| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of Class | Trading Symbol(s) | Name of Exchange on Which Registered | ||
Common Stock, Par Value $0.0001 per share | CFRX | Nasdaq Capital Market |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☒
| Large accelerated filer | ☐ | Accelerated filer | ||||
Non-accelerated filer | Smaller reporting company | ☒ | ||||
| Emerging growth company | ||||||
Auditor Firm Id: 00042 | Auditor Name: Ernst & Young, LLP | Auditor Location: Hartford, Connecticut |
Page | ||||||
PART I | ||||||
Item 1. | 1 | |||||
Item 1A. | ||||||
Item 1B. | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
PART II | ||||||
Item 5. | ||||||
Item 6. | ||||||
Item 7. | ||||||
Item | ||||||
| ||||||
Item 9. | ||||||
Item 9A. | ||||||
Item 9B. | ||||||
Item 9C. | 90 | |||||
PART III | ||||||
Item 10. | ||||||
Item 11. | ||||||
Item 12. | ||||||
Item 13. | ||||||
Item 14. | ||||||
PART IV | ||||||
Item 15. | ||||||
Item 16. | ||||||
References to ContraFect
Forward Looking Information
ii
disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
similar international regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of exebacase or any other product candidate. |
Item 1. | Business |
We believe that
Our most advanced program,CF-301 (“exebacase”), is an investigational novel lysin that targetsStaph aureus, including methicillin-resistant (“MRSA”) strains, which causes serious infections such as bacteremia, pneumonia and osteomyelitis.Staph aureus is also a common cause of biofilm-associated infections of heart valves (endocarditis), prosthetic joints, indwelling devices and catheters. These infections result in significant morbidity and mortality despite currently available antibiotic therapies. Exebacase is being studied incompleted a Phase 2 superiority design study to evaluateof exebacase that evaluated its safety, tolerability, efficacy and pharmacokinetics (“PK”) when used in addition to background standard of care (“SOC”)SOC antibiotics compared to SOC antibiotics alone for the treatment ofStaph
We recently announced positive topline The results from thisfirst-in-patient Phase 2 superiority study of exebacase, which showed clinically meaningful improvement in clinical responder rates among patients treated with exebacase in addition to SOC antibiotics compared to SOC antibiotics alone. In the primary efficacy analysis population of 116 patients with documentedStaph(IV)(“IV”) infusion of blinded study drug, the clinical responder rate at Day 14 was 70.4% for
patients treated with exebacase and 60.0% for patients dosed with SOC antibiotics alone. alone (p=0.314).
We also continue to advance our preclinical portfolio of novel lysin programs. We have developed a novel, engineered variant of exebacase, knownserious or life-threatening diseases where preliminary clinical evidence suggests that the investigational therapy may demonstrate substantial improvement on at least one clinically significant endpoint over available therapies. The Breakthrough Therapy designation provides additional benefits, such asCF-296, which we believe provides expedited interactions with the opportunity for extension of our agents targetingStaph aureus through alternative dosing paradigms or drug product presentations. We are evaluatingFDA and the potential to developCF-296 as a targeted therapy for deep-seated, invasive biofilm-associatedStaph aureus infections such as prosthetic joint infections. We are conducting furtherpriority review, in vitro andin vivo characterization ofCF-296 to determine the profile and potential place in therapy for this compound. Our lysin research efforts are focused on a broad-based gram-negative discovery program which aims to identify, optimize and develop lysins that target deadly gram-negative pathogens. We have discovered and engineered lysins with potent activity against drug-resistantP. aeruginosabacteria, a major cause of morbidity and mortality in patients with hospital acquired pneumonia and a major medical challenge for patients with cystic fibrosis. We are initiating animal studies of our most promising anti-pseudomonal lysins with the goal of moving this programaddition to the clinic as soon as possible. We were awarded $1.0 millionFast Track designation granted to exebacase in funding fromCARB-X (Combating Antibiotic-Resistant Bacteria Biopharmaceutical Accelerator) in 2017 to support these efforts andAugust 2015.
Beyond our lysin programs, we continue our proprietary research to expand our pipeline of complementary, nontraditional antimicrobials to address high unmet medical needs. We have discoveredentered into a novel class of phage-derived lytic agents, known as amurin peptides, which have displayed potent activity againstcost-share contract (the “BARDA Contract”) with BARDA, a wide range of gram-negative pathogens in preclinical studies, including deadly, drug-resistantP. aeruginosa, Klebsiella pneumoniae, Escherichia coli, Acinetobacter baumannii and Enterobacter cloacaebacteria species. We are currently evaluating thein vitro profilesdivision of the amurins asU.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response. Under the BARDA Contract, we continuewill receive funding of up to an estimated $86.8 million to advance the program. We recently announced an award fromCARB-Xdevelopment of exebacase. The base period for the BARDA Contract includes government funding of up to $6.9$9.8 million to reimburse expenses for approximately one year to support the conduct of the ongoing Phase 3 clinical trial and futility analysis. Following successful completion of the base period, the BARDA Contract provides for approximately $77.0 million of additional BARDA funding for five option stages in support of the completion of the Phase 3 clinical trial of exebacase, further clinical and
Our Strategy
Our strategy isapproximately six years. The BARDA Contract contains terms and conditions that are customary for contracts with BARDA of this nature, including provisions giving the government the right to use our novel, highly differentiated therapeutic products, if approved, to achieve a leading market position interminate the treatment of life-threatening infectious diseases, including those caused by drug-resistant pathogens. We plan to pursue commercialization of therapeutic products through discovery, acquisition and development as follows:
|
|
Advance additional product candidates from our portfolio, including lysins targeting gram-negative bacteria, to clinical development as rapidly as possible, and further advance our next-generation gram-positive lysins and amurin antimicrobial peptides;
Acquire additional foundation technologies that enable the efficient discovery of anti-infective agents;
Acquire clinical stage therapies that treat infectious diseases through unique mechanisms of action; and
Establish collaborations to further develop and commercialize our product candidates.
Our Portfolio
Antibiotic resistance has limited the effectiveness of many conventional antibiotics and the discovery and development of new therapeutics to address resistance has not kept pace with the increasing incidence of these
Staph
Staph
Primary Efficacy Endpoint: Clinical Response at Day 14 (MRSA Patients) | Secondary Efficacy Endpoint: Clinical Response at Day 14 (All S. aureus Patients) | Secondary Efficacy Endpoint: Mortality (MRSA Patients) | ||||
Target difference | 28% increase over SOC antibiotics alone | 16% increase over SOC antibiotics alone | 17% decrease from SOC antibiotics alone | |||
Power | 86% | 83% | 80% | |||
Sample size | 135 patients | 339 patients | 135 patients |
The primary efficacy endpoint of the study was clinical response at day 14. Clinical response was defined by objective clinical response criteria including (1) improvement or complete resolution of all attributable signs
and symptoms ofStaph aureus bacteremia that were present at baseline, (2) no new, worsening or persistent signs and symptoms attributable toStaph aureus bacteremia, (3) no development of a new foci ofStaph aureus infection after Day 7, (4) no further anti-staphylococcal therapy was needed, (5) no surgery or further medical intervention for the Staph aureus infection was necessary and (6) the patient is alive. Clinical response was also determined by the independent, blinded clinical adjudication committee.
Recently announced toplineTopline efficacy results from the core study demonstrated the clinical responder rate was 70.4% for patients treated with exebacase and 60.0% for patients treated with SOC antibiotics alone (p=0.314). In a42.8%nearly
Clinical response at Day 14 | exebacase* | antibiotics alone | p-value | |||
Overall mITT population | 70.4% | 60.0% | 0.314 | |||
|
|
| ||||
MRSA infection | 74.1% | 31.3% | 0.010 | |||
|
|
| ||||
MSSA infection | 68.2% | 73.3% | 0.796 | |||
|
|
| ||||
Bacteremia + right-sided endocarditis | 80.0% | 59.5% | 0.028 | |||
|
|
| ||||
Bacteremia only | 81.8% | 61.5% | 0.035 |
Clinical response at Day 14 | Exebacase* | Antibiotics alone | p-value | |||
Overall mITT population | 70.4% | 60.0% | 0.314 | |||
MRSA infection | 74.1% | 31.3% | 0.010 | |||
Bacteremia + right-sided endocarditis | 80.0% | 59.5% | 0.028 | |||
Bacteremia only | 81.8% | 61.5% | 0.035 | |||
Mortality | ||||||
30-day all-cause mortality in MRSA patients | 3.7% | 25.0% | 0.056 | |||
| * | used in addition to antibiotics |
| exebacase* | antibiotics alone | |||
| N=72 n (%) | N=47 n (%) | |||
TEAE | 64 (88.9) | 40 (85.1) | ||
|
| |||
TEAE through day 7 | 48 (66.7) | 31 (66.0) | ||
|
| |||
TEAE leading to study drug interruption | 1 (1.4) | 0 | ||
|
| |||
TEAE leading to study drug withdrawal | 0 | 0 | ||
|
| |||
TEAE related to study drug | 8 (11.1) | 4 (8.5) | ||
|
| |||
Serious TEAE | 34 (47.2) | 24 (51.1) | ||
|
| |||
Total deaths | 14 (19.4) | 7 (14.9) |
Exebacase* | Antibiotics alone | |||
| N=72 n (%) | N=47 n (%) | |||
TEAE | 64 (88.9) | 40 (85.1) | ||
TEAE through day 7 | 48 (66.7) | 31 (66.0) | ||
TEAE leading to study drug withdrawal | 0 | 0 | ||
SAEs through day 180 | 45 (62.5) | 28 (59.5) | ||
SAEs determined to be related to exebacase | 0 | 0 | ||
Total deaths through day 180 | 17 (23.6) | 9 (19.1) |
| * | used in addition to antibiotics |
We expect to progress exebacaseadvancing into Phase 3 of clinical development. Based on previous feedback from the FDA, we believe that a single confirmatory Phase 3 clinical trial evaluating the superiority of exebacase used in addition to SOC antibiotics compared to SOC antibiotics alone for the treatment ofStaph aureus bacteremia, including right-sided endocarditis, together with the full package of Phase 1 and Phase 2 clinical data, along with a robustnon-clinical and PK/PD data package will be sufficient to support the biologics license application (“BLA”) submission. As such, the planned Phase 3 study is expected to be a multi-center, multi-national, randomized, double-blind, placebo-controlled superiority study comparing clinical responder rates of exebacase used in addition to SOC antibiotics to SOC antibiotics alone for the treatment ofStaph aureus bacteremia, including right-sided endocarditis. Specific parameters for Phase 3 will be informed by data from the Phase 2 study once it is completed, and relevant guidance from regulatory authorities. If the Phase 3 study confirms superiority of exebacase, used in addition to SOC antibiotics as compared to antibiotics alone, we would seek marketing authorization with a superiority claim, which we believe would be highly differentiated from conventional antibiotics and would lead to rapid uptake by providers and favorable reimbursements from payors.
3.
viral infection). All of these events were mild in intensity and resolved. No patients withdrew from the study due to an AE. There were no clinically relevant changes in inflammatory markers (e.g., erythrocyte sedimentation rate, high sensitivity
|
|
|
|
|
|
|
these tests, synergy was assessed by checkerboard assay using the fractional inhibitory concentration index (“FICI”) for each combination. An FICI mean was derived from each checkerboard based on two consecutive FIC values along the growth/no growth interface. Synergy was defined as an FICI of£0.5; ≤0.5; strongly additive was³2.
≥2.
The addition of a single dose of exebacase, resulted in an additional
clinical trials.
expect to submit to the FDA. Following submission, we expect that the FDA will conduct
Lysins
In addition to our proprietary lysin discovery program, we have an active collaborative research agreement through which we provide funding for the discovery of new lysins to Dr. Vincent Fischetti’s Laboratory of Bacterial Pathogenesis and Immunology at The Rockefeller University (“Rockefeller”). We have the first right to negotiate a license to all discoveries concerning lysins through October 2019. We hold worldwide exclusive license rights to patents for composition of matter for nine lysins from Rockefeller. Each lysin targets a specific species of gram-positive bacteria, including drug-sensitive and drug-resistant forms as shown in Table 3 below.
Table 3: Lysins Licensed From The Rockefeller University
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
|
P. aeruginosa is the initial target of our gram-negative
P. aeruginosa is
InvasiveP. aeruginosa infections, including ventilator associated pneumonia, blood stream infections, complicated urinary tract infections,bacteria and infections following surgery carry some of the highest risks of mortality among hospital acquired infections. An estimated 51,000 healthcare-associated P. aeruginosa infections occurto enable potent activity in the United States each year. More than 6,000 (13%) of these are multidrug-resistant, with roughly 400 deaths per year attributedhuman serum. We will continue to these infections. Infections caused by multidrug resistantP. aeruginosaare associated with highall-cause mortality, hospital mortality and higher health-care related costs compared to infections caused by susceptible strains.
The discovery and development ofpursue new lysins that targetP. aeruginosais a focus other gram-negative pathogens, such as the
Based on the results of these assays and the additional data we continue to generate in vitro, our gram-negative lysins represent a potential new therapeutic class of bactericidal agents to combat resistantP. aeruginosa. In 2017, we were awarded a grant fromCARB-X in support of this program. In January 2019, we announced an additional $2.3 million in the amount of funding to be received in further support of this effort as we move intoin vivo models of disease to further characterize these candidates.
Enterobacteriaceae
The Enterobacteriaceaefamilyof gram-negative bacteriaincludes (“
|
|
|
Pathogen | CDC Threat Level | WHO Priority Level | Lysins | |||
Staphylococcus aureus | Serious | High | CF-301, CF-302 | |||
Streptococcus pneumoniae | Serious | Medium | CF-303, CF-309 | |||
Enterococcus faecalis | Serious | High | CF-304 | |||
Group B streptococcus | Concerning | — | CF-305, CF-307 | |||
Bacillus anthracis | — | — | CF-306, CF-308 |
bacteriocidality, including antibiotic-resistant strains, the ability to clear biofilms and synergize with conventional antibiotics. However, amurin peptides are further differentiated in their potential ability to exert these actions on the full range of gram-negative ESKAPE pathogens, as well as a range of additional, serious and difficult to treat gram-negative bacteria, includingBurkholdaria some strains of
Pathogen | AM1 | AM2 | AM3 | Colistin | Meropenem | |||||
Escherichia coli | 0.5 | 0.25 | 0.625 | 0.5 | >8 | |||||
Enterobacter cloacae | 0.25 | 0.125 | 0.0625 | 1 | >8 | |||||
Klebsiella pneumoniae | 0.5 | 0.5 | 0.0625 | >8 | 8 | |||||
Acinetobacter baumannii | 1 | 1 | 0.25 | >8 | >8 |
| * | strains listed are representative of >100 strains tested |
CF-404: An Antibody Approach for Influenza
We intend to developCF-404, a combination of three human mAbs against influenza, as a potential treatment for seasonal and pandemic influenza infections, which kill as many as 49,000 people annually in the U.S. alone. Our preclinical studies to date have shown thatCF-404 may have the following attributes:
|
|
|
Preclinical studies
In preclinical studies,CF-404 was active against all seasonal strains of influenza, including the three principal strains (H1, H3 and B). These mAbs react with the principal protein, hemagglutinin, on the surface of influenza at a region referred to as the hemagglutinin stalk which is genetically stable and does not vary from one season to another.
We have tested our mAbs in standard mouse models which use weight changes to evaluate protection against lethal infection with different strains of influenza (H1N1, H3N2 or B). Control mice treated with buffer all succumbed to viral infection within7-9 days. By contrast, when we administered a single treatment ofCF-404 24 hours post-infection, the infected mice appeared healthy, with weight changes comparable to healthy mice.
We are developingCF-404 as an inhaled therapy. We believe that this novel delivery route allowsCF-404 to target the influenza virus more directly where it resides, in the respiratory system. We have demonstrated efficacy in animal models even when using low doses of our antibodies administered in an aerosolized form. In
our inhalation model, control mice treated with buffer all succumbed to viral infection within 10 days. By contrast, when we administered a single inhaled treatment ofCF-404 over a range of low doses 24 hours post-infection, the infected mice were protected and fared better with increasing dose (up to 0.82mg/kg) as compared to the 5mg/kg with a systemic dose.
We are continuing to develop a formulation ofCF-404 that would be suitable for human use. Ourin vivo data has shown that ouranti-H1(CF-401),anti-H3(CF-402) andanti-B(CF-403) mAbs have been able to protect animals from lethal challenge. Importantly, our studies also show that treatment with our mAbs appears to provide greatly enhanced potency compared to treatment with other mAbs. We believe our combination for the treatment of influenza is a novel approach addressing a high unmet medical need and would offer competitive advantages to the only product widely used on the market today if successfully developed and approved.
Our influenza patent portfolio consists of one (1) U.S. patent, eleven (11) foreign patents, andfifty-one (51) U.S. and foreign patent applications, which we have licensed from Trellis and/or developedin-house. The patent applications are directed to compositions relating to influenza antibodies as well as to pharmaceutical compositions for administration to patients and to methods for their use in conferring passive immunity against various influenza strains and clades. If patents are granted on these patent applications they would expire between 2031 and 2036.
2042.
patentability. A provisional patent application is not examined or prosecuted, and automatically expires 12 months after its filing date if a
|
of the first licensed product. Rockefeller may terminate any license agreement in the event of a breach of such agreement by us or if we challenge the validity or enforceability of the underlying patent rights. We may terminate any license agreement at any time on 60 days’ notice.
License Agreement—Trellis Bioscience LLC
On January 29, 2014, we entered into a license agreement with Trellis that gives us exclusive rights to all Trellis mAbs in the field of influenza discovered from their CellSpot platform. Particularly, the license provides us with three fully human mAbs that bind, neutralize and protect animals from all strains of H1, H3 and B influenza, and that will also cross bind, neutralize and protect animals from other seasonal or pandemic influenza strains that may arise (including H5N1 and H7N9). We have selected our three lead mAbs for the H1, H3, and B influenzas and are currently producing these antibodies at scale using manufacturing-grade expression systems and performingIND-enabling studies.
In consideration for the license, we paid Trellis licensing fees in cash and stock and may be required to make specified development and regulatory milestone payments and make additional payments upon the achievement of future sales and a royalty on net sales from products to Trellis. We are allowed to grant sublicenses to third parties. The license agreement terminates upon the earlier of (i) our decision to terminate the agreement at will or for safety reasons, (ii) material breach by either party that is not cured within ninety (90) days, or (iii) either party’s insolvency.
On August 14, 2014, we amended the license agreement to include research conducted pursuant to a government grant.
Collaborative Research Agreements—The Rockefeller University
Beginning in October 2009, we entered into a research agreement with Rockefeller where we provided funding for research focused on producing and testing monoclonal antibodies against proteins ofStaph aureus, which is now expired On October 24, 2011, we entered into a second research agreement with Rockefeller, where we provided funding for the research primarily to identify lysins, enzymes or small molecules that will kill gram-negative bacteria, and to identify and characterize lysins fromClostridia difficile to be engineered into gut commensal bacteria. This agreement expired on October 25, 2016. On October 25, 2016, we entered into a third research agreement with Rockefeller, where we provide funding for the identification of novel lysin therapeutic candidates that target gram-negative pathogens. The research collaboration will focus on gram-negative pathogens such asP. aeruginosa, E. coli, andK. pneumoniae, including antibiotic-resistant strains.
Our current agreement runs through October 24, 2019. Either party may terminate the agreement upon breach of the agreement, following 30 days written notice and failure to cure such breach. Following the expiration or termination of the agreement, each party will have anon-exclusive license to use for internal research purposes all research results, including joint intellectual property. If Rockefeller or joint intellectual property develops from these programs, we will have theright-of-first refusal to negotiate to acquire a royalty-bearing license to utilize such intellectual property for commercial purposes.
Staph
Wethem.
CF-404 is intended We are not aware of
CF-404 may directly or indirectly compete with other products already in development from F.Hoffmann-La Roche Ltd., Genentech, Inc., Johnson & Johnson, Inc., Theraclone Sciences, Inc., Toyama Chemical Co., Ltd., Romark Laboratories, L.C., Aviragen, Inc., Vectura Group plc, Far EastBio-Tec Co. Ltd, Visterra Inc., MedImmune LLC, Ansun Biopharma, Inc. and others with early stage product candidates.
United States.
Research
other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing. We, have invested $22.4 million, $17.3 million,along with third-party contractors, will be required to navigate the various preclinical, clinical and $22.1 millioncommercial approval requirements of the governing regulatory agencies of the countries in researchwhich we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and development expenses for the years ended December 31, 2018, 2017subsequent compliance with applicable federal, state, local and 2016, respectively.
Governmentforeign statutes and regulations require the expenditure of substantial time and financial resources.
The production, distribution, of Drugs and marketing of products employing our research and intellectual property or that we may license from third parties are subject to extensive governmental regulation in the United States and in other countries. Biologics
The following provides further information on certain legal and regulatory requirements that have the potential to affect our operations and the future marketing of our products.
FDA Approval Process
In the United States, pharmaceutical products are subject to extensive regulationprocess required by the FDA. The FDC Act and other federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-
approval monitoring and reporting, sampling, and import and export of pharmaceutical products. In addition to regulation under the FDC Act, biological products used for the prevention, treatment, or cure of a disease or condition of a human being are subject to regulation under provisions of the PHSA, and FDA reviews applications for approval of a biologic pursuant to a BLA. FDA review applications for approval of drug products pursuant to a new drug application (“NDA”). Failure to comply with applicable U.S. requirementsbefore product candidates may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Pharmaceutical product development for a new product or certain changes to an approved productbe marketed in the United States typicallygenerally involves the following:
Preclinical tests include laboratory evaluationcandidate for each proposed indication;
A30-day waiting period aftermay be placed on clinical hold and the submission of each IND is required prior to the commencement of clinical testing in humans. Ifsponsor and the FDA has neither commented on nor questioned the IND within this30-day period,must resolve any outstanding concerns or questions before the clinical trial proposedcan begin. Submission of an IND therefore may or may not result in the IND may begin.
FDA authorization to begin a clinical trial.
The FDAprotocol or investigator brochure.
Clinical trials to support NDAs or BLAs for marketing approval are typically conducted ininvestigation of a drug is generally divided into three sequential phases, butphases. Although the phases are usually conducted sequentially, they may overlap. In overlap or be combined.
in a larger number of patients, typically generally at multiple geographically dispersed clinical trial sites,sites. These clinical trials are intended to permit the FDA to evaluateestablish the overall benefit-risk relationshiprisk/benefit ratio of the drug or biologicinvestigational product and to provide an adequate informationbasis for the labeling of the product. product approval.
Afterfor biologics, the safety, purity and potency
Thethe FDA has 60 days from its receipt of an NDA orreviews the submitted BLA to determine whetherif the application will be acceptedis substantially complete before the agency accepts it for filing based on the agency’s threshold determinationfiling. The FDA may refuse to file any BLA that it is sufficiently complete to permit substantive review.deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. Once the submission isa BLA has been accepted for filing, the FDA begins anin-depth review. The FDA has agreed to certain performance goals in the review of NDAs and BLAs. The FDA aims to review applications for standard review drugs containing new molecular entities or original biologic products within ten months of the date the application was accepted for filing, and theFDA’s goal is to review standard applications within ten months after the filing date, or, if the application qualifies for priority review, drugs or biologics in six months ofafter the dateFDA accepts the application was accepted for filing. Priority review can be appliedThe FDA reviews a BLA to applications for drugs containing new molecular entitiesdetermine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or biologics that are intendedheld meets standards designed to treat a serious disease or conditionassure the product’s continued safety, purity and that, if approved, would provide a significant improvement in safety or effectiveness. The review process forpotency. In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification. When reviewing a BLA, the FDA to consider certain late-submitted information, or information intended to clarify information already provided in the submission.
The FDA may also refer applications for novel drug or biologic products, or drug or biologic products that present difficult questions of safety or efficacy, toconvene an advisory committee—typically a panel that includes clinicians and other experts—forcommittee to provide clinical insight on application review evaluation, and a recommendation as to whether the application should be approved.questions. The FDA is not bound by the recommendationrecommendations of an advisory committee, but it generally followsconsiders such recommendations. recommendations carefully when making decisions.
Complete Response Letter (“CRL”). An approval letter authorizes commercial marketing of the drug or biologicproduct with specific prescribing information for specific indications. As a conditionA CRL will describe all of NDA orthe deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a risk evaluationproduct.
or elements to assure safe use, (“ETASU”). ETASU can include, but are not limitedsuch as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to special trainingproposed labeling or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring,the development of adequate controls and specifications. Once approved, the use of patient registries. The requirement for a REMS can materially affectFDA may withdraw the potential market and profitability of the product. Moreover, product approval if compliance with
Changes to somelimit further marketing of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and product based on the results of these post-marketing studies.
Post-Approval Requirements
Once an NDA or BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs and biologics, including standards and regulations fordirect-to-consumer advertising,off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs and biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA or BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug and biologic manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Fast Track Designation and Accelerated Approval
Expedited Review Programs
Under the fast track program, thewhich it is being studied. The sponsor of a new drug or biologic candidate may request that the FDA designate the candidate for a specific indication as a fast track drug or biologic concurrent with, or after, the filing of the IND for the candidate. The FDA must determine if the drug or biologic candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request. If fast track designation is obtained, the FDA may initiate review of sections of the marketing application before the application is complete. This “rolling review” is available if the applicant provides and the FDA approves a schedule for the remaining information. However, the FDA’s time period goal for reviewing an application does not begin until the last section of the NDA or BLA is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the FDA
believes that the designation is no longer supported by data emerging in the clinical trial process. In addition, a product candidate that receives fast track designation is eligiblehas opportunities for more frequent meetingsinteractions with the FDA to discussreview team during product development and, once a BLA is submitted, the product’s development plan and ensure collection of appropriate data needed to support approval and more frequent communications from FDA regarding such things as the design of the proposed clinical trials and use of biomarkers, as applicable. In August 2015, the FDA granted fast track designation to exebacase for the treatment ofStaph aureus bacteremia, including endocarditis.
In some cases, a product may be eligible for accelerated approval. Drug or biological productspriority review. A fast track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.
A drug or biologic candidate approved on this basis is subject to rigorous post-marketing compliance requirements, includingexpedited withdrawal procedures if the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failuresponsor fails to conduct the required post-approvalpost-marketing studies or confirm aif such studies fail to verify the predicted clinical benefit during post-marketing studies, will allowbenefit. In addition, the FDA to withdraw the drug or biologic from the market on an expedited basis. Allcurrently requires as a condition for accelerated approval
Guidance Even if a product qualifies for Industry: “Antibacterial Therapiesone or more of these programs, the FDA may later decide that the product no longer meets the conditions for Patients With an Unmet Medical Needqualification or decide that the time period for FDA review or approval will not be shortened.
The FDA, issued guidance for the industry in August 2017, whichincluding, among other things, discussesrequirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the potential for antibacterial drug candidates intended to treat serious bacterial infections in patients who have few or no available therapies to be candidates for a streamlined development pathway. Accordingproduct. After approval, most changes to the guidance, candidatesapproved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee
Draft Guidance for Industry: “Limited Population Pathway for Antibacterial and Antifungal Drugs” (LPAD)
As partproduct, complete withdrawal of the 21st Century Cures Actproduct from the market or product recalls;
Breakthrough Therapy Designation
The Food and Drug Administration Safety and Innovation Act established a category of drugs and biologics referred to as “breakthrough therapies” that may be eligible to receive breakthrough therapy designation. A sponsor may seek FDA designation of areference product candidate as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treatFDA approves a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Under the breakthrough therapy program, the sponsor of a new drug candidate may request that the FDA designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the INDfull BLA for the drug candidate.competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The designation includes all of the fast track program features,BPCIA also created certain exclusivity periods for biosimilars approved as well as more intensive FDA interaction and guidance. The breakthrough therapy designationinterchangeable products. At this juncture, it is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met. If a product is designated as breakthrough therapy,unclear whether products deemed “interchangeable” by the FDA will, workin fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
Pediatric Information
Under the Pediatric Research Equity Act (“PREA”), NDAs or BLAs or supplements to NDAs or BLAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.
study.
Biosimilars
The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), created an abbreviated approval pathway for biological products shown to be highly similar to or interchangeable with anFDA-licensed reference biological product. Biosimilarity sufficient to reference a priorFDA-approved product requires that there be no
differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown through analytical studies, animal studies, and at least one clinical study, absent a waiver by the Secretary. A biosimilar product may be deemed interchangeable with a prior approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. To date, few biosimilars have been licensed under the BPCIA, and no interchangeable products have been approved under the BPCIA to date. Complexities associated with the larger, and often more complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation which are still being evaluated by the FDA.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that company’s own preclinical and clinical data from adequate and well-controlled trials to demonstrate the safety, and efficacy of their product. The first biologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference product may also enjoy a period of exclusivity. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
Disclosure of Clinical Trial Information
Sponsors of clinical trials ofFDA-regulated products, including drugs, are required to register and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
DomesticU.S. Regulatory Requirements
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes.
We
health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased thesignificant administrative, civil and criminal penalties, that may be imposed against covered entities, business associatesdamages, fines, exclusion from participation in governmental health care programs, additional reporting obligations and possiblyoversight if we become subject to a corporate integrity agreement or other persons,agreement to resolve allegations of
our operations.
(EMA) – Small and Medium Enterprise (SME)(“SME”) Designation
scientific advice.
We are also subject
We are also subject to E.U. rules with respect to cross-border transfers of personal data out of the E.U. and E.E.A. These rules are under scrutiny from time to time. For example, there is ongoing litigation challenging the EU Commission approved model clauses (also called standard contractual clauses), which is a commonly used transfer mechanism under the GDPR. It is uncertain whether the model clauses will be invalidated by the European courts. In addition, Brexit will mean that atcircumstances, some point that the United Kingdom (“U.K.”) will become a “third party” for the purposes of data transfers under the GDPR.
We depend on a number of third parties in relation to the operation of our business (including clinical research organizations), a number of which process personal data on our behalf. There is no assurance that our own privacyare more stringent than HIPAA and security-related safeguards and/or any contractual measures that we enter intomany of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these providers will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws, by our third party processors could have a material adverse effect on our business andwhere applicable, can result in the finesimposition of significant civil and/or criminal penalties and penalties outlined below.
Weprivate litigation. Privacy and security laws, regulations, and other obligations are subjectconstantly evolving, may conflict with each other to the supervision of local data protection authorities in those E.U.complicate compliance efforts, and E.E.A. jurisdictions where we are established or otherwise subject to the GDPR. Fines for certain breaches of the GDPR are significant: up to the greater of EUR 20 million or 4% of total global annual turnover. In addition to the foregoing, a breach of the GDPR couldcan result in regulatory investigations, reputational damage, ordersproceedings, or actions that lead to cease/ change our processing of oursignificant civil and/or criminal penalties and restrictions on data enforcement notices, assessment notices (for a compulsory audit), as well potential civil claims including class action type litigation where individuals suffer harm.
We are also subject to evolving E.U. privacy laws on cookies, ande-marketing. The E.U. is in the process of replacing thee-Privacy Directive with a new set of rules taking the form of a regulation. The drafte-Privacy Regulation imposes strictopt-in marketing rules with limited exceptions forbusiness-to-business communications, alters rules on third-party cookies, web beacons and similar technology and significantly increases fining powers to the same levels as the GDPR (i.e. the greater of 20 million Euros or 4% of total global annual revenue). While thee-Privacy Regulation was originally intended to be adopted on May 25 2018 (alongside the GDPR), it is still going through the European legislative process and commentators now expect it to be adopted during the second half of 2020 or during 2021 following a transition period. We are likely to be required to expend further capital and other resources to ensure compliance with these changing laws and regulations.
In March 2010, the Affordable Care Act (“ACA”), was passed, which substantially changeschanged the way health care is financed by both governmental and private insurers, and significantly impactsimpacted the U.S. pharmaceutical industry. The Affordable Care Act,ACA, among other things, subjectssubjected biologic products to potential competition by lower-cost biosimilars, addressesaddressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increasesincreased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extendsextended the rebate program to individuals enrolled in Medicaid managed care organizations, establishesestablished annual fees and taxes on manufacturers of certain branded prescription drugs, and a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50%70%
The current presidential administration and U.S. Congress have attempted to repeal or “repeal and replace” the Affordable Care Act. Although those efforts did not succeed, the presidential administration may continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. There is still uncertainty with respect to the impact the President’s administration and the U.S. Congress may have, if any, on the Affordable Care Act, and any changes will likely take time to unfold. Additionally, since
our business.
Employees
A copy
Item 1A. | Risk Factors |
inception and do not expect to generate revenue for at least the next several years.inception. We expect to incur losses for at least the next several years and may never achieve or maintain profitability.investors.investors, and to a lesser extent, grant funding. We have not yet demonstrated an ability to overcome many of the risks and uncertainties frequently encountered by companies in the pharmaceutical industry, and you should analyze our company in light of such risks and uncertainties.net losses were $37.7 million, $15.5 million and $28.5 millionfrom operations for the years ended December 31, 2018, 20172021, 2020 and 2016,2019 were $47.3 million, $34.2 million and $27.9 million, respectively. We have devoted substantially all of our efforts to research and development. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. The net losses we incur may fluctuate significantly from quarter to quarter and year to year.
failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital to expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of the
Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We were incorporated in 2008 and commenced active research operations in 2010. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital and acquiring and developing exebacase and other potential product candidates. We have not yet demonstrated our ability to successfully complete Phase 2 or Phase 3 clinical trials, obtain marketing approval, manufacture a commercial scale product, or arrange for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a product development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.
We
Ourcandidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials mayand could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be suspended at any time forreported by patients. Many times, side effects are only detectable after investigational products are tested in large-scale clinical trials or, in some cases, after they are made available to patients on a number of reasons.commercial scale following approval. For example, it is possible that exposure to exebacase could result in adverse clinical events such as localized inflammation in the region surrounding blood vessels, or having a hypersensitivity reaction, such as serum sickness or anaphylaxis. A
Delays
We may experience delays in clinical trials offor our product candidates. Our plannedIf we experience delays or difficulties enrolling in our clinical trials, might not begin on time, might need toour research and development efforts and business, financial condition, and results of operations could be redesigned, might notmaterially adversely affected.
imposition of a clinical hold by the FDA or other regulatory authorities;
delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites;
delays in recruiting suitable patients to participate in a trial;
delays in having patients complete participation in a trial or return for post-treatmentfollow-up;
clinical sites dropping out of a trial to the detriment of enrollment;
adverse side effects in patient populations;
time required to add new sites;
delays resulting from negative or equivocal findings of the data safety monitoring board for a trial;
delays in completing, or as a result of findings from, preclinical studies;patient enrollment taking longer than anticipated, patient withdrawal or
delays
sites is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. In addition, there may be limited patient pools from which to draw for clinical studies. In addition to the rarity of some diseases, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study. Patient enrollment a significant factor in the timing of clinical trials, is affected bydepends on many factors, including including:
revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize exebacase or any other product candidate that we seek to develop. As a result, our financial results and the commercial prospects for exebacase or any other product candidate that we seek to develop would be harmed, our costs could increase and our ability to generate revenues could be delayed or ended.
As a company, we have never obtained regulatory approval for, or commercialized, a drug or biologic. Itbiologic that is possibleintended to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed in early clinical development. For drugs or biologics that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for clinical development. Drugs or biologics designated as Breakthrough Therapies by the FDA are also eligible for rolling review of the associated marketing application, meaning that the agency may review portions of the marketing application before the sponsor submits the complete application, as well as priority review, if the relevant criteria are met.
Even if the FDA approves exebacase or any other product candidate, adverse effects discovered after approval could adversely affect our markets.
If we obtain regulatory approval for exebacase or any other product candidate that we develop, and we or others later discover that our products cause adverse effects, a number of potentially significant negative consequences could result, including:
regulatory authorities may withdraw their approval of the product;
regulatory authorities may require the addition of labeling statements, such as warnings or contraindications or imposition of a risk management strategy;
we may be required to change the way the product is administered, conduct additional clinical studies or restrict the distribution of the product;
we could be sued and held liable for harm caused to patients and our liability insurance may not adequately cover those claims; and
our reputation may suffer.
Any of these events could prevent us from maintaining market acceptance of the affected product candidate and could substantially increase the costs of, or prevent altogether, the commercializationcommercial supplies of our product candidates.
There are underlying In addition to the risks associated with the manufacture of our product candidates, which could include cost overruns, new impurities, difficulties in process or formulation development, scaling up or reproducing manufacturing processes and lack of timely availability of raw materials.
materials, if these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of exebacase or any other product candidates.
We rely, and expect to continue to rely, on third-party manufacturers for the production of our product candidates for preclinical studies and clinical trials under the guidance of members of our organization. For example, we employ the services of Fujifilm Diosynth Biotechnologies UK LTD (“Fujifilm UK”) to supply the active pharmaceutical ingredient for exebacase. We have not yet manufactured supplies for late phase human clinical trials, scaled upvalidated the process for manufacture of such supplies, validated themanufacturing processes or contractually secured our commercial supplies.
We employ the services of other vendors to produce exebacase in its final vialed drug product form. We do not currently have contractslong-term supply agreements. Furthermore, the raw materials for our product candidates are sourced, in some cases, from a single-source supplier. If we were to experience an unexpected loss of supply of any of our product candidates or any of our future product candidates for any reason, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing
any of our product candidates for which we obtain marketing approval. We intendmay be unable to pursuemaintain or establish required agreements with third-party manufacturers regarding commercial supply at an appropriate future time. We intendor to locate second fill finishdo so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, to supply other world regions such as reliance on third-party manufacturers entails additional risks, including:
Late stage process development activities, including manufacturing process scale up and validationfailure of the bulk drug substance, pose inherent risks that may be greater for biological products than for small molecules. The process will undergo scale up from the current clinical process and then be repeated under protocol successfully three times for validation.
In addition, regulatory requirements could pose barriersthird-party to the manufacture of our active pharmaceutical ingredient and finished drug product for our product candidates. Our third-party manufacturers are required to comply with current good manufacturing practices (“cGMPs”). As a result, the manufacturing facilities and processes used by Fujifilm UK and any of our future manufacturers must pass inspection by the FDA as part of our BLA review and before approval of the applicable product candidate. Similar regulations apply to manufacturers of our products for use or sale in foreign countries. If our manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA and any applicable foreign(or similar regulatory authority, we will not be ableauthorities);
exebacase. We may still experience delays to the manufacturing timeline.
may succeed in developing, acquiring or licensing, on an exclusive basis, drug products that are more effective or less costly than exebacase and our other product candidates.
goal of the Affordable Care ActACA is to reduce the cost of health care and substantially change the way health care is financed by both governmental and private insurers. The Affordable Care Act,ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees on manufacturers of certain branded prescription drugs, required manufacturers to participate in a discount program for certain outpatient drugs under Medicare Part D and promoted programs that increase the federal government’s comparative effectiveness research, which will impact existing government healthcare programs and will result in the development of new programs. An expansion in the government’s role in the United States healthcare industry may further lower rates of reimbursement for pharmaceutical products.
The current presidential administration and U.S. Congress attempted to repeal or “repeal and replace” the Affordable Care Act. Although those efforts did not succeed, the presidential administration may continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions
financial condition.
More recently, on March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which eliminates the statutory cap on the Medicaid drug rebate, currently set at 100% of a drug’s average manufacturer price, beginning January 1, 2024.
Even if we obtain FDA approval of exebacase or any other product candidate, we may never obtain approval or commercialize our products outside of the United States, which would limit our ability to realize their full market potential.
In order to market exebacase or any other products outside of the United States, we must comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in the United States or any foreign country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in the United States or any foreign country and we do not have experience as a company in obtaining regulatory approval in international markets.
We face extensive
oversight.
Similar risks exist in foreign jurisdictions.
promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration requirements and continued compliance with cGMPs or similar requirements outside the United States and GCPs for any clinical trials that we conduct post-approval.
Changessignificantly delayed, possibly for several years, or may require us to expend more resources than we have available. Any delay in fundingobtaining, or an inability to obtain, regulatory approvals would prevent us from meeting our timelines for commercializing exebacase or any other product candidate, generating revenues and achieving and sustaining profitability.
anticipated. Other aspectsIn the EU, these exclusivity periods are even shorter. Upon receiving marketing authorization, new chemical or biological entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic/biosimilar application. During the additional
government. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Health Insurance Portability and Accountability ActAnti-Kickback Statute constitutes a false or fraudulent claim for purposes of 1996,the False Claims Act;
ownership and investment interests held by physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants and certified nurse midwives), and their immediate family members and payments or other transfers of value made to such physician owners; |
|
The unfavorable
In anon-binding referendum
Depending onunder the terms of Brexit, the United Kingdom could lose its present rights or terms of
behalf of its members. The uncertainty regarding newtransition period provided time for the UK and EU to negotiate a framework for partnership for the future, which was then crystallized in the Trade and Cooperation Agreement, or modified arrangements, or initiallyTrade and Cooperation Agreement, which became effective on the absenceJanuary 1, 2021.
UK.
with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a
We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent or other intellectual property rights of a third party. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we use customarynon-disclosure agreements and try to ensure that our employees do not use the proprietary information orknow-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.
In addition, while we typically require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, or such agreements may be inadequately drafted at times thereby not ensuring assignment to us of all potential intellectual property rights. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
different jurisdictions, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
We have not yet registered our trademarks in all of our potential markets, and failure to secure those registrations could adversely affect our business.
Our future trademark applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections from the U.S. Patent and Trademark Office or other applicable foreign intellectual property offices. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections, or have to expend additional resources to secure registrations, such as commencing cancellation proceedings against third-party trademark registrations to remove them as obstacles to our trademark applications. In addition, in the U.S. Patent and Trademark Office and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.
In addition, we have not yet proposed a proprietary name for our product candidates in any jurisdiction. Any proprietary name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable proprietary product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
Risks Related to Our Securities
The price of our common stock may be volatile and you could lose all or part of your investment.
There has been significant volatility in the market price and trading volume of equity and derivative securities, which is unrelated to the financial performance of the companies issuing the securities. In addition, equity markets have experienced significant price and volume fluctuations that have affected the market prices for the securities of biotechnology and also newly public companies for a number of reasons, including reasons that may be unrelated to the business or operating performance of the companies. These broad market fluctuations may negatively affect the market price of our common stock.
Prior to our initial public offering, there was no public market for our common stock. The trading price of our securities has been and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include:
our ability to implement our preclinical, clinical and other development or operational plans;
adverse regulatory decisions;
strategic actions by us or our competitors, such as acquisitions or restructurings;
new laws or regulations, or new interpretations of existing laws or regulations, applicable to our business;
actual or anticipated fluctuations in our financial condition or annual or quarterly results of operations;
our cash position;
public reaction to our press releases, other public announcements and filings with the SEC;
changes in investor and financial analyst perceptions of the risks and condition of our business;
changes in, or our failure to meet, performance expectations of investors or financial analysts (including, without limitation, with respect to the status of development of our product candidates);
changes in market valuations of biotechnology companies;
changes in key personnel;
increased competition;
sales of common stock by us or members of our management team;
trading volume of our common stock;
issuances of debt or equity securities;
the granting or exercise of employee stock options or other equity awards;
changes in accounting standards, policies, guidance, interpretations or principles;
ineffectiveness of our internal controls;
actions by institutional or other large shareholders;
significant lawsuits, including patent or stockholder litigation;
general political, market and economic conditions; and
other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the Nasdaq Capital Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.
We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.
We are required to meet the continued listing requirements of the Nasdaq Capital Market and other Nasdaq rules, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price and certain other corporate governance requirements. In particular, we are required to maintain a minimum bid price for our listed common stock of $1.00 per share. If we do not meet these continued listing requirements, our common stock could be delisted. On February 20, 2019, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided an initial period of 180 calendar days, or until
August 19, 2019, to regain compliance. The letter states that the Nasdaq staff will provide written notification that we have achieved compliance with Rule 5550(a)(2) if at any time before August 19, 2019, the bid price of our common stock closes at $1.00 per share or more for a minimum of ten consecutive business days. The letter has no immediate effect on the listing or trading of our common stock. Delisting from the Nasdaq Capital Market would cause us to pursue eligibility for trading of these securities on other markets or exchanges, or on the “pink sheets.” In such case, our stockholders’ ability to trade, or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of these securities. There can be no assurance that our securities, if delisted from the Nasdaq Capital Market in the future, would be listed on a national securities exchange, a national quotation service, theover-the-counter markets or the pink sheets. Delisting from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional capital, adversely affect the market liquidity of our securities, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence.
We may issue additional shares of common stock, warrants or other securities to finance our growth.
Future sales of our common stock or warrants may cause the market price of our securities to decline.
Sales of substantial amounts of shares of our common stock or warrants in the public market, or the perception that these sales may occur, could adversely affect the price of our securities and impair our ability to raise capital through the sale of additional equity securities. As of March 7, 2019, we have approximately 79.4 million shares of common stock outstanding, of which approximately 77.1 million shares of our outstanding common stock are freely tradable, or may become freely tradable, without restriction, in the public market unless held by our “affiliates,” as defined under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”). Additionally, we have warrants to purchase approximately 31.3 million shares of our common stock outstanding as of March 7, 2019. Approximately 30.9 million shares of common stock underlying the Warrants will be freely tradable upon exercise unless held by our affiliates.
We have registered 9,878,747 shares of our common stock as of March 7, 2019 that we may issue under our employee benefit plans. These shares can be freely sold in the public market upon issuance, unless pursuant to their terms these stock awards have transfer restrictions attached to them. Additionally, pursuant to the 2014 Omnibus Incentive Plan (the “2014 Plan”), our management is authorized to grant stock options and other equity linked award to our employees, directors and consultants. The 2014 Plan provides that the number of shares available for future grant under our 2014 Plan will automatically increase on January 1st each year, from January 1, 2015 through January 1, 2024, by an amount equal to four percent of all shares of our capital stock
outstanding as of December 31st of the preceding calendar year, subject to the ability of our board of directors to take action to reduce the size of such increase in any given year. Unless our board of directors elects not to increase the number of shares underlying our 2014 Plan each year, our stockholders may experience additional dilution, which could cause our stock price to decline.
company.
We completed an initial public offering on August 1, 2014.
Any failure to maintain effective internal control over financial reporting could have a significant adverse effect on our business and the price of our common stock.
Our management is required to report annually on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
In the future, we may identify material weaknesses or significant deficiencies in our internal control over financial reporting, and we may not be able to remediate them in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, we may encounter problems or delays in completing the implementation of any requested improvements and receiving a favorable attestation report from our independent registered public accounting firm, if such a report is required. We will be unable to issue securities in the public markets through the use of a shelf registration statement if we are not in compliance with Section 404. Furthermore, failure to achieve and maintain an effective internal control environment could materially adversely affect our business, reduce the market’s confidence in our common stock, adversely affect the price of our common stock and limit our ability to report our financial results accurately and timely.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and will remain an emerging growth company through the year ended December 31, 2018. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
not being required to comply with the auditor attestation requirements in the assessment
Item 1B. | Unresolved Staff Comments |
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We have taken advantage of certain reduced reporting burdens. We cannot predict whether investors will find our securities less attractive if we rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our common stock, and the prices for our securities may be more volatile.
We have no present intention to pay cash dividends and, even if we change that policy, we may be restricted from paying cash dividends on our common stock.
We do not intend to pay cash dividends for the foreseeable future. We currently expect to retain all future earnings, if any, for use in the development, operation and expansion of our business. Any determination to pay cash dividends in the future will depend upon, among other things, our results of operations, plans for expansion, tax considerations, available net profits and reserves, limitations under law, financial condition, capital requirements and other factors that our board of directors considers to be relevant.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for our securities, thereby depressing the market prices of our securities. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
allow the authorized number of our directors to be changed only by resolution of our board of directors;
establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
limit who may call stockholder meetings;
authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a shareholder rights plan, orso-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding
voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Risks Related to Cybersecurity, Data Protection and Privacy
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we store sensitive data, including intellectual property, proprietary business information and personally identifiable information, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in significant costs to address and remediate the incident, lead to legal claims or proceedings, disrupt our operations, and damage our reputation.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.
Our collection, control, processing, sharing, disclosure and otherwise use of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, and evolving laws concerning data privacy in the E.U. and E.E.A.
The regulatory environment with regard to privacy and data protection issues is increasingly challenging. For example, the GDPR repealed the Data Protection Directive (95/46/EC) and is directly applicable in all E.U. and E.E.A. Member States since its effective date of May 25, 2018. The GDPR applies to companies established in the E.U. or E.E.A., as well as companies that are not established in the E.U. or E.E.A. and which collect and use personal data in relation to offering goods or services to, or monitoring the behavior of, individuals located in the E.U. or E.E.A., including, for example, through the conduct of clinical trials (whether the trials are conducted directly by the company itself or through a clinical vendor or collaborators). The GDPR permits E.U. and E.E.A. Member State derogations for certain matters and, accordingly, we are also subject to EU national laws relating to the processing of certain data such as genetic data, biometric data and health data. It imposes a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that valid consent or another an appropriate legal basis is in place or otherwise exists to justify data processing activities; appointing data protection officers in certain circumstances; granting new rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing current rights (e.g., data subject access requests); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; imposing limitations on retention of personal data; maintaining a record of data processing; defining for the first time pseudonymized (i.e.,key-coded) data; and complying with principal of accountability and complying with the obligation to demonstrate compliance through policies, procedures, training and audit.
We are also subject to E.U. rules with respect to cross-border transfers of personal data out of the E.U. and E.E.A. These rules are under scrutiny from time to time. For example, there is ongoing litigation challenging the EU Commission approved model clauses (also called standard contractual clauses), which is a commonly used transfer mechanism under the GDPR. It is uncertain whether the model clauses will be invalidated by the European courts. In addition, Brexit will mean that at some point that the United Kingdom (“U.K.”) will become a “third party” for the purposes of data transfers under the GDPR.
We depend on a number of third parties in relation to the operation of our business (including clinical research organizations), a number of which process personal data on our behalf. There is no assurance that our own privacy and security-related safeguards and/or any contractual measures that we enter into with these providers will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third party processors could have a material adverse effect on our business and result in the fines and penalties outlined below.
Fines for certain breaches of the GDPR are significant: up to the greater of 4% of total worldwide turnover, or €20 million. In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/ change our processing of our data, enforcement notices, assessment notices (for a compulsory audit), as well potential civil claims including class action type litigation where individuals suffer harm. Our actual or alleged failure to comply with the GDPR could result in enforcement actions and significant penalties against us (as outlined above), which could result in negative publicity, increase our operating, business and/or legal costs, subject us to claims or other remedies and have a material adverse effect on our clinical trials, business, financial condition, and operations.
We are also subject to evolving E.U. privacy laws on cookies, ande-marketing. The E.U. is in the process of replacing thee-Privacy Directive with a new set of rules taking the form of a regulation. The draftE-Privacy Regulation imposes strictopt-in marketing rules with limited exceptions forbusiness-to-business communications, alters rules on third-party cookies, web beacons and similar technology and significantly increases fining powers to the same levels as the GDPR (i.e. the greater of 20 million Euros or 4% of total global annual revenue). While thee-Privacy Regulation was originally intended to be adopted on May 25 2018 (alongside the GDPR), it is still going through the European legislative process and commentators now expect it to be adopted during the second half of 2020 or during 2021 following a transition period. We are likely to be required to expend further capital and other resources to ensure compliance with these changing laws and regulations.
Item 1B. Unresolved Staff Comments
None
In the second quarter of 2011, we opened our
Recent
The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form10-K.
We derived the financial data for the years ended December 31, 2018, 2017 and 2016 and as of December 31, 2018 and 2017 from our audited financial statements, which are included elsewhere in this Annual Report on Form10-K. We derived the financial data for the years ended December 31, 2015 and 2014 and as of December 31, 2016, 2015 and 2014 from our audited financial statements that are not included elsewhere in this Annual Report on Form10-K. The selected financial data in this section are not intended to replace our financial statements and related notes. Our historical results are not necessarily indicative of our future results.
| Year Ended December 31, | ||||||||||||||||||||
Statement of Operations Data | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Loss from operations | $ | (31,124,425 | ) | $ | (26,563,757 | ) | $ | (33,532,246 | ) | $ | (25,065,336 | ) | $ | (16,935,911 | ) | |||||
Net loss attributable to common stockholders | $ | (37,668,424 | ) | $ | (15,517,658 | ) | $ | (28,538,399 | ) | $ | (25,120,964 | ) | $ | (34,617,536 | ) | |||||
Net loss per share of common stock, basic and diluted | $ | (0.50 | ) | $ | (0.28 | ) | $ | (0.85 | ) | $ | (1.08 | ) | $ | (3.86 | ) | |||||
| As of December 31, | ||||||||||||||||||||
Balance Sheet Data | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Cash, cash equivalents and marketable securities | $ | 30,452,253 | $ | 46,853,910 | $ | 35,161,154 | $ | 32,921,653 | $ | 27,393,059 | ||||||||||
Total assets | 32,872,571 | 50,189,479 | 37,624,470 | 35,861,137 | 30,053,622 | |||||||||||||||
Long-term liabilities | 21,533,592 | 14,575,366 | 13,693,419 | 1,416,443 | 1,249,046 | |||||||||||||||
Total stockholders’ equity | 5,541,960 | 31,193,445 | 19,512,854 | 30,675,510 | 25,581,507 | |||||||||||||||
We believe that the properties of our lysins will make them suitable for targeting antibiotic-resistant organisms, such asStaphylococcus aureus (“Staph aureus”) andPseudomonas aeruginosa (“P.aeruginosa”), which cause serious infections such as bacteremia, pneumonia and osteomyelitis. Beyond lysins, we continue to seek and identify novel antibacterial product candidates. We recently discovered a new class of novel lytic agents, called amurin peptides. Our preliminary characterization studies indicate that amurin peptides have potency across a wide range of resistant gram-negative pathogens, including species that are part of the ESKAPE pathogens (Enterococcus faecium,Staphylococcus aureus,Klebsiella pneumoniae,Acinetobacter baumannii,Pseudomonas aeruginosa,andEnterobacter species), which are the leading causes of hospital acquired infections throughout the world. These pathogens are considered to be urgent or serious threats to global health by the U.S. Center for Disease Control (“CDC”) and critical priorities by the World Health Organization (“WHO”). We believe that the amurin peptides will be highly complementary to our pathogen-specific lysin platform in addressing these infections. We aim to improve outcomes in patient with these life-threatening bacterial infections through use of our differentiated biologic candidates developed from our new classes of molecules.
aggregate underwritten public offering of 5,750,00011,500,000 shares of our common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public offering price of $2.00$5.00 per share of common stock, resulting in an underwrittenfollow-on offering, generatingestimated net proceeds of approximately $10.4$53.8 million after underwriting discounts and commissions and offering expenses payable by us.
Exebacase is an investigational novel lysin that targetsStaph aureus
biofilm-dependent pneumonia and osteomyelitis as well as biofilm-associated infections of heart valves (endocarditis), prosthetic joints, indwelling devices and catheters. These infections result in significant morbidity and mortality despite currently available antibiotic therapies. Exebacase
We recently announced positive topline The results from thisfirst-in-patient Phase 2 superiority study of exebacase which showed clinically meaningful improvement in clinical responder rates among patients treated with exebacase in addition to SOC antibiotics compared to SOC antibiotics alone. In the primary efficacy analysis population of 116 patients with documentedStaph(IV)(“IV”) infusion of blinded study drug, the clinical responder rate at Day 14 was 70.4% for patients treated with exebacase and 60.0% for patients dosed with SOC antibiotics alone. alone (p=0.314).
Other programs
We continuethe FDA to explore variants ofgrant Breakthrough Therapy designation to exebacase to expand our portfolio of lysins targeting biofilm-dependentStaph aureus infections. We have engineered a novel mutant variant,CF-296, which we believe has properties which may make it particularly useful for the treatment of prosthetic joint infections. WeMRSA bloodstream infections (bacteremia), including right-sided endocarditis, when used in addition to SOC anti-staphylococcal antibiotics in adult patients. Breakthrough Therapy designation is a program designed by the FDA to expedite the development and review of medicines for serious or life-threatening diseases where preliminary clinical evidence suggests that the investigational therapy may demonstrate substantial improvement on at least one clinically significant endpoint over available therapies. The Breakthrough Therapy designation provides additional benefits, such as expedited interactions with the FDA and the potential for priority review, in addition to the Fast Track designation granted to exebacase in August 2015.
Our lysin research efforts are focused on a broad-based gram-negative discovery program which aims to identify, optimize and develop lysins that target deadly gram-negative pathogens. We have discovered and engineered lysins with potent vivo
Military Infectious Diseases Research Program, United States Army Medical Research and Development Command (“USAMRDC”) over the course of three years to advance
soon as possible.
leverage our employee and infrastructure resources across multiple development programs well as research projects. InWe recorded approximately $35.5 million, $22.6 million, and $18.1 million of research and development expenses for the years ended December 31, 2018, 20172021, 2020 and 2016, we recorded approximately $22.4 million, $17.3 million and $22.1 million, respectively, of research and development expenses.2019, respectively. A breakdown of our research and development expenses by category is shown below. We do not currently utilize a formal time or laboratory project expense allocation system to allocate employee-related expenses, laboratory costs or depreciation to any particular project. Accordingly, we do not allocate these expenses to individual projects or product candidates. However, we do allocate some portions of our research and development expenses in the product development, external research and licensing and professional fees categories by project, includingto exebacase andCF-404, as shown below.
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Product development | $ | 14,307,715 | $ | 10,219,826 | $ | 10,331,021 | ||||||
Personnel related | 3,064,872 | 3,387,749 | 4,357,177 | |||||||||
Professional fees | 2,467,000 | 1,760,608 | 3,170,364 | |||||||||
Laboratory costs | 1,266,780 | 1,011,766 | 2,065,064 | |||||||||
External research and licensing costs | 684,281 | 482,803 | 1,590,668 | |||||||||
Share-based compensation | 626,003 | 451,334 | 587,426 | |||||||||
|
|
|
|
|
| |||||||
Total research and development expense | $ | 22,416,651 | $ | 17,314,086 | $ | 22,101,720 | ||||||
|
|
|
|
|
| |||||||
2019:
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Product development | $ | 29,813 | $ | 15,502 | $ | 10,401 | ||||||
Personnel related | 8,404 | 4,703 | 3,402 | |||||||||
Professional fees | 3,618 | 3,605 | 2,912 | |||||||||
External research and licensing costs | 1,651 | 952 | 2,487 | |||||||||
Laboratory costs | 1,638 | 1,418 | 2,021 | |||||||||
Stock-based compensation | 933 | 655 | 469 | |||||||||
Expenses reimbursed through grant agreements and government contracts | (10,549 | ) | (4,221 | ) | (3,635 | ) | ||||||
Total research and development expense | $ | 35,508 | $ | 22,614 | $ | 18,057 | ||||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Exebacase | $ | 16,218,315 | $ | 10,974,804 | $ | 8,092,280 | ||||||
CF-404 | 5,600 | 797,726 | 5,639,474 | |||||||||
Other research and development | 2,501,861 | 1,707,473 | 3,425,363 | |||||||||
Personnel related and share-based compensation | 3,690,875 | 3,839,083 | 4,944,603 | |||||||||
|
|
|
|
|
| |||||||
Total research and development expense | $ | 22,416,651 | $ | 17,314,086 | $ | 22,101,720 | ||||||
|
|
|
|
|
| |||||||
2019:
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Exebacase | $ | 25,460 | $ | 15,094 | $ | 11,370 | ||||||
CF-370 | 4,077 | 1,325 | — | |||||||||
Other research and development | 7,184 | 5,058 | 6,451 | |||||||||
Personnel related and stock-based compensation | 9,336 | 5,358 | 3,871 | |||||||||
Expenses reimbursed through grant agreements and government contracts | (10,549 | ) | (4,221 | ) | (3,635 | ) | ||||||
Total research and development expense | $ | 35,508 | $ | 22,614 | $ | 18,057 | ||||||
We account for stock options granted tonon-employees, which primarily consists of consultants, using the
We use the Black-Scholes option pricing model. The Black-Scholes option pricing model to estimate the fair value of stock option awards usinguses various assumptions that require management to apply judgment and make estimates, including:
|
2020
| Year Ended December 31, | ||||||||||||||||
| 2018 | 2017 | Dollar Change | % Change | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 22,416,651 | $ | 17,314,086 | $ | 5,102,565 | 29 | % | ||||||||
General and administrative | $ | 8,707,774 | $ | 9,249,671 | $ | (541,897 | ) | (6 | )% | |||||||
Other (expense) income | $ | (6,559,999 | ) | $ | 11,046,099 | $ | (17,606,098 | ) | (163 | )% | ||||||
2020 (in thousands):
Year Ended December 31, | ||||||||||||||||
2021 | 2020 | Dollar Change | % Change | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 35,508 | $ | 22,614 | $ | 12,894 | 57 | % | ||||||||
General and administrative | $ | 11,757 | $ | 11,625 | $ | 132 | 1 | % | ||||||||
Other income | $ | 26,983 | $ | 6,084 | $ | 20,899 | 344 | % | ||||||||
prior year period.
(expense) income
Comparison of years ended December 31, 2017 and 2016
The following table summarizes our results of operations for the years ended December 31, 2017 and 2016:
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2016 | Dollar Change | % Change | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 17,314,086 | $ | 22,101,720 | $ | (4,787,634 | ) | (22 | )% | |||||||
General and administrative | $ | 9,249,671 | $ | 11,430,526 | $ | (2,180,855 | ) | (19 | )% | |||||||
Other income | $ | 11,046,099 | $ | 4,993,847 | $ | 6,052,252 | 121 | % | ||||||||
Research and Development Expenses
Research and development expense was $17.3 million for the year ended December 31, 2017, compared with $22.1 million for the year ended December 31, 2016, a decrease of $4.8 million. This decrease was primarily attributable to a $3.3 million decrease in expenses related to our research headcount, which included a reduction in research and development expense of $1.2 million reflecting grant funding received for salaries, benefits and laboratory costs in support of the discovery and study of additional product candidates and a $1.5 million decrease in external professional and consulting fees.
General and Administrative Expenses
General and administrative expense was $9.2 million for the year ended December 31, 2017, compared with $11.4 million for the year ended December 31, 2016, a decrease of $2.2 million. This decrease was primarily attributable to decreases in severance related costs of $1.1 million, a decrease in external professional, consulting and legal fees of $0.5 million, a decrease of $0.4 million in expenses related to our administrative personnel and a $0.2 million decrease in the administrative portion of the expenditure on our office and laboratory facility and related operating expenses from the reduction of the square footage of our leased premises.
Other income
Other income was $11.0 million for the year ended December 31, 2017 compared with $5.0 million for the year ended December 31, 2016, an increase of $6.0 million. This increase was primarily attributable to an increase innon-cash income of $5.2 million related to the change in fair value of our warrant liability, a decrease of $0.6 million in issuance costs allocated to warrants, issuedfor which there was no such expense in ourfollow-on offerings and an increase in interest income of $0.2 million.
2021.
shelf registration statement on Form
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Net cash provided by (used in): | ||||||||||||
Operating activities | $ | (26,258,849 | ) | $ | (24,528,993 | ) | $ | (29,300,340 | ) | |||
Investing activities | $ | 17,151,224 | $ | (9,359,641 | ) | $ | (8,968,567 | ) | ||||
Financing activities | $ | 10,432,896 | $ | 37,076,696 | $ | 32,103,109 | ||||||
2020:
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Net cash (used in) provided by: | ||||||||
Operating activities | $ | (41,125) | $ | (33,187) | ||||
Investing activities | $ | (11,613 | ) | $ | (27,404 | ) | ||
Financing activities | $ | 53,907 | $ | 51,892 | ||||
Net cash provided by (used in) investing activities
Net cash provided by investing activities in the year ended December 31, 2018 resulted from the excess of the proceeds received from the maturities of marketable securities compared toless the purchases of marketable securities.securities subsequent to the equity offering completed on March 22, 2021. Net cash used in investing activities infor the yearsyear ended December 31, 2017 and 2016 resulted2020 was attributable to the proceeds received from the investmentmaturities of our cash balances into marketable securities less proceeds from any maturitiesthe purchases of those securities.
marketable securities subsequent to the equity offerings completed on May 27, 2020.
resulted from the completion of a registered offering of our securities to institutional investors in July 2017, resulting in net proceeds of $37.1 million. Net cash provided by financing activities in the year ended December 31, 20162020 resulted primarily from the completion of a registered offering of our securities to institutional investors in July 2016,equity offerings on May 27, 2020, resulting in net proceeds of $32.0 million.
$51.9 million, net of offering costs.
seek
acquire orin-license other productsdevelopment and technologies;
add operational,
Contractual Obligations and Commitments
The following table summarizes our contractual obligations at December 31, 2018 and the effect such obligations are expected to have on our liquidity and cash flows in future periods:
| Payments due by period | ||||||||||||||||||||
Contractual obligations | Total | Less than 1 year | 1 - 3 years | 4 - 5 years | More than 5 years | |||||||||||||||
Operating lease commitments(1) | $ | 6,372,936 | $ | 653,324 | $ | 1,346,110 | $ | 1,400,492 | $ | 2,973,010 | ||||||||||
License and sponsored research agreements(2) | 1,449,750 | 449,749 | 400,000 | 400,000 | 200,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total contractual obligations | $ | 7,822,686 | $ | 1,103,073 | $ | 1,746,110 | $ | 1,800,492 | $ | 3,173,010 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
We enter into contracts in the normal course
Off-Balance Sheet Arrangements
We did not have duringcontinue to monitor the periods presented,impact of inflationary pressures on purchases and we are currently not party to, anyoff-balance sheet arrangements.
|
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. As of December 31, 2018, we had cash, cash equivalents and marketable securities of $30.5 million. Because of the short-term maturities of our cash equivalents and marketable securities, we do not believe that an increase in market rates would have any significant impact on the fair value of our cash equivalents or marketable securities. If a 10% change in interest rates were to have immediately occurred on December 31, 2018, this change would not have had a material effect on the fair value of our investment portfolio as of that date.
While we believe our cash, cash equivalents and marketable securities do not contain excessive credit or liquidity risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.
We do not own any derivative financial instruments. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative, foreign currency or other financial instruments that would require disclosure under this item.
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
covered by this Annual Report on Form2018.
2021.
Exchange Act.
As required by Rule13a-15(d) and Rule15d-15(d) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an
Item 10. | Directors, Executive Officers and Corporate Governance |
Steven C. Gilman, Ph.D. 6665 Roger J. Pomerantz, M.D., F.A.C.P. 6269 Ph.D.Ph.D 7174 Isaac Blech 6956 61 Jr.Jr 6063 Ph.D.Ph.D73 70 DirectorCary W. Sucoff, J.D.67
Steven C. Gilman, Ph.D.
Roger J. Pomerantz, M.D., F.A.C.P. Dr. Pomerantz has served as a member of our board of directors since April 2014 and was appointed Vice Chairman in May 2014. SinceFrom November 2013 to December 2019, Dr. Pomerantz has served as Chairman of the board of directors of Seres Therapeutics, Inc., a biotechnology company, and as its President and Chief Executive Officer of Seres sincefrom June 2014.2014 to January 2019. From 2011 to 2013, he was formerly Worldwide Head of Licensing & Acquisitions, Senior Vice President at Merck & Co., Inc. where he oversaw all licensing and acquisitions at Merck Research Laboratories. Previously, he served as Senior Vice President and Global Franchise Head of Infectious Diseases at Merck. Prior to joining Merck, Dr. Pomerantz was Global Head of Infectious Diseases for Johnson & Johnson Pharmaceuticals. He joined Johnson & Johnson in 2005 as President of Tibotec Pharmaceuticals, Inc.
scientific, executive and board leadership experience in drug development and in the pharmaceutical industry qualifies him to serve as a member of our board of directors.
Isaac Blech
acquired by Gilead Sciences. He led the research team responsible for the discovery of sofosbuvir for the treatment of HCV infections. In previous capacities, he has served as Associate Director ofAnti-Infectives Clinical Research at
from New York Law School and her Bachelor of Arts in Biology, with honors, from Queens College of the City University of New York.
Nancy Dong. Ms. Dong, age 53, has served as our Vice President, Finance and Administration since March 2017 She has more than 20 years of experience in accounting, strategic planning, budgeting and forecasting, organizational development, financial systems and controls and human resources. Prior to joining ContraFect in 2010 as Vice President, Controller, she served as controller at XL Marketing, a direct marketing firm, from 2009 to 2010 and at Alley Corp, a company that provides strategic advice to companies within its network, from 2007 to 2009. She also served as Vice President of Finance and Administration at DCM, atele-services firm supporting the performing arts, from 2002 to 2007. Ms. Dong also held the positions of COO and CFO at Semaphore, a project management software development firm. Ms. Dong received her B.A. degree from Yale University and a MPPM degree from The Wharton School at the University of Pennsylvania. She started her career as a management consultant at Ernst & Young LLP.
waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified above.
Item 11. | Executive Compensation |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
| F-2 | ||||
Audited Consolidated Financial Statements: | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-9 |
| Incorporated by Reference | ||||||||||||
Exhibit No. | Description | Form | File No. | Exhibit | Filing Date | Filed/Furnished | ||||||
| 3.1 | Amended and Restated Certificate of Incorporation of ContraFect Corporation, dated August 1, 2014, and Certificate of Amendment, dated May 9, 2016 and Certificate of Amendment dated May 2, 2017 | 8-K | 001-36577 | 3.1 | May 3, 2017 | |||||||
| 3.2 | Amended and Restated Bylaws of ContraFect Corporation | 8-K | 001-36577 | 3.2 | May 10, 2016 | |||||||
| 4.1 | Form of Common Stock Certificate | S-1/A | 333-195378 | 4.1 | July 3, 2014 | |||||||
| 4.2 | Representative’s Warrant, dated August 27, 2014 | 8-K | 001-36577 | 4.14 | October 29, 2015 | |||||||
| 4.3 | Form of Noteholder Warrant | S-1/A | 333-195378 | 4.7 | July 3, 2014 | |||||||
| 4.4 | Specimen Unit Certificate | S-1/A | 333-195378 | 4.8 | July 1, 2014 | |||||||
| 4.5 | Form of Indenture | S-3 | 333-206786 | 4.1 | September 4, 2015 | |||||||
| 4.6 | Form of Investor Warrant | 8-K | 001-36577 | 4.1 | June 12, 2015 | |||||||
Incorporated by Reference | ||||||||||||
Exhibit No. | Description | Form | File No. | Exhibit | Filing Date | Filed/ Furnished Herewith | ||||||
| 3.1 | Amended and Restated Certificate of Incorporation of ContraFect Corporation, dated August 1, 2014, and Certificate of Amendment, dated May 9, 2016, Certificate of Amendment dated May 2, 2017, Certificate of Amendment dated February 3, 2020, and Certificate of Amendment dated February 24, 2022 | 10-K | 001-36577 | 3.1 | March 18, 2020 | |||||||
| 3.2 | Amended and Restated Bylaws of ContraFect Corporation | 10-Q | 001-36577 | 3.2 | November 13, 2020 | |||||||
| 4.1 | Form of Common Stock Certificate | S-1/A | 333-195378 | 4.1 | July 3, 2014 | |||||||
| 4.2 | Form of Warrant Agreement by and between ContraFect Corporation and the American Stock Transfer & Trust Company, LLC, dated July 27, 2016 | 8-K | 001-36577 | 4.1 | July 27, 2016 | |||||||
| 4.3 | Form of Warrant Certificate | 8-K | 001-36577 | 4.2 | July 27, 2016 | |||||||
| * | Filed herewith. |
| ** | Furnished herewith. |
| # | Indicates management contract or compensatory plan. |
Item 16. |
|
| F-2 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-9 |
Description of the Matter | As discussed in Note 2 of the Company’s consolidated financial statements, costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to the Company by its vendors. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred. The Company’s estimates are highly dependent upon the timeliness and accuracy of the data provided by third parties regarding the status of their contracted activity. As of December 31, 2021, total accrued liabilities and prepaid expenses were $9.1 million and $4.4 million, respectively, including estimated amounts for research and clinical development service costs either incurred and unpaid or paid in advance as of that date. | |
| Auditing management’s accrued and prepaid research and development costs is especially challenging and judgmental due to the estimation required by management to determine the cost incurred for the services rendered on or prior to the balance sheet date for enrolling, dosing and monitoring patients, activating trial sites and conducting manufacturing activities. The Company has contracts with multiple clinical research organizations (“CROs”) that conduct and manage clinical studies on its behalf, as well as, contract manufacturing organizations (“CMOs”) that perform manufacturing activities. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payments during the period. | ||
How We Addressed the Matter in Our Audit | To test the estimated accrued and prepaid research and development costs, we performed audit procedures that included, among others, assessing the methodologies and testing the significant assumptions applied, such as the number of patient visits and trial sites and the amount of manufacturing activity. We also tested the underlying data used by management and assessed the historical accuracy of management’s estimates. We performed inquiries of management regarding the status of significant trials and manufacturing activities to understand the impact of recent developments on the accounting for the studies and requested confirmation of costs incurred as of period end that were invoiced or remained unbilled from a sample of CROs and CMOs. Additionally, we compared significant cash payments to the contractual terms. To evaluate the completeness of the accrued research and development costs we also examined invoices received from vendors and cash disbursements made subsequent to December 31, 2021. | |
| December 31, | ||||||||
| 2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,320,317 | $ | 6,995,046 | ||||
Marketable securities | 22,131,936 | 39,858,864 | ||||||
Prepaid expenses and other current assets | 988,799 | 1,848,063 | ||||||
|
|
|
| |||||
Total current assets | 31,441,052 | 48,701,973 | ||||||
Property and equipment, net | 1,076,099 | 1,093,903 | ||||||
Other assets | 355,420 | 393,603 | ||||||
|
|
|
| |||||
Total assets | $ | 32,872,571 | $ | 50,189,479 | ||||
|
|
|
| |||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,427,287 | $ | 1,302,431 | ||||
Accrued liabilities | 4,369,732 | 3,118,237 | ||||||
|
|
|
| |||||
Total current liabilities | 5,797,019 | 4,420,668 | ||||||
Deferred rent | 679,182 | 704,240 | ||||||
Warrant liabilities | 20,781,663 | 13,549,437 | ||||||
Other liabilities | 72,747 | 321,689 | ||||||
|
|
|
| |||||
Total liabilities | 27,330,611 | 18,996,034 | ||||||
Commitments and contingencies (Note 8) | — | — | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none outstanding at December 31, 2018 and 2017 | — | — | ||||||
Common stock, $0.0001 par value, 200,000,000 shares authorized, 79,406,556 shares issued and outstanding at December 31, 2018; 200,000,000 shares authorized, 73,656,006 shares issued and outstanding at December 31, 2017 | 7,941 | 7,366 | ||||||
Additionalpaid-in capital | 204,884,211 | 192,896,367 | ||||||
Accumulated other comprehensive loss | (30,300 | ) | (74,820 | ) | ||||
Accumulated deficit | (199,319,892 | ) | (161,635,468 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 5,541,960 | 31,193,445 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 32,872,571 | $ | 50,189,479 | ||||
|
|
|
| |||||
December 31, | ||||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 16,654 | $ | 15,485 | ||||
Marketable securities | 37,631 | 27,005 | ||||||
Prepaid expenses | 4,439 | 3,084 | ||||||
Other current assets | 4,140 | 1,081 | ||||||
Total current assets | 62,864 | 46,655 | ||||||
Property and equipment, net | 741 | 910 | ||||||
Operating lease right-of-use | 2,544 | 2,811 | ||||||
Other assets | 613 | 740 | ||||||
Total assets | $ | 66,762 | $ | 51,116 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,389 | $ | 1,806 | ||||
Accrued liabilities | 9,128 | 3,610 | ||||||
Current portion of lease liabilities | 657 | 644 | ||||||
Total current liabilities | 12,174 | 6,060 | ||||||
Warrant liabilities | 2,530 | 29,404 | ||||||
Long-term portion of lease liabilities | 2,609 | 2,959 | ||||||
Other liabilities | 73 | 73 | ||||||
Total liabilities | 17,386 | 38,496 | ||||||
Commitments and contingencies (Note 8) | 0— | 0— | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and NaN issued or outstanding at December 31, 2021 and 2020 | 0— | — | ||||||
Common stock, $0.0001 par value, 125,000,000 shares authorized; 39,332,721 and 27,810,161 shares issued and outstanding at December 31, 2021 and 2020 | 4 | 3 | ||||||
Additional paid-in capital | 310,008 | 252,908 | ||||||
Accumulated other comprehensive loss | (84 | ) | (21 | ) | ||||
Accumulated deficit | (260,552 | ) | (240,270 | ) | ||||
Total stockholders’ equity | 49,376 | 12,620 | ||||||
Total liabilities and stockholders’ equity | $ | 66,762 | $ | 51,116 | ||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Operating expenses: | ||||||||||||
Research and development, including stock-based compensation of $626,002, $451,334 and $587,426, respectively | $ | 22,416,651 | $ | 17,314,086 | $ | 22,101,720 | ||||||
General and administrative, including stock-based compensation of $929,521, $1,171,794 and $1,644,456, respectively | 8,707,774 | 9,249,671 | 11,430,526 | |||||||||
|
|
|
|
|
| |||||||
Total operating expenses | 31,124,425 | 26,563,757 | 33,532,246 | |||||||||
|
|
|
|
|
| |||||||
Loss from operations | (31,124,425 | ) | (26,563,757 | ) | (33,532,246 | ) | ||||||
Other (expense) income: | ||||||||||||
Interest income | 672,227 | 418,135 | 216,616 | |||||||||
Other expense | — | (905,014 | ) | (1,569,341 | ) | |||||||
Change in fair value of warrant liabilities | (7,232,226 | ) | 11,532,978 | 6,346,572 | ||||||||
|
|
|
|
|
| |||||||
Total other (expense) income | (6,559,999 | ) | 11,046,099 | 4,993,847 | ||||||||
|
|
|
|
|
| |||||||
Net loss | $ | (37,684,424 | ) | $ | (15,517,658 | ) | $ | (28,538,399 | ) | |||
|
|
|
|
|
| |||||||
Per share information: | ||||||||||||
Net loss per share of common stock, basic and diluted | $ | (0.50 | ) | $ | (0.28 | ) | $ | (0.85 | ) | |||
|
|
|
|
|
| |||||||
Basic and diluted weighted average shares outstanding | 76,062,664 | 55,595,732 | 33,539,465 | |||||||||
|
|
|
|
|
| |||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Operating expenses: | ||||||||||||
Research and development, including stock-based compensation of $933, $655 and $469, respectively | $ | 35,508 | $ | 22,614 | $ | 18,057 | ||||||
General and administrative, including stock-based compensation of $2,261, $1,921 and $977, respectively | 11,757 | 11,625 | 9,809 | |||||||||
Total operating expenses | 47,265 | 34,239 | 27,866 | |||||||||
Loss from operations | (47,265 | ) | (34,239 | ) | (27,866 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 109 | 192 | 359 | |||||||||
Other expense | 0 | (2,165 | ) | — | ||||||||
Change in fair value of warrant liabilities | 26,874 | 8,056 | 14,713 | |||||||||
Total other income | 26,983 | 6,083 | 15,072 | |||||||||
Net loss | $ | (20,282 | ) | $ | (28,156 | ) | $ | (12,794 | ) | |||
Per share information: | ||||||||||||
Net loss per share of common stock, basic and diluted | $ | (0.55 | ) | $ | (1.24 | ) | $ | (1.54 | ) | |||
Basic and diluted weighted average shares outstanding | 36,775,950 | 22,763,528 | 8,283,509 | |||||||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Net loss | $ | (37,684,424 | ) | $ | (15,517,658 | ) | $ | (28,538,399 | ) | |||
Other comprehensive gain (loss): | ||||||||||||
Unrealized gain (loss) onavailable-for-sale securities | 44,520 | (23,154 | ) | (21,293 | ) | |||||||
|
|
|
|
|
| |||||||
Comprehensive loss | $ | (37,639,904 | ) | $ | (15,540,812 | ) | $ | (28,559,692 | ) | |||
|
|
|
|
|
| |||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net loss | $ | (20,282 | ) | $ | (28,156 | ) | $ | (12,794 | ) | |||
Other comprehensive (loss) gain: | ||||||||||||
Unrealized (loss) gain on available-for-sale | (63 | ) | (21 | ) | 30 | |||||||
Comprehensive loss | $ | (20,345 | ) | $ | (28,177 | ) | $ | (12,764 | ) | |||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
Balance, December 31, 2015 | 27,482,692 | $ | 2,748 | $ | 148,282,546 | $ | (30,373 | ) | $ | (117,579,411 | ) | $ | 30,675,510 | |||||||||||
Issuance of common stock for services | 31,206 | 3 | 93,927 | — | — | 93,930 | ||||||||||||||||||
Issuance of securities in registered offering | 14,000,000 | 1,400 | 16,397,372 | — | — | 16,398,772 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (1,383,548 | ) | — | — | (1,383,548 | ) | ||||||||||||||||
Issuance of common stock for exercise of options | 2,850 | 1 | — | — | — | 1 | ||||||||||||||||||
Issuance of common stock for exercise of warrants | 139,258 | 14 | 55,984 | — | — | 55,998 | ||||||||||||||||||
Share-based compensation | — | — | 2,231,883 | — | — | 2,231,883 | ||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (21,293 | ) | — | (21,293 | ) | ||||||||||||||||
Net loss | — | — | — | — | (28,538,399 | ) | (28,538,399 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2016 | 41,656,006 | $ | 4,166 | $ | 165,678,164 | $ | (51,666 | ) | $ | (146,117,810 | ) | $ | 19,512,854 | |||||||||||
Issuance of securities in registered offering | 32,000,000 | 3,200 | 27,613,365 | — | — | 27,616,565 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (2,018,290 | ) | — | — | (2,018,290 | ) | ||||||||||||||||
Share-based compensation | — | — | 1,623,128 | — | — | 1,623,128 | ||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (23,154 | ) | — | (23,154 | ) | ||||||||||||||||
Net loss | — | — | — | — | (15,517,658 | ) | (15,517,658 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2017 | 73,656,006 | $ | 7,366 | $ | 192,896,367 | $ | (74,820 | ) | $ | (161,635,468 | ) | $ | 31,193,445 | |||||||||||
Issuance of common stock in registered offering | 5,750,000 | 575 | 11,499,425 | — | — | 11,500,000 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (1,072,607 | ) | — | — | (1,072,607 | ) | ||||||||||||||||
Issuance of common stock for exercise of warrants | 3,550 | — | 5,503 | — | — | 5,503 | ||||||||||||||||||
Share-based compensation | — | — | 1,555,523 | — | — | 1,555,523 | ||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | 44,520 | — | 44,520 | ||||||||||||||||||
Net loss | — | — | — | — | (37,684,424 | ) | (37,684,424 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance, December 31, 2018 | 79,409,556 | $ | 7,941 | $ | 204,884,211 | $ | (30,300 | ) | $ | (199,319,892 | ) | $ | 5,541,960 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balance, December 31, 2018 | 7,940,931 | $ | 1 | $ | 204,891 | $ | (30 | ) | $ | (199,320 | ) | $ | 5,542 | |||||||||||
Issuance of securities in registered offerings | 6,280,000 | 1 | 20,033 | — | — | 20,034 | ||||||||||||||||||
Issuance of securities in private placement | 1,111,111 | — | 3,000 | — | — | 3,000 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (1,713 | ) | — | — | (1,713 | ) | ||||||||||||||||
Stock-based compensation | — | — | 1,447 | — | — | 1,447 | ||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | 30 | — | 30 | ||||||||||||||||||
Net loss | — | — | — | — | (12,794 | ) | (12,794 | ) | ||||||||||||||||
Balance, December 31, 2019 | 15,332,042 | $ | 2 | $ | 227,658 | $ | — | $ | (212,114 | ) | $ | 15,546 | ||||||||||||
Issuance of securities in registered offerings | 11,797,752 | 1 | 21,107 | — | — | 21,108 | ||||||||||||||||||
Issuance of securities in private placement | 674,156 | — | 3,000 | — | — | 3,000 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (1,462 | ) | — | — | (1,462 | ) | ||||||||||||||||
Issuance of common stock for exercise of warrants | 5,850 | — | 29 | — | — | 29 | ||||||||||||||||||
Issuance of common stock for exercise of options | 361 | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation | — | — | 2,576 | — | — | 2,576 | ||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (21 | ) | — | (21 | ) | ||||||||||||||||
Net loss | — | — | — | — | (28,156 | ) | (28,156 | ) | ||||||||||||||||
Balance, December 31, 2020 | 27,810,161 | $ | 3 | $ | 252,908 | $ | (21 | ) | $ | (240,270 | ) | $ | 12,620 | |||||||||||
Issuance of securities in registered offering | 11,500,000 | 1 | 57,499 | — | — | 57,500 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (3,703 | ) | — | — | (3,703 | ) | ||||||||||||||||
Issuance of common stock for exercise of warrants | 22,560 | — | 110 | — | — | 110 | ||||||||||||||||||
Stock-based compensation | — | — | 3,194 | — | — | 3,194 | ||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (63 | ) | — | (63 | ) | ||||||||||||||||
Net loss | — | — | — | — | (20,282 | ) | (20,282 | ) | ||||||||||||||||
Balance, December 31, 2021 | 39,332,721 | $ | 4 | $ | 310,008 | $ | (84 | ) | $ | (260,552 | ) | $ | 49,376 | |||||||||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net loss | $ | (37,684,424 | ) | $ | (15,517,658 | ) | $ | (28,538,399 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation | 151,292 | 187,249 | 451,008 | |||||||||
Stock-based compensation expense | 1,555,523 | 1,623,128 | 2,231,883 | |||||||||
Issuance of common stock in exchange for services | — | — | 93,930 | |||||||||
Issuance costs allocated to warrants | — | 905,014 | 1,569,341 | |||||||||
Change in fair value of warrant and embedded derivative liabilities | 7,232,226 | (11,532,978 | ) | (6,346,572 | ) | |||||||
(Decrease) increase in deferred rent | (25,058 | ) | (290,199 | ) | 22,320 | |||||||
Net amortization of premium paid on marketable securities | 486,736 | 831,793 | 428,783 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Decrease (increase) in prepaid expenses and other current andnon-current assets | 897,447 | (1,059,502 | ) | 138,352 | ||||||||
Increase in accounts payable and accrued liabilities | 1,127,409 | 324,160 | 649,014 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in operating activities | (26,258,849 | ) | (24,528,993 | ) | (29,300,340 | ) | ||||||
Cash flows from investing activities | ||||||||||||
Purchases of marketable securities | (23,846,176 | ) | (53,162,598 | ) | (36,459,405 | ) | ||||||
Proceeds from maturities of marketable securities | 41,130,888 | 43,802,957 | 27,604,030 | |||||||||
Purchases of property and equipment | (133,488 | ) | — | (113,192 | ) | |||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) investing activities | 17,151,224 | (9,359,641 | ) | (8,968,567 | ) | |||||||
Cash flows from financing activities | ||||||||||||
Proceeds from issuance of equity securities | 11,500,000 | 40,000,000 | 35,000,000 | |||||||||
Payment of financing costs of securities sold | (1,072,607 | ) | (2,923,304 | ) | (2,952,889 | ) | ||||||
Proceeds from exercise of warrants | 5,503 | — | 55,998 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by financing activities | 10,432,896 | 37,076,696 | 32,103,109 | |||||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in cash and cash equivalents | 1,325,271 | �� | 3,188,062 | (6,165,798 | ) | |||||||
Cash and cash equivalents at beginning of period | 6,995,046 | 3,806,984 | 9,972,781 | |||||||||
|
|
|
|
|
| |||||||
Cash and cash equivalents at end of period | $ | 8,320,317 | $ | 6,995,046 | $ | 3,806,984 | ||||||
|
|
|
|
|
| |||||||
Supplemental disclosures of cash flow information andnon-cash investing and financing activities | ||||||||||||
Issuance of common stock for services | $ | — | $ | — | $ | 93,930 | ||||||
Issuance of warrants to purchase common stock | $ | — | $ | 12,383,435 | $ | 18,601,228 | ||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net loss | $ | (20,282 | ) | $ | (28,156 | ) | $ | (12,794 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation | 148 | 168 | 169 | |||||||||
Stock-based compensation expense | 3,194 | 2,576 | 1,447 | |||||||||
Issuance costs allocated to warrants | — | 2,175 | — | |||||||||
Change in fair value of warrant liabilities | (26,874 | ) | (8,056 | ) | (14,713 | ) | ||||||
Net amortization of premium paid on marketable securities | 924 | 378 | 171 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
(Increase) decrease in prepaid expenses and other current and non-current assets | (4,336 | ) | 1,738 | (1,263 | ) | |||||||
Increase (decrease) in accounts payable, accrued liabilities and other liabilities | 6,101 | (4,010 | ) | (445 | ) | |||||||
Net cash used in operating activities | (41,125 | ) | (33,187 | ) | (27,428 | ) | ||||||
Cash flows from investing activities | ||||||||||||
Purchases of marketable securities | (48,698 | ) | (47,555 | ) | — | |||||||
Proceeds from maturities of marketable securities | 37,085 | 20,151 | 21,991 | |||||||||
Purchases of property and equipment | — | — | (20 | ) | ||||||||
Net cash (used in) provided by investing activities | (11,613 | ) | (27,404 | ) | 21,971 | |||||||
Cash flows from financing activities | ||||||||||||
Proceeds from issuance of equity securities | 57,500 | 55,500 | 23,034 | |||||||||
Payment of financing costs of securities sold | (3,703 | ) | (3,637 | ) | (1,713 | ) | ||||||
Proceeds from exercise of warrants | 110 | 29 | — | |||||||||
Net cash provided by financing activities | 53,907 | 51,892 | 21,321 | |||||||||
Net increase (decrease) in cash and cash equivalents | 1,169 | (8,699 | ) | 15,864 | ||||||||
Cash and cash equivalents at beginning of period | 15,485 | 24,184 | 8,320 | |||||||||
Cash and cash equivalents at end of period | $ | 16,654 | $ | 15,485 | $ | 24,184 | ||||||
Supplemental disclosures of cash flow information | ||||||||||||
Prepaid expenses in accrued liabilities | $ | — | $ | — | $ | 4,097 | ||||||
Right-of-use | $ | — | $ | — | $ | 4,149 | ||||||
Leasehold improvement obtained in exchange for lease incentive obligations | $ | — | $ | — | $ | 189 | ||||||
Issuance of warrants to purchase common stock | $ | — | $ | 31,391 | $ | — | ||||||
2021
operations or continue as a going concern.
On July 25, 2017, the Company completed an underwritten public offering of 32,000,000 shares of its common stock and warrants to purchase an additional 16,000,000 shares of its common stock at an exercise price of $1.55 per share (the “2017 Offering”). The public offering price was $1.25 per share of common stock and accompanying warrant, resulting in net proceeds to the Company of approximately $37.1 million after underwriting discounts and commissions and offering expenses payable by the Company.
On August 3, 2018, the Company completed an underwritten public offering of 5,750,00011,500,000 shares of its common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public offering price of $2.00$5.00 per share, resulting in estimated net proceeds to the Company of approximately $10.4$53.8 million after underwriting discounts and commissions and offering expenses payable by the Company.
significant accounting policies
2020.
value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:
Deferred Rent
The Company has an operating lease for office and laboratory space. Rent expense is recorded on a straight-line basis over the initial lease term. The difference between the actual cash paid and the straight-line rent expense is recorded as deferred rent.
such as patient enrollment, clinical site activations, or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid expenses or accrued expenses.
Share-basedliabilities.
Grants
2021.
2021.
applicable to common stockholdersstockholders’ calculation, stock options and warrantwarrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share applicable to common stockholders, as their effect would be anti-dilutive; therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.
In
In August 2016, the FASB issued Accounting Standards UpdateNo. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU2016-15), which amended the existing accounting standards for the statement of cash flows by providing guidance on eight classification issues related to the statement of cash flows. ASU2016-15 is effective in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The amendments should be applied retrospectively to all periods presented. For issues that are impracticable to apply retrospectively, the amendments may be applied prospectively as of the earliest date practicable. The Company adopted ASUNo. 2016-15 as of January 1, 2018 and there was no impact to the Company’s financial statements and related disclosures.
In November 2016, the FASB issued Accounting Standards UpdateNo. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU2016-18), which amended the existing accounting standards for the statement of cash flows by requiring restricted cash to be included with cash and cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the statement of cash flows. ASU2016-18 is effective in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The amendments should be applied retrospectively to all periods presented. The Company adopted ASUNo. 2016-18 as of January 1, 2018 and there was no impact to the Company’s financial statements and related disclosures.
In May 2017, the FASB issued Accounting Standards Update2017-09,Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (ASU2017-09). This new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU2017-09 allows for prospective application and is effective for fiscal years beginning after December 15, 2017, and interim periods therein with early adoption permitted for interim or annual periods. The Company adopted ASUNo. 2017-09 as of January 1, 2018 and there was no impact to the Company’s financial statements and related disclosures.
Recent
In February 2016, the FASB issued a new Accounting Standards Update,Leases (ASU2016-02). ASU2016-02 is aimed at making leasing activities more transparent and comparable and requires most leases be recognized by lessees on the balance sheet as an asset and a corresponding lease liability, regardless of whether they are classified as finance (previously referred to as capital leases) or operating leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. We will adopt the new standard effective January 1, 2019.
This guidance will be effective on a modified retrospective basis and we will apply the optional transition method. The Company is currently evaluating the potential impact ASU2016-02 may have on its financial position, results of operations, and related footnotes. The Company expects it will elect to utilize the available package of practical expedients permitted under the transition guidance within the new standard, which does not require the reassessment of the following: i) whether existing or expired arrangements are or contain a lease, ii) the lease classification of existing or expired leases, and iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. Additionally, the Company expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of its balance sheet. The Company currently expects the lease of its corporate headquarters at 28 Wells Avenue in Yonkers, New York, as disclosed in Note 8— Commitments and Contingencies in our Annual Report on Form10-K filed with the SEC on March 15, 2018, will be subject to the new standard and recognize as aright-of-use asset and operating lease liability upon its adoption of ASU2016-02. The Company has begun its implementation which will increase the total assets and total liabilities that the Company reports relative to such amounts prior to adoption and continues to assess the impact that this standard has on its other contracts, if any. We expect to complete our assessment of the full financial impact of ASC 842 during the first quarter of 2019, and will include all required presentation and disclosures under ASC 842 in our Form10-Q for the three months ending March 31, 2019.
In August 2018, the FASB issued Accounting Standards Update,Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, (ASU2018-13).The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement. The new standard will be effective beginning January 1, 2020 and early adoption is permitted. The Company is currently evaluating the potential impact ASU2018-13 may have on its disclosures upon adoption.
In August 2018, the SEC adopted the final rule under SEC ReleaseNo. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated
or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company anticipates its first presentation of changes in stockholders’ equity as required under the new SEC guidance will be included in its Form10-Q for the quarter ended March 31, 2019.
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 19,179,530 | $ | 314 | $ | (31,160 | ) | $ | 19,148,684 | |||||||
U.S. Treasury securities | 2,982,706 | 546 | — | 2,983,252 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 22,162,236 | $ | 860 | $ | (31,160 | ) | $ | 22,131,936 | ||||||||
|
|
|
|
|
|
|
| |||||||||
following (in thousands):
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 37,715 | $ | 0 | $ | (84 | ) | $ | 37,631 | |||||||
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 39,933,684 | $ | — | $ | (74,820 | ) | $ | 39,858,864 | |||||||
U.S. Treasury securities include government debt instruments issued by the U.S. Department of the Treasury. following (in thousands):
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 27,026 | $ | 6 | $ | (27 | ) | $ | 27,005 | |||||||
December 3
| Fair Value Measurement As of December 31, 2018 | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 6,850,772 | $ | — | $ | — | ||||||
Marketable securities | 22,131,936 | — | — | |||||||||
Warrant liabilities | — | — | 20,781,663 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 28,982,708 | $ | — | $ | 20,781,663 | ||||||
|
|
|
|
|
| |||||||
| Fair Value Measurement As of December 31, 2017 | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 5,949,477 | $ | — | $ | — | ||||||
Marketable securities | 39,858,864 | — | — | |||||||||
Warrant liabilities | — | — | 13,549,437 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 45,808,341 | $ | — | $ | 13,549,437 | ||||||
|
|
|
|
|
| |||||||
The Company issued a warrant to the representative of the underwriter of its initial public offering (the “Representative’s Warrant”). The Company determined that this warrant should be classified as a liability and considers it as a Level 3 financial instrument (see also Note 9, “Capital Structure”). The Representative’s Warrant will bere-measured at each subsequent reporting period and changes in fair value will be recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability:
| As of December 31, 2018 | As of December 31, 2017 | |||||||
Expected volatility | 70.9 | % | 88.1 | % | ||||
Remaining contractual term (in years) | 0.67 | 1.67 | ||||||
Risk-free interest rate | 2.63 | % | 1.89 | % | ||||
Expected dividend yield | — | % | — | % | ||||
Fair Value Measurement as of December 31, 2021 | ||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 7,734 | $ | — | $ | — | ||||||
Marketable securities | 37,631 | — | — | |||||||||
Warrant liabilities | — | — | 2,530 | |||||||||
Total | $ | 45,365 | $ | — | $ | 2,530 | ||||||
Fair Value Measurement as of December 31, 2020 | ||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 12,921 | $ | — | $ | — | ||||||
Marketable securities | 27,005 | — | — | |||||||||
Warrant liabilities | — | — | 29,404 | |||||||||
Total | $ | 39,926 | $ | — | $ | 29,404 | ||||||
| As of December 31, 2018 | As of December 31, 2017 | |||||||
Expected volatility | 72.6 | % | 80.3 | % | ||||
Remaining contractual term (in years) | 2.58 | 3.58 | ||||||
Risk-free interest rate | 2.46 | % | 2.09 | % | ||||
Expected dividend yield | — | % | — | % | ||||
As of December 31, 2020 | ||||
Expected volatility | 59.7 | % | ||
Remaining contractual term (in years) | 0.58 | |||
Risk-free interest rate | 0.09 | % | ||
Expected dividend yield | — | % | ||
| As of December 31, 2018 | As of December 31, 2017 | |||||||
Expected volatility | 87.3 | % | 81.5 | % | ||||
Remaining contractual term (in years) | 3.58 | 4.58 | ||||||
Risk-free interest rate | 2.49 | % | 2.20 | % | ||||
Expected dividend yield | — | % | — | % | ||||
As of December 31, 2021 | As of December 31, 2020 | |||||||
Expected volatility | 56.5 | % | 100.1 | % | ||||
Remaining contractual term (in years) | 0.58 | 1.58 | ||||||
Risk-free interest rate | 0.19 | % | 0.12 | % | ||||
Expected dividend yield | — | % | — | % | ||||
As of December 31, 2021 | As of December 31, 2020 | |||||||
Expected volatility | 61.9 | % | 111.9 | % | ||||
Remaining contractual term (in years) | 1.42 | 2.42 | ||||||
Risk-free interest rate | 0.56 | % | 0.15 | % | ||||
Expected dividend yield | — | % | — | % | ||||
2019 (in thousands):
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Balance at beginning of period | $ | 13,549,437 | $ | 12,698,980 | $ | 444,324 | ||||||
Issuance of 2017 Warrants | — | 12,383,435 | — | |||||||||
Issuance of 2016 Warrants | — | — | 18,601,228 | |||||||||
Change in fair value | 7,232,226 | (11,532,978 | ) | (6,346,572 | ) | |||||||
|
|
|
|
|
| |||||||
Balance at end of period | $ | 20,781,663 | $ | 13,549,437 | $ | 12,698,980 | ||||||
|
|
|
|
|
| |||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Balance at beginning of period | $ | 29,404 | $ | 6,069 | $ | 20,782 | ||||||
Issuance of 2020 Warrants | — | 31,391 | — | |||||||||
Change in fair value | (26,874 | ) | (8,056 | ) | (14,713 | ) | ||||||
Balance at end of period | $ | 2,530 | $ | 29,404 | $ | 6,069 | ||||||
| December 31, | ||||||||
| 2018 | 2017 | |||||||
Computer equipment | $ | 19,691 | $ | 19,691 | ||||
Furniture | 434,697 | 434,697 | ||||||
Lab equipment | 1,844,369 | 1,710,881 | ||||||
Leasehold improvements | 1,855,004 | 1,855,004 | ||||||
|
|
|
| |||||
| 4,153,761 | 4,020,273 | |||||||
Less: accumulated depreciation and amortization | (3,077,662 | ) | (2,926,370 | ) | ||||
|
|
|
| |||||
| $ | 1,076,099 | $ | 1,093,903 | |||||
|
|
|
| |||||
Depreciation expense was $151,292, $187,249 and $451,008of the following for the years ended December 31, 2018, 20172021 and 2016,2020 (in thousands):
December 31, | ||||||||
2021 | 2020 | |||||||
Computer equipment | $ | 20 | $ | 20 | ||||
Furniture | 435 | 435 | ||||||
Lab equipment | 1,864 | 1,864 | ||||||
Leasehold improvements | 1,985 | 2,006 | ||||||
| 4,304 | 4,325 | |||||||
Less: accumulated depreciation and amortization | (3,563 | ) | (3,415 | ) | ||||
| $ | 741 | $ | 910 | |||||
Liabilities
| December 31, | ||||||||
| 2018 | 2017 | |||||||
Accrued research and development service fees | $ | 2,076,764 | $ | 578,562 | ||||
Accrued compensation costs | 1,585,689 | 2,107,118 | ||||||
Accrued professional fees | 433,498 | 168,168 | ||||||
Accrued facilities operation expenses | 232,673 | 221,103 | ||||||
Other accrued expenses | 41,108 | 43,286 | ||||||
|
|
|
| |||||
| $ | 4,369,732 | $ | 3,118,237 | |||||
|
|
|
| |||||
December 31, | ||||||||
2021 | 2020 | |||||||
Accrued research and clinical development service fees | $ | 5,641 | $ | 801 | ||||
Accrued compensation costs | 2,215 | 2,069 | ||||||
Accrued professional fees | 819 | 457 | ||||||
Accrued facilities operation expenses | 307 | 173 | ||||||
Other accrued expenses | 146 | 110 | ||||||
| $ | 9,128 | $ | 3,610 | |||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Net loss applicable to common stockholders | $ | (37,684,424 | ) | $ | (15,517,658 | ) | $ | (28,538,399 | ) | |||
Weighted average shares of common stock outstanding | 76,062,664 | 55,595,732 | 33,539,465 | |||||||||
|
|
|
|
|
| |||||||
Net loss per share of common stock—basic and diluted | $ | (0.50 | ) | $ | (0.28 | ) | $ | (0.85 | ) | |||
|
|
|
|
|
| |||||||
stockholders (in thousands, except share and per share data):
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net loss applicable to common stockholders | $ | (20,282 | ) | $ | (28,156 | ) | $ | (12,794 | ) | |||
Weighted average shares of common stock outstanding | 36,775,950 | 22,763,528 | 8,283,509 | |||||||||
Net loss per share of common stock—basic and diluted | $ | (0.55 | ) | $ | (1.24 | ) | $ | (1.54 | ) | |||
| December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Options to purchase common stock | 7,187,885 | 6,200,151 | 4,691,746 | |||||||||
Warrants to purchase common stock | 31,243,026 | 36,270,103 | 27,214,775 | |||||||||
|
|
|
|
|
| |||||||
| 38,430,911 | 42,470,254 | 31,906,521 | ||||||||||
|
|
|
|
|
| |||||||
December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Options to purchase common stock | 2,899,694 | 1,853,841 | 1,216,338 | |||||||||
Warrants to purchase common stock | 10,926,594 | 12,350,293 | 3,033,910 | |||||||||
13,826,288 | 14,204,134 | 4,250,248 | ||||||||||
In January 2012, the Company entered into atwo2 additional five-year terms. Effective August 1, 2017, the Company relinquished 10,912 square feet of space under the Fourth Floor Lease and was relieved of its obligations related to such space. Monthly rental payments were adjusted and together with
December 31, | ||||||||
Description | 2021 | 2020 | ||||||
Operating lease liabilities: | ||||||||
Current portion of lease liabilities | $ | 657 | $ | 644 | ||||
Long-term portion of lease liabilities | $ | 2,609 | $ | 2,959 | ||||
| Amount | ||||
Year ending December 31: | ||||
2019 | $ | 653,324 | ||
2020 | 666,391 | |||
2021 | 679,719 | |||
2022 | 693,313 | |||
2023 | 707,179 | |||
Thereafter | 2,973,011 | |||
|
| |||
| $ | 6,372,937 | |||
|
| |||
Rent expense is recognizedrenewable at the end of the lease term at the Company’s option. For the purposes of determining the remaining lease term in contemplation of available extensions, the Company did not consider either renewal to be probable at this time. In determining the present value of lease payments, the Company estimated its incremental borrowing rate based on the straight-line method overinformation available at the adoption date of Topic 842. As of January 1, 2019, the remaining lease term was 9.0 years and the discount rate used to determine the operating lease liability was 9.93%.
Amount | ||||
Year ending December 31: | ||||
2022 | $ | 693 | ||
2023 | 707 | |||
2024 | 721 | |||
2025 | 736 | |||
2026 | 750 | |||
Thereafter | 702 | |||
Total lease payments | 4,309 | |||
Less: Present value adjustment | (1,043 | ) | ||
Operating lease liabilities | $ | 3,266 | ||
2020 are as follows (in thousands):
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Operating lease cost (1) | $ | 616 | $ | 615 | ||||
Variable lease costs (2) | 148 | 126 | ||||||
Total lease cost | $ | 764 | $ | 741 | ||||
| (1) | Operating lease payments included in the measurement of the Company’s lease liabilities are comprised of fixed payments according to the terms of the Company’s leases. |
| (2) | Variable lease payments consist of the Company’s utility costs billed by and paid to its landlord. Variable lease payments are presented as operating expenses in the Company’s Consolidated Statement of Operations in the same line item as expense arising from fixed lease payments and in net cash used in operating activities in the Company’s Statement of Cash Flows. |
|
Phase 1 trial. We are allowed to grant sublicenses to third parties without prior approval, subject to certain conditions and the payment of a certain percentage of all payments we receive from sublicensees.
There
Collaborative Research Agreements
Beginning in October 2009, we entered into a research agreement with Rockefeller where we provided funding for the research. The initial agreement focused on producing and testing monoclonal antibodies against proteins ofStaph aureus. On October 24, 2011, we entered into a second research agreement with Rockefeller where we provide funding for the research, to identify lysins, enzymes or small molecules that will kill gram-negative bacteria, and identify and characterize lysins fromClostridia difficile to be engineered into gut commensal bacteria. On October 25, 2016, we entered into a third research agreement with Rockefeller, where we provide funding for the identification of novel lysin therapeutic candidates which target gram-negative pathogens. The research collaboration will focus on gram-negative pathogens such asP. aeruginosa, E. coli, andK. pneumoniae, including antibiotic-resistant strains.
Our current agreement runs through October 24, 2019. Either party may terminate the agreement upon breach of the agreement, following 30 days written notice and failure to cure such breach. Following the expiration or termination of the agreement, each party will have anon-exclusive license to use for internal research purposes all research results, including joint intellectual property. If Rockefeller or joint intellectual property develops from these programs, we will have theright-of-first refusal to negotiate to acquire a royalty-bearing license to utilize such intellectual property for commercial purposes.
Trellis Biosciences, LLC
On January 29, 2014, the Company entered into a license agreement with Trellis Biosciences, LLC (“Trellis”) that gives it exclusive rights to all Trellis mAbs in the field of influenza discovered from the Trellis CellSpot platform. Particularly, the license provides the Company with three fully human mAbs that bind, neutralize and protect animals from all strains of H1, H3 and B influenza, and that will also cross bind, neutralize and protect animals from all other seasonal or pandemic influenza strains that may arise (including H5N1 and H7N9).
The Company will also be required to make payments to Trellis upon the achievement of specified development and regulatory milestones and upon the achievement of future sales and for royalty on future net sales from products of up to 4%. There were no development or regulatory milestones or royalty payments made during the years ended December 31, 2018, 2017 and 2016. The Company is allowed to grant sublicenses to third parties. The license agreement terminates upon the earlier of (i) the Company’s decision to terminate the agreement at will or for safety reasons, (ii) material breach by either party that is not cured within ninety (90) days, or (iii) either party’s insolvency.
Separation Agreement
On December 12, 2017, the Company notified Lisa R. Ricciardi that she would no longer be needed to serve as Chief Operating Officer of the Company effective December 31, 2017. Subject to Ms. Ricciardi entering into a separation agreement, the Company accrued expense of $0.7 million for the severance payments and continued medical, dental and vision coverage under the Company’s group healthcare plans, to be provided for a period of 18 months following the effective date of Ms. Ricciardi’s termination, and recognized share-based compensation
expense of $0.2 million for the accelerated vesting of all unvested portions of Ms. Ricciardi’s stock option grants. The total amount of these charges was recognized as part of general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2017.
9.
On July 27, 2016, The Company completed a concurrent private placement to Pfizer of 674,156 shares of common stock and an accompanying warrant to purchase an additional 505,617 shares of its common stock at an exercise price of $4.90 per share at a price of $4.45 for one share of common stock and an accompanying warrant to purchase 0.75 shares of common stock, resulting in net proceeds to the Company sold 14,000,000of approximately $3.0 million. Warrants to purchase 22,560 and 5,850 shares of common stock were exercised during the years ended December 31, 2021 and 2020, respectively.
Measurements”). Additionally, the Company allocated approximately $2.2 million, $0.9 million and $1.6 million of issuance costs to the 2020 Warrants, the 2017 Warrants and 2016 Warrants, respectively, based on the proportion of the proceeds allocated to the fair value of the warrants. The allocated issuance costs were expensed as other expense in the Company’s consolidated statement of operations.
Private Placement
On June 12, 2015,July 27, 2021, the 2016 Warrants expired in accordance with their terms and are 0 longer exercisable.
The placement agents in the PIPE received warrants to purchase 4% of the total number of shares of common stock sold in the PIPE (the “Placement Agent Warrants”), for a total of 189,126 shares of common stock underlying the Placement Agent Warrants. The Placement Warrants became exercisable upon issuance at an exercise price of $4.65 per share and expire on June 11, 2020.
The common stock and accompanying PIPE Warrants and Placement Agent Warrants werePfizer Warrant should be classified to stockholders’as equity in the Company’s consolidated balance sheet.
Representative’s Warrant
The Maxim Group, LLC, the representative of the underwriters in the IPO, received the Representative’s Warrant to purchase 3% of the total number of shares of common stock sold in the IPO, including those shares sold upon the exercise of the over-allotment, for a total of 206,410 shares of common stock underlying the Representative’s Warrant. The Representative’s Warrant became exercisable at an exercise price of $7.50 per share beginning 180 days after the effective date of the Company’s registration statement (January 24, 2015) and expires on August 27, 2019. The Company classified the Representative’s Warrant as a liability since it did not meet the requirements to be included in equity. The fair value of the Representative’s Warrant will bere-measured at each reporting period and changes in fair value will be recognized in the statement of operations (see Note 3, “Fair Value Measurements”).
Convertible Notes
The Company issued approximately $15.0 million aggregate principal amount of its 8.00% Convertible Notes due May 31, 2015 (the “Convertible Notes”) from June 2013 through June 2014. On August 1, 2014, in conjunction with the closing of the Company’s IPO, the principal amount of the Convertible Notes, and all accrued and unpaid interest thereon, automatically converted into 5,109,988 shares of common stock. Each purchaser of the Convertible Notes also received a warrant which included an exercise price “cap” that was analogous to “down round protection” (the “Note Warrants”). Upon the closing of the IPO and based on the terms of the Note Warrants, the Company determined the total number of shares of the Company’s common stock underlying the Note Warrants to be 3,321,416 at an exercise price of $3.00 per share. There were 2,645,176 Note Warrants that expired during 2018 and therefore have been terminated and are no longer exercisable. There are 670,702 shares of common stock underlying the remaining outstanding Note Warrants as of December 31, 2018. The Note Warrants expire five years from the date of issuance.
| December 31, | ||||||||
| 2018 | 2017 | |||||||
Options to purchase common stock | 7,187,885 | 6,200,151 | ||||||
Warrants to purchase common stock | 31,243,026 | 36,270,103 | ||||||
|
|
|
| |||||
| 38,420,811 | 42,470,254 | |||||||
|
|
|
| |||||
10. Stock Warrants
As of December 31, 20182021 and 2017,2020:
December 31, | ||||||||
2021 | 2020 | |||||||
Outstanding options to purchase common stock | 2,899,694 | 1,853,841 | ||||||
Outstanding warrants to purchase common stock | 10,926,594 | 12,350,293 | ||||||
For future issuance under the 2014 Omnibus Incentive Plan | 77,631 | 41,079 | ||||||
For future issuance under the 2021 Employment Inducement Plan | 1,000,000 | — | ||||||
14,903,919 | 14,245,213 | |||||||
| December 31, | ||||||||
| 2018 | 2017 | |||||||
Note Warrants | 670,702 | 3,315,878 | ||||||
PIPE Warrants (1) | — | 2,364,066 | ||||||
2017 Warrants | 15,996,450 | 16,000,000 | ||||||
2016 Warrants | 14,000,000 | 14,000,000 | ||||||
Representative’s Warrant | 206,410 | 206,410 | ||||||
Placement Agent Warrants | 189,126 | 189,126 | ||||||
Other warrants (2) | 180,338 | 194,623 | ||||||
|
|
|
| |||||
Warrants to purchase common stock | 31,243,026 | 36,270,103 | ||||||
Weighted-average exercise price per share | $ | 2.31 | $ | 2.74 | ||||
December 31, | ||||||||
2021 | 2020 | |||||||
2020 Warrants | 8,819,904 | 8,842,464 | ||||||
2017 Warrants | 1,599,645 | 1,599,645 | ||||||
2016 Warrants | 0 | 1,400,000 | ||||||
Pfizer Warrant | 505,617 | 505,617 | ||||||
Other warrants (1) | 1,428 | 2,567 | ||||||
Warrants to purchase common stock | 10,926,594 | 12,350,293 | ||||||
Weighted-average exercise price per share | $ | 6.47 | $ | 9.14 | ||||
| (1) |
|
Other warrants are comprised of warrants issued prior to the Company’s IPO, generally in exchange for services rendered to the Company. |
Exercise Prices | Shares Underlying Outstanding Warrants | Expiration Date | ||||||
≤ $10.00 | May 27, 2023 | |||||||
> $10.00 ≤ $20.00 | ||||||||
| July | |||||||
> $20.00 | ||||||||
| 1,428 | January 5, 2022 | | ||||||
10,926,594 | ||||||||
11.. Stock Option and Incentive Plans
2021.
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 31, 2017 | 6,200,151 | $ | 3.81 | |||||||||||||
Granted | 2,320,000 | 1.47 | ||||||||||||||
Exercised | — | — | ||||||||||||||
Expired | (865,606 | ) | 3.93 | |||||||||||||
Forfeited | (466,660 | ) | 1.77 | |||||||||||||
|
| |||||||||||||||
Options outstanding at December 31, 2018 | 7,187,885 | $ | 3.17 | 6.61 | $ | 290,781 | ||||||||||
|
|
|
| |||||||||||||
Vested and exercisable at December 31, 2018 | 4,974,057 | $ | 3.78 | 5.73 | $ | 170,919 | ||||||||||
|
|
|
| |||||||||||||
Of the option grants outstanding to purchase 7,187,885 shares of common stock, grants to purchase 657,156 shares of common stock were issued and are outstanding outside the Company’s incentive plans.
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 31, 2020 | 1,853,841 | $ | 14.33 | |||||||||||||
Granted | 1,227,500 | $ | 4.31 | |||||||||||||
Exercised | 0 | 0 | ||||||||||||||
Expired | (109,115 | ) | $ | 45.57 | ||||||||||||
Forfeited | (72,532 | ) | $ | 5.86 | ||||||||||||
Options outstanding at December 31, 2021 | 2,899,694 | $ | 9.12 | 7.85 | $ | 0 | ||||||||||
Vested and exercisable at December 31, 2021 | 1,476,281 | $ | 12.65 | 6.86 | $ | 0 | ||||||||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Risk free interest rate | 2.58 | % | 2.07 | % | 1.22 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected term (in years) | 6.02 | 6.01 | 5.01 | |||||||||
Expected volatility | 82.3 | % | 79.6 | % | 79.5 | % | ||||||
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Risk free interest rate | 0.83 | % | 1.14 | % | 2.35 | % | ||||||
Expected dividend yield | 0 | 0 | 0 | |||||||||
Expected term (in years) | 5.99 | 6.03 | 6.06 | |||||||||
Expected volatility | 94.5 | % | 94.6 | % | 89.7 | % | ||||||
data.
12.
13.
more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, no provision for a deferred tax asset has been made for the tax benefits of the net operating loss carryforwards as the entire amount is offset by a valuation allowance. The valuation allowance increased by approximately $9,006,000$12.8
On December 22, 2017, the Tax Cuts and Jobs Act” (the “2017 Tax Act”) was enacted. The 2017 Tax Act lowered the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, the change in the U.S. federal tax rate required the Company tore-measure its federal deferred tax assets and liabilities. Effective for tax years beginning on January 1, 2018, the 2017 Tax Act repealed the performance exception permitting certain executive officer compensation greater than $1 million to be deducted. During the fourth quarter of 2017, the Company reduced its net deferred tax asset balance and offsetting valuation allowance by $18,284,538 for there-measurement of its U.S. deferred tax balances. There were no changes to the interim re-measurement amount and the Company’s accounting for the 2017 Tax Act is complete.
| December 31, | ||||||||
| 2018 | 2017 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryovers | $ | 49,294,211 | $ | 40,879,826 | ||||
Share-based compensation | 1,754,362 | 1,702,036 | ||||||
R&D tax credits | 2,545,920 | 1,750,785 | ||||||
Accrued compensation and severance | 442,090 | 659,458 | ||||||
Deferred rent | 198,278 | 200,968 | ||||||
Intangible assets | 131,503 | 154,669 | ||||||
|
|
|
| |||||
Total deferred tax assets | $ | 54,366,364 | $ | 45,347,742 | ||||
Valuation allowance | (54,152,886 | ) | (45,146,454 | ) | ||||
|
|
|
| |||||
Total deferred tax assets net of valuation allowance | $ | 213,478 | $ | 201,288 | ||||
Deferred tax liabilities: | ||||||||
Depreciation | (213,478 | ) | (201,288 | ) | ||||
|
|
|
| |||||
Total deferred tax liabilities | $ | (213,478 | ) | $ | (201,288 | ) | ||
|
|
|
| |||||
Net deferred tax asset (liability) | $ | — | $ | — | ||||
|
|
|
| |||||
follows (in thousands):
December 31, | ||||||||
2021 | 2020 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryovers | $ | 77,431 | $ | 65,990 | ||||
Stock-based compensation | 2,457 | 2,265 | ||||||
R&D tax credits | 5,031 | 3,833 | ||||||
Accrued compensation and severance | 563 | 587 | ||||||
Lease liability | 911 | 1,013 | ||||||
Intangible assets | 88 | 99 | ||||||
Total deferred tax asset s | $ | 86,481 | $ | 73,787 | ||||
Valuation allowance | (85,613 | ) | (72,803 | ) | ||||
Total deferred tax assets net of valuation allowance | $ | 868 | $ | 984 | ||||
Deferred tax liabilities: | ||||||||
Right-of-use | (746 | ) | (833 | ) | ||||
Depreciation | (122 | ) | (151 | ) | ||||
Total deferred tax liabilities | $ | (868 | ) | $ | (984 | ) | ||
Net deferred tax asset (liability) | $ | 0 | $ | 0 | ||||
| Year Ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
Federal income tax benefit at statutory rate | (21.00 | )% | (34.00 | )% | (34.00 | )% | ||||||
State income tax, net of federal benefit | (5.64 | ) | (9.95 | ) | (5.49 | ) | ||||||
Permanent items including change in fair value of warrants | 4.80 | (22.03 | ) | (1.54 | ) | |||||||
Change in valuation allowance | 23.95 | (50.33 | ) | 42.12 | ||||||||
R&D tax credits | (2.11 | ) | (3.02 | ) | (1.03 | ) | ||||||
Deferredre-measurement | — | 118.03 | — | |||||||||
Other | — | (1.30 | ) | (0.06 | ) | |||||||
|
|
|
|
|
| |||||||
Effective income tax (benefit) expense rate | 0 | % | 0 | % | 0 | % | ||||||
|
|
|
|
|
| |||||||
14. Selected Quarterly Financial Data (Unaudited)
The following tables show a summary
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Federal income tax benefit at statutory rate | (21.00 | )% | (21.00 | )% | (21.00 | )% | ||||||
State income tax, net of federal benefit | (14.41 | ) | (9.09 | ) | (15.09 | ) | ||||||
Permanent items including change in fair value of warrants | (26.27 | ) | (5.35 | ) | (21.87 | ) | ||||||
Change in valuation allowanc e | 63.08 | 37.88 | 62.56 | |||||||||
R&D tax credits | (5.89 | ) | (2.43 | ) | (4.72 | ) | ||||||
Other | 4.49 | (0.01 | ) | 0.12 | ||||||||
Effective income tax (benefit) expense rate | 0 | % | 0 | % | 0 | % | ||||||
CONTRAFECT CORPORATION | ||||||
Date: March 24, 2022 | By: | /s/ | ||||
| Roger J. Pomerantz, M.D., F.A.C.P. | |||||
President and Chief Executive Officer | ||||||
Signature | Title | Date | ||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
/s/ Roger J. Pomerantz, M.D., F.A.C.P. Roger J. Pomerantz, M.D., F.A.C.P. |
President and Chief Executive Officer, Chairman of the Board (Principal Executive Officer) | March | ||
/s/ Michael Messinger Michael Messinger | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer | March 24, 2022 | ||
/s/ Sol J. Barer, Ph.D. Sol J. Barer, Ph.D. | Lead Independent Director | March 24, 2022 | ||
/s/ Steven C. Gilman, Ph.D. Steven C. Gilman, Ph.D. | Vice Chairman of the Board | March 24, 2022 | ||
/s/ Lishan Aklog, M.D. Lishan Aklog, M.D. | Director | March 24, 2022 | ||
/s/ Jane F. Barlow, M.D., M.P.H., M.B.A. Jane F. Barlow, M.D., M.P.H., M.B.A. | Director | March 24, 2022 | ||
/s/ David N. Low, Jr. David N. Low, Jr. | Director | March 24, 2022 | ||
/s/ Michael J. Otto, Ph.D. Michael J. Otto, Ph.D. | Director | March 24, 2022 | ||
/s/ Cary W. Sucoff Cary W. Sucoff | Director | March | ||