Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, within
the meaning of the U.S. Private Securities Litigation Reform Act of 1995, that
involve substantial risks and uncertainties. In some cases, you can identify
forward-looking statements by the words "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intend," "may," "might," "objective," "ongoing,"
"plan," "predict," "project," "potential," "should," "will," or "would," and or
the negative of these terms, or other comparable terminology intended to
identify statements about the future. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results, levels
of activity, performance or achievements to be materially different from the
information expressed or implied by these forward-looking statements. Although
we believe that we have a reasonable basis for each forward-looking statement
contained in this Quarterly Report on Form 10-Q, we caution you that these
statements are based on a combination of facts and factors currently known by us
and our expectations of the future, about which we cannot be certain.
The forward-looking statements in this Quarterly Report on Form 10-Q include,
among other things, statements about:
? our ability to develop and commercialize ganaxolone;
? status, timing and results of preclinical studies and clinical trials;
design of and enrollment in clinical trials, availability of data from ongoing
? clinical trials, expectations for regulatory approvals, or the attainment of
clinical trial results that will be supportive of regulatory approvals;
? the potential benefits of ganaxolone;
? the timing of seeking marketing approval of ganaxolone in specific indications;
? our ability to obtain and maintain marketing approval for ganaxolone;
? our estimates of expenses and future revenue and profitability;
? our estimates regarding our capital requirements and our needs for additional
financing;
? our plans to develop and market ganaxolone and the timing of our development
programs;
? our estimates of the size of the potential markets for ganaxolone;
our expectations regarding our collaboration with Orion Corporation (Orion),
? including the expected amount and timing of R&D reimbursement, milestone,
royalty and other payments pursuant thereto;
? our ability to attract collaborators with acceptable development, regulatory
and commercial expertise;
the benefits to be derived from corporate collaborations, license agreements,
? and other collaborative or acquisition efforts, including those relating to the
development and commercialization of ganaxolone;
sources of revenue, including contributions from our contract (BARDA Contract)
with the Biomedical Advanced Research and Development Authority (BARDA),
? corporate collaborations, license agreements, and other collaborative efforts
for the development and commercialization of ganaxolone and our product
candidates;
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? our eligibility to receive funding under the debt tranches available under the
Credit Agreement with Oaktree;
? our ability to create an effective sales and marketing infrastructure if we
elect to market and sell ganaxolone directly;
? the rate and degree of market acceptance of ganaxolone;
? the timing and amount of reimbursement for ganaxolone;
? the success of other competing therapies that may become available;
? the manufacturing capacity for ganaxolone;
? the extent to which our ability to market and sell ganaxolone may be negatively
impacted by third party patents;
? our ability to maintain and protect our intellectual property rights;
? our results of operations, financial condition, liquidity, prospects, and
growth strategies;
? the industry in which we operate;
the extent to which our business may be adversely impacted by the effects of
? the COVID-19 coronavirus pandemic or by other pandemics, epidemics or
outbreaks;
? the enforceability of the exclusive forum provisions in our fourth amended and
restated certificate of incorporation; and
? the trends that may affect the industry or us.
You should refer to Part II Item 1A. "Risk Factors" of this Quarterly Report on
this Form 10-Q for a discussion of important factors that may cause our actual
results to differ materially from those expressed or implied by our
forward-looking statements. As a result of these factors, we cannot assure you
that the forward-looking statements in this Quarterly Report on Form 10-Q will
prove to be accurate. Furthermore, if our forward-looking statements prove to be
inaccurate, the inaccuracy may be material. In light of the significant
uncertainties in these forward-looking statements, you should not regard these
statements as a representation or warranty by us or any other person that we
will achieve our objectives and plans in any specified time frame or at all. We
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law.
You should read this Quarterly Report on Form 10-Q and the documents that we
reference in this Quarterly Report on Form 10-Q and have filed as exhibits to
this Quarterly Report on Form 10-Q completely and with the understanding that
our actual future results may be materially different from what we expect. We
qualify all of our forward-looking statements by these cautionary statements.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with: (i) the interim
consolidated financial statements and related notes thereto which are included
in this Quarterly Report on Form 10-Q; and (ii) our annual financial statements
for the year ended December 31, 2020 which are included in our Annual Report on
Form 10-K filed with the SEC on March 9, 2021.
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Overview
We are a clinical stage pharmaceutical company focused on developing and
commercializing innovative therapeutics to treat patients suffering from seizure
disorders. Our clinical stage product candidate, ganaxolone, is a positive
allosteric modulator of GABAA receptors that is being developed in formulations
for two different routes of administration: intravenous (IV) and oral.
Ganaxolone is a synthetic analog of allopregnanolone, an endogenous
neurosteroid. The different formulations are intended to maximize potential
therapeutic applications of ganaxolone for adult and pediatric patient
populations, in both acute and chronic care, and for both in-patient and
self-administered settings. Ganaxolone acts at both synaptic and extrasynaptic
GABAA receptors, a target known for its anti-seizure, antidepressant and
anxiolytic potential.
COVID-19
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) was
identified in Wuhan, China. This virus was declared a pandemic by the World
Health Organization in March 2020 and has spread to nearly every country in the
world, including the U.S. Efforts to contain the spread of COVID-19 have
intensified and many countries, including the U.S., have implemented travel
restrictions, business shutdowns and social distancing measures that have
impacted clinical development through supply chain shortages and clinical trial
enrollment difficulties as hospitals reduce and redeploy staff, divert resources
to patients suffering from COVID-19 and limit hospital access for non-patients.
The pandemic poses the risk that we, our contractors, suppliers, or other
partners may be prevented from conducting normal business activities for an
indefinite period of time, including those due to restrictions that may be
requested or mandated by governmental authorities.
The continued global spread of COVID-19 has not materially adversely impacted
our operating results, financial condition or cash flows as of and for the nine
months ended September 30, 2021. However, COVID-19 has impacted our clinical
operations and timelines. In response to COVID-19, for our ongoing clinical
trials, we have implemented multiple measures consistent with the U.S. Food and
Drug Administration's (FDA) guidance on the conduct of clinical trials of
medical products during the COVID-19 pandemic, including implementing remote
site monitoring and remote visits using telemedicine where needed. However,
COVID-19 may still adversely impact our clinical trials. For example, our Phase
3 clinical trial in refractory status epilepticus (RSE) is conducted in
hospitals, including academic medical centers, which have experienced high rates
of COVID-19 admissions. Due to COVID-19, priorities in several academic medical
centers participating in the RAISE Trial, including staff turnover and the need
for clinical sites to devote significant resources to patients with COVID-19,
the trial has experienced site initiation and enrollment delays. Given these
challenges, we previously updated our expectation of top-line data readout for
the RAISE Trial to be available in the second half of 2022. In addition, our
ganaxolone clinical trials in the outpatient setting may be negatively impacted
if patients and their caregivers do not want to participate while COVID-19
outbreaks continue. We are unable to predict the impact that COVID-19 will have
in the future on our business, operating results, financial condition and cash
flows. The duration and severity of the pandemic and its long-term impact on our
business are uncertain at this time, and our ability to raise sufficient
additional financing depends on many factors beyond our control, including the
current volatility in the capital markets as a result of the COVID-19 pandemic.
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Our Pipeline
We are developing ganaxolone in indications where there is a mechanistic
rationale for ganaxolone to provide a benefit, including the following
indications:
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Status Epilepticus (SE)
Status epilepticus (SE) is a life-threatening condition characterized by
continuous, prolonged seizures or rapidly recurring seizures without intervening
recovery of consciousness. If SE is not treated urgently, permanent neuronal
damage may occur, which contributes to high rates of morbidity and mortality.
Patients with SE who do not respond to first-line benzodiazepine treatment are
classified as having established SE (ESE) and those who then progress to and
then fail at least one second-line antiepileptic drug (AED) are classified as
having refractory status epilepticus (RSE). In RSE, synaptic GABAA receptors are
internalized into the neuron, resulting in decreased responsiveness to drugs
such as benzodiazepines. Treatment for RSE unresponsive to one or more
second-line AEDs is IV anesthesia to terminate seizures and prevent neuronal
injury and other complications. The IV anesthetic is increased to a level that
induces deep coma and is maintained at that rate for 24 hours or more. SE that
recurs following an attempted wean of IV anesthesia is classified as super
refractory status epilepticus (SRSE). In April 2016, we were granted FDA orphan
drug designation for IV formulation of ganaxolone for the treatment of SE, which
includes RSE.
We own a family of pending patent applications that claim certain therapeutic
regimens for the treatment of SE, including RSE, using intravenous ganaxolone.
In September 2021, the United States Patent Office granted us a patent on a
method of treating status epilepticus, including dosing regimens. This issued
patent expires in 2040.
In January 2021, we enrolled the first patient in a Phase 3 pivotal trial (the
Randomized Therapy In Status Epilepticus trial or the RAISE Trial). The RAISE
Trial is a randomized, double-blind, placebo-controlled clinical trial in
patients with RSE. We expect approximately 80 trial sites in hospitals across
the U.S. to participate in the RAISE Trial. The RAISE Trial is designed to
enroll approximately 124 patients, who will be randomized to receive ganaxolone
or placebo added to standard of care second-line AED. With this number of
patients, the trial is designed to provide over 90% power to detect a 30%
efficacy difference between ganaxolone and placebo.
The co-primary endpoints for the RAISE Trial are (1) proportion of patients with
RSE who experience seizure cessation within 30 minutes of treatment initiation
without other medications for RSE treatment, and (2) proportion of patients with
no progression to IV anesthesia for 36 hours following initiation of the study
drug. Due to COVID-19, priorities in several academic medical centers
participating in the RAISE Trial, including staff turnover and the need for
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clinical sites to devote significant resources to patients with COVID-19, the
trial has experienced site initiation and enrollment delays. Given these most
recent challenges, we expect our top-line data readout for the RAISE Trial to be
available in the second half of 2022.
Planning continues for a separate RSE trial to support a European marketing
authorization (the RAISE II Trial). Following a meeting with the EMA in the
first quarter of 2021, at which we discussed trial design, trial initiation is
planned for the first half of 2022. The RAISE II Trial will be a double blind,
placebo-controlled pivotal registration trial expected to enroll 70 patients who
have failed first-line benzodiazepine treatment and at least one prior
second-line AED. Patients will receive either ganaxolone or placebo,
administered in combination with a standard-of-care second-line AED. The RAISE
II Trial in Europe differs from the RAISE Trial in the U.S., with the RAISE II
Trial using adjunctive ganaxolone that can be initiated earlier in the course of
RSE.
The FDA has indicated alignment on the overall trial design for Established
Status Epilepticus (ESE) (the Researching Established Status Epileptics
Treatment trial or RESET Trial), and we are making preparations to begin U.S.
enrollment of this Phase 2 clinical trial in the first half of 2022. The RESET
Trial is expected to be conducted in emergency rooms under exception from
informed consent guidelines and is expected to enroll patients with convulsive
SE. We expect that the RESET Trial will be composed of two stages, the initial
open-label, dose optimization stage and subsequent double-blind
placebo-controlled stage. We anticipate that during the open-label portion of
the trial, multiple sequential cohorts of patients will be assessed to determine
the bolus dose and subsequent IV infusion rate and infusion duration to be used
in the double-blind second stage of the trial. We expect that this double-blind
placebo-controlled phase will enroll approximately 80 ESE patients equally
distributed among two arms of the trial who, in addition to standard of care,
will receive either IV ganaxolone or placebo. We also expect that the primary
efficacy endpoint of the RESET Trial will be the absence of electrographic
(rapid EEG) evidence of SE or recurrence of generalized convulsions at 1 hour
after the initiation of treatment. We plan to announce top-line data from the
RESET trial in the middle of 2023.
CDKL5 Deficiency Disorder (CDD)
CDD is a serious and rare genetic disorder that is caused by a mutation of the
cyclin-dependent kinase-like 5 (CDKL5) gene, located on the X chromosome. It
predominantly affects females and is characterized by early-onset,
difficult-to-control seizures and severe neuro-developmental impairment. The
CDKL5 gene encodes proteins essential for normal brain function. Most children
affected by CDD have difficulty walking, talking and taking care of themselves.
Many also suffer from scoliosis, visual impairment, gastrointestinal
difficulties or sleep disorders. There are no medications approved specifically
for the treatment of CDD. Genetic testing is available to determine if a patient
has a mutation in the CDKL5 gene. In June 2017, we were granted FDA orphan drug
designation for ganaxolone for the treatment of CDKL5 Disorder.
Additionally, in November 2019, the European Medicine Agency's (EMA) Committee
for Orphan Medicinal Products (COMP) granted orphan drug designation for
ganaxolone for the treatment of CDD.
In July 2021, we submitted our New Drug Application (NDA), which was accepted
for filing in September 2021 and granted Priority Review designation. The FDA
assigned a Prescription Drug User Fee Act (PDUFA) action date for this NDA of
March 20, 2022. Priority Review designation is given to an investigational
medicine that, if approved, would be a significant improvement in the safety or
effectiveness of the treatment of a serious condition and accelerates the timing
of the FDA review of the application compared to a standard review. In its
acceptance letter, the FDA indicated that it was not currently planning to hold
an advisory committee meeting to discuss the application.
We also had a pre-Marketing Authorization Application (MAA) meeting with the EMA
in March 2021 to discuss the proposed format and content of the MAA. In August
2021, the Committee for Medicinal Products for Human Use (CHMP) of the EMA
granted our request for accelerated assessment of ganaxolone for the treatment
of seizures associated with CDD. Accelerated assessment is granted by the CHMP
when a medicinal product is expected to be of major public health interest and
therapeutic innovation. Accelerated assessment potentially provides a reduced
review timeline from 210 to 150 days once the MAA is filed and validated, not
counting clock stops when applicants are requested to provide additional
information. The MAA for ganaxolone was submitted to the EMA on October 11, 2021
and was accepted for review on October 28, 2021.
In September 2020, we announced in top-line results that ganaxolone achieved the
primary endpoint in a pivotal Phase 3 clinical trial (Marigold Study), which
evaluated the use of oral ganaxolone in children and young adults with
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CDD. The top-line results reported for the Marigold Study in September 2020
indicated that the primary endpoint, median 28-day major motor seizure frequency
reduction, was 32.2% for ganaxolone compared to 4.0% for placebo (p=0.002). In
connection with the preparation of the NDA submission for CDD, we determined
that the top-line data previously reported in September 2020 included seizure
diary entries that were duplicates of seizures that parents or caregivers had
already entered. The duplicate data, which was the result of programming and
data transfer errors, affected approximately 1.7% of total seizures reported.
These duplicate entries were deleted from the final data analysis that was
submitted with the NDA for the Marigold Study. The final data analysis of the
primary endpoint resulted in a median 28-day major motor seizure frequency
reduction of 30.7% compared to 6.9% for placebo (p=0.0036). We do not believe
these changes affect the statistical or clinical conclusions of the Marigold
Study.
In July 2020, the FDA granted Rare Pediatric Disease Designation (RPD
Designation) for ganaxolone for the treatment of CDD. The FDA grants RPD
Designation for diseases that affect fewer than 200,000 people in the U.S. and
in which the serious or life-threatening manifestations occur primarily in
individuals 18 years of age and younger. If an NDA for ganaxolone in CDD is
approved, we may be eligible to receive a priority review voucher from the FDA,
which can be redeemed for priority review in a subsequent marketing application
or can be sold or transferred to a third party. The authority for the FDA to
award rare pediatric disease priority review vouchers for drugs after September
30, 2024 is currently limited to drugs that RPD Designation on or prior to
September 30, 2024, and the FDA may only award rare pediatric disease priority
review vouchers through September 30, 2026. If the NDA for ganaxolone is not
approved on or prior to September 30, 2026 for any reason, it will not be
eligible for a priority review voucher. However, it is possible that the
authority for the FDA to award rare pediatric disease priority review vouchers
will be further extended by Congress.
In September 2020, Ovid Therapeutics, Inc. (Ovid) contacted us and disclosed
that it owns two recently issued patents that include claims that encompass our
product candidates for the treatment of CDD and PCDH19. Ovid may file a lawsuit
against us alleging infringement of its patents and/or we may challenge the
validity of Ovid's patents with the USPTO or through the courts. Any such
proceeding, regardless of its outcome, would likely result in the expenditure of
significant financial resources and the diversion of management's time and
resources. In addition, any such proceeding may cause negative publicity,
adversely impact patients, and we may be prohibited from marketing or selling
ganaxolone for CDD and PCDH19, during such proceedings or if we are not
successful in such proceedings. If Ovid does decide to bring an infringement
lawsuit, we do not expect that it will be filed before a commercial launch of
ganaxolone for CDD, or PCDH19, as applicable, based upon the "safe harbor"
provisions of the Drug Price Competition and Patent Term Restoration Act of 1984
(the Hatch-Waxman Act). We may need to acquire or obtain a license to the Ovid
patents to market or sell ganaxolone for CDD, which may not be available on
commercially acceptable terms or at all. If we are not able to acquire the Ovid
patents or negotiate a license on acceptable terms, and if our product is
determined to infringe Ovid's patents and the patents are determined to be
valid, then we may be forced to pay Ovid royalties, damages and costs, or we may
be prevented from commercializing ganaxolone for CDD altogether, which would
have a material adverse impact on our business. We are also aware of a patent
application owned by Ovid that is pending in the European Patent Office. That
patent application includes claims that encompass our product candidates for use
in the treatment of CDD. This pending application is under examination. In March
2020 the European Patent Office issued an examiner report stating that none of
the claims meet the requirements for patenting. Ovid filed a brief response but
did not amend any of the claims. The application remains under examination and
no claims have been allowed. It is possible that this pending application may
issue as a patent with claims that encompass our product candidates for the
treatment of CDD, in which case, the above risks would also apply to any such
patent that issues. We are also aware of a pending U.S. patent application by
Ovid in the same patent family that includes claims that encompass our product
candidate for the treatment of SE. This pending patent application is in the
early stages of examination at the USPTO. It is possible that this pending
patent application may issue as a patent with claims that encompass our product
candidate for the treatment of RSE, in which case, the above risks would also
apply to any such patent that was issued.
Tuberous Sclerosis Complex (TSC)
TSC is a rare genetic disorder that affects many organs and causes non-malignant
tumors in the brain, skin, kidney, heart, eyes, and lungs. The condition is
caused by inherited mutations in either the TSC1 gene or the TSC2 gene. TSC
occurs with a frequency of 1:6,000 live births and a mutation is found in 85% of
patients. While the disease phenotype can be extremely variable, epilepsy occurs
in up to 85% of TSC patients. TSC is a leading cause of genetic epilepsy, often
manifesting in the first year of life as either focal seizures or infantile
spasms. There are currently
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few disease-specific treatments approved for seizures in TSC. The orphan drug
designations for ganaxolone for the treatment in TSC were granted by the FDA in
August 2021 and by the EMA in October 2021.
In August 2021, we announced top-line data from our open-label Phase 2 trial
(CALM Trial) evaluating safety and efficacy of adjunctive oral ganaxolone
treatment in 23 patients with seizures associated with tuberous sclerosis
complex (TSC). This open-label trial, the CALM study, enrolled 23 patients ages
2 to 32 who entered a four-week baseline period followed by a 12-week treatment
period where they received up to 600 mg of ganaxolone (oral liquid suspension)
three times a day. Patients who met eligibility criteria were able to continue
ganaxolone treatment during a 24-week extension. The primary endpoint was the
percent change in 28-day TSC-associated seizure frequency during the 12-week
treatment period relative to the four-week baseline period. Secondary outcome
measures included the percentage of patients experiencing a greater than or
equal to 50% reduction in 28-day TSC-associated seizure frequency through the
end of the 12-week treatment period compared to the 4-week baseline period.
The primary endpoint showed a median 16.6% reduction in 28-day primary endpoint
seizure frequency relative to the four-week baseline period. A secondary
endpoint showed that the proportion of patients that achieved an equal to or
greater than 50% seizure reduction was 30.4%. During the trial, patients with
focal seizures (n=19) showed a median 25.2% reduction in focal seizure
frequency. Ganaxolone was generally well-tolerated with somnolence reported as
the most common adverse event. In addition, one treatment-related serious
adverse event of seizure was reported in the trial. Four patients discontinued
the trial due to adverse events. Additionally, the data from the trial suggested
that in patients on concomitant Epidiolex, early elevation of ganaxolone blood
levels occurred and appeared to be linked to greater somnolence. We have
adjusted the titration schedule and maximum daily dose of ganaxolone in the
proposed Phase 3 TSC clinical trial protocol in patients receiving concomitant
Epidiolex with a goal of improving tolerability in those patients.
In response to our request for a Type B meeting with the FDA regarding a
proposed Phase 3 TSC clinical trial, the FDA provided written responses to our
questions in lieu of a meeting. We believe the written responses show overall
alignment on the clinical development plan in TSC. Although it will be a matter
of review, we also believe based on FDA's written responses, that if FDA
determines that ganaxolone has established efficacy for the treatment of
seizures associated with CDD, such a determination could serve as confirmatory
evidence in support of a single adequate and well controlled registration trial
in TSC. A meeting with the EMA is targeted for the first quarter of 2022. We are
targeting the first quarter of 2022 for the first patient to be enrolled in a
global Phase 3 randomized, double blind, placebo-controlled trial (TrustTSC
Trial) of adjunctive ganaxolone in approximately 160 TSC patients. The proposed
primary endpoint for the TrustTSC Trial is percent change in 28-day
TSC-associated seizure frequency.
Lennox-Gestaut Syndrome (LGS)
LGS is a severe form of epilepsy that typically begins between one and eight
years of age. Affected children experience multiple seizure types that are often
unresponsive to treatment, the most common being atonic, tonic and atypical
absence seizures. Children with LGS may also have neurodevelopmental delay and
behavioral problems.
We plan to pursue the development of ganaxolone for LGS, given the overlap in
seizure types and etiologies with other disorders where ganaxolone has potential
to improve clinical outcomes, such as CDD and TSC. We are planning to use a
second generation formulation of ganaxolone for our LGS development program. We
plan to present additional clinical data in the fourth quarter of 2021 and
target the initiation of a Phase 2 clinical trial in the second half of 2022.
PCDH19-Related Epilepsy (PCDH19-RE)
PCDH19-RE is a rare epileptic syndrome characterized by early-onset seizures,
cognitive and sensory impairment, and psychiatric and behavioral disturbances.
We conducted a Phase 2 proof-of-concept (POC) clinical trial (Violet Study) of
ganaxolone treatment in patients with PCDH19-RE
We have deferred further development of ganaxolone for the treatment of
PCDH19-RE in order to focus our efforts and our resources on our ongoing
development of ganaxolone in current indications. Eligible patients who
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completed the PCDH19 Phase 2 Clinical Trial may remain on ganaxolone either
through the open label extension or as compassionate use under the care of the
investigator responsible for their treatment.
Reverse stock split
On September 23, 2020, we effected a 1-for-4 reverse split of shares of our
common stock (Reverse Split), as approved by our Board of Directors and
stockholders. The par value per share of our common stock was not adjusted as a
result of the Reverse Split, and our authorized shares of common stock was
reduced to 150,000,000. All of the share and per share amounts included in this
Quarterly Report on Form 10-Q have been adjusted to reflect the Reverse Split.
Operations
Our operations to date have consisted primarily of organizing and staffing our
company and developing ganaxolone, including conducting preclinical studies,
clinical trials and raising capital. We have funded our operations primarily
through sales of equity and debt securities. At September 30, 2021, we had cash
and cash equivalents of $145.1 million. We have no products currently available
for sale, have incurred operating losses since inception, have not generated any
product sales revenue and have not achieved profitable operations. We incurred a
net loss of $70.5 million and $50.0 million for the nine months ended September
30, 2021 and 2020, respectively. Our accumulated deficit as of September 30,
2021 was $382.4 million, and we expect to continue to incur substantial losses
in future periods. We anticipate that our operating expenses will increase
substantially as we continue to advance our clinical-stage product candidate,
ganaxolone.
We anticipate that our expenses will increase substantially as we:
? conduct multiple concurrent later stage clinical trials in targeted
indications;
? continue the research, development and scale-up manufacturing capabilities to
optimize ganaxolone and dose forms for which we may obtain regulatory approval;
? establish and implement sales, marketing and distribution capabilities to
commercialize ganaxolone;
conduct other preclinical studies and clinical trials to support the filing of
? NDAs with the FDA, MMAs with the EMA and other marketing authorization filings
with regulatory agencies in other countries;
? acquire the rights to other product candidates and fund their development;
? maintain, expand and protect our global intellectual property portfolio;
? hire additional clinical, manufacturing, scientific and commercial personnel;
and
add operational, financial and management information systems and personnel,
? including personnel to support our drug development and potential future
commercialization efforts.
We believe that our cash and cash equivalents balance as of September 30, 2021
will be sufficient to maintain the minimum cash balance required under our debt
facility and to fund our operating expenses and capital expenditure requirements
for at least the next 12 months from the date of this filing. However, we will
need to secure additional funding in the future, from one or more equity or debt
financings, government funding, collaborations, licensing transactions, other
commercial transactions or other sources, in order to carry out all of our
planned research, development and commercialization activities with respect to
ganaxolone.
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Financial Overview
Federal Contract Revenue
In September 2020, we entered into the BARDA Contract with BARDA, a division of
the U.S. Department of Health and Human Services' Office of the Assistant
Secretary for Preparedness and Response. Under the BARDA Contract, we will
receive an award of up to an estimated $51 million for development of IV
administered ganaxolone for the treatment of RSE. Funding will include support
on a cost-sharing basis for completion of a Phase 3 clinical trial of
IV-administered ganaxolone in patients with RSE who are refractory to second
line anti-epileptic drugs, funding of pre-clinical studies to assess whether
IV-administered ganaxolone is an effective treatment for RSE due to chemical
nerve gas agent exposure, and funding of certain ganaxolone manufacturing
scale-up and regulatory activities.
The BARDA Contract consists of an approximately two-year base period-during
which BARDA will provide up to approximately $21 million of funding for the RSE
Phase 3 clinical trial on a cost share basis and funding of additional
preclinical studies of ganaxolone in nerve agent exposure models. Following
successful completion of the RSE Phase 3 clinical trial and preclinical studies
in the base period, the BARDA Contract provides for approximately $30 million of
additional BARDA funding for three options in support of manufacturing, supply
chain, clinical, regulatory and toxicology activities. Under the BARDA Contract,
we will be responsible for cost sharing in the amount of approximately $33
million and BARDA in the amount of approximately $51 million if all development
options are completed. The contract period-of-performance (base period plus
option exercises) is up to approximately five years.
We recognize federal contract revenue from the BARDA Contract in the period in
which the allowable research and development expenses are incurred. We expect
federal contract revenue to increase as the associated costs with our RSE Phase
3 clinical trial increase.
License and Collaboration Revenue
In July 2021, we entered into the Orion Collaboration Agreement with Orion
Corporation. Under the terms of the Orion Collaboration Agreement, we granted
Orion an exclusive, royalty-bearing, sublicensable license to certain of the
Company's intellectual property rights with respect to commercializing
biopharmaceutical products incorporating the Company's product candidate
ganaxolone (Licensed Products) in the European Economic Area, the United Kingdom
and Switzerland (collectively, the Territory) for the diagnosis, prevention and
treatment of certain human diseases, disorders or conditions (the Field),
initially in the indications of CDKL5 deficiency disorder (CDD), tuberous
sclerosis complex (TSC) and refractory status epilepticus (RSE).
Under the terms of the Orion Collaboration Agreement, we received a €25.0
million ($29.6 million) upfront payment from Orion in July 2021. In connection
with the upfront fee, we agreed to provide Orion with the results of a planned
genotoxicity study on the M2 metabolite of ganaxolone, a "Combined Micronucleus
& Comet study in vivo." In the event that the results of such study are
positive, based on the criteria set forth in the study's protocol, Orion will
have the right to terminate the Collaboration Agreement within ninety (90) days
after its receipt of the final report of such study, in which case we must
refund Orion seventy-five percent (75%) of the upfront fee. In the event of such
termination and refund, Orion shall have no further rights pursuant to the oral
and IV dose formulations of ganaxolone and the Collaboration Agreement shall
terminate and be of no further force or effect.
The Company is eligible to receive up to €90.0 million upon the achievement of
specific clinical and commercial achievements. Also, as part of the overall
arrangement, we have agreed to supply the Licensed Products to Orion at an
agreed upon price.
In accordance with the guidance, the Company identified following commitments
under the arrangement: (i) exclusive rights to develop, use, sell, have sold,
offer for sale and import any product comprised of Licensed Product (the
License) (ii) development and regulatory activities (Development and Regulatory
Activities), and (iii) requirement to supply Orion with the Licensed Product at
an agreed upon price (the Supply of Licensed Product). The Company determined
that these three commitments represent distinct performance obligations for
purposes of recognizing revenue
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and will recognize license and collaboration revenue or a reduction of expense
as it fulfills these performance obligations.
Research and Development Expenses
Our research and development expenses consist primarily of costs incurred for
the development of ganaxolone, which include:
? employee-related expenses, including salaries, benefits, travel and stock-based
compensation expense;
expenses incurred under agreements with clinical research organizations (CROs)
? and investigative sites that conduct our clinical trials and preclinical
studies;
? the cost of acquiring, developing and manufacturing clinical trial materials;
? facilities, depreciation and other expenses, which include direct and allocated
expenses for rent and maintenance of facilities, insurance and other supplies;
? costs associated with preclinical activities and regulatory operations; and
? costs associated with developing new formulations and prodrugs of ganaxolone.
We expense research and development costs when we incur them. We record costs
for some development activities, such as clinical trials, based on an evaluation
of the progress to completion of specific tasks using data such as patient
enrollment, clinical site activations and information our vendors provide to us.
As we fulfill our Development and Regulatory Activities under our Orion
Collaboration Agreement, we recognize a reduction of contract liability and
research and development expense.
We will incur substantial costs beyond our present and planned clinical trials
in order to file NDAs and Supplemental New Drug Applications (sNDAs), or MAAs
outside the U.S., for ganaxolone for various clinical indications, and in each
case, the nature, design, size and cost of further clinical trials and other
studies will depend in large part on the outcome of preceding studies and trials
and discussions with regulators. It is difficult to determine with certainty the
costs and duration of our current or future clinical trials and preclinical
studies, or if, when or to what extent we will generate revenue from the
commercialization and sale of ganaxolone if we obtain regulatory approval. We
may never succeed in achieving regulatory approval for ganaxolone. The duration,
costs and timing of clinical trials and development of ganaxolone will depend on
a variety of factors, including the uncertainties of future clinical trials and
preclinical studies, uncertainties in clinical trial enrollment rate and
significant and changing government regulation.
In addition, the probability of success for our clinical programs will depend on
numerous factors, including competition, manufacturing capability and commercial
viability. See "Risk Factors." Our commercial success depends upon attaining
significant market acceptance, if approved, among physicians, patients,
healthcare payers and the medical community. We will determine which programs to
pursue and how much to fund each program in response to the scientific and
clinical success, as well as an assessment of commercial potential.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related
costs for executive and other administrative personnel and consultants,
including stock-based compensation and travel expenses. Other general and
administrative expenses include professional fees for legal, patents, consulting
and accounting services. General and administrative expenses are expensed when
incurred. We expect that our general and administrative expenses will increase
in the future as a result of employee hiring and our scaling-up of operations
commensurate with supporting more advanced clinical trials and in preparation
for commercial infrastructure. These increases will likely include
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increased costs for insurance, hiring of additional personnel, outside
consultants, legal counsel and accountants, among other expenses.
Cost of collaboration revenue
Cost of collaboration revenue represents a one-time fee paid to Purdue
Neuroscience Company related to our license agreement. This fee was paid in
conjunction with our Orion Collaboration Agreement.
Interest Income
Interest income consists principally of interest income earned on cash and cash
equivalents and investment balances.
Interest Expense
Interest expense consists of interest expense and amortization of debt discount
related to our Notes Payable.
Results of Operations
Federal Contract Revenue
Federal contract revenue was $1.1 million and $4.8 million for the three and
nine months ended September 30, 2021, respectively, compared to $0.2 for each of
the comparable periods in 2020 as a result of the BARDA Contract.
License Revenue
License revenue was $9.0 million for the three and nine months ended September
30, 2021 as a result of recognizing the transaction price not subject to certain
return provisions based on results of additional pre-clinical testing related to
entering into the Orion Collaboration Agreement.
Research and Development Expenses
We allocate direct research and development expenses, consisting principally of
external costs, such as fees paid to investigators, consultants, central
laboratories and CROs in connection with our clinical trials, and costs related
to manufacturing or purchasing clinical trial materials, to specific product
development programs. We do not allocate employee and contractor-related costs,
costs associated with our facility expenses, including depreciation or other
indirect costs, to specific product programs because these costs are deployed
across multiple product programs under research and development and, as such,
are separately classified. The table below shows our research and development
expenses incurred with respect to each active program, in thousands. The primary
drivers of our research and development expenditures are currently in our
product development programs in RSE, CDD, TSC and PCDH19-RE. We expect our
research and development expenses for ganaxolone will continue to increase
during subsequent periods.
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We did not allocate research and development expenses to any other specific
product development programs during the periods presented (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
CDKL5 deficiency disorder (1) $ 1,968 $ 1,477 $ 6,529 $ 4,655
PCDH19-related epilepsy (2) 628 656 2,070 2,232
Tuberous Sclerosis (3) 1,093 175 2,347 508
Drug Development - Suspension (4) 1,779 1,276 6,653 5,515
Oral Indications Subtotal 5,468 3,584 17,599 12,910
Status epilepticus 1,777 1,504 4,265 2,765
Drug Development - IV 723 897 3,267 2,693
IV Indications Subtotal (5) 2,500 2,401 7,532 5,458
Other research and development (6) 3,679 453 9,818 5,932
Indirect research and development (7) 6,706 4,868 20,557 13,762
Total
$ 18,353 $ 11,306 $ 55,506 $ 38,062
Note: Certain prior year expenses have been reclassified to conform to current
year presentation.
The increase in the three and nine months ended September 30, 2021 compared
to the 2020 period was due primarily to an increase in regulatory and
(1) statistical analysis expenses associated with our NDA filing, partially
offset by reduced clinical trial activity as 2020 costs associated with our
Phase 3 Marigold study exceeded 2021 costs associated with our on-going open
label extension.
The decrease in the three and nine months ended September 30, 2021 was
(2) primarily due to 2020 including more active clinical development work
associated with our Phase 2 Violet study and 2021 including only limited
costs associated with our on-going open label extension.
The increase in the three and nine months ended September 30, 2021 was
primarily due to increased trial activity in 2021 from the Phase 2 TSC trial
(3) and start-up activities for the proposed Phase 3 TSC trial, as compared to
more limited Phase 2 start-up activities, including enrollment, in the
relevant 2020 periods.
The increase in the three and nine months ended September 30, 2021 was the
(4) result of increased manufacturing costs associated with scale up for the NDA
submission and preparation for commercialization.
The increase in the three and nine months ended September 30, 2021 was
(5) primarily due to start-up activities, including drug manufacturing,
associated with the Phase 3 RSE clinical trial and Phase 2 ESE clinical
trial.
Other research and development expenses include external expenses associated
with preclinical and clinical development of ganaxolone, including safety
(6) studies, stability studies, preclinical studies, including animal toxicology
and pharmacology studies, and other professional fees. The increase in the
three and nine months ended September 30, 2021 was primarily due to safety
studies.
The increase is related to increased personnel costs in support of our
(7) increased activity in preclinical, clinical, and manufacturing activities, as
well as a reduction in expense related to our Development and Regulatory
Activities obligation under our Orion Collaboration Agreement.
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General and Administrative Expenses
General and administrative expenses were $9.5 million and $26.7 million for the
three and nine months ended September 30, 2021, respectively, compared to $4.6
million and $12.5 million for the three and nine months ended September 30,
2020, respectively. The primary drivers of the increase for the three month
comparative period were $1.8 million in increased personnel costs, $1.1 million
contract acquisition costs related to our Orion Collaboration Agreement, $1.0
million in increased commercialization preparation, $0.6 million in increased
noncash stock-based compensation and $0.4 million of legal costs. The primary
drivers of the increase for the nine month comparative period were $4.9 million
in increased personnel costs, $4.1 million in increased noncash stock-based
compensation, $2.9 million in increased commercialization preparation, $1.1
million contract acquisition costs related to our Orion Collaboration Agreement,
$0.8 million in increased legal fees and $0.4 million of other administrative
expenses. Of the increased noncash stock-based compensation, $2.1 million was
due to modifications of stock options recorded in the first quarter of 2021 in
connection with a severance agreement with our former Chief Financial Officer.
Interest Expense
Interest expense increased for the three and nine months ended September 30,
2021 primarily due to $0.5 million interest expense and $0.2 million of debt
amortization for the three months ended September 30, 2021 and $0.7 million
interest expense and $0.3 million of debt amortization for the nine months ended
September 30, 2021 related to our Notes payable (Note 9 in accompanying notes to
consolidated financial statements).
Liquidity and Capital Resources
Since inception, we have incurred net losses and negative cash flows from our
operations. We incurred net losses of $70.5 million and $50.0 million for the
nine months ended September 30, 2021 and 2020, respectively. Our cash used in
operating activities was $33.7 million for the nine months ended September 30,
2021 compared to $44.5 million for the same period a year ago. Historically, we
have financed our operations principally through the sale of common stock,
preferred stock and convertible debt, and the use of term loans. At September
30, 2021, we had cash and cash equivalents of $145.1 million.
European Commercialization Agreement
On July 30, 2021, we entered into a collaboration agreement (the Collaboration
Agreement) with Orion Corporation (Orion), whereby Orion received exclusive
rights to commercialize the oral and IV dose formulations of ganaxolone in the
European Economic Area, United Kingdom and Switzerland in multiple seizure
disorders, including CDD, tuberous sclerosis complex (TSC) and RSE. Under the
agreement, we received a €25 million ($29.6 million) upfront fee and are
eligible to receive up to an additional €97 million in R&D reimbursement and
cash milestone payments based on specific clinical and commercial achievements,
as well as tiered royalty payments based on net sales ranging from the low
double digits to the high teens for the oral programs and the low double-digits
to the low twenties for the IV programs. In connection with the upfront fee, we
agreed to provide Orion with the results of an on-going genotoxicity study on
the M2 metabolite of ganaxolone, a "Combined Micronucleus & Comet study in
vivo." In the event that the results of such study are positive, based on the
criteria set forth in the study's protocol, Orion will have the right to
terminate the Collaboration Agreement within ninety (90) days after its receipt
of the final report of such study, in which case we must refund Orion
seventy-five percent (75%) of the upfront fee. In the event of such termination
and refund, Orion shall have no further rights pursuant to the oral and IV dose
formulations of ganaxolone and the Collaboration Agreement shall terminate and
be of no further force or effect.
Oaktree Credit Agreement
On May 11, 2021 (the Closing Date), we entered into a Credit Agreement and
Guaranty (as amended by that certain letter agreement on May 17, 2021, the
Credit Agreement) with Oaktree Fund Administration, LLC, as administrative agent
and the lenders party thereto that provides for a five-year senior secured term
loan facility in an
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aggregate original principal amount of up to $125.0 million available to us in
five tranches as follows (collectively, the Term Loans):
? $15.0 million of tranche A-1 term loans advanced on the Closing Date.
Through December 31, 2021, $30.0 million of tranche A-2 term loans subject to
? written acceptance by the FDA of an NDA filing relating to the use of
ganaxolone in the treatment of CDD. This $30.0 million tranche was drawn in
September, 2021 after formal acceptance of the NDA filing.
Through December 31, 2022, $30.0 million of tranche B term loans subject to
? receipt of written approval from the FDA of an NDA permitting the marketing of
ganaxolone in the United States to treat CDD (the FDA Approval).
Through June 30, 2023, $25.0 million of tranche C term loans subject to receipt
of the FDA Approval and the completion of one or more financings, including
through the issuance of common stock, convertible debt, subordinated debt, a
synthetic royalty or a sublicense in which we receive gross proceeds in an
? aggregate amount of at least $40.0 million and net proceeds in an aggregate
amount of at least $36.0 million. In addition, the availability of this tranche
is subject to either our current Phase 3 trial in RSE or a Phase 3 trial in TSC
achieving statistical significance (p value < 0.05) across all primary
endpoints and ganaxolone must be generally well tolerated, with a safety
profile generally consistent with previous clinical trials.
Through December 31, 2023, $25 million of tranche D term loans subject to
? receipt of the FDA Approval and us earning an aggregate of at least $50 million
in net product revenue in the United States for a trailing six consecutive
months.
The Term Loans will bear interest at a fixed per annum rate (subject to increase
during an event of default) of 11.50% and are scheduled to mature on the fifth
anniversary of the Closing Date (the Maturity Date). In addition, at the time of
funding of any tranche of the Term Loans, we are required to pay an upfront fee
of 2.0% of the aggregate principal amount being funded. We are required to make
quarterly interest payments until the Maturity Date. We are also required to
make principal payments, which are payable in quarterly installments beginning
on the last day of the first quarter ending after the third anniversary of the
Closing Date in an amount equal to 5.0% of the aggregate amount of the Term
Loans outstanding on the date of the first such quarterly principal payment and
continuing until the Maturity Date, on which date all outstanding Term Loans and
other amounts owed under the Credit Agreement will be required to be paid in
full. A commitment fee of 75 basis points per annum will accrue on each of the
tranche B, C and D commitments for the period beginning 120 days after the
funding date of the tranche A-2 term loans until the applicable tranche is
either funded or terminated.
BARDA Contract
In September 2020, we entered into the BARDA Contract with BARDA. Under the
BARDA Contract, we will receive an award of up to an estimated $51 million for
development of IV administered ganaxolone for the treatment of RSE. Funding will
include support on a cost-sharing basis for completion of a Phase 3 clinical
trial of IV-administered ganaxolone in patients with RSE who are refractory to
second line anti-epileptic drugs, which covers the RAISE Trial, funding of
pre-clinical studies to assess whether IV-administered ganaxolone is an
effective treatment for RSE due to chemical nerve gas agent exposure, and
funding of certain ganaxolone manufacturing scale-up and regulatory activities.
The BARDA Contract consists of an approximately two-year base period-during
which BARDA will provide up to approximately $21 million of funding for the RSE
Phase 3 clinical trial on a cost share basis and funding of additional
preclinical studies of ganaxolone in nerve agent exposure models. Following
successful completion of the RSE Phase 3 clinical trial and preclinical studies
in the base period, the BARDA Contract provides for approximately $30 million of
additional BARDA funding for three options in support of manufacturing, supply
chain, clinical, regulatory and toxicology activities. Under the BARDA Contract,
we will be responsible for cost sharing in the amount
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of approximately $33 million and BARDA in the amount of approximately $51
million if all development options are completed. The contract
period-of-performance (base period plus option exercises) is up to approximately
five years.
Equity Financings
In connection with the closing of an equity financing in December 2020, we
issued a total of 5,000,000 shares of common stock in an underwritten public
offering resulting in aggregate net proceeds, after underwriting discounts and
commissions in the public offering and other estimated offering expenses, of
$64.9 million
In connection with the closing of an equity financing in June 2020, we issued a
total of 4,600,000 shares of common stock in an underwritten public offering
resulting in aggregate net proceeds, after underwriting discounts and
commissions in the public offering and other estimated offering expenses, of
$42.9 million.
In October 2017, we entered into an Equity Distribution Agreement (Prior EDA)
with JMP Securities LLC (JMP), under which JMP, as our exclusive agent, at our
discretion and at such times that we may determine from time to time, may sell
over a three-year period from the execution of the agreement up to a maximum of
$50 million of shares of our common stock. During the year ended December 31,
2020, we issued 78,807 shares of our common stock pursuant to the Prior EDA for
aggregate net proceeds of $0.6 million. On July 9, 2020, we entered into a new
Equity Distribution Agreement (New EDA) with JMP to create an at the market
equity program under which we from time to time may offer and sell shares of our
common stock having an aggregate offering price of up to $60.0 million through
or to JMP. Subject to the terms and conditions of the New EDA, JMP will use its
commercially reasonable efforts to sell shares of our common stock from time to
time, based upon our instructions. JMP will be entitled to a commission of up to
3.0% of the gross proceeds from each sale of shares of our common stock. The New
EDA superseded and terminated the Prior EDA effective immediately upon
effectiveness of our shelf registration statement on Form S-3 (File No.
333-239780) filed with the Securities and Exchange Commission on July 9, 2020
and declared effective by the Securities and Exchange Commission on July 27,
2020. We did not sell any shares of our common stock during the nine months
ended September 30, 2021 under the New EDA.
Cash Flows
Operating Activities. Cash used in operating activities decreased to $33.7
million for the nine months ended September 30, 2021 compared to $44.5 million
for the same period a year ago. The decrease was driven by the upfront payment
related to our Orion Collaboration Agreement and increase in the change in
accounts payable, accrued expenses and other long term-liabilities, offset by
increase in net loss.
Investing Activities. Cash used by investing activities for the nine months
ended September 30, 2021 represents $2.1 million in deposits and purchases of
property and equipment, offset by the maturity of short-term investments of $1.5
million. Cash used in investing activities for the nine months ended September
30, 2020 represents $8.9 million purchases of short term investments, partially
offset by $5.7 million maturities of short-term investments.
Financing Activities. Cash provided by financing activities for the nine months
ended September 30, 2021 primarily represents $40.3 million proceeds from notes
payable, net of issuance costs and $0.9 million proceeds from the exercise of
stock options and for the nine months ended September 30, 2020 represents $43.5
million proceeds from equity offerings, net of offering costs and $0.6 million
proceeds from the exercise of stock options.
Funding Requirements
We have not achieved profitability since our inception, and we expect to
continue to incur net losses for the foreseeable future. We expect our cash
expenditures to increase in the near term as we fund our continuing and planned
clinical trials for ganaxolone, as well as scale up our operations and prepare
for the potential commercialization of ganaxolone.
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We believe that our cash and cash equivalents balance as of September 30, 2021
will be sufficient to maintain the minimum cash balance required under our debt
facility and to fund our operating expenses and capital expenditure requirements
for at least the next 12 months from the date of this filing. However, we will
need to raise substantial additional financing in the future to fund our
operations. In order to meet these additional cash requirements, we may seek to
sell additional equity or convertible debt securities that may result in
dilution to our stockholders, or engage in federal contracts or other
partnerships. If we raise additional funds through the issuance of convertible
debt securities, these securities could have rights senior to those of our
common stock and could contain covenants that restrict our operations. There can
be no assurance that we will be able to obtain additional equity or debt
financing on terms acceptable to us, if at all. Further, the continued spread of
COVID-19 has also led to severe disruption and volatility in the global capital
markets, which could increase our cost of capital and adversely affect our
ability to access the capital markets in the future. Our failure to obtain
sufficient funds on acceptable terms when needed could have a negative impact on
our business, results of operations, and financial condition.
Our future capital requirements will depend on many factors, including:
? the effects of the COVID-19 pandemic on our business, the medical community and
the global economy;
? the results of our preclinical studies and clinical trials;
? the development, formulation and commercialization activities related to
ganaxolone;
the scope, progress, results and costs of researching and developing ganaxolone
? or any other future product candidates, and conducting preclinical studies and
clinical trials;
? the timing of, and the costs involved in, obtaining regulatory approvals for
ganaxolone or any other future product candidates;
the cost of commercialization activities if ganaxolone or any other future
? product candidates are approved for sale, including marketing, sales and
distribution costs;
the cost of manufacturing and formulating ganaxolone, or any other future
? product candidates, to internal and regulatory standards for use in preclinical
studies, clinical trials and, if approved, commercial sale;
? our ability to establish and maintain strategic collaborations, licensing or
other arrangements and the financial terms of such agreements;
? our ability to receive funding under the BARDA Contract;
our expectations regarding the amount and timing of milestone and royalty
? payments pursuant to our exclusive license agreement with Orion for the
commercialization of ganaxolone in Europe;
? our obligation to reimburse the upfront payment under the Collaboration
Agreement to Orion in the event of a positive genotoxicity study;
? our eligibility for additional debt tranches under the Credit Agreement with
Oaktree;
? any product liability, infringement or other lawsuits related to our product
candidates and, if approved, products;
? capital needed to attract and retain skilled personnel;
the costs involved in preparing, filing, prosecuting, maintaining, defending
? and enforcing patent claims, including litigation costs and the outcome of such
litigation; and
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? the timing, receipt and amount of sales of, or royalties on, future approved
products, if any.
Please see "Risk Factors" for additional risks associated with our substantial
capital requirements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.
Discussion of Critical Accounting Policies and Significant Judgments and
Estimates
The preparation of financial statements in conformity with GAAP requires us to
use judgment in making certain estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses in our
financial statements and accompanying notes. Critical accounting policies are
those that are most important to the portrayal of our financial condition and
results of operations and require difficult, subjective and complex judgments by
management in order to make estimates about the effect of matters that are
inherently uncertain. During the nine months ended September 30, 2021, there
were no significant changes to our critical accounting policies from those
described in our annual financial statements for the year ended December 31,
2020, which we included in our Annual Report on Form 10-K and was filed with the
SEC on March 9, 2021.
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