RENEO PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 "Financial Statements and Supplementary Data" and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this Annual Report.
Overview
Reneo is a clinical-stage pharmaceutical company focused on the development and commercialization of therapies for patients with rare genetic mitochondrial diseases, which are often associated with the inability of mitochondria to produce ATP. Our lead product candidate, mavodelpar, is a potent and selective agonist of the PPAR?. Mavodelpar has been shown to increase transcription of genes involved in mitochondrial function and increase FAO, and may increase production of new mitochondria.
The PPAR family of nuclear hormone receptors, PPAR?, PPAR?, and PPAR?, control the transcription of genes critical for regulating energy metabolism and homeostasis. PPAR? is highly expressed in muscle, kidney, brain, and liver tissue. Activation of PPAR? results in changes in the expression of genes involved with multiple aspects of energy metabolism including uptake of fatty acids, utilization of fatty acids as an energy source, and mitochondrial biogenesis.
Increases in PPAR? activity also correlate with a shift in muscle tissue towards oxidative, fat-consuming type I fibers that are associated with endurance as opposed to glycolytic, type II fibers. In preclinical and clinical studies, increased PPAR? activity through transgenic overexpression or pharmacological activation increases muscular strength and endurance across a variety of functional measures. Mavodelpar was studied in healthy male volunteers with one leg immobilized to produce muscle atrophy. Compared to placebo, administration of mavodelpar resulted in statistically significant increases in expression of genes involved in mitochondrial OxPhos, and statistically significant improvements in muscle strength. Mavodelpar was studied in an open-label trial in patients with PMM. Patients with PMM in this trial exhibited improved function, reduced symptoms, and increased expression of genes involved in mitochondrial function. Mavodelpar was also studied in an open-label trial in patients with LC-FAOD. In this trial, patients with LC-FAOD due to certain gene defects exhibited improved function and reduced symptoms.
As a PPAR? agonist, mavodelpar may benefit patients with genetic mitochondrial myopathies who experience weakness, fatigue, or deterioration in muscle due to impaired mitochondrial energy production. Patients with these diseases are unable to perform many everyday activities, can experience cardiomyopathy and other organ dysfunction, and typically have a reduced life expectancy. We are currently developing mavodelpar in rare genetic diseases that typically present with myopathy, including PMM and LC-FAOD.
There are currently no approved therapies for the treatment of PMM, representing a high unmet medical need.
We have received orphan drug designations for mavodelpar in
We have received Fast Track designation for mavodelpar for the treatment of patients with PMM and LC-FAOD due to LCHAD deficiency, one of the predominant LC-FAOD genotypes. We are continuing to collaborate with the FDA and European regulatory agencies to advance the LC-FAOD program which will include patients with
117
--------------------------------------------------------------------------------
Table of Contents
LCHAD as well as other genotypes. These discussions include obtaining alignment on the study design, patient population, and endpoints for the LC-FAOD program's next clinical trial.
Mavodelpar for the Treatment of PMM
We completed an open-label Phase 1b study of mavodelpar in patients with PMM due to mtDNA defects to assess the safety and tolerability of mavodelpar, and evaluated changes in patient function using a 12MWT. Mavodelpar was well-tolerated and had an adequate safety profile in this trial. Compared to baseline, patients receiving mavodelpar once-daily for 12 weeks experienced an average increase in distance of 104.4 meters in the 12MWT, an average increase in weight-adjusted peak VO2 of 1.7 mL/min/kg, a reduction in fatigue and pain, and increased expression of genes involved with transport and metabolism of nutrients in the mitochondria including PDK4, ANGPTL4, and SLC25A34.
Based on these results, we initiated the STRIDE study, a global, randomized,
double-blind, placebo-controlled pivotal Phase 2b trial of mavodelpar in adult
patients with PMM due to mtDNA defects. We achieved the target enrollment of 200
patients in the pivotal STRIDE study in
We are also conducting the STRIDE AHEAD study, a 24-month, open-label, long-term
safety trial outside of
Mavodelpar for the Treatment of LC-FAOD
We completed an open-label Phase 1b study in LC-FAOD adult patients with nDNA defects to assess the safety and tolerability of mavodelpar, and measure changes in functional test such as walk distance, exercise capacity and patient-reported symptoms that could serve as potential endpoints in future clinical studies. The study included patients with defective LCHAD, CPT2, VLCAD, or TFP.
A total of 24 patients were enrolled, including patients with defective LCHAD (n=5), CPT2 (n=8), VLCAD (n=9), or TFP (n=2). We initiated the trial with a dose of 50 mg once-daily in the first three patients followed by 100 mg once-daily in all subsequent patients. The LCHAD and CPT2 groups had the greatest improvement over baseline in 12MWT (73.7 and 51.9 meters, respectively).
In the LC-FAOD Phase 1b study, mavodelpar was well tolerated. The most common adverse events experienced by patients were rhabdomyolysis (4 patients) and myalgia (4 patients), the majority reported to be mild or moderate in severity. The LCHAD and CPT2 groups had the greatest improvement over baseline in 12MWT (73.7 and 51.9 meters, respectively).
We also completed the FORWARD study, a 16-week, observational, non-interventional study in patients with LC-FAOD with different nDNA mutations to better understand the natural history of LC-FAOD and changes in patient function and symptoms over time. A total of 58 patients participated in the FORWARD study, including patients with defective LCHAD (n=16), CPT2 (n=30), or VLCAD (n=12).
118
--------------------------------------------------------------------------------
Table of Contents
Based on the results of the LC-FAOD Phase 1b study, in conjunction with the
results of the FORWARD study, we intend to continue the development of
mavodelpar for certain genotypes of patients with LC-FAOD. Results of the
studies were presented at the International Network of
Financial Overview
Since our inception in 2014, our operations have primarily focused on raising
capital, establishing and protecting our intellectual property portfolio,
organizing and staffing our company, business planning, and conducting
preclinical and clinical development of and manufacturing development for
mavodelpar. We do not have any product candidates approved for sale, have not
generated any revenue from product sales, and do not expect to generate revenues
from the commercial sale of our product candidate for several years, if ever.
Since inception, we have incurred significant operating losses. Our net losses
were
We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase as we conduct our ongoing and planned clinical trials and preclinical studies, engage in other research and development activities, seek regulatory approvals for any product candidates that successfully complete clinical trials, incur development milestone payments related to our research and development activities, prepare for commercialization, hire additional personnel, and protect our intellectual property.
Our net losses may fluctuate significantly from quarter-to-quarter and
year-to-year, depending on the timing of our clinical trials and our
expenditures on other research and development and commercialization activities.
As a result, we will need to raise additional capital. Until such time as we can
generate significant revenue from sales of our product candidate, if ever, we
expect to finance our operations through public or private equity offerings or
debt financings, credit or loan facilities, collaborations, strategic alliances,
licensing arrangements or a combination of one or more of these funding sources.
Additional funds may not be available to us on acceptable terms or at all. Our
ability to raise additional funds may be adversely impacted by potential
worsening global economic conditions and disruptions to, and volatility in, the
credit and financial markets in
License Agreement
In
Upon the achievement of certain pre-specified development and regulatory
milestones, we are also required to pay vTv Therapeutics milestone payments
totaling up to
119
--------------------------------------------------------------------------------
Table of Contents
certain customary reductions. A milestone payment of
Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses primarily relate to preclinical and clinical development of mavodelpar. Research and development expenses include:
•
personnel expenses, including salaries, benefits, and stock-based compensation expense;
•
external expenses incurred under agreements with CROs, investigative sites and consultants to conduct and support our preclinical studies and clinical trials;
•
raw materials related to manufacturing of our product candidate for clinical trials and preclinical studies, including fees paid to third-party manufacturers;
•
expenses related to regulatory activities, including filing fees paid to regulatory agencies;
•
facility costs including rent, depreciation, and maintenance expenses; and
•
fees for maintaining licenses under our third-party licensing agreements.
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. Costs for certain activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators. We expense amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired.
The following table summarizes our research and development expenses for the
years ended
Year Ended December 31,
2022 2021
Clinical and regulatory $ 19,919 $ 14,863
Contract manufacturing cost 8,915 6,450
Nonclinical 3,931 2,339
Research and development-other expense 4,940 4,517
Total $ 37,705 $ 28,169 We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidate into and through clinical trials, continue to conduct preclinical studies and pursue regulatory approval of our product candidate. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidate may be affected by a variety of factors including: the safety and efficacy of our product candidate, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for our product candidate. As a result of the uncertainties discussed above, at this time we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of and obtain regulatory approval for our product candidate. Our research and development costs may vary significantly based on factors such as:
120
--------------------------------------------------------------------------------
Table of Contents
•
the scope, rate of progress, expense and results of clinical trials and preclinical studies;
• per patient trial costs;
•
the number of trials required for approval;
•
the number of sites included in the trials;
•
the countries in which the trials are conducted;
•
the number of patients that participate in the trials;
•
uncertainties in patient enrollment or drop out or discontinuation rates, particularly in light of the current COVID-19 pandemic environment;
•
potential additional safety monitoring requested by regulatory agencies;
•
the duration of patient participation in the trials and follow-up;
•
the safety and efficacy of our product candidate;
•
the cost and timing of manufacturing our product candidates; and
•
the extent to which we establish strategic collaborations or other arrangements.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense, for personnel in executive, finance, accounting, and human resource and other administrative functions. General and administrative expenses also include corporate facility costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, insurance costs and fees for accounting and consulting services.
We expect our general and administrative expenses to increase for the foreseeable future to support continued research and development activities, including our ongoing and planned research and development of our product candidate for multiple indications.
Other Income
Other income consists of interest income on our cash, cash equivalents and short-term investments.
Results of Operations
Comparison of Year Ended
The following table summarizes our results of operations for the years ended
Year Ended December 31,
2022 2021 Change
Operating expenses:
Research and development $ 37,705 $ 28,169 $ 9,536
General and administrative 16,143 11,649 4,494
Total operating expenses 53,848 39,818 14,030
Loss from operations (53,848 ) (39,818 ) (14,030 )
Other income 1,893 48 1,845
Net loss $ (51,955 ) $ (39,770 ) $ (12,185 )
121--------------------------------------------------------------------------------
Table of Contents
Operating Expenses
Research and Development Expenses
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by
Other Income
Other income increased by
Liquidity and Capital Resources
Since inception, we have incurred operating losses and negative cash flows from operations and have funded our operations primarily through the sale of preferred and common stock. We do not have any product candidates approved for sale and have not generated any revenue from product sales, and we do not expect to generate revenues from the commercial sale of our product candidate for at least the foreseeable future, if ever. We are subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We continue to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.
In
The accompanying consolidated financial statements have been prepared assuming
we will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business, and
does not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or amounts and classification of
liabilities that may result from the outcome of this uncertainty. We have
prepared cash flow forecasts which indicate that based on our expected operating
losses and negative cash flows, there is substantial doubt about our ability to
continue as a going concern for twelve months after the date the consolidated
financial statements for the year ended
122
--------------------------------------------------------------------------------
Table of Contents
Cash Flows
The following table summarizes our cash flows for the years ended
Year Ended December 31,
2022 2021
Net cash used in operating activities $ (47,362 ) $ (37,983 )
Net cash used in investing activities (57,842 ) (23,376 )
Net cash provided by financing activities 471 132,406
Net (decrease) increase in cash and cash equivalents
Operating Activities
Net cash used in operating activities for the year ended
Net cash used in operating activities for the year ended
Investing Activities
Net cash used in investing activities for the year ended
Net cash used in investing activities for the year ended
Financing Activities
Net cash provided by financing activities for the year ended
Net cash provided by financing activities for the year ended
123
--------------------------------------------------------------------------------
Table of Contents
Funding Requirements
We will need to raise additional capital through public or private equity
offerings or debt financings, credit or loan facilities, collaborations,
strategic alliances, licensing arrangements or a combination of one or more of
these funding sources. Additional funds may not be available to us on acceptable
terms or at all. Our ability to raise additional funds may be adversely impacted
by potential worsening global economic conditions and disruptions to, and
volatility in, the credit and financial markets in
Our future capital requirements will depend on many factors, including:
•
the scope, progress, results and costs of clinical trials and preclinical studies for mavodelpar;
•
the scope, prioritization and number of our research and clinical indications we pursue;
•
the costs and timing of manufacturing for our product candidates;
•
the costs, timing, and outcome of regulatory review of mavodelpar;
•
the timing and amount of the milestone or other payments we must make to vTv Therapeutics and any future licensors;
•
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
the extent to which we acquire or in-license other product candidates and technologies;
•
the costs of securing manufacturing arrangements for commercial production;
•
our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and
•
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market any product candidates.
As of
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidate, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of a product candidate that we do not expect to be commercially available for many years, if at all. Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt 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.
124
--------------------------------------------------------------------------------
Table of Contents
If we raise funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidate that we would otherwise prefer to develop and market ourselves.
Material Cash Requirements
The discussion below summarizes our significant contractual obligations and
commitments as of
Leases. See Note 6 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding our leases, including the future operating lease minimum payments.
Performance Award. See Note 8 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding a special performance award that our chief executive officer may be entitled to receive, including the maximum payout.
vTv License Agreement. See Note 9 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding the vTv License Agreement, including potential milestone and royalty payments.
In addition to the contractual obligations above, we also expect to have future material cash requirements related to our contract manufacturing, preclinical and clinical programs, and personnel expenses.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
All research and development costs are expensed as incurred. Research and development costs consist primarily of costs associated with manufacturing drug substance and drug product, costs associated with preclinical studies, clinical trials managed through CROs and other third parties, license fees, salaries and employee benefits.
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves the following:
125
--------------------------------------------------------------------------------
Table of Contents
•
communicating with appropriate internal and external 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;
•
estimating and accruing expenses in our consolidated financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and
•
periodically confirming the accuracy of our estimates with service providers and making adjustments, if necessary.
We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, we estimate the time period over which services will be performed and the level of effort to be expended in each period.
Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed, or services are performed.
To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.
Stock-Based Compensation
We recognize stock-based compensation expense for grants under our 2014 and 2021 Equity Incentive Plans and ESPP. We account for all stock-based awards granted to employees and directors at their fair value and recognize compensation expense over the award's vesting period. Determining the amount of stock-based compensation to be recorded requires us to develop estimates of fair values of stock options as of the grant date. We calculate the grant date fair values of stock options using the Black-Scholes valuation model, which requires the input of subjective assumptions, including but not limited to expected stock price volatility over the term of the awards and the expected term of stock options. The fair value of restricted stock awards granted to employees is based on the quoted closing market price per share on grant date.
We granted restricted stock awards with performance conditions that are based upon the achievement of pre-specified clinical development or regulatory performance events. As the outcome of each event has inherent risks and uncertainties, and a positive outcome may not be known until the event is achieved, we will begin to recognize the value of the performance-based restricted stock awards when the achievement of each performance condition is deemed probable, a determination that requires significant judgment by management. Compensation cost is recognized under the accelerated method and is adjusted in future periods for subsequent changes in the expected outcome of the performance-related conditions.
We also granted restricted stock awards with market conditions. We measure the fair value of stock-based awards with market-based vesting conditions on the date of grant using a Monte Carlo simulation model. In accordance with accounting guidance for awards with market conditions, the stock-based compensation expense will be recognized over the derived service period regardless of whether the award achieves the market condition and will only be adjusted to the extent the service condition is not met.
Stock-based compensation expenses year-over-year have increased due to more equity grants awarded in 2022 to attract and retain key scientific or management personnel.
126
--------------------------------------------------------------------------------
Table of Contents
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.
© Edgar Online, source
