NEXIMMUNE, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual
Report on Form 10-K for the year ended
Investors and others should note that we routinely use the Investor Relations section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investor Relations section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that it shares on the Investor Relations section of our website, www.neximmune.com.
Overview
We are a clinical-stage biotechnology company developing a novel approach to immunotherapy designed to employ the body's own T cells to generate a specific, potent and durable immune response that mimics natural biology. Our mission is to create therapies with curative potential for patients with cancer and other life-threatening immune-mediated diseases.
The backbone of our approach is our proprietary Artificial Immune Modulation, or
AIMTM. One of the critical advantages of the AIM technology platform is the
ability to rapidly customize it for new therapeutics, in a modular,
Currently, we have two product candidates in human trials: NEXI-001 in acute
myeloid leukemia, or AML, and NEXI-002 in multiple myeloma, or MM, both of which
are AIM ACT therapies. Both programs have active Phase 1/2 trials ongoing. As
result of changes in the approved product landscape and to conserve resources,
we are pausing enrollment in our Phase 1/2 clinical trial of NEXI-002 and are
exploring the potential for collaborations or partnerships to further advance
the NEXI-002 development program in multiple myeloma. Our next adoptive cell
therapy product candidate, NEXI-003, is our first product candidate targeted at
solid tumors. We filed an IND in
In addition to our programs using the AIM ACT modality, we are also developing "off-the-shelf" AIM INJ. The AIM INJ modality is designed to enable AIM nanoparticles to engage CD8+ T cells directly inside the body without the need for ex vivo expansion and manufacturing, which we believe will result in a greater ease of administration and a less complex and less expensive manufacturing process. We have completed substantial non-clinical work to advance the AIM INJ modality towards a potential investigational new drug application, or IND, filing, including preparing appropriate IND-enabling experiments in support of a planned clinical program focusing on solid tumors. Subject to regulatory feedback and an IND filing, we anticipate a second clinical program that would target autoimmune disease and which would be the first AIM product candidate to suppress, rather than activate, T cell function.
We were incorporated under the laws of the
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To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, identifying and developing product candidates, enhancing our intellectual property portfolio, undertaking research, conducting preclinical studies and clinical trials, and securing manufacturing for our development programs. We do not have any products approved for sale and have not generated any revenue from product sales.
To date, we have funded our operations primarily with proceeds from private
placement of convertible preferred stock, our convertible promissory notes, the
IPO, and an "at-the-market" offering facility. In
We have incurred significant operating losses since our inception, which are
mainly attributed to research and development costs and employee payroll expense
included in general and administrative expenses. As of
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. 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 as and when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates that we would otherwise prefer to develop and market ourselves. The Company is continually looking into further capital planning and the evaluation of strategic alternatives. There is substantial doubt about the Company's ability to continue as a going concern.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of
Components of our Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all.
Research and Development Expenses
To date, our research and development expenses, have related primarily to
development of NEXI-001 and NEXI-002, preclinical studies and other preclinical
activities related to our portfolio. Research and development expenses are
recognized as incurred and payments made prior to the receipt of goods or
services to be used in research and development are capitalized until the goods
or services are received. Research and development expenses also include the
accrual of minimum royalties under our
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Research and development expenses include:
•salaries, payroll taxes, employee benefits and stock-based compensation charges for those individuals involved in research and development efforts;
•external research and development expenses incurred under agreements with contract research organizations, or CROs, and consultants to conduct our preclinical, toxicology and other preclinical studies;
•laboratory supplies;
•costs related to manufacturing product candidates, including fees paid to third-party manufacturers and raw material suppliers;
•license fees and research funding; and
•facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance, equipment and other supplies.
Clinical trial and preclinical study costs are a significant component of
research and development expenses and include costs associated with third-party
contractors. We outsource a substantial portion of our clinical trial
activities, utilizing external entities such as CROs, independent clinical
investigators and other third-party service providers to assist us with the
execution of our clinical trials. We also expect to incur additional expenses
related to milestone and royalty payments payable to
We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and seek to discover and develop new product candidates. Due to the inherently unpredictable nature of preclinical and clinical development, we cannot determine with certainty the timing of the initiation, duration or costs of future clinical trials and preclinical studies of product candidates. Clinical and preclinical development timelines, the probability of success and the amount of development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate's commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly based on factors such as:
•per-patient trial costs;
•the number of trials required for regulatory approval;
•the number of sites included in the trials;
•the countries in which the trials are conducted;
•the length of time required to enroll eligible patients;
•the number of patients that participate in the trials;
•the number of doses that patients receive;
•the drop-out or discontinuation rates of patients;
•potential additional safety monitoring requested by regulatory agencies;
•the duration of patient participation in the trials and follow-up;
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•the phase of development of the product candidate; and
•the efficacy and safety profile of the product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and
employee-related costs, including stock-based compensation, for personnel in our
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 general and administrative expenses will
increase in the future to support our continued research and development
activities, pre-commercialization and, if any product candidates receive
marketing approval, commercialization activities. We also anticipate increased
expenses related to audit, legal, regulatory and tax-related services associated
with maintaining compliance with exchange listing and
Interest Income
Interest income consists of interest earned on our cash equivalents and marketable securities during the period.
Interest Expense
Interest expense consists of interest accrued on the convertible notes and
interest recognized upon the amortization of the beneficial conversion feature,
debt issuance costs and bifurcated derivative liability. No further interest
expense was recognized after the convertible notes were converted into shares of
common stock upon the completion of the IPO in
Change in Fair Value of Derivative Liability
The change in fair value of derivative liability consists entirely of the mark-to-market adjustment of the bifurcated derivative liability related to the convertible notes. As a result of our IPO, the derivative liability was settled.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
June 30,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 11,838 $ 8,125 $ 3,713
General and administrative 4,088 4,038 50
Total operating expenses 15,926 12,163 3,763
Loss from operations (15,926) (12,163) (3,763)
Other income (expense):
Interest income 84 7 77
Other expense (19) (26) 7
Other income (expense) 65 (19) 84
Net loss $ (15,861) $ (12,182) $ (3,679) Research and Development Expenses. Research and development expenses were
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General and Administrative Expenses. General and administrative expenses were
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended
June 30,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 22,286 14,138 $ 8,149
General and administrative 8,693 8,096 597
Total operating expenses 30,979 22,233 8,746
Loss from operations (30,979) (22,233) (8,746)
Other income (expense):
Interest income 117 10 107
Change in fair value of derivative liability - 2,425 (2,425)
Interest expense - (904) 904
Other expense (22) (27) 5
Other income 96 1,504 (1,409)
Net loss $ (30,884) $ (20,729) $ (10,155) Research and Development Expenses. Research and development expenses were
General and Administrative Expenses. General and administrative expenses were
Change in Fair Value of Derivative Liability. The change in fair value of
derivative liability was
Interest Expense. Interest expense was
Liquidity and Capital Resources
We have incurred net losses and negative cash flows from operations since our
inception and anticipate we will continue to incur net losses for the
foreseeable future. As of
We believe that our existing cash and cash equivalents, including amounts
received subsequent to
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As our research and development activities mature and develop over the next year, we will likely require substantial funds to continue such activities, depending upon events that are difficult to predict at this time. In this regard, management plans to raise additional capital through financing activities that may include public offerings and private placements of our common stock, preferred stock offerings, collaborations and licensing arrangements and issuances of debt and convertible debt instruments. In the absence of additional capital, the Company plans to strategically manage its uncommitted spend, execute its priorities and implement cost saving measures to reduce research and development and general and administrative expenditures which could include minimizing staff costs and delaying or terminating manufacturing and clinical trial costs. There are inherent uncertainties associated with fundraising activities and activities to manage our uncommitted spending and the successful execution of these activities may not be within our control. There are no assurances that such additional funding will be obtained and that the Company will succeed in its future operations. If we cannot successfully raise additional capital and implement our strategic development plan, our liquidity, financial condition and business prospects will be materially and adversely affected. We are continually looking into further capital planning and the evaluation of strategic alternatives. There is substantial doubt about our ability to continue as a going concern.
Sources of Liquidity
To date, we have financed our operations principally through private placements of our redeemable convertible preferred stock, our convertible promissory notes, the IPO, and an "at-the-market" offering facility.
Series A Preferred Stock Financing
From
In
In
Convertible Note Financing
From
In
Paycheck Protection Program Loan
On
Initial Public Offering
In
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public offering price of
"At-the-market" offering facility
In
Cash Flows
The following table sets forth a summary of the net cash flow activity for the
six months ended
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (28,200) $ (24,770)
Investing activities $ 38,522 $ (40,616)
Financing activities $ 33 $ 124,170 Net increase in cash, cash equivalents and restricted cash
Operating Activities
Net cash used in operating activities was
The net cash used in operating activities for the six months ended
Investing Activities
Net cash provided by investing activities was
Financing Activities
Net cash provided by financing activities was immaterial for the six months
ended
Funding Requirements
We believe that our existing cash and cash equivalents and marketable securities, together with the net proceeds from our IPO, will be sufficient to meet our anticipated cash requirements into the second quarter of 2023. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. If we are not able to raise additional funding, we may not be able to enter into successful collaborations under favorable terms. As a result, we may be unable to realize value from our assets and discharge our liabilities in the normal course of business.
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Our future capital requirements will depend on many factors, including:
•the initiation, progress, timing, costs and results of drug discovery, preclinical studies and clinical trials of NEXI-001, NEXI-002, NEXI-003 and any other future product candidates;
•the potential to expand the eligible patient population for NEXI-001 to include haplo-identical donor/patients;
•the emerging competition and the potential to evaluate NEXI-002 in earlier lines of therapy or combinations for multiple myeloma patients based on the safety profile and clinical signs observed;
•the consideration of collaborations or strategic partnerships to continue the development of NEXI-002;
•the number and characteristics of product candidates that we pursue;
•the outcome, timing and costs of seeking regulatory approvals;
•the cost of manufacturing NEXI-001 and NEXI-002 and future product candidates for clinical trials in preparation for marketing approval and in preparation for commercialization;
•the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;
•the emergence of competing therapies and other adverse market developments;
•the ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreement;
•the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
•the extent to which we in-license or acquire other products and technologies; and
•the costs of operating as a public company.
Until such time, if ever, as we can generate substantial product revenues to support our capital requirements, we expect to finance our cash needs through cash and cash equivalents and marketable securities on hand and a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and 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 funds through collaborations, or other similar arrangements with third parties, we may need to relinquish valuable rights to our product candidates, future revenue streams or research programs or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings as and when needed, we may be required to delay, limit, reduce or terminate our product development 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.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with
While our significant accounting policies are described in more detail in Note
3, "Summary of Significant Accounting Policies", in our Form 10-K for the year
ended
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Stock-Based Compensation Expense
Stock-based compensation expense represents the cost of the grant date fair
value of equity awards recognized over the requisite service period of the
awards (usually the vesting period) on a straight-line basis. We estimate the
fair value of equity awards using the Black-Scholes option pricing model and
recognize forfeitures as they occur. Estimating the fair value of equity awards
as of the grant date using valuation models, such as the Black-Scholes option
pricing model, is affected by assumptions regarding a number of variables,
including the risk-free interest rate, the expected stock price volatility, the
expected term of stock options, the expected dividend yield and the fair value
of the underlying common stock on the date of grant. Changes in the assumptions
can materially affect the fair value and ultimately how much stock-based
compensation expense is recognized. These inputs are subjective and generally
require significant analysis and judgment to develop. See Note 3, "Summary of
Significant Accounting Policies" contained in our Annual Report on Form 10-K for
the year ended
As part of the process of preparing our 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 make estimates of our 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. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.
We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.
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.
Other Company Information
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company ("EGC") as defined in the Jumpstart Our
Business Startups Act of 2012, as amended, or the JOBS Act. We will remain an
EGC until the earlier of (1)
•we may present only two years of audited financial statements, plus unaudited condensed financial statements for any interim period, and related Management's Discussion and Analysis of Financial Condition and Results of Operations in this filing.
•we may avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
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•we may provide reduced disclosure about our executive compensation arrangements; and
•we may not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements.
We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this filing is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
Under the JOBS Act, EGCs can also delay adopting new or revised accounting standards until such time as those standards apply to private companies, which may make our financial statements less comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Until the date that we are no longer an EGC or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard.
We are also a "smaller reporting company," meaning that the market value of our
stock held by non-affiliates plus the proposed aggregate amount of gross
proceeds to us as a result of the IPO was less than
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued and adopted accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, "Basis of Presentation".
Off-Balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under
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