You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and the related notes and the other financial information included
elsewhere in this Quarterly Report on Form 10-Q. Some of the information
contained in this discussion and analysis or set forth elsewhere in this
Quarterly Report on Form 10-Q, including information with respect to our plans
and strategy for our business and related financing, includes forward-looking
statements that involve risks and uncertainties. As a result of many factors,
including those factors set forth in the "Risk Factors" section of this
Quarterly Report on Form 10-Q, our actual results could differ materially from
the results described in or implied by the forward-looking statements contained
in the following discussion and analysis. Unless otherwise stated herein, all
ordinary shares, exchange rates for the Exchangeable Notes, equity awards,
warrants and per share amounts have been adjusted to reflect the 1-for-15
reverse share split which became effective on August 17, 2022, for all prior
periods presented.
Overview
We are a clinical stage pharmaceutical company dedicated to developing and
commercializing sulopenem to be potentially the first oral branded penem
available in the United States and the first and only oral and intravenous (IV)
branded penem available globally. Penems, including thiopenems and carbapenems,
belong to a class of antibiotics more broadly defined as ß-lactam antibiotics,
the original example of which was penicillin, but which now also includes
cephalosporins. Sulopenem is a potent, thiopenem antibiotic delivered
intravenously which is active against bacteria that belong to the group of
organisms known as gram-negatives and cause urinary tract and intra-abdominal
infections. We have also developed sulopenem in an oral tablet formulation,
sulopenem etzadroxil-probenecid, which we refer to herein as oral sulopenem. We
believe that sulopenem and oral sulopenem have the potential to be important new
treatment alternatives to address growing concerns related to antibacterial
resistance without the known toxicities of some of the most widely used
antibiotics, specifically fluoroquinolones.
During the third quarter of 2018, we initiated three clinical trials in our
Phase 3 development program which included: a Phase 3 uncomplicated urinary
tract infection (uUTI) clinical trial, known as Sulopenem for Resistant
Enterobacteriaceae (SURE) 1, comparing oral sulopenem to oral ciprofloxacin in
women with uUTI, a Phase 3 complicated urinary tract infection (cUTI) clinical
trial known as SURE 2, comparing IV sulopenem followed by oral sulopenem to IV
ertapenem followed by oral ciprofloxacin in adults with cUTI and a Phase 3
complicated intra-abdominal infection (cIAI) clinical trial known as SURE 3,
comparing IV sulopenem followed by oral sulopenem to IV ertapenem followed by a
combination of oral ciprofloxacin and oral metronidazole in adults with cIAI. We
designed one Phase 3 clinical trial in each indication based on our end of Phase
2 meeting with the U.S. Food and Drug Administration (FDA) and feedback from the
European Medicines Agency (EMA). We conducted the Phase 3 clinical trials under
Special Protocol Assessment (SPA) agreements from the FDA. In December 2019, we
announced that sulopenem did not meet the primary endpoint of statistical
non-inferiority compared to the control therapy for the cIAI trial. In the
second quarter of 2020, we announced the results of our Phase 3 clinical trials
in cUTI and uUTI. In the cUTI trial, sulopenem did not meet the primary endpoint
of statistical non-inferiority compared to the control therapies with the
difference in response rates driven almost entirely by higher rates of
asymptomatic bacteriuria on the sulopenem IV to oral sulopenem arm relative to
the ertapenem IV to oral ciprofloxacin arm, only evident at the test of cure
visit. The rates of patients receiving additional antibiotics or with residual
cUTI symptoms were similar between therapies. Similarly, in the uUTI trial,
sulopenem did not meet the primary endpoint of statistical non-inferiority
compared to ciprofloxacin in the population of patients with baseline pathogens
susceptible to ciprofloxacin driven to a large degree by a greater amount of
asymptomatic bacteriuria in the sulopenem treated patients at the test of cure
visit relative to those receiving ciprofloxacin. However, in the uUTI trial, in
the population of patients with baseline pathogens resistant to quinolones,
sulopenem achieved the related primary endpoint by demonstrating statistical
significance in the overall response rate by treatment arm in the
ciprofloxacin-resistant population, providing evidence of a treatment effect in
patients with uUTI. Based on discussions with the FDA at a pre-New Drug
Application (NDA) meeting in September 2020 and previous correspondence with the
FDA, we submitted an NDA for oral sulopenem for the treatment of uUTIs in
patients with a quinolone non-susceptible pathogen in the fourth quarter of 2020
and the FDA accepted the application for review in January 2021. We received a
Complete Response Letter (CRL) from the FDA on July 23, 2021 in respect of our
NDA. The CRL provided that the FDA had completed its review of the NDA and had
determined that it could not approve the NDA in its present form. The CRL
further provided that additional data are necessary to support approval of oral
sulopenem for the treatment of adult women with uUTIs caused by designated
susceptible microorganisms proven or strongly suspected to be non-susceptible to
a quinolone and recommended that we conduct at least one additional adequate and
well-controlled clinical trial, potentially using a different comparator drug.
In July 2022 we reached an agreement with the FDA under the SPA process on the
design, endpoints and statistical analysis of a Phase 3 clinical trial for oral
sulopenem for the treatment of uUTIs and we commenced enrollment in that
clinical trial, known as REnewed ASsessment of Sulopenem in uUTI caused by
Resistant Enterobacterales (REASSURE), in October 2022. The study is designed as
a non-inferiority trial comparing oral sulopenem and Augmentin®
(amoxicillin/clavulanate) in the Augmentin® susceptible population.
Additionally, though not an approvability issue, the FDA recommended in its CRL
that we conduct additional non-clinical Pharmacokinetics and Pharmacodynamics
(PK/PD) studies to support dose selection for the proposed treatment
indication(s). We have commenced additional non-clinical PK/PD investigations to
support the dosing regimen selected for oral sulopenem, as recommended by the
FDA.
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Since our inception, we have incurred significant operating losses. Our ability
to generate product revenue sufficient to achieve profitability will depend
heavily on the successful development and eventual commercialization of oral
sulopenem and sulopenem. As of September 30, 2022, we had an accumulated deficit
of $417.8 million. We expect to continue to incur significant expenses for the
foreseeable future as we conduct ongoing Phase 3 clinical and non-clinical work
to support a potential resubmission of the NDA for approval of oral sulopenem.
In addition, if we obtain marketing approval for oral sulopenem, we expect to
incur significant commercialization expenses related to product manufacturing,
marketing, sales and distribution. We may also incur expenses in connection with
the further clinical development of IV sulopenem and clinical development of
sulopenem in additional indications, the establishment of additional sources for
the manufacture of sulopenem tablets and, if relevant, IV vials or the
in-license or acquisition of additional product candidates. Additionally, we
have incurred and expect to incur additional costs associated with operating as
a public company, including significant legal, accounting, investor relations
and other expenses that we did not incur as a private company.
Until such time as we can obtain marketing approval for oral sulopenem,
sulopenem or any future product candidate and generate significant revenue from
product sales, if ever, we expect to finance our operations through a
combination of equity offerings, debt financings, collaboration agreements,
other third-party funding, strategic alliances, licensing arrangements,
marketing and distribution arrangements or government funding. We may be unable
to raise additional funds or enter into such other agreements or arrangements
when needed on favorable terms, or at all. If we fail to raise capital or enter
into such agreements as, and when, needed, we may have to significantly delay,
scale back or discontinue the development and commercialization of our sulopenem
program, or otherwise change our strategy.
Because of the numerous risks and uncertainties associated with product
development, we are unable to predict the timing or amount of increased expenses
or when or if we will be able to achieve or maintain profitability. Even if we
are able to generate product sales, we may not become profitable. If we fail to
become profitable or are unable to sustain profitability on a continuing basis,
then we may be unable to continue our operations at planned levels and be forced
to reduce or terminate our operations.
As of September 30, 2022, we had cash, cash equivalents, restricted cash and
short-term investments of $64.4 million. We believe that our existing cash, cash
equivalents and short-term investments as of September 30, 2022 should be
sufficient to fund our operating expenses into 2024, based on our current
operating plan. However, this estimate is based on assumptions that may prove to
be wrong, and our operating plans may change as a result of many factors and
various risks and uncertainties.
We are currently evaluating our corporate, strategic, financial and financing
alternatives, with the goal of maximizing value for our stakeholders while
prudently managing our resources. These alternatives could potentially include
the licensing, sale or divestiture of our assets or proprietary technologies, a
sale of our company, a merger or other business combination or another strategic
transaction involving us. The evaluation of corporate, strategic, financial and
financing alternatives may not result in any particular action or any
transaction being pursued, entered into or consummated, and there is no
assurance as to the timing, sequence or outcome of any action or transaction or
series of actions or transactions.
COVID-19 Global Pandemic
In December 2019, an outbreak of COVID-19 was reported in Wuhan, China. On March
11, 2020, the World Health Organization declared COVID-19 a global pandemic and
on March 13, 2020, prior U.S. President Donald J. Trump declared the virus a
national emergency. This highly contagious disease has spread to most of the
countries in the world and throughout the United States, creating a serious
impact on customers, workforces, and suppliers, disrupting economies and
financial markets, and potentially leading to a world-wide economic downturn. It
has caused a disruption of the normal operations of many businesses, including
the temporary closure or scale-back of business operations and/or the imposition
of either quarantine or remote work or meeting requirements for employees,
either by government order or on a voluntary basis. The pandemic may impact the
ability of our strategic partners to operate and fulfill their contractual
obligations, and result in an increase in their costs and cause delays in
performance. We may experience an impact to the timelines of our ongoing and any
additional clinical and non-clinical development for sulopenem due to the
worldwide spread of COVID-19. These effects, and the direct effect of the virus
and any potential disruption on our operations, may negatively impact our
ability to meet our strategic targets. Our employees, in many cases, are working
remotely in part due to safety concerns and using various technologies to
perform their functions. We feel we have sufficient office and IT resources to
allow employees to return to office work or work from home indefinitely based on
the latest government advice. Additionally, the disruption and volatility in the
global and domestic capital markets may increase the cost of capital and limit
our ability to access capital. Both the health and economic aspects of COVID-19
are highly fluid and the future course of each is uncertain. For these reasons
and other reasons that may come to light if the coronavirus pandemic and
associated protective or preventative measures expand, we may experience a
material adverse effect on our business operations and financial condition;
however, its ultimate impact is highly uncertain and subject to change.
We cannot foresee if and when the COVID-19 pandemic will be effectively
contained, nor can we predict the severity and duration of its impact. COVID-19
has not yet had a significant impact on the Company's day to day operations but
there can be no assurance that the continued spread of COVID-19 and the
responsive measures taken to date will not impact the ongoing Phase 3 clinical
trial being conducted in response to the CRL to support a potential resubmission
of our NDA. Additionally, the COVID-19 pandemic could impact the FDA's
regulatory review process, including delays in meetings related to planned or
completed clinical trials and ultimately the review and approval of our product
candidates. The FDA's review of any resubmitted NDA for the approval of oral
sulopenem for the treatment of uUTI may be delayed due to COVID-19, including an
inability to schedule, or delays in scheduling, meetings and inspections.
Additionally, the COVID-19 pandemic may negatively impact our ability to
initiate or complete future clinical trials, disrupt our regulatory and
commercialization activities, and result in other adverse effects on our
business and operations.
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Management is actively monitoring the global situation and its possible effects
on our financial condition, liquidity, suppliers, industry, and operations
including manufacturing, clinical trials and workforce. Given the evolution of
the COVID-19 pandemic and the global responses to curb its spread, we are not
able to estimate the adverse effects of the COVID-19 pandemic on our results of
operations, financial condition, or liquidity.
Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in
connection with the development of our sulopenem program, which include:
•
expenses incurred under agreements with contract research organizations (CROs),
contract manufacturing organizations (CMOs), as well as investigative sites and
consultants that conduct our clinical trials, preclinical studies and other
scientific development services;
•
manufacturing scale-up expenses and the cost of acquiring and manufacturing
preclinical and clinical trial materials and commercial materials, including
manufacturing validation batches and reservation fees;
•
employee-related expenses, including salaries, related benefits, travel and
share-based compensation expense for employees engaged in research and
development functions;
•
costs related to compliance with regulatory requirements, including the
preparation and support of regulatory filings;
•
facilities costs, depreciation and other expenses, which include rent under
operating lease agreements and utilities; and
•
payments made in cash, equity securities or other forms of consideration under
third-party licensing agreements.
We expense research and development costs as incurred. Advance payments we make
for goods or services to be received in the future for use in research and
development activities are recorded as prepaid expenses. 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.
The successful development and commercialization of oral sulopenem and/or
sulopenem is highly uncertain. At this time, we cannot reasonably estimate or
know the nature, timing and costs of the efforts that will be necessary to
complete the clinical development of our sulopenem program or when, if ever,
material net cash inflows may commence from any of our product candidates. This
uncertainty is due to the numerous risks and uncertainties associated with
product development and commercialization, including the uncertainty of:
•
the impact of the COVID-19 pandemic on the economy and our business generally
including the impact the pandemic may have on our ability to efficiently conduct
the ongoing Phase 3 clinical trial to support a potential resubmission of our
NDA for oral sulopenem, timing of regulatory review, potential approval and
commercialization of any future products, including sulopenem for the treatment
of uUTI;
•
the scope, progress, outcome and costs of our clinical trials and other research
and development activities;
•
successful patient enrollment in, and the initiation and completion of, clinical
trials;
•
our ability to apply for regulatory approval, including the potential
resubmission of our NDA for oral sulopenem, and the timing or likelihood of any
such filings and approvals;
•
the timing, receipt and terms of any marketing approvals from applicable
regulatory authorities;
•
establishing commercial manufacturing capabilities or making arrangements with
third-party manufacturers;
•
development and timely delivery of commercial drug formulations (i) that can be
used in our clinical trials and (ii) that are available for commercial launch;
•
obtaining, maintaining, defending and enforcing patent claims and other
intellectual property rights;
•
significant and changing government regulation;
•
launching commercial sales of our product candidates, if and when approved,
whether alone or in collaboration with others; and
•
maintaining a continued acceptable safety profile of the product candidates
following approval.
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We may never succeed in achieving regulatory approval for any of our product
candidates. For example, in the results of our cIAI clinical trial, sulopenem
did not meet the primary endpoint of statistical non-inferiority compared to the
control therapy for the cIAI trial. In the second quarter of 2020, we announced
the results of our Phase 3 clinical trials of sulopenem for the treatment of
cUTI and uUTI. In the cUTI trial, sulopenem did not meet the primary endpoint of
statistical non-inferiority compared to the control therapies with the
difference in response rates driven almost entirely by higher rates of
asymptomatic bacteriuria on the sulopenem IV to oral sulopenem arm relative to
the ertapenem IV to oral ciprofloxacin arm, only evident at the test of cure
visit; the rates of patients receiving additional antibiotics or with residual
cUTI symptoms were similar between therapies. Similarly, in the uUTI trial,
sulopenem did not meet the primary endpoint of statistical non-inferiority
compared to ciprofloxacin in the population of patients with baseline pathogens
susceptible to ciprofloxacin driven to a large degree by a greater amount of
asymptomatic bacteriuria in the sulopenem treated patients at the test of cure
visit relative to those receiving ciprofloxacin. However, in the uUTI trial, in
the population of patients with baseline pathogens resistant to quinolones,
sulopenem achieved the related primary endpoint by demonstrating statistical
significance in the overall response rate by treatment arm in the
ciprofloxacin-resistant population, providing evidence of a treatment effect in
patients with uUTI. Notwithstanding failure to meet the endpoints described
above, in all three Phase 3 clinical trials, at all timepoints measured, the
clinical response to sulopenem and/or oral sulopenem was similar to the
comparator regimen (non-inferior), except in the instance of the quinolone
non-susceptible population in the Phase 3 uUTI trial in which oral sulopenem was
statistically superior. Based on discussions with the FDA at a pre-NDA meeting
in September 2020 and previous correspondence with the FDA, we submitted an NDA
for oral sulopenem for the treatment of uUTIs in patients with a quinolone
non-susceptible pathogen in the fourth quarter of 2020 and the FDA accepted the
application for review in January 2021. We received a CRL from the FDA on July
23, 2021, for our NDA. The CRL provided that additional data are necessary to
support approval of oral sulopenem for the treatment of adult women with uUTIs
caused by designated susceptible microorganisms proven or strongly suspected to
be non-susceptible to a quinolone and recommended that we conduct at least one
additional adequate and well-controlled clinical trial, potentially using a
different comparator drug. In July 2022 we reached an agreement with the FDA
under the SPA process on the design, endpoints and statistical analysis of a
Phase 3 clinical trial for oral sulopenem for the treatment of uUTIs and we
commenced enrollment in that clinical trial, known as REASSURE, in October 2022.
The study is designed as a non-inferiority trial comparing oral sulopenem and
Augmentin® (amoxicillin/clavulanate) in the Augmentin® susceptible population.
Additionally, though not an approvability issue, the FDA recommended in its CRL
that we conduct additional non-clinical PK/PD studies to support dose selection
for the proposed treatment indication(s). We have commenced additional
non-clinical PK/PD investigations to support the dosing regimen selected for
oral sulopenem, as recommended by the FDA. There can be no assurance that we
will be in a position to resolve the matters set forth in the CRL, that we will
be able to complete the ongoing Phase 3 clinical trial and non-clinical studies
intended to support a resubmission of our NDA or that any data generated by such
clinical and non-clinical investigation will be adequate to support resubmission
or approval of our NDA.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related
benefits and share-based compensation expense for personnel in executive,
finance, market research and administrative functions. General and
administrative expenses also include director compensation, travel expenses,
insurance, professional fees for legal, patent, consulting, accounting and audit
services, pre-commercialization activities and market preparation expenses.
Following receipt of the CRL in the third quarter of 2021, in order to reduce
operating expenses and conserve cash resources, we halted any remaining
pre-commercial activities for oral sulopenem and plan to limit spending to
essential costs required in connection with the potential resubmission of the
NDA. If and when we believe regulatory approval of oral sulopenem and/or
sulopenem appears likely, we anticipate an increase in payroll and expenses as a
result of our preparation for commercial operations.
Interest Expense, Net
Interest expense, net consists of interest accrued and amortization of debt
costs with respect to the 6.500% Exchangeable Senior Subordinated Notes due 2025
(Exchangeable Notes) and Limited Recourse Royalty-Linked Subordinated Notes
(RLNs) issued in 2020 (through January 2021), realized and unrealized gains and
losses on our short-term investments, interest earned on our cash and cash
equivalents, which are generally invested in money market accounts, interest
earned on our investments in marketable securities and interest incurred and
amortization of debt costs on our loan from Silicon Valley Bank (SVB) (fully
repaid in March 2022) and interest incurred on our note received under the
Payment Protection Program (the PPP loan) (fully repaid in March 2022). Interest
on the Exchangeable Notes is not payable until maturity of the instrument unless
exchanged prior to maturity in accordance with the terms of the indenture
governing the Exchangeable Notes (Exchangeable Notes Indenture) at which time
any accrued and unpaid interest becomes due and payable.
Adjustments to Fair Value of Derivatives
Derivative liabilities, which consist of embedded features in the Exchangeable
Notes, are revalued at each balance sheet date and the change in fair value
during the reporting period is recorded in the condensed consolidated statements
of operations as adjustments to fair value of derivatives.
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Other Income, Net
Other income, net consists of realized and unrealized foreign currency gains and
losses incurred in the normal course of business based on movement in the
applicable exchange rates and sub-lease income from a sub-lease agreement for a
commercial unit.
Provision for Income Taxes
We recognize income taxes under the asset and liability method. Deferred income
taxes are recognized for differences between the financial reporting and tax
bases of assets and liabilities at enacted statutory tax rates in effect for the
years in which the differences are expected to reverse. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. In evaluating our ability to recover our deferred
tax assets, we consider all available positive and negative evidence including
past operating results, the existence of cumulative income in the most recent
fiscal years, changes in the business in which we operate and our forecast of
future taxable income. In determining future taxable income, we are responsible
for assumptions utilized including the amount of Irish, U.S. and other foreign
pre-tax operating income, the reversal of temporary differences and the
implementation of feasible and prudent tax planning strategies. These
assumptions require significant judgment about the forecasts of future taxable
income and are consistent with the plans and estimates that we are using to
manage the underlying business.
Valuation allowances are provided if it is more likely than not that some
portion or all of the deferred tax assets will not be realized. We account for
uncertain tax positions using a more-likely-than-not threshold for recognizing
and resolving uncertain tax positions. The evaluation of uncertain tax positions
is based on factors including, but not limited to, changes in tax law, the
measurement of tax positions taken or expected to be taken in tax returns, the
effective settlement of matters subject to audit, new audit activity and changes
in facts or circumstances related to a tax position. We evaluate our tax
positions on a quarterly basis. Our policy is to accrue for potential interest
and penalties related to tax matters in income tax expense.
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States. The preparation
of our condensed consolidated financial statements and related disclosures
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue, costs and expenses, and the disclosure of
contingent assets and liabilities in our financial statements. We believe that
our critical accounting policies described under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Critical Accounting Policies and Significant Judgments and Estimates" in our
Annual Report on Form 10-K filed with the SEC on March 28, 2022, involve the
most judgment and complexity. Accordingly, we believe the policies set forth in
such Annual Report on Form 10-K are critical to fully understanding and
evaluating our financial condition and results of operations. If actual results
or events differ materially from the estimates, judgments and assumptions used
by us in applying these policies, our reported financial condition and results
of operations could be materially affected. There have been no significant
changes to our critical accounting estimates from those described in our Annual
Report on Form 10-K filed with the SEC on March 28, 2022.
Results of Operations
Comparison of the three months ended September 30, 2022 and 2021
The following table summarizes our operating loss and (loss) / income before
income taxes for the three months ended September 30, 2022 and 2021 (in
thousands):
Three Months Ended
September 30,
2022 2021 Change
Operating expenses:
Research and development $ (4,353 ) $ (1,845 ) $ (2,508 )
General and administrative (2,681 ) (3,029 ) 348
Total operating expenses (7,034 ) (4,874 ) (2,160 )
Operating loss (7,034 ) (4,874 ) (2,160 )
Total other income / (expense), net (22,645 ) 8,967 (31,612 )
(Loss) / income before income taxes $ (29,679 ) $ 4,093 $ (33,772 )
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Research and Development Expenses (in thousands)
Three Months Ended
September 30,
2022 2021 Change
CRO and other preclinical and clinical trial
expenses $ 2,363 $ 408 $ 1,955
Personnel related (including share-based
compensation) 841 744 97
Chemistry, manufacturing and control (CMC)
related expenses 857 365 492
Consulting fees 292 328 (36 )
Total research and development expenses $ 4,353 $ 1,845 $ 2,508
The increase in CRO and other preclinical and clinical trial expenses of $2.0
million million was primarily due to an increase in costs incurred to support
the activities for our REASSURE trial, which began enrollment in October 2022,
in support of the potential resubmission of our NDA. Personnel related costs
increased by $0.1 million primarily as a result of an increase in headcount.
Personnel related costs for the three months ended September 30, 2022 and 2021
included share-based compensation expense of $0.2 million and $0.6 million,
respectively. CMC related expenses increased by $0.5 million primarily as a
result of the intangible asset amortization charge. Consulting fees of $0.3
million were flat to the prior year.
General and Administrative Expenses (in thousands)
Three Months Ended
September 30,
2022 2021 Change
Personnel related (including share-based compensation) $ 906 $ 1,576 $ (670 )
Facility related and other
749 851 (102 )
Professional and consulting fees 1,026 602 424
Total general and administrative expenses $ 2,681 $ 3,029 $ (348 )
Personnel related costs decreased by $0.7 million primarily as a result of a
decrease in share-based compensation expense. Personnel related costs for the
three months ended September 30, 2022 and 2021 included share-based compensation
expense of $0.2 million and $0.9 million, respectively. Facility related and
other costs decreased by $0.1 million primarily as a result of a decrease in
rent expense. Facility related and other costs for the three months ended
September 30, 2022 and 2021 included share-based compensation expense of $0.1
million and $0.1 million, respectively, for directors. Professional and
consulting fees increased by $0.4 million primarily as a result of an increase
in legal fees associated with the lawsuit filed in August 2021, partially offset
by pre-commercialization activities carried out in 2021 prior to receipt of the
CRL.
Total Other Income / (Expense), net
The following table summarizes our total other income/(expense), net for the
three months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended
September 30,
2022 2021 Change
Interest expense, net $ (636 ) $ (849 ) $ 213
Adjustments to fair value of derivatives (4,834 ) 9,783 (14,617 )
Cancellation of share options
(17,350 ) - (17,350 )
Other income, net 175 33 142
Total other income / (expense), net $ (22,645 ) $ 8,967 $ (31,612 )
Interest Expense, Net
Interest expense, net decreased by $0.2 million for the three months ended
September 30, 2022 primarily as a result of a reduction in interest expense
associated with our credit facility with SVB, which was repaid in full in March
2022.
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Adjustments to Fair Value of Derivatives
Adjustments to the fair value of the Derivative liability were $4.8 million for
the three months ended September 30, 2022. This non-cash adjustment related to
an increase in the fair value of the RLNs due to the newly issued patent for the
bilayer tablet which provides patent protection at least until 2039, partially
offset by a decrease in the value of the derivative components associated with
the Exchangeable Notes, primarily as a result of a decrease in the price of our
ordinary shares and our market capitalization during the period. Adjustments to
the fair value of derivatives were $9.8 million for the three months ended
September 30, 2021. This non-cash adjustment related to a decrease in the value
of the derivative components associated with the Exchangeable Notes, primarily
as a result of a decrease in the price of our ordinary shares and our market
capitalization during the period, partially offset by an increase in the fair
value of the RLNs.
Cancellation of Share Options
On July 7, 2022, certain of the Company's executive officers and employees
agreed to the surrender and cancellation of certain previously granted share
options in order to make available additional shares under the Company's Amended
and Restated 2018 Equity Incentive Plan. Total expense recognized in connection
with the cancellation of these employee share options was $17,350 for three
months ended September 30, 2022.
Other Income, Net
Other income, net consists of realized and unrealized foreign currency gains
incurred in the normal course of business based on movement in the applicable
exchange rates and sub-lease income from a sub-lease agreement for a commercial
unit. The increase of $0.1 million is primarily related to an increase in
unrealized foreign currency gains due to the strength of the US dollar.
Comparison of the nine months ended September 30, 2022 and 2021
The following table summarizes our operating loss and loss before income taxes
for the nine months ended September 30, 2022 and 2021 (in thousands):
Nine Months Ended
September 30,
2022 2021 Change
Operating expenses:
Research and development $ (11,777 ) $ (7,010 ) $ (4,767 )
General and administrative (10,680 ) (10,698 ) 18
Total operating expenses (22,457 ) (17,708 ) (4,749 )
Operating loss (22,457 ) (17,708 ) (4,749 )
Total other income / (expense), net (16,687 ) (69,140 ) 52,453
Loss before income taxes
$ (39,144 ) $ (86,848 ) $ 47,704
Research and Development Expenses (in thousands):
Nine Months Ended
September 30,
2022 2021 Change
CRO and other preclinical and clinical trial
expenses $ 4,812 $ 1,789 $ 3,023
Personnel related (including share-based
compensation) 3,674 1,623 2,051
Chemistry, manufacturing and control (CMC)
related expenses 2,313 1,025 1,288
Consulting fees 978 2,573 (1,595 )
Total research and development expenses $ 11,777 $ 7,010 $ 4,767
The increase in CRO and other preclinical and clinical trial expenses of $3.0
million was primarily due to an increase in costs incurred to support the
activities for our ongoing Phase 3 clinical trial known as REASSURE, which
commenced enrollment in October 2022, in support of the potential resubmission
of our NDA. Personnel related costs increased by $2.1 million primarily as a
result of an increase in headcount to support our REASSURE trial. Personnel
related costs for the nine months ended September 30, 2022 and 2021 included
share-based compensation expense of $1.3 million and $0.7 million, respectively.
CMC related expenses increased by $1.3 million primarily as a result of the
intangible asset amortization charge. The decrease in consulting fees of $1.6
million was primarily due to a decrease in consultants used for research and
development activities in the nine months ended September 30, 2022. Consulting
fees for the nine months ended September 30, 2021 primarily related to
consultants used during the FDA review of our NDA for oral sulopenem.
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General and Administrative Expenses (in thousands)
Nine Months Ended
September 30,
2022 2021 Change
Personnel related (including share-based
compensation) $ 5,281 $ 3,161 $ 2,120
Facility related and other 2,781 2,531 250
Professional and consulting fees 2,618 5,006 (2,388 )
Total general and administrative expenses $ 10,680 $ 10,698 $ (18 )
Personnel related costs increased by $2.1 million primarily as a result of an
increase in headcount. Personnel related costs for the nine months ended
September 30, 2022 and 2021 included share-based compensation expense of $2.6
million and $1.5 million, respectively. Facility related and other costs
increased by $0.3 million primarily as a result of an increase in directors fees
and share-based compensation for directors. Facility related and other costs for
the nine months ended September 30, 2022 and 2021 included share-based
compensation expense of $0.4 million and $0.2 million, respectively, for
directors. Professional and consulting fees decreased by $2.4 million primarily
as a result of pre-commercialization activities carried out in 2021 prior to
receipt of the CRL and a decrease in consultants used to support our general and
administrative functions, partially offset by an increase in legal fees
associated with the lawsuit filed in August 2021.
Total Other Income / (Expense), Net
The following table summarizes our total other income / (expense), net for the
nine months ended September 30, 2022 and 2021 (in thousands):
Nine Months Ended
September 30,
2022 2021 Change
Interest expense, net $ (2,441 ) $ (4,781 ) $ 2,340
Adjustments to fair value of derivatives 2,498 (64,526 ) 67,024
Cancellation of share options
(17,350 ) - (17,350 )
Other income, net 606 167 439
Total other income / (expense), net $ (16,687 ) $ (69,140 ) $ 52,453
Interest Expense, Net
Interest expense, net decreased by $2.3 million for the nine months ended
September 30, 2022 primarily as a result of a decrease in the amortization of
the debt discounts and deferred financing costs relating to the RLNs which were
listed, and therefore fully amortized, - in January 2021, a decrease in interest
accruing on our Exchangeable Notes and a decrease in the amortization of the
debt discounts and deferred financing costs relating to them due to the
reduction in the Exchangeable Notes outstanding balance and a reduction in
interest expense associated with our credit facility with SVB, which was repaid
in full in March 2022, partially offset by an increase in unrealized losses on
our short-term investments.
Adjustments to Fair Value of Derivatives
Adjustments to the fair value of the Derivative liability were $2.5 million for
the nine months ended September 30, 2022. This non-cash adjustment related to a
decrease in the value of the derivative components associated with the
Exchangeable Notes, primarily as a result of a decrease in the price of our
ordinary shares and our market capitalization during the period, partially
offset by an increase in the fair value of the RLNs due to the newly issued
patent for the bilayer tablet which provides patent protection at least until
2039. Adjustments to the fair value of derivatives were $64.5 million for the
nine months ended September 30, 2021. This non-cash adjustment related to an
increase in the value of derivative components associated with the Exchangeable
Notes which were exchanged in the first half of 2021 and an increase in the fair
value of our RLNs, partially offset by a decrease in the value of the derivative
components associated with the Exchangeable Notes, primarily as a result of a
decrease in the price of our ordinary shares and our market capitalization
during the period.
Cancellation of Share Options
On July 7, 2022, certain of the Company's executive officers and employees
agreed to the surrender and cancellation of certain previously granted share
options in order to make available additional shares under the Company's Amended
and Restated 2018 Equity Incentive Plan. Total expense recognized in connection
with the cancellation of these employee share options was $17,350 for nine
months ended September 30, 2022.
Other Income, Net
Other income, net consists of realized and unrealized foreign currency gains
incurred in the normal course of business based on movement in the applicable
exchange rates and sub-lease income from a sub-lease agreement for a commercial
unit. The increase of $0.4 million is primarily related to an increase in
unrealized foreign currency gains due to the strength of the US dollar.
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Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses and negative
cash flows from our operations. We have generated limited revenue to date from a
funding arrangement with the Trustees of Boston University under the Combating
Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) program. We
have funded our operations to date primarily through the issuance of ordinary
and convertible preferred shares, warrants, debt raised under financing
arrangements with SVB including the PPP loan, a sub-award from the Trustees of
Boston University under the CARB-X program and the proceeds of the private
placement which closed in January 2020 (the Private Placement) and the
subsequent rights offering (the Rights Offering) pursuant to which our wholly
owned subsidiary, Iterum Therapeutics Bermuda Limited (Iterum Bermuda), issued
and sold $51.8 million aggregate principal amount of Exchangeable Notes and $0.1
million aggregate principal amount of RLNs. Through September 30, 2022, we had
received cash proceeds of $198.2 million from sales of our Series A and Series B
preferred shares and ordinary shares, $15.0 million from the first drawdown of
our SVB loan, net proceeds of $45.0 million from the Private Placement and the
Rights Offering, $0.7 million from the drawdown of our PPP loan, combined net
proceeds of $8.6 million from the registered direct offering in June 2020 (June
3, 2020 Offering) and the registered direct offering in June 2020 (June 30, 2020
Offering) and $1.8 million from the exercise of warrants issued in the June 30,
2020 Offering, net proceeds of $15.5 million from the underwritten offering in
October 2020 (October 2020 Offering) and $13.9 million from the exercise of
warrants issued in the October 2020 Offering, net proceeds of $42.1 million from
the underwritten offering in February 2021 (February 2021 Underwritten Offering)
and $0.5 million from the exercise of warrants issued in the February 2021
Underwritten Offering and net proceeds of $32.2 million from the registered
direct offering in February 2021 (February 2021 Registered Direct Offering).
As of September 30, 2022, we had cash, cash equivalents, restricted cash and
short-term investments of $64.4 million.
We filed a universal shelf registration statement on Form S-3 with the SEC,
which was declared effective on October 17, 2022 (File No. 333-267795), and
pursuant to which we registered for sale up to $100.0 million of any combination
of debt securities, ordinary shares, preferred shares, subscription rights,
purchase contracts, units and/or warrants from time to time and at prices and on
terms that we may determine. On October 7, 2022, we entered into a sales
agreement (the Sales Agreement), with H.C. Wainwright & Co., LLC (HC
Wainwright), as agent, pursuant to which we may offer and sell ordinary shares,
nominal value $0.01 per share, for aggregate gross sales proceeds of up to $16.0
million (not to exceed 4,478,180 ordinary shares as of the date of filing this
Form 10-Q), from time to time through HC Wainwright by any method permitted that
is deemed to be an "at the market offering" as defined in Rule 415(a)(4)
promulgated under the Securities Act of 1933, as amended.
Secured Credit Facility
On April 27, 2018, our subsidiaries, Iterum Therapeutics International Limited,
Iterum Therapeutics US Holding Limited and Iterum Therapeutics US Limited
(Borrowers), entered into a loan and security agreement with SVB (Loan and
Security Agreement) pursuant to which SVB agreed to lend the Borrowers up to
$30.0 million in two term loans. $15.0 million of the secured credit facility
was funded on closing. A second draw of up to $15.0 million was available to us
through October 31, 2019, upon satisfaction of either of the following: (i) the
achievement by us of both non-inferiority and superiority primary endpoints from
our Phase 3 uUTI trial, as well as reporting satisfactory safety data from the
trial, or (ii) the achievement of non-inferiority primary endpoints from both
our Phase 3 uUTI and cUTI trials, as well as reporting satisfactory safety data
from the trials. We did not satisfy the conditions for the second draw above
before the deadline of October 31, 2019.
Required monthly amortization payments for the initial $15.0 million draw
commenced on November 1, 2019 and total principal repayments of $1,552 were made
during the nine months ended September 30, 2022. Interest accrued at a floating
per annum rate equal to the greater of (i) 8.31%; or (ii) 3.89% above the Wall
Street Journal prime rate, and was payable monthly in arrears. All outstanding
principal, plus a 4.20% final interest payment, were due and paid on March 1,
2022 (the maturity date), effectively terminating the Loan and Security
Agreement. The final payment fee of $0.6 million which represented 4.2% of the
funded loan, was accreted using the effective interest method over the life of
the loan as interest expense.
In connection with the initial $15.0 million draw, we issued SVB and Life
Sciences Fund II LLC (LSF) warrants to purchase an aggregate of 19,890 Series B
convertible preferred shares (which converted into warrants to purchase 1,326
ordinary shares upon our IPO) at an exercise price of $282.75 per share. These
warrants will expire on April 27, 2028.
In connection with the Private Placement, Iterum Bermuda was joined as a party
to the Loan and Security Agreement as a borrower and the Loan and Security
Agreement was amended on January 16, 2020 to, among other things, modify the
definition of subordinated debt to include the RLNs and Exchangeable Notes.
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2025 Exchangeable Notes and Royalty-Linked Notes
On January 21, 2020, we completed the Private Placement pursuant to which our
wholly owned subsidiary, Iterum Bermuda issued and sold $51.6 million aggregate
principal amount of Exchangeable Notes and $0.1 million aggregate principal
amount of RLNs, to a group of accredited investors. On September 8, 2020, we
completed the Rights Offering pursuant to which Iterum Bermuda issued and sold
$0.2 million aggregate principal amount of Exchangeable Notes and $0.04 million
aggregate principal amount of RLNs, to existing shareholders. The Exchangeable
Notes and RLNs were sold in Units with each Unit consisting of an Exchangeable
Note in the original principal amount of $1,000 and 50 RLNs. The Units were sold
at a price of $1,000 per Unit. At any time on or after January 21, 2021, subject
to specified limitations, the Exchangeable Notes are exchangeable for our
ordinary shares, cash or a combination of ordinary shares and cash, at an
exchange rate of 85.7456 shares per $1,000 principal and interest on the
Exchangeable Notes (equivalent to an exchange price of approximately $11.6624
per ordinary share) as of August 17, 2022, which exchange rate was adjusted from
an initial exchange rate of 66.666 shares per $1,000 of principal and interest
on the Exchangeable Notes (equivalent to an initial exchange price of
approximately $15.00 per ordinary share), and is subject to further adjustment
pursuant to the terms of the Exchangeable Notes Indenture. The Exchangeable
Notes will mature on January 31, 2025. Beginning on January 21, 2021 to
September 30, 2022, certain noteholders of $39.2 million aggregate principal
amount of Exchangeable Notes have exchanged their notes for an aggregate of
3,592,555 of our ordinary shares, which included accrued and unpaid interest
relating to such notes. The aggregate principal amount of Exchangeable Notes
outstanding as of September 30, 2022 was $12.6 million. The RLNs entitle holders
to payments based on a percentage of our net revenues from potential U.S. sales
of specified sulopenem products subject to the terms and conditions of the
indenture governing the RLNs (the RLN Indenture). Pursuant to the RLN Indenture,
the payments on the RLNs will be up to either 15% or 20% of net revenues from
U.S. sales of such products, depending on the indication approved by the FDA.
The aggregate amount of payments on each RLN is capped at $160.00 (or 4,000
times the principal amount of such RLN). Iterum Bermuda received net proceeds
from the sale of the Units of $45.0 million, after deducting placement agent
fees and offering expenses.
Registered Direct Offerings
On June 3, 2020, we entered into the securities purchase agreement (June 3, 2020
SPA) with certain institutional investors pursuant to which we issued and sold,
in the June 3, 2020 Offering, an aggregate of 198,118 ordinary shares, $0.01
nominal value per share, at a purchase price per share of $25.2375, for
aggregate gross proceeds to us of $5.0 million and net proceeds of $4.3 million
after deducting fees payable to the placement agent and other offering expenses
payable by us. We offered the ordinary shares in the June 3, 2020 Offering
pursuant to our universal shelf registration statement on Form S-3, which was
declared effective on July 16, 2019 (File No. 333-232569) (the 2019 Shelf
Registration Statement). Pursuant to the June 3, 2020 SPA, in a concurrent
private placement, we issued and sold to the June 3 Purchasers warrants to
purchase up to 99,057 ordinary shares. Upon closing, the warrants became
exercisable immediately at an exercise price of $24.30 per ordinary share,
subject to adjustment in certain circumstances, and will expire on December 5,
2025. The closing date of the June 3, 2020 Offering was June 5, 2020. Warrants
to purchase 13,868 ordinary shares, amounting to 7% of the ordinary shares
issued under the June 3, 2020 SPA, were issued to designees of the placement
agent on the closing of the June 3, 2020 Offering. Upon closing, the warrants
issued to such designees became exercisable immediately at an exercise price of
$31.5465 per ordinary share, and will expire on June 3, 2025.
On June 30, 2020, we entered into the securities purchase agreement (June 30,
2020 SPA) with certain institutional investors pursuant to which we issued and
sold in the June 30, 2020 Offering an aggregate of 224,845 ordinary shares,
$0.01 nominal value per share, at a purchase price per share of $22.2375, for
aggregate gross proceeds to us of $5.0 million and net proceeds of $4.2 million
after deducting fees payable to the placement agent and other offering expenses
payable by us. We offered the ordinary shares in the June 30, 2020 Offering
pursuant to the 2019 Shelf Registration Statement. Pursuant to the June 30, 2020
SPA, in a concurrent private placement, we issued and sold to the June 30
Purchasers warrants to purchase up to 112,422 ordinary shares. Upon closing, the
warrants were exercisable immediately at an exercise price of $21.30 per
ordinary share, subject to adjustment in certain circumstances, and will expire
on January 2, 2026. The June 30, 2020 Offering closed on July 2, 2020. Warrants
to purchase 15,739 ordinary shares, amounting to 7% of the ordinary shares
issued under the June 30, 2020 SPA, were issued to designees of the placement
agent on closing of the June 30, 2020 Offering. Upon closing, the warrants
issued to such designees became exercisable immediately at an exercise price of
$27.7965 per ordinary share, and will expire on June 30, 2025.
On February 9, 2021, we entered into the securities purchase agreement (February
SPA) with certain institutional investors pursuant to which we issued and sold
in the February 2021 Registered Direct Offering an aggregate of 1,166,666
ordinary shares, $0.01 nominal value per share, at a purchase price of $30.00
per share, for aggregate net proceeds to us of $32.2 million after deducting
placement agent fees and other offering expenses payable by us. We offered the
ordinary shares in the February 2021 Registered Direct Offering pursuant to the
2019 Shelf Registration Statement. The February 2021 Registered Direct Offering
closed on February 12, 2021. Warrants to purchase 81,666 ordinary shares,
amounting to 7.0% of the aggregate number of ordinary shares issued under the
February SPA, were issued to designees of the placement agent on closing of the
February 2021 Registered Direct Offering. Upon closing, warrants issued to such
designees became exercisable immediately at an exercise price of $37.50 per
ordinary share and will expire on February 9, 2026.
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October 2020 Offering
On October 27, 2020, we completed the October 2020 Offering in which we sold an
aggregate of (i) 1,034,102 ordinary shares, $0.01 nominal value per share, (ii)
pre-funded warrants exercisable for an aggregate of 760,769 ordinary shares and
(iii) warrants exercisable for an aggregate of 1,346,153 ordinary shares. The
pre-funded warrants were issued and sold to certain purchasers whose purchase of
ordinary shares in the October 2020 Offering would have otherwise resulted in
the purchaser, together with its affiliates and certain related parties,
beneficially owning more than 4.99% (or, at the election of the purchaser,
9.99%) of our outstanding ordinary shares immediately following the consummation
of the October 2020 Offering, if the purchaser so chose in lieu of ordinary
shares that would have otherwise resulted in such excess ownership. The ordinary
shares and pre-funded warrants were each offered together with the warrants, but
the ordinary shares and pre-funded warrants were issued separately from the
warrants. The combined offering price was $9.75 per ordinary share and warrant
and $9.60 per pre-funded warrant and warrant. Our net proceeds from the October
2020 Offering, after deducting placement agent fees and other offering expenses
payable by us, were approximately $15.5 million. The warrants are exercisable
upon issuance at a price of $9.75 per ordinary share, subject to adjustment in
certain circumstances, and expire on October 27, 2025. The pre-funded warrants
are exercisable upon issuance at a price of $0.15 per ordinary share, subject to
adjustment in certain circumstances, and expire when exercised in full, subject
to certain conditions. All pre-funded warrants have been exercised for net
proceeds of $0.11 million. In connection with the October 2020 Offering, we
entered into a Purchase Agreement on October 22, 2020 with certain institutional
investors. The Purchase Agreement contains customary representations and
warranties of ours, termination rights of the parties, and certain
indemnification obligations of ours. Warrants to purchase 125,641 ordinary
shares, which represents a number of ordinary shares equal to 7.0% of the
aggregate number of ordinary shares and pre-funded warrants sold in the October
2020 Offering, were issued to designees of the placement agent on closing of the
October 2020 Offering. Upon closing, the warrants issued to such designees
became exercisable immediately at an exercise price of $12.1875 per ordinary
share and will expire on October 22, 2025.
February 2021 Underwritten Offering
On February 3, 2021, we entered into an underwriting agreement (the Underwriting
Agreement) pursuant to which we issued and sold 2,318,840 ordinary shares, $0.01
nominal value per share, at a public offering price of $17.25 per share. We
offered the ordinary shares in the February 2021 Underwritten Offering pursuant
to the 2019 Shelf Registration Statement. The February 2021 Underwritten
Offering closed on February 8, 2021. Pursuant to the Underwriting Agreement, we
granted the underwriter an option for a period of 30 days to purchase up to an
additional 347,826 ordinary shares on the same terms and conditions, which the
underwriter exercised in full on February 10, 2021. This increased the total
number of ordinary shares we sold in the February 2021 Underwritten Offering to
2,666,666 shares, which resulted in aggregate net proceeds of $42.1 million
after deducting underwriting discounts and commissions and offering expenses. In
addition, pursuant to the Underwriting Agreement, we agreed to issue to the
underwriter's designees warrants to purchase 186,665 ordinary shares, which is
equal to 7.0% of the aggregate number of ordinary shares sold in the February
2021 Underwritten Offering, including the underwriter's option to purchase an
additional 347,826 ordinary shares. The warrants issued to such designees of the
underwriter have an exercise price of $21.5625 per ordinary share, were
exercisable upon issuance and will expire on February 3, 2026.
Payment Protection Program
In April 2020, we began deferring payment on our share of U.S. payroll taxes
owed, as allowed by the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) through December 31, 2020. We paid half of our share of the 2020
U.S. payroll taxes owed in December 2021, with the remaining half due in
December 2022.
On April 3, 2020, the U.S. Small Business Administration (SBA) launched the
Paycheck Protection Program, which was established following the signing of the
CARES Act on March 27, 2020. On April 30, 2020, our wholly owned subsidiary,
Iterum Therapeutics US Limited (Iterum US Limited), entered into the PPP loan
with SVB under the Paycheck Protection Program, pursuant to Iterum US Limited
receiving a loan of $0.7 million with a fixed 1% annual interest rate and a
maturity of two years. Under the terms of the agreement, there were no payments
due until the earlier of the SBA remitting the forgiveness amount to Iterum US
Limited or the Deferral Period. Following the Deferral Period, equal monthly
repayments of principal and interest were due to fully amortize the principal
amount outstanding on the PPP loan by the maturity date. The SBA forgave $0.3
million of the loan in November 2020, and the remaining loan of $0.4 million
began amortization in December 2020 with equal monthly repayments of $26 through
March 2022. All outstanding amounts, including the final interest payment, were
repaid on March 17, 2022, effectively terminating the PPP loan.
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Cash Flows
The following table summarizes our cash flows for each of the periods presented
(in thousands):
Nine Months Ended September 30,
2022 2021
Net cash used in operating activities (14,208 ) (13,383 )
Net cash (used in) / provided by investing activities 9,579 (50,129 )
Net cash (used in) / provided by financing activities (2,251 ) 84,756
Effect of exchange rates on cash and cash equivalents (77 ) (14 )
Net (decrease) / increase in cash, cash equivalents
and restricted cash $ (6,957 ) $ 21,230
Operating Activities
During the nine months ended September 30, 2022, operating activities used $14.2
million of cash, resulting from our net loss of $39.3 million and net cash used
by changes in our operating assets and liabilities of $0.04 million, partially
offset by net non-cash charges of $25.2 million.
During the nine months ended September 30, 2021, operating activities used $13.4
million of cash, resulting from our net loss of $87.4 million, and net cash used
by changes in our operating assets and liabilities of $0.2 million, partially
offset by net non-cash charges of $74.2 million.
Investing Activities
During the nine months ended September 30, 2022, net cash used in investing
activities of $9.6 million was related to the proceeds from the sale of
short-term investments of $45.6 million, partially offset by the purchase of
short-term investments of $36.0 million.
During the nine months ended September 30, 2021, net cash used by investing
activities of $50.1 million was related to the purchase of short-term
investments of $60.1 million, partially offset by proceeds from the sale of
short-term investments of $10.0 million.
Financing Activities
During the nine months ended September 30, 2022, net cash used in financing
activities of $2.3 million was related to principal repayments made to SVB under
the Loan and Security Agreement, including a final payment fee and the PPP loan.
Both loans were repaid in full in March 2022.
During the nine months ended September 30, 2021, net cash provided by financing
activities was $84.8 million and consisted of net cash proceeds of $42.1 million
from the February 2021 Underwritten Offering, net cash proceeds of $32.2 million
from the February 2021 Registered Direct Offering and $15.3 million from the
exercise of warrants, partially offset by principal repayments of $4.8 million
made to SVB under the Loan and Security Agreement and the PPP loan.
Funding Requirements
We expect to continue to incur significant expenses and increasing operating
losses as we seek potential marketing approval for oral sulopenem, engage in any
pre-commercialization activities and pursue the development of our sulopenem
program in additional indications through preclinical and clinical development.
Our expenses will also increase substantially if and as we:
•
conduct additional clinical trials for oral sulopenem and/or sulopenem, which
includes the ongoing Phase 3 clinical trial being conducted to support potential
resubmission of our NDA for oral sulopenem;
•
initiate other studies as part of our sulopenem program, some of which may be
required for regulatory approval of our product candidates and/or may be
conducted in response to the CRL;
•
establish sales, marketing and distribution capabilities either directly or
through a third-party, to commercialize oral sulopenem and/or sulopenem if we
obtain marketing approval from the FDA;
•
establish manufacturing and supply chain capacity sufficient to provide
commercial quantities of oral sulopenem and/or sulopenem, if we obtain marketing
approval and undertake commercialization activities;
•
pursue the development of our sulopenem program in additional indications;
•
maintain, expand, defend and protect our intellectual property portfolio;
•
hire additional clinical, scientific and commercial personnel;
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•
add operational, financial and management information systems and personnel,
including personnel to support our product development and planned future
commercialization efforts; and
•
acquire or in-license other product candidates or technologies.
Because of the numerous risks and uncertainties associated with research,
development and commercialization of pharmaceutical product candidates, we are
unable to estimate the exact amount of our working capital requirements. Our
future funding requirements, both short-term and long-term, will depend on many
factors, including:
•
the timing and costs of our clinical trials of oral sulopenem and sulopenem,
including any clinical trials or non-clinical studies which may be required for
regulatory approval of our product candidates, including the ongoing Phase 3
clinical trial and non-clinical development being conducted in response to the
CRL and to support a potential resubmission of the NDA for approval of oral
sulopenem;
•
any other activities that may be required in connection with the potential
resubmission of the NDA for oral sulopenem;
•
the timing of regulatory filings including a potential resubmission of the NDA
for oral sulopenem;
•
the timing of regulatory review and potential approval of any product
candidates, including oral sulopenem for the treatment of uUTI;
•
the initiation, progress, timing, costs and results of preclinical studies and
clinical trials of other potential product candidates and of our current product
candidates in additional indications;
•
the amount of funding that we receive under government awards that we may apply
for in the future;
•
the number and characteristics of product candidates that we pursue;
•
the outcome, timing and costs of seeking regulatory approvals;
•
the costs of commercialization activities for oral sulopenem and/or sulopenem
and other product candidates if we receive marketing approval, including the
costs and timing of establishing product sales, marketing, distribution and
manufacturing capabilities;
•
the receipt of marketing approval and revenue received from any potential
commercial sales of oral sulopenem and/or sulopenem;
•
the terms and timing of any future collaborations, licensing or other
arrangements that we may establish;
•
the amount and timing of any payments we may be required to make, or that we may
receive, in connection with the licensing, filing, prosecution, defense and
enforcement of any patents or other intellectual property rights, including
milestone and royalty payments and patent prosecution fees that we are obligated
to pay pursuant to an exclusive license agreement with Pfizer Inc. (Pfizer) (the
Pfizer License) or other future license agreements;
•
the amount and timing of any payments we may be required to make in connection
with the RLNs and the repaymemt of the Exchangeable Notes, if required;
•
the costs of preparing, filing and prosecuting patent applications, maintaining
and protecting our intellectual property rights and defending against any
intellectual property related claims;
•
the costs of operating as a public company;
•
the extent to which we in-license or acquire other products and technologies;
•
the impact of the COVID-19 pandemic on the economy and our business generally
including the impact the pandemic may have on our ability to efficiently conduct
and complete the ongoing Phase 3 clinical trial to support a potential
resubmission of our NDA for oral sulopenem, timing of regulatory review,
potential approval and commercialization of any future products, including oral
sulopenem for the treatment of uUTI; and
•
the outcome, impact, effects and results of our evaluation of corporate,
strategic, financial and financing alternatives, including the terms, timing,
structure, value, benefits and costs of any corporate, strategic, financial or
financing alternative and our ability to complete one at all.
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Until such time, if ever, that we can generate product revenue sufficient to
achieve profitability, we expect to finance our cash needs through a combination
of public or private equity offerings, debt financings, collaboration
agreements, other third-party funding, strategic alliances, licensing
arrangements, marketing and distribution arrangements or government funding. The
disruption and volatility in the global and domestic capital markets resulting
from the COVID-19 pandemic may increase the cost of capital and limit our
ability to access capital. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, our shareholders'
ownership interest will be diluted, and the terms of these securities may
include liquidation or other preferences that adversely affect the rights of our
ordinary shareholders. Debt financing and preferred equity financing, if
available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. The RLNs, the Exchangeable Notes
and the investor rights agreement we entered into in connection with the Private
Placement each impose operating and other restrictions on us. Such restrictions
affect, and in many cases limit or prohibit, our ability to dispose of certain
assets, pay dividends, incur additional indebtedness, undergo a change of
control and enter into certain collaborations, strategic alliances or other
similar partnerships, among other things. If we raise additional funds through
other third-party funding, collaboration agreements, strategic alliances,
licensing arrangements or marketing and distribution arrangements, 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. If we are unable to raise additional funds through equity or
debt financings when needed, we may be required to delay, limit, reduce or
terminate our product development or future commercialization efforts or grant
rights to develop and market products or product candidates that we would
otherwise prefer to develop and market ourselves. In addition, as described
above, we are evaluating our corporate, strategic, financial and financing
alternatives, with the goal of maximizing value for our stakeholders while
prudently managing our existing resources.
Contractual Obligations and Commitments
Under the Pfizer License, we have agreed to make certain regulatory and sales
milestone payments. We are also obligated to make a potential one-time payment
related to sublicensing income that exceeds a certain threshold. We are
obligated to pay Pfizer royalties ranging from a single-digit to mid-teens
percentage based on marginal net sales of each licensed product.
Under the RLN Indenture, holders of RLNs will be entitled to payments based
solely on a percentage of our net revenues from U.S. sales of specified
sulopenem products (Specified Net Revenues). Payments will be due within 75 days
of the end of each six-month payment measuring period (Payment Measuring
Period), beginning with the Payment Measuring Period ending June 30, 2020 until
(i) the "Maximum Return" (as described below) has been paid in respect of the
RLNs, or (ii) the "End Date" occurs, which is December 31, 2045, or (iii)
December 31, 2025, in the event that we have not yet received FDA approval with
respect to one or more specified sulopenem products by such date. The aggregate
amount of payments in respect of all RLNs during each Payment Measuring Period
will be equal to the product of total Specified Net Revenues earned during such
period and the applicable payment rate (the Payment Rate), determined based on
which of the specified sulopenem products have received FDA approval. The
Payment Rate will be based on the maximum aggregate principal amount of RLNs and
will equal (i) up to 15% if we or one of our affiliates has received FDA
approval for the use of specified sulopenem products for the treatment of uUTIs
and (ii) up to 20% if we or one of our affiliates has received FDA approval for
the use of specified sulopenem products for the treatment of cUTIs but has not
received FDA approval for treatment of uUTIs. There was no payment due for the
Payment Measuring Period ending June 30, 2020, December 31, 2020, June 30, 2021,
December 31, 2021, June 30, 2022, and September 30, 2022. Prior to the End Date,
we are obligated to make payments on the RLNs from Specified Net Revenues until
each RLN has received payments equal to $160.00 (or 4,000 times the principal
amount of such RLN) (Maximum Return).
Our operating lease obligations primarily consist of payments for office space
and commercial property, which are described further in Note 8 of our condensed
consolidated financial statements included in this Quarterly Report on Form
10-Q. Future contractual payments on operating lease obligations due within one
year of September 30, 2022 are $0.6 million, and future contractual payments on
operating lease obligations due greater than one year from September 30, 2022
are $1.4 million.
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 irrevocably
elected to "opt out" of this provision and, as a result, we will comply with new
or revised accounting standards when they are required to be adopted by public
companies that are not emerging growth companies.
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