LARIMAR THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q, ("Quarterly Report"), and the audited consolidated
financial statements and notes thereto and management's discussion and analysis
of financial condition and results of operations for the year ended
Overview
We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide technology platform. Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin ("FXN"), an essential protein, to the mitochondria of patients with Friedreich's ataxia ("FA"). FA is a rare, progressive, and fatal disease in which patients are unable to produce enough FXN due to a genetic abnormality. There is currently no effective therapy for FA.
We have received orphan drug designation, fast track designation and rare
pediatric disease designation, from the
Our cell penetrating peptide technology platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases. We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity.
CTI-1601 Program Update
On
In
24
--------------------------------------------------------------------------------
On
In
Financial Overview and Liquidity
Since our inception, we have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, and providing general and administrative support for such operations.
We have never generated any revenue and have, to date, incurred net losses. We
incurred net losses of approximately
We expect to continue to incur expenses in connection with our ongoing activities, if and as we:
? continue to advance the development of CTI-1601 through additional clinical trials; ? seek to identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates; ? seek to obtain regulatory approvals for our product candidates; ? identify, acquire or in-license other product candidates and technologies; ? maintain, leverage, and expand our intellectual property portfolio; and ? expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.
As a result, we will need additional financing to support our continuing operations. Until such time that we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies or product candidates. In addition, we may never successfully complete development of any of our product candidates, obtain adequate patent protection for our technology, obtain necessary regulatory approvals for our product candidates, or achieve commercial viability for any approved product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability and may never do so.
At
25
--------------------------------------------------------------------------------
Agreement (as defined below) (See "Liquidity and Capital Resources and
"Operating Capital Requirements"). We believe that, based on our current
operating plan, our cash, cash equivalents and marketable debt securities as of
the filing date of this Quarterly Report on Form 10-Q will enable us to fund
operations for at least twelve months from the issuance of our interim financial
statements for the quarterly period ended
COVID-19 Update
In
Merger with Zafgen
On
Pursuant to the terms of the Merger Agreement, upon closing of the Merger, all
of Chondrial's outstanding common stock was exchanged for our common stock and
all outstanding options exercisable for units of Holdings were exchanged for
options to purchase our common stock. In addition, immediately prior to the
closing of the Merger, we effected a 1 for 12 reverse stock split and changed
our name from
The business combination was accounted for as a reverse acquisition in
accordance with
Private Placement
On
26
--------------------------------------------------------------------------------
"Pre-funded Warrants"). The Pre-Funded Warrants were immediately exercisable at
an exercise price for
The Private Placement closed on
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales, and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts result in clinical success and regulatory approval or collaboration agreements with third parties for our product candidates, we may generate revenue from those product candidates or collaborations.
Operating Expenses
The majority of our operating expenses since inception have consisted primarily of research and development activities, and general and administrative costs.
Research and Development Expenses
Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred. Research and development expenses consist primarily of:
? third-party contract costs relating to research, formulation, manufacturing, non-clinical studies, and clinical trial activities; ? employee related costs, including salaries, benefits and stock-based compensation expenses for employees engaged in scientific research and development functions; ? external costs of outside consultants and vendors; ? payments made under our third-party licensing agreements; ? sponsored research agreements; ? laboratory consumables; and ? allocated facility-related costs.
Costs for certain activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators. Research and development activities are central to our business. We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials. As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of CTI-1601 or any other product candidates we develop. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of CTI-1601 or any other product candidates we develop will depend on a variety of factors, including:
?
the scope, rate of progress and expense of clinical trials and other research
and development activities, including the ongoing impact of COVID-19 on these
activities;
?
clinical trial results;
?
uncertainties in clinical trial enrollment rate or design;
27
--------------------------------------------------------------------------------
? significant and changing government regulation; ? the timing and receipt of any regulatory approvals; ? the influence of theFDA's or other regulatory authority's on our clinical trial design and timing; ? establishing manufacturing capabilities or making arrangements with third-party manufacturers and risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes; ? the impact of the on-going COVID-19 pandemic including the mutations of the original virus that may prove more contagious and deadly; ? our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates; and ? our ability to recruit and retain key research and development personnel.
A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, consisting of salaries, related benefits and stock-based compensation, costs related to our executive, finance, information technology, and costs related to other administrative functions. General and administrative expenses also include insurance expenses and professional fees for auditing, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property. We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our condensed consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate these estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
28
--------------------------------------------------------------------------------
Research and Development Expenses
As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our accrued research and development expenses and evaluate payments made to vendors in advance of actual work activities being performed. This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the 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. We make estimates of our accrued expenses as of each balance sheet date in our condensed consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
? CROs, in connection with clinical trials; ? vendors in connection with non-clinical development activities; ? contract manufacturing organizations in connection with the production of non-clinical and clinical trial materials; and ? vendors related to product candidate manufacturing, development, and distribution of clinical supplies.
We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs or CMOs that conduct and manage clinical trials or manufacture clinical trial material 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 clinical expense, non-clinical expense, or manufacturing activities. Payments under some of these contracts depend on factors such as the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. In accruing CMO costs, we estimate the time period that manufacturing will be completed, the achievement of milestones and the percentage of completion of each specific CMO agreement. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid 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 us recognizing adjustments in future periods as additional information becomes available.
Stock-Based Compensation
We measure all stock-based awards granted to employees, non-employee consultants and directors 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. Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We account for forfeitures as they occur.
We classify stock-based compensation expense in our condensed consolidated statements 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.
Prior to
29
--------------------------------------------------------------------------------
Results of Operations
Comparison of three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended September 30,
Increase
2021 2020 (Decrease)
(in thousands)
Statement of Operations Data:
Operating expenses:
Research and development $ 14,028 $ 6,919 $ 7,109
General and administrative 2,702 3,416 (714 )
Total operating expenses 16,730 10,335 6,395
Loss from operations (16,730 ) (10,335 ) (6,395 )
Other income (expense), net (75 ) 61 (136 )
Net loss $ (16,805 ) $ (10,274 ) $ (6,531 ) Research and development expenses
Research and development expenses for the three months ended
General and administrative expenses
General and administrative expenses for the three months ended
Results of Operations
Comparison of nine months ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended September 30,
Increase
2021 2020 (Decrease)
(in thousands)
Statement of Operations Data:
Operating expenses:
Research and development $ 32,104 $ 20,833 $ 11,271
General and administrative 9,275 7,575 1,700
Total operating expenses 41,379 28,408 12,971
Loss from operations (41,379 ) (28,408 ) (12,971 )
Other income (expense), net (123 ) 130 (253 )
Net loss $ (41,502 ) $ (28,278 ) $ (13,224 )
30
--------------------------------------------------------------------------------
Research and development expenses
Research and development expenses for the nine months ended
General and administrative expenses
General and administrative expenses for the nine months ended
Liquidity and Capital Resources
Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations.
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented below:
Nine Months Ended September 30,
2021 2020
(in thousands)
Net cash used in operating activities $ (34,187 ) $ (32,342 )
Net cash provided by investing activities 17,679 40,635
Net cash provided by financing activities 19,885 93,345
Net increase in cash, cash equivalents and
restricted cash $ 3,377 $ 101,638 Net cash used in operating activities
During the nine months ended
During the nine months ended
31
--------------------------------------------------------------------------------
Net cash provided by investing activities
During the nine months ended
During the nine months ended
Net cash provided by financing activities
During the nine months ended
During the nine months ended
Operating Capital Requirements
CTI-1601 is currently in clinical development. We recently completed the dosing of two phase 1 clinical trials and, subject to resolution of the clinical hold with the FDA, and expect to initiate additional interventional studies of CTI-1601 in Friedreich ataxia in the first half of 2022; therefore, we expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that we will continue to incur expenses, if and as we seek to:
? advance the development of CTI-1601 through additional clinical trials, including the cost of clinical materials as well as manufacturing scale up costs; ? identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates; ? obtain regulatory approvals for our product candidates; ? identify, acquire or in-license other product candidates and technologies; ? maintain, leverage, and expand our intellectual property portfolio; and ? expand our operational, financial, management and commercial systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.
We expect to continue to generate operating losses for the foreseeable future.
We completed the Merger on
We believe that, based on our current operating plan, our cash, cash equivalents
and marketable debt securities as of the filing date of this Quarterly Report on
Form 10-Q, will enable us to fund operations for at least twelve months from the
issuance of our interim financial statements for the quarterly period ended
Until such time, if ever, as we can generate substantial revenue, we expect to seek additional funding through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances, and licensing arrangements. We may not be able to obtain financing on acceptable terms, or at all, and we may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or our existing stockholders' rights. If we are unable to obtain additional funding, we will be forced to delay, reduce, or eliminate some or all of our
32
--------------------------------------------------------------------------------
research and development programs, product portfolio expansion or commercialization efforts, which would adversely affect our business, or we may be unable to continue operations.
Off-Balance Sheet Arrangements
During the periods presented we did not have, and we currently do not have, any
off-balance sheet arrangements, as defined under applicable
Recently Issued Accounting Pronouncements
Please read Note 2 to our condensed consolidated financial statements included in Part I of Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.
Other Company Information
None.
33
--------------------------------------------------------------------------------
© Edgar Online, source
