UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
OR
☐TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from to .
Commission File Number 001-35798
Humanigen, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0557236 | |
| (State or other jurisdiction of | (IRS Employer | |
| incorporation) | Identification No.) |
830 Morris Turnpike, 4th Floor
Short Hills, NJ 07078
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (650) 243-3100(973) 200-3100
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on with registered |
| Common Stock | HGEN | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of November 10, 2017,May 2, 2022, there were 14,986,71270,633,705 shares of common stock of the issuer outstanding.
Unless the context indicates otherwise, the terms “Humanigen,” “we,” “us” and “our” refer to Humanigen, Inc., and its consolidated subsidiaries. This report also may include trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this report are the property of their respective owners.
TABLE OF CONTENTS
HUMANIGEN, INC.
FORM 10-Q
| Page | |||||
| PART I. FINANCIAL INFORMATION | |||||
| Item 1. | |||||
| 4 | |||||
| 4 | |||||
| Condensed Consolidated Statements of and | 5 | ||||
| 6 | |||||
| Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021 | 7 | ||||
| Notes to Condensed Consolidated Financial Statements | |||||
| Item 2. | |||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 24 | |||
| Item 4. | |||||
| PART II. OTHER INFORMATION | |||||
| Item 1. | |||||
| Item 1A. | |||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 25 | |||
| Item 3. | Defaults Upon Senior Securities | 26 | |||
| Item 4. | Mine Safety Disclosures | 26 | |||
| Item 5. | Other Information | 26 | |||
| Item 6. | |||||
| 3 |
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
Humanigen, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,095 | $ | 2,906 | ||||
| Prepaid expenses and other current assets | 1,213 | 1,643 | ||||||
| Total current assets | 2,308 | 4,549 | ||||||
| Property and equipment, net | 30 | 68 | ||||||
| Restricted cash | 101 | 101 | ||||||
| Other assets | 128 | - | ||||||
| Total assets | $ | 2,567 | $ | 4,718 | ||||
| Liabilities and stockholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 4,177 | $ | 4,072 | ||||
| Accrued expenses | 2,990 | 736 | ||||||
| Term loans payable | 15,656 | 3,016 | ||||||
| Total current liabilities | 22,823 | 7,824 | ||||||
| Notes payable to vendors | 1,322 | 1,273 | ||||||
| Total liabilities | 24,145 | 9,097 | ||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $0.001 par value: 85,000,000 shares authorized at September 30, | ||||||||
| 2017 and December 31, 2016; 14,986,712 and 14,977,397 shares issued and outstanding | ||||||||
| at September 30, 2017 and December 31, 2016, respectively | 15 | 15 | ||||||
| Additional paid-in capital | 237,904 | 236,216 | ||||||
| Accumulated deficit | (259,497 | ) | (240,610 | ) | ||||
| Total stockholders’ deficit | (21,578 | ) | (4,379 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 2,567 | $ | 4,718 | ||||
| March 31, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 68,948 | $ | 70,016 | ||||
| Prepaid expenses and other current assets | 2,287 | 955 | ||||||
| Total current assets | 71,235 | 70,971 | ||||||
| Other assets | 90 | 90 | ||||||
| Total assets | $ | 71,325 | $ | 71,061 | ||||
| Liabilities and stockholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 47,873 | $ | 44,698 | ||||
| Accrued expenses | 19,181 | 19,882 | ||||||
| Deferred revenue | 4,127 | 4,145 | ||||||
| Total current liabilities | 71,181 | 68,725 | ||||||
| Non-current liabilities: | ||||||||
| Deferred revenue | - | 1,018 | ||||||
| Long-term debt | 25,193 | 25,006 | ||||||
| Total liabilities | 96,374 | 94,749 | ||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $0.001 par value: 225,000,000 shares authorized at | ||||||||
| March 31, 2022 and December 31, 2021; 69,954,377 and 64,027,629 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 70 | 64 | ||||||
| Additional paid-in capital | 607,238 | 587,327 | ||||||
| Accumulated deficit | (632,357 | ) | (611,079 | ) | ||||
| Total stockholders’ deficit | (25,049 | ) | (23,688 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 71,325 | $ | 71,061 | ||||
See accompanying notes.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 3,807 | $ | 1,741 | $ | 10,328 | $ | 7,805 | ||||||||
| General and administrative | 1,993 | 2,453 | 5,987 | 6,169 | ||||||||||||
| Total operating expenses | 5,800 | 4,194 | 16,315 | 13,974 | ||||||||||||
| Loss from operations | (5,800 | ) | (4,194 | ) | (16,315 | ) | (13,974 | ) | ||||||||
| Other expense: | ||||||||||||||||
| Interest expense | (1,269 | ) | (30 | ) | (2,245 | ) | (76 | ) | ||||||||
| Other income (expense), net | (14 | ) | 128 | (38 | ) | 128 | ||||||||||
| Reorganization items, net | (102 | ) | (427 | ) | (289 | ) | (8,039 | ) | ||||||||
| Net loss | (7,185 | ) | (4,523 | ) | (18,887 | ) | (21,961 | ) | ||||||||
| Other comprehensive income | - | - | - | - | ||||||||||||
| Comprehensive loss | $ | (7,185 | ) | $ | (4,523 | ) | $ | (18,887 | ) | $ | (21,961 | ) | ||||
| Basic and diluted net loss per common share | $ | (0.48 | ) | $ | (0.30 | ) | (1.26 | ) | $ | (2.76 | ) | |||||
| Weighted average common shares outstanding used to | ||||||||||||||||
| calculate basic and diluted net loss per common share | 14,981,346 | 14,879,519 | 14,978,728 | 7,950,826 | ||||||||||||
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue: | ||||||||
| License revenue | $ | 1,036 | $ | 486 | ||||
| Total revenue | 1,036 | 486 | ||||||
| Operating expenses: | ||||||||
| Research and development | 17,220 | 59,934 | ||||||
| General and administrative | 4,345 | 4,948 | ||||||
| Total operating expenses | 21,565 | 64,882 | ||||||
| Loss from operations | (20,529 | ) | (64,396 | ) | ||||
| Other expense: | ||||||||
| Interest expense | (734 | ) | (19 | ) | ||||
| Other expense, net | (15 | ) | (1,152 | ) | ||||
| Net loss | $ | (21,278 | ) | $ | (65,567 | ) | ||
| Basic and diluted net loss per common share | $ | (0.32 | ) | $ | (1.25 | ) | ||
| Weighted average common shares outstanding used to | ||||||||
| calculate basic and diluted net loss per common share | 65,590,724 | 52,655,756 | ||||||
See accompanying notes.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (18,887 | ) | $ | (21,961 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 38 | 81 | ||||||
| Gain on lease termination | - | (227 | ) | |||||
| Noncash interest expense | 2,226 | 46 | ||||||
| Reorganization items related to debtor-in-possession financing | - | 1,627 | ||||||
| Stock based compensation expense | 1,773 | 317 | ||||||
| Issuance of common stock for services | 12 | - | ||||||
| Issuance of warrants in connection with acquisition of licenses | - | 272 | ||||||
| Change in fair value of warrants issued in connection with acquisition of licenses | (97 | ) | - | |||||
| Issuance of common stock to officer and directors | - | 1,452 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | 303 | 428 | ||||||
| Accounts payable | 327 | 3,537 | ||||||
| Accrued expenses | 2,253 | (367 | ) | |||||
| Liabilities subject to compromise | (259 | ) | (3,153 | ) | ||||
| Net cash used in operating activities | (12,311 | ) | (17,948 | ) | ||||
| Investing activities: | ||||||||
| Changes in restricted cash | - | 92 | ||||||
| Net cash provided by investing activities | - | 92 | ||||||
| Financing activities: | ||||||||
| Net proceeds from issuance of common stock | - | 10,132 | ||||||
| Net proceeds from term loan | 10,500 | - | ||||||
| Net proceeds from convertible notes payable | - | 2,198 | ||||||
| Net cash provided by financing activities | 10,500 | 12,330 | ||||||
| Net increase (decrease) in cash and cash equivalents | (1,811 | ) | (5,526 | ) | ||||
| Cash and cash equivalents, beginning of period | 2,906 | 8,431 | ||||||
| Cash and cash equivalents, end of period | $ | 1,095 | $ | 2,905 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Conversion of notes payable and related accrued interest and fees to common stock | $ | - | $ | 3,387 | ||||
| Change in fair value of warrants issued in connection with acquisition of licenses | $ | (97 | ) | $ | - | |||
| Issuance of common stock for services | $ | 12 | $ | - | ||||
| Issuance of warrants in connection with acquisition of licenses | $ | - | $ | 272 | ||||
| Issuance of common stock to officer and directors | $ | - | $ | 1,452 | ||||
| Issuance of notes payable to vendors | $ | - | $ | 1,212 | ||||
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (21,278 | ) | $ | (65,567 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation expense | 1,543 | 510 | ||||||
| Non-cash interest expense related to debt financing | 187 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivable | - | (5,010 | ) | |||||
| Prepaid expenses and other assets | (1,332 | ) | (381 | ) | ||||
| Accounts payable | 3,175 | 28,046 | ||||||
| Accrued expenses | (701 | ) | 2,523 | |||||
| Deferred revenue | (1,036 | ) | 4,055 | |||||
| Net cash used in operating activities | (19,442 | ) | (35,824 | ) | ||||
| Financing activities: | ||||||||
| Net proceeds from issuance of common stock | 18,374 | 36,106 | ||||||
| Proceeds from exercise of stock options | - | 429 | ||||||
| Net proceeds from issuance of long-term debt | - | 24,444 | ||||||
| Net cash provided by financing activities | 18,374 | 60,979 | ||||||
| Net increase (decrease) in cash and cash equivalents | (1,068 | ) | 25,155 | |||||
| Cash and cash equivalents, beginning of period | 70,016 | 67,737 | ||||||
| Cash and cash equivalents, end of period | $ | 68,948 | $ | 92,892 | ||||
| Supplemental cash flow disclosure: | ||||||||
| Cash paid for interest | $ | 550 | $ | 4 | ||||
See accompanying notes.
Humanigen, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(in thousands, except share data)
(Unaudited)
| Three Months Ended March 31, 2022 | ||||||||||||||||||||
| Total | ||||||||||||||||||||
| Additional | Stockholders’ | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balances at January 1, 2022 | 64,027,629 | $ | 64 | $ | 587,327 | $ | (611,079 | ) | $ | (23,688 | ) | |||||||||
| Issuance of common stock, net of expenses | 5,926,748 | 6 | 18,368 | - | 18,374 | |||||||||||||||
| Stock-based compensation expense | - | - | 1,543 | - | 1,543 | |||||||||||||||
| Net loss | - | - | - | (21,278 | ) | (21,278 | ) | |||||||||||||
| Balances at March 31, 2022 | 69,954,377 | $ | 70 | $ | 607,238 | $ | (632,357 | ) | $ | (25,049 | ) | |||||||||
| Three Months Ended March 31, 2021 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balances at January 1, 2021 | 51,626,508 | $ | 52 | $ | 419,923 | $ | (374,430 | ) | $ | 45,545 | ||||||||||
| Issuance of common stock, net of expenses | 1,796,858 | 2 | 36,104 | - | 36,106 | |||||||||||||||
| Issuance of common stock upon option exercise | 233,323 | - | 429 | - | 429 | |||||||||||||||
| Stock-based compensation expense | - | - | 510 | - | 510 | |||||||||||||||
| Net loss | - | - | - | (65,567 | ) | (65,567 | ) | |||||||||||||
| Balances at March 31, 2021 | 53,656,689 | $ | 54 | $ | 456,966 | $ | (439,997 | ) | $ | 17,023 | ||||||||||
See accompanying notes.
| 7 |
Humanigen, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Operations
Description of the Business
The Company was incorporated on March 15, 2000 in Californiais a clinical stage biopharmaceutical company, developing its portfolio of proprietary Humaneered® anti-inflammatory immunology and reincorporated asimmuno-oncology monoclonal antibodies. The Company’s proprietary, patented Humaneered technology platform is a Delaware corporation in September 2001 under the name KaloBios Pharmaceuticals, Inc.method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. Humanigen has developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied its Humaneered technology to optimize them. The Company completed its initial public offering in January 2013. Effective August 7, 2017, the Company changed its legal name to Humanigen, Inc.
The Company is focusing its efforts on the development necessaryof its lead product candidate, lenzilumab. Lenzilumab is a monoclonal antibody that has been demonstrated to seek and obtain approval by the United States Food and Drug Administrationneutralize granulocyte-macrophage colony-stimulating factor (“FDA”GM-CSF”) for benznidazole and the subsequent commercialization, if approved. According to FDA issued guidance, benznidazole is eligible for review pursuant to, a 505(b)(2) regulatory pathway as a potential treatment for Chagas disease and, if it became the first FDA-approved treatment for Chagas disease, the Company would have been eligible to receive a Priority Review Voucher (“PRV”).
The Company has completed a Phase 3 registrational trial with lenzilumab in newly hospitalized COVID-19 patients (known as “LIVE-AIR”) and announced positive topline data in March 2021. Following completion of the LIVE-AIR study, the Company commenced a series of efforts to attain authorization to commercialize lenzilumab for use in hospitalized COVID-19 patients in the United States and the United Kingdom. The Company’s regulatory initiatives have not yet resulted in commercial authorization.
The next anticipated step in the Company’s development has begun program for lenzilumab in COVID-19 is the release of results from the Accelerating COVID-19 Therapeutic Interventions and Vaccines-5 (“ACTIV-5”) and Big Effect Trial, in the “B” arm of the trial (“BET-B”), referred to as the ACTIV-5/BET-B trial, which is sponsored and funded by the National Institutes of Health (“NIH”). This study is evaluating lenzilumab in combination with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, as more fully described below.
A sub-analysis of the LIVE-AIR study suggested that patients with a baseline C-reactive protein level (“CRP”) below 150 mg/L (the “CRP subgroup”) appeared to derive the greatest benefit from lenzilumab; therefore, the ACTIV-5/BET-B study protocol was modified by NIH to include baseline CRP below 150 mg/L as the primary analysis population. The ACTIV-5/BET-B study is fully enrolled with over 400 patients that met this criterion. Topline results from ACTIV-5/BET-B are expected to be released in the second quarter of 2022. If confirmatory of the findings of the CRP subgroup from the Company’s LIVE-AIR study, the Company plans to include the results from ACTIV-5/BET-B in an amendment to its Emergency Use Authorization (“EUA”) submission to the U.S. Food and Drug Administration (“FDA”), and to include these results in a responsive submission to Medicines and Healthcare products Regulatory Agency (“MHRA”) of the United Kingdom along with certain performance process qualification (“PPQ”) data around drug product batches, in the second quarter of 2022. In addition, as a result of feedback received from representatives of European Medicines Agency (“EMA”), if the ACTIV-5/BET-B data are confirmatory of the results of the findings of the CRP subgroup from the LIVE-AIR study, the Company intends to submit a Conditional Marketing Authorization (“CMA”) for lenzilumab with an Investigator-Sponsored Phase 0/1 radiolabeled imaging trialAccelerated Approval request to EMA later in glioblastoma multiforme (“GBM”), a particularly aggressive2022.
See Management’s Discussion and deadly formAnalysis of brain cancer. The Company is exploring partnering opportunities to enable further developmentFinancial Condition and Results of ifabotuzumab,Operations included in Item 7 of the Company’s 2021 Annual Report on Form 10-K for additional information regarding the treatment of certain rare solid and hematologic cancers.
Liquidity and Going Concern
The Condensed Consolidated Financial Statements for the three months ended September 30, 2017March 31, 2022 were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The ability ofHowever, the Company to meethas incurred net losses since its inception, and has negative operating cash flows and its total liabilities exceed total assets. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
| 8 |
As of $24.1March 31, 2022, the Company had cash and cash equivalents of $68.9 million. The Company continues to advance its efforts in support of the development of lenzilumab as a therapy for hospitalized COVID-19 patients, as well as in the CAR-T, aGvHD and chronic myelomonocytic leukemia (“CMML”) settings. On September 8, 2021, FDA declined to authorize the EUA the Company had submitted for lenzilumab in COVID-19 patients. As more fully described under “Item 1. Business���Manufacturing and Raw Materials.” in the Company’s 2021 Annual Report on Form 10-K, the Company had entered into agreements with several contract manufacturing organizations (“CMOs”) to provide manufacturing, fill/finish and packaging services for lenzilumab. While the Company remains committed to its ongoing efforts seeking marketing authorization for lenzilumab to treat hospitalized COVID-19 patients in the U.S., UK and other territories, since September 9, 2021, the Company amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce its future spending on lenzilumab production until and if authorization is received in the U.S., UK, or European Union (“EU”) (See Note 6 below). These actions reduced the Company’s manufacturing costs beginning in the fourth quarter of 2021 and will limit future production of lenzilumab.
Considering the Company’s current cash resources and its current and expected levels of operating expenses for the next twelve months, which includes combined accounts payable and accrued expenses recorded in the Company’s condensed consolidated balance sheets as of March 31, 2022 of $67.1 million, at September 30, 2017 and its non-manufacturing commitments of $1.3 million and manufacturing commitments of $42.6 million during the remaining nine months of 2022, $11.8 million for 2023, and $4.6 million thereafter (see Note 6 below), management expects to need additional capital to fund the Company’s planned operations. Management may seek to raise such additional capital through public or private equity offerings, including under the Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), grant financing and support from governmental agencies, convertible and other debt financings, collaborations, strategic alliances and marketing, supply, distribution, or licensing arrangements. Subsequent to March 31, 2022 and through the date of this filing, as disclosed in Note 11 below, the Company issued and sold 679,328 shares of common stock pursuant to the Sales Agreement and received net proceeds of approximately $2.0 million, after deducting fees and expenses. While management believes its plans to raise additional funds will alleviate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern, these plans are not entirely within the Company’s control and cannot be assessed as being probable of occurring. The Company expects that the results of the ACTIV-5/BET-B trial will be important to potential investors. The Company’s ability to raise capital on favorable terms in the near future is dependent uponlinked to the availabilitysuccess of future funding. The financial statements dothat trial, which cannot be assured. Additional funds may not include any adjustments that might be necessary ifavailable when the Company is unable to continue as a going concern. See Note 12 – “Subsequent Events.”
delay or reduce the scope of or eliminate one or more of its research or development programs, its commercialization efforts or its manufacturing commitments and capacity. In addition, if the Company raises additional funds through collaborations, strategic alliances or marketing, supply, distribution, or licensing arrangements with third parties, the Company may have to relinquish rights to its technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to the Company.
Basis of Presentation
The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements and include all adjustments necessary for the presentation of the Company’s condensed consolidated financial position, results of operations and cash flows for the periods presented.
The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly ownedwholly-owned subsidiaries. These financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The December 31, 20162021 Condensed Consolidated Balance Sheet was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2017,2022, or for any other future annual or interim period. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s 20162021 Annual Report on Form 10-K (the “2016 Annual Report”).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in determiningaccounting for the valuationdetermination of the financing derivative, therevenue recognition, fair value-based measurement of stock-based compensation accruals and warrant valuations.accruals. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements.
2. Summary of Significant Accounting Policies
The filing was madeCompany’s significant accounting policies are detailed in the United States Bankruptcy Courtits Annual Report on Form 10-K for the District of Delaware (the “Bankruptcy Court”) (Case No. 15-12628 (LSS)).
| Nine Months ended | ||||
| (in thousands) | September 30, 2016 | |||
| Upfront fee | $ | 191 | ||
| Commitment fee | 150 | |||
| Beneficial conversion feature | 484 | |||
| Legal fees | 802 | |||
| Total Credit Agreement expense | $ | 1,627 | ||
| Three months ended | Three months ended | |||||||
| (in thousands) | September 30, 2017 | September 30, 2016 | ||||||
| Legal fees | $ | 97 | $ | 224 | ||||
| Professional fees | 5 | 203 | ||||||
| Total reorganization items, net | $ | 102 | $ | 427 | ||||
| Nine months ended | Nine months ended | |||||||
| (in thousands) | September 30, 2017 | September 30, 2016 | ||||||
| Legal fees | $ | 263 | $ | 4,780 | ||||
| Professional fees | 26 | 1,159 | ||||||
| Debtor-in-possession financing costs | - | 1,143 | ||||||
| Beneficial conversion on debtor-in-possession financing | - | 484 | ||||||
| Fair value of shares issued to officer and directors for service in bankruptcy | - | 700 | ||||||
| Gain on lease termination | - | (227 | ) | |||||
| Total reorganization items, net | $ | 289 | $ | 8,039 | ||||
| 9 |
3. Potentially Dilutive Securities
The Company’s potentialpotentially dilutive securities, which include stock options restrictedand warrants and shares of common stock units and warrants,issuable upon conversion of convertible debt, have been excluded from the computation of diluted net loss per common share as the effect of including those securities would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in each period presented.
The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:
| As of September 30, | As of March 31, | |||||||||||||||
| 2017 | 2016 | 2022 | 2021 | |||||||||||||
| Options to purchase common stock | 2,578,948 | 2,036,177 | 4,712,659 | 4,224,111 | ||||||||||||
| Restricted stock units | — | 3,750 | ||||||||||||||
| Warrants to purchase common stock | 356,193 | 331,193 | 31,238 | 51,238 | ||||||||||||
| Convertible debt | 510,986 | 510,986 | ||||||||||||||
| 2,935,141 | 2,371,060 | 5,254,883 | 4,786,335 | |||||||||||||
4. License Revenue
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Money market funds | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
| Total investments | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
| Reported as: | ||||||||||||||||
| Cash and cash equivalents | $ | — | ||||||||||||||
| Restricted cash, long-term | 101 | |||||||||||||||
| Total investments | $ | 101 | ||||||||||||||
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Money market funds | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
| Total investments | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
| Reported as: | ||||||||||||||||
| Cash and cash equivalents | $ | — | ||||||||||||||
| Restricted cash, long-term | 101 | |||||||||||||||
| Total investments | $ | 101 | ||||||||||||||
On November 3, — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair Value Measurements as of September 30, 2017 | ||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Investments: | ||||||||||||||||
| Money market funds | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
| Total assets measured at fair value | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
Fair Value Measurements as of December 31, 2016 | ||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Investments: | ||||||||||||||||
| Money market funds | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
| Total assets measured at fair value | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, payable promptly following the execution of the License Agreement, provideswhich was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a credit facility inminimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.
Since the original principal amountprovision of $3,315,000, provides an original discount equalthe license and the cooperation and assistance to $265,000 (the “Upfront Fee”) and requires the paymentbe provided by the Company to the Term Loan LendersLicensee with regulatory authorities in the Territory and the Company’s obligation to serve on a joint steering committee (the “Services”) are considered a single performance obligation, the $6.0 million upfront payment (or $4.5 million net of a commitment fee equalwithholding taxes and other fees and royalties) and the first milestone payment of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties, are being recognized as revenue ratably over the performance period through March 2023 (the “Performance Period”), the expected period over which the Company conservatively expects the Services to $153,000. In accordancebe performed with approval in the termsTerritory expected by the end of March 2023. Therefore, the Company recognized license revenue totaling approximately $1.0 million and $0.5 million in the three months ended March 31, 2022 and 2021, respectively.
Licensee’s purchases of lenzilumab for development purposes or for commercial requirements, represent options under the agreement and revenues will therefore be recognized when control of the Term Loan Credit Agreement, the Company used the proceedsproduct is transferred to Licensee.
Contract Liabilities
A contract liability of the term loan (the “December 2016 Term Loan”) for general working capital, the payment of certain fees and expenses owed to BHCMF and the Term Loan Lenders and other costs incurred in the ordinary course of business. Dr. Chappell, one of the Company’s former directors, is an affiliate of each of BHCMF, BHC and Cheval.
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The following table presents changes in the Company’s contract liability for the ninethree months ending September 30, 2017 in the accompanying Condensed Statements of Operations and Comprehensive Loss.ended March 31, 2022 (in thousands):
| Balance at January 1, 2022 | $ | 5,163 | ||
| Deductions for performance obligations satisfied: | ||||
| In current period | (1,036 | ) | ||
| Balance at March 31, 2022 | $ | 4,127 |
5. Long-Term Debt
Secured Term Loan Facility
On March 21, 2017,10, 2021, the Company entered into an amendmentexecuted a Loan and Security Agreement with Hercules as agent for its affiliates serving as lenders thereunder (the “Amendment”“Term Loan”) to the. The Term Loan Credit Agreement to obtain an additional term loan (the “March 2017 Term Loan”) in the original principal amount of $5,978,000 less an upfront fee equal to $478,000 (the “Additional Upfront Fee”), and requires the payment by the Company to the Term Loan Lenders of a commitment fee equal to $275,000. In accordance with the terms of the Term Loan Credit Agreement, the Company used the proceeds from the additional loan for general working capital, the payment of certain fees and expenses owed to BHCMF and the Term Loan Lenders in connection with the Term Loan Credit Agreement and other costs incurred in the ordinary course of business. Aside from the increase in the principal amount extended, the Amendment did not modify any of the terms under the Term Loan Credit Agreement, all of which will be applicable to the March 2017 Term Loan extended to the Company by the Lenders.
No principal payments will be due during an interest-only period, commencing on the initial borrowing date and continuing to April 1, 2023, subject to extension to April 1, 2024, and potentially October 1, 2024, under certain conditions. Following the interest-only period, the outstanding balance of the Term Loan Credit Agreement,loan will be required to be repaid monthly, continuing through the maturity date. The Company will be required to repay amounts borrowed by March 1, 2025, subject to a one-year extension option that it may exercise if it has received FDA approval of a Biologics License Application (“BLA”) for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia, and the FDA-authorized label for lenzilumab is generally consistent with that sought in the Company’s BLA filing, and the Company used the proceeds from the Grid Advances for general working capital, the payment ofhas paid Hercules certain fees and expenses owed toassociated with the Agent andextension.
While the Term Loan Lenders in connection withis outstanding, the Term Loan Credit Agreement and other costs incurred inlenders will have the ordinary courseright to convert a portion of business. Aside from the increase in the principal amount extended, the Second Amendment did not modify any of the termsoutstanding under the Term Loan Credit Agreement, all of which will be applicable(ranging from $5.0 million to the Grid Advances extended to the Company by the Term Loan Lenders.
The following table summarizes the outstanding future payments of principal and interest associated with the Company’s Term Loan as of March 31, 2022 (in thousands):
| 2022 | $ | 1,716 | |||
| 2023 | 10,842 | ||||
| 2024 | 13,705 | ||||
| 2025 | 5,163 | ||||
| Total payments | 31,426 | ||||
| Less amount representing interest | (4,738 | ) | |||
| Notes payable, gross | 26,688 | ||||
| Less: Unamortized portion of EOT charge | (1,123 | ) | |||
| Less: Unamortized discount on notes payable | (141 | ) | |||
| Less: Unamortized debt issuance costs | (231 | ) | |||
| Long-term debt | 25,193 | ||||
| Less current portion | - | ||||
| Long-term debt, net of current portion | $ | 25,193 |
Interest expense related to the Term Loan, recorded during the three months ended March 31, 2022, was approximately $0.7 million and the effective interest rate was 9.25%.
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6. Commitments and Contingencies
Eversana Agreement
On January 10, 2021, the Company announced that it had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide the Company multiple services from its integrated commercial platform in preparation for issuancethe potential commercialization of lenzilumab.
Under the Eversana Agreement, Eversana will provide the Company with services in connection with the potential launch of lenzilumab. Eversana services during 2021 comprised marketing, market access, consulting, field solutions, field operations, health economics and medical affairs. Additional services may be negotiated by the parties and set forth in statements of work delivered in accordance with the Eversana Agreement.
On September 21, 2021, the Company notified Eversana that due to the EUA status in the U.S., it was terminating the initial statement of work related to commercialization support of lenzilumab for the treatment of COVID-19 in the United States. Eversana is disputing the termination notice and has requested payment of approximately $4.0 million it has asserted the Company owes for services rendered from April 1, 2021 to September 30, 2021. The Company has disputed this assertion and is working to resolve this dispute.
The Eversana Agreement provides for a one-year term and will renew for subsequent one-year terms unless either party provides a notice of non-renewal. After the first year, the Company may terminate the Eversana Agreement upon advance written notice to Eversana. The Eversana Agreement contains customary provisions allowing either party to terminate the Eversana Agreement as a result of certain changes in law and material breaches and certain insolvency events by or relating to the other party.
The Eversana Agreement imposes customary mutual obligations on the parties to protect and not disclose the confidential information and intellectual property of the other, and contains insurance, non-solicitation, indemnification and limitation of liability provisions customary for service contracts of this type.
Manufacturing Agreements
The Company has entered into agreements with several CMOs to manufacture bulk drug substance (“BDS”) and to provide fill/finish services or drug product (“DP”) for lenzilumab for a potential launch of lenzilumab in anticipation of an EUA or CMA. The Company has also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. Since September 9, 2021, the Company has amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce its future spending on lenzilumab production until and if authorization is received in the U.S., UK, or EU. These actions reduced the Company’s manufacturing costs beginning in the fourth quarter of 2021 and will limit future production of lenzilumab. In addition, certain of the Company’s CMOs have been unsuccessful in their efforts to manufacture some batches of lenzilumab to the Company’s specifications for various reasons. The Company is working with one of these CMOs to determine if batches of lenzilumab manufactured by them will be usable in the future or, if not, whether other financial recompense will be offered to the Company. Another CMO was unsuccessful in its attempts to produce BDS and has filed for arbitration of amounts owed. Mediation efforts were unsuccessful as the CMO insisted on large cash payments despite its inability to produce any BDS. The Company is contemplating litigation in an effort to recover previous monies provided to this CMO as prepayment for services and materials and to recover a significant amount of raw materials and components currently held by this CMO that have been paid for by the Company. As of March 31, 2022, the Company estimates that its commitments remaining to be incurred under these agreements are approximately $42.6 million for the remaining nine months of 2022, $11.8 million for 2023, and $4.6 million thereafter. Certain of these commitments and amounts accrued at year-end are in dispute and the Company intends to defer these payments, negotiate lower amounts or seek other courses of action for the amounts in question.
7. Stockholders’ Equity
Controlled Equity Offering
On December 31, 2020, the Company entered into a Sales Agreement with Cantor, under which the Company could issue and sell, from time-to-time, shares of the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as the sales agent. During the three months ended March 31, 2021, the Company issued and sold 1,796,858 shares of its common stock under the Plan by 3,000,000Sales Agreement for net proceeds of $36.1 million. During the three months ended March 31, 2022, the Company issued and sold 5,926,748 shares and to increase the annual maximum aggregate number of shares subject toits common stock option awards that may be granted to any one person under the PlanSales Agreement for net proceeds of $18.4 million. As of March 31, 2022, the Company had the ability to offer and sell shares of common stock having an aggregate offering price of up to $13.3 million under the prospectus supplement dated August 13, 2021 to the Company’s prospectus dated September 14, 2020 filed in respect of the Sales Agreement. See Note 11 below for additional information related to the Sales Agreement.
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2021 Underwritten Public Offering
On March 30, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several underwriters, in connection with the public offering of 5,000,000 shares of our common stock. In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial offering closed on April 5, 2021. On May 3, 2021, we closed on the sale of an additional 427,017 shares of our common stock related to the exercise of the underwriters’ 30-day option. The aggregate gross proceeds from 125,000 to 1,100,000.the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and offering costs, were approximately $94.2 million.
8. Stock-Based Compensation
A summary of stock option activity for the three and nine months ended September 30, 2017March 31, 2022 under all of the Company’s options plans is as follows:
| Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2016 | 1,835,835 | $ | 4.15 | |||||
| Granted | 615,000 | 2.92 | ||||||
| Exercised | - | - | ||||||
| Cancelled (forfeited) | (17,905 | ) | 3.29 | |||||
| Cancelled (expired) | (87 | ) | 4.24 | |||||
| Outstanding at March 31, 2017 | 2,432,843 | $ | 3.85 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Cancelled (forfeited) | (3,895 | ) | 3.20 | |||||
| Cancelled (expired) | - | - | ||||||
| Outstanding at June 30, 2017 | 2,428,948 | $ | 3.85 | |||||
| Granted | 150,000 | 0.33 | ||||||
| Exercised | - | - | ||||||
| Cancelled (forfeited) | - | - | ||||||
| Cancelled (expired) | - | - | ||||||
| Outstanding at September 30, 2017 | 2,578,948 | $ | 3.65 | |||||
| Options | Weighted Average Exercise Price | |||||||
| Outstanding at January 1, 2022 | 4,429,906 | $ | 7.89 | |||||
| Granted | 350,078 | $ | 2.99 | |||||
| Exercised | - | $ | - | |||||
| Cancelled (forfeited) | (67,325 | ) | $ | 15.09 | ||||
| Cancelled (expired) | - | $ | - | |||||
| Outstanding at March 31, 2022 | 4,712,659 | $ | 7.42 | |||||
The weighted average fair value of options granted during the three and nine months ended September 30, 2017March 31, 2022 was $0.22 and $1.49$2.41 per share, respectively.share.
The Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption terms for the ninethree months ended September 30, 2017:March 31, 2022:
Nine months Ended September 30, 2017 | ||||
| Exercise price | $ | 2.41 | ||
| Market value | $ | 2.41 | ||
| Risk-free rate | 1.78% to 2.09%% | |||
| Expected term | 5.0 to 6.0 years | |||
| Expected volatility | 83.2% to 87.9% | |||
| Dividend yield | - | |||
| Three Months Ended | |
| March 31, 2022 | |
| Exercise price | 2.99 |
| Market value | 2.99 |
| Expected term | 6 years |
| Expected volatility | 104% |
| Risk-free interest rate | 1.59% |
| Expected dividend yield | - % |
The Company recorded stock-based compensation expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss as follows:follows (in thousands):
| Three Months | Nine Months | Three Months Ended March 31, | ||||||||||||||||||
| Ended September 30, | Ended September 30, | 2022 | 2021 | |||||||||||||||||
| (in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| General and administrative | $ | 278 | $ | 273 | $ | 1,477 | $ | 275 | $ | 1,294 | $ | 364 | ||||||||
| Research and development | 67 | 40 | 296 | 42 | 249 | 146 | ||||||||||||||
| $ | 345 | $ | 313 | $ | 1,773 | $ | 317 | |||||||||||||
| Total stock-based compensation | $ | 1,543 | $ | 510 | ||||||||||||||||
At September 30, 2017,March 31, 2022, the Company had $2.5$11.2 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to outstanding stock options that will be recognized over a weighted-average period of 1.91.8 years. As of March 31, 2022, there were 4,714,407 shares available for grant under the Company’s 2020 Equity Incentive Plan.
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9. License and Collaboration Agreements
Kite Agreement
On February 29, 2016,May 30, 2019, the Company entered into a binding letter of intentcollaboration agreement (the “LOI”“Kite Agreement”) with Savant Neglected Diseases, LLCKite Pharmaceuticals, Inc. (“Savant”). The LOI provided that the Company would acquire certain worldwide rights relating to benznidazole (the “Compound”) from Savant. Under the LOI, the Company made a non-refundable deposit to Savant of $500,000, which was credited towards the Initial Payment (as defined below), and agreed to make monthly payments to Savant equal to $87,500 for development services performed by Savant relating to the Compound.
Clinical Trial Agreement consummateswith the transactions contemplatedNational Institute of Allergy and Infectious Diseases
On July 24, 2020, the Company entered into a clinical trial agreement (the “ACTIV-5 Clinical Trial Agreement”) with the National Institute of Allergy and Infectious Diseases (“NIAID”), part of NIH, which is part of the U.S. Government Department of Health and Human Services, as represented by the LOI.
Pursuant to the CompoundACTIV-5 Clinical Trial Agreement, NIAID serves as sponsor and is responsible for funding, supervising and overseeing ACTIV-5/BET-B. The Company has been responsible for providing lenzilumab to NIAID without charge and in quantities to ensure a sufficient supply of lenzilumab. The ACTIV-5 Clinical Trial Agreement imposes additional obligations on the Company that are reasonable and customary for clinical trial agreements of this nature, including in respect of compliance with data privacy laws and potential indemnification obligations.
10. Litigation
Avid Arbitration
On December 17, 2021, Avid Bioservices, Inc. (“Avid”) filed a Demand for Arbitration claiming more than $20.5 million in damages against the Company with the American Arbitration Association entitled, Avid Bioservices, Inc. v. Humanigen, Inc. (AAA Case No. 01-21-0018-0523). The Demand contains three claims for: (1) Breach of Contract concerning the Process Development and Manufacturing Master Services Agreement; (2) Anticipatory Breach of Contract concerning the Capacity Expansion and Contribution/Commitment letter; and (3) Trade Libel and Commercial Disparagement. Avid claims that the Company canceled the contract after Avid was unable to successfully produce any product containingfull batches of lenzilumab BDS, but that the CompoundCompany still owes the full amount due under the contract for all batches under the contract. Avid blamed its failed attempts on a subcontractor. To date, the Company has paid Avid $10.6 million, despite Avid not being able to produce any full BDS batches.
On January 6, 2022, the Company filed an Answer to Avid’s Demand, denying the allegations and an exclusive license of certain intellectual property assets related to the Compound. asserting affirmative defenses.
Savant will retain the right to use the licensed intellectual property for veterinary uses. Litigation
The MDC Agreement provides thatCompany was previously involved in litigation against Savant Neglected Diseases, LLC (“Savant”). In March 2022, the Company and Savant will jointly conduct research and development activities with respect toreached a confidential settlement. Accordingly, the Compound, while the Company will be solely responsible for commercializing the Compound. The Company will fund the development program for the Compound and will reimburselitigation involving Savant for its development program costs. was dismissed on March 31, 2022.
Private Placement Litigation
On June 15, 2020, a product-by-product and country-by-country basis, which royalty will be reduced to the high single digits in the United States if a priority review voucher is not granted subsequent to regulatory approval of any benznidazole product. The MDC Agreement also provides that Savant is entitled to a portion of the amount the Company receives upon the sale, if any, of a PRV relating to the Compound.
On May 9, 2016, the Bankruptcy Court entered an order approving a settlement stipulation betweenApril 19, 2021, the Company and the PIPE Claimants (the “Settlement Stipulation”). Under the Settlement Stipulation,Noble entered into a confidential settlement agreement in connection with the effectivenessrespect of the Plan, and per the terms of the Settlement Stipulation, the Company became obligated to issue 327,608 shares to the PIPE Claimants and make a payment of $250,000 to the PIPE Claimants for the purpose of satisfying expensesseparate lawsuit brought by Noble related to the PIPE Litigation. DuringPrivate Placement (the “Noble Case”) captioned Noble Capital Markets, Inc. v. Humanigen, Inc., Case No. 9:20-CV-81131-WPD, pursuant to which the year ended December 31, 2016,Noble Case was dismissed with prejudice.
On February 24, 2022, the 327,608 shares were issuedCompany entered into a confidential settlement agreement and release with respect to the $250,000 payment was made.
11. Subsequent Events
On April 14, 2022, the Company filed a proof of claim alleging damages from the PIPE transaction and filed an objection to the confirmationprospectus in respect of the Plan. To resolve his objection to the Plan and his proof of claim,Sales Agreement which provides the Company settled with him individually by issuing him 3,750 additionalthe ability to offer and sell shares of common stock. Mr. Biestek, as a former directorstock having an aggregate offering price of up to $75.0 million.
Subsequent to March 31, 2022 and through the date of this filing, the Company issued and sold 679,328 shares of common stock under the Sales Agreement for net proceeds of $2.0 million. As of the Company, was excluded from the Securities Class Action Members and therefore received nothing from the Securities Class Action Litigation.
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| Table of Contents |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
You should read the following discussion and analysis together with our financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10‑Q10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2021. This Quarterly Report on Form 10-Q contains statements that discuss future events or expectations, projections of results of operations or financial condition, trends in our business, business prospects and strategies and other “forward-looking” information. In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or “continue” or the negative of those words and other comparable words. These statements may relate to, among other things, our expectations regarding the scope, progress, timing, expansion, and costs of researching, developing and commercializing our product candidates; our intentexpectations relating to in-licenseregulatory pathways to emergency use or acquire additional product candidates; ourother conditional marketing authorizations and the opportunity to benefit from various regulatory incentives; expectations for our financial results, revenue, operating expenses and other financial measures in future periods; and the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures, and other liquidity requirements. Actual events orAmong the factors that could cause actual results mayto differ materially dueare the factors discussed under “Risk Factors” in “Part I, Item 1A - Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the additional or modified risk factors disclosed in this Quarterly Report on Form 10-Q and each subsequently filed Quarterly Report on Form 10-Q. Some additional factors that could cause actual results to known and unknown risks, uncertainties and other factors such as:differ include:
| the timing of the initiation, enrollment and completion and results of ongoing or planned clinical trials; |
| ● | the evolution of scientific discovery around the coronavirus, COVID-19 and the lung and other organ and systems dysfunction resulting in some patients may indicate that cytokine release syndrome (“CRS”) or cytokine storm is caused by or results from something other than elevated granulocyte-macrophage colony-stimulating factor (“GM-CSF”) levels; |
| ● | our |
| ● | our ability to attain any conditional marketing authorization (“CMA”) for lenzilumab in COVID-19 patients in the United Kingdom, (“UK”), European Union (“EU”) or other markets outside the U.S.; |
| ● | our ability to attain the additional |
| ● | our ability to timely source adequate supply of bulk drug substance and drug product for our development and if approved, finished goods from third-party manufacturers on which we depend; |
| ● | our ability to resolve disputes with certain CMOs regarding our obligations to make payments to them despite their failure to produce lenzilumab within contractual specifications, and our ability to reach a satisfactory resolution of our dispute with Eversana regarding our potential payments under our contract with Eversana; |
| ● | if a marketing authorization or approval were to be granted for lenzilumab, our ability to accurately forecast and predict future revenues in the U.S. and outside the U.S. coupled with our ability to produce sufficient quantities on a timely basis to meet demand; |
| ● | our ability to research, develop and commercialize our product candidates, including our ability to do so after our competitors have developed and commercialized competing products or alternative therapies and vaccines that reduce hospitalizations due to COVID-19 and thus the |
| our ability to |
| the |
| our ability to execute our |
| our ability to |
| the potential, if any, for future development of any of our present or future products; |
| our ability to identify and develop additional uses for our products; |
| our ability to maintain licenses with third parties; |
| ● | our ability to attain market exclusivity and/or to obtain, maintain, protect and enforce our intellectual |
| the outcome of pending, threatened or future |
| ● | acquisitions or in-licensing or out-licensing transactions that we may pursue may fail to perform as expected; |
| ● | our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions; |
| 16 |
| changes in the regulatory landscape that may prevent us from pursuing or realizing any of the expected benefits from the various regulatory incentives, |
| ● | the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing. |
These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Risk Factors” discussed in Part II, Item 1A of this
Overview
We are intended to be subject to protection afforded by the safe harbora clinical stage biopharmaceutical company, developing our portfolio of proprietary Humaneered® anti-inflammatory immunology and immuno-oncology monoclonal antibodies. Our proprietary, patented Humaneered technology platform is a method for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995
We are focusing our Second Amended Plan of Reorganization, dated May 9, 2016, as amended, or the Plan, became effective and we emerged from our Chapter 11 bankruptcy proceedings. For further information on our bankruptcy and emergence from bankruptcy, see Note 2 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.
Our Pipeline
Our product candidates are in the earlyclinical stage of development and will require substantial time, expenses, clinicalresources, research and development, testing, and regulatory approval prior to commercialization. Furthermore, neither of these product candidates has advanced into a pivotal registration study and it may be years before such a studyOur current pipeline is initiated, if at all.depicted below:
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| Table of Contents |
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States,U.S., or GAAP. The preparation of our financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Our management believes judgment is involved in determining revenue recognition, valuation of financing derivative, the fair value-based measurement of stock-based compensation, accruals and warrant valuations.accruals. Our management evaluates estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements. If our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our statements of operations, liquidity and financial condition.
There were no significant and material changes in our critical accounting policies and use of estimates during the three and nine months ended September 30, 2017,March 31, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates” in our 20162021 Annual Report on Form 10-K, (File No. 001-35798), filed with the SEC on March 9, 2017.1, 2022.
Results of Operations
At March 31, 2007 during which we recognized a one-time license payment from Novartis. At September 30, 20172022, we had an accumulated deficit of $259.5$632.4 million, primarily as a result of research and development and general and administrative expenses. Since inception, we have recognized a nominal amount of revenue from payments for license or collaboration fees. While we may in the future generate additional revenue from a variety of sources, including license fees, milestone payments, and research and development payments in connection with strategic partnerships, our product candidates may never be successfully developed or commercialized and we may therefore never realize revenue from any product sales, particularly because most of our product candidates are at an early stage of development.sales. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits.
Comparison of Three Months Ended March 31, 2022 and 2021
The following table summarizes the three and nine months ended September 30, 2016 primarily related to our status as a debtor in possession and other matters in connection with our Chapter 11 bankruptcy proceedings, in addition to our efforts to obtain certain rights related to our former lead product candidate benznidazole. Our operations during the three and nine months ended September 30, 2017, which are now largely related to advancing our development programs, have changed substantially from the same period in 2016. Accordingly, comparisonsresults of our operations for the periods indicated (amounts in thousands, except percentages):
| Three Months Ended March 31, | Increase/ (Decrease) | |||||||||||||||
| (in thousands) | 2022 | 2021 | Amount | % | ||||||||||||
| Revenue: | ||||||||||||||||
| License revenue | $ | 1,036 | $ | 486 | $ | 550 | 113 | |||||||||
| Total revenue | 1,036 | 486 | 550 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 17,220 | 59,934 | (42,714 | ) | (71 | ) | ||||||||||
| General and administrative | 4,345 | 4,948 | (603 | ) | (12 | ) | ||||||||||
| Total operating expenses | 21,565 | 64,882 | (43,317 | ) | (67 | ) | ||||||||||
| Loss from operations | (20,529 | ) | (64,396 | ) | (43,867 | ) | (68 | ) | ||||||||
| Other expense: | ||||||||||||||||
| Interest expense | (734 | ) | (19 | ) | 715 | 3,763 | ||||||||||
| Other income (expense), net | (15 | ) | (1,152 | ) | (1,137 | ) | (99 | ) | ||||||||
| Net loss | $ | (21,278 | ) | $ | (65,567 | ) | $ | (44,289 | ) | (68 | ) | |||||
Revenue
Revenue in the three months ended March 31, 2022 and results2021, represents license revenue under the license agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”) described in more detail in Note 4 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. License revenue was $1.0 million for the three and nine months ended September 30, 2017March 31, 2022, as compared to our operations and results in$0.5 million for the prior year periods may only provide a limited benefit, and similarly should not be relied on as an indicator of our future operations or results.three months ended March 31, 2021.
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Research and Development Expenses
Conducting research and development is central to our business model. We expense both internal and external research and development costs as incurred. We track external research and development costs incurred by project for each of our clinical programs. We began tracking our external costs by project beginning January 1, 2008, and we have continued to refine our systems and our methodology in tracking external research and development costs. Our external research and development costs consist primarily of:
| expenses incurred under agreements with contract research organizations, investigative sites, and consultants that conduct our clinical trials and |
| the cost of acquiring and manufacturing clinical trial, pre-commercial and other |
| other costs associated with development activities, including additional studies. |
Other research and development costs consist primarily of internal research and development costs such as salaries and related fringe benefit costs for our employees, (such as workers compensation and health insurance premiums), stock‑basedstock-based compensation charges, travel costs, lab supplies, overhead expenses such as rent and utilities, and externaltravel costs not allocated to one of our clinical programs. Internal research and development costs generally benefit multiple projects and are not separately tracked per project.
The following table shows our total research and development expenses for the three and nine months ended September 30, 2017March 31, 2022 and 2016:2021:
| Three Months Ended March 31, | ||||||||
| (in thousands) | 2022 | 2021 | ||||||
| External Costs | ||||||||
| Lenzilumab | $ | 16,448 | $ | 59,332 | ||||
| Ifabotuzumab | 158 | 25 | ||||||
| Internal costs | 614 | 577 | ||||||
| Total research and development | $ | 17,220 | $ | 59,934 | ||||
| For the | For the | |||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| External Costs | ||||||||||||||||
| KB001 | $ | - | $ | 5 | $ | - | $ | 10 | ||||||||
| Lenzilumab | 528 | 99 | 1,713 | 215 | ||||||||||||
| Ifabotuzumab | 25 | 30 | 120 | 176 | ||||||||||||
| Benznidazole | 3,138 | 829 | 6,956 | 5,024 | ||||||||||||
| Internal costs | 116 | 778 | 1,539 | 2,380 | ||||||||||||
| Total research and development | $ | 3,807 | $ | 1,741 | $ | 10,328 | $ | 7,805 | ||||||||
Research and development expenses decreased by $42.7 million from $59.9 million for the three months ended March 31, 2021 to $17.2 million for the three months ended March 31, 2022. The decrease is primarily due to a $35.7 million decrease in lenzilumab manufacturing costs and a $4.3 million decrease in clinical trial expenses as the LIVE-AIR study has been completed and the first patient has not yet been dosed in the CAR-T trial.
We expect our research and development costs will continue to decrease in 2022 as compared to 2021. We have sought to mitigate our financial commitments while continuing to position lenzilumab for a future authorization or approval in the U.S., UK and EU. Our mitigation efforts included the amendment or in some cases cancelation of certain of our agreements with CMOs for future manufacturing work, some of which were contingent on EUA, in an effort to reduce our future spending. We incurred cancellation fees for several of these modifications. We also have disputed several invoices for cancellation fees and for production batches for lenzilumab that had been submitted by CMOs that failed to produce lenzilumab within our stated release specifications, but our mitigation efforts may not be successful to recoup any such loss of lenzilumab bulk drug substance (“BDS”) or drug product (“DP”). See Notes 6 and 10 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for more information on these disputes. In the event of authorization by FDA, MHRA, or EMA, we anticipate that the demand for commercial product could exceed the in-process and planned production of lenzilumab through 2022. We intend to seek additional manufacturing capacity if authorization is obtained. We expect to use a portion of the revenues generated from commercial sale of lenzilumab following receipt of a regulatory authorization to support our efforts to expand production capacity in 2023 and beyond.
General and Administrative Expenses
General and administrative expenses consist principally of personnel-related costs (including stock-based compensation), professional fees for legal and patent expenses, insurance, consulting, audit, and tax services, rentinvestor relations costs, and other general operating expenses not otherwise included in research and development.
General and 2016
| Three Months Ended September 30, | Increase/(Decrease) | |||||||||||||||
| (in thousands) | 2017 | 2016 | $'s | % | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 3,807 | $ | 1,741 | $ | 2,066 | 119 | |||||||||
| General and administrative | 1,993 | 2,453 | (460 | ) | (19 | ) | ||||||||||
| Loss from operations | (5,800 | ) | (4,194 | ) | 1,606 | 38 | ||||||||||
| Interest expense | (1,269 | ) | (30 | ) | 1,239 | 4,130 | ||||||||||
| Other income (expense), net | (14 | ) | 128 | 142 | 111 | |||||||||||
| Reorganization items, net | (102 | ) | (427 | ) | (325 | ) | (76 | ) | ||||||||
| Net loss | $ | (7,185 | ) | $ | (4,523 | ) | $ | 2,662 | 59 | |||||||
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Interest Expense
Interest expense for both periods primarily related to the Loan and Security Agreement with Hercules Capital as agent for its affiliates serving as lenders thereunder (the “Term Loan”). Interest expense increased $0.7 million milestone achieved in July 2017.from $19 thousand for the three months ended March 31, 2021, as we drew the initial $25.0 million under the Term Loan on March 29, 2021. After giving effect to payment of fees and expenses associated with the draw, we received net proceeds of approximately $24.4 million. See Note 105 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for moreadditional information regardingon the milestone achievement in July 2017.Term Loan.
Other Expense
Other expense decreased $0.5 million from $2.5by $1.1 million for the three months ended September 30, 2016 to $2.0 million for the three months ended September 30, 2017. The decrease isMarch 31, 2022, primarily due to lower accounting and professional fees partially offset by an increaselitigation settlement costs incurred in legal fees due to the litigation with Savant.
| Nine Months Ended September 30, | Increase/(Decrease) | |||||||||||||||
| (in thousands) | 2017 | 2016 | $'s | % | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 10,328 | $ | 7,805 | $ | 2,523 | 32 | |||||||||
| General and administrative | 5,987 | 6,169 | (182 | ) | (3 | ) | ||||||||||
| Loss from operations | (16,315 | ) | (13,974 | ) | 2,341 | 17 | ||||||||||
| Interest expense | (2,245 | ) | (76 | ) | 2,169 | 2,854 | ||||||||||
| Other income (expense), net | (38 | ) | 128 | 166 | 130 | |||||||||||
| Reorganization items, net | (289 | ) | (8,039 | ) | $ | (7,750 | ) | (96 | ) | |||||||
| Net loss | $ | (18,887 | ) | $ | (21,961 | ) | $ | (3,074 | ) | (14 | ) | |||||
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through proceeds from the public offerings of our common stock, private placements of our common and preferred stock, debt financings, interest income earned on cash, and cash equivalents, and marketable securities, and borrowings against lines of credit, and receipts from agreements with Sanofi and Novartis.the proceeds under the South Korea Agreement. At September 30, 2017,March 31, 2022, we had cash and cash equivalents of $1.1 million. As$68.9 million. In the first quarter of November 162022, we sold an aggregate of 5,926,748 shares of our common stock under the Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), 2017, we had cash and cash equivalentsraising net proceeds of approximately $145,000.$18.4 million.
Primary Sources of Contents
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2022 | 2021 | ||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (19,442 | ) | $ | (35,824 | ) | ||
| Financing activities | 18,374 | 60,979 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | (1,068 | ) | $ | 25,155 | |||
| Nine Months Ended September 30, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (12,311 | ) | $ | (17,948 | ) | ||
| Investing activities | - | 92 | ||||||
| Financing activities | 10,500 | 12,330 | ||||||
| Net decrease in cash and cash equivalents | $ | (1,811 | ) | $ | (5,526 | ) | ||
Net cash used in operating activities was $12.3$19.4 million and $17.9$35.8 million for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively. The primary use of cash in 2017 was to fund our operations related to the development of our product candidates, whereas the primary use of cash in 2016 was to fund our operations related to the Plan. Cash used in operating activities of $12.3$19.4 million for the ninethree months ended September 30, 2017March 31, 2022, primarily related to our net loss of $18.9$21.3 million, adjusted for non-cash items, such as $1.8$1.5 million in stock basedstock-based compensation, $2.2 millionand a net increase in noncash interest expenseoperating assets and net increases in working capital items, primarily $2.3 millionliabilities of Accrued expenses.$0.1 million.
Cash used in operating activities of $17.9$35.8 million for the ninethree months ended September 30, 2016March 31, 2021, primarily related to our net loss of $21.8$65.6 million, adjusted for non-cash items, such as $1.6$0.5 million related to reorganization items related to the debtor-in-possession financing, $1.5 million related to the issuance of stock to our CEOin stock-based compensation, and two directors, $0.3 million related to the issuance of warrants to Savant in connection with the acquisition of certain rights related to the benznidazole license, $0.2 million related to a net gain on lease termination, other non-cash items of $0.4 million and net cash outflows of $0.3 million related to changesincrease in operating assets and liabilities primarily Liabilities subject to compromise, Accounts payable and Accrued expenses.
Net cash provided by financing activities was $10.5$18.4 million for the ninethree months ended September 30, 2017 related toMarch 31, 2022 and consists of $18.4 million received from the March 2017 and July 2017 Term Loans. issuance of common stock in connection with the Sales Agreement with Cantor.
Net cash provided by financing activities was $12.3$61.0 million for the ninethree months ended September 30, 2016 related toMarch 31, 2021 and consists primarily of $36.1 million received from the debtor-in-possession and equity bankruptcy financings.
Recent Financings
Controlled Equity Offering
On December 2016, we31, 2020, the Company entered into the Sales Agreement with Cantor, under which the Company could issue and sell shares of the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as sales agent. For the first three months of 2022, we issued and sold 5,926,748 shares of our common stock under the Sales Agreement, raising net proceeds of $18.4 million, and for the first three months of 2021, we issued and sold 1,796,858 shares of our common stock under the Sales Agreement, raising net proceeds of $36.1 million.
On April 14, 2022, the Company filed a Creditprospectus in respect of the Sales Agreement which provides the Company with the ability to offer and Securitysell shares of common stock having an aggregate offering price of up to $75.0 million.
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Subsequent to March 31, 2022 and through the date of this filing, the Company issued and sold 679,328 shares of common stock under the Sales Agreement (the “Term Loan Credit Agreement”) providing for net proceeds of $2.0 million. As of the date of this filing, the Company has the ability to offer and sell shares of common stock having an original $3.0aggregate offering price of up to $86.3 million credit facility (the “December 2016 Term Loan”), net of certain feesunder the prospectus supplement dated August 13, 2021 and expenses. prospectus dated April 14, 2022.
2021 Underwritten Public Offering
On March 21, 2017,30, 2021, we entered into an amendmentunderwriting agreement with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several underwriters, in connection with the public offering of 5,000,000 shares of our common stock. In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial offering closed on April 5, 2021. On May 3, 2021, we closed on the sale of an additional 427,017 shares of our common stock related to the exercise of the underwriters’ 30-day option. The aggregate gross proceeds from the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and offering costs, were approximately $94.2 million.
Term Loan with Hercules
On March 10, 2021, we entered into the Term Loan Credit Agreement to obtain an additional $5.5 million (the “March 2017 Term Loan”), net of certain fees and expenses, providing additional working capital. On July 8, 2017, we entered into a second amendment to the Term Loan Credit Agreement to obtain an additional $5.0 million (the “July 2017 Term Loan” and togetherwith Hercules which provided us with the December 2016 Term Loan and the March 2017 Term Loan, the “Term Loans”), net of certain fees and expenses, providing additional working capital. As of September 30, 2017, we had received the entire amount available under the July 2017 Term Loan, bringing the total principalability to draw an initial amount of the Term Loans to $14.7 million. The outstanding balance of $16.1$25.0 million, under the Term Loans, including accrued interest and fees, became duewhich we drew on October 31, 2017. On October 31, 2017, we obtained a short-term extension from our Term Loan Lenders of the maturity of our obligations under the Term Loan Credit Agreement until November 10, 2017. On November 16, 2017, we obtained an additional short-term extension of the maturity of our obligations under the Term Loan Credit Agreement. The extension agreed with the Term Loan Lenders extends the maturity date of our obligations under the Term Loan Credit Agreement to the earlier of (i) December 1, 2017, or (ii) the date that we consummate one or more alternative transactions with the Term Loan Lenders. Aside from the extension of the Maturity Date, the extensions did not modify any of the terms under the Term Loan Credit Agreement.
Liquidity and Manufacturing Commitments
We continue to advance our efforts in support of the development of lenzilumab as a therapy for hospitalized COVID-19 patients. As of March 31, 2022, we had cash and cash equivalents of $68.9 million. On September 8, 2021, FDA declined to authorize our EUA for lenzilumab. As more fully described in our 2021 Annual Report on Form 10-K filed on March 1, 2022 under “Item 1. Business—Manufacturing and Raw Materials”, we have entered into agreements with several CMOs to provide manufacturing, fill/finish and packaging services for lenzilumab. While we remain committed to our ongoing efforts seeking authorization or approval for commercial use of lenzilumab to treat hospitalized COVID-19 patients in the U.S., UK, EU and other territories, we have amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce our future spending on lenzilumab production until and if authorization is received in the U.S., UK, or EU (See Notes 6 and 10 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). The actions reduced our manufacturing costs beginning in the fourth quarter of 2021 and will limit future production of lenzilumab because we have not yet entered into any reservation agreements for production in 2023 and beyond.
Considering our current cash resources and our current and expected levels of operating expenses for the next twelve months, which includes our combined accounts payable and accrued expenses as of March 31, 2022 of $67.1 million, and our manufacturing commitments of $42.6 million for the remaining nine months of 2022, $11.8 million for 2023, and $4.6 million thereafter related to our manufacturing agreements, as further described below (see “–Contracts”), we expect to need additional capital to fund our planned operations and capital requirements. Certain of these commitments and amounts accrued at March 31, 2022 are in dispute and we intend to defer these payments, negotiate lower amounts or seek other courses of action, which may include legal recourse for the amounts in question. If marketing authorization or approval for lenzilumab were granted, we would expect to be able to satisfy certain of the cash requirements associated with our future manufacturing commitments from revenues from the commercial sale of lenzilumab. We may seek to raise additional capital through public or private equity offerings, including under the Sales Agreement with Cantor, grant financing and support from governmental agencies, convertible and other debt financings, collaborations, strategic alliances and marketing, supply, distribution, or licensing arrangements. Subsequent to March 31, 2022 and through the date of this filing, as disclosed in Note 11 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, we issued and sold 679,328 shares of common stock pursuant to the Sales Agreement and raised net proceeds of approximately $2.0 million, after deducting fees and expenses.
Other significant contractual cash requirements as of March 31, 2022 include payments for principal and interest on the Term Loan. Our current and long-term obligations related to the Term Loan Credit Agreement. See also Part II, Item 1A, “Risk Factors.”are outlined in Note 5 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
While we were ablebelieve our plans to reach agreement withraise additional funds will alleviate the Term Loan Lenders, we would
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We expect that the results of the ACTIV-5/BET-B trial will be important to potential investors in evaluating an investment in our company. Our ability to raise capital on favorable terms in the near future is linked to the success of that trial, which we cannot assure. Unfavorable results likely would have preferred to developa material and commercialize ourselves and on less than favorable terms, if at all. If in the best interests of our stockholders, we may also find it appropriate to enter into a strategic transaction that could result in, among other things, a sale, merger, consolidation or business combination.
If we are unsuccessful in our efforts to raise additional capital, based on our current and expected levels of operating expenses our current capital will not be sufficient to fund our operations for the next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern.
Contracts
Eversana Agreement
On January 13, 2016, our common stock was suspended from the Nasdaq Global Market and began trading on the over-the-counter market under the ticker symbol KBIOQ. On January 26, 2016, NASDAQ filed10, 2021, we announced that we had entered into a Form 25master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide us with services in connection with the Securities and Exchange Commissionpotential launch of lenzilumab.
On September 21, 2021, we notified Eversana that due to complete the delistingEUA status in the U.S., we were terminating the initial statement of our common stock, and the delisting was effective on February 5, 2016. On June 30, 2016, upon emergence from bankruptcy, the ticker symbolwork related to commercialization support of lenzilumab for the tradingtreatment of our common stock on the over-the-counter market reverted back to KBIO. On June 26, 2017 we began trading on the OTCQB Venture Market under the same ticker symbol. On August 7, 2017, following the effectiveness of our previously reported name change, our common stock began trading on the OTCQB Venture Market under the new ticker symbol “HGEN”. Although our common stock is eligible to tradeCOVID-19 in the OTCQB Venture Market, tradingUnited States. Eversana is limiteddisputing the termination notice and an active markethas requested payment of approximately $4.0 million it has asserted we owe for services rendered from April 1, 2021 to September 30, 2021. We have disputed this assertion and are working to resolve this dispute.
Manufacturing Agreements
We have entered into agreements with several CMOs to manufacture bulk drug substance (“BDS”) and fill/finish/drug product (“DP”) for our common stock may never developlenzilumab clinical trial activities in COVID-19 as well as to manufacture BDS and DP for a potential launch of lenzilumab in anticipation of an EUA or CMA. We have also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. Certain of these CMOs have been unsuccessful in their efforts to manufacture some batches of lenzilumab to our specifications for various reasons. We are working with one of these CMOs to determine if batches of BDS manufactured by them will be usable in the future or, if not, whether other financial recompense will be offered to us. As of April 30, 2022, we believe approximately 83,900 lenzilumab treatments would be available for sale under an EUA. Of these, approximately 26,000 are expected to be available for immediate sale in the U.S. or UK upon authorization. Another 41,000 treatments are in production at one of our CMOs for which could harmmaterial has not yet been released, and which may require reprocessing prior to release. At this time, it is not possible to predict if these 41,000 treatments would be released and available for sale if authorization or approval for lenzilumab were to be attained.
Please see our abilityForm 10-K for the year ended December 31, 2021,Part I, Item 1A - Risk Factors—“Risks Related to raise capitalOur Efforts to continueDevelop Lenzilumab for COVID-19— Manufacturing efforts relating to fund operations.our lenzilumab program in COVID-19 have been extremely costly and inefficient in producing treatments for use in our clinical development program or potential sale.”
License Agreements
We are obligated to make future payments to third parties under in-license agreements, including sublicense fees, royalties, and payments that become due and payable on the achievement of Contents
We record upfront and milestone payments made to third parties under licensing arrangements as an expense. Upfront payments are recorded when incurred and milestone payments are recorded when the specific milestone has been achieved.
Outlicensing Agreements
The South Korea Agreement
On August 24, 2017,November 3, 2020, we entered into a Common Stock PurchaseLicense Agreement dated as(the “South Korea Agreement”) with KPM and Telcon (together, the “Licensee”). Pursuant to the South Korea Agreement, among other things, we granted the Licensee a license under certain patents and other intellectual property to develop and commercialize our lead product candidate, lenzilumab (the “Product”), for treatment of August 23, 2017COVID-19 pneumonia, in South Korea and the Philippines (the "ELOC Purchase Agreement"“Territory”), with Aperture Healthcare Ventures Ltd. ("Aperture") pursuant to which we may, subject to certain conditionsreservations and limitations set forthlimitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in those territories.
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As consideration for the license, the Licensee has agreed to pay us (i) an up-front license fee of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties), payable promptly following the execution of the License Agreement, which was received in the ELOC Purchase Agreement, require Aperture to purchasefourth quarter of 2020, (ii) up to $15.0an aggregate of $14.0 million worthin two payments based on our achievement of newly issued sharestwo specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021,and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that we will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.
Indemnification
In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents, are in the form, or may be in the form of, money market funds or marketable securities and are or may be invested in U.S. Treasury and U.S. government agency obligations. Due to the short-term maturities and low risk profiles of our common stock, over the 36-month term following the effectiveness of the initial resale registration statement described below (the “Investment Period”). From time to time over the Investment Period, andinvestments, an immediate 100 basis point change in our sole discretion, we may present Aperture with one or more notices requiring Aperture to purchaseinterest rates would not have a specified dollar amount of shares of our common stock, basedmaterial effect on the price per share per day over five consecutive trading days (the “Pricing Period”). In addition, in our sole discretion, but subject to certain limitations, we may require Aperture to purchase a percentage of the daily trading volume of our common stock for each trading day during the Pricing Period.
We have yetare not materially exposed to file a registration statement under the ELOC RRA. Sales of common stock under the ELOC Purchase Agreement cannot commence until such registration statement is filed and declared effective by the SEC.
| Item 4. | Controls and |
We maintain disclosure controls and procedures” as (as defined in Rules 13a‑Exchange Act Rule 13a–15(e) and 15d‑15(e) promulgated15d-15(e)) that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Actrules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Evaluation of disclosure controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.Quarterly Report on Form 10-Q. Based uponon the evaluationforegoing, our Chief Executive Officer and Chief Financial Officer concluded that theour disclosure controls and procedures were effective as of September 30, 2017 to ensure that information required to be disclosed inat the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.reasonable assurance level.
Changes in Internal Control Over Financial Reporting
PART II. OTHER INFORMATION
| Item 1. | Legal Proceedings. |
Please
see Note| Item 1A. | Risk Factors. |
FDA declined our initial request for emergency use authorization for lenzilumab as a complaint against Savant Neglected Diseases, LLC (“Savant”)therapy for hospitalized patients with COVID-19. MHRA raised certain questions in its review of our application for marketing authorization to which we are drafting responses. We are continuing to pursue an authorization or approval for lenzilumab’s use in hospitalized patients with COVID-19 in the Superior CourtU.S., UK and EU, but may not obtain one.
We completed a Phase 3 potentially registrational trial with lenzilumab in newly hospitalized COVID-19 patients and announced positive topline data from the study known as “LIVE-AIR” in March 2021. On September 8, 2021, FDA informed us that it had declined to issue an EUA for lenzilumab in this indication. FDA has advised us that they will review an amended EUA submission with further data. MHRA raised certain questions in its review of our application for marketing authorization to which we are drafting responses. A further step in our development program for lenzilumab in COVID-19 is the Staterelease of Delaware, New Castle County (the “Delaware Court”results from the Accelerating COVID-19 Therapeutic Interventions and Vaccines-5 (“ACTIV-5”) and Big Effect Trial, in the “B” arm of the trial (“BET-B”), referred to as the ACTIV-5/BET-B trial, which is sponsored and funded by the National Institutes of Health (“NIH”). KaloBios Pharmaceuticals, Inc. v. Savant Neglected Diseases, LLC, No. N17C-07-068 PRW-CCLD. The Company asserted breachA subgroup analysis of contract and declaratory judgment claims against Savant arisingthe LIVE-AIR study suggested that patients under the MDC Agreement. See Note 10 - “Savant Arrangements”age of 85 and with a baseline CRP below 150 mg/L (the “CRP subgroup”) appeared to derive the accompanying condensed consolidated financial statementsgreatest benefit from lenzilumab. As a result, NIH amended the ACTIV-5/BET-B study protocol to include baseline CRP below 150 mg/L as the primary analysis population and submitted the amendment to FDA. The ACTIV-5/BET-B study has completed enrollment. Analysis of data by the NIH can begin once the database lock has occurred. The NIH controls the data analysis and we may be unable to influence the timeline for more information aboutcompletion. It is possible, but not assured, that the MDC Agreement. The Company alleges that Savant has breached its MDC Agreement obligations to pay cost overages that exceed a budgetary thresholdresults from the ACTIV-5/BET-B trial may support the preparation of an amended submission for an EUA, as well as other related MDC Agreement representations and obligations. Inour response to MHRA. If the litigation, the Company has alleged that as of June 30, 2017, Savant was responsible for aggregate cost overages of approximately $3.4 million, net of a $500,000 deductible under the MDC. The Company asserts that it is entitled to offset $2 million in milestone payments due Savant against the cost overages, such that as of June 30, 2017 Savant owed the Company approximately $1.4 million.
Even if ACTIV-5/BET-B results confirm our findings from the CRP subgroup from the LIVE-AIR study and we prepare an amended EUA submission and respond to MHRA, the regulatory agencies may not find the results compelling. Furthermore, even if the results are deemed compelling, we may be required to obtain and submit additional information related to the Chemistry Manufacturing and Control (“CMC”) aspects of lenzilumab production before we attain EUA, CMA or any other authorization or approval. We are in the process of obtaining additional CMC information but there is no assurance that we will generate sufficient information to satisfy regulatory requirements.
More broadly, in the context of EUA, CMA or any other request for a conditional marketing authorization or approval, there is no requirement that FDA or any regulatory body reach a favorable conclusion about our access to capital funding is uncertain.
Furthermore, if approved, the commercialization of our product candidates. The amount of capital we will require and the timing of our needan EUA is granted to permit lenzilumab to be commercialized for additional capital will depend on many factors, including:
Accordingly, it is possible that FDA and other adverse market developments;
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
None.
| Item 6. | Exhibits. |
**Indicates management contract or compensatory plan.
***The following exhibitscertifications attached as Exhibits 32.1 and 32.2 that accompanies this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Registrant under the Securities Act of 1933, as partamended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q.10-Q, irrespective of any general incorporation language contained in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HUMANIGEN, INC. | |||
| Date: | May 5, 2022 | By: | /s/ Cameron Durrant |
| Cameron Durrant | |||
| Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| By: | /s/ Timothy Morris | ||
| Timothy Morris | |||
| Chief Operating Officer and Chief Financial Officer | |||
| (Principal | |||
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