Item
1. Condensed Consolidated Financial Statements.
PULMATRIX,
INC.
CONSOLIDATED
BALANCE SHEETS
(in
thousands, except share and per share data)
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
(in
thousands, except share and per share data)
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(in
thousands, except share data)
| |
Preferred Stock | | |
Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balance — January 1, 2021 | |
| - | | |
$ | - | | |
| 1,805,250 | | |
$ | - | | |
$ | 257,608 | | |
$ | (234,469 | ) | |
$ | 23,139 | |
Issuance of common stock, net of issuance costs | |
| - | | |
| - | | |
| 1,000,000 | | |
| - | | |
| 37,079 | | |
| - | | |
| 37,079 | |
Exercise of warrants | |
| - | | |
| - | | |
| 7,202 | | |
| - | | |
| 204 | | |
| - | | |
| 204 | |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 328 | | |
| - | | |
| 328 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,104 | ) | |
| (4,104 | ) |
Balance — March 31, 2021 | |
| - | | |
$ | - | | |
| 2,812,452 | | |
$ | - | | |
$ | 295,219 | | |
$ | (238,573 | ) | |
$ | 56,646 | |
Balance | |
| - | | |
$ | - | | |
| 2,812,452 | | |
$ | - | | |
$ | 295,219 | | |
$ | (238,573 | ) | |
$ | 56,646 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 299 | | |
| | | |
| 299 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| (3,852 | ) | |
| (3,852 | ) |
Balance — June 30, 2021 | |
| - | | |
$ | - | | |
| 2,812,452 | | |
$ | - | | |
$ | 295,518 | | |
$ | (242,425 | ) | |
$ | 53,093 | |
Balance | |
| - | | |
$ | - | | |
| 2,812,452 | | |
$ | - | | |
$ | 295,518 | | |
$ | (242,425 | ) | |
$ | 53,093 | |
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in
thousands)
The
accompanying footnotes are an integral part of these condensed consolidated financial statements
PULMATRIX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in
thousands, except share and per share data)
1.
Organization
Pulmatrix,
Inc. (the “Company”) was incorporated in 2013 as a Delaware corporation. The Company is a clinical-stage biotechnology company
focused on the discovery and development of a novel class of inhaled therapeutic products. The Company’s proprietary dry powder
delivery platform, iSPERSE™ (inhaled Small Particles Easily Respirable and Emitted), is engineered to deliver
small, dense particles with highly efficient dispersibility and delivery to the airways, which can be used with an array of dry powder
inhaler technologies and can be formulated with a variety of drug substances. The Company is developing a pipeline of iSPERSE™-
based therapeutic candidates targeted at prevention and treatment of a range of respiratory and other diseases with significant unmet
medical needs.
Reverse
Stock Split
On
February 28, 2022, the Company effectuated a 1-for-20 reverse stock split of its issued and outstanding shares of common stock (the “Reverse
Stock Split”) pursuant to which every 20 shares of the Company’s issued and outstanding common stock were automatically converted
into 1 share of common stock, without any change in the par value per share. Any fraction of a
share of common stock that resulted from the Reverse Stock Split was rounded up to the nearest whole share.
Accordingly, as required in accordance with U.S. GAAP (as defined below), all common stock and per share data are retrospectively restated
to give effect of the Reverse Stock Split for all periods presented herein.
2.
Summary of Significant Accounting Policies and Recent Accounting Standards
Basis
of Presentation
The
condensed consolidated financial statements of the Company included herein have been prepared, pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed
consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included
in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 29, 2022 (the
“Annual Report”).
The
financial information as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021, is unaudited. In the opinion
of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim
financial information have been included. The balance sheet data as of December 31, 2021 was derived from audited consolidated financial
statements. The results of the Company’s operations for any interim periods are not necessarily indicative of the results that
may be expected for any other interim period or for a full fiscal year.
Use
of Estimates
In
preparing condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty
involved in making estimates, actual results may differ from these estimates. On an ongoing basis, the Company evaluates its estimates
and assumptions. The most significant estimates and assumptions in the Company’s condensed consolidated financial statements include,
but are not limited to, estimates of future expected costs in order to derive and recognize revenue, estimates related to clinical trial
accruals and upfront deposits, fair value used to record preferred stock and warrant transactions, incremental borrowing rate, and accounting
for income taxes and the related valuation allowance.
Concentrations
of Credit Risk and Off-Balance Sheet Arrangements
Cash
is a financial instrument that potentially subjects the Company to concentrations of credit risk. For all periods presented, substantially
all of the Company’s cash was deposited in an account at a single financial institution that management believes is creditworthy.
The Company is exposed to credit risk in the event of default by these financial institutions for amounts in excess of the Federal Deposit
Insurance Corporation insured limits. The Company maintains its cash at a high-quality financial institution and has not incurred any
losses to date.
For
the three and six months ended June 30, 2022, one customer accounted for 99%
of revenue recognized in the accompanying financial statements. For the three months and six months ended June 30, 2021, two customers
accounted for 99%
of revenue recognized in the accompanying financial statements. As of June 30, 2022, one customer accounted for 99%
of accounts receivable recorded in the accompanying financial statements.
The
Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.
Recent
Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06,
Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815 – 40) (“ASU 2020-06”). ASU 2020-06 simplifies the guidance on accounting for convertible
financial instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments
with a beneficial conversion feature. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings
per share and share settlement when an instrument can be settled in cash or shares at the entity’s option, unless the instrument
is a liability-classified stock-based payment award. The Company elected to early adopt ASU 2020-06 as of January 1, 2022, using the
modified retrospective method. The adoption of ASU 2020-06 did not have any net impact on the classification or measurement of the Company’s
convertible financial instruments or contracts in the Company’s own equity outstanding as of January 1, 2022, nor the earnings
per-share amounts for the three and six months ended June 30, 2022.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50),
Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):
Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity – Classified Written Call Options (a consensus
of the FASB Emerging Issues Task Force) (“ASU 2021-04”). ASU 2021-04 addresses how an issuer should account for modifications,
or an exchange of freestanding written call options classified as equity that is not within the scope of another topic. The Company elected
to early adopt ASU 2021-04 as of January 1, 2022. The adoption of ASU 2021-04 did not have a material impact on the Company’s condensed
consolidated financial statements.
As
of June 30, 2022, there have been no other new, or existing recently issued or adopted, accounting pronouncements that are of significance,
or potential significance, that impact the Company’s condensed consolidated financial statements.
3.
Fair Value of Financial Instruments
As
of June 30, 2022 and December 31, 2021, the Company did not hold any financial assets or liabilities that were measured at fair value
on a recurring or nonrecurring basis, except for money market funds which are a Level 1 instrument, measured at fair value on a recurring
basis and included in Cash and cash equivalents in the consolidated balance sheets in the amount of $42,905 and $53,840 respectively.
During the three and six months ended June 30, 2022, there were no transfers between Level 1, Level 2 and Level 3.
4.
Prepaid Expenses and Other Current Assets
Prepaid
expenses and other current assets consisted of the following at June 30, 2022 and December 31, 2021 (dollars in thousands):
Schedule of Prepaid Expenses and Other Current Assets
| |
June 30,
2022 | | |
December 31,
2021 | |
Clinical and consulting | |
$ | 1,384 | | |
$ | 230 | |
Insurance | |
| 557 | | |
| 325 | |
Software and hosting costs | |
| 66 | | |
| - | |
Other | |
| 135 | | |
| 316 | |
| |
| | | |
| | |
Total prepaid expenses and other current assets | |
$ | 2,142 | | |
$ | 871 | |
5.
Property and Equipment, Net
Property
and equipment, net consisted of the following at June 30, 2022 and December 31, 2021 (dollars in thousands):
Schedule
of Property and Equipment
| |
June 30,
2022 | | |
December 31,
2021 | |
Laboratory equipment | |
$ | 1,838 | | |
$ | 1,838 | |
Leasehold improvements | |
| 664 | | |
| 602 | |
Computer equipment | |
| 295 | | |
| 304 | |
Office furniture and equipment | |
| 216 | | |
| 217 | |
Capital in progress | |
| 5 | | |
| - | |
Total property and equipment | |
| 3,018 | | |
| 2,961 | |
Less accumulated depreciation and amortization | |
| (2,712 | ) | |
| (2,640 | ) |
Property and equipment, net | |
$ | 306 | | |
$ | 321 | |
Depreciation
and amortization expense for the six months ended June 30, 2022 and 2021 was $81
and $97,
respectively. During the three and six months ended June 30, 2022, the Company disposed of certain fixed assets with immaterial
gross costs and accumulated depreciation.
6.
Accrued Expenses and Other Current Liabilities
Accrued
expenses and other current liabilities consisted of the following at June 30, 2022 and December 31, 2021 (dollars in thousands):
Schedule
of Accrued Expenses and Other Current Liabilities
| |
June 30,
2022 | | |
December 31,
2021 | |
Clinical and consulting | |
$ | 670 | | |
$ | 97 | |
Wages and incentives | |
| 604 | | |
| 991 | |
Vacation | |
| 124 | | |
| 60 | |
Legal and patents | |
| 81 | | |
| 58 | |
Other | |
| 131 | | |
| 27 | |
| |
| | | |
| | |
Total accrued expenses and other current liabilities | |
$ | 1,610 | | |
$ | 1,233 | |
7.
Significant Agreements
Development
and Commercialization Agreement with Cipla Technologies LLC (“Cipla”)
On
April 15, 2019, the Company entered into a Development and Commercialization Agreement (the “Cipla Agreement”) with Cipla
for the co-development and commercialization, on a worldwide exclusive basis, of Pulmazole, the Company’s inhaled iSPERSE™
drug delivery system (the “Product”) enabled formulation of the antifungal drug, itraconazole, which is only available
as an oral drug, for the treatment of all pulmonary indications, including allergic bronchopulmonary aspergillosis (“ABPA”)
in patients with asthma. Pulmatrix entered into an amendment to the Cipla Agreement on November 8, 2021 (the “Amendment”),
and all references to the Cipla Agreement herein refer to the Agreement, as amended.
The
Company received a non-refundable upfront payment of $22.0 million (the “Upfront Payment”) under the Cipla Agreement. Upon
receipt of the Upfront Payment, the Company irrevocably assigned to Cipla the following assets, solely to the extent that each covers
the Product in connection with any treatment, prevention, and/or diagnosis of diseases of the pulmonary system (“Pulmonary Indications”):
all existing and future technologies, current and future drug master files, dossiers, third-party contracts, regulatory filings, regulatory
materials and regulatory approvals, patents, and intellectual property rights, as well as any other associated rights and assets directly
related to the Product, specifically in relation to pulmonary indications (collectively, the “Assigned Assets”), excluding
most specifically the Company’s iSPERSE™ technology.
The Company and Cipla will each be responsible for
60% and 40%, respectively, of the Company’s overhead costs and the time spent by the Company’s employees and consultants
on development of the Product (“Direct Costs”), provided, that Cipla will reimburse the Company an amount equal to 10% of
aggregate Direct Costs upon the achievement of certain development milestones set forth in the table below. The Company will continue
to share all other development costs with Cipla that are not Direct Costs, such as the cost of clinical research organizations, manufacturing
costs and other third-party costs, on a 50/50 basis.
Phase 2b
Development Plan – Development Milestones |
|
Development
Milestone |
|
Milestone
Date |
|
|
|
25% of patients enrolled
in Phase 2b clinical study are dosed |
|
June 30, 2023 |
|
|
|
Company delivers summary
of key efficacy and safety data to include FEV1, IgE, ACQ-6, number of subjects withdrawn, any severe adverse events related
to the medication and an overall summary table of adverse events (“Topline Results”) to the joint steering committee (the “JSC”). |
|
June 30, 2024 |
Phase 3
Development Plan – Development Milestones |
|
Development
Milestone |
|
Milestone
Date |
|
|
|
25% of patients enrolled
in Phase 3 clinical study dosed |
|
To be proposed by JSC |
|
|
|
Company delivers Topline
Results to the JSC |
|
To be proposed by JSC |
|
|
|
The Prescription Drug
User Fee Act (the “PDUFA”) |
|
To be proposed by JSC |
Accounting
Treatment
The
Company concluded that because both it and Cipla are active participants in the arrangement and are exposed to the significant risks
and rewards of the collaboration, the Company’s collaboration with Cipla is within the scope of Accounting Standards Codification
(“ASC”) 808, Collaborative Arrangements (“ASC 808”). The Company concluded that Cipla is a customer since
they contracted with the Company to obtain research and development services and a license to the Assigned Assets, each of which is an
output of the Company’s ordinary activities, in exchange for consideration. Therefore, the Company has applied the guidance in
ASC 606, Revenue from Contracts with Customers (“ASC 606”) to account for the research and development services and
a license within the contract. The Company determined that the research and development services and license to the Assigned Assets are
considered highly interdependent and highly interrelated and therefore are considered a single combined performance obligation because
Cipla cannot benefit from the license without the performance by Pulmatrix of the research and development services. Such research and
development services are highly specialized and proprietary to Pulmatrix and therefore not available to Cipla from any other third party.
The
Company determined the total transaction price to be $22.0 million – comprised of $12.0 million for research and development services
for the Product and $10.0 million for the irrevocable license to the Assigned Assets. Additionally, upon commercialization, Cipla and
the Company will share equally, both positive and negative total free cash-flows earned by Cipla in respect of the Product. However,
the Company has not included such free cash-flows in the transaction price as these milestones are constrained until after the commercialization
of the Product.
Revenue
is recognized for the Cipla Agreement as the research and development services are provided using an input method, according to the ratio
of costs incurred to the total costs expected to be incurred in the future to satisfy the Company’s obligations. In management’s
judgment, this input method is the best measure of the transfer of control of the combined performance obligation. The amounts received
that have not yet been recognized as revenue are recorded in deferred revenue on the Company’s consolidated balance sheets, with
amounts expected to be recognized in the next 12 months recorded as current.
The
Company concluded that the Amendment represented a contract modification that is treated for accounting purposes as the termination of
the Cipla Agreement and a creation of a new contract (the “Amended Cipla Agreement”). Accordingly, the modification is accounted
for on a prospective basis. The total transaction price for the Amended Cipla Agreement includes variable consideration from the Amendment
as well as $7.4 million deferred under the Cipla Agreement as of the Amendment execution date. Revenue is recognized for the Amended
Cipla Agreement as the research and development services are provided using an input method, according to the ratio of costs incurred
to the total costs expected to be incurred in the future to satisfy the Company’s obligations.
During
the three and six months ended June 30, 2022, the Company recognized $1.3 million and $2.5 million in revenue related to the research
and development services and irrevocable license to the Assigned Assets in the Company’s consolidated statements of operations.
As of June 30, 2022, the aggregate transaction price related to the Company’s unsatisfied obligations was $6.9 million and was
recorded in deferred revenue in the accompanying consolidated balance sheets, $1.6 million of which was current.
8.
Preferred Stock
The
Company’s amended and restated certificate of incorporation (the “Articles”) provides for a class of authorized
stock known as preferred stock, consisting of 500,000
shares, $0.0001
par value per share, issuable from time to time in one or more series. During 2021, the Articles were amended to designate and
authorize 6,746
shares of Series A convertible preferred stock (the “Series A Preferred Stock”).
The
Series A Preferred Stock does not have any mandatory redemption provisions, contingently redeemable redemption provisions,
preferential dividend rights, liquidation preferences, or voting rights, apart from mirrored, non-discretionary voting rights with
common stock as a single class, equal to 100,000 votes per share of common stock underlying the Series A Preferred Stock on the
Reverse Stock Split proposal which was approved by the Company’s stockholders at a special stockholder meeting on February 10,
2022.
As of June 30, 2022, there are no shares of Series A Preferred Stock outstanding
as all previously issued shares were converted into common stock during the six months ended June 30, 2022 and the year ended December
31, 2021.
9.
Common Stock
In
May 2021, the Company entered into an At-The-Market Sales Agreement (the “Sales Agreement”) with H.C. Wainwright and Co.,
LLC (“HCW”) to act as the Company’s sales agent with respect to the issuance and sale of up to $20.0 million of the
Company’s shares of common stock, from time to time in an at-the-market public offering (the “ATM Offering”). Sales
of common stock under the Sales Agreement are made pursuant to an effective shelf registration statement on Form S-3, which was filed
with the SEC on May 26, 2021, and subsequently declared effective on June 9, 2021 (File No. 333-256502), and a related prospectus. HCW
acts as the Company’s sales agent on a commercially reasonable efforts basis, consistent with its normal trading and sales practices
and applicable state and federal laws, rules and regulations and the rules of The NASDAQ Capital Market. If expressly authorized by the
Company, HCW may also sell the Company’s common stock in privately negotiated transactions. There is no specific date on which
the ATM Offering will end, there are no minimum sale requirements and there are no arrangements to place any of the proceeds of the ATM
Offering in an escrow, trust or similar account. HCW is entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds
from the sale of the Company’s common stock pursuant to the Sales Agreement.
There
have been no sales of common stock under the Sales Agreement as of June 30, 2022.
10.
Warrants
There
were no warrants issued or exercised during the three and six months ended June 30, 2022. There were warrants to purchase 254,942
shares that expired during the three and six months ended June 30, 2022.
The
following represents a summary of the warrants outstanding and exercisable at June 30, 2022:
Schedule of Warrants Outstanding
| |
| |
Adjusted | | |
Expiration | |
Number of Shares Underlying Warrants | |
Issue Date | |
Classification | |
Exercise Price | | |
Date | |
Outstanding | | |
Exercisable | |
17-Dec-21 | |
Equity | |
$ | 14.99 | | |
15-Dec-26 | |
| 36,538 | | |
| 36,538 | |
17-Dec-21 | |
Equity | |
$ | 13.99 | | |
17-Dec-26 | |
| 281,047 | | |
| 281,047 | |
16-Feb-21 | |
Equity | |
$ | 49.99 | | |
11-Feb-26 | |
| 65,003 | | |
| 65,003 | |
7-Aug-20 | |
Equity | |
$ | 35.99 | | |
14-Jul-25 | |
| 90,743 | | |
| 90,743 | |
7-Aug-20 | |
Equity | |
$ | 44.99 | | |
14-Jul-25 | |
| 10,939 | | |
| 10,939 | |
23-Jul-20 | |
Equity | |
$ | 35.99 | | |
14-Jul-25 | |
| 77,502 | | |
| 77,502 | |
13-Jul-20 | |
Equity | |
$ | 44.99 | | |
14-Jul-25 | |
| 21,846 | | |
| 21,846 | |
13-Jul-20 | |
Equity | |
$ | 35.99 | | |
14-Jul-25 | |
| 334,800 | | |
| 334,800 | |
8-Apr-19 | |
Equity | |
$ | 26.99 | | |
8-Apr-24 | |
| 65,907 | | |
| 65,907 | |
8-Apr-19 | |
Equity | |
$ | 33.74 | | |
3-Apr-24 | |
| 39,871 | | |
| 39,871 | |
12-Feb-19 | |
Equity | |
$ | 36.62 | | |
7-Feb-24 | |
| 5,548 | | |
| 5,548 | |
12-Feb-19 | |
Equity | |
$ | 26.79 | | |
12-Aug-24 | |
| 66,675 | | |
| 66,675 | |
4-Feb-19 | |
Equity | |
$ | 42.49 | | |
30-Jan-24 | |
| 1,732 | | |
| 1,732 | |
31-Jan-19 | |
Equity | |
$ | 42.49 | | |
26-Jan-24 | |
| 511 | | |
| 511 | |
3-Dec-18 | |
Equity | |
$ | 77.99 | | |
3-Jun-24 | |
| 46,876 | | |
| 46,876 | |
3-Apr-18 | |
Equity | |
$ | 149.99 | | |
3-Apr-23 | |
| 117,559 | | |
| 117,559 | |
4-Apr-18 | |
Equity | |
$ | 149.99 | | |
4-Apr-23 | |
| 5,751 | | |
| 5,751 | |
15-Jun-15 | |
Equity | |
$ | 1,509.99 | | |
Five years after milestone achievement | |
| 15,955 | | |
| - | |
| |
| |
| | | |
| |
| | | |
| | |
| |
| |
| | | |
| |
| 1,284,803 | | |
| 1,268,848 | |
11.
Stock-Based Compensation
The
Company sponsors the Pulmatrix, Inc. 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). As of June
30, 2022, the 2013 Plan provides for the grant of up to 454,363 shares of common stock, of which 163,995 shares remain available
for future grant.
In
addition, the Company sponsors two legacy plans under which no additional awards may be granted. As of June 30, 2022, the two legacy
plans have a total of 35 options outstanding, all of which are fully vested.
During
the six months ended June 30, 2022, the Company granted 97,472 options
to employees and directors with a weighted-average grant date fair value of $6.96 per
share.
The
following table summarizes stock option activity for the six months ended June 30, 2022:
Summary of Stock Option Activity
| |
Number of Options | | |
Weighted-Average Exercise Price | | |
Weighted-
Average Remaining Contractual Term (Years) | | |
Aggregate
Intrinsic Value | |
Outstanding — January 1, 2022 | |
| 196,006 | | |
$ | 52.72 | | |
| 8.12 | | |
$ | - | |
Granted | |
| 97,472 | | |
| 6.96 | | |
| | | |
| | |
Forfeited or expired | |
| (6,913 | ) | |
| 320.18 | | |
| | | |
| | |
Outstanding — June 30, 2022 | |
| 286,565 | | |
$ | 30.70 | | |
| 8.34 | | |
$ | - | |
Exercisable — June 30, 2022 | |
| 120,669 | | |
$ | 49.51 | | |
| 7.59 | | |
$ | - | |
The
Company records stock-based compensation related to stock options based on their grant date fair value. During the six months
ended June 30, 2022, the Company used the Black-Scholes option-pricing model to estimate the fair value of stock option grants and to
determine the related compensation expense. The assumptions used in estimating the fair value of stock-based payment awards represent
management’s best estimates. The weighted-average assumptions used in determining fair value of the stock options for the six months ended June 30, 2022 and 2021, are as follows:
Schedule
of Calculation of Fair Value Assumptions
| |
Six Months Ended
June 30,
| |
| |
2022 | | |
2021 | |
Expected option life (years) | |
| 6.01 | | |
| 5.97 | |
Risk-free interest rate | |
| 1.74 | % | |
| 0.60 | % |
Expected volatility | |
| 113.59 | % | |
| 104.89 | % |
Expected dividend yield | |
| 0 | % | |
| 0 | % |
The
expected life of the Company’s options was determined using the simplified method as a result of limited historical data regarding
the Company’s activity. The risk-free interest rate was obtained from U.S. Treasury rates for the expected life of the stock options.
The Company’s expected volatility was based upon the weighted average of historical volatility for its own volatility. The dividend
yield considers that the Company has not historically paid dividends and does not expect to pay dividends in the foreseeable future.
As
of June 30, 2022, there was $2.2
million of unrecognized stock-based compensation expense related to unvested stock options granted under the Company’s stock
award plans. This expense is expected to be recognized over a weighted-average period of approximately 2.30
years.
The
following table presents total stock-based compensation expense for the three and six months ended June 30, 2022 and 2021, respectively
(dollars in thousands):
Schedule
of Stock-based Compensation Expenses
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three Months Ended
June 30,
| | |
Six Months Ended
June 30,
| |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Research and development | |
$ | 64 | | |
$ | 55 | | |
$ | 126 | | |
$ | 111 | |
General and administrative | |
| 213 | | |
| 244 | | |
| 432 | | |
| 516 | |
Total stock-based compensation expense | |
$ | 277 | | |
$ | 299 | | |
$ | 558 | | |
$ | 627 | |
12.
Commitments and Contingencies
Research
and Development Activities
The Company contracts with various other organizations to conduct research
and development activities, including clinical trials. As of June 30, 2022, the Company had aggregate commitments to pay approximately
$5.7 million remaining on these contracts, of which the company expects to be reimbursed $2.4 million by partners. Of the gross amount
of $5.7 million in commitments, $4.4 million would be considered current over the next 12 months and $1.3 million would be considered
long-term. The scope of the services under contracts for research and development activities may be modified and the contracts, subject
to certain conditions, may generally be cancelled by the Company upon written notice. In some instances, the contracts, subject to certain
conditions, may be cancelled by the third party.
Legal
Proceedings
In
the ordinary course of its business, the Company may be involved in various legal proceedings involving contractual and employment relationships,
patent or other intellectual property rights, and a variety of other matters. The Company is not aware of any pending legal proceedings
that would reasonably be expected to have a material impact on the Company’s financial position or results of operations
13.
Leases
Current
Corporate Headquarters
The
Company has limited leasing activities as a lessee which are primarily related to its corporate headquarters located at 99 Hayden Avenue,
Suite 390, Lexington, Massachusetts. The lease is for approximately 22,000 square feet of office and lab space under a lease with 99
Hayden LLC which was subsequently amended on April 30, 2020 and October 6, 2021, and will expire on June 30, 2023. The lease provides
for base rent, and the Company is responsible for real estate taxes, maintenance, and other operating expenses applicable to the leased
premises.
The
Company also leases small office equipment which is primarily short-term or immaterial in nature. Therefore, no right-of-use assets and
lease liabilities are recognized for these leases.
The
components of lease expense for the Company for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in thousands):
Schedule
of Components of Lease Expenses
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three Months Ended
June 30,
| | |
Six Months Ended
June 30,
| |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Lease cost | |
| | | |
| | | |
| | | |
| | |
Fixed lease cost | |
$ | 357 | | |
$ | 259 | | |
$ | 715 | | |
$ | 518 | |
Variable lease cost | |
| 146 | | |
| 96 | | |
| 350 | | |
| 222 | |
Total lease cost | |
$ | 503 | | |
$ | 355 | | |
$ | 1,065 | | |
$ | 740 | |
Other information | |
| | | |
| | | |
| | | |
| | |
Immaterial office equipment lease obligation, 4-year lease | |
| | | |
| | | |
$ | 8 | | |
$ | 12 | |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | | |
| | | |
| | | |
| | |
Operating cash flows from operating leases | |
$ | 308 | | |
$ | 299 | | |
$ | 615 | | |
$ | 597 | |
Weighted-average remaining lease term — operating leases | |
| | | |
| | | |
| 1.0 year | | |
| | |
Weighted-average discount rate — operating leases | |
| | | |
| | | |
| 3.0 | % | |
| | |
Maturities
of lease liabilities due under these lease agreements as of June 30, 2022 are as follows:
Schedule of Maturities of Lease Liabilities
| |
Operating Leases | |
Maturity of lease liabilities | |
| | |
2022 (half year) | |
$ | 863 | |
2023 | |
| 863 | |
Total lease payments | |
| 1,726 | |
Less interest | |
| (24 | ) |
Total lease liabilities | |
$ | 1,702 | |
Schedule of Operating Lease Liability
Reported as of June 30, 2022 | |
| | |
Lease liabilities — short term | |
$ | 1,702 | |
Lease liabilities — long term | |
| - | |
Total
lease liabilities | |
$ | 1,702 | |
Future
Corporate Headquarters
On
January 7, 2022, the Company executed a lease agreement with Cobalt Propco 2020, LLC for its new corporate headquarters at 36 Crosby
Drive, Bedford, Massachusetts. The leased premises comprises approximately 20,000
square feet of office and lab space and is expected to commence in May 2023, following completion of construction to prepare the
premises for the Company’s intended use. Based on the Company’s current plans, management anticipates the improvements will
be funded by (i) the landlord through a tenant allowance of $3.9
million, (ii) a landlord funded advance on tenant improvements of $0.5 million
which will be repaid over the lease term, and (iii) approximately $1.5 million by the Company. The
lease provides for base rent of $101
thousand per month, which will increase 3% each year over the ten year noncancellable term. The Company has the option to extend the
lease for one additional 5-year term and is responsible for real estate taxes, maintenance, and other operating expenses applicable
to the leased premises.
During
the construction period, the Company will evaluate the nature of the costs incurred to determine the accounting owner of the
improvements. If it is determined the improvements are Company owned assets, they will be capitalized by the Company in accordance
with ASC 360, Property, Plant and Equipment. As of June 30, 2022, construction
had not commenced and a lease commencement date in accordance with ASC 842, Leases, had not occurred.
14.
Income Taxes
The
Company had no income tax expense due to operating losses incurred for the three and six months ended June 30, 2022 and 2021.
Management
of the Company evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and determined
that it is more likely than not that the Company will not recognize the benefits of the deferred tax assets. As a result, a full valuation
allowance was recorded as of June 30, 2022 and December 31, 2021.
The
Company applies ASC 740, Income Taxes, for the financial statement recognition, measurement, presentation, and disclosure of uncertain
tax positions taken or expected to be taken in income tax returns. Unrecognized tax benefits represent tax positions for which reserves
have been established. A full valuation allowance has been provided against the Company’s deferred tax assets, so that the effect
of the unrecognized tax benefits is to reduce the gross amount of the deferred tax asset and the corresponding valuation allowance. The
Company has no material uncertain tax positions as of June 30, 2022 and December 31, 2021.
15.
Net Loss Per Share
Basic
and diluted earnings (loss) per share are computed using the two-class method, which is an earnings allocation method that
determines earnings (loss) per share for common shares and participating securities. The participating securities consist of the
Company’s Series A Preferred Stock. The undistributed earnings are allocated between common shares and participating
securities as if all earnings had been distributed during the period. In periods of loss, no allocation is made to the Series A Preferred Stock and diluted net loss per share is the same as basic net loss per share because common stock equivalents are excluded as its
inclusion would be anti-dilutive.
The
following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding,
because such securities had an antidilutive impact:
Schedule of Computation of Anti-Dilutive Weighted-Average Shares Outstanding
| |
2022 | | |
2021 | |
| |
Three Months Ended June 30, | |
| |
2022 | | |
2021 | |
Stock options to purchase common stock | |
| 286,565 | | |
| 196,757 | |
Warrants to purchase common stock | |
| 1,284,803 | | |
| 1,122,042 | |
Total | |
| 1,571,368 | | |
| 1,318,799 | |
16.
Subsequent Events
The
Company has completed an evaluation of all subsequent events after the balance sheet date of June 30, 2022 through the date the condensed
consolidated financial statements were issued, to ensure that the condensed consolidated financial statements include appropriate disclosure
of events both recognized in the condensed consolidated financial statements as of June 30, 2022, and events which occurred subsequently
but were not recognized in the condensed consolidated financial statements. The Company has concluded that no subsequent events have
occurred that require disclosure, except as disclosed within the condensed consolidated financial statements.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements
with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other
factors that may affect our future results. The information set forth below should be read in conjunction with the condensed consolidated
financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q as well as the audited consolidated
financial statements and the notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission
(the “SEC”) on March 29, 2022. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,”
“we,” “our,” or our “Company” and similar terms refer to Pulmatrix, Inc., a Delaware corporation
and its subsidiaries.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained
herein, including statements regarding our business plans or strategies, projected or anticipated benefits or other consequences of our
plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues,
earnings, or other aspects of our operating results, are forward-looking statements. Words such as “anticipates,” “assumes,”
“believes,” “can,” “could,” “estimates,” “expects,” “forecasts,”
“guides,” “intends,” “is confident that,” “may,” “plans,” “seeks,”
“projects,” “targets,” and “would,” and their opposites and similar expressions, as well as statements
in future tense, are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of
future performance or results and may not be accurate indications of when such performance or results will actually be achieved. Forward-looking
statements are based on information we have when those statements are made or our management’s good faith belief as of that time
with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially
from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include,
but are not limited to:
|
● |
the
impact of the ongoing coronavirus (“COVID-19”) pandemic on the Company’s ongoing and planned clinical trials; |
|
|
|
|
● |
our
history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty
regarding the adequacy of our liquidity to pursue or complete our business objectives; |
|
|
|
|
● |
our
inability to carry out research, development and commercialization plans; |
|
|
|
|
● |
our
inability to manufacture our product candidates on a commercial scale on our own or in collaborations with third parties; |
|
|
|
|
● |
our
inability to complete preclinical testing and clinical trials as anticipated; |
|
● |
our
collaborators’ inability to successfully carry out their contractual duties; |
|
|
|
|
● |
termination
of certain license agreements; |
|
|
|
|
● |
our
ability to adequately protect and enforce rights to intellectual property, or defend against claims of infringement by others; |
|
|
|
|
● |
difficulties
in obtaining financing on commercially reasonable terms, or at all; |
|
|
|
|
● |
intense
competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory
and clinical, manufacturing, marketing and sales, distribution, personnel and resources than we do; |
|
|
|
|
● |
entry
of new competitors and products and potential technological obsolescence of our products; |
|
|
|
|
● |
adverse
market and economic conditions; |
|
● |
our
ability to maintain compliance with the NASDAQ Capital Market’s listing standards; |
|
|
|
|
● |
loss
of one or more key executives or scientists; and |
|
|
|
|
● |
difficulties
in securing regulatory approval to market our product candidates. |
For
a more detailed discussion of these and other risks that may affect our business and that could cause our actual results to differentiate
equally from those projected in these forward-looking statements, see the risk factors and uncertainties described under the heading
“Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. The forward-looking statements contained in this
Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation
to update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect
the occurrence of unanticipated events, except as required by law.
“iSPERSE™”
is one of our trademarks used in this Quarterly Report on Form 10-Q. Other trademarks appearing in this report are the property of their
respective holders. Solely for convenience, these and other trademarks, trade names and service marks referred to in this report appear
without the ®, TM and SM symbols, but those references are not intended to indicate, in any way, we or the owners of such
trademarks will not assert, to the fullest extent under applicable law, their rights to these trademarks and trade names.
Overview
Business
We
are a clinical-stage biotechnology company focused on the discovery and development of novel inhaled therapeutic products intended to
prevent and treat respiratory and other diseases with significant unmet medical needs.
We
design and develop inhaled therapeutic products based on our proprietary dry powder delivery technology, iSPERSE™
(inhaled Small Particles Easily Respirable and Emitted), which enables delivery of small or large molecule drugs to the lungs by inhalation
for local or systemic applications. The iSPERSE™ powders are engineered to be small, dense particles with highly
efficient dispersibility and delivery to airways. iSPERSE™ powders can be used with an array of dry powder inhaler
technologies and can be formulated with a broad range of drug substances including small molecules and biologics. We believe the iSPERSE™
dry powder technology offers enhanced drug loading and delivery efficiency that outperforms traditional lactose-blend inhaled
dry powder therapies.
We
believe the advantages of using the iSPERSE™ technology include reduced total inhaled powder mass, enhanced dosing
efficiency, reduced cost of goods, and improved safety and tolerability profiles.
Our
goal is to develop breakthrough therapeutic products that are safe, convenient, and more effective than the existing therapeutic products
for respiratory and other diseases where iSPERSE™ properties are advantageous.
Our
current pipeline is aligned to this goal as we develop iSPERSE™- based therapeutic candidates which target the
prevention and treatment of a range of diseases. These therapeutic candidates include Pulmazole for the treatment of allergic bronchopulmonary
aspergillosis (“ABPA”) in patients with asthma, and in patients with cystic fibrosis (“CF”), PUR1800 for the
treatment of acute exacerbations of chronic obstructive pulmonary disease (“AECOPD”), and PUR3100 for the treatment of acute
migraine. Each program is enabled by its unique iSPERSE™ formulation designed to achieve specific therapeutic
objectives.
We
intend to capitalize on our iSPERSE™ technology platform and our expertise in inhaled therapeutics to identify
new product candidates for the prevention and treatment of diseases with significant unmet medical needs and to build our product pipeline
beyond our existing candidates. In order to advance clinical trials for our therapeutic candidates and leverage the iSPERSE™
platform to enable delivery of partnered compounds, we intend to form strategic alliances with third parties, including pharmaceutical
and biotechnology companies or academic or private research institutes.
We
expect to continue to incur significant expenses and operating losses for at least the next several years based on our drug development
plans. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, as we:
|
● |
Resume
Pulmazole clinical trials focused on the development of an inhaled anti-fungal therapy to treat an allergic/hypersensitivity response
to fungus in the lungs of patients with asthma and CF. |
We
will continue to direct resources to advance the research and development of Pulmazole for ABPA in patients with asthma and CF. In
2018, we successfully conducted clinical testing of Pulmazole in normal healthy volunteers and subjects with asthma. In 2019, we
began a Phase 2 study of Pulmazole with patients with asthma and are suffering from ABPA but stopped the Phase 2 study due to the
COVID-19 pandemic and its impact on enrollment. In January 2021, we conducted a Type C meeting with the FDA to discuss our plans for
a Phase 2b study. Utilizing the FDA feedback, we now intend to advance Pulmazole into a Phase 2b efficacy study that will include a
16-week dosing regimen and is designed with efficacy endpoints that would potentially support a registrational trial, rather than the 4-week dosing regimen in the
terminated Phase 2 safety biomarker study. The Phase 2b study is anticipated to begin dosing subjects with ABPA in the first quarter
of 2023.
|
● |
Continue
to advance PUR1800, focusing on the development of an inhaled kinase inhibitor for treatment of AECOPD. |
We
completed preclinical safety studies for our lead iSPERSE™ formulation in 2018 and advanced our formulation
and process development efforts to support clinical testing in subjects with stable moderate-severe chronic obstructive pulmonary
disease (“COPD”). In February 2021, we successfully dosed the first patient with PUR1800, in a Phase 1b clinical study
in subjects with stable moderate-severe COPD. We received top-line data from the Phase 1b clinical study in the first quarter of
2022. We are analyzing the Phase 1b clinical study data for future publication and to finalize the design of a potential Phase 2
study in the treatment of AECOPD.
|
● |
Conduct
and complete non-clinical studies and a Phase 1 clinical study of PUR3100, an orally inhaled dihydroergotamine (“DHE”)
for the treatment of acute migraine. |
We
developed PUR3100, an iSPERSE™ formulation of DHE in 2020 and completed a pharmacokinetic study in dogs in January
2021. On July 12, 2022, we announced the dosing of the first five subjects in a Phase 1 trial evaluating PUR3100, a novel pulmonary inhaled
formulation for the treatment of acute migraine. The Phase 1 study design is a double-dummy, double-blinded trial to assess the safety,
tolerability, and pharmacokinetics of 3 doses of single doses of inhaled PUR3100 with IV placebo, as compared to IV DHE (DHE mesylate
injection) with inhaled placebo. Twenty-four healthy volunteers are to be randomized to one of the four dose groups consisting of six
subjects each. To date, the trial has enrolled 23 of 24 patients and top-line data is anticipated in the fourth quarter of 2022
|
● |
Capitalize
on our proprietary iSPERSE™ technology and our expertise in inhaled therapeutics and particle engineering to identify
new product candidates for prevention and treatment of diseases with significant unmet medical needs. |
To
add additional inhaled therapeutics to our discovery pipeline and facilitate additional discovery collaborations, we are leveraging our
iSPERSE™ technology and our management’s expertise in inhaled therapeutics and particle engineering to
identify potential product candidates. These potential product candidates are potentially safer and more effective than the current standard
of care for prevention and treatment of diseases with significant unmet medical needs.
|
● |
Invest
in protecting and expanding our intellectual property portfolio and file for additional patents to strengthen our intellectual property
rights. |
The
status of our patent portfolio changes frequently in the ordinary course of patent prosecution. As of June 30, 2022, our patent portfolio
related to iSPERSE™ included approximately 135 granted patents, 19 of which are granted US patents, with expiration
dates from 2024 to 2037, and approximately 42 additional pending patent applications in the US and other jurisdictions. Our in-licensed
portfolio related to kinase inhibitors included approximately 270 granted patents, 32 of which are granted US patents, with expiration
dates from 2029 to 2035, and approximately 28 additional pending patent applications in the US and other jurisdictions. On March 1, 2022,
we filed a patent cooperation treaty application that discloses and claims certain formulations and methods of
use relevant to our PUR3100 program.
|
● |
Hire
personnel to support our product development, commercialization, and administrative efforts. |
With
the ongoing PUR3100 clinical trial and plans to advance Pulmazole into a clinical trial, we plan to hire additional personnel
in areas of pharmaceutical and clinical development. In 2022, we hired our Chief Medical Officer, among other personnel, to support
these two programs.
Pulmazole
On
April 15, 2019, we entered into a Development and Commercialization Agreement (the “Cipla Agreement”) with Cipla Technologies
LLC (“Cipla”) for the co-development and commercialization, on a worldwide, except for the Cipla Territory defined below,
exclusive basis, of Pulmazole, our inhaled iSPERSE™ drug delivery system (the “Product”) enabled
formulation of the antifungal drug, itraconazole, which is only available as an oral drug, for the treatment of all pulmonary indications,
including ABPA in patients with asthma. We entered into an amendment to the Cipla Agreement on November 8, 2021 (the “Amendment”),
and all references to the Cipla Agreement herein refer to the Cipla Agreement, as amended.
The
Cipla Agreement will remain in effect in perpetuity, unless otherwise earlier terminated in accordance with its terms. In the event of
circumstances affecting the continuity of development of the Product in line with the Cipla Agreement or certain development milestones
are not achieved within a specified timeframe discussed in greater detail below, the JSC will
evaluate the cause and effect and make a recommendation as to the most optimal option available to Cipla and us. In such events, the
parties are not obligated to follow the recommendation of the JSC and, either party may elect to terminate (a “Terminating Party”)
its obligation to fund additional costs and expenses for the development and/or commercialization of the Product. If the non-Terminating
Party wishes to continue the development of the Product, it will have the right to purchase the rights of the Terminating Party in the
Product at its fair market value. If both Cipla and we abandon the development program, Cipla and we shall make commercially reasonable
efforts to monetize the Product and development program in connection with the Pulmonary indications. Cipla and we will equally share
the proceeds.
We
and Cipla are responsible for 60% and 40%, respectively, of our overhead costs and the time spent by our employees and consultants on
development of the Product (“Direct Costs”), provided, that Cipla reimburses us an amount equal to 10% of aggregate Direct
Costs upon the achievement of certain development milestones set forth in the table below. We continue to share all other development
costs with Cipla that are not Direct Costs, such as the cost of clinical research organizations, manufacturing costs and other third-party
costs, on a 50/50 basis.
Pursuant
to the Cipla Agreement, (i) all development and commercialization activities with respect to the Product in India, South Africa, Sri
Lanka, Nepal, Iran, Yemen, Myanmar and Algeria (such countries, the “Cipla Territory”) will be conducted exclusively by Cipla
at Cipla’s sole cost and expense, and (ii) Cipla shall be entitled to all profits from the sale of the Product in the Cipla Territory,
except that if Cipla successfully transfers manufacturing of the Product for the Cipla Territory to a manufacturing site determined by
Cipla, we will become entitled to a royalty equal to 2% of net sales in the Cipla Territory.
In
partnership with Cipla, we initiated a Phase 2 clinical study in 2019, entitled: “A Randomized, Double-Blind, Multicenter, Placebo-Controlled,
Phase 2 Study to Evaluate the Safety, Tolerability, and Pharmacokinetics of Itraconazole Administered as a Dry Powder for Inhalation
(PUR1900) in Adult Asthmatic Patients with ABPA”. This clinical study was terminated in July 2020 due to the ongoing impact of the COVID-19
pandemic on patient enrollment and clinical study conduct.
Following
termination of the Phase 2 clinical study, Pulmatrix conducted a Type C meeting with the FDA on January 27, 2021, in order to discuss
the program’s overall development plan and the current Phase 2b clinical study design. The Phase 2b clinical study design includes
a 16-week dosing regimen with an 8-week follow up and is intended to explore potential efficacy endpoints, whereas the terminated Phase
2 clinical study had comprised only a 4-week dosing regimen with safety and tolerability as its primary endpoint. The longer dosing regimen
of the new Phase 2b clinical study is supported by the 6-month inhalation toxicology study in dogs completed in April 2020. The new development
plan, including the planned Phase 2b clinical study, was approved on November 8, 2021 in the Amendment by the JSC.
In
addition to the terms of the Cipla Agreement described above, if any of the below development milestones are not met by the date that
is nine months after the applicable deadline for achieving such development milestone, either party may elect to terminate its obligation
to fund additional development costs, in which case either (i) the non-Terminating Party can acquire the rights of the Terminating Party
for fair market value or (ii) the parties will monetize the Product. The table below sets forth the development milestones.
Phase
2b Development Plan – Development Milestones |
|
Development
Milestone |
|
Milestone
Date |
|
|
|
25%
of patients enrolled in Phase 2b clinical study are dosed |
|
June
30, 2023 |
|
|
|
Company
delivers summary of key efficacy and safety data to include FEV1, IgE, ACQ-6, number of subjects withdrawn, any severe
adverse events related to the medication and an overall summary table of adverse events (“Topline Results”) to the JSC. |
|
June
30, 2024 |
Phase
3 Development Plan – Development Milestones |
|
Development
Milestone |
|
Milestone
Date |
|
|
|
25%
of patients enrolled in Phase 3 clinical study dosed |
|
To
be proposed by JSC |
|
|
|
Company
delivers Topline Results to the JSC |
|
To
be proposed by JSC |
|
|
|
The
Prescription Drug User Fee Act (the “PDUFA”) |
|
To
be proposed by JSC |
We
successfully completed a Phase 1/1b clinical study in 2018. We anticipate the first patient to be dosed in this Phase 2b clinical study
during the first quarter of 2023 with top-line data expected in mid-2024. This clinical study start may be affected by conditions related
to the COVID-19 pandemic with respect to clinical study conduct and patient enrollment.
PUR1800
We
completed the Phase 1b safety, tolerability, and pharmacokinetics of PUR1800 for subjects with stable moderate-severe COPD. Top-line data
was delivered in the first quarter of 2022.
The
clinical study, performed at the Medicines Evaluation Unit in Manchester, UK, was a randomized, three-way crossover double-blind study
with 14 days of daily dosing which includes placebo and one of two doses of PUR1800, and included a 28 day follow up period after each
treatment period. A total of 18 adults with stable COPD were enrolled. Safety and tolerability, as well as systemic PK were evaluated.
PUR1800
was well tolerated and there were no observed safety signals. The preliminary PK data indicate that PUR1800 results in low and consistent
systemic exposure when administered via oral inhalation. The complete datasets will be analyzed and we expect to submit study results
at a relevant medical conference later this year. This top-line data, along with the results from chronic toxicology studies, support
the continued development of PUR1800 for the treatment of AECOPD and other inflammatory respiratory disease.
Toxicology
studies in rats and dogs, with durations of six and nine months, respectively, were then completed. The data from both studies demonstrated
that PUR1800 is safe and well tolerated with chronic dosing, with no progression of findings from 28-day studies. We believe this indicates
potential for chronic dosing of PUR1800, enabling Pulmatrix to explore PUR1800 therapy for chronic respiratory disease such as steroid
resistant asthma, COPD, or idiopathic pulmonary fibrosis. While the program is currently in development for treatment of AECOPD, these
positive toxicology study results could expand potential indications and value of the program.
All
rights to our kinase inhibitor portfolio, including PUR1800 and PUR5700, reverted to us upon the termination of our License, Development
and Commercialization Agreement (the “JJEI License Agreement”), dated December 26, 2019, with Johnson & Johnson Enterprise
Innovation, Inc. (“JJEI”). JJEI notified us that they were terminating the JJEI License Agreement in April 2021, and the
effective date of the termination was July 6, 2021.
PUR3100
In
2020, Pulmatrix developed PUR3100, the iSPERSE™ formulation of DHE, for the treatment of acute migraine. Over
38 million people suffer from migraine in the United States. Currently DHE is only available as intravenous infusion or intranasal delivery.
If approved for commercialization, PUR3100 should be the first orally inhaled DHE treatment for acute migraine and be an alternative
to other acute therapies, such as oral and intravenous triptans that currently represent the majority of the annual migraine prescriptions
in the United States. Given the oral inhaled route of delivery, PUR3100 is anticipated to provide a rapid onset of migraine symptom relief
with a favorable tolerability profile.
Two
14-day good laboratory practice (“GLP”) toxicology studies have been conducted, one in rats and one in dogs, to support initial
single dose clinical studies. An additional 14-day GLP toxicology study in rats to fully characterize local toxicity in the lungs to
enable species selection for a single species chronic toxicology study to support longer-term clinical dosing has also been completed.
We
submitted pre-investigational new drug application questions to the FDA for which we have received written responses that have confirmed
and/or clarified several manufacturing, non-clinical, and clinical aspects of the PUR3100 development program. After consideration of
the responses, we have updated the initial clinical study from a 2-part Phase 1/Phase 2 clinical study to a Phase 1 double-blind matching
placebo (double-dummy) clinical study in healthy volunteers. Participants are being randomized to receive 1 of 3 doses of PUR3100 or
intravenous DHE. The Phase 1 clinical study is evaluating safety, tolerability, and pharmacokinetics of PUR3100 in humans. Based on our
FDA communications, we believe this study may provide preliminary comparative bioavailability data to potentially support a 505(b)(2)
pathway for marketing authorization. Based on FDA guidance provided in the pre-IND meeting, 300 patients will be followed for 6 months
of dosing and 100 of which will be followed for 12 months of dosing as part of an open-label extension study of the potential pivotal
study. The FDA also confirmed that it will be necessary to perform a safety study administering PUR3100 to otherwise healthy subjects
with asthma before a new drug application is submitted for PUR3100.
We
further conducted a Type C meeting with the FDA to add additional clarification around some of the written responses in relation to the
overall non-clinical and clinical program. We believe that conducting the Phase 1 clinical study in Australia allows us to generate the most comprehensive dataset for inclusion in an IND for Phase 2 in the United States, while also providing the
most cost and time efficient path to Phase 1 data in 2022. On July 12, 2022, we announced the dosing of the first five subjects in a
Phase 1 trial evaluating PUR3100, a novel pulmonary inhaled formulation for the treatment of acute migraine. The Phase 1 study design
is a double-dummy, double-blinded trial to assess the safety, tolerability, and pharmacokinetics of 3 doses of single doses of inhaled
PUR3100 with IV placebo, as compared to IV DHE (DHE mesylate injection) with inhaled placebo. Twenty-four healthy volunteers are to be
randomized to one of the four dose groups consisting of six subjects each. To date, the trial has enrolled 23 of 24 subjects and we anticipate top-line data in the fourth quarter of 2022.
Following the Australia Phase 1 clinical study completion, we plan to open an IND in order to enable a randomized placebo-controlled
Phase 2 clinical study in patients with migraines to assess the safety and effectiveness of two doses of PUR3100, in which the selection
of the two doses has been informed by the initial Phase 1 clinical study.
Nasdaq
Minimum Bid Price Requirement
As
previously reported, on August 17, 2021, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”)
indicating that, based upon the closing bid price of our common stock for the 30 consecutive business day period between July 6, 2021
through August 16, 2021, we did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital
Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). On February 15, 2022, we
received a letter from Nasdaq notifying us that we have been granted an additional 180-day period, or until August 15,
2022, to regain compliance with the Minimum Bid Price Requirement. On March 15, 2022, we received a letter from Nasdaq notifying
it that it had regained full compliance with the Minimum Bid Price Rule, and that the matter was closed.
Recent
Developments
Bylaw
Amendment
On
April 28, 2022, our board of directors of approved an amendment to the existing bylaws (the “Amendment”), effective as of
April 28, 2022. The Amendment amends and restates Article I, Section 4 of the existing bylaws in its entirety to lower the number of
holders of the shares entitled to vote at a meeting of stockholders constituting a quorum, in person or by proxy, from a majority to
one-third.
Appointment
of Interim Chief Financial Officer
On
April 14, 2022, our board of directors appointed Peter Ludlum as our Interim Chief Financial Officer, effective as of April 18, 2022,
to serve until a successor is chosen and qualified, or until his earlier resignation or removal. Mr. Ludlum also serves as our principal
accounting officer and principal financial officer.
Financial
Overview
Revenues
To
date, we have not generated any product sales. The revenue for the three and six months ended June 30, 2022 was primarily generated by
the collaboration and license agreement with Cipla on our Pulmazole program. The revenue for the three and six months ended June 30,
2021 was primarily generated by the Cipla Agreement and the JJEI License Agreement for our PUR1800 kinase inhibitor.
For
more discussion on the collaboration or licensing agreements, please see Note 7 —Significant Agreements of the condensed
consolidated financial statements included in the Quarterly Report on Form 10-Q.
Research
and Development Expenses
Research
and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical candidates,
and include:
|
● |
employee-related
expenses, including salaries, benefits and stock-based compensation expense; |
|
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● |
development
costs associated with our iSPERSE™ pipeline programs including expenses incurred under agreements with CROs or CMOs, and consultants
that conduct our clinical trials and preclinical activities; |
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|
|
|
● |
the
cost of acquiring, developing and manufacturing clinical trial materials and lab supplies; |
|
|
|
|
● |
facility,
depreciation, and other expenses, which include direct and allocated expenses for rent, maintenance of our facility, insurance, and
other supplies; |
|
|
|
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● |
costs
associated with preclinical activities and clinical regulatory operations; and |
|
|
|
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● |
consulting
and professional fees associated with research and development activities. |
We
expense research and development costs to operations as incurred. We recognize costs for certain development activities, such as clinical
trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations
or information provided to us by our vendors.
Research
and development activities are central to our business model. We utilize a combination of internal and external efforts to advance product
development from early-stage work to clinical trial manufacturing and clinical trial support. External efforts include work with consultants
and substantial work at CROs and CMOs. We support an internal research and development team and facility for our pipeline programs. To
move these programs forward along our development timelines, a large portion (approximately 79% of staff) are research and development
employees. In addition, we maintain approximately a 22,000 square foot office and research and development facility which includes capital
equipment for the manufacture and characterization of our iSPERSE™ powders for our pipeline programs. As we identify
opportunities for iSPERSE™ in respiratory indications, we anticipate additional head count, capital, and development
costs will be incurred to support these programs. Because of the numerous risks and uncertainties associated with product development,
however, we cannot determine with certainty the duration and completion costs of these or other current or future preclinical studies
and clinical trials. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety
of factors, including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rates
and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on
numerous factors, including competition, manufacturing capability and commercial viability.
General
and Administrative Expenses
General
and administrative expenses consist principally of salaries and related costs such as stock-based compensation for personnel and consultants
in executive, finance, business development, corporate communications and human resource functions, facility costs not otherwise included
in research and development expenses, patent filing fees and professional legal fees. Other general and administrative expenses include
travel expenses, expenses related to a publicly traded company and professional fees for consulting, auditing and tax services.
We
anticipate that our general and administrative expenses will increase in the future as they relate to audit, legal, regulatory, and tax-related
services associated with maintaining compliance with exchange listing and SEC requirements, director and
officer liability insurance, investor relations costs and other costs associated with being a public company. Additionally, if and when
we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in staffing and related expenses as
a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.
Critical
Accounting Policies, Judgments, and Estimates
This
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the
disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments,
including those related to revenue recognition, accrued expenses, and stock-based compensation. We base our estimates on historical experience,
known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
There
were no changes to our critical accounting policies during the six months ended June 30, 2022, including estimates, assumptions,
and judgments as compared to those described in Management’s Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 29, 2022 (the
“2021 Annual Report”). It is important that the discussion of our operating results that follow be read in conjunction with
the critical accounting policies disclosed in our 2021 Annual Report.
Results
of Operations
Three
Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021
The
following table sets forth our results of operations for each of the periods set forth below (in thousands):
| |
Three Months Ended June 30, | | |
Change | |
| |
2022 | | |
2021 | | |
2022 vs. 2021 | |
Revenues | |
$ | 1,331 | | |
$ | 2,254 | | |
$ | (923 | ) |
| |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | |
Research and development | |
| 4,337 | | |
| 4,541 | | |
| (204 | ) |
General and administrative | |
| 1,553 | | |
| 1,562 | | |
| (9 | ) |
Total operating expenses | |
| 5,890 | | |
| 6,103 | | |
| (213 | ) |
Loss from operations | |
| (4,559 | ) | |
| (3,849 | ) | |
| (710 | ) |
Other income (expense) | |
| | | |
| | | |
| | |
Interest income | |
| 15 | | |
| 2 | | |
| 13 | |
Other expense, net | |
| (51 | ) | |
| (5 | ) | |
| (46 | ) |
Total other expense, net | |
| (36 | ) | |
| (3 | ) | |
| (33 | ) |
Net loss | |
$ | (4,595 | ) | |
$ | (3,852 | ) | |
$ | (743 | ) |
Revenues
— Revenue was $1.3 million for the three months ended June 30, 2022, compared
to $2.2 million for the three months ended June 30, 2021, a decrease of $0.9 million. The decrease was primarily due to the termination
of the JJEI License Agreement on July 6, 2021, offset by a $1.0 million increase in revenues recorded period over period on the Cipla
Agreement.
Research
and development expenses — For the three months ended June 30, 2022, research and development expenses were $4.3
million compared to $4.5 million for the three months ended June 30, 2021, a decrease of $0.2 million. The decrease was primarily due
to decreased spend of $0.9 million in preclinical and clinical costs related to our PUR1800 program and $0.5 million in preclinical and
manufacturing costs related to our PUR3100 program, partially offset by increased spend of $0.6 million in clinical and manufacturing
costs related to the Pulmazole program, $0.5 million in employment costs, and $0.1 million in facility costs.
General and administrative expenses
— General and administrative expenses were $1.6 million for both the three months ended June 30, 2022 and 2021. There were no significant
changes in the nature or composition of general and administrative expenses incurred period over period.
Six
Months ended June 30, 2022 Compared with Six Months Ended June 30, 2021
The
following table sets forth our results of operations for each of the periods set forth below (in thousands):
| |
Six Months Ended June 30, | | |
Change | |
| |
2022 | | |
2021 | | |
2022 vs. 2021 | |
Revenues | |
$ | 2,491 | | |
$ | 3,644 | | |
$ | (1,153 | ) |
| |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | |
Research and development | |
| 8,486 | | |
| 8,397 | | |
| 89 | |
General and administrative | |
| 3,527 | | |
| 3,181 | | |
| 346 | |
Total operating expenses | |
| 12,013 | | |
| 11,578 | | |
| 435 | |
Loss from operations | |
| (9,522 | ) | |
| (7,934 | ) | |
| (1,588 | ) |
Other income (expense) | |
| | | |
| | | |
| | |
Interest income | |
| 16 | | |
| 5 | | |
| 11 | |
Other expense, net | |
| (62 | ) | |
| (27 | ) | |
| (35 | ) |
Total other expense, net | |
| (46 | ) | |
| (22 | ) | |
| (24 | ) |
Net loss | |
$ | (9,568 | ) | |
$ | (7,956 | ) | |
$ | (1,612 | ) |
Revenue
— Revenue was $2.5 million for the six months ended June 30, 2022, compared
to $3.6 million for the six months ended June 30, 2021, a decrease of $1.1 million. The decrease was primarily due to the termination
of the JJEI License Agreement on July 6, 2021, offset by a $1.5 million increase in revenues recorded period over period on the Cipla
Agreement.
Research
and development expenses — For the six months ended June 30, 2022, research and development expenses were $8.5 million
compared to $8.4 million for the six months ended June 30, 2021, an increase of $0.1 million. The increase was primarily due to increased
spend of $1.2 million in employment costs, $0.3 million in clinical costs related to the Pulmazole program, and $0.3 million in facility
costs, partially offset by decreased spend of $1.2 million in preclinical and clinical costs related to our PUR1800 program and $0.5
million in preclinical and manufacturing costs related to our PUR3100 program.
General and administrative expenses
— General and administrative expenses were $3.5 million for the six months ended June 30, 2022, compared to $3.2 million for the
six months ended June 30, 2021, an increase of $0.3 million. The increase was primarily due to increased spend of $0.2 million in employment
costs, $0.2 million in consulting costs, and $0.1 million in facility costs, partially offset by decreased spend of $0.2 million in legal
and patent costs.
Liquidity
and Capital Resources
Through
June 30, 2022, we have incurred an accumulated deficit of $264.2 million, primarily as a result of expenses incurred through a combination
of research and development activities related to our various product candidates and general and administrative expenses supporting those
activities. We have financed our operations since inception primarily through the sale of preferred and common stock, the issuance of
convertible promissory notes and term loans, and collaboration and license agreements. Our total cash and cash equivalents balance as
of June 30, 2022 was $42.9 million.
We
anticipate that we will continue to incur losses, and that such losses will increase over the next several years due to development costs
associated with our iSPERSE™ pipeline programs. We expect that our research and development and general and administrative expenses
will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination
of equity offerings, debt financings, other third-party funding and other collaborations and strategic alliances.
We
contract with various other organizations to conduct research and development activities, including clinical trials. As of June 30,
2022, we had aggregate commitments to pay approximately $5.7 million remaining on these contracts, of which the company expects to be reimbursed $2.4 million by partners.
Of the gross amount of $5.7 million in commitments, $4.4 million would be considered current over the next 12 months and $1.3 million
would be considered long-term. The scope of the services under
contracts for research and development activities may be modified and the contracts, subject to certain conditions, may generally be
cancelled by us upon written notice. In some instances, the contracts, subject to certain conditions, may be cancelled by the third
party.
We
expect that our existing cash and cash equivalents as of June 30, 2022 will enable us to fund our projected operating expenses
and capital expenditures into the second quarter of 2024. We have based our projections of operating capital requirements on assumptions
that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous
risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate
the exact amount of our operating capital requirements.
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
is material to investors.
The
following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
| |
Six Months Ended June 30, | |
| |
2022 | | |
2021 | |
Net cash used in operating activities | |
$ | (10,706 | ) | |
$ | (12,019 | ) |
Net cash used in investing activities | |
| (77 | ) | |
| (18 | ) |
Net cash (used in) provided by financing activities | |
| (152 | ) | |
| 37,283 | |
Net (decrease) increase in cash, cash equivalents, and restricted cash | |
$ | (10,935 | ) | |
$ | 25,246 | |
Cash
Flows from Operating Activities
Net
cash used in operating activities for the six months ended June 30, 2022 was $10.7 million, which consisted of a $9.6 million net
loss and $2.4 million in cash outflows associated with changes in operating assets and liabilities, partially offset by $1.3 million
of net non-cash adjustments. Our non-cash adjustments were comprised of $0.6 million of stock-based compensation expense, $0.7
million of amortization of operating lease right-of-use asset, and $82 thousand of depreciation and amortization expense. The net
cash outflows associated with changes in operating assets and liabilities were primarily due to decreases of $0.6 million in
accounts receivable, $1.6 million in prepaid expenses and other current and long-term assets, $0.6 million in operating lease
liability, and $89 thousand in deferred revenue, partially offset by an increase of $51 thousand in accounts payable and
$0.4 million in accrued expenses.
Net
cash used in operating activities for the six months ended June 30, 2021 was $12.0 million, which consisted of a $8.0 million net loss and $5.2 million in cash outflows associated with changes in operating assets and liabilities,
partially offset by $1.2 million of net non-cash adjustments. Our non-cash
adjustments were primarily comprised of $0.6 million of stock-based compensation expense, $0.5 million of amortization of operating
lease right-of-use asset and $88 thousand of depreciation and amortization expense. The net cash outflows associated with changes in
operating assets and liabilities were primarily due to decreases of $1.7 million in accounts receivable, $0.8 million in prepaid
expenses and other current assets, $0.8 million in accrued expenses, $0.5 million in operating lease liability, and $1.9 million in
deferred revenue, partially offset by an increase of $0.5 million in accounts payable.
Cash
Flows from Investing Activities
Net
cash used in investing activities for the six months ended June 30, 2022 and June 30, 2021 were entirely due to the purchases of property
and equipment.
Cash
Flows from Financing Activities
Net cash used
in financing activities for the six months ended June 30, 2022 was $0.2 million as compared to $37.3 million provided by financing activities
for the six months ended June 30, 2021. Net cash used in financing activities for the six months ended June 30, 2022 resulted from the
payment of preferred stock issuance costs from a registered direct offering in December 2021. Net cash provided by financing activities
for the six months ended June 30, 2021 resulted from $37.1 million of net proceeds from the issuance of common stock in a registered direct
offering and $0.2 million from the exercise of warrants.
Financings
On
December 17, 2021, we closed a registered direct offering with certain institutional investors for the issuance and sale of an aggregate
of 6,745.008 shares of convertible preferred stock and warrants to purchase up to an aggregate of 281,047 shares of common stock, par
value $0.0001 per share, for gross proceeds of $6.8 million or net proceeds of $6.0 million after placement agent’s fees and other
offering expenses. The shares of preferred stock have a stated value of $1,000 per share and are initially convertible into an aggregate
of 562,085 shares of common stock at a conversion price of $12.00 per share at any time. The common warrants have an exercise price of
$13.99 per share. In addition, we issued the placement agent designees warrants to purchase up to 36,538 shares of common stock at an
exercise price of $14.99 per share. Both the common warrants and the placement warrants are exercisable six months following the date
issuance and have a five-year term. The shares of preferred stock and common warrants were offered by us pursuant to a “shelf”
registration statement on Form S-3 (Registration No. 333-256502) previously filed with the SEC on May 26, 2021 and became effective on June 9, 2021.
In
May 2021, we entered into an At-The-Market Sales Agreement (the “Sales Agreement”) with H.C. Wainwright and Co., LLC (“HCW”)
to act as our sales agent with respect to the issuance and sale of up to $20.0 million of our shares of common stock, from time to time
in an at-the-market public offering (the “ATM Offering”). Sales of common stock under the Sales Agreement are made pursuant
to an effective shelf registration statement on Form S-3, which was filed with the SEC on May 26, 2021, and subsequently declared effective
on June 9, 2021 (File No. 333-256502), and a related prospectus. HCW acts as our sales agent on a commercially reasonable efforts basis,
consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of
Nasdaq. If expressly authorized by us, HCW may also sell our common stock in privately negotiated transactions. There
is no specific date on which the ATM Offering will end, there are no minimum sale requirements and there are no arrangements to place
any of the proceeds of the ATM Offering in an escrow, trust or similar account. HCW is entitled to compensation at a fixed commission
rate of 3.0% of the gross proceeds from the sale of our common stock pursuant to the Sales Agreement. There have been no sales of our
common stock as of June 30, 2022 under the Sales Agreement.
On
February 16, 2021, we closed on a registered direct offering with certain healthcare-focused institutional investors to purchase up to
an aggregate of 1,000,000 shares of our common stock at $40.00 per share, for gross proceeds $40.0 million or net proceeds of $37.1 million
after placement agent’s fees and other offering expenses. In connection with the offering, 65,003 warrants with a five-year expiry
were issued to placement agent designees at an exercise price of $49.99 per share. The shares of common stock were offered by Pulmatrix
pursuant to a “shelf” registration statement on Form S-3 (File No. 333-230225) previously filed with the SEC on March 12,
2019 and declared effective by the SEC on March 15, 2019.
Known
Trends, Events and Uncertainties
The
ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain
and cannot be predicted with confidence. These include but are not limited to the duration of the COVID-19 outbreak, new information
which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that regulators,
or our board or management, may determine are needed.
The
COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. We may not be able to
raise sufficient additional capital and may tailor our drug candidate development program based on the amount of funding we are able
to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
Other
than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have
a material effect on our financial condition.