VAXART, INC.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the other sections of this Annual
Report on Form 10-K, including our consolidated financial statements and notes
thereto included elsewhere. This discussion contains a number of forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to these differences include those
discussed below and elsewhere in the Annual Report on Form 10-K, particularly in
Item 1A - "Risk Factors." The forward-looking statements made in this Annual
Report on Form 10-K are made only as of the date hereof.
Company Overview
We are a clinical-stage biotechnology company primarily focused on the
development of oral recombinant vaccines based on our Vector-Adjuvant-Antigen
Standardized Technology ("VAAST") proprietary oral vaccine platform. Our oral
vaccines are designed to generate broad and durable immune responses that may
protect against a wide range of infectious diseases and may be useful for the
treatment of chronic viral infections and cancer. Our investigational vaccines
are administered using a room temperature-stable tablet, rather than by
injection.
We are developing prophylactic vaccine candidates that target a range of
infectious diseases, including SARS-CoV-2 (the virus that causes coronavirus
disease 2019 ("COVID-19")), norovirus (a widespread cause of acute
gastro-intestinal enteritis), seasonal influenza and respiratory syncytial virus
("RSV") (a common cause of respiratory tract infections). We have completed
human dosing for our Phase 1 clinical trial for our SARS CoV-2 vaccine
candidate that commenced in October 2020 and met its primary and secondary
endpoints. Three Phase 1 human studies for our norovirus vaccine candidate have
been completed, including a study with a bivalent norovirus vaccine which, as we
disclosed in September 2019 , met its primary and secondary endpoints. Our
monovalent H1 influenza vaccine protected participants against H1 influenza
infection in a Phase 2 challenge study. In addition, we are developing our first
therapeutic vaccine targeting cervical cancer and dysplasia caused by human
papillomavirus ("HPV").
As we previously disclosed, we are no longer prioritizing internal manufacturing
and plan to rely primarily on third party manufacturers for the current Good
Manufacturing Practice ("cGMP") manufacturing of our candidate vaccines. In
addition, we are focusing our efforts on partnering opportunities utilizing the
vaccine programs currently in our pipeline, including the bivalent norovirus
vaccine program, our seasonal flu vaccine, and the Universal Influenza vaccine
collaboration with Janssen Vaccines & Prevention B.V . Finally, we are focusing
on the development of a coronavirus vaccine candidate utilizing our proprietary
oral vaccine platform. Pending licensing, partnering or collaboration
agreements, our seasonal influenza, RSV and HPV programs are currently on hold.
Through our merger with Aviragen Therapeutics, Inc. , or Aviragen, we acquired
two royalty-earning products, Relenza and Inavir. We also acquired three Phase 2
clinical stage antiviral compounds, which we have discontinued.
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Table of Contents Merger with AviragenVaxart Biosciences, Inc. was originally incorporated inCalifornia under the nameWest Coast Biologicals, Inc. inMarch 2004 and changed its name toVaxart, Inc. ("Private Vaxart") inJuly 2007 , when it reincorporated in the state ofDelaware . OnFebruary 13, 2018 , Private Vaxart completed a reverse merger (the "Merger") withAviragen Therapeutics, Inc. ("Aviragen"), pursuant to which Private Vaxart survived as a wholly owned subsidiary of Aviragen. Under the terms of the Merger, Aviragen changed its name toVaxart, Inc. and Private Vaxart changed its name toVaxart Biosciences, Inc. Immediately prior to the Merger, all PrivateVaxart's convertible promissory notes and convertible preferred stock were converted into common stock, following which each share of common stock was converted into approximately 0.22148 shares of common stock. Immediately following the completion of the Merger, we effected a reverse stock split at a ratio of one new share for every eleven shares of our common stock outstanding, or the Reverse Stock Split. All share, equity security and per share amounts are presented to give retroactive effect to the Reverse Stock Split. Immediately after the Merger and the Reverse Stock Split there were approximately 7.1 million shares of common stock outstanding. In addition, immediately after the Merger, Private Vaxart's stockholders, warrantholders and optionholders owned approximately 51% of the common stock of the combined company and the stockholders and optionholders of Aviragen immediately prior to the Merger owned approximately 49% of the common stock of the combined company (on a fully diluted basis).
Financial Operations Overview
Revenue
Revenue from Customer Service Contracts
We have been earning revenue from a fixed price service contract, as amended,
for a total of
Revenue from Government Contract
The government contract with theDepartment of Health and Human Services ,Office of Biomedical Advanced Research and Development Authority ("HHS BARDA"), as modified, was a cost-plus-fixed-fee contract, under which we were reimbursed for allowable direct contract costs plus allowable indirect costs and a fixed-fee totaling$15.7 million fromSeptember 2015 throughSeptember 30, 2018 . Activities were completed in 2018 and no future revenue is expected from this contract. Royalty Revenue We earn royalty revenue on sales of Inavir and, until the patent expired, earned royalty revenue on sales of Relenza (both treatments for influenza) through our licensees Daiichi Sankyo Company, Limited and GlaxoSmithKline, plc, respectively, under royalty agreements with expiry dates inDecember 2029 andJuly 2019 , respectively, based on fixed percentages of net sales of these drugs.
Non-Cash Royalty Revenue Related to Sale of Future Royalties
InApril 2016 , Aviragen sold certain royalty rights related to Inavir in the Japanese market for$20.0 million toHealthCare Royalty Partners III, L.P. ("HCRP"). We pay HCRP the first$3 million plus 15% of the next$1 million of royalties earned in annual periods ending onMarch 31 . At the time of the Merger, the estimated future benefit to HCRP was remeasured at fair value and was estimated to be$15.9 million , which we account for as a liability and amortize using the effective interest method over the remaining estimated life of the arrangement. Even though we do not retain the related royalties under the transaction, as the amounts are remitted to HCRP, we will continue to record revenue related to these royalties until the amount of the associated liability and related interest is fully amortized.
Research and Development Expenses
Research and development expenses represent costs incurred to conduct research, including the development of our tablet vaccine platform, and the manufacturing, preclinical and clinical development activities of our tablet vaccine candidates. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
? employee-related expenses, which include salaries, benefits and stock-based
compensation;
? expenses incurred under agreements with contract research
organizations ("CROs"), that conduct clinical trials on our behalf;
? expenses incurred under agreements with contract manufacturing organizations
("CMOs"), that manufacture product used in the clinical trials;
? manufacturing materials, analytical and release testing services required to
produce vaccine candidates used primarily in clinical trials;
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? process development expenses incurred internally and externally to improve the
efficiency and yield of the bulk vaccine and tablet manufacturing activities;
? laboratory supplies and vendor expenses related to preclinical research
activities;
? consultant expenses for services supporting our clinical, regulatory and
manufacturing activities; and
? facilities, depreciation and allocated overhead expenses.
We do not allocate our internal expenses to specific programs. Our employees and
other internal resources are not directly tied to any one research program and
are typically deployed across multiple projects. Internal research and
development expenses are presented as one total.
We incur significant external costs for manufacturing our tablet vaccine candidates, and for CROs that conduct clinical trials on our behalf. We capture these expenses for each vaccine program. We do not allocate external costs incurred on preclinical research or process development to specific programs.
The following table shows our period-over-period research and development
expenses, identifying external costs that were incurred in each of our vaccine
programs and, separately, on preclinical research and process development (in
thousands):
Year Ended December 31,
2020 2019 2018
External program costs:
COVID-19 program $ 6,659 $ - $ -
Norovirus program 549 3,765 2,578
RSV and HPV programs - 21 53
Teslexivir and vapendavir programs 7 63 1,902
Influenza program, funded by BARDA - -
749
Preclinical research and process development 1,899 807
285
Total external costs 9,114 4,656 5,567
Internal costs 10,749 9,884 11,708
$ 19,863 $ 14,540 $ 17,275
We expect that research and development expenses will increase in 2021 and
beyond as we advance our tablet vaccine candidates into and through clinical
trials, pursue regulatory approval of our tablet vaccine candidates and prepare
for a possible commercial launch, all of which will also require a significant
investment in manufacturing and inventory related costs. To the extent that we
enter into licensing, partnering or collaboration agreements, a significant
portion of such costs may be borne by third parties.
The process of conducting clinical trials necessary to obtain regulatory
approval is costly and time consuming. We may never succeed in achieving
marketing approval for our tablet vaccine candidates. The probability of
successful commercialization of our tablet vaccine candidates may be affected by
numerous factors, including clinical data obtained in future trials,
competition, manufacturing capability and commercial viability. As a result, we
are unable to determine the duration and completion costs of our research and
development projects or when and to what extent we will generate revenue from
the commercialization and sale of any of our tablet vaccine candidates.
General and Administrative Expense
General and administrative expenses consist of personnel costs, allocated
expenses and expenses for outside professional services, including legal, audit,
accounting, public relations, market research and other consulting services.
Personnel costs consist of salaries, benefits and stock-based compensation.
Allocated expenses consist of rent, depreciation and other facilities related
expenses.
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Table of Contents Results of Operations The following table presents period-over-period changes in selected items in the consolidated statements of operations and comprehensive loss, which include the operations of Aviragen for periods afterFebruary 13, 2018 (in thousands, except percentages): Year Ended December 31, 2020 % Change 2019 % Change 2018 Revenue$ 4,046 (59 )%$ 9,862 137 %$ 4,159 Operating expenses 34,216 33 % 25,647 (1 )% 25,915 Operating loss (30,170 ) 91 % (15,785 ) (27 )% (21,756 ) Other income and (expenses) (1,812 ) (24 )% (2,370 ) (161 )% 3,858 Loss before provision for income taxes (31,982 ) 76 % (18,155 ) 1 % (17,898 ) Provision for income taxes 238 (51 )% 490 350 % 109 Net loss$ (32,220 ) 73 %$ (18,645 ) 4 %$ (18,007 ) 90
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Table of Contents Total Revenues
The following table summarizes the period-over-period changes in our revenues
for years ended
2020 % Change 2019 % Change 2018
Revenue from customer service
contracts $ 198 (51 )% $ 406 N/A $ -
Revenue from government contract - N/A (20 ) N/A 1,344
Royalty revenue 2,962 (33 )% 4,446 232 % 1,340
Non-cash royalty revenue related
to sale of future royalties 886 (82 )% 5,030 241 % 1,475
Total revenue $ 4,046 (59 )% $ 9,862 137 % $ 4,159 Revenue from Customer Service Contracts
We earned revenue from customer service contracts of$198,000 and$406,000 in the years endedDecember 31, 2020 and 2019, respectively. This revenue was recognized from a fixed price contract executed inJuly 2019 , as amended, for a total of$617,000 , which we have now completed, enabling us to recognize the remaining$13,000 as revenue in the three months endingMarch 31, 2021 . There were no comparable contracts in 2018.
Revenue from Government Contract
We recognized revenue of$1.3 million during the year endedDecember 31, 2018 , of which$20,000 was reversed during the year endedDecember 31, 2019 . As ofDecember 31, 2020 , the cumulative revenue recorded from inception under the HHS BARDA contract represents$20,000 less than the maximum amount billable under the contract as presently modified. The active phase of the contract occurred in 2016 and 2017. In 2018 activities were wound down and completed and no future revenue is expected from this contract. Royalty Revenue For the year endedDecember 31, 2020 , royalty revenue decreased by$1.5 million , or 33%, compared to the year endedDecember 31, 2019 , which represented an increase of$3.1 million , or 232%, compared to the year endedDecember 31, 2018 . Royalty revenue in the year endedDecember 31, 2018 , excludes comparable revenue of$3.5 million earned in the pre-Merger period, which more than accounts for the increase in 2019. Royalty revenue was earned on sales of Relenza and Inavir, both treatments for influenza, which were acquired in the Merger and is based on fixed percentages of net sales of these drugs in the period. Relenza revenue ceased in 2019 and all our 2020 Inavir royalty revenue was earned in the first quarter. We recognize royalty revenue from sales of Inavir only after the first$3 million net of 5% withholding tax in years ending onMarch 31 has been recognized as non-cash royalty revenue related to sale of future royalties. We expect our royalty revenue in 2021, if any, will be significantly lower than in 2020, partly because we expect the increase in social distancing and mask wearing due to the COVID-19 pandemic will cause the number of influenza infections to decrease in the year endingMarch 31, 2021 .
Non-cash Royalty Revenue Related to Sale of Future Royalties
For the year endedDecember 31, 2020 , non-cash royalty revenue related to sale of future royalties was$886,000 , compared to$5.0 million for the year endedDecember 31, 2019 and$1.5 million for the year endedDecember 31, 2018 . Non-cash royalty revenue of up to$3.3 million may be earned in each year ending onMarch 31 . In 2018, we only recognized$1.5 million related to the year endedMarch 31, 2019 , since all non-cash royalty revenue related to the year endedMarch 31, 2018 , was earned in the pre-Merger period. In 2019, we recorded$1.7 million related to the year endedMarch 31, 2019 , plus$3.3 million related to the year endingMarch 31, 2020 . In the year endedDecember 31, 2020 , we recognized the$34,000 not recognized in 2019 for the year endingMarch 31, 2020 , and$852,000 related to the year endingMarch 31, 2021 , so we expect non-cash royalty revenue related to sale of future royalties to increase in the year endingDecember 31, 2021 . 91
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Table of Contents Total Operating Expenses
The following table summarizes the period-over-period changes in our operating
expenses for years ended
2020 % Change 2019 % Change 2018
Research and development $ 19,863 37 % $ 14,540 (16 )% $ 17,275
General and administrative 15,202 146 % 6,187 (7 )% 6,681
Impairment of intangible assets - N/A - (100 )% 1,600
Costs of exit from leased premises - N/A - (100 )% 359
Restructuring charges and (reversals) (849 ) N/A 4,920 N/A -
Total operating expenses $ 34,216 33 % $ 25,647 (1 )% $ 25,915
Research and Development
For 2020, research and development expenses increased by $5.3 million , or 37%,
compared to 2019. The increase was principally due to preclinical, manufacturing
and clinical expenses related to our COVID-19 vaccine candidate, partially
offset by lower costs of manufacturing and clinical trials for our norovirus
vaccine candidate and lower depreciation and amortization expense.
For 2019, research and development expenses decreased by $2.7 million , or 16%,
compared to 2018. The decrease was principally due to the absence of the
teslexivir clinical trials and costs incurred under the HHS BARDA contract,
along with decreases in preclinical research, personnel, non-restructuring
severance and intangible asset amortization costs, partially offset by increases
in manufacturing and clinical trial costs related to our norovirus vaccine
tablets.
We expect that research and development expenses will increase in 2021 as we
will incur significant expenses for manufacturing and clinical trials related to
our COVID-19 vaccine candidate.
General and Administrative
For 2020, general and administrative expenses increased by $9.0 million , or
146%, compared to 2019. The principal reasons for the increase in 2020 are
increased legal fees, higher stock-based compensation costs, additional D&O
insurance costs, severance expenses for our former Chief Executive Officer and
increased costs incurred in upgrading our accounting systems and in line with
our corporate growth.
For 2019, general and administrative expenses decreased by
Impairment of Intangible Assets
Impairment of intangible assets represents the write-off in 2018 of the in-process research and development related to teslexivir that we acquired in the Merger. Since the Phase 2 trial completed inMay 2018 did not achieve the primary efficacy endpoint and we suspended development activities, we now consider this asset to be fully impaired.
Costs of Exit from Leased Premises
Costs of exit from leasehold premises in 2019 comprise both our lease loss accrual and our write-down of leasehold improvements and furniture at our leased premises inAlpharetta, Georgia . Since this facility had surplus capacity, we subleased these premises, commencing inNovember 2018 , for the remainder of the lease term for less than we are presently paying. Accordingly, we recorded an exit charge consisting of loss on lease obligations for the net discounted future cash flows for rental and associated costs at the cease-use date of$253,000 and a property and equipment impairment charge of$106,000 . 92
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Restructuring Charges and (Reversals)
In 2019, in connection with our December restructuring, we accrued costs of$3.2 million representing the amount we were invoiced byLonza Houston, Inc. ("Lonza") after the suspension of our norovirus manufacturing work order, representing the maximum amount potentially payable to Lonza. We also accrued$0.4 million for severance and legal expenses and impaired$1.3 million of property and equipment and right-of-use assets, mainly related to manufacturing assets. In 2020, we incurred further costs, principally legal fees, of$0.1 million and we paid$2.3 million in full settlement with Lonza, enabling us to reverse$0.9 million of the 2019 accrual. We do not expect to incur any further charges related to this restructuring. Other Income and (Expenses) The following table summarizes the period-over-period changes in our non-operating income and expenses for years endedDecember 31 (in thousands, except percentages): 2020 % Change 2019 % Change 2018 Bargain purchase gain $ - N/A $ - (100 )%$ 6,760 Interest income 75 (50 )% 149 157 % 58 Interest expense - (100 )% (315 ) (62 )% (821 ) Non-cash interest expense related to sale of future royalties (1,874 ) (10 )% (2,073 ) 12 % (1,859 ) Gain (loss) on sale of equipment - (100 )% 1 N/A (11 ) Loss on revaluation of financial instruments - N/A - (100 )% (3 ) Loss on debt extinguishment - (100 )% (100 ) N/A - Foreign exchange loss, net (13 ) (59 )% (32 ) (88 )% (266 ) Net non-operating income and (expenses)$ (1,812 ) $ (2,370 ) $ 3,858 For 2020 we recorded net non-operating expenses of$1.8 million , compared to net non-operating expenses of$2.4 million in 2019 and net non-operating income of$3.9 million in 2018. The principal source of non-operating income in 2018 was a bargain purchase gain of$6.8 million , representing the excess of our valuation of the fair value of net assets acquired over the fair value of the common stock issued to acquire them in the Merger. Interest expense was$315,000 in 2019, decreasing from$821,000 in 2018 due to the absence of an expense of$295,000 related to Private Vaxart's convertible promissory notes being outstanding for the 43 days prior to the Merger and the lower balance payable on our note due toOxford Finance LLC , the remaining balance of which was repaid inNovember 2019 , for which we incurred a one-time charge of$100,000 for debt extinguishment. As a result, we incurred no interest expense in 2020. Non-cash interest expense related to sale of future royalties, which relates to accounting for sums that will become payable to HCRP for royalty revenue earned from Inavir as debt, was$2.1 million in 2019, higher than the$1.9 million in 2020 when the outstanding balance due to HCRP had been paid down, and higher than the$1.9 million in 2018 which related to the shorter post-Merger period. The foreign exchange loss of$266,000 in 2018 relates to the revaluation of cash and receivables denominated in Australian dollars and British pounds because of the strengtheningU.S. dollar. In 2019 and 2020 we held minimal cash and receivables denominated in foreign currency and the loss decreased commensurately. Provision for Income Taxes The following table summarizes the period-over-period changes in our provision for income taxes for years endedDecember 31 (in thousands, except percentages): 2020 % Change 2019 % Change 2018 Foreign withholding tax on royalty revenue$ 183 (58 )%$ 435 326 %$ 102 Foreign taxes payable on intercompany interest 52 (2 )% 53 1,225 % 4 State income taxes 3 50 % 2 (33 )% 3 Provision for income taxes$ 238 (51 )%$ 490 350 %$ 109 The majority of the provision for income taxes in the years endedDecember 31, 2020 , 2019 and 2018, respectively, represents withholding tax on royalty revenue earned on sales of Inavir inJapan , which is potentially recoverable as a foreign tax credit but expensed because we record a 100% valuation allowance against our deferred tax assets. The amount of income tax expense recorded is directly proportional to Inavir royalties, including the portion that we pass through to HCRP, and was low in 2018 because the majority of Inavir sales in the first calendar quarter arise in the first six weeks, so most of the revenue in the 2018 period was earned pre-Merger. In addition, we incurred charges relating to interest on an intercompany loan from a foreign subsidiary and for state income taxes inthe United States . 93
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Liquidity and Capital Resources
From its inception until the Merger, Private Vaxart's operations were financed primarily by net proceeds of$38.9 million and$29.4 million from the sale of convertible preferred stock and the issuance of convertible promissory notes, respectively, all of which were converted into Aviragen common stock in the Merger, and$4.9 million from the issuance of secured promissory notes toOxford Finance , of which the remaining balance of$2.5 million as ofSeptember 30, 2019 , was repaid in full onNovember 4, 2019 .Vaxart gained$25.5 million in cash from Aviragen in the Merger, of which$4.9 million was used to pay Aviragen's Merger-related costs. Since the Merger, throughDecember 31, 2020 , we have received net proceeds of$156.8 million from the sale of common stock, pre-funded warrants and common stock warrants and the exercise of pre-funded warrants and common stock warrants from equity financings in March, April andSeptember 2019 and March, July andOctober 2020 (see Note 1 to the Consolidated Financial Statements in Part II, Item 8 for further information regarding our offerings). As ofDecember 31, 2020 , we had$126.9 million of cash and cash equivalents. Since then, we have received net proceeds of$65.8 million from the sale of common stock under the Open Market Sale Agreement, (the "Sales Agreement") and$1.6 million from the exercise of common stock warrants. There is approximately$167 million in net proceeds still available to us under the Sales Agreement. We believe our existing funds (including funds already received in 2021) are sufficient to fund us well into 2022 and possibly beyond. To continue operations thereafter, we expect that we will need to raise further capital, through the sale of additional securities or otherwise. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. As ofDecember 31, 2020 , we had no commitments for capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, most notably our ability to successfully commercialize our products and services. We may fund a significant portion of our ongoing operations through partnering and collaboration agreements which, while reducing our risks and extending our cash runway, will also reduce our share of eventual revenues, if any, from our vaccine product candidates. We may be able to fund certain activities with assistance from government programs including HHS BARDA. We may also need to fund our operations through equity and/or debt financing. The sale of additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market vaccine candidates that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects.
Our future funding requirements will depend on many factors, including the following:
? the timing and costs of our planned preclinical studies for our product
candidates;
? the timing and costs of our planned clinical trials of our product candidates;
? our manufacturing capabilities, including the availability of contract
manufacturing organizations to supply our product candidates at reasonable
cost;
? the amount and timing of royalties received on sales of Inavir;
? the number and characteristics of product candidates that we pursue;
? the outcome, timing and costs of seeking regulatory approvals;
? revenue received from commercial sales of our future products, which will be
subject to receipt of regulatory approval;
? the terms and timing of any future collaborations, licensing, consulting or
other arrangements that we may enter into;
? the amount and timing of any payments that may be required in connection with
the licensing, filing, prosecution, maintenance, defense and enforcement of
any patents or patent applications or other intellectual property rights; and
? the extent to which we in-license or acquire other products and technologies.
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Cash Flows
The following table summarizes our cash flows for the periods indicated (in
thousands):
Year Ended December 31,
2020 2019 2018
Net cash used in operating
activities $ (23,750 ) $ (13,090 ) $ (14,548 )
Net cash (used in) provided by
investing activities (1,220 ) (850 ) 26,212
Net cash provided by (used in) financing activities 138,314 15,960 (1,729 ) Net increase in cash and cash equivalents$ 113,344 $ 2,020 $ 9,935
We experienced negative cash flow from operating activities in 2020, 2019 and 2018 in the amounts of$23.8 million ,$13.1 million and$14.5 million , respectively. The cash used in operating activities in 2020 was due to cash used to fund a net loss of$32.2 million , partially offset by adjustments for net non-cash income related to depreciation and amortization, stock-based compensation, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling$5.6 million and a decrease in working capital of$2.8 million . The cash used in operating activities in 2019 was due to cash used to fund a net loss of$18.6 million , partially offset by net non-cash expenses related to depreciation and amortization, gain on sale of equipment, impairment charges, stock-based compensation, non-cash interest expense, loss on debt extinguishment, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling$4.2 million and a decrease in working capital of$1.3 million . The cash used in operating activities in 2018 was due to a net loss of$18.0 million , partially offset by$1.0 million of adjustments for net non-cash income related to the bargain purchase gain, depreciation and amortization, loss on sale of equipment, impairment charges, stock-based compensation, loss on revaluation of financial instruments, non-cash interest, amortization of note discount, non-cash interest expense related to sale of future royalties and revenue related to sale of future royalties and$2.5 million provided by a change in working capital, principally due to the receipt of accounts receivable of$14.7 million acquired in the Merger.
We used
Net Cash Provided by (Used in) Financing Activities
In 2020, we received$9.2 million from the sale of common stock and common stock warrants in a registered direct offering in March,$97.0 million from the sale of common stock under an at-the-market facility in July,$4.9 million from the sale of common stock under an Open Market Sale Agreement that began in October,$26.0 million from the exercise of common stock warrants,$602,000 from the exercise of stock options and net proceeds of$652,000 from the disgorgement of related party short-swing profits. In 2019, we received$2.5 million from the sale of common stock in a registered direct offering in March,$8.1 million from the sale of common stock, pre-funded warrants and common stock warrants in an underwritten public offering in April,$7.8 million from the sale of common stock, pre-funded warrants and common stock warrants in an underwritten public offering in September,$1.2 million from the exercise of pre-funded warrants and$180,000 from the exercise of common stock warrants, partially offset by repayment of principal of$3.8 million on the secured promissory note payable toOxford Finance . We used$1.5 million in 2018 to repay principal on the secured promissory note payable toOxford Finance and$214,000 to repay principal on a short-term note, partially offset by$13,000 received upon the exercise of stock options. 95
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Contractual Obligations and Commercial Commitments
We have the following contractual obligations and commercial commitments as of
Contractual Obligation Total < 1 Year 1 - 3 Years
3 - 5 Years > 5 Years
Long Term Debt, HCRP$ 23,455 $ 2,779 $ 6,218 $ 5,812 $ 8,646 Operating Leases 8,772 2,633 3,386 2,753 - Purchase Obligations 24,581 11,481 13,100 - - Total$ 56,808 $ 16,893 $ 22,704
$ 8,565 $ 8,646
Long Term Debt, HCRP. Under an agreement executed in 2016, we are obligated to
pay HCRP the first
Note 7 to the Consolidated Financial Statements in Part II, Item 8 for further details.
Operating leases. Operating lease amounts include future minimum lease payments under all our non-cancellable operating leases with an initial term in excess of one year. See Note 8 to the Consolidated Financial Statements in Part II, Item 8 for further details. Purchase obligations. These amounts include an estimate of all open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers for which we have not received the goods or services. We consider all open purchase orders, which are generally enforceable and legally binding, to be commitments, although the terms may afford us the option to cancel based on our business needs prior to the delivery of goods or performance of services.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements in the periods presented.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
We record accrued expenses for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided and include the costs incurred but not yet invoiced within other accrued liabilities in the balance sheets and within research and development expense in the consolidated statements of operations and comprehensive loss. These costs can be a significant component of our research and development expenses. We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Intangible Assets Intangible assets acquired in the Merger were recorded at their estimated fair values of$20.3 million for developed technology related to Inavir which is being amortized on a straight-line basis over the estimated period of future royalties of 11.75 years,$1.8 million for the developed technology related to Relenza which was fully amortized over the remaining royalty period of 1.3 years, and$1.6 million for in-process research and development related to teslexivir which was considered indefinite-lived until it was assessed as impaired in the three months endedJune 30, 2018 . These valuations were prepared by an independent third party based on estimated discounted cash flows based on probability-weighted future development expenditures and revenue streams, which are highly subjective.
Recently Issued Accounting Pronouncements
See the "Recent Accounting Pronouncements" in Note 2 to the Consolidated
Financial Statements in Part II, Item 8 for information related to the issuance
of new accounting standards in 2020, none of which have had, or are expected to
have, a material impact on our consolidated financial statements.
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