VACCINEXPAR You should read the following discussion and analysis of financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled "Special Note Regarding Forward Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled "Risk Factors" under Part I, Item 1A in this Annual Report on Form 10-K.
Company Overview
We are a clinical-stage biotechnology company engaged in the discovery and development of targeted biotherapeutics to treat serious diseases and conditions with unmet medical needs, including cancer, neurodegenerative diseases, and autoimmune disorders. We believe we are the leader in the field of semaphorin 4D, or SEMA4D, biology and that we are the only company targeting SEMA4D as a potential treatment for cancer, neurodegenerative diseases, or autoimmune disorders. SEMA4D is an extracellular signaling molecule that regulates the migration of immune and inflammatory cells to sites of injury, cancer, or infection. We are leveraging our SEMA4D antibody platform and our extensive knowledge of SEMA4D biology to develop our lead product candidate, pepinemab, an antibody that we believe utilizes novel mechanisms of action. We are focused on developing pepinemab for the treatment of head and neck cancer, or HNSCC, non-small cell lung cancer, or NSCLC, Huntington's disease, and Alzheimer's disease. Additionally, third party investigators are studying pepinemab in clinical trials in breast cancer, pancreatic cancer, as well as in "window of opportunity" studies in other indications, including HNSCC and melanoma. We have developed multiple proprietary platform technologies and are developing product candidates to address serious diseases or conditions that have a substantial impact on day-to-day functioning and for which treatment is not addressed adequately by available therapies. We employ our proprietary platform technologies, including through our work with our academic collaborators, to identify potential product candidates for sustained expansion of our internal product pipeline and to facilitate strategic development and commercial partnerships.
Our lead platform technologies include our SEMA4D antibody platform and our ActivMAb antibody discovery platform. Our lead product candidate, pepinemab, is currently in clinical development for the treatment of HNSCC, pancreatic and breast cancer, and Alzheimer's disease, through our efforts or through investigator-sponsored trials, or ISTs. Our additional product candidate VX5 is in an earlier stage of development and was selected using our ActivMAb platform. We believe our multiple platform technologies position us well for continued pipeline expansion and partnership opportunities going forward.
We have generated a limited amount of service revenue from collaboration
agreements but have not generated any revenue from product sales to date. We
continue to incur significant development and other expenses related to our
ongoing operations. As a result, we are not and have never been profitable and
have incurred losses in each period since our inception, resulting in
substantial doubt in our ability to continue as a going concern. We reported a
net loss of
Our recurring net losses and negative cash flows from operations raised
substantial doubt regarding our ability to continue as a going concern within
one year after the issuance of our consolidated financial statements for the
year ended
Equity Financings
During the year ended
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On
In January and
Our cash and cash equivalents were
Debt Financings
In
In January and
In addition, on
Grant Revenues
During the year ended
Our strategic plans and certain of our clinical trial operations have been adversely impacted by the COVID-19 pandemic, and the measures imposed to mitigate the spread of COVID-19, including unprecedented restrictions on business operations, travel, and gatherings, resulting in a global economic downturn and other adverse economic and societal impacts, and our ability to raise additional capital necessary to continue as a going concern. We had previously anticipated initiating a trial of pepinemab in Alzheimer's disease in mid-2020, but the initial enrollment date is now delayed until the second half of 2022. In addition, as discussed above, to mitigate the impacts of the COVID-19 pandemic, including impacts on the Company's ability to raise capital and to maintain its personnel, the Company applied for and received the PPP Loan. We may experience further disruptions as a result of the COVID-19 pandemic that could adversely impact our business, including disruption of research and clinical development activities, plans for release of data, manufacturing, supply, and interactions with regulators and other third parties, and further difficulties in raising additional capital. The extent to which the COVID-19 pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
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Financial Overview
Revenue
To date, we have not generated any revenue from product sales. During the years
ended
Our ability to generate revenue and become profitable depends on our ability to successfully obtain marketing approval of and commercialize our product candidates. We do not expect to generate product revenue in the foreseeable future as we continue our development of, and seek regulatory approvals for, our product candidates, and potentially commercialize approved products, if any.
Operating Expenses
Research and Development. Research and development expenses consist primarily of costs for our clinical trials and activities related to regulatory filings, employee compensation-related costs, supply expenses, equipment depreciation and amortization, consulting and other miscellaneous costs. The following table sets forth the components of our research and development expenses and the amount as a percentage of total research and development expenses for the periods indicated.
Year Ended December 31,
2021 2020
(in thousands) % (in thousands) %
Clinical trial costs $ 10,302 60 % $ 13,570 63 %
Wages, benefits, and related costs 4,199 25 % 4,413 20 %
Preclinical supplies and equipment
depreciation 1,776 10 % 1,926 9 %
Consulting, non-clinical trial
services, and other 883 5 % 1,640 8 %
Total research and development
expenses$ 17,160 $ 21,549
Our current research and development activities primarily relate to the clinical development in the following indications:
• Huntington's Disease. We evaluated pepinemab for the treatment of HD in
our Phase 2 SIGNAL trial. Topline data for this trial, consisting of 265
subjects, was reported in late September 2020 . Although the study did not
meet its prespecified primary endpoints, it provided important new
information, including evidence of cognitive benefit and a reduction in
brain atrophy in patients with manifest disease symptoms. An improved
study design would focus on patients with early signs of cognitive or
functional deficits since they appeared to derive the greatest treatment
benefit. The Company is evaluating its development strategy in terms of
business opportunity and other near-term clinical activities.
• Cancer Studies. We and others have shown that SEMA4D, the target of
pepinemab, is highly expressed in head and neck cancer where it impedes
recruitment and activation of cytotoxic T cells that can attack the tumor
while also inducing differentiation of myeloid derived suppressor cells
that inhibit any remaining tumoricidal immune activity. Head and neck
cancer is, therefore, a cancer in which immunotherapy with pepinemab in
combination with a checkpoint inhibitor such as Keytruda could be uniquely
effective. We have entered into a collaboration with Merck, who is
supplying Keytruda, for first-line treatment of up to 65 head and neck
cancer patients. Pepinemab is also being evaluated by third parties in
investigator-sponsored trials, or ISTs, for pancreatic and breast cancer,
and in multiple "window of opportunity" studies in additional cancer
indications.
• Alzheimer's Disease. Given the impact of the COVID-19 pandemic in 2020 and
2021, we delayed plans to initiate a clinical trial of pepinemab in
Alzheimer's disease until mid-2021. We have now initiated a randomized,
double-blind, phase 1/2a study in 40 patients with mild AD.
We expense research and development costs as incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment. We do not allocate employee related costs, depreciation, rental and other indirect costs to specific research and development programs because these costs are deployed across multiple of our product programs under research and development.
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Results of Operations
The following table set forth our results of operations for the periods
presented (in thousands):
Year Ended December 31,
2021 2020
Revenue $ 900 $ 625
Costs and expenses:
Cost of revenue - 2
Research and development 17,160 21,549
General and administrative 6,230 7,405
Total costs and expenses 23,390 28,956
Loss from operations (22,490 ) (28,331 )
Interest expense (809 ) (489 )
Gain on forgiveness of PPP loan 876 -
Other (expense) income, net 43 (31 )
Loss before provision for income taxes (22,380 ) (28,851 )
Provision for income taxes - -
Net loss (22,380 ) (28,851 )
Net loss attributable to noncontrolling interests - -
Net loss attributable to Vaccinex, Inc. $ (22,380 ) $ (28,851 ) Comparison of the Years Ended
Operating Expenses
Year Ended December 31,
2021 2020 $ Change % Change
(in thousands)
Research and development $ 17,160 $ 21,549 $ (4,389 ) (20 )%
General and administrative 6,230 7,405 (1,175 ) (16 )%
Total operating expenses $ 23,390 $ 28,954 $ (5,564 ) (19 )%
Research and Development. Research and development expenses in the year ended
General and Administrative. General and administrative expenses in the year
ended
Liquidity and Capital Resources
To date, we have not generated any revenue from product sales. Since our
inception in 2001, we have relied on public and private sales of equity and debt
financing to fund our operations, in addition to capital contributions from
noncontrolling interests and limited service revenue from collaboration
agreements, and to some degree, grant money. We are not a party to any material
off-balance sheet arrangements as defined in the rules and regulations of the
In
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proceeds of
In
In
In
In
Operating Capital Requirements
Our primary uses of capital are, and we expect will continue to be, compensation
and related expenses, third-party research services and amounts due to vendors
for research supplies. As of
Since our inception in 2001, we have incurred significant net losses and
negative cash flows from operations. For the years ended
Our recurring net losses and negative cash flows from operations, as well as
forecast of continued losses and negative cash flows from operations, raised
substantial doubt regarding our ability to continue as a going concern within
one year after the issuance of our consolidated financial statements for the
year ended
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Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates or cease operations. If we raise additional funds through the issuance of additional debt or equity securities it could result in dilution to our existing stockholders, increased fixed payment obligations and these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.
Financing strategies we may pursue include, but are not limited to, the public or private sale of equity, debt financings or funds from other capital sources, such as government or grant funding, collaborations, strategic alliances or licensing arrangements with third parties. There can be no assurances additional capital will be available to secure additional financing, or if available, that it will be sufficient to meet our needs on favorable terms. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates. If we raise additional funds through the public or private sale of equity or debt financings, it could result in dilution to our existing stockholders or increased fixed payment obligations and these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Year Ended December 31,
2021 2020
(in thousands)
Cash used in operating activities
(32 ) (290 )
Cash provided by financing activities 23,323 36,757
Operating Activities. We have historically experienced negative cash flows as we have developed our product candidates and continued to expand our business. Our net cash used in operating activities primarily results from our net loss adjusted for non-cash expenses and changes in working capital components as we have continued our research and development and is influenced by the timing of cash payments for research related expenses. Our primary uses of cash from operating activities are compensation and related-expenses, employee-related expenditures, third-party research services and amounts due to vendors for research supplies. Our cash flows from operating activities will continue to be affected principally by the extent to which we increase spending on personnel, research and development and other operating activities as our business grows.
During the year ended
During the year ended
Investing Activities. Cash used in investing activities during the year ended
Financing Activities. During the year ended
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JOBS Act Accounting Election
We are an "emerging growth company" within the meaning of the Jumpstart Our Business Startups Act, or the JOBS Act. Section 107(b) of the JOBS Act provides that an emerging growth company can leverage the extended transition period, provided in Section 102(b) of the JOBS Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our consolidated financial statements may not be comparable to companies that comply with public company effective dates of such accounting standards.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Research and Development Expenses
Research and development expenses represent costs associated with developing our proprietary drug candidates, our collaboration agreements for such drugs, and our ongoing clinical studies.
Clinical trial costs are a significant component of our research and development expenses. We have a history of contracting with third parties that perform various clinical trial activities on our behalf in the ongoing development of our drug candidates. Expenses related to clinical trials are accrued based on our estimates of the actual services performed by the third parties for the respective period. If the contracted amounts are revised or the scope of a contract is revised, we will modify the accruals accordingly on a prospective basis and will do so in the period in which the facts that give rise to the revision become reasonably certain.
Recent Accounting Pronouncements Not Yet Adopted
For a discussion of recent accounting pronouncements that we have not yet adopted, see Note 2 to our consolidated financial statements.
Recently Adopted Accounting Pronouncements
For a discussion of accounting pronouncements that we have recently adopted, see Note 2 to our consolidated financial statements.
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