INTRA-CELLULAR THERAPIES, INC. The following discussion of the financial condition and results of our operations should be read in conjunction with the financial statements and the notes to those statements appearing elsewhere in this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses the fiscal years endedDecember 31, 2021 and 2020 items and year to year comparisons between the fiscal years endedDecember 31, 2021 and 2020. The discussion around results of operations for the fiscal year endedDecember 31, 2019 and a comparison of our results for the fiscal years endedDecember 31, 2020 and 2019 is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for fiscal year endedDecember 31, 2020 , filed with theSEC onFebruary 25, 2021 . Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the Risk Factors set forth in Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on the discovery, clinical development and commercialization of innovative, small molecule drugs that address underserved medical needs primarily in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system, or CNS. InDecember 2019 , CAPLYTA (lumateperone) was approved by theU.S. Food and Drug Administration , or FDA, for the treatment of schizophrenia in adults (42mg/day) and we initiated the commercial launch of CAPLYTA in lateMarch 2020 . In support of our commercialization efforts, we employ a national sales force. InDecember 2021 , CAPLYTA was approved by the FDA for the treatment of bipolar depression in adults (42mg/day). CAPLYTA is the only FDA-approved treatment for depressive episodes associated with bipolar I or II disorder (bipolar depression) in adults as monotherapy and as adjunctive therapy with lithium or valproate. We initiated the commercial launch of CAPLYTA for the treatment of bipolar depression in lateDecember 2021 . In support of the commercial launch of lumateperone for the treatment of bipolar depression, we have expanded our sales force from approximately 240 sales representatives to approximately 320 sales representatives. As used in this report, "CAPLYTA" refers to lumateperone approved by the FDA for the treatment of schizophrenia in adults and for the treatment of bipolar depression in adults, and "lumateperone" refers to, where applicable, CAPLYTA as well as lumateperone for the treatment of indications beyond schizophrenia and bipolar depression.
Lumateperone is in Phase 3 clinical development as a novel treatment for major depressive disorder, or MDD. Patient enrollment in Study 501 and Study 502, our global Phase 3 clinical trials evaluating lumateperone 42 mg as an adjunctive therapy to antidepressants for the treatment of MDD has commenced. We expect to file an sNDA with the FDA for approval of lumateperone as an adjunctive therapy to antidepressants for the treatment of MDD in 2024. In the first quarter of 2020, as part of our lumateperone bipolar depression clinical program, we initiated our third monotherapy Phase 3 study, Study 403, evaluating lumateperone as monotherapy in the treatment of major depressive episodes associated with Bipolar I or Bipolar II disorder. Following the positive results in our adjunctive study that was part of our bipolar depression clinical program, Study 402, we amended Study 403 to evaluate major depressive episodes with mixed features in bipolar disorder in patients with Bipolar I or Bipolar II disorder and mixed features in patients with MDD. We expect to complete Study 403 in the second half of 2022 and following completion we intend to discuss the results with the FDA to determine whether Study 403, as amended, will provide supportive data for a potential future regulatory filing for this indication.
We have also initiated a Phase 3 study evaluating lumateperone for the prevention of relapse in patients with schizophrenia. The study is being conducted in five phases consisting of a screening phase, a 6-week, open-
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label run-in phase during which all patients will receive 42 mg of lumateperone per day, a 12-week, open-label stabilization phase during which all patients will receive 42 mg of lumateperone per day; a double-blind treatment phase 26 weeks in duration during which patients receive either 42 mg of lumateperone per day or placebo (1:1 ratio) and a 2-week safety follow-up phase. This study is being conducted in accordance with our post approval marketing commitment to the FDA in connection with the approval of CAPLYTA for the treatment of schizophrenia as is typical for antipsychotics.
Within the lumateperone portfolio, we are also developing a long-acting
injectable, or LAI, formulation to provide more treatment options to patients
suffering from mental illness. We have completed the preclinical development of
an LAI formulation and in
We are developing
ITI-1284-ODT-SL
for the treatment of behavioral disturbances in patients with dementia, the
treatment of dementia-related psychosis and for the treatment of certain
depressive disorders, in the elderly.
ITI-1284-ODT-SL
is a deuterated form of lumateperone, a new molecular entity formulated as an
oral disintegrating tablet for sublingual administration.
ITI-1284-ODT-SL
is formulated as an oral solid dosage form that dissolves almost instantly when
placed under the tongue, allowing for ease of use in the elderly and may be
particularly beneficial for patients who have difficulty swallowing conventional
tablets. Phase 1 single and multiple ascending dose studies in healthy
volunteers and healthy elderly volunteers (> than 65 years of age) evaluated the
safety, tolerability and pharmacokinetics of
ITI-1284-ODT-SL.
In these studies, there were no reported serious adverse events in either age
group. In the elderly cohort, reported adverse events were infrequent with the
most common adverse event being transient dry mouth (mild). Based on these
results, we have initiated our program evaluating
ITI-1284-ODT-SL
for the treatment of agitation in patients with probable Alzheimer's disease. We
are in discussions with the FDA regarding the
non-clinical
toxicological profile of
ITI-1284-ODT-SL.
The FDA has informed us that they do not believe the deuterated and undeuterated
forms of lumateperone are identical. As a result, the
non-clinical
data from lumateperone may not be broadly applied to
ITI-1284-ODT-SL
and we may be required to conduct additional toxicology studies in
non-rodent
species and this could delay the commencement of our clinical program. We expect
to commence clinical conduct in this program in 2022. Additional studies in
dementia-related psychosis, and certain depressive disorders in the elderly are
also planned for 2022.
We have another major program that has yielded a portfolio of compounds that
selectively inhibit the enzyme phosphodiesterase type 1, or PDE1. PDE1 enzymes
are highly active in multiple disease states and our PDE1 inhibitors are
designed to reestablish normal function in these disease states. Abnormal PDE1
activity is associated with cellular proliferation and activation of
inflammatory cells. Our PDE1 inhibitors ameliorate both of these effects in
animal models. We intend to pursue the development of our phosphodiesterase, or
PDE, program, for the treatment of aberrant immune system activation in several
CNS
and non-CNS conditions
with a focus on diseases where excessive PDE1 activity has been demonstrated and
increased inflammation is an important contributor to disease pathogenesis. Our
potential disease targets include heart failure, immune system regulation,
neurodegenerative diseases, cancers and
other non-CNS disorders. Lenrispodun (ITI-214)
is our lead compound in this program. Following the favorable safety and
tolerability results in our Phase 1 program, we initiated our development
program for lenrispodun for Parkinson's disease and commenced patient enrollment
in the third quarter of 2017 in a Phase 1/2 clinical trial of lenrispodun in
patients with Parkinson's disease to evaluate safety and tolerability in this
patient population, as well as motor
and non-motor exploratory
endpoints. In the fourth quarter of 2018, we announced that the Phase 1/2
clinical trial of lenrispodun has been completed
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and topline results demonstrated lenrispodun was generally well-tolerated with a favorable safety profile and clinical signs consistent with improvements in motor symptoms and dyskinesias. We have initiated our Phase 2 clinical program with lenrispodun for Parkinson's disease and expect to commence patient enrollment in the first half of 2022. In addition, in the second quarter of 2020, we announced topline results from Study ITI-214-104, a Phase 1/2 translational study of single ascending doses of lenrispodun in patients with chronic systolic heart failure with reduced ejection fraction. In this study, lenrispodun improved cardiac output by increasing heart contractility and decreasing vascular resistance. Agents that both increase heart contractility (inotropism) and decrease vascular resistance (vasodilation) are called inodilators. Inodilators in current clinical use are associated with the development of arrhythmias, which are abnormal heart rhythms that when serious can impair heart function and lead to mortality. Lenrispodun, which acts through a novel mechanism of action, was not associated with arrhythmias in this study and was generally well-tolerated in all patients. We also have a development program with our ITI-333 compound as a potential treatment for substance use disorders, pain and psychiatric comorbidities including depression and anxiety. There is a pressing need to develop new drugs to treat opioid addiction and safe, effective, non-addictive treatments to manage pain. ITI-333 is a novel compound that uniquely combines activity as an antagonist at serotonin 5-HT2A receptors and a partial agonist at µ-opioid receptors. These combined actions support the potential utility of ITI-333 in the treatment of opioid use disorder and associated comorbidities (e.g., depression, anxiety, sleep disorders) without opioid-like safety and tolerability concerns. InDecember 2020 , we initiated a Phase 1 single ascending dose study evaluating the safety, tolerability and pharmacokinetics of ITI-333 in healthy volunteers. This study was recently completed and ITI-333 achieved plasma exposures at or above those required for efficacy and was generally safe and well-tolerated. We have received a grant from theNational Institute on Drug Abuse under the Helping to End Addiction Long-term Initiative, or NIH HEAL Initiative, that we expect will fund a significant portion of the early stage clinical development costs associated with this program.
We have assembled a management team with significant industry experience to lead the commercialization of our product and the discovery, development and potential commercialization of our product candidates. We complement our management team with a group of scientific and clinical advisors that includes recognized experts in the fields of schizophrenia, bipolar depression and other CNS disorders.
COVID-19
InDecember 2019 , a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019 (COVID-19), surfaced inWuhan, China . Since then, SARS-CoV-2 and COVID-19 have spread to countries worldwide, includingthe United States . The COVID-19 pandemic continues to evolve, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. In response to the spread of SARS-CoV-2 and COVID-19, we have instructed the majority of our office-based employees to work from home. In connection with our commercial launch of CAPLYTA, which is approved by FDA for the treatment of schizophrenia and bipolar depression in adults, our commercial organization and sales force and medical organization are having significantly reduced personal interactions with physicians and customers and continue to conduct many promotional activities virtually, and elected to cease in-person interactions with physicians and customers entirely for some period of time in the interest of employee and community safety. Even though certain of our sales force and medical organization are having personal interactions with physicians and customers, we may have to cease such personal interactions depending on the COVID-19 situation. In addition, the COVID-19 situation has resulted in a decrease in the number of patient visits to healthcare providers. As a result of the COVID-19 pandemic, or similar pandemics, we may experience disruptions that could severely impact our business, including our ability to successfully commercialize our only commercial product, CAPLYTA, inthe United States , and these disruptions could negatively impact our sales of CAPLYTA. Business interruptions from the current or future pandemics may also adversely impact the third parties we rely on to sufficiently manufacture CAPLYTA and to produce our product candidates in quantities we require, which may impair the commercialization and our research and development activities. 59
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We conduct clinical trials for our product candidates in many countries, includingthe United States ,Europe andRussia and may expand to other geographies. Timely enrollment of, completion of and reporting on our clinical trials is dependent upon these global clinical trial sites which are, or in the future may be, adversely affected by the COVID-19 pandemic or other pandemics. Some factors from the COVID-19 pandemic that have or may adversely affect the timing and conduct of our clinical trials and adversely impact our business generally, include but are not limited to delays or difficulties in clinical site initiation, patient enrollment, diversion of healthcare resources away from clinical trials to pandemic concerns, limitations on travel, regulatory delays and supply chain disruptions. In response to the COVID-19 pandemic, inMarch 2020 , the FDA announced its intention to temporarily postpone most inspections of foreign manufacturing facilities and products, as well as routine surveillance inspections of domestic manufacturing facilities, and it also provided guidance regarding the conduct of clinical trials, which has been further updated several times since that time. In mid-2020, the FDA noted it was continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals and conducting mission-critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards. The FDA subsequently publicized its development and use of an internal rating system called the COVID-19 Advisory Rating system, to assist in determining when and where it is safest to conduct such inspections based on data about the virus's trajectory in a given country, state and locality and the rules and guidelines that are put in place by foreign, state and local governments. As ofOctober 2021 , FDA is either continuing to, on a case-by-case basis, conduct only "mission-critical" inspections, or, where possible to do so safely, resuming prioritized domestic inspections, which generally include pre-approval inspections, or PAIs. Foreign PAIs that are not deemed mission-critical remain postponed, while those deemed mission-critical will be considered for inspection on a case-by-case basis. FDA will use similar data to inform resumption of other prioritized operations abroad as it becomes feasible and advisable to do so. During the global response to the COVID-19 pandemic, moreover, there have been strategic redeployments of government resources to priority projects, including FDA and EMA resources and staff, which could have an impact on the timeline for review and approval of new marketing applications. Over the course of the pandemic,FDA's new drug review programs continued to meet key performance goals related to working with applicants and approving NDAs and NDA supplements, although the agency has also stated that the uncertainty of the COVID-19 situation may make it difficult to sustain that level of performance indefinitely. The FDA may not be able to maintain its normal pace with respect to new drug applications and delays or setbacks are possible in the future. The FDA has told industry that it intends to be as transparent as possible about its workload and performance metrics as the situation evolves, and also that it intends to communicate proactively with applicants during the review cycle regarding the need for a pre-approval inspection and whether such PAI is considered "mission-critical."
Should FDA determine that a PAI is necessary for approval of an NDA or NDA supplement and such an inspection cannot be completed during the review cycle due to restrictions on travel or other safety protocols, FDA has stated that it generally intends to issue a complete response letter. Further, if there is inadequate information to make a determination on the acceptability of a facility, FDA may defer action on the application until an inspection can be completed. Such decisions will be based on the totality of the information available to the FDA, including considerations of whether it can obtain existing inspection reports from trusted foreign regulatory partners through mutual recognition and confidentiality agreements and/or secure additional records from the applicant, the manufacturing facility, or other inspected entities. Accordingly, FDA has encouraged applicants to effectively communicate with all their facilities and sites to ensure timely responses to any inquiries from FDA for information needed to support its assessment of pending drug applications. FDA has also stated that it is using all available tools and sources of information to support regulatory decisions on NDAs such as the historical compliance status of a manufacturing facility and other risk-benefit considerations pertaining to the proposed new drug product and its manufacturing process and facilities. In addition, whether or not FDA considers a facility inspection to be "mission-critical" involves several factors related to the public health
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benefits of the proposed new drug product, including but not limited to whether
the candidate has been granted breakthrough therapy designation and whether the
candidate is intended to treat or prevent a serious disease or medical condition
for which there is no other appropriate substitute. Regulatory authorities
outside
The COVID-19 pandemic continues to rapidly evolve, and the severity and duration of the pandemic remain uncertain. The extent to which the pandemic impacts our business, including our commercial results, clinical trials, and preclinical studies will depend on future developments, which are highly uncertain.
Results of Operations
The following discussion summarizes the key factors our management believes are necessary for an understanding of our financial statements.
Revenues
Net revenues from product sales consist of sales of CAPLYTA, which was approved
by the FDA for the treatment of schizophrenia in adults in
We do not expect any revenues that we may generate in the next few years to be significant enough to completely fund our operations.
Expenses
The process of researching, developing and commercializing drugs for human use is lengthy, unpredictable and subject to many risks. We are unable with certainty to estimate either the costs or the timelines in which those costs will be incurred. The costs associated with the commercialization of CAPLYTA will be substantial and will be incurred prior to our generating sufficient revenue to offset these costs. Costs for the clinical development of lumateperone for the treatment of MDD consumes and, together with our anticipated clinical development programs for lenrispodun, will continue to consume a large portion of our current, as well as projected, resources. We intend to pursue other disease indications that lumateperone may address, but there are significant costs associated with pursuing FDA approval for those indications, which would include the cost of additional clinical trials.
Our PDE program has a compound, lenrispodun (ITI-214), in Phase 1/2 development. We intend to pursue the development of our PDE program, including lenrispodun for the treatment of several CNS and non-CNS conditions. We have ongoing development programs for lenrispodun for Parkinson's disease. Our other projects are still in the preclinical stages, and will require extensive funding not only to complete preclinical testing, but to commence and complete clinical trials. Expenditures that we incur on these projects will be subject to availability of funding in addition to the funding required for the advancement of lumateperone. Any failure or delay in the advancement of lumateperone could require us to re-allocate resources from our other projects to the advancement of lumateperone, which could have a material adverse impact on the advancement of these other projects and on our results of operations.
Our operating expenses are comprised of (i) costs of product sales; (ii) research and development expenses; (iii) general and administrative expenses and (iv) selling expenses.
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Costs of product sales are comprised of:
• direct costs of formulating, manufacturing and packaging drug product;
• overhead costs consisting of labor, share-based compensation, shipping,
outside inventory management and other miscellaneous operating costs; and
• royalty payments on product sales.
Our research and development costs are comprised of:
• internal recurring costs, such as costs relating to labor and fringe
benefits, materials, supplies, facilities and maintenance; and
• fees paid to external parties who provide us with contract services, such
as
pre-clinical
testing, manufacturing and related testing, clinical trial activities and
license milestone payments.
Selling expenses are incurred in three major categories:
• salaries and related benefit costs of a dedicated sales force; • sales operation costs; and • marketing and promotion expenses.
General and administrative expenses are incurred in three major categories:
• salaries and related benefit costs; • patent, legal, and professional costs; and • office and facilities overhead. Product sold throughDecember 31, 2021 consisted of drug product that was previously charged to research and development expense prior to FDA approval of CAPLYTA and other direct, indirect, and overhead costs required to make final product for sale. Because the Company's prior policy did not allow for the capitalization of pre-approval product, the cost of drug product sold is lower than it would have been and has a positive impact on our cost of product sales for the years endedDecember 31, 2021 and 2020. The Company's reported cost of product sales as a percentage of product sales, net was 9.8% or approximately$8.0 million for the year endedDecember 31, 2021 , as compared to 8.4% or approximately$1.9 million for the year endedDecember 31, 2020 , of which more than half related to royalty payments accrued to BMS.
We will expect to continue to have this favorable impact on cost of product sales and related product gross margins until our sales of CAPLYTA include drug product that is manufactured entirely after the FDA approval. We are currently unable to estimate how long it will be until we begin selling product entirely manufactured post FDA approval.
We expect that research and development expenses will increase as we proceed
with our clinical trials, increased manufacturing of drug product for clinical
trials
and pre-clinical
development activities. We also expect that our selling, general and
administrative costs will increase from prior periods primarily due to costs
associated with promotional activities to support the commercial sales of
CAPLYTA as well as cost associated with building and maintaining infrastructure,
which will include hiring additional personnel and increasing technological
capabilities. We granted significant shared-based awards in 2020 and 2021. We
expect to continue to grant share-based awards in the future due to our growing
employee base, which will increase our share-based compensation expense in
future periods.
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The following table sets forth our revenues, operating expenses, interest income, net and income tax expense for the years endedDecember 31, 2021 , 2020 and 2019 (in thousands): For the Year Ended December 31, 2021 2020 2019 Revenues, net$ 83,803 $ 22,813 $ 61 Expenses Cost of product sales 8,035 1,895 - Research and development 88,845 65,782 89,125
Selling, general and administrative 272,611 186,364 64,948
Total costs & expenses 369,491 254,041 154,073 Loss from operations (285,688 ) (231,228 ) (154,012 ) Interest income, net 1,568 4,235 6,292 Income tax expense (6 ) (13 ) (2 ) Net loss$ (284,126 ) $ (227,006 ) $ (147,722 )
Comparison of Years Ended
Total Revenues, Net
Total revenues, net for the year ended
Cost of Product Sales
Cost of product sales was approximately
We will continue to have a lower cost of product sales that excludes the cost of the drug product that was incurred prior to FDA approval until our sales of CAPLYTA include drug product that is entirely manufactured after the FDA approval. We expect that this will be the case for the near-term and as a result, our cost of product sales will be less than we anticipate it will be in future periods.
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Research and Development Expenses
2021 2020
External costs $ 53,166 $ 38,791
Internal costs 35,679 26,991
$ 48,633 $ 32,884
Manufacturing costs of drug candidates 4,960 5,585 Share- based compensation
11,456 8,415
Other projects and overhead 23,796 18,898
Research and development expenses increased to$88.8 million for the year endedDecember 31, 2021 as compared to$65.8 million for the year endedDecember 31, 2020 , representing an increase of approximately$23.0 million , or 35%. This increase is due primarily to an increase of$15.7 million for lumateperone clinical trial and other costs, approximately$4.9 million for other projects and overhead, including the ITI-1284, ITI-214, and ITI-333 programs, among others, and approximately$3.0 million for share-based compensation expense. Internal costs increased by approximately$8.7 million for the period due primarily to labor related costs and share-based compensation. As the development of lumateperone progresses, we anticipate research and development costs for lumateperone programs to increase moderately due primarily to conducting ongoing and planned Phase 3 and other clinical trials relating to our lumateperone programs in the next several years. We are also required to complete non-clinical testing to obtain FDA approval and manufacture material needed for clinical trial use, which includes non-clinical testing of the drug product and drug product in anticipation of possible additional FDA approvals of lumateperone for indications beyond schizophrenia and bipolar depression.
As of
We currently have several projects, in addition to lumateperone, that are in the research and development stages. We have used internal resources and incurred expenses not only in relation to the development of lumateperone, but also in connection with these additional projects as well, including our PDE program. We have not, however, reported these costs on a project-by-project basis, as these costs are broadly spread among these projects. The external costs for these projects have been modest and are reflected in the table above in this section "- Research and Development Expenses ."
The research and development process necessary to develop a pharmaceutical
product for commercialization is subject to extensive regulation by numerous
governmental authorities in
• completion of extensive
pre-clinical
laboratory tests, animal studies, and formulation studies in accordance
with the FDA's Good Laboratory Practice, or GLP, regulations;
• submission to the FDA of an Investigational New Drug application, or IND,
for human clinical testing, which must become effective before human
clinical trials may begin;
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• performance of adequate and well-controlled human clinical trials to
establish the safety and efficacy of the drug for each proposed
indication;
• submission to the FDA of a New Drug Application, or NDA, after completion
of all clinical trials;
• satisfactory completion of an FDA
pre-approval
inspection of the manufacturing facility or facilities at which the
active pharmaceutical ingredient, or API, and finished drug product are
produced and tested to assess compliance with current Good Manufacturing
Practices, or cGMPs;
• satisfactory completion of FDA inspections of clinical trial sites to
assure that data supporting the safety and effectiveness of product
candidates has been generated in compliance with Good Clinical Practices;
and
• FDA review and approval of the NDA prior to any commercial marketing or
sale of the drug in the United States .
The successful development of our product candidates and the approval process
requires substantial time, effort and financial resources, and is uncertain and
subject to a number of risks. We cannot be certain that any of our product
candidates will prove to be safe and effective, will meet all of the applicable
regulatory requirements needed to receive and maintain marketing approval, or
will be granted marketing approval on a timely basis, if at all. Data from
pre-clinical
studies and clinical trials are susceptible to varying interpretations that
could delay, limit or prevent regulatory approval or could result in label
warnings related to or recalls of approved products. We, the FDA, or other
regulatory authorities may suspend clinical trials at any time if we or they
believe that the subjects participating in such trials are being exposed to
unacceptable risks or if such regulatory agencies find deficiencies in the
conduct of the trials or other problems with our product candidates. Other risks
associated with our product candidates are described in the section entitled
"Risk Factors" in this Annual Report on
Form 10-K.
Selling, General and Administrative Expenses
Selling, general and administrative costs for the year ended
Selling costs were
General and administrative expenses for the year ended
We expect selling, general and administrative costs to increase in 2022 as compared to the year endedDecember 31, 2021 . We are expanding post approval marketing, including increased efforts to educate physicians due to the limitations related to the COVID-19 virus pandemic and market access efforts as well as our administrative infrastructure. 65
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Interest Income
Interest income has decreased to approximately
Income Taxes
In
Liquidity and Capital Resources
Through
As ofDecember 31, 2021 , we had a total of approximately$413.7 million in cash and cash equivalents and available-for-sale investment securities, including$1.4 million in restricted cash, and approximately$53.4 million of short-term liabilities consisting entirely of liabilities from operations, including approximately$6.7 million of short-term lease obligations. In the year endedDecember 31, 2021 , we spent approximately$348.8 million in cash for operations and equipment. We have sources of cash which included$87.3 million of collected product sales and$1.6 million of interest income, resulting in net cash used in operations of$259.9 million . The use of cash was primarily for selling and marketing costs in connection with our commercial launch of CAPLYTA, conducting clinical trials and non-clinical testing, product manufacturing, and funding recurring operating expenses.
In
Based on our current operating plans, we expect that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of this Annual Report. During that time, we expect that our expenses will increase substantially due primarily to our commercialization activities and related infrastructure expansion in connection with the commercialization of CAPLYTA for the treatment of schizophrenia and for the treatment of bipolar depression; the development of lumateperone in our late stage clinical programs; the development of our other product candidates, including lenrispodun; the continuation of manufacturing activities for anticipated future sales of product and in connection with the development of lumateperone; and general operations.
For 2022, we expect to spend up to
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manufacturing and inventory production, expansion of our administrative infrastructure and other development activities. Our other development activities will include efforts related to our ITI-1284, lenrispodun and ITI-333 programs, among others. However, the COVID-19 pandemic may negatively impact our commercialization of CAPLYTA, our ability to complete our ongoing or planned nonclinical and clinical trials, our ability to obtain approval of any product candidates from the FDA or other regulatory authorities, and our workforce and therefore our research, development and commercialization activities. This may ultimately have a material adverse effect on our liquidity, although we are unable to make any prediction with certainty given the rapidly changing nature of the pandemic and governmental and other responses to it. We may require significant additional financing in the future to continue to fund our operations. We believe that we have the funding in place to commercialize CAPLYTA in patients with schizophrenia and bipolar depression. We also plan to fund additional clinical trials of lumateperone for the treatment of depressive disorders and other CNS disorders; preclinical and clinical development of our ITI-007 long acting injectable development program; additional clinical trials of lumateperone; clinical development of ITI-1284, continued clinical development of our PDE product candidates, including lenrispodun; research and preclinical development of our other product candidates; and the continuation of manufacturing activities in connection with the development of lumateperone. We may require additional funds for further development of lumateperone in patients with depressive disorders and other indications, and for development of our other product candidates. We have incurred losses in every year since inception with the exception of 2011, when we received an up-front fee and a milestone payment related to a license agreement that has been terminated. These losses have resulted in significant cash used in operations.
In the year ended
We seek to balance the level of cash, cash equivalents and investments on hand with our projected needs and to allow us to withstand periods of uncertainty relative to the availability of funding on favorable terms. Until we can generate significant revenues from operations, we will need to satisfy our future cash needs through public or private sales of our equity securities, sales of debt securities, incurrence of debt from commercial lenders, strategic collaborations, licensing a portion or all of our product candidates and technology and, to a lesser extent, grant funding. OnAugust 30, 2019 , we filed a universal shelf registration statement on Form S-3, which was declared effective by theSEC onSeptember 12, 2019 , on which we registered for sale up to$350 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, which included up to$75 million of common stock that we could issue and sell from time to time, throughSVB Leerink LLC acting as our sales agent, pursuant to the sale agreement that we entered into withSVB Leerink onAugust 29, 2019 for our "at-the-market" equity program. In the quarter endedJune 30, 2020 , we sold 230,000 shares of common stock under our "at-the-market" equity program which resulted in our receiving net proceeds of$5.6 million inJuly 2020 . In the quarter endedSeptember 30, 2020 , we issued an additional 512,791 shares of common stock under our "at-the-market" equity program and received approximately$12.3 million of net proceeds. OnSeptember 10, 2020 , we terminated the "at-the-market" equity program agreement withSVB Leerink LLC . OnJanuary 6, 2020 , we filed an automatic shelf registration statement on Form S-3 with theSEC , which became effective upon filing, on which we registered for sale an unlimited amount of any combination of its common stock, preferred stock, debt securities, warrants, rights, and/or units from time to time and at prices and on terms that we may determine, so long as we continue to satisfy the requirements of a "well-known seasoned issuer" underSEC rules. These registration statements will remain in effect for up to three years from the respective dates they became effective. 67
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We cannot be sure that future funding will be available to us when we need it on terms that are acceptable to us, or at all. We sell securities and incur debt when the terms of such transactions are deemed favorable to us and as necessary to fund our current and projected cash needs. The amount of funding we raise through sales of our common stock or other securities depends on many factors, including, but not limited to, the magnitude of sales of CAPLYTA, the status and progress of our product development programs, projected cash needs, availability of funding from other sources, our stock price and the status of the capital markets. Due to the volatile nature of the financial markets, equity and debt financing may be difficult to obtain. Additionally, the continued spread of COVID-19 and uncertain market conditions may limit our ability to access any financing. In addition, any unfavorable results in the commercialization of CAPLYTA and unfavorable development or delay in the progress of our lumateperone program could have a material adverse impact on our ability to raise additional capital.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances 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 to grant licenses on terms that may not be favorable to us.
If adequate funds are not available to us on a timely basis, we may be required to: (1) delay, limit, reduce or terminate nonclinical studies, clinical trials or other clinical development activities for one or more of our product candidates, including our lead product candidate lumateperone, lenrispodun, and our other product candidates; (2) delay, limit, reduce or terminate our discovery research or pre-clinical development activities; (3) enter into licenses or other arrangements with third parties on terms that may be unfavorable to us or sell, license or relinquish rights to develop or commercialize our product candidates, technologies or intellectual property at an earlier stage of development and on less favorable terms than we would otherwise agree; or (4) limit or reduce commercialization efforts related to CAPLYTA.
Our cash is maintained in checking accounts, money market accounts, money market
mutual funds,
In 2014, we entered into a long-term lease with a related party which, as
amended, provided for a lease of 16,753 square feet of useable laboratory and
office space located at
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Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations
are based on our financial statements, which have been prepared in accordance
with accounting principles generally accepted in
We believe that the following critical accounting policy affects management's more significant judgments and estimates used in the preparation of our financial statements:
Research and Development, Including Clinical Trial Expenses
Except for payments made in advance of services, we expense our research and development costs as incurred. For payments made in advance, we recognize research and development expense as the services are rendered. Research and development costs primarily consist of salaries and related expenses for personnel and resources and the costs of clinical trials. Other research and development expenses include preclinical analytical testing, manufacturing of drug product, outside services, providers, materials and consulting fees.
Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by our vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be.
As part of the process of preparing our financial statements, we are required to
estimate expenses resulting from the obligations under contracts with vendors,
clinical research organizations and consultants and under clinical site
agreements in connection with conducting clinical trials. The financial terms of
these contracts are subject to negotiations, which vary from contract to
contract and may result in payment flows that do not match the periods over
which materials or services are provided under such contracts. Our objective is
to reflect the appropriate clinical trial expenses in our financial statements
by matching those expenses with the period in which services are performed and
efforts are expended. We account for these expenses according to the progress of
the clinical trial as measured by subject progression and the timing of various
aspects of the trial. We determine accrual estimates through financial models
taking into account various clinical information provided by vendors and
discussion with applicable personnel and outside service providers as to the
progress or state of consummation of trials, or the services completed. During
the course of a clinical trial, we adjust our clinical expense recognition if
actual results differ from our estimates. We make estimates of our accrued
expenses as of each balance sheet date based on the facts and circumstances
known to us at that time. Our clinical trial accruals are dependent upon the
timely and accurate reporting of contract research organizations, clinical sites
and other third-party vendors. 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 relative to the actual status and timing
of services performed may vary and may result in us reporting amounts that are
too high or too low for any particular period. For the year ended
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Recently Issued Accounting Pronouncements
We review new accounting standards to determine the expected financial impact, if any, that the adoption of each such standard will have.
InJune 2016 , the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). This guidance applies to all entities and impacts how entities account for credit losses for most financial assets and other instruments. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. We adopted this standard onJanuary 1, 2020 and evaluated the implications of the new standard, inclusive of the applicable financial statement disclosures required, as well as to its internal controls, business processes, and accounting policies, noting there was no significant impact to the financial statements as ofJanuary 1, 2020 and for the year endedDecember 31, 2020 .
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