☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Ordinary Shares, par value $0.0001 per share | BYSI | The NASDAQ Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Emerging growth company | ☒ |
U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
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Item 1. | 3 | ||
Item 2. | 3 | ||
Item 3. | 3 | ||
Item 4. | 57 | ||
Item 4A. | 111 | ||
Item 5. | 111 | ||
Item 6. | 124 | ||
Item 7. | 136 | ||
Item 8. | 139 | ||
Item 9. | 140 | ||
Item 10. | 140 | ||
Item 11. | 153 | ||
Item 12. | 153 | ||
154 | |||
Item 13. | 154 | ||
Item 14. | 154 | ||
Item 15. | 154 | ||
Item 16. | 155 | ||
Item 16A. | 155 | ||
Item 16B. | 155 | ||
Item 16C. | 155 | ||
Item 16D. | 155 | ||
Item 16E. | 155 | ||
Item 16F. | 156 | ||
Item 16G. | 156 | ||
Item 16H. | 156 | ||
156 | |||
Item 17. | 156 | ||
Item 18. | 156 | ||
Item 19. | 156 |
• | the initiation, timing, progress and results of our studies in animals and clinical trials, and our research and development programs; |
• | our ability to advance our product candidates into, and successfully complete, clinical trials; |
• | our reliance on the success of our clinical-stage product candidates; |
• | the timing or likelihood of regulatory filings and approvals; |
• | the commercialization of our product candidates, if approved; |
• | our ability to develop sales and marketing capabilities; |
• | the pricing and reimbursement of our product candidates, if approved; |
• | the implementation of our business model, strategic plans for our business and technology; |
• | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology; |
• | our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties; |
• | costs associated with defending intellectual property infringement, product liability and other claims; |
• | regulatory development in the United States, China and other jurisdictions; |
• | estimates of our expenses, future revenues, capital requirements and our needs for additional financing; |
• | the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements; |
• | our ability to maintain and establish collaborations or obtain additional grant funding; |
• | the rate and degree of market acceptance of our product candidates; |
• | developments relating to our competitors and our industry, including competing therapies; |
• | our ability to effectively manage our anticipated growth; |
• | our ability to attract and retain qualified employees and key personnel; |
• | our expectations regarding the period during which we qualify as an emerging growth company under the U.S. Jumpstart Our Business Startups Act, or the JOBS Act; |
• | statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and share performance; |
• | the future trading price of our ordinary shares and impact of securities analysts’ reports on these prices; |
• | the impact of widespread health developments, including the recent global coronavirus (COVID-19) pandemic, and the responses thereto, which could materially and adversely affect, among other things, enrollment of patients in our clinical trials and our expected timeline for data readouts of our clinical trials and certain regulatory filings for our product candidates; and |
• | other risks and uncertainties, including those listed under the “Item 3. Key Information—D. Risk Factors.” |
Item 1. | Identity of Directors, Senior Management and Advisors |
Item 2. | Offer Statistics and Expected Timetable |
Item 3. | Key Information |
A. | Selected Financial Data |
Year Ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
(In thousands of U.S. Dollars (“$”), except share and per share amounts) | ||||||||||||
Consolidated statements of comprehensive loss data: | ||||||||||||
Revenue | — | — | — | |||||||||
Operating expenses: | ||||||||||||
Research and development (including patent cost of $42,259 for the year ended December 31, 2017) | (88,928 | ) | (51,618 | ) | (31,342 | ) | ||||||
General and administrative | (9,053 | ) | (5,927 | ) | (8,965 | ) | ||||||
Loss from operations | (97,981 | ) | (57,545 | ) | (40,307 | ) | ||||||
Foreign exchange gain (loss), net | 555 | (455 | ) | (4 | ) | |||||||
Interest income | 120 | 211 | 184 | |||||||||
Other income | 918 | 315 | — | |||||||||
Interest expenses | — | — | (206 | ) | ||||||||
Net loss before income tax | (96,388 | ) | (57,474 | ) | (40,333 | ) | ||||||
Income tax benefit | — | — | — | |||||||||
Net loss | (96,388 | ) | (57,474 | ) | (40,333 | ) | ||||||
Less: Net loss attributable to noncontrolling interests | (4,625 | ) | (2,605 | ) | (2,248 | ) | ||||||
Net loss attributable to BeyondSpring Inc. | (91,763 | ) | (54,869 | ) | (38,085 | ) | ||||||
Net loss per share | ||||||||||||
Basic and diluted | (4.40 | ) | (2.42 | ) | (1.55 | ) | ||||||
Weighted average shares outstanding Basic and diluted | 20,866,084 | 22,665,265 | 24,645,714 |
Year Ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
(In thousands of U.S. Dollars (“$”), except share and per share amounts) | ||||||||||||
Other comprehensive loss | ||||||||||||
Foreign currency translation adjustment (loss) gain | (1 | ) | 251 | 96 | ||||||||
Total comprehensive loss | (96,389 | ) | (57,223 | ) | (40,237 | ) | ||||||
Less: Comprehensive loss attributable to noncontrolling interests | (4,535 | ) | (2,578 | ) | (2,250 | ) | ||||||
Comprehensive loss attributable to BeyondSpring Inc. | (91,854 | ) | (54,645 | ) | (37,987 | ) | ||||||
Consolidated balance sheet data: | ||||||||||||
Cash and cash equivalents | 27,481 | 3,889 | 35,933 | |||||||||
Total assets | 32,828 | 7,063 | 44,555 | |||||||||
Total current liabilities | 4,792 | 16,445 | 10,053 | |||||||||
Total liabilities | 4,792 | 16,445 | 13,424 | |||||||||
Noncontrolling interests | 960 | (1,616 | ) | 854 | ||||||||
Total equity (deficit) | 28,036 | (9,382 | ) | 31,131 |
B. | Capitalization and Indebtedness |
C. | Reasons for the Offer and Use of Proceeds |
D. | Risk Factors |
• | the costs of our current, planned and potential future clinical trials; |
• | the outcome, timing and cost of regulatory approvals by the Food and Drug Administration, or FDA, the National Medical Products Administration, or NMPA, which is the successor to the China Food and Drug Administration, or CFDA, and the European Medicines Agency, or EMA, and comparable regulatory authorities, including any additional studies we may be required to perform; |
• | the cost of commercialization of our product candidates; |
• | the cost and timing of completion of commercial-scale outsourced manufacturing activities; |
• | the amount of profit we earn from product candidates that we succeed in commercializing, if any; |
• | the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; |
• | the expenses associated with any potential future collaborations, licensing or other arrangements that we may establish; |
• | cash requirements of any future acquisitions; |
• | the costs of operating as a public company; |
• | the time and cost necessary to respond to technological and market developments; and |
• | the number and characteristics of product candidates that we may develop and expenses associated with that development. |
• | developing a sustainable and scalable manufacturing process for our product candidates and any approved products, including establishing and maintaining commercially viable supply relationships with third parties; |
• | launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor; |
• | obtaining market acceptance of our product candidates as viable treatment options; and |
• | addressing any competing technological and market developments. |
• | successful enrollment in, and completion of, studies in animals and clinical trials; |
• | third parties’ ability in conducting our clinical trials safely, efficiently and according to the agreed protocol; |
• | receipt of regulatory approvals from the FDA, NMPA, EMA and other comparable regulatory authorities for our product candidates; |
• | establishing commercial manufacturing capabilities by making arrangements with third-party manufacturers; |
• | launching commercial sales of our product candidates, if and when approved; |
• | ensuring we do not infringe, misappropriate or otherwise violate the patent, trade secret or other intellectual property rights of third parties; |
• | obtaining acceptance of our product candidates by doctors and patients; |
• | obtaining reimbursement from third-party payors for our product candidates, if and when approved; |
• | our ability to compete against other product candidates and drugs; |
• | maintaining an acceptable safety profile for our product candidates following regulatory approval, if and when received; and |
• | obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity. |
• | the research methodology used may not be successful in identifying potential indications and/or product candidates; |
• | potential product candidates may, after further study, be shown to have harmful adverse effects or other characteristics that indicate they are unlikely to be effective drugs; or |
• | it may take greater human and financial resources to identify additional therapeutic opportunities for our product candidates or to develop suitable potential product candidates through internal research programs than we will possess, thereby limiting our ability to diversify and expand our drug portfolio. |
• | emergence of a pandemic or other widespread health emergencies or concerns over the possibility of such an emergency, including the recent COVID-19 outbreak, which has already severely affected our enrollment of patients in Ukraine. |
• | the size, nature and geographical composition of the patient population; |
• | the patient eligibility criteria defined in the clinical protocol; |
• | the size of the study population required for statistical analysis of the trial’s primary endpoints; |
• | the proximity of patients to trial sites; |
• | the design of the trial and changes to the design of the trial; |
• | our ability to recruit clinical trial investigators with the appropriate competencies and experience; |
• | competing clinical trials for similar therapies or other new therapeutics exist and will reduce the number and types of patients available to us; |
• | clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating; |
• | our ability to obtain and maintain patient consents; |
• | patients enrolled in clinical trials may not complete a clinical trial; |
• | the availability of approved therapies that are similar to our product candidates; and |
• | regulators, institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; |
• | clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs; |
• | the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment may be insufficient or slower than we anticipate or patients may drop out at a higher rate than we anticipate; |
• | our third-party contractors and investigators may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
• | we might have to suspend or terminate clinical trials of our product candidates for various reasons, including a lack of clinical response or a determination that participants are being exposed to unacceptable health risks; |
• | regulators, IRBs or ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; |
• | the cost of clinical trials of our product candidates may be greater than we anticipate; |
• | the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and |
• | our product candidates may cause adverse events or have undesirable side effects or other unexpected characteristics, causing us, our investigators, or regulators to suspend or terminate the trials. |
• | be delayed in obtaining regulatory approval for our product candidates; |
• | not obtain regulatory approval at all; |
• | obtain approval for indications that are not as broad as intended; |
• | have a drug removed from the market after obtaining regulatory approval; |
• | be subject to additional post-marketing testing requirements; |
• | be subject to restrictions on how a drug is distributed or used; or |
• | be unable to obtain reimbursement for use of a drug. |
• | disagreement with regulators regarding the design or implementation of our clinical trials; |
• | failure to demonstrate that a product candidate is safe and effective or safe, pure and potent for its proposed indication; |
• | failure of clinical trial results to meet the level of statistical significance required for approval. For example, the results of Study 101 were not statistically significant; |
• | failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; |
• | disagreement with regulators regarding our interpretation of data from studies in animals or clinical trials; |
• | insufficiency of data collected from clinical trials of our product candidates to support the submission and filing of a new drug application, or an NDA, or other submission or to obtain regulatory approval; |
• | the FDA, NMPA, EMA or a comparable regulatory authority’s finding of deficiencies related to the manufacturing processes or facilities of third-party manufacturers with whom we contract for clinical and commercial supplies; and |
• | changes in approval policies or regulations that render our preclinical studies and clinical data insufficient for approval. |
• | our inability to obtain sufficient funds required to conduct or continue a clinical trial, including lack of funding due to unforeseen costs or business decisions; |
• | failure to reach agreement with, or inability to comply with conditions imposed by, the FDA, NMPA, EMA or other regulators regarding the scope or design of our clinical trials or other aspects of the regulatory approval process; |
• | clinical holds, other regulatory objections or conditions to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals; |
• | our inability to reach agreements on acceptable terms with prospective CROs with the requisite experience and expertise, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
• | our inability to obtain approval from IRBs or ethics committees to conduct clinical trials at their respective sites; |
• | our inability to enroll in a clinical trial a sufficient number of patients who meet the applicable inclusion and exclusion criteria in a clinical trial; |
• | our inability to retain a sufficient number of patients in a clinical trial; |
• | our inability to conduct a clinical trial in accordance with regulatory requirements or our clinical protocols; |
• | clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, withdrawing from or dropping out of a trial, or becoming ineligible to participate in a trial; |
• | inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication; |
• | delay or failure in adding new clinical trial sites; |
• | failure of our CROs or third-party clinical trial managers to satisfy their contractual duties or meet expected deadlines; |
• | manufacturing issues, including delays or other problems with manufacturing, quality issues or timely obtaining from third parties sufficient quantities of a product candidate for use in a clinical trial; |
• | difficulty in maintaining contact with patients after treatment, resulting in incomplete data; |
• | ambiguous or negative interim or final results, or results that are inconsistent with earlier results; |
• | unfavorable or inconclusive results of clinical trials or supportive studies in animals; |
• | regulatory requests for additional analyses, reports, data, or studies in animals or clinical trials, or regulatory questions regarding the interpretation of data; |
• | feedback from the FDA, NMPA, EMA, an IRB, data safety monitoring boards, or comparable entities, or results from earlier stage or concurrent studies in animals or clinical trials, regarding our product candidates or other drug products, including which might require modification of a trial protocol or suspension or termination of a clinical trial; |
• | unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects in our product candidates or other drug products; |
• | a decision by the FDA, NMPA, EMA, an IRB, comparable entities, or the company, or recommendation by a data safety monitoring board or comparable regulatory entity, to suspend or terminate clinical trials at any time for safety issues or for any other reason; and |
• | failure to demonstrate a benefit from using a drug. |
• | we may limit or suspend marketing of the drug; |
• | regulatory authorities may withdraw approvals of the drug; |
• | regulatory authorities may require additional warnings on the label; |
• | we may be required to develop a REMS for the drug or, if a REMS is already in place, to incorporate additional requirements under the REMS, or to develop a similar strategy as required by a comparable regulatory authority; |
• | we may be required to conduct post-market studies; |
• | we could be sued and held liable for harm caused to subjects or patients; and |
• | our reputation may suffer. |
• | restrictions on the marketing or manufacturing of our drugs, withdrawal of the product from the market, or voluntary or mandatory product recalls; |
• | fines, untitled or warning letters, or holds on clinical trials; |
• | refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals; |
• | product seizure or detention, or refusal to permit the import or export of our product candidates; and |
• | injunctions or the imposition of civil or criminal penalties. |
• | A plan to accelerate innovative drug approval with a special review and approval process, with a focus on areas of high unmet medical needs, including drugs for HIV, cancer, serious infectious diseases and orphan diseases, as well as drugs on national priority lists. |
• | A plan to adopt a policy which would allow companies to act as the marketing authorization holder and to hire contract manufacturing organizations to produce drug products. |
• | A plan to improve the review and approval of clinical trials, and to allow companies to conduct clinical trials at the same time as they are being conducted in other countries and encourage local clinical trial organizations to participate in international multi-center clinical trials. |
• | A one-time umbrella approval procedure allowing approval of all phases of a new drug’s clinical trials at once, rather than the current phase-by-phase approval procedure, will be adopted for new drugs’ clinical trial applications. |
• | A fast track drug registration or clinical trial approval pathway will be available for the following applications: (1) registration of innovative new drugs treating HIV, cancer, serious infectious diseases and orphan diseases; (2) registration of pediatric drugs; (3) registration of geriatric drugs and drugs treating China-prevalent diseases in elders; (4) registration of drugs sponsored by national science and technology grants; (5) registration of innovative drugs using advanced technology, using innovative treatment methods, or having distinctive clinical benefits; (6) registration of foreign innovative drugs to be manufactured locally in China; (7) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured using the same production line in China; and (8) clinical trial applications for drugs with urgent clinical need and patent expiry within three years, and marketing authorization applications for drugs with urgent clinical need and patent expiry within one year. |
• | A fast track drug registration or clinical trial approval pathway is available for the following drug registration applications with distinctive clinical benefits: (1) registration of innovative drugs not sold within or outside China; (2) registration of innovative drug transferred to be manufactured in China; (3) registration of drugs using advanced technology, using innovative treatment methods, or having distinctive treatment advantages; (4) clinical trial applications for drugs with patent expiry within three years, and marketing authorization applications for drugs with patent expiry within one year; (5) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured using the same production line in China; (6) traditional Chinese medicines (including ethnic medicines) with clear position in prevention and treatment of serious diseases; and (7) registration of new drugs sponsored by national key technology projects or national key development projects, and registration for drugs with clinical trials conducted by China National Clinical Research Center and recognized by the administration department of the China National Clinical Research Center. |
• | A fast track drug registration approval pathway is available for the drug registration applications with distinctive clinical benefits for the prevention and treatment of the following diseases: HIV, phthisis, viral hepatitis, orphan diseases, cancer, pediatric diseases, and geriatrics. |
• | the clinical indications for which our product candidates are approved; |
• | physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment; |
• | the potential and perceived advantages of our product candidates over alternative treatments; |
• | the prevalence and severity of any side effects; |
• | product labeling or product insert requirements of the FDA, NMPA, EMA or other comparable regulatory authorities; |
• | limitations or warnings contained in the labeling approved by the FDA, NMPA, EMA or other comparable regulatory authorities; |
• | the timing of market introduction of our product candidates as well as competitive drugs; |
• | the cost of treatment, including in relation to alternative treatments and their relative benefits; |
• | the amount of upfront costs or training required for physicians to administer our product candidates; |
• | the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities; |
• | the willingness of patients to pay out-of-pocket in the absence of coverage and reimbursement by third-party payors and government authorities; |
• | relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and |
• | the effectiveness of our sales and marketing efforts. |
• | an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs |
• | an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; |
• | expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance; |
• | a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices; |
• | extension of manufacturers’ Medicaid rebate liability; |
• | expansion of eligibility criteria for Medicaid programs; |
• | expansion of the entities eligible for discounts under the Public Health Service Act pharmaceutical pricing program; |
• | requirements to report financial arrangements with physicians and teaching hospitals; |
• | a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and |
• | a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. |
• | the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs; |
• | federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which may be pursued through civil whistleblower or qui tam actions, impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, false or fraudulent claims for payment or approval from Medicare, Medicaid or other third-party payors or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; |
• | federal criminal statutes created through the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; |
• | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information; |
• | federal transparency requirements, including the Affordable Care Act provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and |
• | federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers. |
• | we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA, NMPA, EMA or other comparable regulatory authorities must evaluate any manufacturers. This assessment requires new testing and cGMP-compliance inspections by the FDA, NMPA, EMA or other comparable regulatory authorities. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our drugs; |
• | our manufacturers may have little or no experience with manufacturing our product candidates, and therefore may require a significant amount of support from us to implement and maintain the infrastructure and processes required to manufacture our product candidates; |
• | our third-party manufacturers might be unable to timely manufacture our product candidates or produce the quantity and quality required to meet our clinical and commercial needs, if any; |
• | our contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately; |
• | our contract manufacturers may not perform as agreed, may not devote sufficient resources to our product candidates, or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our drugs; |
• | any potential third-party manufacturer may be unable to initially pass federal, state or international regulatory inspections in a timely or cost effective manner; |
• | manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies in the U.S. and other regulatory authorities to ensure strict compliance with cGMPs and other government regulations and corresponding non-U.S. requirements and our third-party manufacturers may fail to comply with these regulations and requirements; |
• | we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates; |
• | our third-party manufacturers could breach or terminate their agreements with us; |
• | our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-made disasters; |
• | our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields; and |
• | we may not be able to obtain raw materials and components used in the manufacturing process that are suitable or acceptable for use, particularly where we have no other source or supplier for the raw materials or components. |
• | collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration; |
• | collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive drugs, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities; |
• | collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing; |
• | collaborators could independently develop, or develop with third parties, drugs that compete directly or indirectly with our drugs or product candidates; |
• | a collaborator with marketing and distribution rights to one or more drugs may not commit sufficient resources to their marketing and distribution; |
• | collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; |
• | disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources; |
• | collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; |
• | collaborators may own or co-own intellectual property covering our drugs that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property; |
• | the collaboration may result in increased operating expenses or the assumption of indebtedness or contingent liabilities; and |
• | the collaboration arrangement may result in the loss of key personnel and uncertainties in our ability to maintain key business relationships. |
• | identifying, recruiting, integrating, maintaining and motivating additional employees; |
• | managing our internal development efforts effectively, including the clinical and FDA or other comparable regulatory authority review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and |
• | improving our operational, financial and management controls, reporting systems and procedures. |
• | unexpected changes in, or impositions of, legislative or regulatory requirements; |
• | the occurrence of economic weakness, including inflation or political instability; |
• | the effects of applicable non-U.S. tax structures and potentially adverse tax consequences; |
• | differences in protection of our intellectual property rights including third party patent rights; |
• | the burden of complying with a variety of foreign laws including difficulties in effective enforcement of contractual provisions; |
• | delays resulting from difficulty in obtaining export licenses, tariffs and other barriers and restrictions, potentially longer payment cycles, greater difficulty in accounts receivable collection and potentially adverse tax treatment; and |
• | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad. |
• | decreased demand for our drugs; |
• | injury to our reputation; |
• | withdrawal of clinical trial participants and inability to continue clinical trials; |
• | initiation of investigations by regulators; |
• | costs to defend the related litigation; |
• | a diversion of management’s time and our resources; |
• | substantial monetary awards to trial participants or patients; |
• | product recalls, withdrawals or labeling, marketing or promotional restrictions; |
• | loss of revenue; |
• | exhaustion of any available insurance and our capital resources; |
• | the inability to commercialize any product candidate; and |
• | a decline in our ordinary share price. |
• | announcements of regulatory approval or a complete response letter, or specific label indications or patient populations for the use of our product candidates, or changes or delays in the regulatory review process; |
• | announcements of therapeutic innovations or new products by us or our competitors; |
• | adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities; |
• | any adverse changes to our relationship with manufacturers or suppliers; |
• | the results of our testing and clinical trials; |
• | the results of our efforts to acquire or license additional product candidates; |
• | variations in the level of expenses related to our existing product candidates or preclinical studies and clinical trials; |
• | any intellectual property infringement actions in which we may become involved; |
• | announcements concerning our competitors or the pharmaceutical industry in general; |
• | achievement of expected product sales and profitability; |
• | manufacturing, supply or distribution shortages; |
• | variations in our results of operations; |
• | announcements about our earnings that are not in line with analyst expectations; |
• | publication of operating or industry metrics by third parties, including government statistical agencies, that differ from expectations of industry or financial analysts; |
• | research reports and changes in financial estimates by securities research analysts; |
• | announcements made by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments; |
• | press reports, whether or not true, about our business; |
• | additions to, or departures of, our management; |
• | fluctuations of exchange rates between the RMB and the U.S. dollar; |
• | release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares; |
• | sales or perceived potential sales of additional ordinary shares; |
• | sales of our ordinary shares by us, our executive officers and directors or our shareholders in the future; |
• | general economic and market conditions and overall fluctuations in the U.S. equity markets; |
• | changes in accounting principles; and |
• | changes or developments in the Chinese or global regulatory environment. |
Item 4. | Information on the Company |
A. | History and Development of the Company |
B. | Business Overview |
• | Advance Plinabulin through a Phase 3 trial for NSCLC and two Phase 3 trials for CIN by utilizing global clinical trials that incorporate China investigators. We believe that our global development strategy has provided and will continue to provide significant advantages, including the ability to conduct trials in China with quicker enrollment and lower costs. In China, we conduct all of our trials under U.S. Good Clinical Practice, or GCP, guidelines but at lower cost than we would incur in the U.S. Also, by utilizing our Chinese subsidiary to execute on this global development strategy, we have been able to enroll our NSCLC and CIN clinical trials more quickly than anticipated. Each year China has approximately five million new cancer patients. Patients in China are generally more motivated to participate in clinical trials because insurance coverage is not as prevalent in China as it is in the West. Additionally, China’s cancer care is still highly centralized, primarily in the Beijing, Shanghai and Guangzhou areas and cancer patients from around the country travel to these areas for care. Thus, our trials may benefit from faster enrollment in China based on our work with treatment centers in these areas. |
• | Seek expedited approval for Plinabulin in China for NSCLC and CIN based upon interim trend data and apply for approval in the U.S. and other countries once final data from our late stage clinical trials are completed. In October 2017, the Chinese government announced in a broad policy that the drug regulatory authority could consider conditional approval based on a trend of clinical patient benefit, rather than waiting for full clinical trial data for life-threatening diseases, with a focus on novel drugs that address unmet medical needs and orphan drugs. To implement such policy, the PRC Drug Administration Law, recently amended in 2019, formally adopted the conditional approval mechanism and provides that drugs (i) for treatment of severe and life threatening diseases that cannot be cured in an effective manner, or (ii) urgently in need to improve public health, may be approved conditionally, provided that indicators in clinical trials for these drugs show efficacy and potential clinical value. The aforementioned conditional approval mechanism was further adopted by the newly revised Provisions for Drug Registration, which were issued by the State Administration for Market Regulation on January 22, 2020 and will come into effect on July 1, 2020. We intend to utilize this new policy to attempt to accelerate the approval of Plinabulin in China. Pending positive interim results in our late stage clinical trials, we expect to submit two NDAs in China in 2020 for conditional approval of Plinabulin. We initiated the rolling submission of an NDA in China for CIN in the first quarter of 2020, and expect to submit an NDA for NSCLC in the second half of 2020. After finalization of our Phase 3 clinical trials for CIN and NSCLC, we intend to submit an NDA in the U.S. for each in the second half of 2020 and the first half of 2021, respectively, and in other countries for the same indications thereafter. We may also be able to benefit from fast-track regulatory status in China based on our potential ability to file as a Category 1 drug. |
• | Explore the potential of Plinabulin in combination with immuno-oncology agents and continue to develop a pipeline of other immuno-oncology agents through utilization of our scientific collaborators. We are utilizing our research collaborators to advance Plinabulin in clinical trials to investigate its therapeutic potential as an immuno-oncology agent. We also have a pipeline of preclinical immuno-oncology product candidates and we are investigating the ubiquitin-mediated degradation pathway in collaboration with the University of Washington. |
• | Replicate our global clinical development plan for Plinabulin in other indications as well as with drug candidates in our internal pipeline or acquired by in-licensing. We believe our specific advantages observed in our ongoing clinical trials in China can serve as a template for future product candidates we might develop. Thus, we intend to leverage our Chinese subsidiary to enable us to develop our product candidates effectively and efficiently. We will opportunistically assess potential compounds for development or in-licensing that fit our strengths in clinical development in the U.S., China and other jurisdictions. |
• | Partner with one or more national pharmaceutical companies or build our own sales force to commercialize Plinabulin ourselves in China and partner with one or more global pharmaceutical companies outside of China. With receipt of the 2017 Grant, Plinabulin has the potential to be included in the National Drug Priority Review List. According to the Outline of the Thirteenth Five-Year Plan of the National Economy and Social Development of the People’s Republic of China, the government encourages the research, development and production of new drugs, the new drugs with approval to be marketed shall enjoy priority to be included in the National Insurance System. We believe that, pending drug approval and successful pricing negotiations with the Chinese government, the 2017 Grant could assist with inclusion of Plinabulin in the National Insurance System, which would allow for faster access to patients and reimbursement. We plan to either partner with one or more national pharmaceutical companies or build our own commercial organization for marketing Plinabulin for advanced NSCLC and in CIN in Beijing, Shanghai and Guangzhou areas, which represent approximately 80% of China’s geographic cancer care market. We also plan to retain a contract sales organization for selling efforts in other markets in China. In the U.S. and for the rest of world, we intend to work with one or multiple potential global pharmaceutical partners for commercialization. |
• | other chemotoxic agents, such as docetaxel or pemetrexed; |
• | inhibitors of intracellular enzymes that have specific mutations in genes, including EGFR kinases; |
• | agents that disrupt blood vessel formation in tumors, such as ramucirumab; and |
• | checkpoint inhibitors, such as nivolumab. |
Certain Events | Plinabulin + Docetaxel (n=90) | Docetaxel (n=73) | ||||||
Grade 3 and 4 Neutropenia | 7%(p=0.002) | 26% | ||||||
Use of G-CSF | 10% | 30% | ||||||
Sepsis | 0% | 3.6% | ||||||
Severe infections | 0% | 3.6% | ||||||
Docetaxel dose reduction due to toxicity | 6.7% | 19.2% |
• | the incidence of CIN in subsequent cycles; |
• | the incidence of severe neutropenia associated with fever and infections; |
• | the incidence and duration of hospitalization due to neutropenia associated with fever; |
• | the incidence of antibiotic use; |
• | the incidence, occurrence and severity of bone pain; |
• | the maximum decrease of platelet count in the first cycle of chemotherapy from baseline; and |
• | the proportion of patients with NLR>5 after Day 7 through Day 15 in the first cycle of chemotherapy. |
• | In October 2018, we announced the opening of an investigator-initiated Phase 1 clinical trial with a triple combination therapy, consisting of Plinabulin, nivolumab, and ipilimumab, for the treatment of SCLC. The trial, conducted through the Big Ten Cancer Research Consortium, is currently enrolling subjects at Rutgers Cancer Institute of New Jersey and other clinical centers in the U.S. The trial is expected to enroll approximately 15 patients in the Phase 1 portion of this Phase 1/2 combined study, and an additional 40 patients in the Phase 2 portion. This study will investigate whether the addition of Plinabulin results in a reduction of immune-related side effects of PD-1 and CTLA-4 antibodies and provides efficacy synergy. |
• | In July 2018, we entered into an SRA with MD Anderson to evaluate the benefits of adding Plinabulin to radiation therapy plus immune checkpoint antibodies. The study has demonstrated that the triple combination approach (Plinabulin + radiation + PD-1 antibody) has dramatic benefits in tumor reduction, increasing tumor dendritic cell maturation, and increasing tumor T-cell infiltration. We plan to file an IND for the treatment of patients after progression on PD-1 or PD-L1 antibody therapies in various cancer types and expect to dose the first patient in a Phase 1/2 trial in the second half of 2020. Given the high incidence of progression on PD-1/PD-L1 antibody therapies in the majority of cancers, we believe this novel triple combination approach will restore or enable the immune targeting of cancer in patients that have progressed on checkpoint-targeted therapy. |
• | completion of nonclinical laboratory tests, preclinical studies and formulation studies according to Good Laboratory Practices, or GLP, regulations; |
• | submission to the FDA of an IND, which must become effective before human clinical trials may begin; |
• | approval by an independent IRB, at each clinical site before each trial may be initiated; |
• | performance of adequate and well-controlled human clinical trials according to GCP, to establish the safety and efficacy of the proposed product for its intended use; |
• | preparation and submission to the FDA of an NDA, for a drug; |
• | satisfactory completion of an FDA advisory committee review, if applicable; |
• | satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with cGMP; and |
• | payment of user fees and FDA review and approval of the NDA. |
• | Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic, the initial human testing may be conducted in patients. |
• | Phase 2. The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule. |
• | Phase 3. The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate data to evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. |
• | the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; |
• | federal civil and criminal false claims laws, false statement laws, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money to the federal government; |
• | HIPAA, which imposes federal criminal and civil liability for executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters; |
• | the federal transparency laws, including the federal Physician Payments Sunshine Act, which is part of the Affordable Care Act, that requires applicable manufacturers of covered drugs to disclose payments and other transfers of value provided to physicians and teaching hospitals and physician ownership and investment interests; |
• | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and |
• | state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and are not preempted by HIPAA, thus complicating compliance efforts. |
• | The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. The Affordable Care Act increased pharmaceutical manufacturers’ rebate liability on most branded prescription drugs from 15.1% of the average manufacturer price to 23.1% of the average manufacturer price, added a new rebate calculation for line extensions of solid oral dosage forms of branded products, and modified the statutory definition of average manufacturer price. The Affordable Care Act also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and expanding the population potentially eligible for Medicaid drug benefits. |
• | In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The Affordable Care Act expanded the types of entities eligible to receive discounted 340B pricing. |
• | The Affordable Care Act imposed a requirement on manufacturers of branded drugs to provide a 50% discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., the “donut hole”). |
• | The Affordable Care Act imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications. |
1. | the effective constituent of drug extracted from plants, animals, minerals, etc. as well as the preparations thereof have never been marketed in China, and the material medicines and the preparations thereof are newly discovered; |
2. | the chemical raw material medicines as well as the preparations thereof and the biological product have not been approved for marketing home and abroad; |
3. | the new drugs are for treating AIDS, malignant tumors and rare diseases, etc., and have obvious advantages in clinic treatment; or |
4. | the new drugs are for treating diseases with no effective methods of treatment. |
• | A plan to accelerate innovative drug approval with a special review and approval process, with a focus on areas of high unmet medical needs, including drugs for HIV, cancer, serious infectious diseases, orphan diseases and drugs on national priority lists; |
• | A plan to adopt a policy which would allow companies to act as the marketing authorization holder and to hire contract manufacturing organizations to produce drug products; |
• | A plan to improve the review and approval of clinical trials, and to allow companies to conduct clinical trials in China at the same time as they are doing so in other countries and encourage local clinical trial organizations to participate in international multi-center clinical trials. |
• | A one-time umbrella approval procedure allowing approval of all phases of a new drug’s clinical trials at once, rather than the current phase-by-phase approval procedure, will be adopted for new drugs’ clinical trial applications; |
• | A fast track drug registration or clinical trial approval pathway will be available for the following applications: (1) registration of innovative new drugs treating HIV, cancer, serious infectious diseases and orphan diseases; (2) registration of pediatric drugs; (3) registration of geriatric drugs that treat China-prevalent diseases; (4) registration of drugs sponsored by national science and technology grants; (5) registration of innovative drugs using advanced technology, using innovative treatment methods, or having distinctive clinical benefits; (6) registration of foreign innovative drugs to be manufactured locally in China; (7) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured using the same production line in China; and (8) clinical trial applications for drugs with urgent clinical need and patent expiry within three years, and marketing authorization applications for drugs with urgent clinical need and patent expiry within one year. |
• | Applications for drugs with obvious clinical benefits if any of the following circumstances applies: (1) registration applications for innovative drugs that are not marketed in China and abroad; (2) registration applications for innovative drugs to be manufactured locally in China; (3) registration applications for drugs using advanced formulation technology, using innovative treatment methods, or having distinctive clinical benefits; (4) clinical trial applications for patented drugs with patent to be expired in three years and manufacturing applications for drugs with patent to be expired in one year; (5) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured using the same production line in China; (6) registration applications for traditional Chinese drugs (including ethnic drugs) with clear clinical directions in the prevention and treatment of severe diseases; (7) registration applications for new drugs sponsored by national science and technology grants and of which clinical trials were conducted by a national clinical medical research center and approved by the administration department of such center. |
• | Applications for drugs with obvious clinical benefits in the prevention and treatment of following diseases: (1) HIV; (2) pulmonary tuberculosis; (3) viral hepatitis; (4) orphan diseases; (5) malignant tumor; (6) pediatric drugs; (7) senile diseases. |
• | the review and approval process should be accelerated for drugs or medical devices that are urgently in need for clinical practice; |
• | for drugs or medical devices that are (i) for treatment of severe and life threatening diseases that cannot be cured in an effective manner, or (ii) urgently in need to improve public health, if early and mid-term indicators in clinical trials for the aforementioned drugs or medical devices show efficacy and potential clinical value, the marketing of these drugs and medical devices may be approved conditionally, and companies who desire to market such drugs or medical devices shall develop risk control plans for conducting research according to applicable requirements; |
• | extension of the patent term for certain new drugs may be granted, given that clinical trials and the review and approval process may cause delay in bringing new drugs to the market; and |
• | clinical trial data obtained from foreign countries may be used to register drugs and medical devices in China if such data meet applicable requirements for the registration of drugs and medical devices in China. |
To improve the quality of clinical trial, the CFDA promulgated the Administration of Quality of Drug Clinical Practice in August 2003, which was further revised by the NMPA and the National Health Commission of the PRC, formerly known as the Ministry of Health or the National Health and Family Planning Commission, on April 23, 2020. The revised Administration of Quality of Drug Clinical Practice will come into effect on July 1, 2020.
In February 2004, the CFDA issued the Circular on Measures for Certification of Drug Clinical Practice (trial), providing that the NMPA is responsible for certification of clinical trial institutions, and that the National Health Commission of the PRC is responsible for relevant things in respect of certification of clinical trial institutions within its duties. Under the Circular on Measures for Certification of Drug Clinical Practice (trial), the NMPA and the National Health Commission of the PRC decide whether an institution is qualified for undertaking pharmaceutical clinical trial upon the evaluation of the institution’s organizational administration, its research personnel, its equipment and facilities, its management system and its standard operational rules. If all requirements are met, a GCP Certification will be issued by the NMPA and the result will be published on the NMPA’s website.
On December 1, 2019, the newly revised PRC Drug Administration Law came into effect, which provides that instead of the aforesaid certification, the drug clinical trial institutions are now subject to a record-filing system. In accordance therewith, the NMPA and the National Health Commission of the PRC jointly issued the Announcement on the Release of Regulations for Drug Clinical Trial Institutions on November 29, 2019, which changes the GCP certification system for drug clinical trial institutions to a filing system and overrides the Circular on Measures for Certification of Drug Clinical Practice (trial). A clinical trial institution shall, by itself or appoint third parties, to evaluate whether the institution is qualified for undertaking pharmaceutical clinical trial. If such evaluation determines that the institution is qualified then a filing is required to the newly established filing system run by the NMPA.
• | Laboratory animals must be qualified and sourced from institutions that have Certificates for Production of Laboratory Animals; |
• | The environment and facilities for the animals’ living and propagating must meet state requirements; |
• | The animals’ feed and water must meet state requirements; |
• | The animals’ feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel; |
• | The management systems must be effective and efficient; and |
• | The applicable entity must follow other requirements as stipulated by Chinese laws and regulations. |
• | The applicant shall first conduct an overall evaluation on the global clinical trial data and further make trend analysis of the Asian and Chinese clinical trial data. In the analysis of Chinese clinical trial data, the applicant shall consider the representativeness of the research subjects i.e. the participating patients; |
• | The applicant shall analyze whether the amount of Chinese research subjects is sufficient to assess and adjudicate the safety and effectiveness of the drug under clinical trial, and satisfy the statistical and relevant legal requirements; and |
• | The onshore and offshore international multi-centers clinical trial research centers shall be subject to on-site inspections of competent PRC governmental agencies. |
• | Any person who uses, promises to sell, sells or imports any patented product or product directly obtained in accordance with the patented methods after such product is sold by the patent owner or by its licensed entity or individual; |
• | Any person who has manufactured an identical product, has used an identical method or has made necessary preparations for manufacture or use prior to the date of patent application continues to manufacture such product or use such method only within the original scope; |
• | Any foreign transportation facility that temporarily passes through the territory, territorial waters or territorial airspace of China uses the relevant patents in its devices and installations for its own needs in accordance with any agreement concluded between China and that country to which the foreign transportation facility belongs, or any international treaty to which both countries are party, or on the basis of the principle of reciprocity; |
• | Any person who uses the relevant patents solely for the purposes of scientific research and experimentation; or |
• | Any person who manufactures, uses or imports patented drugs or patented medical equipment for the purpose of providing information required for administrative approval, or manufactures, uses or imports patented drugs or patented medical equipment for the abovementioned person. |
• | directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; |
• | directly or indirectly used for investment in securities, unless otherwise provided by relevant laws and regulations; |
• | directly or indirectly used for granting the entrusted loans in RMB, unless permitted by the scope of business, repaying the inter-enterprise borrowing (including advances by the third party), or repaying the bank loans in RMB that have been sub-lent to the third party; and/or |
• | paying the expenses related to the purchase of real estate that is not for self-use, except for the foreign-invested real estate enterprises. |
• | directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; |
• | directly or indirectly used for investment in securities and investment in wealth management products except for principal-guaranteed bank wealth management products, unless otherwise provided by relevant laws and regulations; |
• | directly or indirectly used for extending the entrusted loans to non-affiliate enterprises, unless permitted by the scope of business; and/or |
• | used for construction or purchase of real estate that is not for self-use, except for the foreign-invested real estate enterprises. |
C. | Organizational Structure |
D. | Property, Plants and Equipment |
Item 4A. | Unresolved Staff Comments |
Item 5. | Operating and Financial Review and Prospects |
A. | Operating Results |
• | continue preclinical studies and clinical development of our programs including in connection with the clinical development programs for Plinabulin in CIN and NSCLC; |
• | hire additional research, development and business personnel; |
• | maintain, expand and protect our intellectual property portfolio; |
• | launch and commercialize Plinabulin in China; |
• | fund the discovery and development of new product candidates; and |
• | incur additional costs associated with operating as a public company. |
• | employee-related expenses, including salaries, benefits and travel expense for research and development personnel; |
• | expenses incurred under agreements with CROs, contract manufacturing organizations, and consultants that conduct and support clinical trials and preclinical studies; |
• | costs associated with preclinical studies and development activities; |
• | costs associated with regulatory operations; |
• | costs associated with protecting intellectual property; |
• | share-based compensation to employees, directors and non-employee consultants; and |
• | other expenses, which include direct and allocated expenses for rent, insurance and other supplies used in research and development activities. |
• | Study 105, an approximately 200 patient Phase 2/3 clinical trial for Plinabulin to prevent CIN in intermediate risk chemotherapy; |
• | Study 106, an approximately 340 patient Phase 2/3 clinical trial for Plinabulin to prevent CIN in high risk chemotherapy; |
• | Study 103, a 554-patient Phase 3 clinical trial of Plinabulin in combination with docetaxel for second and third line treatments of advanced NSCLC; |
• | Three Phase 1/2 investigator-initiated clinical trials of Plinabulin in combination with various immuno-oncology agents; |
• | Preclinical studies investigating both Plinabulin’s, and our preclinical product candidates’, potential in combination with immunotherapies; and |
• | Preclinical study investigating the ubiquitin-mediated degradation pathway. |
• | the number of clinical sites included in the trials; |
• | the design of the trial and changes to the design of the trial; |
• | establishing an appropriate safety profile; |
• | the length of time required to enroll suitable patients; |
• | the number of patients that ultimately participate in the trials; |
• | the number of doses patients receive; |
• | the duration of patient follow-up; |
• | the results of our clinical trials; |
• | making arrangements with third-party manufacturers; |
• | receipt of marketing approvals from applicable regulatory authorities; |
• | commercializing the product candidates, if and when approved, whether alone or in collaboration with others; |
• | obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; |
• | continued acceptable safety profiles of the products following approval; and |
• | retention of key research and development personnel. |
Years Ended December 31, | ||||||||||||
2019 | 2018 | Change | ||||||||||
(in thousands of U.S. Dollars (“$”)) | % | |||||||||||
Revenue | — | — | — | |||||||||
Operating expenses | ||||||||||||
Research and development | (31,342 | ) | (51,618 | ) | -39 | % | ||||||
General and administrative | (8,965 | ) | (5,927 | ) | 51 | % | ||||||
Loss from operations | (40,307 | ) | (57,545 | ) | -30 | % | ||||||
Other (expense) income | ||||||||||||
Foreign exchange loss, net | (4 | ) | (455 | ) | -99 | % | ||||||
Interest expense | (206 | ) | — | -100 | % | |||||||
Interest income | 184 | 211 | -13 | % | ||||||||
Other income | — | 315 | -100 | % | ||||||||
Total other (expense) income | (26 | ) | 71 | -137 | % | |||||||
Net loss before income tax | (40,333 | ) | (57,474 | ) | -30 | % | ||||||
Income tax benefit | — | — | — | |||||||||
Net loss | (40,333 | ) | (57,474 | ) | -30 | % |
R&D activities(1) | Years Ended December 31, | |||||||||||
2019 | 2018 | Change | ||||||||||
(in thousands of U.S. Dollars (“$”)) | % | |||||||||||
Study 103 | 7,516 | 10,020 | -25 | % | ||||||||
Study 105 | 2,250 | 9,837 | -77 | % | ||||||||
Study 106 | 6,144 | 5,443 | 13 | % | ||||||||
Preclinical | 1,206 | 1,553 | -22 | % | ||||||||
Other clinical trials | 1,298 | 1,634 | -21 | % | ||||||||
Employee-related expenses | 4,953 | 4,015 | 23 | % | ||||||||
Share-based compensation | 630 | 6,821 | -91 | % | ||||||||
Consultant and other | 7,345 | 12,295 | -40 | % | ||||||||
Total research and development | 31,342 | 51,618 | -39 | % |
(1) | Due to the inherently unpredictable nature of preclinical and clinical development, we do not track all of our internal research and development expenses on a program-by-program basis as they primarily relate to personnel, early research, manufacturing and development, which are deployed across multiple projects under development. These costs are therefore shown separately. |
Years Ended December 31, | ||||||||||||
2018 | 2017 | Change | ||||||||||
(in thousands of U.S. Dollars (“$”)) | % | |||||||||||
Revenue | — | — | — | |||||||||
Operating expenses | ||||||||||||
Research and development, including patent cost of $42,259 thousand dollars for the year ended December 31, 2017 | (51,618 | ) | (88,928 | ) | -42 | % | ||||||
General and administrative | (5,927 | ) | (9,053 | ) | -35 | % | ||||||
Loss from operations | (57,545 | ) | (97,981 | ) | -41 | % | ||||||
Other (expense) income | ||||||||||||
Foreign exchange (loss)gain, net | (455 | ) | 555 | -182 | % | |||||||
Interest income | 211 | 120 | 76 | % | ||||||||
Other income | 315 | 918 | -66 | % | ||||||||
Total other (expenses) income | 71 | 1,593 | -96 | % | ||||||||
Net loss before income tax | (57,474 | ) | (96,388 | ) | -40 | % | ||||||
Income tax benefit | — | — | — | |||||||||
Net loss | (57,474 | ) | (96,388 | ) | -40 | % |
• | the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
• | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; |
• | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and |
• | Regulation FD, which regulates selective disclosures of material information by issuers. |
B. | Liquidity and Capital Resources |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
(in thousands of U.S. Dollars (“$”)) | ||||||||||||
Net cash used in operating activities | (48,162 | ) | (39,955 | ) | (28,796 | ) | ||||||
Net cash (used in)/provided by investing activities | (4 | ) | 2,867 | (3,150 | ) | |||||||
Net cash provided by financing activities | 80,171 | 13,245 | 47,722 | |||||||||
Net effect of foreign exchange rate changes | 39 | 251 | 18 | |||||||||
Net increase/(decrease) in cash and cash equivalents | 32,044 | (23,592 | ) | 15,794 |
• | the costs, timing and outcome of regulatory reviews and approvals; |
• | the ability of our product candidates to progress through clinical development successfully; |
• | the initiation, progress, timings, costs and results of studies in animals and clinical trials for our other programs and potential product candidates; |
• | the number and characteristics of the product candidates we pursue; |
• | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
• | the extent to which we acquire or in-license other products and technologies; |
• | our ability to establish and maintain arrangements partnership with other pharmaceutical companies for the development, licensing and commercialization of our assets; and |
• | our ability to maintain and establish collaboration arrangements on favorable terms, if at all. |
C. | Research and Development, Patents and Licenses, etc. |
D. | Trend Information |
E. | Off-Balance Sheet Arrangements |
F. | Contractual Obligations and Commitments |
Payments Due by Period | ||||||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Contractual obligations | ||||||||||||||||||||
Operating lease commitments | $ | 3,007 | 763 | 1,536 | 708 | - | ||||||||||||||
Debt obligation | 1,644 | 109 | 1,535 | - | - | |||||||||||||||
Total | $ | 4,651 | 872 | 3,071 | 708 | - |
G. | Safe Harbor |
Item 6. | Directors, Senior Management and Employees |
A. | Directors and Senior Management |
Name | Age | Position(s) | ||
Executive Officers | ||||
Lan Huang, Ph.D. | 49 | Co-Founder, Chairman and Chief Executive Officer | ||
Edward Dongheng Liu | 38 | Chief Financial Officer | ||
Ramon W. Mohanlal, M.D., Ph.D. | 61 | Chief Medical Officer, Executive Vice President of Research and Development and Director | ||
G. Kenneth Lloyd, Ph.D. | 76 | Chief Scientific Officer Emeritus and Senior Advisor | ||
Gordon L. Schooley, Ph.D. | 73 | Chief Regulatory Officer | ||
Richard Daly, M.B.A. | 59 | Chief Operating Officer | ||
James R. Tonra, Ph.D. | 54 | Chief Scientific Officer | ||
Non-Employee Directors | ||||
Patrick Fabbio, M.B.A. | 52 | Director | ||
Matthew Kirkby, M.A. | 51 | Director | ||
Quanqi Song, Ph.D. | 55 | Director | ||
Yanbin Xie, M.D. | 61 | Director | ||
Christine Ying Zhao, M.B.A. | 47 | Director | ||
Daniel L. Zabrowski, Ph.D. | 60 | Director |
B. | Compensation |
• | an annual cash retainer fee equal to $30,000 (pro-rated for any partial year of service), plus an additional cash retainer fee equal to $3,750 (pro-rated for any partial year of service) for any director serving as chairman of either the Compensation Committee, the Nominating and Corporate Governance Committee, or the Audit Committee, and |
• | an annual grant of restricted shares with a grant date value of $30,000 (pro-rated for any partial year of service), plus an additional grant of restricted shares with a grant date value of $3,750 (pro-rated for any partial year of service, but not pro-rated in respect of fiscal year 2017) for any director serving as chairman of either the Compensation Committee, the Nominating and Corporate Governance Committee, or the Audit Committee, in each case paid on a fiscal year basis in arrears. |
• | Dr. Huang: none. |
• | Mr. Liu: none. |
• | Dr. Mohanlal: 180,000 options, granted on January 14, 2020 at an exercise price of $17.94 per share, 50,000 of which were vested. |
• | Dr. Lloyd: 74,000 options, granted on January 14, 2020 at an exercise price of $17.94 per share, 37,000 of which were vested. |
• | Dr. Schooley: 95,000 options, granted on January 14, 2020, at an exercise price of $17.94 per share, 30,000 of which were vested. |
• | Mr. Daly: 100,000 options, granted on August 2, 2018 at an exercise price of $24.21 per share, 30,000 of which were vested. |
• | Dr. Tonra: 30,000 options, granted on March 16, 2018, at an exercise price of $27.30 per share, 10,500 of which were vested. |
C. | Board Practices |
• | selecting and appointing our independent registered public accounting firm, and approving the audit and permitted non-audit services to be provided by our independent registered public accounting firm; |
• | evaluating the performance and independence of our independent registered public accounting firm; |
• | monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements or accounting matters; |
• | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures; |
• | establishing procedures for the receipt, retention and treatment of accounting-related complaints and concerns; |
• | reviewing and discussing with the independent registered public accounting firm the results of our year-end audit, and recommending to our board of directors, based upon such review and discussions, whether our financial statements shall be included in our annual report on Form 20-F; |
• | reviewing all related party transactions for potential conflict of interest situations and approving all such transactions; and |
• | reviewing the type and presentation of information to be included in our earnings press releases, as well as financial information and earnings guidance provided by us to analysts and rating agencies. |
• | reviewing the goals and objectives of our executive compensation plans, as well as our executive compensation plans in light of such goals and objectives; |
• | evaluating the performance of our executive officers in light of the goals and objectives of our executive compensation plans and recommending to our board of directors with respect to the compensation of our executive officers; |
• | reviewing the goals and objectives of our general compensation plans and other employee benefit plans, as well as our general compensation plans and other employee benefit plans in light of such goals and objectives; |
• | retaining and approving the compensation of any compensation advisors; |
• | reviewing all equity-compensation plans to be submitted for shareholder approval under the NASDAQ listing rules, and reviewing and approving all equity-compensation plans that are exempt from such shareholder approval requirement; |
• | evaluating the appropriate level of compensation for board and board committee service by non-employee directors; and |
• | reviewing and approving description of executive compensation included in our annual report on Form 20-F. |
• | assisting our board of directors in identifying prospective director nominees and recommending nominees for election by the shareholders or appointment by our board of directors; |
• | advising the board of directors periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; |
• | overseeing the evaluation of our board of directors; and |
• | recommending members for each board committee of our board of directors. |
D. | Employees |
2017 | 2018 | 2019 | ||||||||||
Research and Development and Laboratory Operations | 22 | 38 | 37 | |||||||||
General and Administrative Functions | 10 | 14 | 24 |
E. | Share Ownership |
Item 7. | Major Shareholders and Related Party Transactions |
A. | Major Shareholders |
• | each person or group of affiliated persons known by us to own beneficially 5% or more of our outstanding ordinary shares; |
• | each of our directors and executive officers individually; and |
• | all of our executive officers and directors as a group. |
Name of Beneficial Owner | Number of Ordinary Shares Beneficially Owned | % | ||||||
5% Shareholders | ||||||||
Ever Regal Group Limited(1) | 3,660,000 | 13.12 | ||||||
Fairy Eagle Investment Limited(1) | 4,620,000 | 16.57 | ||||||
Entities affiliated with Decheng Capital(2) | 2,688,912 | 9.64 | ||||||
Rosy Time Holdings Limited(1) | 1,190,000 | 4.27 | ||||||
Entities affiliated with Sangel Venture Capital(3) | 2,105,494 | 7.55 | ||||||
Executive Officers and Directors | ||||||||
Lan Huang(1) | 10,367,037 | 37.17 | ||||||
Edward Dongheng Liu(4) | 155,555 | * | ||||||
Ramon W. Mohanlal(5) | 380,098 | 1.36 | ||||||
G. Kenneth Lloyd(6) | 75,500 | * | ||||||
Gordon L. Schooley(7) | 45,137 | * | ||||||
Richard Daly(8) | 37,500 | * | ||||||
James R. Tonra(9) | 11,500 | * | ||||||
Patrick Fabbio(10) | 3,921 | * | ||||||
Matthew Kirkby(11) | 4,767 | * | ||||||
Quanqi Song(12) | 689,759 | 2.47 | ||||||
Yanbin Xie(13) | 4,221 | * | ||||||
Christine Ying Zhao(14) | 4,767 | * | ||||||
Daniel L. Zabrowski | — | — | ||||||
All Directors and Executive Officers as a group (13 people) | 11,779,762 | 42.24 |
* | Amounts represent less than 1% of outstanding ordinary shares. |
(1) | Dr. Lan Huang, our Co-founder, Chairman and Chief Executive Officer, is the sole owner of Ever Regal Group Limited. Mr. Linqing Jia, Dr. Huang’s spouse, is the sole owner of Fairy Eagle Investments Limited and Rosy Time Holdings Limited. Dr. Huang and Mr. Jia collectively also own 100% of the equity interest in Wanchun Biotech. Dr. Huang and Mr. Jia may be deemed to have shared voting and dispositive power over the shares held by each of Ever Regal Group Limited, Fairy Eagle Investments Limited, Rosy Time Holdings Limited and Wanchun Biotech, and the 137,037 restricted shares, all of which have been vested, held of record by Mr. Jia. The amount also includes 223,968 ordinary shares held by Dr. Huang and 376,032 ordinary shares held by Lan Huang 2018 Grantor Retained Annuity Trust, over which Dr. Huang as the trustee has the sole voting and dispositive power. |
(2) | Consisting of 1,344,455 ordinary shares owned by Decheng Capital China Life Sciences USD Fund II, L.P. (“Fund II”) and 1,344,457 ordinary shares owned by Decheng Capital China Life Sciences USD Fund III, L.P. (“Fund III”). Decheng Capital Management II (Cayman), LLC (the “Fund II GP”) is the general manager of Fund II and Decheng Capital Management III (Cayman), LLC (the “Fund III GP”) is the general manager of Fund III. Xiangmin Cui is the sole manager of each of Fund II GP and Fund III GP. Each of Fund II GP and Xiangmin Cui may be deemed to share voting and dispositive power over the shares held directly by Fund II, and each of Fund III GP and Cui may be deemed to share voting and dispositive power over the shares held directly by Fund III. As such, Fund II GP may be deemed to beneficially own the shares held by Fund II, Fund III GP may be deemed to beneficially own the shares held by Fund III, and Cui may be deemed to beneficially own the shares held by Fund II and Fund III. |
(3) | Consisting of 800,000 ordinary shares owned by Beijing Sangel Fang Sheng Venture Capital (Limited Partnership), 300,000 ordinary shares owned by Shenzhen Sangel Jing Rui Venture Capital (Limited Partnership), 200,000 ordinary shares owned by Shenzhen Sangel Sino-Euro Venture Capital (Limited Partnership), 444,444 ordinary shares owned by Beijing Huarong Sangel Venture Capital (Limited Partnership) (previously named Beijing Sangel Venture Capital (Limited Partnership)) (“Beijing Huarong Sangel”) and 361,050 ordinary shares owned by Sangel Star Biomedical Fund LP. Shenzhen Sangel Capital Management Limited Company (“Sangel Venture Capital”) is the sole general partner of Beijing Sangel Fang Sheng Venture Capital (Limited Partnership), Shenzhen Sangel Jing Rui Venture Capital (Limited Partnership) and Shenzhen Sangel Sino-Euro Venture Capital (Limited Partnership). Sangel Star Biomedical Fund LP is an affiliate of Sangel Venture Capital. The managing members of Sangel Venture Capital are Mr. Mulong Liu (who is a founding partner of Sangel Venture Capital and one of our former directors), Dr. Feng Fang, Dr. Nanxing He (who is one of our former directors), Dr. Jinglong Liu, Mr. Xiaoming Yang and Dr. Huali Zhang. The address of Sangel Venture Capital is 8th Floor, Design House, Donghua Garden, Nanshan District, Shenzhen, China. Sangel Venture Capital and Huarong Tianze Investments Limited (“Huarong Tianze”) are the general partners of Beijing Huarong Sangel Venture Capital (Limited Partnership). The managing members of Huarong Tianze are Mr. Xiaoming Ran and Mr. Xiaodong Wu. The address of Huarong Tianze is 2nd Floor, Building A, No. 8 Financial Street, Xicheng District, Beijing, China. |
(4) | Consisting of (i) 55,555 ordinary shares held of record by Mr. Edward Dongheng Liu, and (ii) 100,000 restricted shares, 37,500 of which have been vested, granted under the 2017 Omnibus Incentive Plan. |
(5) | Consisting of (i) 220,098 restricted shares, 145,098 of which have been vested, held of record by Dr. Ramon W. Mohanlal, granted under the 2017 Omnibus Incentive Plan, and (ii) vested options to purchase 160,000 ordinary shares granted under the 2017 Omnibus Incentive Plan. |
(6) | Consisting of (i) 20,000 restricted shares, all of which have been vested, held of record by Dr. G. Kenneth Lloyd, granted under the 2017 Omnibus Incentive Plan, and (ii) vested options to purchase 55,500 ordinary shares granted under the 2017 Omnibus Incentive Plan. |
(7) | Consisting of (i) 137 restricted shares, all of which have been vested, held of record by Dr. Gordon Schooley granted under the 2017 Omnibus Incentive Plan, and (ii) vested options to purchase 45,000 ordinary shares granted under the 2017 Omnibus Incentive Plan. |
(8) | Consisting of options to purchase 37,500 ordinary shares granted under the 2017 Omnibus Incentive Plan. |
(9) | Consisting of options to purchase 11,500 ordinary shares granted under the 2017 Omnibus Incentive Plan. |
(10) | Consisting of 3,921 restricted shares, 568 of which have been vested, held of record by Mr. Patrick Fabbio, granted under the 2017 Omnibus Incentive Plan. |
(11) | Consisting of 4,767 restricted shares, 1,132 of which have been vested, held of record by Mr. Matthew Kirkby, granted under the 2017 Omnibus Incentive Plan. |
(12) | Consisting of 685,538 ordinary shares owned by Hover Dragon Investment Limited, an entity wholly owned by Winning View Investments Limited and 4,221 restricted shares, 995 of which have been vested, held by record by Dr. Quanqi Song. Dr. Quanqi Song, a member of our board of directors, is the sole shareholder of Winning View Investments Limited. |
(13) | Consisting of 4,221 restricted shares, 995 of which have been vested, held of record by Dr. Yanbin Xie, granted under the 2017 Omnibus Incentive Plan. |
(14) | Consisting of 4,767 restricted shares, 1,132 of which have been vested, held of record by Ms. Christine Ying Zhao, granted under the 2017 Omnibus Incentive Plan. |
B. | Related Party Transactions |
C. | Interests of Experts and Counsel |
Item 8. | Financial Information |
A. | Consolidated Financial Statements and Other Financial Information |
B. | Significant Changes |
Item 9. | Offer and Listing |
A. | Offer and Listing Details |
B. | Plan of Distribution |
C. | Markets |
D. | Selling Shareholders |
E. | Dilution |
F. | Expenses of the Issue |
Item 10. | Additional Information |
A. | Share Capital |
B. | Memorandum and Articles of Association |
• | the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; |
• | the instrument of transfer is in respect of only one class of shares; |
• | the instrument of transfer is properly stamped, if required; |
• | in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and |
• | a fee of such maximum sum as the Nasdaq Capital Market may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
• | the designation of the series; |
• | the number of shares of the series; |
• | the dividend rights, dividend rates, conversion rights, voting rights; and |
• | the rights and terms of redemption and liquidation preferences. |
• | authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders; and |
• | limit the ability of shareholders to requisition and convene general meetings of shareholders. |
• | does not have to file an annual return of its shareholders with the Registrar of Companies; |
• | is not required to open its register of members for inspection; |
• | does not have to hold an annual general meeting; |
• | may issue negotiable or bearer shares or shares with no par value; |
• | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); |
• | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
• | may register as a limited duration company; and |
• | may register as a segregated portfolio company. |
• | the names and addresses of the members, together with a statement of the shares held by each member and such statement shall confirm (i) the amount paid, or agreed to be considered as paid, on the shares of each member, (ii) the number and category of shares held by each member and (iii) whether each relevant category of shares held by a member carries voting rights under the articles of association of the company, and if so, whether such voting rights are conditional; |
• | the date on which the name of any person was entered on the register as a member; and |
• | the date on which any person ceased to be a member. |
C. | Material Contracts |
D. | Exchange Controls |
E. | Taxation |
• | the primary location of the enterprise’s senior executives of the day-to-day operational management and senior management departments performing their duties is in China; |
• | decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in China; |
• | the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder meeting minutes are located or maintained in China; and |
• | 50% or more of voting board members or senior executives habitually reside in China. |
• | banks, financial institutions or insurance companies; |
• | real estate investment trusts, regulated investment companies or grantor trusts; |
• | brokers or dealers in securities, commodities or currencies; |
• | traders in securities who have elected the mark-to-market method of accounting for their securities; |
• | tax-exempt entities or organizations, including individual retirement accounts or other tax-deferred accounts; |
• | former citizens or long-term residents of the United States; |
• | persons that received our shares as compensation for the performance of service, including shareholders who acquired shares pursuant to the exercise of an employee stock option; |
• | persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or other risk reduction strategy or as a position in a “straddle” for U.S. federal income tax purposes; |
• | entities classified as partnerships for U.S. federal income tax purposes or other pass-through entities, or holders that will hold our shares through such an entity; |
• | persons whose “functional currency” is not the U.S. dollar; or |
• | holders that own or have owned directly, indirectly or constructively 10.0% or more of the voting power or value of our shares. |
• | an individual citizen or resident of the United States; |
• | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons has or have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
• | at least 75% of its gross income is “passive income”; or |
• | at least 50% of the average quarterly value of its total gross assets is attributable to assets that produce “passive income” or are held for the production of passive income. |
F. | Dividends and Paying Agents |
G. | Statement by Experts |
H. | Documents on Display |
I. | Subsidiary Information |
Item 11. | Qualitative and Quantitative Disclosures About Market Risk |
Item 12. | Description of Securities Other than Equity Securities |
A. | Debt Securities |
B. | Warrants and Rights |
C. | Other Securities |
D. | American Depositary Shares |
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
Item 15. | Controls and Procedures |
(a) | Disclosure Controls and Procedures |
(b) | Management’s Annual Report on Internal Control Over Financial Reporting |
(c) | Attestation Report of the Registered Public Accounting Firm |
(d) | Changes in Internal Control Over Financial Reporting |
Item 16. | [Reserved] |
Item 16A. | Audit Committee Financial Expert |
Item 16B. | Code of Ethics |
Item 16C. | Principal Accountant Fees and Services |
Year Ended December 31, | ||||||||
2018 | 2019 | |||||||
Audit Fees(1) | $ | 393 | $ | 366 | ||||
Audit-Related Fees(2) | 75 | 144 | ||||||
Tax Fees(3) | — | — | ||||||
All Other Fees(4) | — | — | ||||||
Total | $ | 468 | $ | 510 |
(1) | “Audit Fees” represents the aggregate fees for the interim reviews and annual audit of our financial statements for 2019 as well as other assurance service. |
(2) | “Audit-Related Fees” represents the aggregate fees billed for each of the fiscal years listed for the assurance and related services rendered by our principal auditors that are reasonably related to the performance of the audit or review of our financial statements and not reported under “Audit Fees.” |
(3) | “Tax Fees” represents the aggregate fees billed for each of the fiscal years listed for the professional tax services rendered by our principal auditors. |
(4) | “All Other Fees” represents the aggregate fees for services rendered by our principal auditors other than services reported under “Audit Fees,” “Audit-related Fees” and “Tax Fees.” |
Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
Item 16F. | Change in Registrant’s Certifying Accountant |
Item 16G. | Corporate Governance |
Item 16H. | Mine Safety Disclosure |
Item 17. | Financial Statements |
Item 18. | Financial Statements |
Item 19. | Exhibits |
Amended and Restated Memorandum and Articles of Association of BeyondSpring Inc. | |
Specimen Certificate for Ordinary Shares of BeyondSpring Inc. | |
Description of Securities Registered under Section 12 of the Exchange Act | |
Consulting Agreement, dated as of June 18, 2013, between Wanchun Pharma and GKOL Inc. | |
First Amendment to the Consulting Agreement, dated as of March 30, 2014, among Wanchun Pharma, BeyondSpring U.S. and GKOL Inc. | |
Eighth Amendment to the Consulting Agreement, dated as of January 1, 2020, between BeyondSpring U.S. and GKOL Inc. | |
Termination Agreement, dated as of February 2, 2015, among BeyondSpring Inc., Wanchun Biotech and Nereus | |
Amended and Restated Employment Agreement, dated as of November 10, 2016, between BeyondSpring U.S. and Lan Huang | |
Amended and Restated Employment Agreement, dated as of November 10, 2016, between BeyondSpring U.S. and Ramon Mohanlal |
Amended and Restated Employment Agreement, dated as of November 10, 2016, between BeyondSpring U.S. and Gordon L. Schooley | |
Form of Director and Executive Officer Indemnification Agreement | |
BeyondSpring Inc. 2017 Omnibus Incentive Plan and related form agreements | |
Form of Director Agreement | |
Letter Agreement with respect to BPI-002 Milestone Stock Bonus Award, dated as of April 11, 2017, between BeyondSpring Inc. and Ramon Mohanlal | |
Letter Agreement with respect to BPI-004 Milestone Stock Bonus Award, dated as of April 11, 2017, between BeyondSpring Inc. and Ramon Mohanlal | |
Employment Agreement, dated as of March 26, 2018, between BeyondSpring U.S. and Edward Dongheng Liu | |
Employment Agreement, dated as of June 8, 2018, between BeyondSpring U.S. and Richard Daly | |
Amended and Restated Employment Agreement, dated as of January 1, 2020, between BeyondSpring U.S. and James Tonra | |
Open Market Sale Agreement, dated as of May 21, 2019, between BeyondSpring Inc. and Jefferies LLC | |
Amendment No. 1 to the Open Market Sale Agreement, dated as of February 7, 2020, between BeyondSpring Inc. and Jefferies LLC | |
English Translation of the Capital Increase Agreement, dated as of June 14, 2019, among Dalian Wanchunbulin Pharmaceuticals Ltd., Wanchun Biotech Ltd. and Shenzhen Efung 9th Venture Investment Center (Limited Partnership) | |
English Translation of the Capital Increase Agreement, dated as of July 3, 2019, among Dalian Wanchunbulin Pharmaceuticals Ltd., Wanchun Biotech Ltd. and Nanjing TEEWIN Investment Partnership (Limited Partnership) | |
Amendment to Employment Agreement, dated as of September 24, 2019, between BeyondSpring US and Richard Daly | |
Second Amendment to Employment Agreement, dated as of December 26, 2019, between BeyondSpring US and Richard Daly | |
Letter Agreement, dated as of January 1, 2020, between BeyondSpring US and Lan Huang | |
Letter Agreement, dated as of January 1, 2020, between BeyondSpring US and Edward Dongheng Liu | |
Letter Agreement, dated as of December 9, 2019, between BeyondSpring US and Ramon W. Mohanlal | |
Letter Agreement, dated as of January 1, 2020, between BeyondSpring US and Gordon Schooley | |
List of Subsidiaries of BeyondSpring Inc. | |
Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Consent of Ernst & Young Hua Ming LLP | |
Consent of Maples and Calder (Hong Kong) LLP | |
Consent of Han Kun Law Offices | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
(1) | Previously filed with the Registration Statement on Form F-1 (File No. 333-214610), as amended, initially filed on November 15, 2016, and incorporated herein by reference. |
(2) | Filed with this annual report on Form 20-F. |
(3) | Furnished with this annual report on Form 20-F. |
(4) | Incorporated by reference to the 2016 annual report on Form 20-F of BeyondSpring Inc. filed with the SEC on April 28, 2017. |
(5) | Incorporated by reference to the 2017 annual report on Form 20-F of BeyondSpring Inc. filed with the SEC on April 3, 2018. |
(6) | Incorporated by reference to the 2018 annual report on Form 20-F of BeyondSpring Inc. filed with the SEC on April 30, 2019. |
(7) | Previously filed with Form 6-K of BeyondSpring Inc., filed with the SEC on May 22, 2019, and incorporated by reference herein. |
(8) | Previously filed with Form 6-K of BeyondSpring Inc., filed with the SEC on February 7, 2020, and incorporated by reference herein. |
(9) | Previously filed with Form 6-K of BeyondSpring Inc., filed with the SEC on July 10, 2019, and incorporated by reference herein. |
• | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
• | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
BeyondSpring Inc. | |||
By: | /s/ Lan Huang | ||
Name: | Lan Huang | ||
Title: | Chief Executive Officer | ||
Date: April 30, 2020 |
Page | |
Audited Consolidated Financial Statements of BeyondSpring Inc. | |
Report of Independent Registered Public Accounting Firm | F-2 |
Consolidated balance sheets as of December 31, 2019 and 2018 | F-3 |
Consolidated statements of comprehensive loss for the years ended December 31, 2019, 2018 and 2017 | F-5 |
Consolidated statements of shareholders’ equity (deficit) for the years ended December 31, 2019, 2018 and 2017 | F-6 |
Consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017 | F-7 |
Notes to consolidated financial statements | F-9 |
/s/ Ernst & Young Hua Ming LLP We have served as the Company’s auditor since 2015. Beijing, People’s Republic of China April 30, 2020 |
As of December 31, | |||||||||||
Note | 2018 | 2019 | |||||||||
$ | $ | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | 3,889 | 35,933 | |||||||||
Advances to suppliers | 1,209 | 4,519 | |||||||||
Due from related parties | 5 | 481 | - | ||||||||
Prepaid expenses and other current assets | 292 | 410 | |||||||||
Total current assets | 5,871 | 40,862 | |||||||||
Noncurrent assets: | |||||||||||
Property and equipment, net | 3 | 282 | 209 | ||||||||
Operating lease right-of-use assets | 11 | - | 2,538 | ||||||||
Other noncurrent assets | 910 | 946 | |||||||||
Total noncurrent assets | 1,192 | 3,693 | |||||||||
Total assets | 7,063 | 44,555 | |||||||||
Liabilities and equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | 9,586 | 2,537 | |||||||||
Accrued expenses | 5,495 | 5,861 | |||||||||
Current portion of operating lease liabilities | 11 | - | 537 | ||||||||
Due to related parties | 5 | - | 29 | ||||||||
Other current liabilities | 12 | 1,364 | 1,089 | ||||||||
Total current liabilities | 16,445 | 10,053 | |||||||||
Noncurrent liabilities: | |||||||||||
Long-term loans | 4 | - | 1,436 | ||||||||
Operating lease liabilities | 11 | - | 1,935 | ||||||||
Total noncurrent liabilities | - | 3,371 | |||||||||
Total liabilities | 16,445 | 13,424 | |||||||||
Commitments and contingencies | 13 |
As of December 31, | |||||||||
Note | 2018 | 2019 | |||||||
$ | $ | ||||||||
Equity (deficit): | |||||||||
Ordinary shares ($0.0001 par value; 500,000,000 shares authorized; 23,184,612 shares and 27,885,613 shares issued and outstanding as of December 31, 2018 and 2019, respectively) | 2 | 3 | |||||||
Additional paid-in capital | 170,950 | 246,979 | |||||||
Accumulated deficit | (178,760 | ) | (216,845 | ) | |||||
Accumulated other comprehensive income | 42 | 140 | |||||||
Total BeyondSpring Inc. shareholders’ (deficit) equity | (7,766 | ) | 30,277 | ||||||
Noncontrolling interests | (1,616 | ) | 854 | ||||||
Total (deficit) equity | (9,382 | ) | 31,131 | ||||||
Total liabilities and equity (deficit) | 7,063 | 44,555 |
Year ended December 31, | |||||||||||||||
Note | 2017 | 2018 | 2019 | ||||||||||||
$ | $ | $ | |||||||||||||
Revenue | - | - | - | ||||||||||||
Operating expenses | |||||||||||||||
Research and development, including patent cost of $42,259 for the year ended December 31, 2017 | (88,928 | ) | (51,618 | ) | (31,342 | ) | |||||||||
General and administrative | (9,053 | ) | (5,927 | ) | (8,965 | ) | |||||||||
Loss from operations | (97,981 | ) | (57,545 | ) | (40,307 | ) | |||||||||
Foreign exchange gain (loss), net | 555 | (455 | ) | (4 | ) | ||||||||||
Interest income | 120 | 211 | 184 | ||||||||||||
Interest expenses | - | - | (206 | ) | |||||||||||
Other income | 918 | 315 | - | ||||||||||||
Loss before income tax | (96,388 | ) | (57,474 | ) | (40,333 | ) | |||||||||
Income tax benefit | 6 | - | - | - | |||||||||||
Net loss | (96,388 | ) | (57,474 | ) | (40,333 | ) | |||||||||
Less: Net loss attributable to noncontrolling interests | (4,625 | ) | (2,605 | ) | (2,248 | ) | |||||||||
Net loss attributable to BeyondSpring Inc. | (91,763 | ) | (54,869 | ) | (38,085 | ) | |||||||||
Net loss per share | |||||||||||||||
Basic and diluted | 7 | (4.40 | ) | (2.42 | ) | (1.55 | ) | ||||||||
Weighted average shares outstanding | |||||||||||||||
Basic and diluted | 7 | 20,866,084 | 22,665,265 | 24,645,714 | |||||||||||
Other comprehensive loss, net of tax of nil: | |||||||||||||||
Foreign currency translation adjustment (loss) gain | (1 | ) | 251 | 96 | |||||||||||
Comprehensive loss | (96,389 | ) | (57,223 | ) | (40,237 | ) | |||||||||
Less: Comprehensive loss attributable to noncontrolling interests | (4,535 | ) | (2,578 | ) | (2,250 | ) | |||||||||
Comprehensive loss attributable to BeyondSpring Inc. | (91,854 | ) | (54,645 | ) | (37,987 | ) |
BeyondSpring Inc.’s shareholders | ||||||||||||||||||||||||||||||||
Ordinary share | Additional paid-in | Accumulated | Accumulated other | Non controlling | Total equity | |||||||||||||||||||||||||||
Shares | Amount | capital | deficit | (loss) gain | Subtotal | interests | (deficit) | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Balances at January 1, 2017 | 16,879,628 | 2 | 44,369 | (32,128 | ) | (91 | ) | 12,152 | 147 | 12,299 | ||||||||||||||||||||||
Issuance of ordinary shares (Note 1) | 4,828,297 | - | 89,443 | - | - | 89,443 | - | 89,443 | ||||||||||||||||||||||||
Capital contribution shared by noncontrolling interests | - | - | (1,480 | ) | - | - | (1,480 | ) | 1,480 | - | ||||||||||||||||||||||
Share-based compensation (Note 8) | 822,777 | - | 18,815 | - | - | 18,815 | 3,868 | 22,683 | ||||||||||||||||||||||||
Foreign currency translation adjustment (loss) gain | - | - | - | - | (91 | ) | (91 | ) | 90 | (1 | ) | |||||||||||||||||||||
Net loss | - | - | - | (91,763 | ) | - | (91,763 | ) | (4,625 | ) | (96,388 | ) | ||||||||||||||||||||
Balances at December 31, 2017 | 22,530,702 | 2 | 151,147 | (123,891 | ) | (182 | ) | 27,076 | 960 | 28,036 | ||||||||||||||||||||||
Issuance of ordinary shares (Note 1) | 739,095 | - | 13,245 | - | - | 13,245 | - | 13,245 | ||||||||||||||||||||||||
Share-based compensation (Note 8) | (85,185 | ) | - | 6,558 | - | - | 6,558 | 2 | 6,560 | |||||||||||||||||||||||
Foreign currency translation adjustment gain | - | - | - | - | 224 | 224 | 27 | 251 | ||||||||||||||||||||||||
Net loss | - | - | - | (54,869 | ) | - | (54,869 | ) | (2,605 | ) | (57,474 | ) | ||||||||||||||||||||
Balances at December 31, 2018 | 23,184,612 | 2 | 170,950 | (178,760 | ) | 42 | (7,766 | ) | (1,616 | ) | (9,382 | ) | ||||||||||||||||||||
Issuance of ordinary shares (Note 1) | 4,588,574 | 1 | 68,565 | - | - | 68,566 | - | 68,566 | ||||||||||||||||||||||||
Capital contribution from noncontrolling interests | - | - | 5,941 | - | - | 5,941 | 4,142 | 10,083 | ||||||||||||||||||||||||
Share-based compensation (Note 8) | 112,427 | - | 2,101 | - | - | 2,101 | - | 2,101 | ||||||||||||||||||||||||
Capital contribution shared by noncontrolling interests | - | - | (578 | ) | - | - | (578 | ) | 578 | - | ||||||||||||||||||||||
Foreign currency translation adjustment (loss) gain | - | - | - | - | 98 | 98 | (2 | ) | 96 | |||||||||||||||||||||||
Net loss | - | - | - | (38,085 | ) | - | (38,085 | ) | (2,248 | ) | (40,333 | ) | ||||||||||||||||||||
Balances at December 31, 2019 | 27,885,613 | 3 | 246,979 | (216,845 | ) | 140 | 30,277 | 854 | 31,131 |
Year ended December 31, | |||||||||||||||
Note | 2017 | 2018 | 2019 | ||||||||||||
$ | $ | $ | |||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net loss | (96,388 | ) | (57,474 | ) | (40,333 | ) | |||||||||
Adjustments to reconcile net loss to cash used in operating activities: | |||||||||||||||
Depreciation expenses | 3 | 32 | 48 | 77 | |||||||||||
Share-based compensation | 8 | 22,683 | 6,560 | 2,101 | |||||||||||
Research and development expense settled by share issuance | 13 | 42,259 | - | - | |||||||||||
Other income from government grant | - | (307 | ) | - | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Advances to suppliers | (726 | ) | 316 | (3,310 | ) | ||||||||||
Due from related parties | 5 | - | (481 | ) | 481 | ||||||||||
Prepaid expenses and other current assets | 96 | (28 | ) | (137 | ) | ||||||||||
Operating lease right-of-use assets | - | - | 650 | ||||||||||||
Other noncurrent assets | (240 | ) | (549 | ) | (36 | ) | |||||||||
Accounts payable | 2,935 | 6,207 | (7,049 | ) | |||||||||||
Due to related parties | (210 | ) | - | - | |||||||||||
Accrued expenses | 699 | 4,688 | 366 | ||||||||||||
Operating lease liabilities | - | - | (697 | ) | |||||||||||
Other current liabilities | 64 | 1,065 | (275 | ) | |||||||||||
Net cash used in operating activities | (28,796 | ) | (39,955 | ) | (48,162 | ) | |||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisitions of property and equipment | (76 | ) | (207 | ) | (4 | ) | |||||||||
Purchase of short-term investments | (3,074 | ) | - | - | |||||||||||
Proceeds from maturity of short-term investments | - | 3,074 | - | ||||||||||||
Net cash (used in) provided by investing activities | (3,150 | ) | 2,867 | (4 | ) | ||||||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from issuance of ordinary shares, net of underwriting discounts and commissions | 1 | 50,505 | 14,000 | 69,454 | |||||||||||
Capital contributions from noncontrolling interests | - | - | 10,083 | ||||||||||||
Payments of offering costs | (2,783 | ) | (755 | ) | (888 | ) | |||||||||
Proceeds from loans | 4 | - | - | 2,986 | |||||||||||
Proceeds from related party borrowings | 5 | - | - | 5,894 | |||||||||||
Repayments of loans | 4 | - | - | (1,493 | ) | ||||||||||
Repayments of related party borrowings | 5 | - | - | (5,865 | ) | ||||||||||
Net cash provided by financing activities | 47,722 | 13,245 | 80,171 |
Year ended December 31, | |||||||||||||
Note | 2017 | 2018 | 2019 | ||||||||||
$ | $ | $ | |||||||||||
Effect of foreign exchange rate changes | 18 | 251 | 39 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 15,794 | (23,592 | ) | 32,044 | |||||||||
Cash at beginning of year | 11,687 | 27,481 | 3,889 | ||||||||||
Cash at end of year | 27,481 | 3,889 | 35,933 | ||||||||||
Supplemental disclosures of cash flow information: | |||||||||||||
Interest paid | - | - | 202 | ||||||||||
Non-cash activities: | |||||||||||||
Research and development expense settled by share issuance | 13 | 42,259 | - | - |
1. | Nature of the business |
1. | Nature of the business (continued) |
Name of company | Place of incorporation | Date of incorporation | Percentage of ownership by the Company | Principal activities |
BeyondSpring Pharmaceuticals Inc. (“BeyondSpring US”) | Delaware, United States of America (“U.S.”) | June 18, 2013 | 100% | Clinical trial activities |
BeyondSpring Ltd. | BVI | December 3, 2014 | 100% | Holding company |
BeyondSpring (HK) Limited (“BeyondSpring HK”) | Hong Kong | January 13, 2015 | 100% | Holding company |
Wanchun Biotechnology Limited (“BVI Biotech”) | BVI | April 1, 2015 | 100% | Holding company |
Wanchun Biotechnology (Shenzhen) Ltd. (“Wanchun Shenzhen”) | PRC | April 23, 2015 | 100% | Holding company |
Wanchunbulin | PRC | May 6, 2015 | 57.97% | Clinical trial activities |
BeyondSpring Pharmaceuticals Australia PTY Ltd. (“BeyondSpring Australia”) | Australia | March 3, 2016 | 100% | Clinical trial activities |
Beijing Wanchun Pharmaceutical Technology Ltd. (“Beijing Wanchun”) | PRC | May 21, 2018 | 57.97% | Clinical trial activities |
SEED | BVI | June 25, 2019 | 100% | Holding company |
SEED Technology | BVI | December 9, 2019 | 57.97% | Holding company |
2. | Summary of significant accounting policies |
2. | Summary of significant accounting policies (continued) |
2. | Summary of significant accounting policies (continued) |
2. | Summary of significant accounting policies (continued) |
Balance at December 31, 2018 | Adjustments due to Lease ASUs | Balance at January 1 2019 | ||||||||||
$ | $ | $ | ||||||||||
Assets: | ||||||||||||
Prepaid expenses and other current assets | 292 | (19 | ) | 273 | ||||||||
Operating lease right-of-use assets | - | 3,188 | 3,188 | |||||||||
Liabilities: | ||||||||||||
Current portion of operating lease liabilities | - | 605 | 605 | |||||||||
Operating lease liabilities | - | 2,564 | 2,564 |
Category | Estimated useful life |
Office equipment | 5 years |
Laboratory equipment | 2-5 years |
Motor vehicles | 10 years |
Leasehold improvements | Lower of lease term or economic life |
2. | Summary of significant accounting policies (continued) |
• | Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
• | Level 2 —Other inputs that are directly or indirectly observable in the marketplace. |
• | Level 3—Unobservable inputs which are supported by little or no market activity. |
2. | Summary of significant accounting policies (continued) |
December 31, | ||||||||
2018 | 2019 | |||||||
PRC | 73 | 52 | ||||||
U.S. | 208 | 157 | ||||||
Australia | 1 | - | ||||||
Total | 282 | 209 |
2. | Summary of significant accounting policies (continued) |
2. | Summary of significant accounting policies (continued) |
2. | Summary of significant accounting policies (continued) |
2. | Summary of significant accounting policies (continued) |
3. | Property and equipment, net |
December 31, | |||||||||
2018 | 2019 | ||||||||
Office equipment | 143 | 150 | |||||||
Laboratory equipment | 111 | 114 | |||||||
Motor vehicles | 23 | 23 | |||||||
Leasehold improvements | 109 | 103 | |||||||
386 | 390 | ||||||||
Less: accumulated depreciation | (104 | ) | (181 | ) | |||||
Property and equipment, net | 282 | 209 |
4. | Long-term loans |
6. | Income taxes |
Year Ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
Cayman Islands | 2,045 | 3,305 | 3,843 | |||||||||
U.S. | 80,008 | 23,347 | 17,251 | |||||||||
PRC | 11,341 | 6,742 | 5,586 | |||||||||
BVI | 2,498 | 22,979 | 13,568 | |||||||||
Australia | 496 | 1,101 | 85 | |||||||||
Net loss before income taxes | 96,388 | 57,474 | 40,333 |
6. | Income taxes (continued) |
Year Ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
Net loss before income taxes | 96,388 | 57,474 | 40,333 | |||||||||
Expected income tax benefit | 33,736 | 12,069 | 8,470 | |||||||||
Tax rate differential | 5,796 | (2,121 | ) | (3,425 | ) | |||||||
Non-deductible expenses | (25,299 | ) | (880 | ) | (5,228 | ) | ||||||
Research tax credits | - | - | 2,360 | |||||||||
Deemed disposal gain* | (10,506 | ) | - | - | ||||||||
Impact of U.S. statutory tax rate change | (2,943 | ) | - | - | ||||||||
Non-taxable income | 227 | 75 | - | |||||||||
Others | 74 | (143 | ) | (99 | ) | |||||||
Change in valuation allowance | (1,085 | ) | (9,000 | ) | (2,078 | ) | ||||||
Total income tax benefit | - | - | - |
December 31, | ||||||||
2018 | 2019 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforward | 13,403 | 14,345 | ||||||
Intangible asset | 191 | 69 | ||||||
Deferral of tax deduction of R&D expense | 2,891 | 4,149 | ||||||
Share based compensation | 2,754 | 404 | ||||||
Research tax credits | - | 2,360 | ||||||
Lease liability obligation | - | 519 | ||||||
Total deferred tax assets | 19,239 | 21,846 | ||||||
Deferred tax liabilities: | ||||||||
Right of use lease assets | - | (529 | ) | |||||
Total deferred tax liabilities | - | (529 | ) | |||||
Total gross deferred tax assets | 19,239 | 21,317 | ||||||
Less: valuation allowance | (19,239 | ) | (21,317 | ) | ||||
Net deferred tax assets | - | - |
6. | Income taxes (continued) |
Year Ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
Beginning balance, as of January 1 | - | 219 | 827 | |||||||||
Additions based on tax positions related to prior tax years | - | 608 | 332 | |||||||||
Additions based on tax positions related to the current tax year | 219 | - | - | |||||||||
Ending balance, as of December 31 | 219 | 827 | 1,159 |
7. | Net loss per share |
Year Ended December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
Numerator: | ||||||||||||
Net loss attributable to BeyondSpring Inc.—basic and diluted | $ | (91,763 | ) | $ | (54,869 | ) | $ | (38,085 | ) | |||
Denominator: | ||||||||||||
Weighted average number of ordinary shares outstanding —basic and diluted | 20,866,084 | 22,665,265 | 24,645,714 | |||||||||
Net loss per share—basic and diluted | $ | (4.40 | ) | $ | (2.42 | ) | $ | (1.55 | ) |
8. | Share based compensation |
8. | Share based compensation (continued) |
Numbers of shares | Weighted average grant date fair value | |||||||
$ | ||||||||
Outstanding at December 31, 2016 | - | - | ||||||
Granted | 1,141,477 | 20.76 | ||||||
Vested | (434,615 | ) | 22.19 | |||||
Forfeited | (318,700 | ) | 19.80 | |||||
Outstanding at December 31, 2017 | 388,162 | 19.93 | ||||||
Granted | 9,815 | 19.50 | ||||||
Vested | (147,727 | ) | 19.88 | |||||
Forfeited | (95,000 | ) | 19.96 | |||||
Outstanding at December 31, 2018 | 155,250 | 19.94 | ||||||
Granted | 112,427 | 14.11 | ||||||
Vested | (113,102 | ) | 17.90 | |||||
Forfeited | - | - | ||||||
Outstanding at December 31, 2019 | 154,575 | 17.19 | ||||||
Expected to vest at December 31, 2019 | 99,575 | 17.19 |
8. | Share based compensation (continued) |
Numbers of options | Weighted average exercise price | Weighted average grant date fair value | Weighted average remaining contractual term | Average intrinsic value | ||||||||||||||||
$ | $ | Years | $ | |||||||||||||||||
Outstanding at December 31, 2016 | - | - | ||||||||||||||||||
Granted | 343,000 | 29.00 | 19.91 | |||||||||||||||||
Outstanding at December 31, 2017 | 343,000 | 29.00 | 9.98 | 27.00 | ||||||||||||||||
Granted | 130,000 | 25.08 | 14.49 | |||||||||||||||||
Forfeited | (7,100 | ) | 29.00 | 19.91 | ||||||||||||||||
Outstanding at December 31, 2018 | 465,900 | 27.91 | 9.12 | - | ||||||||||||||||
Granted | 19,700 | 13.96 | 8.63 | |||||||||||||||||
Canceled | (335,900 | ) | 29.00 | 19.91 | ||||||||||||||||
Outstanding at December 31, 2019 | 149,700 | 23.61 | 8.69 | - | ||||||||||||||||
Exercisable as of December 31, 2019 | 40,690 | 24.12 | 8.63 | - | ||||||||||||||||
Vested and expected to vest at December 31, 2019 | 132,040 | 23.45 | 8.71 | - |
8. | Share based compensation (continued) |
December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
Fair value of ordinary share | 34.00 | 24.87~26.09 | 13.96 | |||||||||
Risk-free interest rate | 2.28% | 2.73%~2.89% | 1.62%~1.68% | |||||||||
Expected term | 5.5 years | 5.9~6.2 years | 5.0~7.1 years | |||||||||
Expected volatility | 60% | 60% | 70% | |||||||||
Expected dividend yield | 0% | 0% | 0% | |||||||||
Contractual life | 10 years | 10 years | 10 years |
December 31, | ||||||||||||
2017 | 2018 | 2019 | ||||||||||
Research and development | 17,753 | 6,821 | 630 | |||||||||
General and administrative | 4,930 | (261 | ) | 1,471 | ||||||||
Total | 22,683 | 6,560 | 2,101 |
9. | Employee defined contribution plan |
10. | Restricted net assets |
10. | Restricted net assets (continued) |
11. | Lease |
As of December 31, 2019 | ||||
$ | ||||
Operating lease right-of-use asset | 2,538 | |||
Current portion of operating lease liabilities | 537 | |||
Operating lease liabilities | 1,935 | |||
Total lease liabilities | 2,472 |
11. | Lease (continued) |
$ | ||||
Year ending December 31, 2020 | 763 | |||
Year ending December 31, 2021 | 766 | |||
Year ending December 31, 2022 | 770 | |||
Year ending December 31, 2023 | 708 | |||
Total lease payment | 3,007 | |||
Less imputed interest | (535 | ) | ||
Present value of lease liabilities | 2,472 |
Year ended December 31, 2019 | ||||
$ | ||||
Operating cash flows used in operating lease | 863 |
As of December 31, 2019 | ||||
Weighted average remaining lease term (years) | 4.00 | |||
Weighted average discount rate | 8.4% |
$ | ||||
Year ending December 31, 2019 | 792 | |||
Year ending December 31, 2020 | 798 | |||
Year ending December 31, 2021 | 786 | |||
Year ending December 31, 2022 | 789 | |||
Year ending December 31, 2023 | 793 | |||
Total | 3,958 |
12. | Supplemental Balance Sheet Information |
December 31, | ||||||||
2018 | 2019 | |||||||
Compensation related | 237 | 226 | ||||||
Professional services | 237 | - | ||||||
Other taxes related | 778 | 798 | ||||||
Other | 112 | 65 | ||||||
Total | 1,364 | 1,089 |
13. | Commitments and contingencies |
14. | Subsequent events |