SURROZEN, INC. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, or this Report, and our consolidated financial statements and related notes thereto for the year endedDecember 31, 2021 included in the Annual Report on Form 10-K filed onMarch 28, 2022 . Unless otherwise indicated, the terms "Surrozen ," "we," "us," or "our" refer toSurrozen Operating, Inc. , or Legacy Surrozen, prior to the Business Combination withConsonance-HFW Acquisition Corp. andSurrozen, Inc. , formerly known asConsonance-HFW Acquisition Corp. , together with its consolidated subsidiaries after giving effect to the Business Combination.
Forward-Looking Statements
The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are "forward-looking statements" for purposes of these provisions, including those relating to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as "may," "might," "will," "should," "expect," "plan," "anticipate," "project," "believe," "estimate," "predict," "potential," "intend" or "continue," the negative of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are only predictions. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors. In evaluating these statements, you should specifically consider various factors, including the risks outlined under the caption "Risk Factors" set forth in Item 1A of Part II of this Report, as well as those contained from time to time in our other filings with theSEC . We caution investors that our business and financial performance are subject to substantial risks and uncertainties. Overview We are discovering and developing biologic drug candidates to selectively modulate the Wnt pathway, a critical mediator of tissue repair, in a broad range of organs and tissues, for human diseases. Building upon the seminal work of our founders and scientific advisors who discovered the Wnt gene and key regulators of the Wnt pathway, we have made breakthrough discoveries that we believe will overcome previous limitations in harnessing the potential of Wnt biology. These breakthroughs enable us to rapidly and flexibly design tissue-targeted therapeutics that modulate Wnt signaling. As a result of our discoveries, we are pioneering the selective activation of Wnt signaling, designing and engineering Wnt pathway mimetics, and advancing tissue-specific Wnt candidates. Our lead product candidates are multi-specific, antibody-based therapeutics that mimic the roles of naturally occurring Wnt or R-spondin proteins, which are involved in activation and enhancement of the Wnt pathway, respectively. Given Wnt signaling is essential in tissue maintenance and regeneration throughout the body, we have the potential to target a wide variety of severe diseases, including certain diseases that afflict the intestine, liver, retina, cornea, lung, kidney, cochlea, skin, pancreas and central nervous system. In each of these areas, we believe our approach has the potential to change the treatment paradigm for the disease and substantially impact patient outcomes. Our strategy is to exploit the full potential of Wnt signaling by identifying disease states responsive to Wnt modulation, design tissue-specific therapeutics, and advance candidates into clinical development in targeted indications with high unmet need. Our unique approach and platform technologies have led to the discovery and advancement of two lead product candidates. We initiated a Phase 1 clinical trial in the second quarter of 2022 for SZN-1326, our candidate in development for moderate to severe inflammatory bowel disease, or IBD, with ulcerative colitis, or UC, as our first proposed indication. SZN-1326, a Fzd5 targeted bi-specific antibody, is the first development candidate designed usingSurrozen's SWAP™ technology and targets the Wnt-signaling pathway in the intestinal epithelium. In preclinical animal models of acute and chronic colitis, SZN-1326 has been shown to transiently activate Wnt signaling in the diseased intestine, stimulate intestinal epithelial regeneration, reduce inflammation and reduce disease activity with no treatment related adverse effects observed in 13-week toxicology evaluations in rats and non-human primates (NHPs). InNovember 2022 , we announced that we voluntarily paused enrollment in the single ascending dose, or SAD, portion of our Phase 1 clinical trial evaluating SZN-1326 in healthy volunteers following the observation of treatment-related adverse events. Several subjects experienced asymptomatic liver transaminase elevations including three subjects with grade 3 ALT and AST elevations. There were no corresponding increases in total bilirubin, nor any changes in liver function markers such as coagulation markers or albumin. No other clinically significant laboratory abnormalities were observed, and the transaminase elevations resolved spontaneously in all subjects. 18 -------------------------------------------------------------------------------- No serious adverse events were observed during the study. We intend to further analyze available clinical data with the study investigator and conduct additional pre-clinical experiments to identify the potential mechanism of the transaminase elevations to determine next steps in the development program. We initiated a Phase 1 clinical trial in the second quarter of 2022 for SZN-043, our candidate in development for severe alcoholic hepatitis, or AH. SZN-043, a hepatocyte-specific R-spondin mimetic bispecific fusion protein targeting ASGR1, is the first development candidate usingSurrozen's SWEETS™ technology which is designed to mimic the regenerative properties of the protein R-Spondin by enhancing Wnt signaling in a cell-targeted manner. In multiple preclinical animal models of liver injury and fibrosis, SZN-043 has been shown to selectively activate Wnt signaling in the liver, stimulate transient hepatocyte proliferation, improve liver function and reduce fibrosis with no treatment-related adverse effects observed in 4-week GLP toxicology evaluations in mice and NHPs.Surrozen is developing SZN-043 for severe liver diseases, initially focusing on severe alcoholic hepatitis. InNovember 2022 , we provided an update on the ongoing SAD portion of the SZN-043 trial in healthy volunteers. Grade 1 and 2 treatment-related asymptomatic liver transaminase elevations were present in several subjects dosed with SZN-043. There were no corresponding increases in total bilirubin or GGT nor any changes in liver function markers such as coagulation markers or albumin in these subjects. No other clinically significant laboratory abnormalities were observed and the transaminase increases for these subjects resolved spontaneously. No serious adverse events have been observed to date in the ongoing study. We will be re-evaluating the overall clinical development timeline for this program. In the first quarter of 2022, we nominated SZN-413, a Fzd4 targeted bi-specific antibody, as a development candidate for the treatment of retinal vascular associated diseases. Fzd4 mediated Wnt signaling is known to play a critical role in retinal vascular integrity and function. Data generated in preclinical models of retinopathy demonstrated SZN-413 stimulated Wnt signaling and was able to induce normal retinal vessel regrowth while suppressing pathological vessel growth. We recently entered into a Collaboration and Licensing Agreement, or CLA, withBoehringer Ingelheim International GmbH , or BI, to research, develop and commercialize Fzd4 bi-specific antibodies designed using the Company's SWAP™ technology, including SZN-413.
The chart below represents a summary of our wholly owned product candidates:
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By leveraging our scientific capabilities and approach, we have identified more than 20 potential tissue types to explore. We are assessing the potential to drive tissue repair in diseases resulting in tissue injury to organs including the lung, lacrimal gland, cornea, pancreas and skin.
The chart below represents a summary of our wholly-owned research programs:
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Since our inception in 2015, we have devoted substantially all of our efforts
and financial resources to organizing and staffing our company, business
planning, raising capital, developing and optimizing our Wnt therapeutics
platform, identifying potential product candidates, undertaking research and
development activities, engaging in strategic transactions, establishing and
enhancing our
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intellectual property portfolio, and providing general and administrative
support for these operations. We have incurred net losses since inception.
During the three months ended
We expect to continue to incur losses for the foreseeable future and expect to incur increased expenses as we expand our pipeline and advance our product candidates through clinical development and regulatory submissions. Specifically, in the near term we expect to incur substantial expenses relating to our Phase 1 clinical trials, the development and validation of our manufacturing processes, and other research and development activities.
Impacts of the Conflict between
Russia invadedUkraine inFebruary 2022 and is still engaged in active armed conflict against the country. The global COVID-19 pandemic continues to evolve, and we will continue to monitor developments closely. To date, our financial condition and operations have not been significantly impacted by the conflict betweenRussia andUkraine and the COVID-19 pandemic. The extent of the impact on our business, operations and clinical development timelines and plans remains uncertain and will depend on certain developments, including the actions ofU.S. and foreign governments to impose sanctions onRussia and to slow the spread of the COVID-19 and their impact on our preclinical development activities, regulatory agencies, clinical research organizations, or CROs, third-party manufacturers, other third parties with whom we do business, and, if we obtain regulatory approval to commence dosing in humans, trial enrollment and trial sites. We will continue to actively monitor the rapidly evolving situation and may take actions that alter our operations, including those that may be required by federal, state or local authorities or that we determine are in the best interests of our employees and other third parties with whom we do business.
Impact of Inflation
Inflation has increased and is expected to continue to increase for the near future. Inflation generally affects us by increasing our labor costs, research and clinical trial costs. While we do not believe that inflation has had a material effect on our financial condition and results of operations during the periods presented, it may result in increased costs in the foreseeable future and adversely affect our business and financial condition. In addition, inflation may cause us to experience greater uncertainty in general economic conditions and additional volatility in the market price of our common stock, which are already subject to the effects of rising interest rates and the ongoing military conflict inUkraine . If these conditions worsen or do not improve, our ability to raise capital and our shareholders ability to sell their shares will be adversely affected.
Intellectual Property and Licensing Arrangements
As ofSeptember 30, 2022 , our patent portfolio consisted of over 20 pending patent application families, including 15 families that have entered national phase inthe United States and other countries, two families with pending Patent Cooperation Treaty, or PCT, applications, which have also been filed in certain non-PCT countries (e.g.,Taiwan ), and five families with pendingU.S. provisional applications. These patent applications are directed to, for example, the SWAP™ and SWEETS™ platforms, the parental constructs of our two lead product candidate molecules, SZN-043 and SZN-1326, the recently out-licensed SZN-413, as well as methods of treating disorders of the liver, intestine, retina, cornea, lacrimal gland, and kidney. We also have entered into patent and research tool license arrangements with third-parties, as described in Note 6 of the footnotes to the financial statements of this Report. The license agreements require milestone payments upon the achievement of certain regulatory and developmental stages. In addition, we will be required to pay royalties on sales of certain licensed products. As ofSeptember 30, 2022 , we have incurred nominal fees and milestone payments under our license agreements. Upon the achievement of further regulatory and developmental milestones and the sale of licensed products, we may incur significant fees and royalties under these licenses. As described in Note 11 of the footnotes to the financial statements of this Report, we executed the CLA with BI inOctober 2022 to research, develop and commercialize Fzd4 bi-specific antibodies designed using the Company's SWAP™ technology, including SZN-413. We and BI will conduct partnership research focused on SZN-413 during a one-year period, which BI has the right to extend by up to six months. After completion of the partnership research, BI will have an exclusive, royalty-bearing, worldwide, sublicensable license, under our applicable patents and know-how, to develop, manufacture and commercialize such antibodies and their derivatives for all uses, and BI shall be responsible for all further research, preclinical and clinical development, manufacturing, regulatory approvals, and commercialization of licensed products at its expense. 20 --------------------------------------------------------------------------------
Components of Results of Operations
Revenue
We had not generated any revenue throughSeptember 30, 2022 and prior to the execution of the CLA inOctober 2022 . Under the CLA, we are eligible to receive a non-refundable upfront payment of$12.5 million as described in Note 11 of the footnotes to the financial statements of this Report. We do not expect to generate any revenue from the sale of our products unless and until we obtain regulatory clearance or approval.
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
Since our inception, we have focused significant resources on our research and development activities. Our research and development expenses consist of external and internal expenses incurred in connection with our research activities and development programs.
External expenses include:
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costs incurred under agreements with third parties, including CROs and other third parties conducting research and development activities on our behalf;
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costs of outside consultants, including their fees, stock-based compensation and related travel expenses;
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costs of laboratory supplies and acquiring, developing and manufacturing drug candidate materials; and
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license payments under our license agreements made for intellectual property used in research and development activities.
Internal expenses include:
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personnel-related costs, including salaries, bonuses, benefits and stock-based compensation for individuals involved in our research and product development activities; and
•
facilities, depreciation, and other allocated costs, which include rent and insurance.
We track external expenses that are directly attributable to our clinical development candidates. We allocate internal expenses to our clinical development candidates on a program-specific basis. The internal expenses for early-stage research and discovery programs are not allocated as our internal resources, employees and infrastructure are typically deployed across multiple programs. As such, we do not provide financial information regarding the costs incurred for early-stage research and discovery programs on a program-specific basis. We expect our research and development expenses will increase significantly for the foreseeable future as we identify and develop product candidates, in particular as we seek to continue clinical trials and pursue regulatory approval and commercialization for SZN-1326 and SZN-043. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of SZN-1326, SZN-043 and SZN-413 or any future product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates, many of which are outside of our control, including those associated with:
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our ability, and the ability of our primary business partners, to hire and retain key personnel;
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the timing and progress of preclinical and clinical development activities;
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the number and scope of preclinical and clinical programs we decide to pursue;
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our ability to maintain our current research and development programs and to establish new ones;
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establishing an appropriate safety profile with IND-enabling studies;
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the number of sites and patients included in the clinical trials;
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the countries in which the clinical trials are conducted;
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per patient trial costs;
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successful patient enrollment in, and the initiation of, clinical trials, as well as drop out or discontinuation rates, particularly in light of the lingering effects of the COVID-19 pandemic, the availability of alternate treatments and the limited pool of eligible patients in certain disease areas;
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the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
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the number of trials required for regulatory approval;
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the timing, receipt and terms of any regulatory approvals from applicable regulatory authorities;
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our ability to establish new licensing or collaboration arrangements;
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the performance of our current and future business partners, if any;
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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
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significant and changing government regulation and regulatory guidance;
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the impact of any business interruptions to our operations or to those of the third parties with whom we work, particularly in light of the conflict betweenRussia andUkraine and the current COVID-19 pandemic environment;
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the impact of inflation on our expenses;
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launching commercial sales of our drug candidates, if approved, whether alone or in collaboration with others;
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the effect of products that may compete with our product candidates or other market developments; and
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maintaining a continued acceptable safety profile of the drug candidates following approval.
Any changes in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our drug candidates.
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, human resources, business and corporate development, legal, information technology 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, and facility costs not otherwise included in research and development expenses, and costs associated with compliance with the rules and regulations of theSEC and Nasdaq. We expect that our general and administrative expenses will increase significantly for the foreseeable future to support our expanding headcount and operations.
Interest Income
Interest income consists primarily of interest earned on our cash equivalents and marketable securities.
Other Income (Expense), Net Other income (expense), net consists of the gain on the change in fair value of warrant liabilities and expenses pertaining to the commitment shares issued toLincoln Park Capital Fund, LLC , or Lincoln Park, under the Equity Purchase Agreement.
Results of Operations
Comparison of the Three Months Ended
The following table summarizes results of operations for the periods presented
(dollars in thousands):
Three Months Ended September 30, $ %
2022 2021 Change Change
Operating expenses:
Research and
development $ 8,624 $ 10,418 $ (1,794 ) -17 %
General and
administrative 4,981 3,287 1,694 52 %
Total operating
expenses 13,605 13,705 (100 ) -1 %
Loss from operations (13,605 ) (13,705 ) 100 -1 %
Interest income 198 14 184 *
Other income
(expense), net 50 (328 ) 378 -115 %
Net loss $ (13,357 ) $ (14,019 ) $ 662 -5 %
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*Percentage is not meaningful
Research and Development Expenses
The following table summarizes research and development expenses for the periods presented (dollars in thousands):
Three Months Ended September 30, $ %
2022 2021 Change Change
SZN-1326 $ 2,808 $ 4,505 $ (1,697 ) -38 %
SZN-043 3,545 2,023 1,522 75 %Discovery and preclinical
stage programs 2,271 3,890 (1,619 ) -42 % Total research and development expenses $ 8,624 $ 10,418$ (1,794 ) -17 % The decrease of$1.7 million , or 38%, in SZN-1326 program expenses for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , is primarily due to the completion of manufacturing drug substance. The increase of$1.5 million , or 75%, in SZN-043 program expenses for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , is primarily due to a$0.6 million increase in the allocated personnel costs and stock-based compensation expense and a$0.9 million decrease in the government grant from theNational Institute of Health awarded inSeptember 2020 . There was a decrease of$1.6 million , or 42%, in discovery and preclinical stage program expenses for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , as we shifted our resources to support our clinical programs.
General and Administrative Expenses
The increase of$1.7 million , or 52%, in general and administrative expenses for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , is primarily attributable to a$1.0 million increase in personnel-related expenses due to an increase in headcount, a$0.3 million increase in professional fees and a$0.3 million increase in other expenses such as software licenses and computer supplies primarily due to the growth of operations and a$0.1 million increase in corporate insurance.
Interest Income
The increase of
Other Income (Expense), Net
The increase of$0.4 million , or 115%, in other income (expense), net, for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , is primarily attributable to the transaction costs incurred during the three months endedSeptember 30, 2021 related to the warrant liabilities issued in connection with the business combination consummated inAugust 2021 . No such costs were incurred during the three months endedSeptember 30, 2022 . Results of Operations
Comparison of the Nine Months Ended
The following table summarizes results of operations for the periods presented
(dollars in thousands):
Nine Months Ended September 30, $ %
2022 2021 Change Change
Operating expenses:
Research and
development $ 27,576 $ 29,284 $ (1,708 ) -6 %
General and
administrative 14,594 10,112 4,482 44 %
Total operating
expenses 42,170 39,396 2,774 7 %
Loss from operations (42,170 ) (39,396 ) (2,774 ) 7 %
Interest income 307 30 277 923 %
Other income
(expense), net 6,634 (328 ) 6,962 *
Net loss $ (35,229 ) $ (39,694 ) $ 4,465 -11 %
*Percentage is not meaningful
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--------------------------------------------------------------------------------Research and Development Expenses
The following table summarizes research and development expenses for the periods presented (dollars in thousands):
Nine Months Ended September 30, $ %
2022 2021 Change Change
SZN-1326 $ 7,914 $ 11,613 $ (3,699 ) -32 %
SZN-043 9,410 7,382 2,028 27 %
Discovery and preclinical
stage programs 10,252 10,289 (37 ) 0 %
Total research and
development expenses $ 27,576 $ 29,284 $ (1,708 ) -6 %
The decrease of $3.7 million , or 32%, in SZN-1326 program expenses for the nine
months ended September 30, 2022 , compared to the nine months ended September 30,
2021 , is primarily due to the completion of manufacturing drug substance. The
increase of $2.0 million , or 27%, in SZN-043 program expenses for the nine
months ended September 30, 2022 , compared to the nine months ended September 30,
2021 , is primarily due to the higher personnel costs and stock-based
compensation expense allocated to the program. The preclinical, discovery and
other research and development costs for the nine months ended September 30,
2022 is close to those for the nine months ended September 30, 2021 .
General and Administrative Expenses
The increase of$4.5 million , or 44%, in general and administrative expenses for the nine months endedSeptember 30, 2022 , compared to the nine months endedSeptember 30, 2021 , is primarily attributable to a$3.1 million increase in personnel-related expenses due to an increase in headcount and options granted to our employees, a$1.2 million increase in corporate insurance, a$0.4 million increase in other expenses such as software licenses and computer supplies primarily due to the growth of operations and a$0.2 million increase in recruiting costs, offset by a$0.4 million decrease in professional and consulting service fees related to the potential initial public offering prior to our decision to commence the business combination withConsonance-HFW Acquisition Corp.
Interest Income
The increase of$0.2 million , or 923%, in interest income for the nine months endedSeptember 30, 2022 , compared to the nine months endedSeptember 30, 2021 , is primarily due to an increase in investments in money market funds and marketable securities and an increase in interest rates on our investments in money market funds and marketable securities.
Other Income (Expense), Net
The increase of$7.0 million in other income (expense), net, for the nine months endedSeptember 30, 2022 , compared to the nine months endedSeptember 30, 2021 , is primarily attributable to a$6.9 million increase in gain on the change in fair value of warrant liabilities and a$0.4 million decrease in expenses related to the warrant liabilities issued in connection with the business combination consummated inAugust 2021 , offset by a$0.3 million increase in expenses related to the commitment shares issued to Lincoln Park under the Equity Purchase Agreement inFebruary 2022 .
Liquidity and Capital Resources
Since inception, we have incurred significant net operating losses and negative cash flows from operations. Historically, we financed our operations primarily from the sales of our redeemable convertible preferred stock. As ofSeptember 30, 2022 , we had cash, cash equivalents and marketable securities of$78.4 million and an accumulated deficit of$177.9 million . We entered into a purchase agreement and a registration rights agreement with Lincoln Park inFebruary 2022 , pursuant to which Lincoln Park is obligated to purchase up to$50.0 million of our common stock from time to time at our sole discretion over a 36-month period commencing onApril 27, 2022 . To date we have not sold any shares of common stock under the purchase agreement. We executed the CLA inOctober 2022 and will receive a non-refundable upfront payment of$12.5 million under the CLA.$10.5 million of the upfront payment is expected to be received in the fourth quarter of 2022 and the remaining$2.0 million is expected to be received during the first six months of 2023. In addition, we will be eligible to receive success-based milestone payments up to$587 million plus mid-single digit to low-double digit royalties on net sales of the licensed products. We believe, based on our current operating plan, that our existing cash, cash equivalents, and marketable securities, plus the gross cash proceeds of$12.5 million that will be received pertaining to the CLA, before deducting the fees of$1.3 million to be paid toStanford and The Regents of theUniversity of California , will be sufficient to fund our operations for at least the next 12 months from the date of this Report. However, if the anticipated operating results are not achieved in future periods, we could use our capital resources sooner than expected which may result in the need to reduce future planned expenditures and/or raise additional capital to continue to fund the operations. 24 --------------------------------------------------------------------------------
Future Funding Requirements
To date, we have only generated revenue from our partnership with BI in connection with the CLA executed inOctober 2022 . We have not generated and do not expect to generate any revenue from sale of our products unless and until we obtain regulatory approval and commercialize one of our product candidates, and we do not know when, or if, that will occur. We will continue to require substantial additional capital to develop our products candidates and fund operations for the foreseeable future. Since our inception in 2015, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, developing and optimizing our Wnt therapeutics platform, identifying potential product candidates, undertaking research and development activities, engaging in strategic transactions, establishing and enhancing our intellectual property portfolio, and providing general and administrative support for these operations. We expect our expenses to continue to increase in connection with our ongoing activities as we continue to advance our product candidates through clinical development and regulatory approval. In addition, we will continue to incur additional costs associated with operating as a public company. We expect that our cash, cash equivalents and marketable securities, will provide the capital needed to fund our operations in the short-term. We expect that in the long-term we will need to raise additional capital through public or private equity offerings, debt financings or other capital sources, including government grants, potential collaborations with other companies or other strategic transactions as we do not expect sales of common stock to Lincoln Park and revenue derived from the CLA to be sufficient to provide all necessary financing until we are able to generate revenue on our own. There can be no assurance that sufficient funds will be available to us at all or on attractive terms when needed from these sources. If we are unable to obtain additional funding from these or other sources when needed, it may be necessary to significantly reduce expenses through reductions in staff and delaying, scaling back operations, or stopping certain research and development programs. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
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the scope, rate of progress, results and costs of researching and developing our lead product candidates or any future product candidates, conducting preclinical and clinical studies, in particular our current ongoing clinical studies of SZN-1326 and SZN-043;
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the outcome, costs, and timing involved in obtaining regulatory approvals for our lead product candidates or our other product candidates;
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the number and scope of clinical programs we decide to pursue;
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the cost of acquiring, licensing, or investing in product candidates and technologies;
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the costs associated with securing and establishing commercialization;
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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;
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our need and ability to retain key management and hire scientific, technical, business, and medical personnel;
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the effect of competing products and product candidates and other market developments;
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the timing, receipt, and amount of sales from SZN-1326, SZN-043 and any other product candidates, if approved;
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our need to implement additional internal systems and infrastructure, including financial and reporting systems;
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the economic and other terms, timing of, and success of any collaboration, licensing, or other arrangements which we may enter in the future; and
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the effects of the disruptions to and volatility in the credit and financial markets in theU.S. and worldwide from the conflict betweenRussia andUkraine and the COVID-19 pandemic. In addition, any future financing through sales of equity securities, including sales of common stock to Lincoln Park, will cause our stockholders to 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. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others our rights to any of our current or future product candidates or discovery programs in certain territories or indications that we would prefer to develop and commercialize ourselves. 25
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