The information set forth below should be read in conjunction with our
consolidated financial statements and related notes thereto included elsewhere
in this Annual Report on Form 10-K. This discussion and analysis contain
forward-looking statements based on our current expectations, assumptions,
estimates and projections. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those indicated
in these forward-looking statements as a result of certain factors, including
those discussed in Item 1 of this Annual Report on Form 10-K, entitled
"Business," under "Forward-Looking Statements" and Item 1A of this Annual Report
on Form 10-K, entitled "Risk Factors." References in this discussion and
analysis to "us," "we," "our," or our "Company" refer to
Overview
We are a clinical-stage biotechnology company developing innovative inhaled therapies to address serious pulmonary diseases and central nervous system ("CNS") disorders using its patented iSPERSE™ technology. The Company's proprietary product pipeline includes treatments for serious lung diseases, such as allergic bronchopulmonary aspergillosis ("ABPA") and Chronic Obstructive Pulmonary Disease ("COPD"), and CNS disorders such as acute migraine. Our product candidates are based on its proprietary engineered dry powder delivery platform, iSPERSE™, which seeks to improve therapeutic delivery to the lungs by maximizing local concentrations and reducing systemic side effects to improve patient outcomes.
We design and develop inhaled therapeutic products based on our proprietary dry powder delivery technology, iSPERSE™(inhaled Small Particles Easily Respirable and Emitted), which enables delivery of small or large molecule drugs to the lungs by inhalation for local or systemic applications. The iSPERSE™ powders are engineered to be small, dense particles with highly efficient dispersibility and delivery to airways. iSPERSE™ powders can be used with an array of dry powder inhaler technologies and can be formulated with a broad range of drug substances including small molecules and biologics. We believe the iSPERSE™ dry powder technology offers enhanced drug loading and delivery efficiency that outperforms traditional lactose-blend inhaled dry powder therapies.
41
We believe the advantages of using the iSPERSE™ technology include reduced total inhaled powder mass, enhanced dosing efficiency, reduced cost of goods and improved efficacy, safety and tolerability profiles. Our goal is to develop breakthrough therapeutic products that are safe, convenient, and more effective than the existing therapeutic products for respiratory and other diseases where iSPERSE™ properties are advantageous.
Our current pipeline is aligned to this goal as we develop iSPERSE™-based therapeutic candidates which target the prevention and treatment of a range of diseases. These therapeutic candidates include PUR1900 for the treatment of allergic bronchopulmonary aspergillosis ("ABPA") in patients with asthma and in patients with cystic fibrosis ("CF"), PUR3100 for the treatment of acute migraine, and PUR1800 for the treatment of acute exacerbations of chronic obstructive pulmonary disease ("AECOPD"). Each program is enabled by its unique iSPERSE™ formulation designed to achieve specific therapeutic objectives.
We intend to capitalize on our iSPERSE™ technology platform and our expertise in inhaled therapeutics to identify new product candidates for the prevention and treatment of diseases with significant unmet medical needs and to build our product pipeline beyond our existing candidates. In order to advance our clinical trials for our therapeutic candidates for respiratory and neurological diseases and leverage the iSPERSE™ platform to enable delivery of partnered compounds, we intend to form strategic alliances with third parties, including pharmaceutical and biotechnology companies or academic or private research institutes.
We expect to continue to incur significant expenses and increasing operating losses for at least the next several years based on our drug development plans. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, as we:
? conduct PUR1900 clinical trials focused on the development of an inhaled antifungal therapy to prevent and treat allergic/hypersensitivity response to fungus in the lungs of patients with asthma and CF; ? pursue further clinical studies for PUR3100, an orally inhaled dihydroergotamine ("DHE") including a Phase 2 clinical study for the treatment of acute migraine; ? continue to advance PUR1800, focusing on the development of an inhaled kinase inhibitor for treatment of AECOPD; ? capitalize on our proprietary iSPERSE™ technology and our expertise in inhaled therapeutics and particle engineering to identify new product candidates for prevention and treatment of diseases with significant unmet medical needs; ? invest in protecting and expanding our intellectual property portfolio and file for additional patents to strengthen our intellectual property rights; and ? hire personnel to support our product development, commercialization and administrative efforts.
We do not have any products approved for sale and have not generated any revenue from product sales. We will not generate product sales unless and until we successfully complete clinical developments and obtain regulatory approvals for our product candidates. Additionally, we currently utilize third-party contract research organizations ("CROs") to carry out our clinical development activities and third-party contract manufacturing organizations ("CMOs") to carry out our clinical manufacturing activities as we do not yet have a commercial organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Accordingly, we anticipate that we will seek to fund our operations through public or private equity or debt financings, licensing arrangements, collaborations with third parties, non-dilutive grants or other sources, potentially including collaborative commercial arrangements. Likewise, we intend to seek to limit our commercialization costs by partnering with other companies with complementary capabilities or larger infrastructure including sales and marketing.
Because of the numerous risks and uncertainties associated with product development, we are unable to 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.
42 Therapeutic Candidates PUR1900
On
The Cipla Agreement will remain in effect in perpetuity, unless otherwise
earlier terminated in accordance with its terms. In the event of circumstances
affecting the continuity of development of the Product in line with the Cipla
Agreement or certain development milestones are not achieved within a specified
timeframe discussed in greater detail below, the joint steering committee
("JSC") will evaluate the cause and effect and make a recommendation as to the
most optimal option available to Cipla and us. In such events, the parties are
not obligated to follow the recommendation of the JSC and, either party may
elect to terminate (a "Terminating Party") its obligation to fund additional
costs and expenses for the development and/or commercialization of the Product.
If the non-Terminating Party wishes to continue the development of the Product,
it will have the right to purchase the rights of the
We and Cipla will each be responsible for 60% and 40%, respectively, of our overhead costs and the time spent by our employees and consultants on development of the Product ("Direct Costs"), in addition to which, Cipla will reimburse us an amount equal to 10% of aggregate Direct Costs upon the achievement of the development milestones set forth in the table below, potentially bringing the sharing of Direct Costs to a 50/50 basis. We will continue to share all other development costs with Cipla that are not Direct Costs, such as the cost of clinical research organizations, manufacturing costs and other third-party costs, on a 50/50 basis.
Pursuant to the Cipla Agreement, (i) all development and commercialization
activities with respect to the Product in
In partnership with Cipla, we initiated a Phase 2 clinical study in 2019,
entitled: "A Randomized, Double-Blind, Multicenter, Placebo-Controlled, Phase 2
Study to Evaluate the Safety, Tolerability, and Pharmacokinetics of Itraconazole
Administered as a Dry Powder for Inhalation (PUR1900) in Adult Asthmatic
Patients with ABPA." This clinical study was terminated in
Following termination of the Phase 2 clinical study, we conducted a Type C
meeting with the FDA on
In addition to the terms of the Cipla Agreement described above, if any of the
below development milestones are not met by the date that is nine months after
the applicable deadline for achieving such development milestone, either party
may elect to terminate its obligation to fund additional development costs, in
which case either (i) the non-Terminating Party can acquire the rights of the
43
Phase 2b Development Plan - Development Milestones
Development Milestone Milestone Date
25% of patients enrolled in Phase 2b clinical study are dosed
Company delivers summary of key efficacy and safety data to
Phase 3 Development Plan - Development Milestones
Development Milestone Milestone Date
25% of patients enrolled in Phase 3 clinical study dosed To be proposed by JSC
Company delivers Topline Results to the JSC To be proposed by JSC The Prescription Drug User Fee Act (the "PDUFA") To be proposed by JSC PUR3100
In 2020, we developed PUR3100, the iSPERSE™ formulation of DHE, for the
treatment of acute migraine. Over 38 million people suffer from migraine in
A total of three 14-day good laboratory practices ("GLP") toxicology studies have been completed with PUR3100 to support single dose clinical studies. Preparations are underway for chronic toxicology to support long-term dosing and an eventual NDA.
We have completed several interactions with the FDA, and they have confirmed that, in addition to the Planned Phase 2 and Phase 3 studies, long-term safety should be assessed in a minimum of one hundred patients for six months of dosing and fifty patients for twelve months of dosing. The FDA also confirmed that it will be necessary to perform a safety study administering PUR3100 to otherwise healthy patients with asthma before a NDA is submitted.
On
No vomiting was observed in any of the PUR3100 dose groups. Oral inhalation of PUR3100 achieved peak exposures in the targeted therapeutic range at all doses and the Tmaxoccurred at five minutes after dosing.
We believe these data are encouraging and suggest that the orally inhaled formulation of DHE, PUR3100, will result in rapid systemic exposure in the therapeutic range, while minimizing the risk of side effects related to exposure levels associated with IV dosing. We believe the PUR3100 formulation of DHE is highly differentiated from other DHE products already approved or in development, can be immediately self-administered and has a pharmacokinetic profile that may potentially advance the treatment of patients with acute migraine.
We plan to open an IND in the second quarter of 2023 in order to conduct a randomized placebo-controlled Phase 2 clinical study in patients with migraine to assess the safety and effectiveness of two doses of PUR3100, in which the selection of the two doses has been informed by the initial Phase 1 clinical study. We anticipate that this Phase 2 clinical study will initiate once financing or partnership arrangements have been made.
44 PUR1800
We completed the Phase 1b safety, tolerability, and pharmacokinetics of PUR1800 for patients with stable moderate-severe chronic obstructive pulmonary disease ("COPD"). Topline data was delivered in the first quarter of 2022.
The clinical study, performed at the Medicines Evaluation Unit in
PUR1800 was well tolerated and there were no observed safety signals. The PK
data indicate that PUR1800 results in low and consistent systemic exposure when
administered via oral inhalation. The topline data, along with the results from
chronic toxicology studies, was delivered in the first quarter of 2022 and
presented at the
Toxicology studies in rats and dogs, with durations of six and nine months respectively, are complete. The data from both studies demonstrated that PUR1800 is safe and well tolerated with chronic dosing, with little to no progression of findings from 28-day studies. We believe that this indicates potential for chronic dosing of PUR1800, enabling us to explore PUR1800 therapy for chronic respiratory disease such as steroid resistant asthma, COPD, or idiopathic pulmonary fibrosis. While the program is currently in development for treatment of acute exacerbation of AECOPD, these positive toxicology study results could expand potential indications and value of the program.
All rights to our kinase inhibitor portfolio, including PUR1800 and PUR5700,
reverted to us upon the termination of our License, Development and
Commercialization Agreement (the "JJEI License Agreement"), dated
Financial Overview
To date, we have not generated any product sales. The 2022 and 2021 revenue was
generated by the collaboration agreement and license agreement with Cipla on our
PUR1900 program, the JJEI License Agreement for our PUR1800 kinase inhibitor,
and immaterial royalties from legacy products. Effective as of
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical candidates, and include:
? employee-related expenses, including salaries, benefits and stock-based compensation expense; ? expenses incurred under agreements with CROs or CMOs, and consultants that conduct our clinical trials and preclinical activities; ? the cost of acquiring, developing and manufacturing clinical trial materials and lab supplies; ? facility, depreciation and other expenses, which include direct and allocated expenses for rent, maintenance of our facility, insurance and other supplies; ? costs associated with preclinical activities and clinical regulatory operations; and ? consulting and professional fees associated with research and development activities 45
We expense research and development costs to operations as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors.
Research and development activities are central to our business model. We utilize a combination of internal and external efforts to advance product development from early-stage work to clinical trial manufacturing and clinical trial support. External efforts include work with consultants and substantial work at CROs and CMOs. We support an internal research and development team and facility for our pipeline programs. To move these programs forward along our development timelines, a large portion (approximately 83%) of our staff are research and development employees. In addition, we maintain an approximately 22,000 square foot office and research and development facility which includes capital equipment for the manufacture and characterization our iSPERSE™ powders for our pipeline programs. As we identify opportunities for iSPERSE™ in respiratory indications, we anticipate additional head count, capital, and development costs will be incurred to support these programs. Because of the numerous risks and uncertainties associated with product development, however, we cannot determine with certainty the duration and completion costs of these or other current or future preclinical studies and clinical trials. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability.
General and Administrative Expenses
General and administrative expenses consist principally of salaries, benefits and related costs such as stock-based compensation for personnel and consultants in executive, finance, business development, corporate communications and human resource functions, facility costs not otherwise included in research and development expenses, patent filing fees and legal fees. Other general and administrative expenses include travel expenses, expenses related to being a publicly traded company and professional fees for consulting, auditing and tax services.
We anticipate that our general and administrative expenses will increase in the
future as they relate to audit, legal, regulatory, and tax-related services
associated with maintaining compliance with exchange listing and
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Our principal sources of revenue during the years ended
46
At inception, we determine whether contracts are within the scope of
For contracts and units of account that are determined to be within the scope of ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services. To achieve this core principle, we apply the following five steps (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Performance obligations promised in a contract are identified at contract inception based on the goods and services that are both capable of being distinct and are distinct in the context of the contract. To the extent a contract includes multiple promised goods and services, we apply judgment to determine whether promised goods and services are both capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods and services to the customer. At the inception of each contract that includes research or development milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
If the license to the Company's intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the counterparty can benefit from a promise for its intended purpose without the receipt of the remaining promise, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development and licensing agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods.
47
The promises under the Company's arrangements may include research and development services to be performed by the Company on behalf of the counterparty. Payments or reimbursements from customers resulting from the Company's research and development efforts are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts. The Company uses an input method, according to the ratio of costs incurred to the total costs expected to be incurred in the future to satisfy the performance obligation. In management's judgment, this input method is the best measure of the transfer of control of the performance obligation. Amounts received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion. Reimbursements from and payments to the counterparty that are the result of a collaborative relationship, instead of a customer relationship, such as co-development activities, are recognized as the services are performed and presented as a reduction to research and development expense. To date, the Company has determined that all arrangements which include research and development services have been transacted with customers and recognized on a gross basis using ASC 606.
For contracts that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.
If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options that are not determined to be material rights are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.
Research and Development Costs
Research and development costs are expensed as incurred and include salaries, benefits, bonus, stock-based compensation, license fees, milestone payments due under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials, and develop drug materials and delivery devices; and associated overhead and facilities costs. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors, CROs and CMOs. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimate of fees and costs associated with the contract that were rendered during the period and they are expensed as incurred. Research and development costs that are paid in advance of performance are capitalized as prepaid expenses and amortized over the service period as the services are provided.
48 Results of Operations
Comparison of the Years Ended
The following table sets forth our results of operations for each of the periods set forth below (in thousands):
Year ended December 31, 2022 2021 Change Revenues$ 6,071 $ 5,169 $ 902 Operating expenses: Research and development 18,240 15,382 2,858 General and administrative 6,778 6,377 401 Impairment of goodwill - 3,577 (3,577 ) Total operating expenses 25,018 25,336 (318 ) Loss from operations (18,947 ) (20,167 ) 1,220 Other income/(expense): Interest income 309 7 302 Other expense, net (198 ) (11 ) (187 ) Net loss$ (18,836 ) $ (20,171 ) $ 1,335
Revenue - Revenue was
Research and development expenses- Research and development expense was
General and administrative expenses - General and administrative expense was
Impairment of goodwill - During 2021 we recorded an expense of
Liquidity and Capital Resources
Through
We anticipate that we will continue to incur losses, and that such losses will increase over the next several years due to development costs associated with our iSPERSE™ pipeline programs. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding and other collaborations and strategic alliances. We are currently exploring financing or partnership arrangements to develop and initiate a potential Phase 2 clinical study for PUR3100.
We expect that our existing cash and cash equivalents as of
49
We have no material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
Year ended December 31, 2022 2021 Net cash used in operating activities$ (19,356 ) $ (19,727 ) Net cash used in investing activities (86 ) (144 ) Net cash provided by financing activities 1,230 43,475 Net (decrease) increase in cash, cash equivalents, and restricted cash$ (18,212 ) $ 23,604
Cash Flows from Operating Activities
Net cash used in operating activities for the year ended
Net cash used in operating activities for the year ended
Cash Flows from Investing Activities
Net cash used in investing activities for the years ended
Cash Flows from Financing Activities
Net cash provided by financing activities for the year ended
Financings 2022 Financings
In
50 2021 Financings
On
On
In addition to the above registered direct offerings, during the year ended
Known Trends, Events and Uncertainties
The ultimate impact of the COVID-19 pandemic and its ongoing effects on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence. These include but are not limited to the COVID-19 pandemic and its continuing effects on the global economy, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that regulators, or our board or management, may determine are needed.
The COVID-19 pandemic has created significant economic uncertainty and
volatility in the credit and capital markets, and the ongoing effects of the
COVID-19 pandemic, including but not limited to, supply chain issues, global
shortages of supplies, materials and products, and rising global inflation,
continue to do so. In addition, the ongoing conflict between
Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
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