The following management's discussion and analysis should be read in conjunction
with the unaudited consolidated financial statements included elsewhere in this
Quarterly Report and with our historical consolidated financial statements, and
the related notes thereto, included in our Annual Report on Form 10-K for the
year ended
The discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which we have prepared in
accordance with
All share amounts presented in this Item 2 give effect to the 1-for-25 reverse
stock split of our outstanding shares of common stock, par value
Overview
We are a research and clinical-stage biomaterials and biotechnology company with
a focus on treatment of spinal cord injuries, or SCIs. Our approach to treating
acute SCIs is based on our investigational Neuro-Spinal Scaffold™ implant, a
bioresorbable polymer scaffold that is designed for implantation at the site of
injury within a spinal cord and is intended to treat acute SCI. The Neuro-Spinal
Scaffold implant incorporates intellectual property licensed under an exclusive,
worldwide license from
The current standard of care for acute management of spinal cord injuries focuses on preventing further injury to the spinal cord. However, the current standard of care does not address repair of the spinal cord.
18 Table of Contents Our Clinical Program
We currently have one clinical development program for the treatment of acute SCI.
Neuro-Spinal Scaffold Implant for acute SCI
Our Neuro-Spinal Scaffold implant is an investigational bioresorbable polymer scaffold that is designed for implantation at the site of injury within a spinal cord. The Neuro-Spinal Scaffold implant is intended to promote appositional, or side-by-side, healing by supporting the surrounding tissue after injury, minimizing expansion of areas of necrosis, and providing a biomaterial substrate for the body's own healing/repair processes following injury. We believe this form of appositional healing may spare white matter, increase neural sprouting, and diminish post-traumatic cyst formation.
The Neuro-Spinal Scaffold implant is composed of two biocompatible and bioresorbable polymers that are cast to form a highly porous investigational product:
Poly lactic-co-glycolic acid, a polymer that is widely used in resorbable
? sutures and provides the biocompatible support for Neuro-Spinal Scaffold
implant; and
? Poly-L-Lysine, a positively charged polymer commonly used to coat surfaces in
order to promote cellular attachment.
Because of the complexity of SCIs, it is likely that multi-modal therapies will
be required to maximize positive outcomes in SCI patients. In the future, we may
attempt to further enhance the performance of our Neuro-Spinal Scaffold implant
by multiple combination strategies involving electrostimulation devices,
additional biomaterials, drugs approved by the
INSPIRE 2.0 Study
Our Neuro-Spinal Scaffold implant has been approved to be studied under our
approved Investigational Device Exemption, or IDE, in the INSPIRE 2.0 Study,
which is titled the "Randomized, Controlled, Single-blind Study of Probable
Benefit of the Neuro-Spinal Scaffold™ for Safety and Neurologic Recovery in
Subjects with Complete Thoracic AIS A Spinal Cord Injury as Compared to Standard
of Care." The purpose of the INSPIRE 2.0 Study is to assess the overall safety
and probable benefit of the Neuro-Spinal Scaffold for the treatment of
neurologically complete thoracic traumatic acute SCI. The INSPIRE 2.0 Study is
designed to enroll 10 subjects into each of the two study arms, which we refer
to as the Scaffold Arm and the Comparator Arm. Patients in the Comparator Arm
will receive the standard of care, which is spinal stabilization without dural
opening or myelotomy. The INSPIRE 2.0 Study is a single blind study, meaning
that the patients and assessors are blinded to treatment assignments. The FDA
approved the enrollment of up to 35 patients in this study so that there would
be at least 20 evaluable patients (10 in each study arm) at the primary endpoint
analysis, accounting for events such as randomization or screen failures or
deaths that would prevent a patient from reaching the primary endpoint visit. On
The primary endpoint of the INSPIRE 2.0 Study is defined as the proportion of patients achieving an improvement of at least one American Spinal Injury Association Impairment Scale ("AIS") grade at six months post-implantation. Assessments of AIS grade are at hospital discharge, three months, six months, 12 months and 24 months. The definition of study success for INSPIRE 2.0 is that the difference in the proportion of subjects who demonstrate an improvement of at least one grade on AIS assessment at the 6-month primary endpoint follow-up visit between the Scaffold Arm and the Comparator Arm must be equal to or greater than 20%. In one example, if 50% of subjects in the Scaffold Arm have an improvement of AIS grade at the six-month primary endpoint and 30% of subjects in the Comparator Arm have an improvement, then the difference in the proportion of subjects who demonstrated an improvement is equal to 20% (50% minus 30% equals 20%) and the definition of study success would be met. In another example, if 40% of subjects in the Scaffold Arm have an improvement of AIS grade at the six-month primary endpoint and 30% of subjects in the Comparator Arm have an improvement, then the difference in the proportion of subjects who
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demonstrated an improvement is equal to 10% (40% minus 30% equals 10%) and the definition of study success would not be met. Additional endpoints include measurements of changes in neurological level of injury, sensory levels and motor scores, bladder, bowel and sexual function, pain, Spinal Cord Independence Measure, and quality of life.
Our Neuro-Spinal Scaffold was previously studied in The INSPIRE Study: the "InVivo Study of Probable Benefit of the Neuro- Spinal Scaffold for Safety and Neurologic Recovery in Subjects with Complete Thoracic AIS A Spinal Cord Injury," under an IDE application for the treatment of neurologically complete thoracic traumatic acute SCI. Although The INSPIRE Study was structured with an Objective Performance Criterion, or the OPC as the primary component for demonstrating probable benefit, the OPC is not the only variable that the FDA would evaluate when reviewing a future human device exemption, or HDE, application. Similarly, while our INSPIRE 2.0 Study is structured with a definition of study success requiring a minimum difference between study arms in the proportion of subjects achieving improvement, that success definition is not the only factor that the FDA would evaluate in the future HDE application. Approval is not guaranteed if the OPC is met for The INSPIRE Study or the definition of study success is met for the INSPIRE 2.0 Study, and even if the OPC or definition of study success are not met, the FDA may approve a medical device if probable benefit is supported by a comprehensive review of all clinical endpoints and preclinical results, as demonstrated by the sponsor's body of evidence.
In 2016, the FDA accepted our proposed HDE modular shell submission and review
process for the Neuro-Spinal Scaffold implant. The HDE modular shell is
comprised of three modules: a preclinical module, a manufacturing module, and a
clinical data module. As part of its review process, the FDA reviews each
module, which are individual sections of the HDE submission, on a rolling basis.
Following the submission of each module, the FDA reviews and provides feedback,
typically within 90 days, allowing the applicant to receive feedback and
potentially resolve any deficiencies during the review process. Upon receipt of
all three modules, which constitutes the complete HDE submission, the FDA makes
a filing decision that may trigger the review clock for an approval decision. We
submitted the first module (the preclinical module) in
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in
On an ongoing basis, we evaluate our estimates and judgments for all assets and liabilities, stock-based compensation expense, and the fair value determined for stock purchase warrants classified as derivative liabilities. We base our estimates and judgments on historical experience, current economic and industry conditions, and on various other factors that we believe to be reasonable under the circumstances. Such factors form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes in our critical accounting policies and estimates from the disclosure provided in our 2021 Annual Report.
We believe that the consolidated financial statements accurately reflect our best estimate of the results of operations, financial position, and cash flows for the periods presented.
Results of Operations
Comparison of the Three Months Ended
Research and Development Expenses
Research and development expenses consisted primarily of expenses related to contract research organizations and clinical sites, professional services, and payroll. Research and development expenses for the three months ended
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General and Administrative Expenses
General and administrative expenses consisted primarily of payroll, rent, and
professional services. General and administrative expenses for the three months
ended
Other Income and Expense
Other income for the three months ended
Comparison of the Six Months Ended
Research and Development Expenses
Research and development expenses consisted primarily of expenses related to
contract research organizations and clinical sites, professional services, and
payroll. Research and development expenses for the six months ended
General and Administrative Expenses
General and administrative expenses consisted primarily of payroll, rent, and
professional services. General and administrative expenses for the six months
ended
Other Income and Expense
Other income for the six months ended
Liquidity, Capital Resources and Going Concern
Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. Since inception, we have devoted substantially all of our efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, and raising capital. We have historically financed our operations primarily through the sale of equity-related securities. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expects to incur additional operating losses.
As of
21 Table of Contents
quarter of 2023. This estimate is based on assumptions that may prove to be wrong; expenses could prove to be significantly higher, leading to a more rapid consumption of our existing resources.
Our consolidated financial statements as of
We have limited liquidity and capital resources and must obtain significant additional capital resources in order to fund our operations and sustain our product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of our anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for selling, general and administrative expenses and for other working capital requirements. We will need to raise additional capital through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Additionally, the COVID-19 pandemic could have a continued adverse impact on economic and market conditions and extend the period of global economic slowdown, which could impair our ability to raise needed funds. Our liquidity is also impacted by the limited number of authorized shares that remain available under our certificate of incorporation, and the resulting constraints on financing options and alternatives.
We may pursue various other dilutive and nondilutive funding alternatives depending upon our clinical path forward and the extent to which we require additional capital to proceed with development of some or all of our product candidates on expected timelines. The source, timing and availability of any future financing will depend principally upon market conditions and the status of our clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate some or all of our research and product development programs, planned clinical trials, and capital expenditures or to license our potential products or technologies to third parties. We may alternatively engage in cost-cutting measures in an attempt to extend our cash resources as long as possible. If we are unable to raise additional capital, we may be forced to cease operations entirely.
Our consolidated financial statements as of
Cashflows
Net cash used in operating activities for the six months ended
Net cash used in operating activities for the six months ended
Net cash used in investing activities for the six months ended
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The Company did not generate or use cash in financing activities during the six
months ended
Inflation and Changing Prices
We do not believe that inflation has had, or will have, a material impact on our operating costs and earnings.
Material Cash Requirements from Contractual Obligations
Leases
As of
Clinical Trial Commitments
We have engaged and executed contracts with clinical research organizations to
assist with the administration of our ongoing INSPIRE 1.0 and INSPIRE 2.0
clinical trials. As of
See Note 5, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements for information regarding our commitments.
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