alt-10q_20210331.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 001-32587

 

ALTIMMUNE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

20-2726770

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

910 Clopper Road Suite 201S, Gaithersburg, Maryland

 

20878

(Address of Principal Executive Offices)

 

(Zip Code)

 

(240) 654-1450

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

ALT

The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

As of May 14, 2021 there were 38,396,843 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

 

 


 

 

 

 

 

ALTIMMUNE, INC.

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements

 

1

 

 

 

 

 

Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020

 

1

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2019 (unaudited)

 

2

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)

 

3

 

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)

 

4

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

5

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

18

 

 

 

 

Item 4.

Controls and Procedures

 

18

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

19

 

 

 

 

Item 1A.

Risk Factors

 

19

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

19

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

19

 

 

 

 

Item 4.

Mine Safety Disclosures

 

19

 

 

 

 

Item 5.

Other Information

 

19

 

 

 

 

Item 6.

Exhibits

 

20

 

 

 

 

 

Signatures

 

21

 

 

 

 

 

 

 


 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

ALTIMMUNE, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

149,932,387

 

 

$

115,917,807

 

Restricted cash

 

 

34,174

 

 

 

34,174

 

Total cash, cash equivalents and restricted cash

 

 

149,966,561

 

 

 

115,951,981

 

Short-term investments

 

 

76,574,768

 

 

 

100,005,558

 

Accounts receivable

 

 

4,801,428

 

 

 

4,610,202

 

Tax refund receivable

 

 

7,898,067

 

 

 

7,762,793

 

Prepaid expenses and other current assets

 

 

5,950,999

 

 

 

1,926,675

 

Total current assets

 

 

245,191,823

 

 

 

230,257,209

 

Property and equipment, net

 

 

5,198,052

 

 

 

1,056,920

 

Right of use asset

 

 

866,336

 

 

 

903,825

 

Intangible assets, net

 

 

12,879,247

 

 

 

12,823,846

 

Other assets

 

 

115,300

 

 

 

73,413

 

Total assets

 

$

264,250,758

 

 

$

245,115,213

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

418,243

 

 

$

612,293

 

Accrued expenses and other current liabilities

 

 

9,405,649

 

 

 

11,408,154

 

Total current liabilities

 

 

9,823,892

 

 

 

12,020,447

 

Contingent consideration

 

 

6,270,000

 

 

 

5,390,000

 

Other long-term liabilities

 

 

1,719,438

 

 

 

1,828,443

 

Total liabilities

 

 

17,813,330

 

 

 

19,238,890

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized;

38,257,180 and 37,142,946 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

3,810

 

 

 

3,697

 

Additional paid-in capital

 

 

462,417,706

 

 

 

417,337,742

 

Accumulated deficit

 

 

(210,944,707

)

 

 

(186,420,599

)

Accumulated other comprehensive loss, net

 

 

(5,039,381

)

 

 

(5,044,517

)

Total stockholders’ equity

 

 

246,437,428

 

 

 

225,876,323

 

Total liabilities and stockholders’ equity

 

$

264,250,758

 

 

$

245,115,213

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

 

 

 

 

1


 

 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Revenues

 

$

837,516

 

 

$

2,212,694

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

11,877,900

 

 

 

7,187,531

 

General and administrative

 

 

3,821,420

 

 

 

2,331,917

 

Total operating expenses

 

 

15,699,320

 

 

 

9,519,448

 

Loss from operations

 

 

(14,861,804

)

 

 

(7,306,754

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(11,671

)

 

 

(1,885

)

Interest income

 

 

42,499

 

 

 

151,569

 

Other (expense) income, net

 

 

(33,132

)

 

 

25,542

 

Total other (expense) income, net

 

 

(2,304

)

 

 

175,226

 

Net loss before income tax benefit

 

 

(14,864,108

)

 

 

(7,131,528

)

Income tax benefit

 

 

 

 

 

3,245,879

 

Net loss

 

 

(14,864,108

)

 

 

(3,885,649

)

Other comprehensive income (loss) – unrealized gain (loss) on investments

 

 

5,136

 

 

 

(32,435

)

Comprehensive loss

 

$

(14,858,972

)

 

$

(3,918,084

)

Net loss per share, basic and diluted

 

$

(0.38

)

 

$

(0.26

)

Weighted-average common shares outstanding, basic and diluted

 

 

38,914,990

 

 

 

15,110,585

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

 

2


 

 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2020

 

 

37,142,946

 

 

$

3,697

 

 

$

417,337,742

 

 

$

(186,420,599

)

 

$

(5,044,517

)

 

$

225,876,323

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,218,351

 

 

 

 

 

 

 

 

 

1,218,351

 

Vesting of restricted stock awards including withholding, net

 

 

(6,349

)

 

 

1

 

 

 

(92,507

)

 

 

 

 

 

 

 

 

(92,506

)

Issuance of common stock from Employee Stock Purchase Plan

 

 

8,733

 

 

 

1

 

 

 

106,000

 

 

 

 

 

 

 

 

 

106,001

 

Retirement of common stock in exchange for common stock warrant

 

 

(1,000,000

)

 

 

(100

)

 

 

(7,539,900

)

 

 

(9,660,000

)

 

 

 

 

 

(17,200,000

)

Issuance of common stock warrant in exchange for retirement of common stock

 

 

 

 

 

 

 

 

17,200,000

 

 

 

 

 

 

 

 

 

17,200,000

 

Issuance of common stock in at the market offering, net

 

 

2,110,800

 

 

 

211

 

 

 

34,178,020

 

 

 

 

 

 

 

 

 

34,178,231

 

Issuance of common stock upon cashless exercise of warrants

 

 

1,050

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

Unrealized income on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,136

 

 

 

5,136

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,864,108

)

 

 

 

 

 

(14,864,108

)

Balance at March 31, 2021

 

 

38,257,180

 

 

$

3,810

 

 

$

462,417,706

 

 

$

(210,944,707

)

 

$

(5,039,381

)

 

$

246,437,428

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2019

 

 

15,312,167

 

 

$

1,508

 

 

$

187,914,916

 

 

$

(137,376,122

)

 

$

(5,020,156

)

 

$

45,520,146

 

Stock-based compensation

 

 

 

 

 

 

 

 

214,921

 

 

 

 

 

 

 

 

 

214,921

 

Vesting of restricted stock awards including withholding, net

 

 

(5,974

)

 

 

1

 

 

 

(17,080

)

 

 

 

 

 

 

 

 

(17,079

)

Issuance of common stock from Employee Stock Purchase Plan

 

 

38,809

 

 

 

3

 

 

 

56,736

 

 

 

 

 

 

 

 

 

56,739

 

Issuance of common stock upon exercise of warrants

 

 

14,500

 

 

 

2

 

 

 

39,972

 

 

 

 

 

 

 

 

 

39,974

 

Unrealized loss on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,435

)

 

 

(32,435

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,885,649

)

 

 

 

 

 

(3,885,649

)

Balance at March 31, 2020

 

 

15,359,502

 

 

$

1,514

 

 

$

188,209,465

 

 

$

(141,261,771

)

 

$

(5,052,591

)

 

$

41,896,617

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

3


 

 

 

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(14,864,108

)

 

$

(3,885,649

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Change in fair value of contingent consideration liability

 

 

880,000

 

 

 

1,750,000

 

Stock-based compensation expense

 

 

1,218,351

 

 

 

214,921

 

Depreciation and amortization

 

 

74,298

 

 

 

73,356

 

Unrealized losses on foreign currency exchange

 

 

33,376

 

 

 

24,939

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(191,226

)

 

 

(973,557

)

Prepaid expenses and other current assets

 

 

(4,200,624

)

 

 

(214,893

)

Accounts payable

 

 

(194,050

)

 

 

911,397

 

Accrued expenses and other liabilities

 

 

(2,189,903

)

 

 

1,112,718

 

Tax refund receivable

 

 

(135,274

)

 

 

(3,360,633

)

Net cash used in operating activities

 

 

(19,569,160

)

 

 

(4,347,401

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sales and maturities of short-term investments

 

 

30,912,000

 

 

 

13,700,000

 

Purchases of short-term investments

 

 

(7,476,074

)

 

 

(7,099,263

)

Purchases of property and equipment, net

 

 

(4,208,790

)

 

 

(18,131

)

Cash paid for internally developed patents

 

 

(62,041

)

 

 

(19,390

)

Net cash provided by investing activities

 

 

19,165,095

 

 

 

6,563,216

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments of deferred offering costs

 

 

134,413

 

 

 

 

Proceeds from exercises of warrants

 

 

 

 

 

39,974

 

Proceeds from issuance of common stock in at the market offering, net

 

 

34,178,231

 

 

 

 

Proceeds from issuance of common stock from Employee Stock Purchase Plan

 

 

106,001

 

 

 

56,739

 

Net cash provided by financing activities

 

 

34,418,645

 

 

 

96,713

 

Net increase in cash and cash equivalents and restricted cash

 

 

34,014,580

 

 

 

2,312,528

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

115,951,981

 

 

 

8,996,860

 

Cash, cash equivalents and restricted cash at end of period

 

$

149,966,561

 

 

$

11,309,388

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Fair value of common stock retired in exchange for issuance of common stock warrant

 

$

17,200,000

 

 

$

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

 

4


 

 

ALTIMMUNE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Altimmune, Inc., headquartered in Gaithersburg, Maryland, United States, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware.

The Company is focused on developing intranasal vaccines, immune modulating therapies, and treatments for liver disease. The Company’s diverse pipeline includes proprietary intranasal vaccines for COVID-19 (AdCOVID), anthrax (NasoShield) and influenza (NasoVAX); an intranasal immune modulating therapeutic for COVID-19 (T-COVID); and next generation peptide therapeutics for NASH (ALT-801) and chronic hepatitis B (HepTcell). Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt, and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.

Basis of Presentation

The accompanying unaudited consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 included in the Annual Report on Form 10-K which was filed with the SEC on February 25, 2021. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as the audited consolidated financial statements, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2021 or any future years or periods.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern.

2. Summary of Significant Accounting Policies

During the three months ended March 31, 2021, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC, except for the recently adopted accounting standard for income taxes.

Use of Estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, financial condition, and results of operations is highly uncertain and subject to change. The Company considered the potential impact of the COVID-19 pandemic on the Company’s estimates and assumptions and determined that there was not a material impact to the Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2021. However, actual results could differ from those estimates and there may be changes to the Company’s estimates in future periods.

Recently Issued Accounting Pronouncements - Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU 2019-12 amends the approaches and methodologies in accounting for income taxes during interim periods and makes changes to certain income tax classifications. The new standard allows exceptions to the use of the incremental approach for intra-period tax allocation, when there is a loss from continuing operations and income or a gain from other items, and to the general methodology for calculating income taxes in an interim period, when a year-to-date loss exceeds the anticipated loss for the year. The standard also requires franchise or similar taxes partially based on income to be reported as income tax and the effects of enacted changes in tax laws or rates to be included in the annual effective tax rate computation from the date of enactment. Lastly, in any future acquisition, the Company would be required to evaluate when the step-up in the tax basis of

5


 

goodwill is part of the business combination and when it should be considered a separate transaction. The Company adopted the standard as of January 1, 2021 and has evaluated the effects of this standard and determined that the adoption did not have a material impact on the Company’s consolidated financial statements.

3. Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2021 consisted of the following:

 

 

Fair Value Measurement at March 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

 

$

13,962,902

 

 

$

13,962,902

 

 

$

 

 

$

 

Short-term investments

 

 

76,574,768

 

 

 

 

 

 

76,574,768

 

 

 

 

Total

 

 

90,537,670

 

 

 

13,962,902

 

 

 

76,574,768

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability (see Note 8)

 

 

6,270,000

 

 

 

 

 

 

 

 

 

6,270,000

 

Total

 

$

6,270,000

 

 

$

 

 

$

 

 

$

6,270,000

 

 

The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2020 consisted of the following:

 

 

 

Fair Value Measurement at December 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

 

$

90,389,473

 

 

$

90,389,473

 

 

$

 

 

$

 

Short-term investments

 

 

100,005,558

 

 

 

 

 

 

100,005,558

 

 

 

 

Total

 

 

190,395,031

 

 

 

90,389,473

 

 

 

100,005,558

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability (see Note 8)

 

 

5,390,000

 

 

 

 

 

 

 

 

 

5,390,000

 

Warrant liability

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

Total

 

$

5,400,000

 

 

$

 

 

$

 

 

$

5,400,000

 

The warrant liability is included in Other long-term liabilities in the consolidated balance sheet at December 31, 2020. The warrant liability was valued using the Monte Carlo simulation valuation model with Level 3 inputs.

Short-term investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data (Level 2). The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value.

Short-term investments had quoted prices at March 31, 2021 as shown below:

 

 

 

March 31, 2021

 

 

 

Amortized Cost

 

 

Unrealized Gain (Loss)

 

 

Market Value

 

United States treasury securities

 

$

16,029,965

 

 

$

2,995

 

 

$

16,032,960

 

Commercial paper and corporate debt securities

 

 

33,412,043

 

 

 

(1,935

)

 

 

33,410,108

 

Asset backed securities

 

 

2,111,239

 

 

 

(278

)

 

 

2,110,961

 

Certificate of deposit

 

 

25,020,739

 

 

 

 

 

 

25,020,739

 

Total

 

$

76,573,986

 

 

$

782

 

 

$

76,574,768

 

 

Short-term investments had quoted prices at December 31, 2020 as shown below:

 

 

December 31, 2020

 

 

 

Amortized Cost

 

 

Unrealized Gain (Loss)

 

 

Market Value

 

United States treasury securities

 

$

20,052,757

 

 

$

1,843

 

 

$

20,054,600

 

Commercial paper and corporate debt securities

 

 

47,521,344

 

 

 

(5,440

)

 

 

47,515,904

 

Asset backed securities

 

 

7,414,619

 

 

 

(757

)

 

 

7,413,862

 

Certificate of deposit

 

 

25,021,192

 

 

 

 

 

 

25,021,192

 

Total

 

$

100,009,912

 

 

$

(4,354

)

 

$

100,005,558

 

 

6


 

 

The fair value of contingent payments classified as a liability is based on the regulatory milestones described in Note 8 and estimated using the Monte Carlo simulation valuation model with Level 3 inputs.

The assumptions used to estimate the fair value of contingent payments that are classified as a liability at March 31, 2021 include the following significant unobservable inputs:

 

Unobservable input

 

Value or Range

 

 

Weighted Average

 

Expected volatility

 

117.4%

 

 

117.4%

 

Risk-free interest rate

 

0.09%

 

 

0.09%

 

Cost of capital

 

30%

 

 

30%

 

Discount for lack of marketability

 

16%-19%

 

 

18%

 

Probability of payment

 

63%

 

 

63%

 

Projected year of payment

 

2022

 

 

2022

 

 

If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers into and out of any of the levels of the fair value hierarchy as of March 31, 2021 and December 31, 2020.

 

Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. Assets recorded at fair value on a non-recurring basis, such as property and equipment and intangible assets are recognized at fair value when they are impaired. As of March 31, 2021 and December 31, 2020, the Company had no significant assets or liabilities that were measured at fair value on a non-recurring basis.

 

4. Property and Equipment, Net

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Furniture, fixtures and equipment

 

$

185,878

 

 

$

125,538

 

Laboratory equipment

 

 

1,041,752

 

 

 

959,585

 

Computers and telecommunications

 

 

250,516

 

 

 

220,316

 

Software

 

 

64,409

 

 

 

64,409

 

Leasehold improvements

 

 

1,415,608

 

 

 

1,285,883

 

Construction-in-progress

 

 

4,000,000

 

 

 

 

Property and equipment, at cost

 

 

6,958,163

 

 

 

2,655,731

 

Less: accumulated depreciation and amortization

 

 

(1,760,111

)

 

 

(1,598,811

)

Property and equipment, net

 

$

5,198,052

 

 

$

1,056,920

 

As of March 31, 2021, construction-in-progress primarily includes costs related to the procurement of long-lead equipment and build out of the suite associated with the Company's manufacturing collaboration with Lonza Houston, Inc. (“Lonza”) described in Note 16. Depreciation expense related to property and equipment was approximately $67,658 and $59,505, for the three months ended March 31, 2021 and 2020, respectively.

5. Intangible Assets

The Company’s intangible assets consisted of the following:

 

 

 

March 31, 2021

 

 

 

Estimated

Useful Lives

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

Internally developed patents

 

6-20 years

 

$

946,828

 

 

$

(486,548

)

 

$

460,280

 

Acquired licenses

 

16-20 years

 

 

285,000

 

 

 

(285,000

)

 

 

 

Total intangible assets subject to amortization

 

 

 

 

1,231,828

 

 

 

(771,548

)

 

 

460,280

 

IPR&D assets

 

Indefinite

 

 

12,418,967

 

 

 

 

 

 

12,418,967

 

Total

 

 

 

$

13,650,795

 

 

$

(771,548

)

 

$

12,879,247

 

 

7


 

 

 

 

December 31, 2020

 

 

 

Estimated

Useful Lives

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

Internally developed patents

 

6-10 years

 

$

884,787

 

 

$

(479,908

)

 

$

404,879

 

Acquired licenses

 

16-20 years

 

 

285,000

 

 

 

(285,000

)

 

 

 

Total intangible assets subject to amortization

 

 

 

 

1,169,787

 

 

 

(764,908

)

 

 

404,879

 

IPR&D assets

 

Indefinite

 

 

12,418,967

 

 

 

 

 

 

12,418,967

 

Total

 

 

 

$

13,588,754

 

 

$

(764,908

)

 

$

12,823,846

 

Amortization expense of intangible assets was $6,640 and $13,851 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the weighted average amortization period remaining for intangible assets was 12.3 years. Amortization expense was classified as research and development expenses in the accompanying unaudited consolidated statements of operations and comprehensive loss.

6. Operating Leases

The Company rents office and laboratory space in the United States. The Company also leases office equipment under a non-cancellable equipment lease through December 2022. Rent expense during the three months ended March 31, 2021 and 2020 under all of the Company’s operating leases was $130,138 and $87,599, respectively. Rent expense includes short-term leases and variable lease costs that are not included in the lease obligation.

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.

The office space leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The office space lease also includes an option to renew the lease as of the end of the term. The Company has determined that the lease renewal option is not reasonably certain of being exercised.

The cash paid for operating lease liabilities for the three months ended March 31, 2021 and 2020 was $117,354 and $95,714, respectively.

Supplemental other information related to the operating leases balance sheet information was as follows:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Operating lease obligations (see Note 7 and 9)

 

$

1,739,559

 

 

$

1,824,840

 

Operating lease right-of-use assets

 

$

866,336

 

 

$

903,825

 

Weighted-average remaining lease term (years)

 

 

4.1

 

 

 

4.3

 

Weighted-average discount rate

 

 

7.3

%

 

 

7.3

%

  

7. Accrued Expenses

Accrued expenses and other current liabilities consist of the following:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Accrued professional services

 

$

612,212

 

 

$

1,350,194

 

Accrued payroll and employee benefits

 

 

1,182,658

 

 

 

2,351,599

 

Accrued interest

 

 

13,744

 

 

 

13,016

 

Accrued research and development

 

 

7,211,778

 

 

 

7,316,876

 

Lease obligation, current portion (see Note 6)

 

 

365,504

 

 

 

356,716

 

Deferred revenue

 

 

19,753

 

 

 

19,753

 

Total accrued expenses

 

$

9,405,649

 

 

$

11,408,154

 

 

8. Contingent Consideration

The Company entered into an Agreement and Plan of Merger and Reorganization, dated July 8, 2019, by and among the Company, Springfield Merger Sub, Inc., Springfield Merger Sub, LLC, Spitfire Pharma, Inc. and David Collier, as the Stockholder Representative (the “Spitfire Merger Agreement”) to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”). Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis.  

The transaction closed on July 12, 2019. The Company issued 1,887,250 unregistered shares of its common stock (the “shares”) as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5.0 million less working capital and transaction expense adjustment amounts as defined in the agreement.

8


 

The acquisition of Spitfire was accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset was not considered a business. The Company expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses. 

The Spitfire Merger Agreement also includes future contingent payments up to $88.0 million in cash and shares of the Company’s common stock as follows (each, a “Milestone Event”):

 

a one-time payment of $5.0 million (the “IND Milestone Consideration Amount”) within sixty days of the submission of an Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (the “FDA”) or other applicable governmental authority in a foreign jurisdiction, which IND has not been rejected or placed on clinical hold by the FDA or such applicable foreign governmental authority within time specified in the Merger Agreement;

 

a one-time payment of $3.0 million (the “Phase 2 Milestone Consideration Amount” and together with the IND Milestone Consideration Amount, the “Regulatory Milestones”) within sixty days of the initiation of a Phase 2 clinical trial of a product candidate anywhere in the world; and

 

payments of up to $80.0 million upon the achievement of specified worldwide net sales (the “Sales Milestones”) of all products developed using the technology acquired in the License Agreement within ten years following the approval of a new drug application filed with the FDA.

The Regulatory Milestones will be payable in shares of the Company’s Common Stock, with the number of shares of the Company’s Common Stock to be issued in connection with each milestone amount, if any, are dependent on the share price at the time of achievement. The number of any shares issued in consideration for the IND Milestone Consideration Amount will be determined based on lower of (A) the average of the closing prices of our Common Stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to the IND Reference Date or (B) $2.95. The value of any shares issued in consideration for the Phase 2 Milestone Consideration Amount shall be determined based the lower of (A) on the average of the closing trading prices of our Common Stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days immediately preceding the date of the occurrence of the Phase 2 Milestone Event or (B) $3.54.

The future contingent payments related to the Regulatory Milestones are stock-based payments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity (“ASC 480”). Such stock-based payments are subject to a lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. The future contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, the Company will recognize the Sales Milestones when the contingency is resolved and the amount is paid or payable.

The Company estimates the future contingent consideration for the Regulatory Milestones based upon a Monte Carlo simulation valuation model that is risk adjusted based on the probability of achieving the milestones and a discount for lack of marketability. The Company remeasures the fair value of the contingent consideration at each reporting period. During the fourth quarter of 2020, the Company achieved the IND Milestone and paid the obligation in shares according to the calculation above. Below is a summary of the contingent consideration activity:

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Beginning balance

 

$

5,390,000

 

 

$

2,750,000

 

Change in fair value

 

 

880,000

 

 

 

1,750,000

 

Ending balance

 

$

6,270,000

 

 

$

4,500,000

 

 

As of March 31, 2021, the increase in fair value was primarily attributable to an increase in the closing share price of the Company’s common stock and in the probability of milestone achievement. As of March 31, 2020, the increase in fair value was primarily due to an increase in the probability of milestone achievement. Any changes in fair value have been recorded within research and development expense during the respective periods presented.

9. Other Long-Term Liabilities

The Company’s other long-term liabilities are summarized as follows:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Lease obligation, long-term portion (see Note 6)

 

$

1,374,055

 

 

$

1,468,124

 

Conditional economic incentive grants

 

 

250,000

 

 

 

250,000

 

Other

 

 

95,383

 

 

 

110,319

 

Total other long-term liabilities

 

$

1,719,438

 

 

$

1,828,443

 

 

9


 

 

10. Common Stock

Public Offering

On July 16, 2020, the Company offered and sold (i) 3,369,564 shares of common stock, at a price to the public of $23.00 per share, and (ii) pre-funded warrants of the Company to purchase 1,630,436 shares of common stock at an exercise price equal to $0.0001 per share (the “Pre-Funded Warrants”), at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of Common Stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of the Company’s common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to the Company. The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020. The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

The Company has assessed the Pre-Funded Warrants for appropriate equity or liability classification and determined that the Pre-Funded Warrants are freestanding instruments that do not meet the definition of a liability pursuant to ASC 480 and do not meet the definition of a derivative pursuant to FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (“ASC 815”). The Pre-Funded Warrants are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the Pre-Funded Warrants are classified as equity and are accounted for as a component of additional paid-in capital at the time of issuance. As of March 31, 2021, no Pre-Funded Warrants were exercised.

At-the-Market Offerings

On February 25, 2021, the Company entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C., and B. Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million (the “Shares”) through the Sale Agents (the “2021 Offering”). Any Shares offered and sold in the 2021 Offering will be issued pursuant to the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on December 31, 2020, which was declared effective on January 11, 2021, the prospectus supplement relating to the 2021 Offering filed with the SEC on February 25, 2021 and any applicable additional prospectus supplements related to the 2021 Offering that form a part of the Registration Statement.

As of March 31, 2021, the Company has sold 2,110,800 shares of Common Stock under the 2021 Agreement resulting in approximately $34.2 million in net proceeds, with $89.7 million remaining available to be sold under the 2021 Agreement. As of March 31, 2021, the Company recorded approximately $0.1 million of offering costs which offset the proceeds received from the shares sold through March 31, 2021 and recognized approximately $0.1 million of deferred offering costs which will offset future proceeds received under the 2021 Agreement.

On March 27, 2020, the Company entered into an Equity Distribution Agreement (the “2020 Agreement”) with JMP Securities LLC, serving as placement agent (the “Placement Agent”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million (the “Shares”) through the Placement Agent (the “2020 Offering”). Any Shares offered and sold in the 2020 Offering were issued pursuant to the Company’s Registration Statement on Form S-3 filed with the SEC on April 4, 2019, which was declared effective on April 12, 2019, the prospectus supplement relating to the 2020 Offering filed with the SEC on March 27, 2020 and any applicable additional prospectus supplements related to the 2020 Offering that form a part of the Registration Statement. The aggregate market value of Shares eligible for sale in the 2020 Offering and under the 2020 Agreement were subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The Company offered Shares having an aggregate offering price of $18.9 million pursuant to the prospectus supplement filed with the SEC on March 27, 2020. On June 1, 2020, the Company filed an amendment to the 2020 Agreement which amended the prospectus supplement dated March 27, 2020 to increase the aggregate offering price to $50.0 million. No Shares were sold under the 2020 Agreement during the three months ended March 31, 2020. As of March 31, 2021, the 2020 Agreement was fully utilized and no Shares were sold under the 2020 Agreement during the three months ended March 31, 2021.    

Exchange Agreement

On February 25, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with an Investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.0001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,000,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $0.0001 per share. The Exchange Warrants do not expire and are exercisable at any time except that the Exchange Warrants cannot be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99% of the Company’s common stock, subject to certain exceptions. In accordance with FASB Accounting Standards Codification Topic 505, Equity, the

10


 

Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and a corresponding debit to additional paid-in-capital and accumulated deficit at the fair value of the Exchange Warrants on the issuance date. The Exchange Warrants are classified as equity in accordance with ASC 480 and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in-capital is not subject to remeasurement. The Company determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants. As of March 31, 2021, none of the Exchange Warrants have been exercised.

11. Warrants

A summary of warrant activity during the three months ended March 31, 2021 is as follows:

Warrants outstanding, December 31, 2020