Note
2 – Liquidity and Plan of Operations
The
Company has experienced net losses and negative cash flows from operations each period since its inception. Through March 31, 2022, the
Company had an accumulated deficit of approximately $137.6 million. The Company’s net loss was approximately $6.0 million and $5.0
million for the three-month periods ended March 31, 2022 and 2021, respectively.
The
Company has been engaged in developing LYPDISO (formerly MAT9001) as well as its lipid nanocrystal (“LNC”) platform delivery
technology and a pipeline of associated product candidates, including MAT2203 and MAT2501, since 2011. To date, the Company has not obtained
regulatory approval for any of its product candidates nor generated any revenue from product sales, and the Company expects to incur
significant expenses to complete development of its product candidates. The Company may never be able to obtain regulatory approval for
the marketing of any of its product candidates in any indication in the United States or internationally and there can be no assurance
that the Company will generate revenues or ever achieve profitability.
If
the Company obtains Food and Drug Administration
(“FDA”) approval for one or more of its product candidates, the Company expects that its expenses will continue to increase
once the Company reaches commercial launch. The Company also expects that its research and development expenses will continue to increase
as it moves forward with additional clinical studies for its current product candidates and development of additional product candidates.
As a result, the Company expects to continue to incur substantial losses for the foreseeable future, and that these losses will be increasing.
As
of March 31, 2022, the Company had cash and cash equivalents of approximately $19.3 million, marketable securities of approximately $24.5
million and restricted cash of approximately $0.3 million. The Company believes the cash and cash equivalents and marketable securities
on hand are sufficient to fund planned operations through 2023.
Note
3 – Summary of Significant Accounting Policies
Basis
of presentation and principles of consolidation
The
accompanying unaudited condensed consolidated financial statements include the consolidated accounts of Holdings and its wholly owned
subsidiaries, BioPharma, and Nanotechnologies. The accompanying unaudited condensed consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and reflect the operations
of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
The
Company’s significant accounting policies are described in Note 3 within the Company’s Notes to Consolidated Financial Statements
included in the Company’s 2021 Form 10-K.
The Company’s management has considered
all recent accounting pronouncements issued and believes that these recent pronouncements will not have a material effect on the Company’s
financial statements.
COVID-19
Since
its emergence in 2019, COVID-19 has continued to spread and has adversely affected workforces, economies, and financial markets globally,
and has and may continue to cause economic downturns.
The
financial results for the three months ended March 31, 2022 were not significantly impacted by COVID-19. However, the Company cannot
predict the impact of the progression of COVID-19 on future results or the Company’s ability to raise capital due to a variety
of factors, including but not limited to the continued good health of Company employees, the ability of suppliers to continue to operate
and deliver, the ability of the Company to maintain operations, and any further government and/or public actions taken in response to
COVID-19.
Note
4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities
The
Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash
and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable
securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S.
treasury bonds that mature within three months of settlement date.
Cash,
Cash Equivalents and Restricted Cash
The
Company presents restricted cash with cash and cash equivalents in the Condensed Consolidated Statements of Cash Flows. Restricted cash
at both March 31, 2022 and December 31, 2021 of approximately $250 thousand represents funds the Company is required to set aside as
collateral primarily for the Company’s lab operating lease and other purposes.
The
following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance
Sheets to the total of the amounts in the Condensed Consolidated Statements of Cash Flows as of March 31, 2022, December 31, 2021, March
31, 2021 and December 31, 2020:
Schedule of Cash, Cash Equivalents and Restricted Cash
| |
March 31, 2022 | | |
December 31, 2021 | | |
March 31, 2021 | | |
December 31, 2020 | |
Cash and cash equivalents | |
$ | 19,328 | | |
$ | 21,030 | | |
$ | 23,383 | | |
$ | 12,432 | |
Restricted cash included in current/long term assets | |
| 250 | | |
| 250 | | |
| 336 | | |
| 336 | |
Cash, cash equivalents and restricted cash in the statement of cash flows | |
$ | 19,578 | | |
$ | 21,280 | | |
$ | 23,719 | | |
$ | 12,768 | |
Marketable
Securities
The
Company has classified its investments in marketable securities as available-for-sale and as a current asset. The Company’s investments
in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’
equity. Unrealized losses and gains are classified as other comprehensive (loss)/income and costs are determined on a specific identification
basis. Realized gains and losses from our marketable securities are recorded in other income, net. For the three months ended March 31,
2022 and 2021, the Company recorded unrealized losses of approximately $484 thousand and $92 thousand, respectively. As of March 31,
2022 and December 31, 2021, the Company had net accumulated unrealized losses of approximately $629 thousand and $145 thousand, respectively.
The
following tables summarizes the Company’s marketable securities as of March 31, 2022:
Summary of Marketable Securities
| |
Amortized Cost | | |
Unrealized Gain | | |
Unrealized (Loss) | | |
Fair Value | |
| |
Amortized | | |
Unrealized | | |
Unrealized | | |
| |
| |
Cost | | |
Gain | | |
(Loss) | | |
Fair Value | |
U.S. Treasury Bonds | |
$ | 988 | | |
$ | — | | |
$ | (13 | ) | |
$ | 975 | |
U.S. Government Notes | |
| 18,378 | | |
| — | | |
| (519 | ) | |
| 17,859 | |
Corporate Debt Securities | |
| 5,555 | | |
| — | | |
| (97 | ) | |
| 5,458 | |
State and Municipal Bonds | |
| 250 | | |
| — | | |
| — | | |
| 250 | |
Total marketable securities | |
$ | 25,171 | | |
$ | — | | |
$ | (629 | ) | |
$ | 24,542 | |
Maturities
of debt securities classified as available-for-sale were as follows at March 31, 2022:
Schedule of Maturities of Debt Securities Available-for-sale
| |
| | |
Net Carrying | |
| |
Fair Value | | |
Amount | |
Due within one year | |
$ | 5,253 | | |
$ | 5,260 | |
Due after one year through five years | |
| 19,289 | | |
| 19,349 | |
| |
$ | 24,542 | | |
$ | 24,609 | |
Note
5 - Fair Value Measurements
The
Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs
to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions
market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable
inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each
level within the hierarchy is described below:
● |
Level
1 – Quoted prices for identical assets or liabilities in active markets. |
|
|
● |
Level
2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations
whose inputs are directly or indirectly observable or whose significant value drivers are observable. |
|
|
● |
Level
3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable
and for which assumptions are used based on management estimates. |
The
Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible as well as considers counterparty credit risk in its assessment of fair value.
The
carrying amounts of cash equivalents, current portion of restricted cash, marketable securities, prepaid expenses and other current assets,
accounts payable, current portion of lease liabilities and accrued expenses approximate fair value due to the short-term nature of these
instruments.
A
summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:
Schedule of Fair Value Measurement of Assets and Liabilities
March 31, 2022 | |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | |
Fair Value Hierarchy | |
March 31, 2022 | |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets | |
| | |
| | |
| | |
| |
Marketable Securities: | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Bonds | |
$ | 975 | | |
$ | 975 | | |
$ | — | | |
$ | — | |
U.S. Government Notes | |
| 17,859 | | |
| — | | |
| 17,859 | | |
| — | |
Corporate Debt Securities | |
| 5,458 | | |
| — | | |
| 5,458 | | |
| — | |
State and Municipal Bonds | |
| 250 | | |
| — | | |
| 250 | | |
| — | |
Total | |
$ | 24,542 | | |
$ | 975 | | |
$ | 23,567 | | |
$ | — | |
March 31, 2022 | |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | |
Fair Value Hierarchy | |
December 31, 2021 | |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets | |
| | |
| | |
| | |
| |
Marketable Securities: | |
| | | |
| | | |
| | | |
| | |
U.S. Government Notes | |
$ | 19,277 | | |
$ | — | | |
$ | 19,277 | | |
$ | — | |
Corporate Debt Securities | |
| 9,065 | | |
| — | | |
| 9,065 | | |
| — | |
State and Municipal Bonds | |
| 250 | | |
| — | | |
| 250 | | |
| — | |
Total | |
$ | 28,592 | | |
$ | — | | |
$ | 28,592 | | |
$ | — | |
Marketable Securities | |
$ | 28,592 | | |
$ | — | | |
$ | 28,592 | | |
$ | — | |
U.S.
treasury bonds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices for identical
assets in active markets. Marketable securities consisting of U.S. government notes, corporate debt securities and state and municipal
bonds are classified as Level 2 and are valued using quoted market prices in markets that are not active.
Note
6 – Leasehold Improvements and Equipment
Leasehold
improvements and equipment, summarized by major category, consist of the following as of March 31, 2022 and December 31, 2021:
Schedule
of Leasehold Improvements and Equipment
| |
March 31, 2022 | | |
December 31, 2021 | |
Equipment | |
$ | 1,964 | | |
$ | 1,640 | |
Leasehold improvements | |
| 1,155 | | |
| 935 | |
Total | |
| 3,119 | | |
| 2,575 | |
Less: accumulated depreciation and amortization | |
| 1,106 | | |
| 1,037 | |
Leasehold improvements and equipment, net | |
$ | 2,013 | | |
$ | 1,538 | |
Depreciation
and amortization expense for the three months ended March 31, 2022 and 2021 was approximately $69 thousand and $59 thousand, respectively.
During the three months ended March 31, 2022 the Company purchased leasehold improvements of approximately $220 thousand, and equipment
of approximately $324 thousand. The Company did not purchase any leasehold improvements and equipment during the three months ended March
31, 2021.
Note
7 – Accrued Expenses and Other Liabilities
Accrued
Expenses, summarized by major category, as of March 31, 2022 and December 31, 2021 consist of the following:
Schedule
of Accrued Expenses
| |
March 31, 2022 | | |
December 31, 2021 | |
Payroll and incentives | |
$ | 482 | | |
$ | 1,343 | |
General and administrative expenses | |
| 302 | | |
| 195 | |
Research and development expenses | |
| 355 | | |
| 381 | |
Deferred revenue and other deferred liabilities * | |
| 702 | | |
| 932 | |
Total | |
$ | 1,841 | | |
$ | 2,851 | |
* |
At
March 31, 2022, approximately $669 thousand is the remaining balance of the CFF Agreement’s deferred liability and approximately
$33 thousand is deferred revenue related to the Genentech Agreement. At December 31, 2021, the balance included approximately $899
thousand related to the CFF Agreement’s deferred liability and approximately $33 thousand is deferred revenue related to the
Genentech feasibility study agreement. |
Note
8 – Leases
The
Company has various lease agreements , including leases of office space, a laboratory and manufacturing facility, and various equipment.
Some leases include purchase, termination or extension options for one or more years. These options are included in the lease term when
it is reasonably certain that the option will be exercised.
The
assets and liabilities from operating and finance leases are recognized at the lease commencement date based on the present value of
remaining lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates, when readily determinable.
Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. The Company’s operating
leases do not provide implicit rates, therefore the Company utilized a discount rate based on its incremental borrowing rate to record
the lease obligations. The Company’s finance leases provide readily determinable implicit rates.
Operating
lease obligations
The
Company incurred lease expense for its operating leases of approximately $226 thousand and $203 thousand for the three months ended March
31, 2022 and 2021, respectively. The Company incurred amortization expense on its operating lease right-of-use assets of approximately
$136 thousand and $127 thousand for the three months ended March 31, 2022 and 2021, respectively.
Finance
Leases
The
Company incurred interest expense on its finance leases of approximately $1 thousand for the three months ended March 31, 2022 and 2021.
The Company incurred amortization expense on its finance lease right-of-use assets of approximately $6 thousand and $12 thousand for
the three months ended March 31, 2022 and 2021, respectively.
The
following table presents information about the amount and timing of liabilities arising from the Company’s operating leases and
finance leases as of March 31, 2022:
Schedule
of Maturity of Operating and Finance Leases Liabilities
Maturity of Lease Liabilities | |
Operating Lease Liabilities | | |
Finance Lease Liabilities | |
Remainder of 2022 | |
$ | 666 | | |
$ | 15 | |
2023 | |
| 922 | | |
| 2 | |
2024 | |
| 962 | | |
| - | |
2025 | |
| 1,004 | | |
| - | |
2026 | |
| 1,046 | | |
| - | |
2026 | |
| 1,046 | | |
| - | |
Thereafter | |
| 1,112 | | |
| - | |
Total undiscounted operating lease payments | |
$ | 5,712 | | |
$ | 17 | |
Less: Imputed interest | |
| 1,160 | | |
| - | |
Present value of operating lease liabilities | |
$ | 4,552 | | |
$ | 17 | |
| |
| | | |
| | |
Weighted average remaining lease term in years | |
| 5.8 | | |
| 1.1 | |
Weighted average discount rate | |
| 7.8 | % | |
| 7.6 | % |
The
following table presents information about the amount and timing of liabilities arising from the Company’s operating leases and
finance leases as of December 31, 2021:
Maturity of Lease Liabilities | |
Operating Lease Liabilities | | |
Finance Lease Liabilities | |
2022 | |
$ | 883 | | |
$ | 22 | |
2023 | |
| 922 | | |
| 2 | |
2024 | |
| 962 | | |
| - | |
2025 | |
| 1,004 | | |
| - | |
2026 | |
| 1,046 | | |
| - | |
Thereafter | |
| 1,112 | | |
| - | |
Total undiscounted operating lease payments | |
$ | 5,929 | | |
$ | 24 | |
Less: Imputed interest | |
| 1,250 | | |
| - | |
Present value of operating lease liabilities | |
$ | 4,679 | | |
$ | 24 | |
| |
| | | |
| | |
Weighted average remaining lease term in years | |
| 6.1 | | |
| 0.9 | |
Weighted average discount rate | |
| 7.8 | % | |
| 7.8 | % |
Note
9 - Collaboration Agreements, Licenses and Other Research and Development Agreements
Cystic
Fibrosis Foundation Therapeutics Development Award
On
November 19, 2020, the Company entered into an award agreement (the “CFF Agreement”) with the Cystic Fibrosis Foundation
(“CFF”), pursuant to which it received a Therapeutics Development Award of up to $4.2 million (the “Award”) (of
which $484 thousand had been previously received) to support the preclinical development (the “Development Program”) of the
Company’s MAT2501 product candidate. On November 19, 2021, the Company and CFF entered into an Amendment to the CFF Agreement which
added an additional milestone payment in the amount of $321 thousand, which was received in the fourth quarter of 2021.
As
of March 31, 2022, the Company has received $3.6 million of the $4.5 million commitment, including the Amendment’s additional milestone
payment, and a related deferred liability balance of $669 thousand and $899 thousand is included in accrued expense and other current
liabilities at March 31, 2022 and December 31, 2021, respectively. The remainder of the Award will be paid to the Company upon the achievement
of certain milestones related to progress of the Development Program, as set forth in the CFF Agreement.
Genentech
Feasibility Study Agreement
On
December 12, 2019, the Company entered into a feasibility study agreement (the “Genentech Agreement”) with Genentech, Inc.
(“Genentech”). The Genentech Agreement involves the development of oral formulations using the Company’s LNC platform
delivery technology. Under the terms of the Genentech
Agreement, Genentech paid the Company a total of $100
thousand
for the development of three molecules, or approximately $33
thousand
per molecule, which is being recognized upon the Company fulfilling its obligations for each molecule under the Genentech Agreement.
The Company recorded the upfront consideration as deferred revenue, which is included in accrued expenses on the consolidated balance
sheets. As of December 31, 2021, the Company completed its obligations related to the first and second of the three molecules.
During the three months ended March 31, 2022, the Company did not complete its obligations related to the remaining molecule.
Note
10 – Income Taxes
Sale
of net operating losses (NOLs) & tax credits
The
Company recognized approximately $1.7 million and approximately $1.3 million for the three months ended March 31, 2022 and 2021 in connection
with the sale of certain State of New Jersey Net Operating Losses (“NOL”) and Research and Development (“R&D”)
tax credits to a third party under the New Jersey Technology Business Tax Certificate Transfer Program.
Note
11 – Stockholders’ Equity
Common
Stock
On
February 8, 2022, the Company issued 400,000 unregistered shares of its common stock to Rutgers, The State University of New Jersey (“Rutgers”),
as partial consideration pursuant to the Second Amended and Restated Exclusive License Agreement between the Company and Rutgers. The
agreement provides for (1) royalties on a tiered basis between low single digits and the mid-single digits of net sales of products using
such licensed technology, (2) a one-time sales milestone fee of $100,000 when and if sales of products using the licensed technology
reach the specified sales threshold and (3) an annual license fee of $50,000 over the term of the license agreement. There was also a
reduction in the consideration paid to Rutgers in the event of a sublicense to a third party of the exclusive patent rights granted pursuant
to the Agreement. The Company recorded a $291 thousand research and development expense related to the issuance of the 400,000 shares
based on the closing price of the Company’s common stock of $0.728 on the date of issuance.
For
the three months ended March 31, 2021, the Company sold 3,023,147 shares of its common stock under its At-The-Market Sales Agreement
with BTIG, LLC, at an average price of $1.90, generating gross proceeds of approximately $5.8 million and net proceeds of approximately
$5.6 million. No sales of the Company’s common stock occurred during the three months ended March 31, 2022.
Warrants
All
warrants issued by the Company are exercisable immediately upon issuance and have a five-year term. The warrants may be exercised at
any time in whole or in part upon payment of the applicable exercise price until expiration. No fractional shares will be issued upon
the exercise of the warrants. The exercise price and the number of shares purchasable upon the exercise of the warrants are subject to
adjustment upon the occurrence of certain events, which include stock dividends, stock splits, combinations and reclassifications of
the Company’s capital stock or other similar changes to the equity structure of the Company. The warrants do not have a redemption
feature. They may be exercised on a cashless basis at the holder’s option. The warrants are classified as equity instruments.
As
of March 31, 2022, the Company had outstanding warrants to purchase an aggregate of 988,000 shares of common stock at exercise prices
ranging from $0.50 to $0.75 per share, and with expiration dates between December 31, 2022 and June 21, 2023. A summary of warrants outstanding
as of March 31, 2022 and December 2021 is presented below, all of which are fully vested:
Summary
of Shareholders Equity Warrants Outstanding
| |
Shares | |
Outstanding at December 31, 2020 | |
| 1,328 | |
Issued | |
| - | |
Exercised | |
| (320 | ) |
Tendered | |
| - | |
Expired | |
| (20 | ) |
Outstanding at December 31, 2021 | |
| 988 | |
| |
| | |
Issued | |
| - | |
Exercised | |
| - | |
Tendered | |
| - | |
Expired | |
| - | |
Outstanding at March 31, 2022 | |
| 988 | * |
* |
Weighted
average exercise price for outstanding warrants is $0.56. |
Basic
and diluted net loss per common share
During
the three months ended March 31, 2022 and 2021, diluted earnings per common share is the same as basic earnings per common share because,
as the Company incurred a net loss during each period presented, the potentially dilutive securities from the assumed exercise of all
outstanding stock options, warrants and conversion of preferred stock, would have an anti-dilutive effect. The following outstanding
shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common shareholders
because including them would have been anti-dilutive as of March 31, 2022 and 2021:
Schedule
of Anti - Diluted Securities Excluded from Computation of Earning Per Share
| |
| | | |
| | |
| |
As of March 31, | |
| |
2022 | | |
2021 | |
Stock options | |
| 27,748 | | |
| 22,890 | |
Warrants | |
| 988 | | |
| 1,326 | |
Preferred Stock and accrued dividend as converted | |
| - | | |
| 10,123 | |
Total | |
| 28,736 | | |
| 34,339 | |
Anti dilutive securities | |
| 28,736 | | |
| 34,339 | |
Note
12 – Accumulated Other Comprehensive (Loss)/Income
The
following table summarizes the changes in accumulated other comprehensive income by components during the three months ended March 31,
2022 and 2021:
Schedule
of Components of Accumulated Other Comprehensive (Loss)/Income
| |
Net Unrealized (Losses)/Gains on Available-for-Sale Securities | | |
Accumulated Other Comprehensive (Loss)/Income | |
Balance, December 31, 2021 | |
$ | (145 | ) | |
$ | (145 | ) |
Net unrealized loss on securities available-for-sale | |
| (484 | ) | |
| (484 | ) |
Net current period other comprehensive loss | |
| (484 | ) | |
| (484 | ) |
Balance, March 31, 2022 | |
$ | (629 | ) | |
$ | (629 | ) |
| |
| | | |
| | |
Balance, December 31, 2020 | |
$ | 228 | | |
$ | 228 | |
Net unrealized loss on securities available-for-sale | |
| (92 | ) | |
| (92 | ) |
Net current period other comprehensive income | |
| (92 | ) | |
| (92 | ) |
Balance, March 31, 2021 | |
$ | 136 | | |
$ | 136 | |
All
components of accumulated other comprehensive income are net of tax.
Note
13 – Stock-based Compensation
The
Company’s Amended and Restated 2013 Equity Compensation Plan (the “Plan”) provides for the granting of incentive stock
options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. There were no significant
modifications to the Plan during the three months ended March 31, 2022 and 2021.
The
following table contains information about the Company’s stock plan at March 31, 2022:
Schedule of Equity Compensation Plan by Arrangements
| |
Awards Reserved for Issuance | | |
Awards Issued & Exercised | | |
Awards Available for Grant | |
2013 Equity Compensation Plan | |
| 45,603 | * | |
| 32,429 | ** | |
| 13,174 | |
| |
| | | |
| | | |
| | |
* |
Increased
by 8,651 thousand on January 1, 2022 representing 4% of the total number of shares of common stock outstanding on December 31, 2021.
|
** |
Includes
both restricted stock grants and option grants |
The
Company recognized stock-based compensation expense (options and restricted share grants) in its condensed consolidated statements of
operations as follows:
Schedule
of Recognized Stock-Based Compensation
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Research and Development | |
$ | 550 | | |
$ | 485 | |
General and Administrative | |
| 710 | | |
| 616 | |
Total | |
$ | 1,260 | | |
$ | 1,101 | |
As
of March 31, 2022, total compensation costs related to unvested awards not yet recognized was approximately $10.5 million and the weighted-average
periods over which the awards are expected to be recognized was 2.7 years.
Stock
Options
The
following table summarizes the activity for Company’ stock options for the three months ended March 31, 2022:
Schedule
of Stock Option Activity
| | |
Stock Options |
Outstanding at December 31, 2021 | | |
28,184 |
Granted | | |
225 |
Exercised | | |
(195) |
Forfeited | | |
(100) |
Cancelled | | |
- |
Expired | | |
(366) |
Outstanding at March 31, 2022 | | |
27,748 |
Restricted
Stock Awards
During
the three months ended March 31, 2022 and 2021, the Company granted restricted stock awards for 0
and 8
thousand shares of common stock, respectively.
These awards are typically granted to members of the Board of Directors as payment in lieu of cash fees or as payment to a vendor pursuant
to a consulting agreement. The Company values restricted stock awards at the fair market value on the date of grant. The Company recorded
the value of these restricted awards as general and administrative expense of approximately $0
and $20
thousand in the condensed consolidated statement
of operations for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was no unrecognized compensation
costs related to restricted stock grants.
Note
14 – Commitments and Contingencies
On
March 7, 2022, the Company entered into an agreement with Thermo Fisher Scientific to provide scale-up and commercial manufacturing
capabilities for MAT2203. The estimated fees under the agreement, including capital equipment requirements, are approximately $7.7
million. The
fees are expected to be incurred over a two-year period beginning in March 2022 through the first quarter of 2024.
Note
15 – Subsequent Event
On
April 8, 2022, the Company entered into an exclusive research collaboration with BioNTech SE to evaluate the combination of mRNA formats
utilizing the Company’s proprietary LNC platform technology. Under the terms of the agreement, the Company will receive an exclusivity
fee in the amount of $2.75
million, and BioNTech SE will fund certain of
the Company’s research expenses related to the collaboration. The parties have also commenced discussions on a potential license
agreement for the Company’s LNC platform technology.
Item
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of operations should be read together with our financial statements
and the related notes and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report
on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2021 and in other reports we file with the Securities
and Exchange Commission, particularly those under “Risk Factors.” Dollars in tabular format are presented in thousands, except
per share data, or otherwise indicated.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations,
assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which
may be beyond our control, including risks and uncertainties related to the impact of COVID-19, and which may cause our actual results,
performance or achievements to be materially different from future results, performance or achievements expressed or implied by such
forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements.
You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,”
“assume,” “should,” “indicate,” “would,” “believe,” “contemplate,”
“expect,” “seek,” “estimate,” “continue,” “plan,” “point to,”
“project,” “predict,” “could,” “intend,” “target,” “potential”
and other similar words and expressions of the future.
There
are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking
statement made by us. These factors include, but are not limited to:
● |
our
ability to raise additional capital to fund our operations and to develop our product candidates; |
|
|
● |
our
anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product
approvals; |
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|
● |
our
history of operating losses in each year since inception and the expectation that we will continue to incur operating losses for
the foreseeable future; |
|
|
● |
our
dependence on product candidates which are still in an early development stage; |
|
|
● |
our
reliance on our proprietary lipid nanocrystal (LNC) platform delivery technology, which is licensed to us by Rutgers University; |
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|
● |
our
ability to manufacture GMP batches of our product candidates which are required for preclinical and clinical trials and, subsequently,
if regulatory approval is obtained for any of our products, our ability to manufacture commercial quantities; |
|
|
● |
our
ability to complete required clinical trials for our lead product candidate and other product candidates and obtain approval from
the FDA or other regulatory agents in different jurisdictions; |
● |
our
dependence on third parties, including third parties to manufacture our intermediates and final product formulations and third-party
contract research organizations to conduct our clinical trials; |
|
|
● |
our
ability to maintain or protect the validity of our patents and other intellectual property; |
|
|
● |
our
ability to retain and recruit key personnel; |
|
|
● |
our
ability to internally develop new inventions and intellectual property; |
|
|
● |
interpretations
of current laws and the passages of future laws; |
|
|
● |
our
lack of a sales and marketing organization and our ability to commercialize products, if we obtain regulatory approval, whether alone
or through potential future collaborators; |
|
|
● |
our
ability to successfully commercialize, and our expectations regarding future therapeutic and commercial potential with respect to,
our product candidates; |
|
|
● |
the
accuracy of our estimates regarding expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to
obtain additional financing; |
|
|
● |
developments
and projections relating to our competitors or our industry; |
|
|
● |
our
operations, business and financial results may be adversely impacted by COVID-19; and |
● |
the
factors listed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021,
elsewhere in this report and other reports that we file with the Securities and Exchange Commission. |
All
forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue
reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by
reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-
looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and
projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs
or projections will result or be achieved or accomplished.
Overview
We
are a clinical-stage biopharmaceutical company focused on redefining the intracellular delivery of nucleic acids and small molecules
through our lipid nanocrystal (LNC) delivery platform technology. Our current pipeline consists of two potent anti-infective small molecules,
MAT2203 (oral amphotericin B) and MAT2501 (oral amikacin). We are also expanding the application of our LNC platform through collaborations
with well-respected pharmaceutical companies whose molecules and compounds benefit from the unique capabilities of our delivery technology,
which can provide oral bioavailability and facilitate non-toxic and efficient intracellular delivery. We are intent on further expansion
of our LNC platform, both internally and through external partnerships, into the field of nucleic acids where delivery into cells remains
a critical element of therapeutic effect.
Key
elements of our strategy include:
● |
Advancing
our clinical stage assets based on our LNC platform delivery technology and continuing to expand utilization of this promising technology
into areas of innovative medicine beyond small molecules, including nucleic acids (e.g. mRNA, DNA, ASOs) and proteins, both internally
and through additional external collaborations and partnerships, including our feasibility study agreement with Genentech and
exclusive research collaboration with BioNTech SE. |
|
|
● |
Advancing
MAT2203 toward NDA filing through the ongoing EnACT study for the treatment of cryptococcal meningitis, which highlights the safety
and efficacy of this promising drug candidate, while also demonstrating the ability of our LNC platform technology to deliver potent
medicines across the blood-brain barrier with oral administration. |
|
|
● |
Progressing
the development of MAT2501 through extensive preclinical toxicology and efficacy studies in NTM infections and completing a single
ascending dose (SAD) pharmacokinetic study in healthy volunteers later in 2022, all with the financial support of the CFF. |
We
have incurred losses for each period from our inception. For the three months ended March 31, 2022 and 2021, our net loss was approximately
$6.0 million and $5.0 million, respectively. We expect to incur significant expenses and operating losses over the next several years.
Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public
or private equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. Adequate
additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would
impact our going concern and would have a negative impact on our financial condition and our ability to pursue our business strategy
and continue as a going concern. We will need to generate significant revenues to achieve profitability, and we may never do so.
Financial
Operations Overview
Revenue
During
the three months ended March 31, 2022, we did not generate any revenue and during the three months ended March 31, 2021, we generated
contract research revenue of approximately $33 thousand resulting from the feasibility study agreement with Genentech Inc. Our ability
to generate product revenue, which we do not expect to occur for many years, if ever, will depend heavily on the successful development
and eventual commercialization of our early-stage product candidates.
Research
and Development Expenses
Research
and development expenses consist of costs incurred for the development of product candidates MAT2203 and MAT2501, and advancement of
our LNC delivery technology platform, which include:
● |
the
cost of conducting pre-clinical work; |
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|
● |
the
cost of acquiring, developing and manufacturing pre-clinical and human clinical trial materials; |
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|
● |
costs
for consultants and contractors associated with Chemistry and Manufacturing Controls (CMC), pre-clinical and clinical activities
and regulatory operations; |
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|
● |
expenses
incurred under agreements with contract research organizations, or CROs, including the NIH, that conduct our pre-clinical or clinical
trials; |
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|
● |
employee-related
expenses, including salaries and stock-based compensation expense for those employees involved in the research and development process;
and |
|
|
● |
the
reimbursement of certain expenses related to the CFF award agreement. |
The
table below summarizes our direct research and development expenses for our product candidates and development platform for the three
months ended March 31, 2022 and 2021. Our direct research and development expenses consist principally of external costs, such as fees
paid to contractors, consultants, analytical laboratories and CROs and/or the NIH, in connection with our development work. We typically
use our employee and infrastructure resources for manufacturing clinical trial materials, conducting product analysis, study protocol
development and overseeing outside vendors. Included in “Internal staffing, overhead and other” below is the cost of laboratory
space, supplies, research and development (R&D) employee costs (including stock-based compensation), travel and medical education.
| |
Three months ended March 31, | |
| |
2022 | | |
2021 | |
Direct research and development expenses: | |
| | | |
| | |
Manufacturing process development | |
$ | 884 | | |
$ | 489 | |
Preclinical trials | |
| 566 | | |
| 9 | |
Clinical development | |
| 583 | | |
| 771 | |
Regulatory | |
| 169 | | |
| 42 | |
Internal staffing, overhead and other | |
| 2,776 | | |
| 1,930 | |
Total research and development | |
$ | 4,978 | | |
$ | 3,241 | |
Research
and development activities are central to our business model. We expect our research and development expenses to increase because product
candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage human trials. Our research and development expenses reflect the reimbursement
of certain MAT2501 program expenses related to the CFF award agreement. In addition, we will look to strategically expand the use of
our drug platform technology through additional development work. During 2022, we will be focused on advancing our lead product candidate,
MAT2203, to efficacy data in the treatment of cryptococcal meningitis (CM), accelerating the development of MAT2501 and also expanding
application of our LNC platform delivery technology through both internal efforts and collaborations with third parties. We have also
initiated a global process to identify a suitable partner to continue the development of LYPDISO.
General
and Administrative Expenses
General
and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions. Other
general and administrative expenses include facility costs, insurance, investor relations expenses, professional fees for legal, patent
review, consulting and accounting/audit services. We anticipate that our general and administrative expenses during 2022 will remain
relatively consistent with expenses incurred during 2021.
Sale
of Net Operating Losses (NOLs) & Tax Credits
Income
obtained from selling unused net operating losses (NOLs) and unused research tax credits under the New Jersey Technology Business Tax
Certificate Program was approximately $1.7 million and $1.3 million for the three months ended March 31, 2022 and 2021, respectively.
Other
Income, net
Other
income, net is largely comprised of interest income/(expense), dividends and franchise taxes.
Application
of Critical Accounting Policies and Accounting Estimates
A
critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires
management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect
of matters that are inherently uncertain.
For
a description of our significant accounting policies, refer to “Note 3 – Summary of Significant Accounting Policies”
in our 2021 Form 10-K. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated
Financial Statements as they require the application of the most difficult, subjective and complex judgments; (i) Stock-based compensation,
(ii) Fair value measurements, (iii) Research and development costs, (iv) Goodwill and other intangible assets, and (v) Basic and diluted
net loss per common share.
Recent
Accounting Pronouncements
Refer
to “Note 3 – Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial
Statements for a discussion of recently adopted accounting pronouncements and their expected impact on our financial positions and results
of operations.
Current
Operating Trends
Our
current R&D efforts are focused on advancing our lead LNC product candidates, MAT2203, through clinical development toward an initial
indication for the treatment of CM, accelerating preclinical development of MAT2501 with the assistance of the CFF, and expanding application
of our LNC platform delivery technology through collaborations with third parties. Our R&D expenses consist of manufacturing work
and the cost of active pharmaceutical ingredients and excipients used in such work, fees paid to consultants for work related to clinical
trial design and regulatory activities, fees paid to providers for conducting various clinical studies as well as for the analysis of
the results of such studies, and for other medical research addressing the potential efficacy and safety of our drugs. We believe that
significant investment in product development is a competitive necessity, and we plan to continue these investments in order to be in
a position to realize the potential of our product candidates and proprietary technologies.
We
expect that all of our R&D expenses in the near-term future will be incurred in support of our current and future preclinical and
clinical development programs rather than technology development. These expenditures are subject to numerous uncertainties relating to
timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology and efficacy. At the appropriate
time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials for each drug candidate. We
anticipate funding these trials ourselves, and possibly with the assistance of federal grants, contracts or other agreements. As we obtain
results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources on more
promising products. Completion of clinical trials may take several years, and the length of time generally varies substantially according
to the type, complexity, novelty and intended use of a product candidate.
The
commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical
trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays. In addition, we
may encounter regulatory delays or rejections as a result of many factors, including results that do not support the intended safety
or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the
period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing
and costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business,
financial condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical
trials or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows
from the relevant drug or program would be delayed or would not occur.
Results
of Operations
The
following tables summarizes our revenues and operating expenses for the periods presented:
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Revenues | |
$ | - | | |
$ | 33 | |
| |
| | | |
| | |
Expenses: | |
| | | |
| | |
Research and development | |
$ | 4,978 | | |
$ | 3,241 | |
General and administrative | |
| 2,744 | | |
| 3,145 | |
Operating Expenses | |
$ | 7,722 | | |
$ | 6,386 | |
| |
| | | |
| | |
Sale of net operating losses (NOLs) | |
$ | 1,734 | | |
$ | 1,328 | |
Revenues.
During the three months ended March 31, 2022 we generated no revenue and approximately $33 thousand during the same period in
2021. The amount earned consists of contract research revenue resulting from the feasibility study agreement with Genentech Inc.
Research
and Development expenses. Research and Development (R&D) expense for the three months ended March 31, 2022 and 2021 was approximately
$5.0 million and $3.2 million, respectively. The increase in R&D expenses was primarily due to the increased clinical trials related
to the advancement of our product candidates and higher compensation expense in 2022.
General
and Administrative expenses. General and administrative expense for the three months ended March 31, 2022 and 2021 was approximately
$2.7 million and $3.1 million, respectively. The decrease in general and administrative expense was primarily due to non-recurring compensation
expense related to the exercise of stock options during the three months ended March 31, 2021.
Liquidity
and capital resources
Sources
of Liquidity
We
have funded our operations since inception through private placements and public offerings of our equity securities. As of March 31,
2022, we have raised a total of approximately $156.7 million in gross proceeds and $143.9 million, net, from sales of our equity securities.
As
of March 31, 2022, we had cash, cash equivalents and marketable securities totaling approximately $43.9 million.
Cash
Flows
The
following table sets forth the primary sources and uses of cash, cash equivalents and restricted cash for each of the periods set forth
below:
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Cash used in operating activities | |
$ | (4,756 | ) | |
$ | (4,651 | ) |
Cash provided by investing activities | |
| 2,961 | | |
| 8,817 | |
Cash provided by financing activities | |
| 93 | | |
| 6,785 | |
Net (decrease)/increase in cash and cash equivalents and restricted cash | |
$ | (1,702 | ) | |
$ | 10,951 | |
Operating
Activities
Net
cash used in operating activities was approximately $4.8 million and $4.7 million for the three-month periods ended March 31, 2022 and
2021, respectively. Net losses of approximately $6.0 million and $5.0 million for the three-month periods ended March 31, 2022 and 2021,
respectively, were partially offset by working capital adjustments due to the timing of receipts and payments in the ordinary course
of business. We expect that there will be an increase in cash used in operations during the remainder of 2022 due to higher research
and development expenses as we continue to move our product candidates and delivery platform forward in their development cycles.
Investing
Activities
Approximately
$3.0 million and $8.8 million of net cash was provided by investing activities for the three-month periods ended March 31, 2022 and 2021,
respectively. The decrease of approximately $5.8 million was primarily due to the approximately $6.9 million decrease in proceeds received
from maturities of our marketable securities and the purchase of $0.5 million of leasehold improvements and equipment offset by the decrease
of approximately $1.7 million in purchases of marketable securities as compared to March 31, 2021.
Financing
Activities
Net
cash provided by financing activities was approximately $0.1 million and approximately $6.8 million for the three-months periods ended
March 31, 2022 and 2021, respectively. The decrease of approximately $6.7 million is primarily due to the ATM sales during January 2021
of approximately $5.6 million, for which the Company did not have similar equity raises during the three months ended March 31, 2022,
and a decrease in receipt of proceeds of approximately $1.1 million from the exercising of stock options.
Funding
Requirements and Other Liquidity Matters
We
expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses
will increase substantially if and as we:
● |
conduct
further preclinical and clinical studies of MAT2203, our lead product candidate, even if such studies are primarily financed with
non-dilutive funding from NIH; |
|
|
● |
support
the conduct of further clinical studies of MAT2501, even if such studies are primarily financed with non-dilutive funding from the
CFF; |
|
|
● |
seek
to discover and develop additional product candidates; |
|
|
● |
seek
regulatory approvals for any product candidates that successfully complete clinical trials; |
|
|
● |
require
the manufacture of larger quantities of product candidates for clinical development and potentially commercialization; |
|
|
● |
maintain,
expand and protect our intellectual property portfolio; |
|
|
● |
hire
additional clinical, quality control and scientific personnel; and |
|
|
● |
add
operational, financial and management information systems and personnel, including personnel to support our product development and
planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public
company. |
We
expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditures requirements
through 2023.
Until
such time, if ever, that we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through
a combination of public and private equity offerings, debt financings, government or other third-party funding, collaborations and licensing
arrangements. We do not have any committed external source of funds other than limited grant funding from the CFF and NIH. To the extent
that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest
of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect your rights of our common stockholders. Debt financing and preferred equity financing, if available, would result in increased
fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct
our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert
a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability
to oversee the development of our product candidates.
If
we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates
or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings
when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant
rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual
Obligations and Commitments
On
March 7, 2022, the Company entered into an agreement with a contract manufacturing organization to provide commercial manufacturing capabilities
for MAT2203. The estimated fees under the agreement, including capital equipment requirements, are approximately $7.7 million. The fees
are expected to be incurred over a two-year period beginning in March 2022 through the first quarter of 2024.
Off-Balance
Sheet Arrangements
We
did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules,
such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special
purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance
sheets.