MIRUM PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 "Financial Statements and Supplementary Data" and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this Annual Report.
Overview
We are a biopharmaceutical company focused on the development and
commercialization of a late-stage pipeline of novel therapies for debilitating
liver diseases. We focus on diseases for which the unmet medical need is high
and the biology for treatment is clear. Our pipeline consists of two
clinical-stage product candidates with mechanisms of action that have potential
utility across a wide range of orphan cholestatic liver diseases. We are
developing maralixibat for the treatment of pediatric patients with Alagille
syndrome ("ALGS"), progressive familial intrahepatic cholestasis ("PFIC") and
biliary atresia ("BA"). In the third quarter of 2020, we initiated a rolling
submission of a New Drug Application ("NDA"), for the treatment of cholestatic
pruritus in patients with ALGS to the
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 no products approved for commercial sale and have never generated any revenues from product sales. We have funded our operations to date primarily through debt and equity financings.
Financing Transactions
In
In
In
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which we may elect to issue and sell, from time to time, shares of common stock
having an aggregate offering price of up to
In
In
Concurrently with our entry into the RIPA, we entered into a Common Stock
Purchase Agreement (the "Stock Purchase Agreement") with
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 preparation activities for maralixibat, 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. 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 do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which could take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.
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Accordingly, until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including through the RIPA, 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.
COVID-19
The COVID-19 pandemic has had a significant economic impact across the global marketplace presenting challenges to maintaining business continuity. 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 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 year ended
We continue to believe that existing cash, cash equivalents and investments 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. 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.
Assignment and License Agreement with Shire (Takeda)
In
Under the Shire License Agreement and Assigned License Agreements, we have paid
aggregate development milestones of
See Note 7 to our consolidated financial statements included elsewhere in this Annual Report.
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Components of Results of Operations
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 or could include:
• 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;
• 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.
Because our product candidates are still in clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability. However, as we add additional development programs, our research and development expenses will increase. We do not track costs on a project-by-project basis. As our programs advance, we intend to track the external and internal cost of each program.
General and Administrative Expense
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 expect that our general and administrative expenses will increase as we expand our operating activities, including commercial preparation activities and increased headcount.
Interest Income
Interest income consists of interest earned on our cash equivalents and investments.
Interest Expense
Interest expense for the year ended
Other Expense, Net
Other expense, net consists of transactional currency exchange loss.
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Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
Revenue Interest Liability
In
At
The fair value of the derivative liability is valued using a "with-and-without" method. The "with-and-without" methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability. The estimated probability and timing of underlying events triggering the exercisability of the derivative liability bifurcated from within the RIPA, forecasted cash flows and the discount rate are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative.
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We accrue and expense clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations, clinical trial sites and other vendors associated with the clinical trials. We determine the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.
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We make estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Stock-Based Compensation
We recognize compensation costs related to stock-based awards granted to employees and directors, including stock options, based on the estimated fair value of the awards on the date of grant. We estimate the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.
The Black-Scholes option-pricing model requires the use of subjective assumptions to determine the fair value of stock-based awards. These assumptions include:
• Fair value of common stock-For grants prior to our IPO in July 2019 , the
fair value of our common stock underlying share-based awards was
estimated on each grant date by our board of directors. In order to
determine the fair value of our common stock underlying option grants,
our board of directors considered, among other things, valuations of our
common stock prepared by an unrelated third-party valuation firm in
accordance with the guidance provided by the American Institute of
Certified Public Accountants Practice Guide , Valuation of
Privately-Held-Company Equity Securities Issued as Compensation. For all
grants subsequent to our IPO in July 2019 , the fair value of common stock
is determined by using the closing price per share of common stock as
reported on the Nasdaq Global Market.
• Expected term- The expected term represents the period that stock-based
awards are expected to be outstanding. The expected term for option
grants is determined using the simplified method. The simplified method
deems the term to be the average of the time-to-vesting and the
contractual life of the stock-based awards.
• Expected volatility- We use an average historical stock price volatility
of comparable public companies within the biotechnology and
pharmaceutical industry that were deemed to be representative of future
stock price trends as we do not have sufficient trading history for our
common stock. We will continue to apply this process until a sufficient
amount of historical information regarding the volatility of our own
stock price becomes available.
• Risk-free interest rate-The risk-free interest rate is based on the U.S.
Treasury zero coupon issues in effect at the time of grant for periods
corresponding with the expected term of option.
• Expected dividend-We have never paid dividends on our common stock and
have no plans to pay dividends on our common stock. Therefore, we used an
expected dividend yield of zero.
The assumptions used in our Black-Scholes option-pricing model represent management's best estimates at the time of measurement. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management's judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation could be materially different in the future.
For the years ended
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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 consolidated financial statements included elsewhere in this Annual Report.
Results of Operations for the Years Ended
The following table summarizes our results of operations for the years ended
Year Ended December 31,
2020 2019 Change
Operating expenses:
Research and development $ 81,605 $ 42,991 $ 38,614
General and administrative 22,691 11,752 10,939
Total operating expenses 104,296 54,743 49,553
Loss from operations (104,296 ) (54,743 ) (49,553 )
Other income (expense):
Interest income 1,559 2,232 (673 )
Interest expense (335 ) - (335 )
Other expense, net (192 ) (21 ) (171 )Net loss before provision for income taxes (103,264 ) (52,532 ) (50,732 )
Provision for income taxes 6 21 (15 ) Net Loss$ (103,270 ) $ (52,553 ) $ (50,717 )
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
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Interest Income
Interest income was
Interest Expense
Interest expense was
Liquidity and Capital Resources
Overview
We had
In
In
In
In
Pursuant to the RIPA, we received a net upfront cash payment of
Pursuant to the Stock Purchase Agreement, entered into concurrently with our
entry into the RIPA, we issued an aggregate of 509,164 shares of our common
stock at a price per share of
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Based on our current and anticipated level of operations, we believe our cash, cash equivalents and investments will be sufficient to fund current operations through at least the next 12 months. Our cash, 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 preparation activities for maralixibat, 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, general and administrative expenditures, including commercial planning 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.
Until such time, if ever, as we can generate substantial product revenue from sales of maralixibat, volixibat or any future product candidates, 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. 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.
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.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources, which consist of cash, cash equivalents and investments, sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of our products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
• the cost of commercialization activities if our product candidates or any
future product candidates are approved or cleared for sale, including
marketing, sales and distribution costs;
• the cost of establishing sales and marketing activities;
• the number and characteristics of any future product candidates we
develop or acquire;
• the timing of any cash milestone payments pursuant to the Shire License
Agreement as well as our other license and acquisition agreements if we
successfully achieve certain predetermined milestones;
• our ability to forecast demand for our products, scale our supply to meet
that demand and manage working capital effectively
• the cost of manufacturing our product or any future product candidates
and any products we successfully commercialize, including costs
associated with building our supply chain;
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• our ability to establish and maintain strategic collaborations, the RIPA,
licensing or other arrangements and the financial terms of any such
agreements that we may enter into;
• any product liability or other lawsuits related to our products;
• the expenses needed to attract and retain skilled personnel;
• the costs associated with being a public company;
• the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims, including litigation costs related
to maralixibat and volixibat, and the outcome of this and any other
future patent litigation we may be involved in; and
• the timing, receipt and amount of sales of any future approved or cleared
products, if any.
Cash Flows
The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):
Year Ended December 31,
2020 2019
Net cash used in operating activities $ (89,075 ) $ (39,362 ) Net cash provided by (used in) investing activities 37,874 (127,781 )
Net cash provided by financing activities 181,288 127,177 Effect of exchange rate on cash and cash equivalents 29 (27 )
Net increase (decrease) in cash and cash equivalents
Cash Used in Operating Activities
Net cash used in operating activities was
Net cash used in operating activities was
Cash Used in Investing Activities
Net cash provided by investing activities was
Net cash used in investing activities was
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Cash Provided by Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
Contractual Obligations
The following table summarizes our principal contractual obligations and commitments as ofDecember 31, 2020 that will affect our future liability (in thousands): Payments due by period Total Less than 1 - 3 3 - 5 More than 1 year Years Years 5 years
Operating lease obligations(1)
(1) Consists of leases for our corporate headquarters encompassing approximately
11,200 square feet of office space that expires in March 2025 , and the lease
for our office space in Basel, Switzerland encompassing approximately 1,400
square feet that expires in May 2024 .
The above table does not include our obligations under the RIPA as products are not yet approved for sale and the timing or amounts of repayment is likely to change each reporting period. Refer to Note 6 to our audited financial statements included elsewhere in this Annual Report on Form 10-K for further information.
From time to time we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims, including the Shire License Agreement, RIPA, and certain real estate leases, supply purchase agreements, and agreements with directors and officers. The terms of such obligations vary by contract and in most instances a maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted, thus no liabilities have been recorded for these obligations on our consolidated balance sheet for the periods presented.
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.
Contractual Arrangements
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. Under the Shire License Agreement
and Assigned License Agreements, we have paid development milestones of
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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 ("Sarbanes-Oxley Act").
We will remain an emerging growth company until the earliest of (i)
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