INOZYME PHARMA, INC. The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and the related notes appearing elsewhere in the Quarterly Report on Form 10-Q
and our Annual Report on Form 10-K for the year ended
Overview
We are a clinical-stage rare disease biopharmaceutical company developing novel therapeutics for the treatment of diseases of abnormal mineralization impacting the vasculature, soft tissue and skeleton. Through our in-depth understanding of the biological pathways involved in mineralization, we are pursuing the development of therapeutics to address the underlying causes of these debilitating diseases. It is well established that two genes, ENPP1 and ABCC6, play key roles in a critical mineralization pathway and that defects in these genes lead to abnormal mineralization. We are initially focused on developing a novel therapy to treat the rare genetic diseases of ENPP1 and ABCC6 Deficiencies.
Our lead product candidate, INZ-701, is a soluble, recombinant, genetically engineered, fusion protein that is designed to correct a defect in the mineralization pathway caused by ENPP1 and ABCC6 Deficiencies. This pathway is central to the regulation of calcium deposition throughout the body and is further associated with neointimal proliferation, or the overgrowth of smooth muscle cells inside blood vessels. We have generated robust preclinical proof of concept data demonstrating that in animal models INZ-701 prevented pathological calcification, led to improvements in overall health and survival and prevented neointimal proliferation. In addition, INZ-701 achieved survival benefit in a mouse model of ENPP1 Deficiency.
We are currently conducting Phase 1/2 clinical trials of INZ-701 for the
treatment of ENPP1 Deficiency and ABCC6 Deficiency. These clinical trials are
being, and will be, conducted in both
In
In
In
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In
Subject to successfully completing clinical development of INZ-701 in ENPP1 and ABCC6 Deficiencies, we plan to seek marketing approvals for INZ-701 on a worldwide basis. Beyond our development focus on INZ-701, we believe that our therapeutic approach has the potential to benefit patients suffering from additional diseases of abnormal mineralization, including those without a clear genetic basis, such as calciphylaxis. In the fourth quarter of 2022, we plan to finalize the regulatory pathway which will allow us to initiate a clinical trial of INZ-701 in calciphylaxis. We are also exploring the potential for development of a gene therapy for ENPP1 Deficiency.
Our Operations
We have not yet commercialized any products or generated any revenue from
product sales. Our operations to date have been limited to organizing and
staffing our company, business planning, raising capital, securing intellectual
property rights, conducting research and development activities, including
preclinical studies and early-stage clinical trials, establishing arrangements
for the manufacture of INZ-701 and longer term planning for potential
commercialization. To date, we have funded our operations primarily with
proceeds from the sales of convertible preferred stock, offerings of common
stock and pre-funded warrants and borrowings under our loan and security
agreement, or the Loan Agreement, with
Uncertainty remains as to the potential impact of COVID-19 on our future
research and development activities and the potential for a material impact on
the Company increases the longer the virus impacts certain aspects of economic
activity around the world. The full extent to which COVID-19 will directly or
indirectly impact our business, results of operations and financial condition,
including our ability to fulfill our clinical trial enrollment needs, will
depend on future developments that are highly uncertain, including as a result
of new information that may emerge concerning COVID-19 and the actions taken to
contain it or treat COVID-19, as well as the economic impact on local, regional,
national and international markets, the ultimate geographic spread of the
disease, the duration of the pandemic, travel restrictions and social distancing
in
Since inception, we have incurred significant operating losses. Our ability to
generate revenue from product sales sufficient to achieve profitability will
depend heavily on the successful development and eventual commercialization of
INZ-701 or one or more of our future product candidates and programs. Our net
losses were
Our operating expenses were
As a result, we will need to obtain substantial additional funding to support our continuing operations. Until such time, if ever, as we can generate significant revenues from product sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution and licensing arrangements. We do not have any committed external source of funds, other than under our Loan Agreement. Our ability to borrow under our Loan Agreement is subject to our satisfaction of specified conditions and lender discretion. If we are unable to raise capital or obtain adequate funds when
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needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our research and development efforts.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or even continue our operations.
As of
On
On
The facility carries a 48-month term with interest only payments for 36 months
and then interest and equal principal payments for the next 12 months. The term
loan will mature on
Subject to certain conditions, we granted the Lenders the right, prior to
repayment of the term loans, to invest up to
We believe that our existing cash, cash equivalents and short-term investments
as of
To finance our operations beyond that point, we will need to raise additional capital, which cannot be assured.
We anticipate that our expenses will increase substantially if and as we:
•
conduct our ongoing Phase 1/2 clinical trials of INZ-701 for ENPP1 Deficiency and ABCC6 Deficiency;
•
prepare for, initiate and conduct later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies;
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•
conduct research and preclinical testing of INZ-701 for additional indications;
•
conduct research and preclinical testing of other product candidates;
•
advance INZ-701 for additional indications or any other product candidate into clinical development;
•
seek marketing approval for INZ-701 or any other product candidate if it successfully completes clinical trials;
•
scale up our manufacturing processes and capabilities;
•
establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;
•
in-license or acquire additional technologies or product candidates;
•
make any payments to
•
maintain, expand, enforce and protect our intellectual property portfolio;
•
hire additional clinical, regulatory, quality control and scientific personnel; and
•
add operational, financial and management information systems and personnel, including personnel to support our research, product development and planned future commercialization efforts and our operations as a public company.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If development efforts for our product candidates are successful and result in regulatory approval or we enter into collaboration or similar agreements with third parties, we may generate revenue from those product candidates.
Research and Development Expenses
Research and development expenses primarily consist of costs incurred in connection with the discovery and development of our lead product candidate, INZ-701.
We expense research and development costs as incurred. These expenses include:
•
fees and expenses incurred in connection with the in-license of technology and intellectual property rights;
•
expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct research, preclinical and clinical activities on our behalf as well as third parties that manufacture our product candidates for use in our preclinical studies and planned clinical trials;
•
manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical trial materials, including manufacturing validation batches;
•
employee-related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;
•
the costs of laboratory supplies and acquiring, developing preclinical studies and clinical trial materials;
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•
costs related to compliance with regulatory requirements; and
•
facilities costs, which include depreciation costs of equipment and allocated expenses for rent, utilities and other operating costs.
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
Research and development activities are central to our business model. We are
still in the early stages of development of INZ-701. We are currently conducting
our Phase 1/2 clinical trials of INZ-701 for ENPP1 Deficiency and ABCC6
Deficiency. Product candidates in later stages of clinical development generally
have higher development costs than those in preclinical development or in
earlier stages of clinical development, primarily due to the increased size and
duration of later-stage clinical trials. From inception through
The successful development of INZ-701 and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any product candidate. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving marketing approval for any of our product candidates. The success of INZ-701 and any other product candidate we develop will depend on a variety of factors, including:
•
successfully completing preclinical studies and initiating clinical trials;
•
successfully enrolling patients in and completing clinical trials;
•
scaling up manufacturing processes and capabilities to support clinical trials of INZ-701 and any other product candidates we develop;
•
applying for and receiving marketing approvals from applicable regulatory authorities;
•
obtaining and maintaining intellectual property protection and regulatory exclusivity for INZ-701 and any other product candidates we develop;
•
making arrangements for commercial manufacturing capabilities;
•
establishing sales, marketing and distribution capabilities and launching commercial sales of INZ-701 and any other product candidates we develop, if and when approved, whether alone or in collaboration with others;
•
acceptance of INZ-701 and any other product candidates we develop, if and when approved, by patients, the medical community and third-party payors;
•
effectively competing with other therapies;
•
obtaining and maintaining coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;
•
maintaining, enforcing, defending and protecting our rights in our intellectual property portfolio;
•
not infringing, misappropriating or otherwise violating others' intellectual property or proprietary rights; and
•
maintaining a continued acceptable safety profile of our products following receipt of any marketing approvals.
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A change in the outcome of any of these variables with respect to the development, manufacture or commercialization activities of any of our product candidates could mean a significant change in the costs, timing and viability associated with the development of that product candidate. For example, if we are required to conduct additional clinical trials or other testing beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related
benefits, travel and stock-based compensation expense for personnel in
executive, finance and administrative functions. General and administrative
expenses also include professional fees for legal, consulting, accounting, tax
and audit services, and information technology infrastructure costs. We
anticipate that our general and administrative expenses will increase in the
future as we increase our headcount to support our continued research activities
and development of our product candidates. We incur and anticipate that we will
continue to incur costs associated with being a public company, including costs
of accounting, audit, legal, regulatory, compliance and tax-related services
related to maintaining compliance with requirements of Nasdaq and the
Interest Income
Interest income consists of income from bank deposits and investments.
Other Income (Expense), net
Other income (expense), net primarily consists of foreign exchange gains or losses.
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
June 30,
Increase
2022 2021 (Decrease)
Operating expenses:
Research and development $ 10,007 $ 8,220 $ 1,787
General and administrative 5,384 4,435 949
Total operating expenses 15,391 12,655 2,736
Loss from operations (15,391 ) (12,655 ) 2,736
Other income (expense):
Interest income 321 58 263
Other (expenses) income (191 ) 57 (248 )
Other income, net 130 115 15
Net loss $ (15,261 ) $ (12,540 ) $ 2,721 Research and Development Expense
Research and development expense increased by
We expect that our research and development expenses will increase for the foreseeable future as we conduct clinical trials of INZ-701, prepare for, initiate and conduct later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6
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Deficiencies, further scale our manufacturing processes and advance development of INZ-701 for additional indications or potentially additional product candidates.
General and Administrative Expense
General and administrative expense increased by
Interest Income
Interest income for the three months ended
Other (Expenses) Income
Other expenses, consisting primarily of foreign exchange gains and losses, for
the three months ended
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended
June 30,
Increase
2022 2021 (Decrease)
Operating expenses:
Research and development $ 21,821 $ 14,823 $ 6,998
General and administrative 10,409 8,804 1,605
Total operating expenses 32,230 23,627 8,603
Loss from operations (32,230 ) (23,627 ) 8,603
Other income (expense):
Interest income 381 121 260
Other expense (296 ) (84 ) 212
Other income, net 85 37 48
Net loss $ (32,145 ) $ (23,590 ) $ 8,555 Research and Development Expense
Research and development expense increased by
We expect that our research and development expenses will increase for the foreseeable future as we conduct clinical trials of INZ-701, prepare for, initiate and conduct later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies, further scale our manufacturing processes and advance development of INZ-701 for additional indications or potentially additional product candidates.
General and Administrative Expense
General and administrative expense increased by
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general and administrative expenses will increase in future periods as we expand our operations and incur costs in connection with being a public company.
Interest Income
Interest income for the six months ended
Other Expenses
Other expenses, consisting primarily of foreign exchange gains and losses, for
the six months ended
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Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue and have incurred
significant operating losses and negative cash flows from our operations. To
date, we have funded our operations primarily with proceeds from the sales of
convertible preferred stock, offerings of common stock and pre-funded warrants
and borrowings under our Loan Agreement. Through
On
In
In
The facility carries a 48-month term with interest only payments for 36 months
and then interest and equal principal payments for the next 12 months. The term
loan will mature on
The Lenders may elect at any time following the closing and prior to the full
repayment of the term loans to convert any portion of the principal amount of
the term loans then outstanding, up to an aggregate of
Subject to certain conditions, we granted the Lenders the right, prior to
repayment of the term loans, to invest up to
Cash in excess of immediate requirements is invested primarily with a view to
liquidity and capital preservation. The following table provides information
regarding our total cash, cash equivalents and short-term investments at
June 30, December 31,
2022 2021
Cash and cash equivalents $ 62,620 $ 23,316
Short-term investments 88,860 88,485
Total cash, cash equivalents and short-term investments
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Cash Flows
The following table provides information regarding our cash flows for the six
months ended
Six Months Ended
June 30,
2022 2021
Net cash used in operating activities $ (28,847 ) $ (22,409 )
Net cash (used in) provided by investing activities (364 ) 20,247
Net cash provided by financing activities 68,573 361
Net increase (decrease) in cash, cash equivalents and restricted cash
$ 39,362 $ (1,801 )
The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.
Net cash used in operating activities was
Net cash used in investing activities was
Net Cash Provided by Financing Activities
Net cash provided by financing activities of
Funding Requirements
We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct our ongoing Phase 1/2 clinical trials of INZ-701 for ENPP1 and ABCC6 Deficiencies, and continue research and development and initiate additional clinical trials of, and seek marketing approval for, INZ-701 and any other product candidate we develop. We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our preclinical activities and clinical trials. In addition, if we obtain marketing approval for INZ-701 or any other product candidates we develop, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our research and development efforts.
Our future capital requirements will depend on many factors, including:
•
the progress, costs and results of our ongoing Phase 1/2 clinical trials of INZ-701 for ENPP1 Deficiency and ABCC6 Deficiency and any future clinical development of INZ-701 for these indications;
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•
the scope, progress, costs and results of research, preclinical testing and clinical trials of INZ-701 for additional indications;
•
the number of and development requirements for additional indications for INZ-701 or for any other product candidates we develop;
•
our ability to scale up our manufacturing processes and capabilities;
•
the costs, timing and outcome of regulatory review of INZ-701 and any other product candidates we develop;
•
potential changes in the regulatory environment and enforcement rules;
•
our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;
•
the payment of license fees and other costs of our technology license arrangements;
•
the extent of our debt service obligations and our ability, if desired, to refinance any of our existing debt on terms that are more favorable to us;
•
the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for INZ-701 and any other product candidates we develop for which we may receive marketing approval;
•
the amount and timing of revenue, if any, received from commercial sales of INZ-701 and any other product candidates we develop for which we receive marketing approval;
•
potential changes in pharmaceutical pricing and reimbursement infrastructure;
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims; and
•
the extent to which we in-license or acquire additional technologies or product candidates.
As of
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. We will not generate commercial revenues unless and until we can achieve sales of products, which we do not anticipate for a number of years, if at all. Accordingly, we will need to obtain substantial additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all, and may be impacted by the economic climate and market conditions.
Until such time, if ever, as we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not have any committed external source of funds, other than under our Loan Agreement. Our ability to borrow under our Loan Agreement is subject to our satisfaction of specified conditions and lender discretion. To the extent that we raise additional capital through the sale of equity or convertible debt securities or to the extent the Lenders elect to convert a portion of their outstanding principal into shares of our common stock pursuant to the Loan Agreement, the ownership interests of our stockholders will be diluted, and the terms of any new securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include
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covenants limiting or restricting our operations and ability to take specific actions, such as incurring additional indebtedness, making acquisitions, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments or declaring dividends. The covenants under our Loan Agreement and the pledge of our assets as collateral limit our ability to take specific actions, including obtaining additional debt financing.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Critical Accounting 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 generally accepted accounting principles in
Contractual Obligations, Commitments and Contingencies
During the six months ended
For a description of the Loan Agreement entered into in
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and will do so until such time that we either (1) irrevocably elect to "opt out" of such extended transition period or (2) no longer qualify as an emerging growth company.
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