You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q and our audited financial statements and notes thereto and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our prospectus dated
Forward-Looking Statements
In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or the negative of these terms or other similar expressions.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a late-stage biopharmaceutical company focused on developing and commercializing novel therapies for rare endocrine disorders with significant unmet medical need. We are initially developing our wholly-owned product candidate, tildacerfont, as the potential first non-steroidal therapy to offer markedly improved disease control and reduce steroid burden for patients suffering from classic congenital adrenal hyperplasia, or CAH. Classic CAH is a serious and life-threatening disease with no known novel therapies approved in approximately 50 years. In a 12-week Phase 2a proof-of-concept clinical trial, tildacerfont-treated adult patients suffering from classic CAH who had poor disease control despite being on standard of care therapy achieved approximately 80% reductions in hormones that are key indicators of poor disease control. Furthermore, 163 subjects across six clinical trials to date have been administered tildacerfont with no drug-related SAEs reported.
We have initiated a placebo-controlled, double-blind Phase 2b clinical trial in adult patients with classic CAH with poor disease control and anticipate topline results in the fourth quarter of 2021 or the first quarter of 2022. We have also initiated a second Phase 2b clinical trial in adult patients with classic CAH with good disease control focused on glucocorticoid reduction and anticipate topline results in the first half of 2022. Based on post-hoc analyses of our clinical data to date, we have chosen to target two distinct groups of classic CAH patients with either good disease control or poor disease control. These two groups, which together make up the entire classic CAH patient population, have differing disease challenges centered on excessive adrenal androgen levels or excessive glucocorticoid usage, both of which have the potential to be addressed by treatment with tildacerfont, if approved. We believe our strategy may enable us to observe clinically meaningful outcomes with fewer total patients studied. Additionally, we believe these two clinical trials will provide sufficient patient exposures for our registrational safety database. Assuming positive results in the glucocorticoid reduction trial, we plan to meet with the FDA and comparable foreign regulatory authorities in 2022 to discuss registration.
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Since our inception in
We rely, and expect to continue to rely, on third parties for the manufacture of tildacerfont for preclinical studies and clinical trials, as well as for commercial manufacture if tildacerfont obtains marketing approval. We also rely, and expect to continue to rely, on third parties to package, label, store, and distribute tildacerfont, if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of tildacerfont.
Since inception, we have incurred significant losses and negative cash flows
from operations. During the nine months ended
Since inception through
? advance tildacerfont through our ongoing Phase 2b clinical trials in adult patients with classic CAH; ? pursue regulatory approvals of tildacerfont in adult patients with classic CAH; ? advance clinical development of tildacerfont in additional indications, including pediatric classic CAH and a subpopulation of females with a rare form of polycystic ovary syndrome, or PCOS; ? build a highly specialized commercial organization to support the commercialization of tildacerfont, if approved, inthe United States andEurope ; ? build a commercial infrastructure or opportunistically seek strategic collaborations to benefit from the resources of biopharmaceutical companies specialized in either relevant disease areas or geographies, if tildacerfont is approved for additional indications; ? identify additional indications and formulations for which to investigate tildacerfont in the future and expand our pipeline of product candidates; ? implement operational, financial, and management information systems; ? hire additional personnel; ? operate as a public company; and ? obtain, maintain, expand, and protect our intellectual property portfolio. 20
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Our business has been and could continue to be adversely affected by the evolving COVID-19 pandemic. For example, the COVID-19 pandemic has resulted in and could result in delays to our clinical trials for numerous reasons including additional delays or difficulties in enrolling patients, diversion of healthcare resources away from the conduct of clinical trials, interruption or delays in the operations of the FDA or other regulatory authorities, and delays in clinical sites receiving the supplies and materials to conduct our clinical trials. At this time, the extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted.
License Agreement with Eli Lilly and Company
Below is a summary of the key terms for our license agreement, or the License Agreement, with Eli Lilly and Company, or Lilly. For additional details, see Note 7 to our interim condensed financial statements, included elsewhere in this Quarterly Report on Form 10-Q.
In
As partial consideration for the rights granted to us under the License
Agreement, we made a one-time upfront payment to Lilly of
Components of Results of Operations
Operating Expenses
We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.
Research and Development Expenses
Our research and development expenses consist of external and internal expenses incurred in connection with our research activities and development programs.
These expenses include:
? external expenses, consisting of: ? clinical trials-expenses associated with clinical research organizations, or CROs, engaged to manage and conduct clinical trials; ? preclinical studies-expenses associated with preclinical studies performed by vendors; ? other research and development-expenses associated with contract manufacturing; labeling, packaging, and distribution of clinical trial supplies; and consulting; and 21
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Table of Contents ? internal expenses, consisting of personnel, including expenses for salaries, bonuses, benefits, stock-based compensation, as well as allocation of certain expenses.
To date, most of these expenses have been incurred to advance tildacerfont. We expect that significant additional spending will be required to progress tildacerfont through clinical development and regulatory approval. These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply.
Research and development expenses are recognized as they are incurred. If deposits are required by external vendors, a portion of the deposit is included as a prepaid expense until sufficient progress has occurred to amortize the deposit to expense in the statement of operations.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs
(including salaries, bonuses, benefits, and stock-based compensation expense)
for personnel in executive, finance, and other administrative functions. General
and administrative expenses also include legal fees, professional fees paid for
accounting, auditing, consulting, tax, and investor relations services,
insurance costs, facility costs not otherwise included in research and
development expenses, and public company expenses such as costs associated with
compliance with the rules and regulations of the
We expect that our general and administrative expenses will continue to increase in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company, as we advance tildacerfont through our ongoing and planned clinical trials, and as we identify additional indications and formulations for which to investigate tildacerfont in the future and expand our pipeline of product candidates.
Interest Expense
Interest expense consists of interest incurred and non-cash amortization of debt
discount and issuance costs in connection with the Term Loan with
Other Income, Net
Other income, net primarily consists of interest income earned on our cash and cash equivalents.
Results of Operations
Comparisons of the Three Months Ended
The following table summarizes our results of operations for the periods presented (in thousands): Three Months Ended September 30, 2020 2019 Change Operating expenses: Research and development$ 7,769 $ 2,107 $ 5,662 General and administrative 1,790 457 1,333 Total operating expenses 9,559 2,564 6,995 Loss from operations (9,559 ) (2,564 ) (6,995 ) Interest expense (79 ) (5 ) (74 ) Other income, net 51 18 33 Net loss$ (9,587 ) $ (2,551 ) $ (7,036 ) 22
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Research and Development Expenses
Research and development expenses were
Three Months Ended September 30, 2020 2019 Change External expenses: Clinical development$ 4,445 $ 478 $ 3,967 Manufacturing 1,406 813 593 Non-clinical 624 - 624 Other research and development 202 27 175 Internal expenses: Personnel 1,065 753 312 Allocated overhead 27 36 (9 ) Total research and development expenses$ 7,769 $ 2,107 $ 5,662
General and Administrative Expenses
General and administrative expenses were
Interest Expense
Interest expense was
Other Income, Net
Other income, net was minimal for the three months ended
Comparisons of the Nine Months Ended
The following table summarizes our results of operations for the periods presented (in thousands): Nine Months Ended September 30, 2020 2019 Change Operating expenses: Research and development$ 18,040 $ 7,969 $ 10,071 General and administrative 3,041 2,004 1,037 Total operating expenses 21,081 9,973 11,108 Loss from operations (21,081 ) (9,973 ) (11,108 ) Interest expense (245 ) (5 ) (240 ) Other income, net 125 72 53 Net loss$ (21,201 ) $ (9,906 ) $ (11,295 ) 23
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Research and Development Expenses
Research and development expenses were
Nine Months Ended September 30, 2020 2019 Change External expenses: Clinical development$ 9,939 $ 3,293 $ 6,646 Manufacturing 3,019 1,494 1,525 Non-clinical 1,259 667 592 Other research and development 449 243 206 Internal expenses: Personnel 3,283 2,175 1,108 Allocated overhead 91 97 (6 ) Total research and development expenses$ 18,040 $ 7,969 $ 10,071
General and Administrative Expenses
General and administrative expenses were
Interest Expense
Interest expense was
Other Income, Net
Other income, net was comparable for the nine months ended
Liquidity and Capital Resources
Liquidity
Since our inception, we have not generated any revenue from product sales and
have incurred significant operating losses and negative cash flows from
operations. We anticipate that we will continue to incur net losses for the
foreseeable future. As of
Loan Agreement
In
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In
The Loan Agreement, as amended by the Deferral Agreement, provides for monthly
cash interest-only payments through
We may prepay amounts outstanding under the Term Loan at any time provided certain notification conditions are met, in which case, all outstanding principal plus accrued and unpaid interest, the end of term payment, a prepayment fee between 1% and 3% of the principal amount of the first and second tranches, and any bank expenses become due and payable.
The Loan Agreement contains certain covenants that limit our ability to engage
in certain transactions that may be in our long-term best interest, including
entering into a change in control transaction. The Loan Agreement also contains
certain covenants that limit our ability to obtain additional debt financing,
including incurring debt from third parties not permitted under the Loan
Agreement or incurring liens or encumbrances on our property. While we have not
previously breached and are currently in compliance with the covenants contained
in the Loan Agreement, we may breach these covenants in the future. Our ability
to comply with these covenants may be affected by events and factors beyond our
control. In the event that we breach one or more covenants,
In connection with the first and second tranches under the Loan Agreement, we
issued a warrant to purchase up to an aggregate of 49,609 shares of common stock
at
Funding Requirements
To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize tildacerfont or any future product candidates, and we do not know when, or if at all, that will occur. We will continue to require additional capital to develop tildacerfont and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our clinical development programs, and to a lesser extent, general and administrative expenses.
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, tildacerfont or any of our future product candidates. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in research and development activities related to developing tildacerfont, as tildacerfont continues to advance into later stages of development for the treatment of classic CAH in adult patients, as we conduct clinical trials of tildacerfont in additional indications beyond classic CAH in adult patients, as we seek regulatory approvals for tildacerfont, and incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, the successful development of tildacerfont is highly uncertain, and we may never succeed in achieving regulatory approval for tildacerfont in classic CAH in adult patients or other indications. In addition, we expect to incur additional costs associated with operating as a public company.
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We may seek to raise capital through equity or debt financings, collaborative agreements or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:
? the progress, costs, trial design, results of, and timing of our ongoing and planned clinical trials of tildacerfont; ? the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; ? the number and characteristics of product candidates that we may pursue; ? our ability to manufacture sufficient quantities of tildacerfont; ? our plan to expand our research and development activities; ? the costs associated with manufacturing tildacerfont and establishing commercial supplies and sales, marketing, and distribution capabilities; ? the costs associated with securing and establishing commercialization; ? the costs of acquiring, licensing, or investing in product candidates; ? our ability to maintain, expand, and defend the scope of our 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 retain key management and hire scientific, technical, business, and medical personnel; ? the effect of competing products and product candidates and other market developments; ? the timing, receipt, and amount of sales from tildacerfont and any future product candidates, if approved; ? our need to implement additional internal systems and infrastructure, including financial and reporting systems; ? the economic and other terms, timing of, and success of any collaboration, licensing, or other arrangements which we may enter in the future; and ? the effects of the disruptions to and volatility in the credit and financial markets inthe United States and worldwide from the COVID-19 pandemic.
If we raise additional funds by issuing equity securities, our stockholders will experience dilution. If we raise additional capital through debt financing, we may be subject to covenants that restrict our operations including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.
We may be unable to raise additional funds or to enter into such agreements or
arrangements on favorable terms, or at all. Our ability to raise additional
funds may be adversely impacted by potential worsening global economic
conditions and the disruptions to, and volatility in, the credit and financial
markets in
The amount and timing of our future funding requirements will depend on many factors including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
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