IkT-148009, is a brain penetrant Abelson tyrosine kinase, or c-Abl inhibitor, that halts disease progression and reverses functional loss in the brain and reverses neurological dysfunction in the GI tract in animal models of human disease. We have not yet observed reversal of functional loss in humans with IkT-148009. The ability to halt progression and restore function was shown in animal models of progressive disease that mimic the rate of disease progression and the extent of functional loss in the brain and/or the GI tract as found in patients with PD. We believe our therapeutic approach would be disease-modifying. Our understanding of how and why PD progresses has led us to believe that functional loss in Parkinson's patients may be at least partially reversed although this has not been shown clinically. Based on the measurements in animal models, it is possible that patients treated with IkT-148009 may have their disease progression slowed or halted, we may see a progressive reduction in the need for symptomatic or supportive therapy and/or we may ultimately eliminate the need for symptomatic therapy. However, as of the date of this Report, it is unknown whether any of the outcomes seen in the animal models will occur in patients following treatment with IkT-148009.
Impact of the ongoing military conflict between
In lateFebruary 2022 ,Russia invadedUkraine , significantly amplifying already existing geopolitical tensions amongRussia and other countries in the region and in the west, including theU.S. Russia's invasion, the responses of countries and political bodies toRussia's actions, the larger overarching tensions, andUkraine's military response and the potential for wider conflict have resulted in financial market volatility and capital markets disruption and inflation, potentially increasing in magnitude, and could have severe 17 --------------------------------------------------------------------------------
adverse effects on regional and global economic markets and international relations. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
FollowingRussia's actions, various countries, including theU.S. ,Canada and theUnited Kingdom , as well as theEuropean Union , issued broad-ranging economic sanctions againstRussia . Such sanctions included, among other things, a prohibition on doing business with certain Russian companies, officials and oligarchs; a commitment by certain countries and theEuropean Union to remove selected Russian banks from theSociety for Worldwide Interbank Financial Telecommunications (SWIFT) electronic banking network that connects banks globally; a ban on Russian oil and gas imports to theU.S. ; and restrictive measures to prevent theRussian Central Bank from undermining the impact of the sanctions. The current sanctions (and potential further sanctions in response to continued Russian military activity) and other actions may have adverse effects on regional and global economic markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds and increasing the volatility of our stock price. Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. We are also monitoring other macro-economic and geopolitical developments such as inflation and cybersecurity risks so that we can be prepared to react to new developments as they arise.
Components of Operating Results
Operating Expenses
Research and Development
Research and development activities account for a significant portion of our operating expenses. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and prodrug technologies include:
•
external research and development expenses, including expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants;
•
fees related to our license and collaboration agreements;
•
personnel related expenses, including salaries, benefits and non-cash stock-based compensation expense; and
•
other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.
A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis from inception of the program.
Program expenses include expenses associated with our most advanced product candidates and the discovery and development of compounds that are potential future candidates. We also track external expenses associated with our third-party research and development efforts. All external costs are tracked by therapeutic indication. We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis. These expenses primarily relate to salaries and benefits and stock-based compensation and office consumables. At this time, we can only estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:
•
our ability to add and retain key research and development personnel and other key employees;
•
our ability to successfully file INDs and NDAs with the FDA, including our ability to have the FDA lift its clinical hold on our IkT-148009 programs;
•
our ability to conduct and continue trials;
•
our ability to commence future trials;
•
our ability to establish an appropriate safety profile with IND-enabling toxicology studies;
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our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates;
•
our successful enrollment in and completion of our current and future clinical trials;
•
the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;
•
our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;
•
our ability to establish agreements with third-party manufacturers for clinical supply for any future clinical trials and commercial manufacturing, if our product candidates are approved;
•
the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;
•
our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;
•
our receipt of marketing approvals from applicable regulatory authorities;
•
the impact of COVID-19;
•
our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and
•
the continued acceptable safety profiles of the product candidates following approval.
A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase for the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
Selling, General and Administrative
Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense, expenses for outside professional services and allocated expenses. Outside professional services consist of legal, accounting and audit services, investor relations services and other consulting fees. Allocated expenses consist of rent expenses related to our offices inLexington, Massachusetts andAtlanta, Georgia not otherwise included in research and development expenses. We are incurring additional expenses as compared to when we were a private company, including expenses related to compliance with the rules and regulations of theSEC and those of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also are increasing our administrative headcount as a public company and as we advance our product candidates through clinical development, which will also likely require us to increase our selling, general and administrative expenses. 19 --------------------------------------------------------------------------------
Results of Operations
Comparison of the Three Months Ended
The following table sets forth the significant components of our results of
operations:
For the Three Months Ended
September 30, Change
2022 2021 ($) (%)
(unaudited)
Grant revenue $ 7,291 $ 328,459 $ (321,168 ) (97.8 )
Research and development (2,981,653 ) (3,154,553 ) 172,900 (5.5 )
Selling, general and administrative (1,538,737 ) (1,644,946 ) 106,209 (6.5 )
Loss from operations (4,513,099 ) (4,471,040 ) (42,059 ) (0.9 )
Interest income 18,536 - 18,536
Interest expense - 157 157 100.0
Net loss $ (4,494,563 ) $ (4,471,197 ) $ (23,366 ) (0.5 )
Grant Revenue
Grant revenue for the three months ended September 30, 2022 , decreased by
$321,168 or (97.8)% to $7,291 from $328,459 in the prior year comparable period.
During 2022, the Company's focus was shifted toward advancing its PD clinical
trials which did not result in significant grant revenue. The Company is
utilizing its increased working capital and personnel resources in 2022 to carry
on its increasing PD clinical trial activity in addition to nominal grant
research activity.
Research and Development
Research and development expenses decreased by$172,900 or (5.5)% to$2,981,653 from$3,154,553 in the prior year comparable period. The$0.17 million decrease in research and development expenses for the third quarter 2022 was due to a$0.77 million decrease in stock compensation partially offset by a net increase of$0.60 million of all other normal R&D expenses expenditures as we continue to focus on and progress in our PD clinical trial activities.
Selling, General and Administrative
Selling, general and administrative expenses decreased by$106,209 or (6.5)% to$1,538,737 from$1,644,946 in the prior year comparable period. The decrease was primarily driven by a$0.36 million decrease in stock compensation expense partially offset by increases of$0.13 million and$0.08 million of legal fees and compensation and related costs, respectively, and a$0.04 million net increase in all other normal selling, general and administrative expenses.
Interest Income
Interest income increased by$18,536 from$0 in the prior comparable period. The increase was driven by interest earned onU.S. Treasuries and money market instruments commencing inJuly 2022 . In the prior comparable period the Company held cash only in non-interest bearing accounts.
Interest Expense
Interest expense decreased by$157 or 100% to$0 from$157 in the prior year comparable period. The decrease was driven by the full settlement of the CEO Note onJanuary 3, 2022 . No additional debt has been incurred since settlement of the CEO Note. 20 --------------------------------------------------------------------------------
Comparison of the Nine Months Ended
The following table sets forth the significant components of our results of
operations:
For the Nine Months
Ended September 30, Change
2022 2021 ($) (%)
(unaudited)
Grant revenue $ 59,874 $ 3,098,661 $(3,038,787 ) (98.1 ) Research and development (8,980,827 ) (7,968,846 ) (1,011,981 )
12.7
Selling, general and
administrative (4,872,681 ) (4,854,494 ) (18,187 ) 0.4
Loss from operations (13,793,634 ) (9,724,679 ) (4,068,955 ) 41.8
Interest income 18,536 - 18,536
Interest expense 5 19,765 19,760 100.0 Net loss$ (13,775,103 ) $ (9,744,444 ) $ (4,030,659 ) 41.4 Grant Revenue Grant revenue for the nine months endedSeptember 30, 2022 decreased by$3,038,787 or (98.1)% to$59,874 from$3,098,661 in the prior year comparable period. During 2022, the Company's focus was shifted toward advancing its PD clinical trials which did not result in significant grant revenue. The Company is utilizing its increased working capital and personnel resources in 2022 to carry on its increasing PD clinical trial activity in addition to nominal grant research activity. Research and Development Research and development expenses increased by$1,011,981 or 12.7% to$8,980,827 from$7,968,846 in the prior year comparable period. The$1.01 million increase was driven by a$0.49 million decrease in non-cash stock compensation expenses offset by a$0.48 million increase in compensation and related costs, a$0.90 million increase in external R&D services and consultants, a$0.08 million increase in legal and a net increase of$0.04 million in all other normal R&D expensed.
Selling, General and Administrative
Selling, general and administrative expenses increased by$18,187 or 0.4% to$4,872,681 from$4,854,494 in the prior year comparable period. Although the overall net change was only$0.18 million , the major drivers were a$1.07 million decrease in non-cash stock compensation expense for the nine months endedSeptember 30, 2002 compared to the nine months endedSeptember 30, 2021 . The stock compensation decrease was offset by increased compensation and related costs of$0.38 million , increased legal fees of$0.35 million , increased compliance, regulatory and consultants of$0.30 million and a net increase all other normal selling, general and administrative expenses of$0.02 million .
Interest Income
Interest income increased by$18,536 from$0 in the prior comparable period. The increase was driven by interest earned onU.S. Treasuries and money market instruments commencing inJuly 2022 . In the prior comparable period the Company held cash only in non-interest bearing accounts.
Interest Expense
Interest expense decreased by$19,760 or 100% to$5 from$19,765 in the prior year comparable period. The decrease was driven by the full settlement of the CEO Note onJanuary 3, 2022 . No additional debt has been incurred since settlement of the CEO Note.
Liquidity and Capital Resources
Sources of Liquidity
From our inception up until ourDecember 2020 Initial Public Offering, we funded our operations primarily through private, state and federal contracts and grants. From our inception throughSeptember 30, 2022 , we generated aggregate cash proceeds of approximately$23.5 million from private, state and federal contracts and grants. InJune 2021 andDecember 2020 , the Company raised approximately$41.1 million and$14.6 million in working capital from its underwritten public offering (the "June 2021 Offering") and its IPO, respectively. 21 -------------------------------------------------------------------------------- We are able to sell securities on a shelf registration statement pursuant to the Equity Distribution Agreement withPiper Sandler & Co. Under currentSecurities and Exchange Commission regulations, because our public float was less than$75 million at the relevant measurement period pursuant to General Instruction I.B.6. to Form S-3, the amount we can raise through primary public offerings of securities in any subsequent 12-month period under our shelf registration statement is limited to an aggregate of one-third of our public float until such time, if any, as our public float is$75 million or more.
Our ability to issue securities is subject to market conditions.
No securities have been sold under the Equity Distribution Agreement during the
nine months ended
AtSeptember 30, 2022 , the Company had working capital of$24,773,396 , an accumulated deficit of$43,592,790 , cash of$5,781,918 , and accounts payable, accrued expenses and other current liabilities of$3,070,949 . The Company had active grants in the amount of$385,888 , of which$300,386 remained available in accounts held by theU.S. Treasury as ofNovember 1, 2022 .
Future Funding Requirements
To date, we have not generated any revenue from the sale of commercial products. We do not expect to generate any significant revenue from product sales unless and until we obtain regulatory approval of and successfully commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any future approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of the IPO, we incurred additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations beyondFebruary 2024 . Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our incremental cash needs through a combination of equity offerings, debt financings, working capital lines of credit, grant funding and potential licenses and collaboration agreements. Additional working capital may not be available on commercially reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of$43,592,790 atSeptember 30, 2022 . We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities. We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional working capital, or if we are able to raise additional working capital, we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue to develop our product candidates. The Company had working capital of$24,773,396 atSeptember 30, 2022 and active grants in the amount of$385,888 , of which$300,386 remained available in accounts held by theU.S. Treasury as ofNovember 1, 2022 . The Company estimates that its working capital atNovember 14, 2022 is sufficient to fund its normal operations throughFebruary 2024 . However, until the Company receives and evaluates the official clinical hold letter from the FDA, it is unable to fully evaluate the effect of the clinical hold on the Company's liquidity. For example, if or when the clinical hold is lifted by the FDA, it is likely that the Company will have to recommence its IkT-148009 201 clinical trial for PD. In such event, the costs of completion of such clinical trial will be greater than originally anticipated.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating
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--------------------------------------------------------------------------------to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
The expected use of the net proceeds from our
The timing and amount of our operating expenditures will depend largely on:
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the timing and progress of preclinical and clinical development activities;
•
our ability to successfully lift the current FDA clinical hold on our IkT-148009 programs;
•
the number and scope of preclinical and clinical programs we decide to pursue;
•
possible delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to the COVID-19 pandemic;
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the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;
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our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;
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our ability and success in securing manufacturing relationships with third parties or, in the future, in establishing and operating a manufacturing facility;
•
the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;
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the cost and timing of regulatory approvals;
•
our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and
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the costs and ongoing investments to in-license and/or acquire additional technologies.
A change in the outcome of any of these or other variables with respect to the development of any of our 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 may need additional funds to meet operational needs and capital requirements associated with such operating plans. Cash Flows
The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below:
Nine Months Ended
2022 2021
Net cash used in operating activities$ (13,794,729 )
Net cash used in investing activities (20,968,717 ) - Net cash (used in) provided by financing activities (204,769 )
41,093,671
Net (decrease) increase in cash$ (34,968,215 ) $ 30,892,437
Net Cash Flows Used in Operating Activities
Net cash flows used in operating activities for the nine months endedSeptember 30, 2022 , totaled$13,794,729 , and consisted primarily of a net loss of$13,775,103 adjusted for non-cash stock compensation of$357,784 , non-cash consulting fees of$67,000 , a decrease of$825,419 in prepaid research and development, an increase in prepaid expenses and other assets of$996,801 , a decrease in accrued expenses and other current liabilities of$449,718 , a decrease in accounts payable of$308,555 , and an increase in grants receivable of$96,299 . 23 -------------------------------------------------------------------------------- Net cash flows used in operating activities for the nine months endedSeptember 30, 2021 , totaled$10,201,234 , and consisted primarily of a net loss of$9,744,444 adjusted for non-cash stock compensation of$1,266,026 , non-cash warrant expense of$658,945 , non-cash consulting fees of$60,391 , non-cash PPP loan forgiveness of$27,550 , a decrease in grants receivable of$217,482 , a decrease in prepaid expenses of$486,551 , a decrease of$509,975 in prepaid research and development, a decrease in accounts payable of$1,166,879 , an increase in accrued expenses of$1,272,076 , and a decrease in deferred revenue of$2,325,741 .
Cash Used in Investing Activities
Net cash flows used in investing activities for the nine months endedSeptember 30, 2022 , totaled$20,968,717 , of which$243,255 was used for the purchase of equipment and$20,725,462 was used for the purchase of marketable securities investments.
Cash Provided by Financing Activities
Net cash flows used in financing activities for the nine months endedSeptember 30, 2022 , totaled$204,769 , which primarily was from the full settlement of the CEO Note onJanuary 3, 2022 offset by proceeds from a stock option exercise.
Net cash flows provided by financing activities for the nine months ended
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Contractual Obligations and Commitments
InJune 2018 , the Company entered into a one-year, noncancelable operating lease for space inBoston, Massachusetts . The total lease obligation was$54,000 , payable in 12 equal monthly installments commencingAugust 1, 2018 . OnApril 18, 2022 , the Company entered into an operating lease agreement throughJuly 31, 2025 for its office space inLexington, Massachusetts to replace the office space inBoston, Massachusetts . The Company vacated theBoston office during the third quarter of 2022 without further contractual obligation. TheLexington space is expected to be ready for use and occupancy during the third quarter 2022. TheLexington lease contains escalating payments during the lease period. Upon execution of this lease agreement, the Company prepaid one month of rent, applied to the first month's rent, and a security deposit, which will be held in escrow and credited at the termination of the lease. Our total lease obligation is$444,366 , consisting of minimum annual rental obligations of$33,469 for fiscal year 2022,$145,836 for fiscal year 2023,$150,095 for fiscal year 2024 and$114,966 for fiscal year 2025.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States , or US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our 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. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Research and Development Expenses
We record research and development expenses to operations as incurred. Research
and development expenses represent costs incurred by us for the discovery and
development of our product candidates and the development of our RAMP™ drug
discovery program and prodrug technologies and include: employee-related
expenses, such as salaries, benefits, travel and non-cash stock-based
compensation expense; external research and development expenses incurred under
arrangements with third parties, such as CROs, preclinical testing
organizations, clinical testing organizations, CMOs, academic and non-profit
institutions and consultants; costs to acquire technologies to be used in
research and development that have not reached technological feasibility and
have no alternative future use; license fees; and other expenses, which include
direct and allocated expenses for laboratory, facilities and other costs.
As part of the process of preparing financial statements, we are required to
estimate and accrue expenses. A portion of our research and development expenses
is comprised of external costs, which we track on a program-specific basis. We
record the estimated expenses of research and development activities conducted
by third-party service providers as they are incurred and
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provided within research and development expense in the statements of
operations. These services include the conduct of clinical studies, preclinical
studies and consulting services. These costs are a significant component of our
research and development expenses.
Costs for research and development activities are recognized based on costs
incurred. We make significant judgments and estimates in determining the accrued
balance in each reporting period. As actual costs become known, we adjust our
accrued estimates. Although we do not expect our estimates to be materially
different from amounts actually incurred, our understanding of the status and
timing of services performed may vary from our estimates and could result in us
reporting amounts that are too high or too low in any particular period. Our
accrued expenses are dependent, in part, upon the receipt of timely and accurate
reporting from external clinical research organizations and other third-party
service providers. Due to the nature of estimates, we cannot assure you that we
will not make changes to our estimates in the future as we become aware of
additional information about the status or conduct of our clinical trials and
other research activities.
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