You should read the following discussion and analysis of our financial condition
and results of operations together with our consolidated financial statements
and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q
and our audited financial statements and related notes for the year ended
Overview
We are a clinical-stage biopharmaceutical company engaged in the discovery and development of novel immunotherapeutics and vaccines for the treatment and prevention of infectious diseases and cancer. We use our proprietary platform to develop product candidates that stimulate powerful, targeted immune responses against pathogens and tumor cells. We design our product candidates to stimulate immune responses that are robust, highly specific, and are differentiated by the magnitude of the T cell populations induced, which exhibit critical functionality and durability. We are focused on applying our platform capabilities and the expertise of our team to address significant unmet medical needs in two settings-the therapeutic setting, for the treatment of chronic infectious diseases and cancer, and the prophylactic setting, for the prevention of infectious diseases, based on our platform's ability to respond rapidly to epidemic and pandemic threats.
We have a broad pipeline of both clinical and preclinical stage therapeutic and
prophylactic programs. Our current therapeutic programs include VTP-300 for the
treatment of chronic hepatitis B infection, or CHB, VTP-200 for the treatment of
human papilloma virus infection, or HPV, VTP-850 for the treatment of prostate
cancer and VTP-600 for the treatment of non-small cell lung cancer, or NSCLC.
Our current prophylactic programs include VTP-400 for the prevention of herpes
zoster, or shingles, VTP-500 for the prevention of
On
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We have incurred net losses each year since inception. For the three and six
months ended
At this time, we cannot reasonably estimate, or know the nature, timing and estimated costs of all of the efforts that will be necessary to complete the development of any of our product candidates that we develop through our programs. We are also unable to predict when, if ever, material net cash inflows will commence from sales of product candidates we develop, if at all. This is due to the numerous risks and uncertainties associated with developing product candidates to approval and commercialization, including the uncertainty of:
? successful completion of preclinical studies and clinical trials;
? sufficiency of our financial and other resources to complete the necessary
preclinical studies and clinical trials;
? acceptance of investigational new drug applications, or INDs, for our planned
clinical trials or future clinical trials;
? successful enrollment and completion of clinical trials;
data from our clinical program supporting approvable and commercially
? acceptable risk/benefit profiles for our product candidates in the intended
populations;
receipt and maintenance of necessary regulatory and marketing approvals from
? applicable regulatory authorities, in the light of the commercial environment
then existent;
? scale-up of our manufacturing processes and formulation of our product
candidates for later stages of development and commercial production;
establishing either our own manufacturing capabilities or satisfactory
? agreements with third-party manufacturers for clinical supply for later stages
of development and commercial manufacturing;
? entry into collaborations where appropriate to further the development of our
product candidates;
obtaining and maintaining intellectual property and trade secret protection or
? regulatory exclusivity for our product candidates as well as qualifying for,
maintaining, enforcing and defending such intellectual property rights and
claims;
? successfully launching or assisting with the launch of commercial sales of our
product candidates following approval;
? acceptance of each product's benefits and uses by patients, the medical
community and third-party payors following approval;
? the prevalence and severity of any adverse events experienced with our product
candidates in development;
? establishing and maintaining a continued acceptable safety profile of
the product candidates following approval;
? obtaining and maintaining healthcare coverage and adequate reimbursement from
third-party payors if necessary or desirable; and
? effectively competing with other therapies.
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A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and/or timing associated with the development of that product candidate or could
prevent continuation of that program being in the company's interests. For
example, if the FDA or another regulatory authority were to require us to
conduct clinical trials beyond those that we anticipate will be required for the
completion of clinical development of a product candidate, or if we experience
significant delays in our clinical trials due to patient enrollment or other
reasons, we might be required to expend significant additional financial
resources and time on the completion of clinical development. In some
circumstances, such as the emergence of a significantly more effective therapy
from a competitor, it may be appropriate to discontinue a product candidate
program. Including the net proceeds from our IPO, we expect that our cash
balance as of
Recent Developments
On
Despite challenges related to COVID-19 pandemic, the lead-in phase of HPV001, a
Phase 1/2 clinical trial of VTP-200, is now fully enrolled with 12 participants
screened and 9 dosed across multiple clinical trial sites in
Impact of the COVID-19 Pandemic
The spread of COVID-19, which we refer to as the COVID-19 pandemic, and the
policies and regulations implemented by governments in response to the COVID-19
pandemic have had a significant impact, both directly and indirectly, on the
global economy and our business and operations, including in particular the
interruption of our clinical trial activities and potential interruption to our
supply chain. Namely, the initiation of our Phase 1/2a clinical trial for
VTP-200 and our Phase 1 clinical trial for VTP-500, which are being conducted at
the
For our Phase 1 (HBV001) clinical trial for VTP-300, recruitment of patients
with Chronic Hepatitis B (CHB) in the
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If the disruption due to the COVID-19 pandemic continues, our planned future preclinical and clinical development for our other product candidates could also be delayed due to government orders and site policies as a result of the pandemic. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we have mandated that our non-laboratory based employees, such as clinical, manufacturing, finance, administrative, quality, regulatory and program managers continue their work outside of our offices and limited the number of staff in any given research and development laboratory at any time. Our increased reliance on personnel working from home may negatively impact productivity, increase the potential risks of data privacy or security breaches, or disrupt, delay, or otherwise adversely impact our business.
We are still assessing our business plans and the impact the COVID-19 pandemic may have on our ability to advance the development of our product candidates as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom we rely, or to raise financing to support the development of our ongoing product candidate development. No assurances can be given that this analysis will enable us to avoid part or all of any impact from the COVID-19 pandemic, including downturns in business sentiment generally or in our sector in particular. We cannot currently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties on whom we rely or with whom we conduct business were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and adversely impacted.
Components of Our Operating Results
Revenue
To date, we have not generated any revenue from product sales and do not expect
to do so in the near future, if at all. Our revenue to date has been derived
from a research grant from BARDA, a research, collaboration and license
agreement with
In
We determined that we have no further performance obligations under the terms of the OUI License Agreement Amendment, which comprised the transfer of intellectual property rights only. Accordingly, we plan to recognize these and any future amounts as revenue when received.
Operating Expenses
Our operating expenses since inception have consisted of research and development costs and general administrative costs.
Research and Development Expenses
Since our inception, we have focused significant resources on our research and development activities, including establishing and building on our adenovirus platform, further enhancing our in-licensed ChAdOx1, ChAdOx2 and MVA vectors, developing a new next-generation adenoviral vector, conducting preclinical studies, developing various manufacturing processes, and advancing clinical development of our programs including Phase 2 clinical trials for VTP-100, which we subsequently discontinued development of, as well as initiating the clinical trials for VTP-200 and VTP-300, and readying VTP-600 and VTP-850 for clinical trials. Research and development activities account for the major portion of our operating expenses. Research and development costs are expensed as incurred. These costs include:
? salaries, benefits and other related costs, including share-based compensation,
for personnel engaged in research and development functions;
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expenses incurred in connection with the development of our programs including
? preclinical studies and clinical trials of our product candidates, under
agreements with third parties, such as consultants, contractors, academic
institutions and CROs;
the cost of manufacturing drug products for use in preclinical development and
? clinical trials, including under agreements with third parties, such as CMOs,
consultants and contractors;
? laboratory costs;
? leased facility costs, equipment depreciation and other expenses, which include
direct and allocated expenses; and
? intellectual property costs incurred in connection with filing and prosecuting
patent applications as well as third-party license fees.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs in
our executive, finance, business development and other administrative functions.
Other general and administrative expenses include consulting fees and
professional service fees for auditing, tax and legal services, rent expenses
related to our offices, depreciation and other central non-research costs. We
expect our general and administrative expenses to continue to increase in the
future as we expand our operating activities and potentially prepare for
manufacturing and/or commercialization of our current and future product
candidates. These costs would normally increase as our headcount rises to allow
full support for our operations as a public company, including increased
expenses related to legal, accounting, regulatory and tax-related services
associated with maintaining compliance with requirements of the Nasdaq Global
Market and the
Other Income (Expense)
Change in Fair Value of Derivatives
We recognized a change in fair value in relation to the conversion and
redemption features embedded in the convertible loan notes in the condensed
consolidated statements of operations and comprehensive loss for the six months
ended
Loss on Extinguishment of Convertible Loan Notes
On
The conversion was accounted for as an extinguishment of the convertible loan notes. As a result, the 12,421 Series B preferred shares issued on conversion was recognized at the settlement-date fair value of the Series B shares and a loss was recognized in earnings for the difference between (1) the fair value of those shares and (2) the sum of the carrying amounts of the convertible loan notes and the bifurcated conversion and redemption feature liability.
Interest Expense
Interest expense results primarily from our convertible loan notes, which carry
a market rate of interest. These notes were issued between July and
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Research and Development Incentives
Research and development incentives contain payments we received from the
Critical Accounting Policies and Use of Estimates
This discussion and analysis of financial condition and results of operations is
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in
While our significant accounting policies are more fully described in Note 2 to
our annual consolidated financial statements for the year ended
Results of Operations
Comparison of the Three Months Ended
The following table sets forth the significant components of our results of operations (in thousands): Three Three months months ended June 30, ended June 30, 2021 2020 Change Revenue from Licenses, Grants & Services $ 35 $ 511 (476) Operating expenses: Research & development 4,509 3,877 672 General and administrative 12,371 970 12,033 Total operating expenses 16,880 4,847 11,451 Loss from operations (16,845) (4,336) (12,509) Other income (expense) Research and development incentives 875 679 196 Other (3) - (3) Total other (expense) income 872 679 193 Tax (expense)/benefit (12) - (12) Net loss$ (15,985) $ (3,657) (12,328) Revenue
For the three months ended
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Research and Development Expenses
The following table summarizes our research and development expenses for the
three months ended
Three Three months months ended June 30, ended June 30, 2021 2020 Change Direct research and development expenses by program: VTP-200 HPV 728 785 (57) VTP-300 HBV 1,391 1,006 385 VTP-600 NSCLC 171 281 (110) VTP-800/850 Prostate cancer 335 - 335 Other and earlier stage programs 295 745 (450) Internal research and development expenses: Personnel-related (including share-based compensation) 1,472 766 706 Facility related 43 53 (10) Other internal costs 67 240 (173) Total research and development expense $ 4,509 $ 3,877 632
Our research and development expenses for the three months ended
General and Administrative Expenses
General and administrative expenses for the three months ended
Research and Development Incentives
For the three months ended
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Comparison of the Six Months Ended
The following table sets forth the significant components of our results of operations (in thousands): Six months Six months ended June ended June 30, 2021 30, 2020 Change Revenue from Licenses, Grants & Services Operating expenses: $ 250$ 1,216 (966) Research & development 9,119 8,119 1,000 General and administrative 14,148 2,082 12,066 Total operating expenses 23,267 10,201 13,066 Loss from operations (23,017) (8,985) (14,032) Other income (expense) Change in fair value of derivatives 5,994 - 5,994 Unrealized exchange gain on convertible loan notes 209 - 209 Loss on extinguishment of convertible loan notes (13,789) - (13,789) Interest income 2 - 2 Interest expense (2,650) - (2,650) Research and development incentives 1,830 1,377 453 Others (3) - (3) Total other (expenses) income (8,407) 1,377 (9,783) Tax benefit 53 - 53 Net loss$ (31,195) $ (7,608) (23,587) Revenue
For the six months ended
Research and Development Expenses
The following table summarizes our research and development expenses for the six
months ended
Six months Six months ended June ended June 30, 2021 30, 2020 Change
Direct research and development expenses by program: VTP-200 HPV
1,406 1,621 (215) VTP-300 HBV 3,077 1,821 1,256 VTP-600 NSCLC 585 891 (306) VTP-800/850 Prostate cancer 708 - 708 Other and earlier stage programs 733 1,671 (938) Internal research and development expenses: Personnel-related (including share-based compensation) 2,445 1,649 796 Facility related 86 112 (26) Other internal costs 78 354 (276) Total research and development expense$ 9,119 $ 8,119 1,000 24 Table of Contents
Our research and development expenses for the six months ended
General and Administrative Expenses
General and administrative expenses for the six months ended
Change in fair value of derivatives
For the six months ended
Loss on extinguishment of convertible loan notes
For the six months ended
Interest Expense
For the six months ended
Research and Development Incentives
For the six months ended
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have funded our operations primarily through private and
public placements of our ordinary and preferred shares as well as from grants
and research incentives, various agreements with public funding agencies, and
most recently from an upfront payment from OUI in connection with the OUI
License Agreement Amendment and the issuance of convertible loan notes. Through
? In
issuance of our seed round of ordinary shares.
? Between
million from the issuance of our Series A Shares.
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? Between
from the issuance of convertible loan notes.
? In
our Series B shares.
? In
offering of our ordinary shares on NASDAQ.
We do not expect positive cash flows from operations in the foreseeable future, if at all. Historically, we have incurred operating losses as a result of ongoing efforts to develop our heterologous ChAdOx1-MVA prime-boost immunotherapy platform and our product candidates, including conducting ongoing research and development, preclinical studies, clinical trials, providing general and administrative support for these operations and developing our intellectual property portfolio. We expect to continue to incur net operating losses for at least the next few years as we progress clinical development, seek regulatory approval, prepare for and, if approved, proceed to manufacture and commercialization of our most advanced product candidates. Operating profits may arrive earlier if programs are licensed or sold to third parties before final approval, but this cannot be guaranteed.
Cash Flows
The following table sets forth a summary of the primary sources and uses of cash (in thousands) for each period presented:
Six months Six months ended June ended June 30, 2021 30, 2020 Net cash used in operating activities$ (22,593) $ (5,271) Net cash used in investing activities (594) (68) Net cash provided by financing activities 224,120 - Effect of exchange rates on cash and cash equivalents (580) (817)
Net increase (decrease) in cash and cash equivalents
Cash Used in Operating Activities
During the six months ended
During the six months ended
Net Cash Provided by Financing Activities
During the six months ended
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To date, we have devoted substantially all of our resources to organizing and
staffing our company, business planning, raising capital, undertaking
preclinical studies and conducting clinical trials of our product candidates. As
a result, we are not yet profitable and have incurred losses in each period
since our inception in 2016. As of
? pursue the clinical and preclinical development of our current product
candidates;
? use our technologies to advance additional product candidates into preclinical
and clinical development;
? seek marketing authorizations for product candidates that successfully complete
clinical trials, if any;
? attract, hire and retain additional clinical, regulatory, quality control and
other scientific personnel;
establish our manufacturing capabilities through third parties or by ourselves ? and scale-up manufacturing to provide adequate supply for clinical trials and
commercialization, including any manufacturing finishing and logistics
personnel;
expand our operational, financial and management systems and increase personnel ? appropriately, including personnel to support our manufacturing and
commercialization efforts and our operations as a public company;
? maintain, expand, enforce, and protect our intellectual property portfolio as
appropriate;
establish sales, marketing, medical affairs and distribution teams and ? infrastructure to commercialize any products for which we may obtain marketing
approval and intend to commercialize on our own or jointly;
? acquire or in-license other companies, product candidates and technologies; and
incur additional legal, accounting and other expenses in operating our ? business, including office expansion and the additional costs associated with
operating as a public company.
Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditure to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other factors that may adversely affect our business. The size of our future net losses will depend on the rate of future growth of our expenses combined with our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our shareholders' equity and working capital unless and until eliminated by revenue growth.
We may require substantial additional financing in the future to meet any such unanticipated factors and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.
Since our foundation, we have invested a significant portion of our efforts and financial resources in research and development activities for our ChAdOx1, ChAdOx2 and MVA technologies and our product candidates derived from these technologies. Preclinical studies and especially clinical trials and additional research and development activities will require substantial funds to complete. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of our current product candidates and programs as well as any future product candidates we may elect to pursue, as well as the gradual gaining of control over our required manufacturing capabilities and other corporate functions. These expenditures will include costs associated with conducting preclinical studies and clinical trials, obtaining regulatory approvals, and potentially in-house manufacturing and supply, as well as marketing and selling any products approved for sale. In addition, other unanticipated costs may arise as outlined above. Because the outcome of any preclinical study or clinical trial is uncertain and the rate of change of third-party costs is also unpredictable, we cannot reasonably estimate now the actual amounts which will be necessary to complete the development and commercialization of our current or future product candidates successfully.
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Our future capital requirements may depend on many factors, including:
the scope, progress, results and costs of researching and developing our ? current and future product candidates and programs, and of conducting
preclinical studies and clinical trials;
the number and development requirements of other product candidates that we may ? pursue, and of other indications for our current product candidates that we may
pursue;
the stability, scale and yield of future manufacturing processes as we scale-up ? production and formulation of our product candidates either internally or
externally for later stages of development and commercialization;
the timing of, success achieved and the costs involved in obtaining regulatory
and marketing approvals and developing our ability to establish license or sale ? transactions and/or sales and marketing capabilities, if any, for our current
and future product candidates if clinical trials and approval processes are
successful;
? the success of our collaborations with CanSino, CRUK and the
and any future collaboration partners;
? the success of OUI's licensed product candidate with AstraZeneca;
? our ability to establish and maintain collaborations, strategic licensing or
other arrangements and the financial terms of such agreements;
the cost to the company of commercialization activities for our current and ? future product candidates that we may take on, whether alone or with a
collaborator;
the costs involved in preparing, filing, prosecuting, maintaining, expanding, ? defending and enforcing patent and other intellectual property claims,
including litigation costs and the outcome of such litigation;
? the timing, receipt and amount of sales of, or royalties or other income from,
our future products, if any; and
? the emergence and success or otherwise of competing oncology and infectious
disease therapies and other market developments.
A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate, in either direction. Furthermore, our operating plans may change in the future owing to research outcomes or other opportunities, and we may need additional funds to meet operational needs and capital requirements associated with such altered operating plans.
Based on our research and development plans, we expect that the net proceeds from our IPO, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into 2024. These estimates are based on assumptions that may prove to be wrong, and we could use our available capital resources more quickly than we expect.
Emerging Growth Company Status
We are an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an emerging growth company, we may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We will remain an emerging growth company until the earliest of (1) the last day
of the fiscal year (a) following the fifth anniversary of the date of the
closing of our IPO, (b) in which we have total annual gross revenue of at least
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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 in the rules and regulations of the
Recent Accounting Pronouncements
A description of recently issued accounting pronouncement that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report.
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