OUTLOOK THERAPEUTICS, INC. You should read this section in conjunction with our unaudited interim
consolidated financial statements and related notes included in Part I. Item 1
of this report and our audited consolidated financial statements and related
notes thereto and management's discussion and analysis of financial condition
and results of operations for the years ended
Forward-Looking Statements
This discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
Forward-looking statements are identified by words such as "believe," "may,"
"could," "will," "estimate," "continue," "anticipate," "intend," "seek," "plan,"
"expect," "should," "would," "potentially" or the negative of these terms or
similar expressions in this report. You should read these statements carefully
because they discuss future expectations, contain projections of future results
of operations or financial condition, or state other "forward-looking"
information. These statements relate to our future plans, objectives,
expectations, intentions and financial performance and the assumptions that
underlie these statements. These forward-looking statements are subject to
certain risks and uncertainties that could cause a material difference include,
but are not limited to, those discussed under the caption "Risk Factors" in our
Annual Report on Form 10-K for the year ended
Overview
We are a biopharmaceutical company working to develop and launch the first
ophthalmic formulation of bevacizumab approved by the
ONS-5010 (LYTENAVA (bevacizumab-vikg)), our sole product candidate in active
clinical development, is an investigational ophthalmic formulation of
bevacizumab, which we are developing to be administered as an intravitreal
injection for the treatment of wet AMD and other retinal diseases. Bevacizumab
is a full-length, humanized anti-VEGF (Vascular Endothelial Growth Factor)
recombinant monoclonal antibody, or mAb, that inhibits VEGF and associated
angiogenic activity. The study design for our Phase 3 clinical program to
evaluate ONS-5010 as an ophthalmic formulation of bevacizumab was reviewed at an
end of Phase 2 meeting with the FDA in
Our clinical program for ONS-5010 in wet AMD involves three clinical trials,
which we refer to as NORSE ONE, NORSE TWO and NORSE THREE. We reported achieving
the anticipated safety and efficacy and positive proof-of-concept topline
results from NORSE ONE, a clinical experience study, in
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(p = 0.05) with a mean change in letters with ranibizumab of 7.0 letters and
with bevacizumab-vikg 11.1 letters. NORSE THREE is an open-label safety study we
conducted to ensure the adequate number of safety exposures to ONS-5010 are
available for the initial ONS-5010 Biologics License Application, or BLA, filing
with the FDA. In
In addition, we have received agreements from the FDA on three Special Protocol Assessments, or SPAs, for three additional registration clinical trials for our ongoing Phase 3 program for ONS-5010. These SPAs cover the protocols for NORSE FOUR, a registration clinical trial evaluating ONS-5010 to treat BRVO, and NORSE FIVE and NORSE SIX, two registration clinical trials to evaluate ONS-5010 to treat DME. We intend to potentially initiate these studies after the completion of NORSE TWO.
Currently, the cancer drug Avastin (bevacizumab) is used off-label for the
treatment of wet AMD and other retinal diseases such as DME and BRVO even though
Avastin has not been approved by regulatory authorities for use in these
diseases. Off-label use of unapproved bevacizumab is currently estimated to
account for at least 50% of all wet AMD treatments in
Going Concern
Through
In
In
In
Our current cash resources of
We do not have any products approved for sale and we have only generated revenue from our collaboration agreements. We have incurred operating losses and negative operating cash flows since inception and there is no assurance that we will ever achieve profitable operations, and if achieved, that profitable operations will be sustained. Our net loss for the nine
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months ended
We have incurred recurring losses and negative cash flows from operations since
inception. As of
Impacts of the COVID-19 Pandemic
We continue to monitor the ongoing COVID-19 global pandemic, which has resulted
in travel and other restrictions to reduce the spread of the disease. To date,
we have experienced only minor disruptions from the ongoing COVID-19 pandemic,
including a brief delay in
The safety, health and well-being of all patients, medical staff and our internal and external teams is paramount and is our primary focus. As shelter-in-place rules evolve in jurisdictions across the country, we are aware that the potential exists for further disruptions to our projected timelines. We are in close communication with our key vendors and are prepared to take action should the pandemic worsen and impact our business in the future.
The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to
change. We do not yet know the full extent of any impacts the evolving COVID-19
pandemic may have on our business, operations, financial position and our CMC,
clinical and regulatory activities. To the extent the evolving effects of the
COVID-19 pandemic adversely affect our business and financial condition, it may
also have the effect of heightening many of the other risks and uncertainties
described under "Risk Factors" in our Annual Report on Form 10-K for the year
ended
Collaboration, License and Strategic Partnership Agreements
From time to time, we enter into collaboration and license agreements for the research and development, manufacture and/or commercialization of our products and/or product candidates. These agreements generally provide for non-refundable upfront license fees, development and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. We have also licensed rights to our inactive biosimilar program product candidates (ONS-3010, ONS-1045 and ONS-1050) in other markets.
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Syntone - PRC Joint Venture
In
We used approximately
In
Components of our Results of Operations
Research and Development Expenses
Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:
expenses incurred under agreements with contract research organizations, or
? CROs, as well as investigative sites and consultants that conduct our
preclinical studies and clinical trials;
expenses incurred by us directly, as well as under agreements with contract
? manufacturing organizations, or CMOs, for manufacturing scale-up expenses and
the cost of acquiring and manufacturing preclinical and clinical trial
materials and commercial materials, including manufacturing validation batches;
? outsourced professional scientific development services;
? employee-related expenses, which include salaries, benefits and stock-based
compensation;
? payments made under a third-party assignment agreement, under which we acquired
intellectual property;
? expenses relating to regulatory activities, including filing fees paid to
regulatory agencies;
? laboratory materials and supplies used to support our research activities; and
? allocated expenses, utilities and other facility-related costs.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:
? the number of clinical sites included in the trials;
? the length of time required to enroll suitable patients;
? the number of patients that ultimately participate in the trials;
? the number of doses patients receive;
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? the duration of patient follow-up;
? the results of our clinical trials;
? the establishment of commercial manufacturing capabilities;
? the receipt of marketing approvals; and
? the commercialization of product candidates.
Our expenditures are subject to additional uncertainties, including the terms
and timing of regulatory approvals. We may never succeed in achieving regulatory
approval for any of our product candidates. We may obtain unexpected results
from our clinical trials. We may elect to discontinue, delay or modify clinical
trials of some product candidates or focus on others. A change in the outcome of
any of these variables with respect to the development of a product candidate
could mean a significant change in the costs and timing associated with the
development of that product candidate. For example, if the
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size, complexity and duration of later-stage clinical trials.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing and prosecution costs and professional fees for business development, legal, auditing and tax services and insurance costs.
We anticipate that our general and administrative expenses will increase if and when we believe a regulatory approval of a product candidate appears likely, and we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of our product.
Loss on
Loss on equity method investment represents our proportionate share for the period of the net loss of our investee to which the equity method of accounting is applied.
Interest Expense
Interest expense consists of cash paid and non-cash interest expense related to our senior secured notes, and unsecured notes with current and former stockholders, unsecured promissory note, equipment loans, finance leases and other finance obligations.
Gain or Loss on Extinguishment of Debt
Gain or loss on extinguishment of debt consists of modifications to senior secured notes that are deemed to be substantially different from the existing notes and the exchange of senior secured notes for our shares of common stock.
Change in Fair Value of Redemption Feature
Change in fair value of the redemption feature reflects the change in the fair
value of the embedded derivative contained in the senior secured notes issued in
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recorded at fair value and was subject to re-measurement at each balance sheet date until our obligations under the senior secured notes were satisfied.
Change in Fair Value of Warrant Liability
Warrants to purchase our common stock that were issued in conjunction with the
convertible senior secured notes originally issued
Income Taxes
Since inception, we have not recorded any
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We have not completed a study to assess whether an ownership change has occurred in the past. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our NOLs are also subject to international regulations, which could restrict our ability to utilize our NOLs. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.
Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.
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Results of Operations
Comparison of Three Months Ended
Three months ended June 30,
2021 2020 Change
Operating expenses:
Research and development $ 8,545,279 $ 8,488,143 $ 57,136
General and administrative 2,929,717 3,286,739 (357,022)
Impairment of property and equipment - 104,296 (104,296)
11,474,996 11,879,178 (404,182)
Loss from operations (11,474,996) (11,879,178) 404,182
Loss on equity method investment 435,346 - 435,346
Interest expense, net 256,873 443,624 (186,751)
Gain on extinguishment of debt - (6,164,284) 6,164,284
Change in fair value of warrant liability 29,332 127,506 (98,174)
Loss before income taxes (12,196,547) (6,286,024) (5,910,523)
Income tax benefit - (3,271,157) 3,271,157
Net loss $ (12,196,547) $ (3,014,867) $ (9,181,680) Research and Development Expenses
The following table summarizes our research and development expenses by
functional area for the three months ended
Three months ended June 30,
2021 2020
ONS-5010 development $ 7,411,262 $ 6,792,319
Compensation and related benefits 411,695 336,612
Stock-based compensation 239,230 915,974
Other research and development 483,092 443,238
Total research and development expenses
Research and development expenses for the three months ended
General and Administrative Expenses
The following table summarizes our general and administrative expenses by type
for the three months ended
Three months ended June 30,
2021 2020
Professional fees $ 1,162,616 $ 1,248,157
Compensation and related benefits 305,015 370,431
Stock-based compensation 959,153 442,746
Facilities, fees and other related costs 502,933 1,225,405
Total general and administrative expenses
General and administrative expenses for the three months ended
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decrease in professional fees of
Impairment of Property and Equipment
During the three months ended
Interest Expense
Interest expense decreased by
Debt Extinguishment
We recognized a
Change in Fair Value of Warrant Liability
During the three months ended
Comparison of Nine Months Ended
Nine months ended June 30,
2021 2020 Change
Operating expenses:
Research and development $ 29,023,253 $ 18,718,659 $ 10,304,594
General and administrative 9,267,962 7,580,638 1,687,324
Impairment of property and equipment - 527,624 (527,624)
38,291,215 26,826,921 11,464,294
Loss from operations (38,291,215) (26,826,921) (11,464,294)
Loss on equity method investment 435,346 - 435,346
Interest expense, net 666,945 1,737,440 (1,070,495)
Loss on extinguishment of debt - 1,896,296 (1,896,296)
Change in fair value of redemption feature - (1,796,982) 1,796,982
Change in fair value of warrant liability 363,476 (74,636) 438,112
Loss before income taxes (39,756,982) (28,589,039) (11,167,943)
Income tax expense (benefit) 2,000 (3,271,157) 3,273,157
Net loss $ (39,758,982) $ (25,317,882) $ (14,441,100)
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Research and Development Expenses
The following table summarizes our research and development expenses by
functional area for the nine months ended
Nine months ended June 30,
2021 2020
ONS-5010 development $ 25,635,197 $ 15,165,085
Compensation and related benefits 1,165,430 1,029,283
Stock-based compensation 707,442 1,064,912
Other research and development 1,515,184 1,459,379
Total research and development expenses
Research and development expenses for the nine months ended
General and Administrative Expenses
The following table summarizes our general and administrative expenses by type
for the nine months ended
Nine months ended June 30,
2021 2020
Professional fees $ 4,107,749 $ 2,968,390
Compensation and related benefits 863,646 724,498
Stock-based compensation 2,775,330 957,824
Facilities, fees and other related costs 1,521,237 2,929,926
Total general and administrative expenses
General and administrative expenses for the nine months ended
Impairment of Property and Equipment
During the nine months ended
Interest Expense
Interest expense decreased by
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Debt Extinguishment
During the nine months ended
Change in Fair Value of Warrant Liability
During the nine months ended
During the nine months ended
Liquidity and Capital Resources
We have not generated any revenue from product sales. Since inception, we have
incurred net losses and negative cash flows from our operations. Through
In
In
In
In
As of
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development programs, liquidate all or a portion of our assets, and/or seek
protection under the provisions of the
Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional financing discussed above, (ii) our ability to complete revenue-generating partnerships with pharmaceutical companies, (iii) the success of our research and development, (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies, and, ultimately, (v) regulatory approval and market acceptance of our proposed future products..
Funding Requirements
We plan to focus in the near term on filing of a BLA with the FDA to support the generation of commercial revenues. We anticipate we will incur net losses and negative cash flow from operations for the foreseeable future. We may not be able to complete the development and initiate commercialization of ONS-5010 if, among other things, if the FDA does not approve our application arising out of our current clinical trials when we expect, or at all, or if we are not able to enter into strategic partnerships for ONS-5010 providing for sufficient funding of our expected commercial and development costs and we are unable to obtain such funding elsewhere.
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, manufacturing and facility costs, external research and development services, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs. Our future funding requirements will be heavily determined by the resources needed to support development of our lead product candidate and any other product candidates we may choose to pursue.
We believe our existing cash as of
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Nine months ended June 30,
2021 2020
Net cash used in operating activities
- (900,000)
Net cash provided by financing activities 52,419,173 36,549,780
Operating Activities.
During the nine months ended
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million from changes in our operating assets and liabilities was primarily due
to an increase in prepaid expenses of
During the nine months ended
Investing Activities.
During the nine months ended
Financing Activities.
During the nine months ended
During the nine months ended
Description of Indebtedness
In
While the unsecured note is outstanding, we agreed to keep adequate public information available, maintain our Nasdaq listing, and refrain from undertaking certain "Variable Security Issuances" without the noteholders' consent, subject to certain limited exempt issuances, in addition to other negative covenants. The unsecured note provides that it is an event of default if we breach our negative covenants under the purchase agreement, undertake certain "Fundamental Transactions" (as defined therein), along with other customary events of default, in addition to providing for a default rate of 14%, and gives the noteholder the right to increase the outstanding balance by 5% in the event of default.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
Contractual Obligations and Commitments
Not applicable.
Critical Accounting Policies and Significant Judgments and Estimates
The Critical Accounting Policies and Significant Judgments and Estimates
included in our Form 10-K for the fiscal year ended
JOBS Act Accounting Election
The JOBS Act, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
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