VERA THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q and our audited financial statements and notes thereto and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K filed with the
Forward-Looking Statements
In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or the negative of these terms or other similar expressions.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a late-stage biotechnology company focused on developing and
commercializing transformative treatments for patients with serious
immunological diseases. Our lead product candidate, atacicept, a
self-administered fusion protein that blocks both B lymphocyte stimulator (BLyS)
and a proliferation-inducing ligand (APRIL), is currently being evaluated for
the treatment of immunoglobulin A nephropathy (IgAN) in the Phase 2b ORIGIN
clinical trial, which has completed enrollment. We expect to announce topline
results in the first quarter of 2023. If the data from this trial are
supportive, we plan to initiate a pivotal Phase 3 clinical trial in 2023. Based
on positive feedback from the
Since our inception, we have devoted substantially all of our resources to our research and development efforts, pre-clinical studies and clinical trials, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations
We do not have any product candidates approved for commercial sale, and we have not generated any revenue from product sales. Our ability to generate revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of one or more of our product candidates, which we expect, if they ever occur, will take a number of years. We also do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for nonclinical and clinical testing, as well as for commercial manufacturing if any of our product candidates obtain marketing approval. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.
To date, we have funded our operations primarily through proceeds from the sale
of shares of our Class A common stock, redeemable convertible preferred stock,
debt financing and convertible promissory notes. As of
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completed a follow-on public offering and issued 5,742,026 shares of Class A
common stock for net proceeds of approximately
We have incurred significant operating losses since the commencement of our
operations. Our net losses were
We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:
•
continue our ongoing and planned research and development of our product candidates, atacicept, for the treatment of IgAN and LN, and MAU868 for the treatment of BK viremia;
•
conduct clinical trials and nonclinical studies for atacicept and MAU868;
•
seek regulatory approvals for any product candidates that successfully complete clinical trials;
•
continue to scale up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization;
•
establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates and related additional commercial manufacturing costs;
•
develop, maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know how;
•
attract, hire and retain additional clinical, scientific, quality control, and manufacturing management and administrative personnel;
•
expand leased office facilities;
•
add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and
•
incur additional legal, accounting, investor relations and other expenses associated with operating as a public company.
We also expect to increase the size of our administrative function to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
We will require substantial additional funding to develop our product candidates
and support our continuing operations. Until such time that we can generate
significant revenue from product sales or other sources, if ever, we expect to
finance our operations through the sale of equity, debt financings, or other
capital sources, which could include income from collaborations, strategic
partnerships, or marketing, distribution, licensing or other strategic
arrangements with third parties, or from grants. We may be unable to raise
additional funds or to enter into such agreements or arrangements on favorable
terms, or at all. Our ability to raise additional funds may be adversely
impacted by potential worsening global economic conditions and the disruptions
to, and volatility in, the credit and financial markets in
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COVID-19 Pandemic and other Geopolitical and Macroeconomic Events
Since it was reported to have surfaced in
As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. To date, we have initiated some and may take additional temporary precautionary measures intended to help ensure our employees' well-being and minimize business disruption. For the safety of our employees and their families, we have reduced the amount of time we expect our employees to spend onsite in our facilities. Certain of our third-party service providers have also experienced shutdowns or other business disruptions. We are continuing to assess the impact of the COVID-19 pandemic on our current and future business and operations, including our expenses, clinical trials and other development timelines, as well as on our industry and the healthcare system.
As a result of the COVID-19 pandemic, or similar pandemics and outbreaks, we have and may in the future experience severe disruptions, including:
•
interruption of or delays in receiving products and supplies from the third parties on which we rely, due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;
•
limitations on our business operations by the local, state, or federal government;
•
business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, travel limitations, cybersecurity and data accessibility limits, or communication or mass transit disruptions; and
•
limitations on employee resources that would otherwise be focused on the conduct of our activities, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.
Additionally, financial markets around the world experienced volatility
following the recent invasion of
Although we did not experience significant financial effects to our business
operations as a result of macroeconomic events, such as the COVID-19 pandemic or
the ongoing
Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods presented.
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Three Months Ended
September 30, CHANGE
(dollars in thousands) 2022 2021 AMOUNT %
Operating expenses:
Research and development $ 19,656 $ 3,564 $ 16,092 452 %
General and administrative 5,588 3,688 1,900 52 %
Total operating expenses 25,244 7,252 17,992 248 %
Loss from operations (25,244 ) (7,252 ) (17,992 ) 248 %
Other income (expense):
Interest income 567 5 562 *
Interest expense (147 ) - (147 ) *
Other income 347 - 347 *
Change in fair value of non-marketable
equity securities (202 ) (364 ) 162 *
Total other income (expense) 565 (359 ) 924 *
Net loss $ (24,679 ) $ (7,611 ) $ (17,068 ) 224 %
* Not meaningful
Research and Development Expenses
Research and development expenses represent a substantial portion of our
operating expenses. Our research and development expenses consist primarily of
direct and indirect expenses incurred in connection with the research and
development of our product candidates. Direct expenses include costs incurred
under agreements with third parties, including contract research and
manufacturing organizations and consultants directly related to our research and
development of product candidates, laboratory supplies and costs of lab studies,
and license and milestone fees incurred as a result of our contractual
obligations for our development candidates. Indirect expenses include employee
compensation and other personnel-related expenses, including stock-based
compensation, facilities and depreciation related to buildings and equipment
used for research and development personnel and activities and other expenses.
From
Research and development expenses are recorded as expense in the period in which the related activities occurred, and payments we make prior to the receipt of goods or services to be used in research and development efforts are deferred as prepaid expenses until the goods or services are received and used. We accrue expenses for contract research and development as the related services are performed by monitoring the status of specified activities and billings received from our external service providers. These expenses are accrued based on estimates and are adjusted as actual expenses become known. The cost incurred in obtaining technology licenses, including initial and subsequent milestone payments incurred under our licensing agreements, are recorded as expense in the period in which they are incurred, as the licensed technology, method or process has no alternative future uses other than for our research and development activities. Where contingent milestone payments are due to third parties under license or other agreements, the milestone payment obligations are recognized as expense when achievement of the contingent milestone is probable, which is generally upon achievement of the milestone.
The following table summarizes our research and development expenses incurred during the respective periods.
Three Months Ended
September 30, CHANGE
(dollars in thousands) 2022 2021 AMOUNT %
Direct research and development expenses
Clinical trial expenses $ 4,658 $ 1,371 $ 3,287 240 %
Contract drug manufacturing 5,812 564 5,248 930 %
License and milestone obligations 3,661 - 3,661 *
Consulting and professional services 2,081 455 1,626 357 %
Indirect research and development expenses
Compensation and related benefits 3,174 1,159 2,015 174 %
Facilities and other 270 15 255 *
Research and development expenses $ 19,656 $ 3,564 $ 16,092 452 %
* Not meaningful
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Research and development expenses increased by
We expect our research and development expenses to increase in future periods as we initiate additional clinical sites and enroll patients in the Phase 3 COMPASS clinical trial, initiate a Phase 3 clinical trial of atacicept in IgAN, and plan and initiate a Phase 2b or Phase 3 clinical trial of MAU868.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and personnel-related expenses, including stock-based compensation, for our personnel in executive management, legal, finance, human resources, and other administrative functions. General and administrative expenses also include professional fees paid for accounting, auditing, legal, tax and consulting services, and other general overhead costs to support our operations. General and administrative expenses are recorded as expense in the period they are incurred, and payments we make prior to the receipt of goods or services to be used for general and administrative purposes efforts are deferred as prepaid expenses until the goods or services are received and used.
Three Months Ended
September 30 , CHANGE
(dollars in thousands) 2022 2021 AMOUNT %
General and administrative
General and administrative expenses increased by
Total Other Income (Expense)
Three Months Ended
September 30, CHANGE
(dollars in thousands) 2022 2021 AMOUNT %
Total other income (expense) $ 565 $ (359 ) 924 (257 )%
Total other income increased by
Liquidity and Capital Resources
To date, we have funded our operations primarily through proceeds from the sale
of shares of our Class A common stock, redeemable convertible preferred stock,
debt financing and convertible notes. From our inception through
We use our cash to fund operations, primarily to fund our research and development efforts, clinical trials, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for
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these operations. Cash used to fund operating expenses is affected by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid assets.
We anticipate that we will continue to incur net losses for the foreseeable future as we continue research and development activities of atacicept and MAU868, hire additional staff, including clinical, operational, administrative and management personnel, and incur additional expenses associated with operating as a public company. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our clinical development activities and our product candidate portfolio. We expect that our research and development and general and administrative costs will increase substantially as a result of our acquisition of MAU868, including in connection with conducting additional clinical trials and clinical trials for our research programs and product candidates, contracting with third parties to support nonclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.
On
In
In
On
In
As of
Cash Flows
The following table summarizes our cash flows for the periods indicated.
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Nine Months Ended
September 30,
(dollars in thousands) 2022 2021
Net cash used in operating activities $ (46,434 ) $ (17,270 )
Net cash (used in) provided by investing activities (83,989 ) 796
Net cash provided by financing activities 81,224 48,961
Net (decrease) increase in cash, cash equivalents and
restricted cash $ (49,199 ) $ 32,487
Operating Activities
In the nine months ended
In the nine months ended
Investing Activities
In the nine months ended
In the nine months ended
Financing Activities
In the nine months ended
In the nine months ended
Contractual Obligations
During the nine months ended
Loan and security agreement
On
The final maturity date of the Loan is
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Initially, through
We are permitted to prepay the Loan in full or in part at any time upon 10 business days' written notice to the Lender, subject to the applicable Prepayment Fee (as defined below). Upon the earliest to occur of the maturity date, acceleration of the Loan or prepayment of the Loan, we are required to make a final payment equal to 5.0% (7.0% if the Maturity Date Extension is exercised) of the aggregate principal amount of the Loan (the Final Fee). Any prepayments of the Loan, whether mandatory or voluntary, must include an amount equal to the sum of (a) the portion of the outstanding principal of the Loan being prepaid plus accrued and unpaid interest thereon through the prepayment date, (b) the Final Fee, (c) the Lender's expenses and all other obligations that are due and payable to the Lender, and (d) a prepayment fee of (i) 3.0% of the portion of the Loan being prepaid if the repayment is on or before the first anniversary of the funding date of such term loan or (ii) 2.0% of the portion of the Loan being prepaid if the repayment is after the first anniversary of the funding date but on or before the second anniversary of the funding date of such term loan (the Prepayment Fee). There is no Prepayment Fee for any prepayments occurring after the second anniversary of the funding date of such term loan.
Our obligations under the Loan Agreement are secured by a security interest in all of our assets, other than our intellectual property, which is subject to a negative pledge. The Loan Agreement does not contain any financial related covenants. Included in the Loan Agreement are customary representations and covenants that, subject to exceptions, restrict our ability to, among other things: declare dividends or redeem or repurchase equity interests; incur additional liens; make loans and investments; incur additional indebtedness; engage in mergers, acquisitions and asset sales; transact with affiliates; undergo a change in control; add or change business locations; and engage in businesses that are not related to our existing business.
Upon the occurrence of an event of default, a default interest rate of an
additional 5.0% may be applied to the outstanding loan balances, and the Lender
may declare all outstanding obligations immediately due and payable and take
such other actions as set forth in the Loan Agreement. Events of default under
the Loan Agreement include customary events of default, including, but not
limited to: (i) failure to (a) make any payment of principal or interest on its
due date, or (b) pay any other obligations within three business days after such
obligations are due and payable; (ii) failure to perform any obligation under
specified covenants; (iii) the occurrence of a material adverse change; (iv) we
or any of our subsidiaries being or becoming insolvent, beginning an insolvency
proceeding, or becoming subject to an insolvency proceeding that is not
dismissed or stayed within 45 days; (v) a default under any agreement with a
third party resulting in a right by such third party to accelerate the maturity
of any indebtedness in an amount in excess of
Emerging growth company status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company under the JOBS Act until the earliest
of (i) the last day of our first fiscal year in which we have total annual gross
revenue of
Critical Accounting Policies and Significant Judgments and Estimates
The discussion and analysis of our financial condition and results of operations
is based on our unaudited condensed financial statements, which have been
prepared in accordance with
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as expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies are described in the section titled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies, Significant Judgments and Use of
Estimates" in our Annual Report and the notes to our unaudited condensed
financial statements appearing elsewhere in this Quarterly Report on Form 10-
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