GENERAL
The following discussion and analysis of the results of operations and financial
condition of the Company for the years ended December 31, 2020 and 2019 should
be read in conjunction with our audited consolidated financial statements and
related notes and the description of our business and properties included
elsewhere herein.
IMPACT OF THE CORONAVIRUS PANDEMIC
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus originating in Wuhan,
China (the "COVID-19 outbreak") and the risks to the international community as
the virus spreads globally beyond its point of origin. In March 2020, the WHO
classified the COVID-19 outbreak as a pandemic, based on the rapid increase in
exposure globally.
The COVID-19 pandemic continues to rapidly evolve. The extent to which the
outbreak impacts our business, preclinical studies and clinical trials will
depend on future developments, which are highly uncertain and cannot be
predicted with confidence, such as the ultimate geographic spread of the
disease, the duration of the pandemic, travel restrictions and social
distancing, business closures or business disruptions and the effectiveness of
actions taken in the U.S., Europe, and other countries to contain and treat the
disease.. As such, it is uncertain as to the full magnitude that the pandemic
will have on the Company's financial condition, liquidity, and future results of
operations.
Management has taken measures in-line with the country requirements where we are
operating and we are actively monitoring the global situation on its financial
condition, liquidity, operations, scientific collaborations, suppliers,
industry, and workforce. Given the daily evolution of the COVID-19 outbreak and
the global responses to curb its spread, the Company is not able to estimate the
effects of the COVID-19 outbreak on its results of operations, financial
condition, or liquidity for fiscal year 2021.
The Company's partner for the oncology immunotherapy project in the Netherlands
has decreased their laboratory experiments due to reduced operating hours in
those facilities. While the Company considers this disruption to be temporary,
continued disruption in this project will lead to delayed advances by the
Company of its research and could negatively impact future revenue for the
fiscal year 2021 and the Company's overall liquidity.
The Company is dependent on its workforce to deliver and advance its research.
Developments such as physical distancing and working from home directives have
and will continue to impact the Company's ability to deploy its workforce
effectively. While expected to be temporary, prolonged workforce disruptions may
negatively impact future revenues for the remainder of fiscal year 2021 and the
Company's overall liquidity.
The Company is dependent on its partners in certain projects, such as the
University of Louisiana at Lafayette ("ULL") for the NIH funded project to
maintain the agreed timelines and execute their tasks. Developments such as
social distancing and shelter-in-place directives and lock-down directives have
and will continue to impact the Company's ability to execute on project plans
and research objectives effectively. While expected to be temporary, prolonged
disruptions in collaboration projects may negatively impact funding for the
fiscal year 2021 and the Company's overall liquidity.
Although the Company cannot estimate the length or gravity of the impact of the
COVID-19 outbreak at this time, if the pandemic continues, it may have a
material adverse effect on the Company's results of future operations, financial
position, and liquidity for the fiscal year 2021.
CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT
On March 27, 2020, the U.S. Government enacted the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") was signed into law. The CARES Act includes
various income and payroll tax provisions. The Company has analyzed the tax
provisions of the CARES Act and determined they have no significant financial
impact to the condensed financial statements. The Company has no intention of
taking advantage of other benefits but will continue to evaluate the impact on
the Company's financial position.
44
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2020 COMPARED TO YEAR ENDED
DECEMBER 31, 2019:
We reached €668 and €653 in revenue for the years ending December 31, 2020 and
2019, respectively. For 2020, €633 was related to the revenue recognized for the
work performed under the NIH Grant project and the remaining for a small
pre-clinical research project with a US academic institution. For 2019, the
revenue was related to the recognition of €542 of grant revenue from the NIH and
€111 related to the fees from research and development services.
Research and development expenses increased to €1,055 in the current period from
€970 in the comparative period of 2019, an increase of 8.8%. This increase is
mainly due to subcontracting services related to the NIH Grant project incurred
during the year 2020.
General and administrative expenses increased to €1,187 in the year ended
December 31, 2020 from €1,064 in the comparable period of 2019, an increase of
11.6% mainly due to the D&O liability 2019 annual insurance premium expensed in
the previous year and an increase in the audit cost recognized during the year
ended December 31, 2020.
REVENUE RECOGNITION AND RECEIVABLES
In April 2018, the Company entered into a Research and Option to License
Agreement with Anergis SA ("Anergis"). Under the terms of the Research
Agreement, a pre-clinical study program was triggered and evaluated the
immunogenicity profile of the Anergis' peptides designed to treat birch allergy
when presented on Mymetics' proprietary virosomes, with or without undisclosed
TLR ligands or other adjuvants. The results were compared to Anergis' AllerT
product combination.
In December 2018, Mymetics and Anergis announced that the pre-clinical study
program was successful. The pre-defined success criteria were met and Anergis
had a time limited option to enter into an exclusive license agreement with
Mymetics for the use of virosomes in the field of allergies. If Anergis and
Mymetics had executed a License and Collaboration Agreement (LCA), Anergis would
have had to make an upfront payment to Mymetics. The LCA also included milestone
payments based on certain regulatory clearances and royalties for net sales. The
LCA was not executed .
In October 2019, Mymetics announced that Anergis SA had started a new study with
Stallergenes Greer SA whereby the COP-Virosomes were tested in the therapeutic
mouse model of birch allergy in comparison with positive controls, i.e., birch
allergen and birch pollen extract. This model has been confirmed as having
predictive value towards the future clinical efficacy of new AIT treatment
candidates. During the last quarter of 2019, the Company received an amount of
€111 related to the Amendment 3 of the Research and Option to License Agreement
dated September 3, 2019. This revenue is fully recognized as the deliverables
for the Stallergenes-Anergis study were met and Anergis paid for an extension of
the option to execute the LCA.
In May 2020, Mymetics announced the results of the study with Stallergenes
Greer, a worldwide leader in allergen immunotherapy (AIT) and Anergis, a leader
in ultra-fast AIT research and development. The results showed that a treatment
with COP-virosomes was able to cure allergic asthma in birch pollen sensitized
mice and that the COP-virosomes were significantly superior to the COP or the
virosome alone, confirming the synergy between COP and virosomes to foster an
improved second generation AIT treatment.
In January 2021, following the two successful studies with its virosome
platform, Mymetics announced the acceptance of its joint publication in the
scientific journal Clinical & Experimental Allergy with Stallergenes Greer SA
and Anergis SA, with the title: Bet v 1 contiguous overlapping peptides anchored
to virosomes with TLR4 agonist enhance immunotherapy efficacy in mice. As of
February 1, 2021, Anergis SA announced that it had to enter into liquidation
procedures since it was not able to raise sufficient funds to continue to
operate. This has no implications on the business of the Company going forward.
As of December 31, 2020, the Company was engaged in the pre-clinical testing of
some of its vaccine candidates and a commercially viable product is not expected
for several more years. The Company is working actively on the COVID-19 virosome
vaccine preclinical development with leading academic institutions and on
several research projects with commercial partners for immunotherapy in the
field of oncology. Mymetics started the project funded by the National
Institutes of Health (NIH) on May 1, 2019, which is still ongoing, and will test
Mymetics virosome based HIV vaccine candidate in non-human primates at the
University of Louisiana at Lafayette and prepare for the clinical trial
development of the vaccine candidate.
Since April 2020, the Company has started to work on the development of a
virosome-based vaccine to prevent Covid-19, the disease caused by the SARS-CoV-2
virus and has attracted some in-kind contributions from the European Community
through their Transvac2 program. For the Covid-19 vaccine candidates the Company
is collaborating with leading academic institutions, like Baylor College of
Medicine in Texas. Management believes that the Company's research and
development activities will result in valuable intellectual property that can
generate significant revenues in the future through licensing since the Company
believes that vaccines are one of the fastest growing markets in the
pharmaceutical industry.
45
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
CURRENCY TRANSLATION
Our functional currency is the Euro because substantially all of our activities
are conducted in Europe. Non-Euro assets and liabilities of our subsidiaries are
translated at the rate of exchange at the balance sheet date. Revenues and
expenses are translated at the average rate of exchange throughout the year.
Unrealized gains or losses from these translations are reported as a separate
component of comprehensive income. Transaction gains or losses are included in
general and administrative expenses in the consolidated statements of
operations. The translation adjustments do not recognize the effect of income
tax because we expect to reinvest the amounts indefinitely in operations.
GOODWILL
Goodwill represents the excess of purchase price over the value assigned to the
net tangible and identifiable intangible assets of a business acquired. The
Company typically performs its annual goodwill impairment test effective as of
April 1 of each year, unless events or circumstances indicate impairment may
have occurred before that time. The Company assesses qualitative factors to
determine whether it is more likely than not that the fair value of the
reporting unit is less than its carrying amount. If further testing was
necessary, the Company would determine the fair value of each reporting unit,
and compare the fair value to the reporting unit's carrying amount. The Company
has one reporting unit. As of April 1, 2020 and December 31, 2020, the Company's
reporting unit had a negative carrying amount and was thus not required to test
goodwill further for impairment.
BUSINESS PLAN
We aim to be a lean and effective research and development company, focused on
virosome based vaccines and immunotherapies. Our core value lies in the know-how
and intellectual property related to virosome based vaccines, membrane proteins,
integration of antigens and adjuvants into lipid membranes and the mucosal
immune response. We have in-house laboratory facilities and expertise and we
subcontract some of our research project modules to best of class research
teams. We pay for and coordinate the work, consolidate the results and retain
all associated intellectual property. If required, we execute partnership
agreements with companies offering technologies that can enhance our products or
we collaborate with specific biotech partners in order to enhance their
therapies.
We will continue in the foreseeable future to outsource to specialized third
parties all human clinical trials of our vaccines, such process being complex
and highly regulated. Further, we will continue to seek partnerships with
leading vaccine development groups, pharma companies and grant providing
organizations for the vaccines we are developing.
Our business plan is predicated by the size and availability of our resources.
The short term focus of our research team is aimed on the execution of further
development of our virosome platform in certain immunotherapy fields like
allergy and cancer. In parallel, we are eager to advance our promising Malaria
and HIV-1 vaccine candidates by working closely with non-for-profit funding
organizations and academic institutions.
Depending on the situation, we would not pursue human clinical trials for our
vaccine beyond phase II, which normally involves no more than 250-300 volunteers
and a cost in the range of $5-10 million per phase I and II trial cycle. In
contrast, phase III trials for a prophylactic vaccine can involve up to 30,000
patients and several testing centers spread over two or more continents. The
high number of volunteers, as well as the logistical complexity of such an
undertaking, implies a cost-per-volunteer in the $10,000 to $12,000 range, or up
to $360 million per phase III trial. Similarly, the cost and complexity of the
vaccine registration procedure with the relevant European agencies can be very
expensive. The cost of registration with the U.S. Food and Drug Administration
(FDA) is generally significantly higher due to a variety of factors, including,
potential product liability claims.
We will enter into negotiations with potential pharmaceutical partners as soon
as positive intermediary results will be observed in view of a partnership
agreement as described above.
LIQUIDITY AND CAPITAL RESOURCES
We had €1,083 cash at December 31, 2020, compared to €683 at December 31, 2019.
During 2020, our revenue has been mainly been generated through the NIH project.
For 2021, besides revenue recognized under the NIH grant project, new
significant revenues will not be expected, unless and until a major licensing
agreement or other commercial arrangement is entered into with respect to our
technology or new grant financings are awarded.
46
As of December 31, 2020, we had an accumulated deficit of approximately €93
million and generated net loss of €4,158 in the year ended December 31, 2020.
The net loss in 2020 was mainly associated with interest expenses on shareholder
loans (€2,708) and expenses that are not covered by revenues. We expect to
continue to incur expenses in the future for research, development and
activities related to the future licensing of our technologies.
Net cash used in operating activities increased to €1,696 for the year ended
December 31, 2020, compared to €972 for the year ended December 31, 2019, mainly
due to the timing of payments received for our grant project.
Investing activities used cash of €14 for the year ended December 31, 2020,
related to the purchase of IT equipment, and €36 for the year ended December 31,
2019, related to the purchase of equipment (UPLC) in the Netherlands.
Financing activities provided €2,106 cash for the year ended December 31, 2020,
which includes €1,950 of promissory notes from our main investors and €156 of
borrowings on a Swiss Federal credit line in relation with the Covid-19
pandemic. For the year ended December 31, 2019, €1,200 cash was provided by our
two main investors.
Our major shareholder, a member of our Board of Directors and another previous
investor have made available an aggregate €63,090 in the form of notes payable
including accumulated interest, the details of which are described in Note 2of
our financial statements.
The Company's budgeted operational cash outflow, or cash burn rate, for 2021 is
approximately €4,900 for research, fixed and normal recurring expenses, assuming
the ability to obtain the necessary financing and without taking into account
any grants that may be obtained.
12 Months
2021 budget
Revenue from R&D services --
Grant receipts from the NIH E 1,068
Total cash in: 1,068
R&D costs 1,955
R&D costs (COVID) 2,710
G&A costs 1,303
Total cash out: 5,968
Total cash burn rate E 4,900
Management expects the cash outflow on R&D will focus on the virosome
immunotherapy vaccine development and the development of a virosome-based
vaccine to prevent Covid-19, which will be partially offset by the expected
incoming cash related to the NIH project payments.
Additional funding requirements during the next 12 months will be needed to
further develop our malaria and immunotherapy vaccines, which we will try to
seek through collaborations with not-for-profit organizations and through
additional financing from our investors.
In the past, we have financed our research and development activities primarily
through debt and equity financings from various parties, complemented by the
recent grant agreements for our HIV and malaria vaccine candidates.
We anticipate that our normal operations will require approximately €3,800
additional funding in the year ending December 31, 2021. We will seek to raise
the additional capital from equity or debt financings, and grants through donors
and potential partnerships with major international pharmaceutical and
biotechnology firms. However, there can be no assurance that it will be able to
raise additional capital on satisfactory terms, or at all, to finance its
operations on the longer term. In the event that we are not able to obtain such
additional capital, we will be required to further restrict or even cease our
operations.As discussed in Note 1 to the consolidated financial statements, the
Company has experienced recurring losses from operations and negative cash flows
from operating activities. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
47
RECENT FINANCING ACTIVITIES
During 2020, our principal source of funds has been revenues related to the NIH
grant / HIV project and additional promissory notes from our two main investors.
We have filed or are in the process of filing several new grant applications
with U.S. and European institutions in relation to our virosome based vaccines.
We anticipate using our current funds and those we receive in the future both to
meet our working capital needs and for funding the ongoing vaccines pre-clinical
research costs for new virosome vaccine.
Management anticipates that our existing capital resources will be sufficient to
fund our cash requirements through the next four months. We have cash presently
on hand in conjunction with the collection of receivables, based upon our
current levels of expenditures and anticipated needs during this period. For
2021, we will need additional funding through future collaborative arrangements,
licensing arrangements, and debt and equity financings under Regulation D and
Regulation S under the Securities Act of 1933. We do not know whether additional
financing will be available on commercially acceptable terms when needed.
If management cannot raise funds on acceptable terms when needed, we may not be
able to successfully commercialize our technologies, take advantage of future
opportunities, or respond to unanticipated requirements. If unable to secure
such additional financing when needed, we will have to curtail or suspend all or
a portion of our business activities and could be required to cease operations
entirely. Further, if new equity securities are issued, our shareholders may
experience severe dilution of their ownership percentage.
The extent and timing of our future capital requirements will depend primarily
upon the rate of our progress in the research and development of our
technologies, our ability to enter into a partnership agreement with a major
pharmaceutical company, and the results of our present projects and future
clinical trials.
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus originating in Wuhan,
China (the "COVID-19 outbreak") and the risks to the international community as
the virus spreads globally beyond its point of origin. In March 2020, the WHO
classified the COVID-19 outbreak as a pandemic, based on the rapid increase in
exposure globally.
The COVID-19 pandemic continues to rapidly evolve. The extent to which the
outbreak impacts our business, preclinical studies and clinical trials will
depend on future developments, which are highly uncertain and cannot be
predicted with confidence, such as the ultimate geographic spread of the
disease, the duration of the pandemic, travel restrictions and social
distancing, business closures or business disruptions and the effectiveness of
actions taken in the U.S., Europe, and other countries to contain and treat the
disease. As such, it is uncertain as to the full magnitude that the pandemic
will have on the Company's financial condition, liquidity, and future results of
operations.
Management has taken measures in-line with the country requirements where we are
operating and we are actively monitoring the global situation on its financial
condition, liquidity, operations, scientific collaborations, suppliers,
industry, and workforce. Given the daily evolution of the COVID-19 outbreak and
the global responses to curb its spread, the Company is not able to estimate the
effects of the COVID-19 outbreak on its results of operations, financial
condition, or liquidity for the fiscal year 2021.
The Company's partner for the oncology immunotherapy project in the Netherlands
has decreased their laboratory experiments due to reduced operating hours in
those facilities. While the Company considers this disruption to be temporary,
continued disruption in this project will lead to delayed advances by the
Company of its research and could negatively impact future revenue for the
fiscal year 2021 and the Company's overall liquidity.
The Company is dependent on its workforce to deliver and advance its research.
Developments such as physical distancing and working from home directives will
impact the Company's ability to deploy its workforce effectively. While expected
to be temporary, prolonged workforce disruptions may negatively impact future
revenues in fiscal year 2021 and the Company's overall liquidity.
The Company is dependent on its partners in certain projects, such as the
University of Louisiana at Lafayette ("ULL") for the NIH funded project to
maintain the agreed timelines and execute their tasks. Developments such as
social distancing and shelter-in-place directives and lock-down directives will
impact the Company's ability to execute on project plans and research objectives
effectively. While expected to be temporary, prolonged disruptions in
collaboration projects may negatively impact funding for the fiscal year 2021
and the Company's overall liquidity.
Although the Company cannot estimate the length or gravity of the impact of the
COVID-19 outbreak at this time, if the pandemic continues, it may have a
material adverse effect on the Company's results of future operations, financial
position, and liquidity for the year 2021.
48
OFF-BALANCE SHEET ARRANGMENTS
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MYMETICS CORPORATION 
