You should read the following discussion and analysis of our financial condition
and results of operations together with our consolidated financial statements
and the related notes and the other financial information included elsewhere in
this Annual Report on Form 10-K. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report on Form
10-K, 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 Annual Report on Form 10-K, 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 completed the additional non-clinical PK/PD
investigations, as recommended by the FDA, which we believe support the dosing
regimen selected for oral sulopenem.
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
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of December 31, 2022, we had an accumulated deficit of $422.9 million. We expect
to continue to incur significant expenses for the foreseeable future as we
conduct additional 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 December 31, 2022, we had cash, cash equivalents and short-term
investments of $60.8 million. We believe that our existing cash, cash
equivalents and short-term investments as of December 31, 2022 should be
sufficient to fund our operating expenses and capital expenditure requirements
until mid-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 remaining 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.
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;
•
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, amortization 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.
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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 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 completed the additional
non-clinical PK/PD investigations, as recommended by the FDA, which we believe
support the dosing regimen selected for oral sulopenem. 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
intended to support a resubmission of our NDA or that any data generated by such
clinical trial 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 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.
Financing Transaction Costs
Financing transaction costs consist of the portion of transaction costs incurred
in relation to the private placement completed in January 2020 (Private
Placement) and subsequent rights offering (Rights Offering) in September 2020,
in which we issued Exchangeable Notes and RLNs, allocated to derivative
liabilities (the Derivative liability).
Adjustments to Fair Value of Derivatives
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Derivative liabilities are revalued at each balance sheet date and the change in
fair value during the reporting period is recorded in the consolidated
statements of operations as adjustments to fair value of derivatives.
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. We also accrue for potential interest and
penalties related to unrecognized tax benefits in income tax expense.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States. The preparation of our
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 base our estimates on historical
experience, known trends and events and various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. We evaluate our estimates and
assumptions on an ongoing basis. Our actual results may differ from these
estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2
to our consolidated financial statements appearing elsewhere in this Annual
Report on Form 10-K, we believe that the following accounting policies are those
most critical to the judgments and estimates used in the preparation of our
consolidated financial statements.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we
are required to estimate our accrued research and development expenses. This
process involves reviewing open contracts and purchase orders, communicating
with our personnel to identify services that have been performed on our behalf
and estimating the level of service performed and the associated cost incurred
for the service when we have not yet been invoiced or otherwise notified of
actual costs. The majority of our service providers invoice us in arrears for
services performed, on a pre-determined schedule or when contractual milestones
are met; however, some require advanced payments. We make estimates of our
accrued expenses as of each balance sheet date in the consolidated financial
statements based on facts and circumstances known to us at that time. We
periodically confirm the accuracy of these estimates with the service providers
and make adjustments if necessary. Examples of estimated accrued research and
development expenses include fees paid to:
•
vendors, including central laboratories, in connection with preclinical
development activities;
•
CROs and investigative sites in connection with preclinical studies and clinical
trials; and
•
CMOs in connection with drug substance and drug product formulation of
preclinical and clinical trial materials.
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We base our expenses related to preclinical studies and clinical trials on our
estimates of the services received and efforts expended pursuant to quotes and
contracts with multiple research institutions and CROs that conduct and manage
preclinical studies and clinical trials on our behalf. The financial terms of
these agreements are subject to negotiation, vary from contract to contract and
may result in uneven payment flows. There may be instances in which payments
made to our vendors will exceed the level of services provided and result in a
prepayment of the expense. Payments under some of these contracts depend on
factors such as the successful enrollment of patients and the completion of
clinical trial milestones. In accruing service fees, we estimate the time period
over which services will be performed and the level of effort to be expended in
each period. If the actual timing of the performance of services or the level of
effort varies from the estimate, we adjust the accrual or the amount of prepaid
expenses accordingly. 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 reporting amounts that are too
high or too low in any particular period. To date, there have not been any
material adjustments to our prior estimates of accrued research and development
expenses.
Share-Based Compensation
We measure share options and other share-based awards granted to employees and
directors with service based vesting conditions only based on the fair value on
the date of grant using the Black-Scholes option-pricing model. Compensation
expense of those awards is recognized over the requisite service period, which
is generally the vesting period of the respective award, using the straight-line
method.
We measure share-based awards granted to employees and directors with both
performance and service based vesting conditions based on the fair value on the
date of grant using the Monte Carlo simulation model. Compensation expense of
those awards is recognized over the determined vesting period, the period over
which all the specified vesting conditions are to be satisfied, using the
straight-line method.
For awards granted to consultants and non-employees, compensation expense is
recognized over the period during which services are rendered until completed.
At the end of each financial reporting period prior to completion of the
service, the fair value of these awards is remeasured using the then-current
fair value of our ordinary shares and updated assumption inputs in the
Black-Scholes option-pricing model or the Monte Carlo simulation model.
We classify share-based compensation expense in the consolidated statement of
operations and comprehensive loss in the same manner in which the award
recipient's payroll costs are classified or in which the award recipient's
service payments are classified.
The Black-Scholes option-pricing model uses key inputs and assumptions including
the expected term of the option, share price volatility, risk-free interest
rate, dividend yield, share price and exercise price which is equivalent to
closing market value on the date of grant. Many of the assumptions require
significant judgment and any changes could have a material impact in the
determination of share-based compensation expense.
The Monte Carlo simulation model uses key inputs and assumptions including share
price volatility, risk-free interest rate, the expected date of satisfaction of
vesting conditions and share price. Many of the assumptions require significant
judgment and any changes could have a material impact in the determination of
share-based compensation expense.
We have elected to account for forfeitures as they occur.
Derivative Liability
We account for derivative instruments in accordance with Accounting Standard
Codification (ASC) 815, Derivatives and Hedging - Contracts in Entity's Own
Equity, which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
financial instruments or contracts which require bifurcation and measurement at
fair value for accounting purposes on the balance sheet date. Any liabilities
recorded at fair value are revalued each reporting period with the resulting
change in fair value reflected in the consolidated statements of operations as
adjustments to fair value of derivatives.
In determining the appropriate fair values, we use the binomial option pricing
model, and in the case of the change of control component, in combination with a
discounted cash flow (DCF) analysis. Our derivative financial instruments
consist of embedded features in the Exchangeable Notes. The embedded derivatives
include provisions that provide the noteholder with certain exchange rights and
protections on a fundamental change such as a change of control. The effects of
interactions between embedded derivatives are calculated and accounted for in
arriving at the overall fair value of the financial instruments.
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The binomial option-pricing model uses certain key inputs and assumptions
including share price and share price volatility, the exchange rate, risk-free
interest rate and dividend yield. Many of the assumptions require significant
judgment and any changes could have a material impact in the determination of
the derivative liability balances.
Royalty-Linked Notes
On recognition, the RLNs qualified as debt instruments under ASC 470, Debt, and
were initially recorded at fair value, applying a DCF model, and then
subsequently measured at amortized cost. In January 2021, the RLNs were exchange
listed, and therefore, derivative accounting has been applied in accordance with
ASC 815, Derivatives and Hedging, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other financial instruments or contracts which require bifurcation
and measurement at fair value for accounting purposes on the balance sheet date.
Any liabilities recorded at fair value are revalued at each reporting period
with the resulting change in fair value reflected in the consolidated statements
of operations as adjustments to fair value of derivatives.
The RLN liability is carried at fair value on the consolidated balance sheets
and determined using a DCF analysis. The key inputs and assumptions used in the
DCF model at each reporting date include the terms of the indenture governing
the RLNs, probability of regulatory approval of sulopenem, royalty payments
based on estimated sales volumes and the discount rate. These assumptions
require significant judgment and any changes could have a material impact in the
determination of revaluation of the RLNs at each reporting date.
Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
The following table summarizes our operating loss and loss before income tax for
the years ended December 31, 2022 and 2021:
Year Ended December 31,
2022 2021 Change
(In thousands)
Operating expenses:
Research and development $ (17,617 ) $ (10,712 ) $ (6,905 )
General and administrative (12,766 ) (13,825 ) 1,059
Total operating expenses $ (30,383 ) $ (24,537 ) $ (5,846 )
Operating loss (30,383 ) (24,537 ) (5,846 )
Total other expense (13,750 ) (66,322 ) 52,572
Loss before income taxes $ (44,133 ) $ (90,859 ) $ 46,726
Research and Development Expenses
Year Ended December 31,
2022 2021 Change
(In thousands)
CRO and other preclinical and clinical trial
expenses $ 9,374 $ 2,153 $ 7,221
Personnel related (including share-based
compensation) 4,446 2,630 1,816
Chemistry, manufacturing and control (CMC)
related expenses 2,642 2,981 (339 )
Consulting fees 1,155 2,948 (1,793 )
Total research and development expenses $ 17,617 $ 10,712 $ 6,905
The increase in CRO and other preclinical and clinical trial expenses of $7.2
million was primarily due to an increase in costs incurred to support our
REASSURE trial, which began enrollment in October 2022. Personnel related
expenses increased by $1.8 million as a result of an increase in headcount.
Personnel related expenses for the years ended December 31, 2022 and 2021
included share-based compensation expense of $1.4 million and $1.3 million,
respectively. CMC related expenses decreased by $0.3 million primarily due to
process qualification work completed in 2021. The decrease in consulting fees of
$1.8 million was primarily due to a decrease in consultants used for research
and development activities in 2022. Consulting fees for the year ending December
31, 2021 primarily related to consultants used during the FDA review of our NDA
for oral sulopenem.
General and Administrative Expenses
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Year Ended December 31,
2022 2021 Change
(In thousands)
Personnel related (including share-based
compensation) $ 6,153 $ 4,870 $ 1,283
Facility related and other 3,527 3,416 111
Professional and consultant fees 3,086 5,539 (2,453 )
Total general and administrative expenses $ 12,766 $ 13,825 $ (1,059 )
Personnel related expenses increased by $1.3 million primarily as a result of an
increase in compensation and headcount. Personnel related expenses for the years
ended December 31, 2022 and 2021 included share-based compensation expense of
$2.8 million and $2.7 million, respectively. Facility related and other costs
increased by $0.1 million primarily as a result of an increase in directors'
fees and directors' share-based compensation, partially offset by a reduction in
rent expense. Facility related and other costs for the years ended December 31,
2022 and 2021 included directors' share-based compensation expense of $0.6
million and $0.3 million, respectively. Professional and consulting fees
decreased by $2.5 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 which was dismissed with prejudice (case cannot be brought back to court)
in January 2023.
The following table summarizes our total other expense for the years ended
December 31, 2022 and 2021:
Year Ended December 31,
2022 2021 Change
(In thousands)
Interest expense, net $ (2,361 ) $ (5,553 ) $ 3,192
Adjustments to fair value of derivatives 5,458 (60,964 ) 66,422
Cancellation of share options (17,350 ) - (17,350 )
Other income, net 503 195 308
Total other expense $ (13,750 ) $ (66,322 ) $ 52,572
Interest Expense, Net
Interest expense, net decreased by $3.2 million for the year ended December 31,
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, and a decrease in unrealized losses on our short-term investments.
Adjustments to Fair Value of Derivatives
Adjustments to the fair value of the Derivative liability were $5.4 million and
$61.0 million for the years ended December 31, 2022 and 2021, respectively. This
non-cash adjustment in 2022 primarily related to a decrease in the value of
derivative components associated with the Exchangeable Notes due to the decrease
in our market value. This non-cash adjustment in 2021 related to an increase in
the value of derivative components associated with the Exchangeable Notes that
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 remaining Exchangeable Notes.
Cancellation of Share Options
On July 7, 2022, certain of our executive officers and employees agreed to the
surrender and cancellation of certain previously granted share options in order
to make available additional shares under our Amended and Restated 2018 Equity
Incentive Plan. Total expense recognized in connection with the cancellation of
these employee share options was $17.4 million for the year ended December 31,
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.
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Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our operating loss and loss before tax for the
years ended December 31, 2021 and 2020:
Year Ended December 31,
2021 2020 Change
(In thousands)
Operating expenses:
Research and development $ (10,712 ) $ (21,074 ) $ 10,362
General and administrative (13,825 ) (11,052 ) (2,773 )
Total operating expenses $ (24,537 ) $ (32,126 ) $ 7,589
Operating loss (24,537 ) (32,126 ) 7,589
Total other expense (66,322 ) (19,137 ) (47,185 )
Loss before income taxes $ (90,859 ) $ (51,263 ) $ (39,596 )
Research and Development Expenses
Year Ended December 31,
2021 2020 Change
(In thousands)
CRO and other preclinical and clinical trial
expenses $ 2,153 $ 9,881 $ (7,728 )
Personnel related (including share-based
compensation) 2,630 4,682 (2,052 )
Chemistry, manufacturing and control (CMC)
related expenses 2,981 3,031 (50 )
Consulting fees 2,948 3,480 (532 )
Total research and development expenses $ 10,712 $ 21,074 $ (10,362 )
The decrease in CRO and other preclinical and clinical trial expenses of $7.7
million was primarily due to a decrease in costs incurred related to our three
Phase 3 clinical trials, which were completed in 2020. Personnel related
expenses decreased by $2.1 million as a result of a reduction in headcount in
our CMC, clinical and regulatory functions partially offset by an increase in
share-based compensation. Personnel related expenses for the years ended
December 31, 2021 and 2020 included share-based compensation expense of $1.3
million and $0.8 million, respectively. CMC related expenses remained flat year
over year at $3.0 million. The decrease in consulting fees of $0.5 million was
primarily due to the decrease in research and development activities in 2021.
General and Administrative Expenses
Year Ended December 31,
2021 2020 Change
(In thousands)
Personnel related (including share-based
compensation) $ 4,870 $ 5,433 $ (563 )
Facility related and other 3,416 3,141 275
Professional and consultant fees 5,539 2,478 3,061
Total general and administrative expenses $ 13,825 $ 11,052 $ 2,773
Personnel related expenses decreased by $0.6 million primarily as a result of a
reduction in headcount in our general and administrative and commercial
functions partially offset by an increase in share-based compensation. Personnel
related expenses for the years ended December 31, 2021 and 2020 included
share-based compensation expense of $2.7 million and $1.8 million, respectively.
Facility related and other costs increased by $0.3 million primarily as a result
of an increase in directors' fees and directors' share-based compensation.
Facility related and other costs for the years ended December 31, 2021 and 2020
included directors' share-based compensation expense of $0.3 million and $0.2
million, respectively. Professional and consulting fees increased by $3.1
million primarily as a result of an increase in consultants used for
pre-commercialization activities conducted prior to receipt of the CRL in July
2021 and to support our general and administrative function.
The following table summarizes our total other expense for the years ended
December 31, 2021 and 2020:
Year Ended December 31,
2021 2020 Change
(In thousands)
Interest expense, net $ (5,553 ) $ (15,097 ) $ 9,544
Financing transaction costs - (2,848 ) 2,848
Adjustments to fair value of derivatives (60,964 ) (1,745 ) (59,219 )
Extinguishment of debt - 340 (340 )
Other income, net 195 213 (18 )
Total other expense $ (66,322 ) $ (19,137 ) $ (47,185 )
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Interest Expense, Net
Interest expense, net decreased by $9.5 million for the year ended December 31,
2021 primarily as a result of the decrease in interest accruing on our
Exchangeable Notes of $2.1 million, a decrease in the amortization of the debt
discounts and deferred financing costs relating to the Exchangeable Notes and
RLNs of $6.4 million, a reduction in interest expense of $1.1 million associated
with our credit facility with SVB as the outstanding balance reduced as well as
an increase in interest income of $0.5 million, partially offset by an increase
in unrealized losses of $0.6 million.
Financing Transaction Costs
Financing transaction costs, which include costs expensed on recognition of the
Derivative liability, were $2.8 million for the year ended December 31, 2020. No
such costs were expensed for the year ended December 31, 2021.
Adjustments to Fair Value of Derivatives
Adjustments to the fair value of the Derivative liability were $61.0 million and
$1.7 million for the years ended December 31, 2021 and 2020, respectively. This
non-cash adjustment in 2021 related to an increase in the value of derivative
components associated with the Exchangeable Notes that 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 remaining Exchangeable Notes.
Extinguishment of Debt
In November 2020, the SBA forgave $0.3 million of the $0.7 million loan we
received in 2020 as part of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act).
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.
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 December 31, 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).
On October 7, 2022, 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 (subject to the availability of ordinary shares), 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. During the year ended December 31, 2022, we
sold 356,933 ordinary shares under the Sales Agreement at an average price of
$1.25 per share for net proceeds of $0.4 million, after deducting commissions to
HC Wainwright of $0.01 million.
As of December 31, 2022, we had cash, cash equivalents and short-term
investments of $60.8 million.
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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 year ended December, 31, 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 repaid 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 to, among other things, modify the definition of
subordinated debt to include the RLNs and Exchangeable Notes.
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 87.8139 shares per $1,000 principal and interest on the
Exchangeable Notes (equivalent to an exchange price of approximately $11.3877
per ordinary share) as of December 31, 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 December
31, 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
December 31, 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.
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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.
October 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
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In April 2020, we began deferring payment on our share of U.S. payroll taxes
owed, as allowed by the 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 paid 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 (the Borrower), entered into the PPP loan with
SVB under the Paycheck Protection Program, pursuant to the Borrower 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 the Borrower 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.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Year Ended December 31,
2022 2021 2020
(In thousands)
Net cash used in operating activities $(18,473) $(15,842) $(54,528)
Net cash provided by / (used in) investing
activities 13,957 (54,595) (11)
Net cash (used in) / provided by financing
activities (1,818) 83,127 64,475
Effect of exchange rates on cash and cash
equivalents (50) 4 (11)
Net (decrease) / increase in cash, cash
equivalents and restricted cash $(6,384) $12,694 $9,925
Operating Activities
During the year ended December 31, 2022, operating activities used $18.5 million
of cash, resulting from our net loss of $44.4 million, partially offset by
non-cash charges of $23.7 million, consisting primarily of $17.4 million of
expense for the cancellation of share options, and net cash provided by changes
in our operating assets and liabilities of $2.3 million. Net cash provided by
changes in our operating assets and liabilities for the year ended December 31,
2022 consisted primarily of an increase in accounts payable and accrued
expenses.
During the year ended December 31, 2021, operating activities used $15.8 million
of cash, resulting from our net loss of $91.6 million and net cash used by
changes in our operating assets and liabilities of $0.4 million, partially
offset by non-cash charges of $76.2 million. Net cash used by changes in our
operating assets and liabilities for the year ended December 31, 2021 consisted
primarily of decreases in other liabilities and accrued expenses, offset by a
decrease in prepaid expenses and other current assets, primarily due to the
refund of the FDA filing fees of $2.9 million received in January 2021.
During the year ended December 31, 2020, operating activities used $54.5 million
of cash, resulting from our net loss of $52.0 million and net cash used by
changes in our operating assets and liabilities of $24.5 million, partially
offset by non-cash charges of $19.2 million and financing transaction costs
reclassified to financing activities of $2.8 million. Net cash used by changes
in our operating assets and liabilities for the year ended December 31, 2020
consisted of primarily of decreases in accounts payable and accrued expenses
primarily due to payments made for clinical trial expenses incurred in the
fourth quarter of 2019 and lower clinical trial expenses for the year ended
December 31, 2020.
Investing Activities
During the year ended December 31, 2022, net cash provided by investing
activities was primarily related to sales of short-term investments of $59.7
million, partially offset by purchases of short-term investments of $45.7
million. During the year ended December 31, 2021, net cash used in investing
activities was primarily related to purchases of short-term investments of $67.0
million, partially offset by sales of short-term investments of $12.5 million.
During the year ended December 31, 2020, net cash used in investing activities
was related to purchases of property and equipment.
Financing Activities
During the year ended December 31, 2022, net cash used in financing activities
of $1.8 million was related to principal repayments made to SVB under the Loan
and Security Agreement, including a final payment fee, and the PPP loan,
partially offset by net proceeds from the sale of ordinary shares of $0.4
million pursuant to the Sales Agreement. During the year ended December 31,
2021, net cash provided by financing activities was $83.1 million and consisted
of net cash proceeds of $42.1 million from the February Underwritten Offering,
net cash proceeds of $32.2 million from the February Registered Direct Offering
and $15.3 million
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from the exercise of warrants, partially offset by principal repayments of $6.5
million made to SVB under the Loan and Security Agreement and the PPP loan.
During the year ended December 31, 2020, net cash provided by financing
activities was $64.5 million and consisted of net cash proceeds of approximately
$45.0 million from the Private Placement and the Rights Offering, net cash
proceeds of $8.6 million from the June 3 and June 30 Offerings, net cash
proceeds of approximately $15.5 million from the October 2020 Offering, net cash
proceeds of $0.9 million from the exercise of warrants and $0.7 million from the
drawdown of the PPP loan, partially offset by principal repayments of $6.2
million made to SVB under the Loan and Security Agreement.
Funding Requirements
We expect to continue to incur significant expenses and increasing operating
losses as we seek potential marketing approval for oral sulopenem, resume 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 our REASSURE 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 in the
United States 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;
•
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 our REASSURE trial
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;
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•
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 repayment 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;
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.
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. 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 remaining
resources.
Contractual Obligations and Commitments
Under the Pfizer License, we have agreed to make certain regulatory and sales
milestone payments and are 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 each
of the Payment Measuring Periods through the payment measuring period ending
December 31, 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
consolidated financial statements included in this Annual Report on Form 10-K.
Future contractual payments
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on operating lease obligations due within one year of December 31, 2022 are $0.6
million, and future contractual payments on operating lease obligations due
greater than one year from December 31, 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.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is disclosed in Note 2
to our consolidated financial statements appearing elsewhere in this Annual
Report on Form 10-K.
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