The following discussion and analysis of our unaudited condensed consolidated
financial condition and results of operations should be read in conjunction with
the audited consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2020,
as filed with the Securities and Exchange Commission ("SEC") on March 29, 2021,
as amended on April 29, 2021 (collectively, the "Form 10-K"), and certain other
reports filed with the SEC as may be set forth below.
Forward Looking Statements
This quarterly report on Form 10-Q ("Quarterly Report") and other reports filed
by Scopus BioPharma Inc. (the "Company") from time to time with the SEC
(collectively, the "Filings") contain or may contain forward-looking statements
and information that are based upon beliefs of, and information currently
available to, the Company's management, as well as estimates and assumptions
made by Company's management. Readers are cautioned not to place undue reliance
on these forward-looking statements, which are only predictions and speak only
as of the date hereof. When used in the Filings, the words "may", "will",
"anticipate", "believe", "estimate", "expect", "future", "intend", "plan", or
the negative of these terms and similar expressions as they relate to the
Company or the Company's management are intended to identify forward-looking
statements. Such statements reflect the current view of the Company with respect
to future events and we caution you that these statements are not guarantees of
future performance or events and are subject to risks, assumptions, and other
factors. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated, expected, intended,
or planned. Unless otherwise stated in this Quarterly Report, "we", "us", "our",
"Company", "Scopus" and "Scopus BioPharma" refer to Scopus BioPharma Inc.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance, or achievements. Except as required by
applicable law, including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to conform these
statements to actual results.
Our unaudited condensed consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States
("GAAP"). These accounting principles require us to make certain estimates,
judgments and assumptions. We believe that the estimates, judgments and
assumptions upon which we rely are reasonable based upon information available
to us at the time that these estimates, judgments and assumptions are made.
These estimates, judgments and assumptions can affect the reported amounts of
assets and liabilities as of the date of the financial statements, as well as
the reported amounts of revenues and expenses during the periods presented. Our
unaudited condensed consolidated financial statements would be affected to the
extent there are material differences between these estimates and actual
results. In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's judgment in its
application. There are also areas in which management's judgment in selecting
any available alternative would not produce a materially different result. The
following discussion should be read in conjunction with our financial statements
and notes thereto appearing elsewhere in this Quarterly Report.
Overview
We are a clinical-stage biopharmaceutical company developing transformational
therapeutics for serious diseases with significant unmet medical needs. Our
mission is to improve patient outcomes and save lives. To achieve our mission,
we are capitalizing on groundbreaking scientific and medical discoveries at some
of the world's foremost research and academic institutions.
Our lead development program is a novel, targeted immunotherapy for the
treatment of multiple cancers. We have partnered with City of Hope ("COH") for
CpG-STAT3siRNA, or CO-sTiRNATM, which is a TRL9 agonist and STAT3 inhibitor.
Pre-clinical testing at COH was designed to determine whether CO-sTiRNA would
reduce growth and metastasis of various pre-clinical tumor models, including
melanoma, and colon and bladder cancers, as well as leukemia and lymphoma. Based
upon such testing, an IND for CO-sTiRNA for B-cell non-Hodgkin lymphoma ("B-cell
lymphoma) was filed with and subsequently approved by the United States Food and
Drug Administration ("FDA") in April 2021 and May 2021, respectively. We
currently anticipate that a first-in-human Phase 1 clinical trial for B-cell
lymphoma will commence in 2021.
In conjunction with COH, Phase 1 clinical trials for additional cancer
indications are being considered for CO-sTiRNA in combination with immune
checkpoint inhibitors and chimeric antigen receptor T-cells ("CAR-Ts").
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On June 25, 2021, we acquired Olimmune Inc., a developer of groundbreaking
oligonucleotide immunotherapies for the treatment of multiple cancers
("Olimmune"). Olimmune owns exclusive, worldwide licenses to certain patents
from COH (the "Olimmune Licenses") to develop and commercialize CpG-STAT3ASO and
CpG-STAT3decoy. Like CO-sTiRNA (CpG-STAT3siRNA), such oligonucleotide
immunotherapies combine both TRL9 immunostimulation and STAT3 inhibition. As a
result, our pipeline now consists of several immuno-oncology lead development
programs. We anticipate that INDs for CpG-STAT3ASO for genitourinary and head
and neck cancers will be submitted in Q4 2022.
Our pipeline of drug candidates also includes MRI-1867, a
peripherally-restricted, dual-action cannabinoid-1 ("CB1") receptor inverse
agonist and inhibitor of inducible nitric oxide synthase ("iNOS"). We have
partnered with the National Institutes of Health ("NIH") for MRI-1867 and are
initially targeting systemic sclerosis ("SSc"). Over-activation of CB1 and iNOS
has been implicated in the pathophysiology of SSc, which includes fibrosis of
the skin, lung, kidney, heart, and the gastrointestinal tract. We are also
partnered with The Hebrew University of Jerusalem ("Hebrew University") on
several additional research and development programs. These programs relate to a
proprietary opioid-sparing anesthetic and synthesis of novel compounds and new
chemical entities ("NCEs"). We are continually monitoring the impact of the
on-going global pandemic on us. Until we are able to gain greater visibility as
to the impact of the evolving pandemic, including emerging variants and
responses thereto, we intend to commit greater resources to our existing and
future programs in the United States and may reduce resources for development
programs outside the United States.
We have devoted substantially all of our resources to our development efforts
relating to our drug candidates, including sponsoring research with
world-renowned academic and medical research institutions, preparing to
implement a Phase 1 clinical trial for B-cell lymphoma at COH, pursuing
additional pre-clinical studies, securing and protecting our licensed
intellectual property, and providing general and administrative support for
these operations. We do not have any products approved for sale and have not
generated any revenue from product sales. From inception (April 18, 2017) until
June 30, 2021, we have funded our operations primarily through the issuance of
equity and debt securities.
We have incurred net losses in each year since our inception. As of June 30,
2021, we had an accumulated deficit of $33,535,946. Substantially all of our net
losses resulted from costs incurred in connection with our research and
development programs and from general and administrative costs associated with
our operations.
We expect to continue to incur significant expenses and increasing operating
losses for at least the next several years. We anticipate that all our expenses
will increase substantially as we:
? continue our research and development efforts;
? contract with third-party research organizations to manage our clinical and
pre-clinical trials for our drug candidates;
? outsource the manufacturing of our drug candidates for clinical trials and
pre-clinical testing;
? seek to obtain regulatory approvals for our drug candidates;
? maintain, expand, and protect our intellectual property portfolio;
? add operational, financial and management information systems and personnel to
support our research and development and regulatory efforts; and
? operate as a public company.
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We do not expect to generate revenue from product sales unless and until we
successfully complete development and obtain marketing approval for one or more
of our drug candidates, which we expect will take a number of years and is
subject to significant uncertainty. Accordingly, we will need to raise
additional capital prior to the commercialization of any of our current or
future drug candidates. Until such time, if ever, as we can generate substantial
revenue from product sales, we expect to finance our operating activities
through equity and debt offerings. We may also raise capital through government
or other third-party funding and grants, collaborations and development
agreements, strategic alliances, and licensing arrangements. 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 our ability to develop our drug candidates.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
we have prepared in accordance with GAAP. The preparation of these condensed
consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported revenues and expenses during the reporting periods. We
evaluate these estimates and judgments on an ongoing basis. We base our
estimates on historical experience and on various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Our actual results may differ from these
estimates under different assumptions or conditions.
Our significant accounting policies are more fully described in Note 2 to our
consolidated financial statements appearing in our Form 10-K. We believe that
the accounting policies are critical for fully understanding and evaluating our
financial condition and results of operations.
Net Loss Per Share
Basic net loss per common share attributable to common shareholders is
calculated by dividing net loss attributable to common shareholders by the
weighted average number of common shares outstanding for the period. Since the
company was in a loss position for all periods presented, basic net loss per
share is the same as dilutive net loss per share as the inclusion of all
potential dilutive common shares which consist of stock options and warrants,
would be anti-dilutive.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS
Act, was enacted. Under the JOBS Act, emerging growth companies can delay
adopting new or revised accounting standards issued after the enactment of the
JOBS Act until such time as those standards apply to private companies. We have
irrevocably elected to avail ourselves of this exemption from new or revised
accounting standards, and, therefore, will not be subject to the same new or
revised accounting standards as public companies that are not emerging growth
companies. As a result of this election, our financial statements may not be
comparable to companies that are not emerging growth companies.
We are in the process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements provided by the JOBS Act. Subject to certain
conditions set forth in the JOBS Act, as an "emerging growth company," we intend
to rely on certain of these exemptions, including without limitation, (i)
providing an auditor's attestation report on our system of internal controls
over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act
and (ii) complying with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements,
known as the auditor discussion and analysis. We will remain an "emerging growth
company" until the earliest of (i) the last day of the fiscal year in which we
have total annual gross revenues of $1 billion or more; (ii) the last day of our
fiscal year following the fifth anniversary of the date of the completion of our
initial public offering; (iii) the date on which we have issued more than $1
billion in non-convertible debt during the previous three years; or (iv) the
date on which we are deemed to be a large accelerated filer under the rules of
the SEC.
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Results of Operations
Three Months Ended June 30, 2021 Versus Three Months Ended June 30, 2020
The following table summarizes our results of operations for the three months
ended June 30, 2021 and 2020, respectively:
Three Months Ended
June 30,
2021 2020 Change % Change
Operating Expenses:
General and Administrative $ 1,726,988 $ 710,729 $ 1,016,259 143 %
Research and Development 13,555,633 7,234,590 6,321,043 87 %
Loss from Operations 15,282,621 7,945,319 7,337,302 92 %
Net Loss $ 15,628,900 $ 8,025,261 $ 7,603,639 95 %
Our net losses were $15,628,900 and $8,038,651 for the three months ended June
30, 2021 and 2020, respectively, an increase of $7,603,639 or 95%. We anticipate
our net losses will continue as we advance our research and drug development
activities and incur additional general and administrative expenses to meet the
needs of our business.
Revenue
We did not have any revenue during the three months ended June 30, 2021 or 2020.
Our ability to generate product revenues in the future will depend almost
entirely on our ability to successfully develop, obtain regulatory approval for,
and then successfully commercialize a drug candidate.
Operating Expenses
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and
benefits to our personnel, including the costs related to our management
services agreements, directors and scientific and senior advisors; professional
fees and services, including accounting and legal services; and expenses related
to obtaining and protecting our intellectual property. We incurred general and
administrative expenses in the three months ended June 30, 2021 and 2020 of
$1,726,988 and $710,729, respectively, an increase of $1,016,259 or 143%. This
increase in our general and administrative expenses is primarily attributable to
increases in fees and stock compensation expenses associated with our directors
and scientific and senior advisors, most of whom joined the company during the
second half of 2020 and did not have an impact on our financial results during
the three months ended June 30, 2020; and professional fees and services related
to operating as a public company (including increased costs for investor
relations, directors and officers insurance and to comply with corporate
governance, internal controls and similar requirements applicable to public
companies), all of which have increased in 2021 following the completion of our
IPO in December 2020. In the three months ended June 30, 2021 compared to the
three months ended June 30, 2020, the increase of $1,016,259 is comprised
principally of an additional $212,312, $674,701 and $99,959 of costs for
compensation to our directors and scientific and senior advisors, professional
fees and certain public company costs, respectively. Included in professional
fees and services are legal fees and expenses incurred in connection with legal
services provided to the board of directors and certain committees thereof,
including relating to former officers and directors. See Part II-Other
Information, Item 1. Legal Proceedings, the Form 10-K, the Schedule 13D filed
with the SEC by a former director on April 7, 2021 and the Form 8-K filed with
the SEC on July 9, 2021 for additional information concerning such matters.
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Research and Development and Expenses
We recognize research and development expenses as they are incurred. Our
research and development expenses consist of the costs associated with obtaining
our intellectual property that are classified as in-process research and
development and fees incurred under our agreements with COH, the NIH and Hebrew
University, including the expenses associated with securities issued in
connection with such agreements, as applicable. For the three months ended June
30, 2021 and 2020, we incurred research and development expenses of $13,555,633
and $7,234,590, respectively, an increase of $6,321,043 or 87%. These expenses
increased primarily as a result of the costs and expenses related to our
acquisition of Olimmune, the upfront costs under the Olimmune Licenses and costs
associated with preparation for the Phase 1 clinical trial for CO-sTiRNA.
Expenses relating to the acquisition of Olimmune, the Olimmune Licenses and
preparation for the Phase 1 clinical trial for CO-sTiRNA were $6,998,530,
$1,081,622 and $323,797, respectively. These new expenses were offset by
$1,995,702 due to lower in-process research and development costs related to our
acquisition of Bioscience Oncology and CO-sTiRNA in 2021 compared to 2020. We
anticipate that our research and development expenses, exclusive of any
in-process research and development relating to our acquisitions, will increase
for the foreseeable future as we continue the clinical development of CO-sTiRNA,
the pre-clinical development of CpG-STAT3ASO, CpG-STAT3decoy and MRI-1867, and
to further advance the development of our other research and development
programs, subject to the availability of additional funding.
Other Expenses
Other expenses consists of changes in the fair value of a warrant liability, as
well as interest expense on our Convertible Notes. Other expenses were $346,279
and $79,942 for the three months ended June 30, 2021 and 2020, respectively, an
increase of $266,337 or 333%. Expense related to the change in fair value of
warrant liability was $14,274 for the three months ended June 30, 2021. There
was no expense related to the warrant liability during the three months ended
June 30, 2020. This expense during the three months ended June 30, 2021 is
associated with the increase of a liability related to certain warrants issued
in August and September 2020. We are required to revalue warrants classified on
our balance sheet as a liability at the end of each reporting period and reflect
a gain or loss from the change in fair value in the period in which the change
occurred. We calculate the fair value of such warrants using a Monte Carlo daily
price simulation. Interest expense was $332,005 and $79,942 for the three months
ended June 30, 2021 and 2020, respectively, an increase of $252,063 or 315%.
This increase is attributable to the entire principal amount of our Convertible
Notes being outstanding for the full three months ended June 30, 2021, whereas
only a portion of the principal amount of our Convertible Notes was outstanding
during the three months ended June 30, 2020.
Six Months Ended June 30, 2021 Versus Six Months Ended June 30, 2020
The following table summarizes our results of operations for the six months
ended June 30, 2021 and 2020, respectively:
Six Months Ended
June 30,
2021 2020 Change % Change
Operating Expenses:
General and Administrative $ 3,545,793 $ 1,279,689 $ 2,266,104 177 %
Research and Development 14,810,130 7,284,874 7,525,256 103 %
Loss from Operations 18,355,923 8,564,563 9,791,360 114 %
Net Loss $ 19,034,207 $ 8,651,397 $ 10,382,810 120 %
Our net losses were $19,034,207 and $8,651,397 for the six months ended June 30,
2021 and 2020, respectively, an increase of $10,382,810 or 120%. We anticipate
our net losses will continue as we advance our research and drug development
activities and incur additional general and administrative expenses to meet the
needs of our business.
Revenue
We did not have any revenue during the six months ended June 30, 2021 or 2020.
Our ability to generate product revenues in the future will depend almost
entirely on our ability to successfully develop, obtain regulatory approval for,
and then successfully commercialize a drug candidate.
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Operating Expenses
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and
benefits to our personnel, including the costs related to our employees,
management services agreements, directors and scientific and senior advisors;
professional fees and services, including accounting and legal services; and
expenses related to obtaining and protecting our intellectual property. We
incurred general and administrative expenses in the six months ended June 30,
2021 and 2020 of $3,545,793 and $1,279,689, respectively, an increase of
$2,266,104 or 177%. This increase in our general and administrative expenses is
primarily attributable to increases in fees and stock compensation expenses
associated with our directors and scientific and senior advisors, most of whom
joined the company during the second half of 2020 and did not have an impact on
our financial results during the six months ended June 30, 2020; and
professional fees and services related to operating as a public company
(including increased costs for investor relations, directors and officers
insurance and to comply with corporate governance, internal controls and similar
requirements applicable to public companies), all of which have increased in
2021 following the completion of our IPO in December 2020. In the six months
ended June 30, 2021 compared to the six months ended June 30, 2020, the increase
of $2,266,104 is comprised principally of an additional $432,071, $1,638,263 and
$206,125 of costs for compensation to our directors and scientific and senior
advisors, professional fees and certain public company costs, respectively.
Included in professional fees and services are legal fees and expenses incurred
in connection with legal services provided to the board of directors and certain
committees thereof, including relating to former officers and directors. See
Part II-Other Information, Item 1. Legal Proceedings, the Form 10-K, the
Schedule 13D filed with the SEC by a former director on April 7, 2021 and the
Form 8-K filed with the SEC on July 9, 2021 for additional information
concerning such matters.
Research and Development and Expenses
We recognize research and development expenses as they are incurred. Our
research and development expenses consist of the costs associated with our
acquisition of intellectual property that are classified as in-process research
and development and fees incurred under our agreements with COH, the NIH and
Hebrew University, including the expenses associated with securities issued in
connection with such agreements, as applicable. For the six months ended June
30, 2021 and 2020, we incurred research and development expenses of $14,810,130
and $7,284,874, respectively, an increase of $7,525,256 or 103%. These expenses
increased primarily as a result of the costs related to our acquisition of
Olimmune, the upfront costs under the Olimmune Licenses and costs associated
with the filing of the IND and preparation for the Phase 1 clinical trial for
CO-sTiRNA. Expenses relating to the acquisition of Olimmune, the Olimmune
Licenses and the CO-sTiRNA IND and Phase I clinical trial were $6,998,530,
$1,081,622 and $1,503,277, respectively. These new expenses were offset by
$1,995,702 due to lower in-process research and development costs related to our
acquisition of Bioscience Oncology and CO-sTiRNA in 2021 compared to 2020. We
anticipate that our research and development expenses, exclusive of any
in-process research and development relating to our acquisitions, will increase
for the foreseeable future as we continue the clinical development of CO-sTiRNA,
the pre-clinical development of CpG-STAT3ASO, CpG-STAT3decoy and MRI-1867, and
to further advance the development of our other research and development
programs, subject to the availability of additional funding.
Other Expenses
Other expenses consists of changes in the fair value of a warrant liability, as
well as interest expense on our Convertible Notes. Other expenses were $678,284
and $86,834 for the six months ended June 30, 2021 and 2020, respectively, an
increase of $591,450 or 681%. Expense related to the change in fair value of
warrant liability was $14,274 for the six months ended June 30, 2021 There were
no expenses related to the warrant liability during the six months ended June
30, 2020. This expense during the six months ended June 30, 2021 is associated
with the increase of a liability related to certain warrants issued in August
and September 2020. We are required to revalue warrants classified on our
balance sheet as a liability at the end of each reporting period and reflect a
gain or loss from the change in fair value in the period in which the change
occurred. We calculate the fair value of such warrants using a Monte Carlo daily
price simulation. Interest expense was $664,010 and $86,834 for the six months
ended June 30, 2021 and 2020, respectively, an increase of $577,176 or 665%.
This increase is attributable to the entire principal amount of our Convertible
Notes being outstanding for the full six months ended June 30, 2021, whereas
only a portion of the principal amount of our Convertible Notes was outstanding
during the three months ended June 30, 2020.
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Liquidity and Capital Resources
Since April 18, 2017 (inception), we have incurred losses and, as of June 30,
2021, we had an accumulated deficit of $33,535,946. From inception through June
30, 2021, we have funded our operations principally through the sale of equity
and debt securities totaling $19,382,497 in the aggregate. As of June 30, 2021,
we had cash of $6,261,042 and net working capital of ($1,987,332) compared to
cash of $1,832,100 and net working capital of ($1,831,228) as of December 31,
2020. Net working capital as of June 30, 2021, as adjusted for the common stock
warrant liability would have been $1,427,585.
For the six months ended June 30, 2021, we used $4,759,242 of cash in
operations, which was attributable to our net loss of $19,034,207 and changes in
operating assets and liabilities of $646,831, partially offset by $13,628,134 of
non-cash expenses. For the six months ended June 30, 2020, we used $944,929 of
cash in operations, which was attributable to our net loss of $8,651,397 and
changes in operating assets and liabilities of $1,174,047, partially offset by
non-cash expenses of $6,532,421.
In July 2021, $3,084,875 of outstanding principal and accrued interest under our
Convertible Notes was converted into 6,169,771 Series W Warrants ("W Warrants").
The balance of $129,548 of outstanding principal and accrued interest was repaid
in cash. Accordingly, we had no further obligations under our Convertible Notes.
Future Funding Requirements
We have not generated any revenue. We do not know when, or if, we will generate
any revenue from product sales. We do not expect to generate significant revenue
from product sales unless and until we obtain regulatory approval of and
commercialize any of our drug candidates. We anticipate that we will continue to
incur losses for at least the next several years. We expect that our research
and development costs and general and administrative expenses will continue to
increase as we advance our drug candidates through the pre-clinical and clinical
development processes and hire additional personnel and/or consultants to
support such activities. In addition, subject to obtaining regulatory approval
of any of our drug candidates, we expect to incur significant commercialization
expenses for product sales, marketing, manufacturing and distribution.
As a result, we anticipate that we will need substantial additional funding in
connection with our continuing operations to fund future clinical trials and
pre-clinical testing for our drug candidates, general and administrative costs
and public company and other expenses, including legal fees (both general, as
well as related to litigation). See Part II-Other Information, Item 1. Legal
Proceedings, the Form 10-K, the Schedule 13D filed with the SEC by a former
director on April 7, 2021 and the Form 8-K filed with the SEC on July 9, 2021
for additional information concerning such matters. We expect to finance our
cash needs primarily through the sale of our debt and equity securities. We may
also raise capital through government or other third-party funding and grants,
collaborations and development agreements, strategic alliances and licensing
arrangements. Because of the numerous risks and uncertainties associated with
the development and commercialization of our drug candidates, we are unable to
estimate the amounts of additional capital outlays and operating expenditures
necessary to complete the development of our drug candidates.
Our future capital requirements will depend on many factors, including:
the progress, costs, results and timing of our drug candidates' future clinical
? studies and future pre-clinical trials, and the clinical development of our
drug candidates for other potential indications beyond their initial target
indications;
the willingness of the FDA and the EMA to accept our future drug candidate
? clinical trials, as well as our other completed and planned clinical and
pre-clinical studies and other work, as the basis for review and approval of
our drug candidates;
? the outcome, costs and timing of seeking and obtaining FDA, EMA and any other
regulatory approvals;
? the number and characteristics of drug candidates that we pursue, including our
drug candidates in future pre-clinical development;
? the ability of our drug candidates to progress through clinical development
successfully;
? our need to expand our research and development activities;
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? the costs associated with securing and establishing commercialization and
manufacturing capabilities;
? the costs of acquiring, licensing or investing in businesses, products, drug
candidates and technologies;
our ability to maintain, expand and defend the scope of our licensed
intellectual property portfolio, including the amount and timing of any
? payments we may be required to make, or that we may receive, in connection with
the licensing, filing, prosecution, defense and enforcement of any patents or
other intellectual property rights;
? our need and ability to hire additional management and scientific and medical
personnel;
? the effect of competing technological and market developments;
? our need to implement additional internal systems and infrastructure, including
financial and reporting systems;
? the duration and spread of the COVID-19 pandemic, and associated operational
delays and disruptions and increased costs and expenses; and
? the economic and other terms, timing and success of any collaboration,
licensing or other arrangements into which we may enter in the future.
Until such time, if ever, as we can generate substantial revenue from product
sales, we expect to finance our cash needs through a combination of debt
financings and equity offerings, government or other third-party funding,
marketing and distribution arrangements and other collaborations, strategic
alliances and licensing arrangements. To the extent that we raise additional
capital through the sale of debt and equity securities, the ownership interests
of our common stockholders will 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, 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 additional funds through government or other
third-party funding, marketing and distribution arrangements or other
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 drug candidates or to grant licenses on
terms that may not be favorable to us.
We have considered the spread of the COVID-19 coronavirus outbreak, which the
World Health Organization has declared a "Public Health Emergency of
International Concern." The COVID-19 outbreak is disrupting supply chains and
affecting production and sales across a range of industries. The extent of the
impact of COVID-19 on our operational and financial performance will depend on
certain developments, including the duration and spread of the pandemic and its
impact on our employees and vendors, and our ability to raise capital, all of
which are uncertain and cannot be predicted. At this point, the extent to which
COVID-19 may impact our financial condition or results of operations remains
uncertain.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements as defined under SEC rules.
Recent Accounting Pronouncements
The Company is an "emerging growth company", as defined in the Jumpstart Our
Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging
growth companies can delay adopting new or revised accounting standards issued
subsequent to the enactment of the JOBS Act until such time as those standards
apply to private companies. The Company has irrevocably elected to avail itself
of this exemption from new or revised accounting standards, and, therefore, will
not be subject to the same new or revised accounting standards as public
companies that are not emerging growth companies.
We have reviewed recent accounting pronouncements and concluded they are either
not applicable to the business or no material effect is expected on the
condensed consolidated financial statements as a result of future adoption.
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Effect of Inflation and Changes in Prices
We do not believe that inflation and changes in prices will have a material
effect on our operations.
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