MIRUM PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our unaudited condensed
consolidated financial statements and the related notes and other financial
information included elsewhere in this Quarterly Report on Form 10-Q and our
audited consolidated financial statements and notes thereto and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K ("Annual Report") for the
year ended
Forward-Looking Statements
In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or the negative of these terms or other similar expressions.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases. We focus on diseases for which the unmet medical need is high and the biology for treatment is clear.
Our lead product LIVMARLI (maralixibat) oral solution ("Livmarli"), a novel,
oral, minimally-absorbed agent designed to selectively inhibit ASBT, also known
as the ileal bile acid transporter ("IBAT"), is approved for the treatment of
cholestatic pruritus in patients with Alagille syndrome ("ALGS") 1 year of age
and older in
We are advancing our second product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat for the treatment of intrahepatic cholestasis of pregnancy ("ICP"), primary sclerosing cholangitis ("PSC") and primary biliary cholangitis ("PBC"). Volixibat has been studied in over 400 adults for up to 48 weeks. Clinical trials of volixibat have shown significant activity on apical sodium bile acid transporter ("ASBT") and bile acid markers such as 7?C4, fecal bile acids and cholesterol, demonstrating potent biological activity.
We were incorporated in
We have a limited operating history and incurred significant operating losses
since our inception and expect to continue to incur significant operating losses
for the foreseeable future. We have only one product approved for commercial
sale and have not generated significant revenues from product sales, net as of
Financing Transactions
In
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we issued and sold 995,897 shares of common stock pursuant to the Sales
Agreement at a weighted-average price of
In
Financial Overview
Our net loss was
We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials, continue our research and development activities, continue commercial activities for Livmarli, and seek regulatory approvals for our product candidates, as well as hire additional personnel and protect our intellectual property. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We have also entered into collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, research and development funding, development and sales-based milestones, and tiered royalties based on sales of commercialized products. Arrangements that include upfront payments may require deferral of revenue recognition to a future period until we perform obligations under these arrangements. The event-based milestone and other contingent payments represent variable consideration, and we use the most likely amount method or expected value method to estimate this variable consideration, depending on the nature of the contingency and the variable payments. Given the high degree of uncertainty around the occurrence of these events, we generally determine the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. We will recognize revenue from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur. The timing of these activities may fluctuate significantly. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our clinical trials and non-clinical studies and our expenditures on other research and development activities.
We expect our product sales from Livmarli will increase in the future. However, the timing and amount of product sales are unknown. Accordingly, until such time as we can generate substantial product revenues to support our cost structure and sustain operating activities, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Prior to the regulatory approval of Livmarli, the manufacturing and related costs were expensed as research and development as any future economic benefit was not considered probable; accordingly, these costs were not capitalized and as a result gross margins resulting from product sales will initially be higher until we deplete inventories that we had expensed prior to receiving approval
COVID-19
The coronavirus (including its variants, "COVID-19") pandemic has had a significant economic impact across the global marketplace presenting challenges to maintaining business continuity and dramatically changing the ways in which we live and interact with others. Although the initial impact of the pandemic has subsided, we are uncertain as to how more transmissible variants may impact our business. We are working diligently to ensure the advancement of all of our clinical development programs in the safest manner possible. While we are unable to reliably estimate the duration or extent of any potential business disruption or financial impact during this time, we remain committed to (i) prioritizing the safety, health and well-being of patients, their caregivers, healthcare providers and our employees; (ii) ensuring patients are well supported and have continued uninterrupted access to our product candidates, for which we currently do not expect any supply disruption; and (iii) advancing our clinical trials. Examples
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include a "Work from Home Policy" for our employees and access to home health care to assist families with safer participation in our trials.
Although we did not see a significant financial impact to our business
operations as a result of COVID-19 for the three months ended
We continue to believe that existing cash, cash equivalents and investments, excluding restricted cash equivalents, and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures, debt service requirements and other business development initiatives that we plan to strategically pursue in the 12 months from the issuance of the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. However, should the COVID-19 pandemic and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity and cash flows could be materially impacted as a result of a lower likelihood of effectively and efficiently developing new medicines and successfully commercializing our products.
License Agreements
Assignment and License Agreement with Shire (Takeda)
In
Under the Shire License Agreement and Assigned License Agreements, to date, we
have paid aggregate development and regulatory milestones of
Components of Results of Operations
Revenue
Product Sales, Net
Our approved product, Livmarli, was approved by the FDA in
Our revenue from product sales, net further depends on our prescription mix of
License Revenue
Under the exclusive licensing agreements with CANbridge and GC Biopharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments are fully constrained and will be recognized in revenue in the period in which achievement of the milestones becomes probable. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur.
Cost of Sales
Cost of sales consist of third party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of capitalized intangibles associated with contractual milestone payments paid to licensors upon certain regulatory approval and sales-based events and royalty payments payable on net sales of Livmarli under
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licensing agreements. Cost of sales may also include period costs related to
certain manufacturing services and inventory adjustment charges. Prior to
receiving approval from the FDA in
Operating Expenses
Research and Development Expenses
Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things:
•
salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;
•
external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;
•
expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers;
•
licensing milestone payments related to development or regulatory events;
•
research and development funding for collaboration arrangements;
•
expenses related to non-clinical studies;
•
expenses related to compliance with drug development regulatory requirements; and
•
other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.
We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred.
We anticipate that our research and development expenses will increase in the future as we continue the clinical and development activity for further indications of Livmarli, as well as expand the clinical and development activity associated with our volixibat pipeline. These increases will likely include increased costs related to hiring of additional development personnel and fees to outside clinical development organizations that support clinical trial activity.
Selling, General and Administrative Expense
Selling expenses consist of professional fees related to preparation and commercialization of Livmarli, finished goods warehousing costs, as well as salaries and related employee benefits for commercial employees, including stock-based compensation.
General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs.
We anticipate that our selling, general and administrative expenses will
increase in the future to support our continued commercialization efforts of
Livmarli in
Interest Income
Interest income consists of interest earned on our cash equivalents and investments.
Interest Expense
Interest expense for the three months ended
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Change in Fair Value of Derivative Liability
Change in fair value of derivative liability consists of the gain or loss from remeasurement of the compound derivative liability related to the revenue interest liability during the period.
Other Income (Expense), Net
Other income (expense), net consists of transactional currency exchange gain or loss.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with
There have been no significant changes during the three months ended
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations for the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended March 31,
2022 2021 Change
Revenue:
Product sales, net $ 10,892 $ - $ 10,892
License revenue 2,000 - 2,000
Total revenue 12,892 - 12,892
Operating expenses:
Cost of sales $ 2,424 $ - $ 2,424
Research and development 24,088 38,134 (14,046 )
Selling, general and administrative 19,116 9,479 9,637
Total operating expenses 45,628 47,613 (1,985 )
Loss from operations (32,736 ) (47,613 ) 14,877
Other income (expense):
Interest income 69 149 (80 )
Interest expense (3,774 ) (3,381 ) (393 )
Change in fair value of derivative
liability - 334 (334 )
Other expense, net (154 ) (16 ) (138 )
Net loss before provision for income
taxes (36,595 ) (50,527 ) 13,932
Provision for income taxes 11 5 6
Net Loss $ (36,606 ) $ (50,532 ) $ 13,926
Product Sales, Net
Product sales, net were
License Revenue
License revenue was
Cost of Sales
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For the three months ended
Research and Development Expenses
The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands):
Three Months Ended March 31,
2022 2021 Change
Product-specific costs:
Livmarli $ 9,468 $ 9,732 $ (264 )
Volixibat $ 4,151 $ 2,749 1,402
Non product-specific costs:
Collaboration funding $ - $ - -
Stock-based compensation $ 2,585 $ 2,743 (158 )
Personnel $ 5,821 $ 4,913 908
License fees (milestone payments) $ - $ 17,000 (17,000 )
Other $ 2,063 $ 997 1,066
Total research and development expenses
Research and development expenses were
•
for Livmarli programs, a decrease of
•
for volixibat programs, an increase of
•
for personnel related expenses, an increase of
•
for license fees, a decrease of
•
for other expense, an increase of
Selling, General and Administrative Expenses
Selling, general and administrative expenses were
Interest Expense
Interest expense was
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Liquidity and Capital Resources
Overview
Since inception, we have funded our operations primarily through debt, equity,
revenue interest financings and, to a lesser extent, cash from our product sales
and collaboration revenue. We had
In
In
Based on our current and anticipated level of operations, we believe our cash, unrestricted cash equivalents and investments will be sufficient to fund current operations through at least the next 12 months from the filing of this Quarterly Report on Form 10-Q. Our cash, cash equivalents, unrestricted cash equivalents and investments include money market funds, government agency securities, corporate debt and commercial paper. We maintain established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.
We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercial launch activities for Livmarli and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development and commercial milestones in connection with our license agreements.
Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, selling, general and administrative expenditures, including commercial launch expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
Although Livmarli has been approved by the FDA for the treatment of cholestatic pruritus in patients with ALGS one year of age and older, and we expect product revenues to increase as we continue commercial activities, Livmarli may not achieve commercial success. Our principal sources of liquidity are cash from the sale of our equity securities, revenue interest financings and collaboration arrangements and, to a lesser extent, from product revenue from the sale of Livmarli. Until such time, if ever, as we can generate substantial product revenue from sales of Livmarli, our current product candidates or any future product candidates, if approved, we expect to finance our cash needs through a combination of equity offerings, debt financings, revenue interest purchase agreements and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations, to pay our debt obligations under the RIPA and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. 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.
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If we raise additional funds through the RIPA, collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. 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 drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
In addition to ongoing capital needs to fund our ongoing operations, our material cash requirements include the following contractual and other obligations.
Pursuant to the RIPA, the Purchasers have a right to receive Revenue Interests
based on product sales, net of Livmarli. The amounts of quarterly Revenue
Interest Payments will change each reporting period based upon the underlying
product sales, net of Livmarli and will initially be 9.75% of product sales,
net. Under the RIPA, every
Under the Shire License Agreement, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to our unaudited condensed consolidated financial statements.
We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our unaudited condensed consolidated financial statements.
We are party to certain license and collaboration agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments. The amount and timing of those payments are unknown or uncertain as we are unable to estimate the timing or likelihood of the events that will obligate those payments.
We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts.
Cash Flows
The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):
Three Months Ended March 31,
2022 2021
Net cash used in operating activities $ (39,669 ) $ (25,210 )
Net cash provided by (used in) provided by
investing activities 36,500 (32,784 )
Net cash provided by financing activities 18,104 6,594
Effect of exchange rate on cash, cash equivalents
and restricted cash equivalents (3 ) (9 )
Net increase (decrease) in cash, cash equivalents
and restricted cash equivalents $ 14,932 $ (51,409 )
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Net cash used in operating activities was
Net cash used in operating activities was
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was
Net cash used in investing activities was
Net Cash Provided by Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
JOBS Act
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended ("Sarbanes-Oxley Act").
We will remain an emerging growth company until the earliest of (i)
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