Schedule of Cash, Cash Equivalents and Restricted Cash
| |
September 30, 2022 | | |
December 31, 2021 | | |
September 30, 2021 | | |
December 31, 2020 | |
Cash and cash equivalents | |
$ | 11,176 | | |
$ | 21,030 | | |
$ | 24,923 | | |
$ | 12,432 | |
Restricted cash included in current/non-current assets | |
| 250 | | |
| 250 | | |
| 250 | | |
| 336 | |
Cash, cash equivalents and restricted cash in the statement of cash flows | |
$ | 11,426 | | |
$ | 21,280 | | |
$ | 25,173 | | |
$ | 12,768 | |
Marketable
Debt Securities
The
Company has classified its investments in marketable debt securities as available-for-sale and as a current asset. The Company’s
investments in marketable debt 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 debt securities are recorded in other income, net.
For the three and nine months ended September 30, 2022, the Company recorded unrealized losses of $181 thousand and $790 thousand, respectively.
For the three and nine months ended September 30, 2021, the Company recorded unrealized losses of $53 thousand and $230 thousand, respectively.
As of September 30, 2022 and December 31, 2021, the Company had net accumulated unrealized losses of $936 thousand and $145 thousand,
respectively.
The
following tables summarizes the Company’s marketable debt securities as of September 30, 2022:
Schedule of Marketable Securities
| |
Amortized Cost | | |
Unrealized Gain | | |
Unrealized (Loss) | | |
Fair Value | |
| |
Amortized | | |
Unrealized | | |
Unrealized
| | |
| |
| |
Cost | | |
Gain | | |
(Loss) | | |
Fair Value | |
U.S. Treasury Bonds | |
$ | 991 | | |
$ | — | | |
$ | (36 | ) | |
$ | 955 | |
U.S. Government Notes | |
| 16,342 | | |
| — | | |
| (784 | ) | |
| 15,558 | |
Corporate Debt Securities | |
| 5,478 | | |
| — | | |
| (116 | ) | |
| 5,362 | |
State and Municipal Bonds | |
| | | |
| — | | |
| — | | |
| | |
Total marketable debt securities | |
$ | 22,811 | | |
$ | — | | |
$ | (936 | ) | |
$ | 21,875 | |
Maturities
of debt securities classified as available-for-sale were as follows at September 30, 2022:
Schedule of Maturities of Debt Securities Available-for-sale
| |
Fair Value | |
Due within one year | |
$ | 10,349 | |
Due after one year through five years | |
| 11,526 | |
| |
$ | 21,875 | |
The
following tables summarizes the Company’s marketable debt securities as of December 31, 2021:
Maturities
of debt securities classified as available-for-sale were as follows at December 31, 2021:
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, 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
| |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | |
Fair Value Hierarchy | |
September 30, 2022 | |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets | |
| | | |
| | | |
| | | |
| | |
Marketable Debt Securities: | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Bonds | |
$ | 955 | | |
$ | 955 | | |
$ | — | | |
$ | — | |
U.S. Government Notes | |
| 15,558 | | |
| — | | |
| 15,558 | | |
| — | |
Corporate Debt Securities | |
| 5,362 | | |
| — | | |
| 5,362 | | |
| — | |
Total | |
$ | 21,875 | | |
$ | 955 | | |
$ | 20,920 | | |
$ | — | |
| |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
| |
| | |
Fair Value Hierarchy | |
December 31, 2021 | |
Total | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets | |
| | | |
| | | |
| | | |
| | |
Marketable Debt 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 | | |
$ | — | |
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 debt 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 September 30, 2022 and December 31, 2021:
Schedule of Leasehold Improvements and Equipment
| |
September 30, 2022 | | |
December 31, 2021 | |
Equipment | |
$ | 2,269 | | |
$ | 1,640 | |
Leasehold improvements | |
| 1,156 | | |
| 935 | |
Total | |
| 3,425 | | |
| 2,575 | |
Less: accumulated depreciation and amortization | |
| 1,281 | | |
| 1,037 | |
Leasehold improvements and equipment, net | |
$ | 2,144 | | |
$ | 1,538 | |
Depreciation
and amortization expense for the three and nine months ended September 30, 2022 was $89 thousand and $244 thousand, respectively, and
for the three and nine months ended September 30, 2021 was $62 thousand and $179 thousand, respectively. During the nine months ended
September 30, 2022 the Company purchased leasehold improvements of $221 thousand, and equipment of $629 thousand. During the nine months
ended September 30, 2021 the Company purchased leasehold improvements of $57 thousand, and equipment of approximately $167 thousand.
Note
7 – Accrued Expenses and Other Liabilities
Accrued
Expenses, summarized by major category, as of September 30, 2022 and December 31, 2021 consist of the following:
Schedule of Accrued Expenses
| |
September 30, 2022 | | |
December 31, 2021 | |
Payroll and incentives | |
$ | 1,462 | | |
$ | 1,343 | |
Deferred revenue * | |
| 1,408 | | |
| 33 | |
Research and development expenses | |
| 334 | | |
| 381 | |
General and administrative expenses | |
| 299 | | |
| 195 | |
Other deferred liabilities ** | |
| 194 | | |
| 899 | |
Total | |
$ | 3,697 | | |
$ | 2,851 | |
|
* |
At
September 30, 2022, the balance included $1,375 thousand related to an exclusive research collaboration with BioNTech SE (the “BioNTech
Agreement”) and $33 thousand is related to a feasibility study agreement with Genentech, Inc. (the “Genentech Agreement”),
which is expected to be recognized by December 31, 2022. At December 31, 2021, the balance of $33 thousand was related to the Genentech
Agreement. The balance of the BioNTech Agreement will be recognized evenly over the next six months. (See Note 9 – Revenue
Recognition, Collaboration Agreements and Other). |
|
|
|
|
** |
At
September 30, 2022 and December 31, 2021, the balances of $194 thousand and $899 thousand, respectively, related to an award agreement
with the Cystic Fibrosis Foundation (the “CFF Agreement). (See Note 9 – Revenue Recognition, Collaboration Agreements
and Other). |
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
On
September 13, 2022, the Company entered into an amendment to the operating lease agreement for its administrative office space in Bedminster,
New Jersey which extends the term of the lease until June 30, 2029. Before this amendment, the lease term was scheduled to expire on
July 31, 2028. (See Note 8 – Leases within the Company’s Notes to Consolidated Financial Statements included in the Company’s
2021 Form 10-K.)
The
Company incurred lease expense for its operating leases of $194 thousand and $646 thousand for the three and nine months ended September
30, 2022, respectively, and $219 thousand and $626 thousand for the three and nine months ended September 30, 2021, respectively. The
Company incurred amortization expense on its operating lease right-of-use assets of $138 thousand and $413 thousand for the three and
nine months ended September 30, 2022, respectively, and $125 thousand and $368 thousand for the three and nine months ended September
30, 2021, respectively.
Finance
Leases
The
Company incurred interest expense on its finance leases of $0 and $1 thousand for the three and nine months ended September 30, 2022,
respectively, and $1 thousand and $3 thousand for the three and nine months ended September 30, 2021, respectively. The Company incurred
amortization expense on its finance lease right-of-use assets of $3 thousand and $15 thousand for the three and nine months ended September
30, 2022, respectively, and $9 thousand and $29 thousand for the three and nine months ended September 30, 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 September 30, 2022:
Schedule of Maturity of Operating and Finance Leases Liabilities
Maturity of Lease Liabilities | |
Operating Lease Liabilities | | |
Finance Lease Liabilities | |
Remainder of 2022 | |
$ | 225 | | |
$ | 6 | |
2023 | |
| 916 | | |
| 2 | |
2024 | |
| 956 | | |
| - | |
2025 | |
| 998 | | |
| - | |
2026 | |
| 1,040 | | |
| - | |
Thereafter | |
| 1,355 | | |
| - | |
Thereafter | |
| 1,112 | | |
| - | |
Total undiscounted operating lease payments | |
$ | 5,490 | | |
$ | 8 | |
Less: Imputed interest | |
| 1,266 | | |
| - | |
Present value of operating lease liabilities | |
$ | 4,224 | | |
$ | 8 | |
| |
| | | |
| | |
Weighted average remaining lease term in years | |
| 5.6 | | |
| 0.5 | |
Weighted average discount rate | |
| 9.2 | % | |
| 7.0 | % |
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 – Revenue Recognition, Collaboration Agreements and Other
BioNTech
Research Collaboration
On
April 8, 2022, the Company entered into the BioNTech Agreement to evaluate the combination of mRNA formats utilizing the Company’s
proprietary LNC platform delivery technology. Under the terms of the BioNTech Agreement, the Company received an exclusivity fee in the
amount of $2.75 million, and BioNTech SE will fund certain of the Company’s research expenses to be incurred under the agreement.
The parties have also commenced discussions on a potential option to license (“OTL”) agreement for the Company’s LNC
platform delivery technology. The term of the agreement begins on the effective date and ends on the earlier of the execution of an OTL
agreement by the parties, 12-months after the effective date and termination of the agreement.
The
Company assessed the BioNTech Agreement under ASC 808 Collaboration Arrangements and ASC 606 Revenue from Contracts with Customers
(“ASC 606”) and concluded that the contract counterparty, BioNTech SE, is a customer based on the arrangement structure.
The Company identified two material promises to deliver under the contract: (1) grant of an exclusive research license and (2) clinical
research services. However, given the nature of the promises, the license and research services are not considered to be distinct from
each other within the context of the contract. The Company therefore concluded that there is one combined performance obligation for
both the license and research services.
The
$2.75 million license fee was recorded as deferred revenue and is being recognized over the term of the contract performance obligation
period, which the Company has concluded to be 12 months after the execution of the contract. The clinical research services are being
invoiced as service revenue is earned on a monthly basis during the term of the contract.
As
of September 30, 2022, the Company recognized approximately $2.1 million of contract research revenue from the BioNTech Agreement. For
the three and nine months ended September 30, 2022, $688 thousand and $1.4 million of the contract research revenue was recognized from
the license fee and $375 thousand and $750 thousand was earned from the monthly clinical research services performed by the Company.
As of September 30, 2022, approximately $1.4 million of the license fee is included in deferred revenue within accrued expenses.
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 September 30, 2022, the Company has received approximately $3.6 million of the $4.5 million commitment, including the Amendment’s
additional milestone payment, and a related deferred liability balance of $194 thousand and $899 thousand is included in accrued expenses
at September 30, 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 the Genentech Agreement which 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 $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 and nine months ended September 30, 2022, the Company did not complete its
obligations related to the remaining molecule but expects to do so by December 31, 2022.
Note
10 – Income Taxes
Sale
of net operating losses (NOLs) & tax credits
The
Company recognized approximately $1.7 million and $1.3 million for the nine months ended September 30, 2022 and 2021, respectively, in
connection with the sale of certain state net operating losses (“NOLs”) and research and development tax credits to a third
party under the New Jersey Technology Business Tax Certificate Transfer Program.
Note
11 –
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 nine months ended September 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 nine months ended September 30, 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 September 30, 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, all of which are fully vested and with expiration dates between December 31, 2022 and June 21,
2023. The following table summarizes the changes in warrants outstanding during 2021 and for the nine months ended September 30, 2022:
Schedule 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 September 30, 2022 | |
| 988 | * |
* |
Weighted
average exercise price for outstanding warrants is $0.56. |
Basic
and diluted net loss per common share
During
the three and nine months ended September 30, 2022 and 2021, diluted loss per common share is the same as basic loss 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 and warrants, 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 September 30, 2022 and 2021:
Schedule of Anti-dilutive Securities Excluded from Computation of Earning Per Share
| |
As of September 30, | |
| |
2022 | | |
2021 | |
Stock options | |
| 27,782 | | |
| 22,242 | |
Warrants | |
| 988 | | |
| 988 | |
Total | |
| 28,770 | | |
| 23,230 | |
Note
12 – Accumulated Other Comprehensive (Loss)/Income
The
following table summarizes the changes in accumulated other comprehensive (loss)/income by component during the nine months ended September
30, 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 | |
| (791 | ) | |
| (791 | ) |
Net current period other comprehensive loss | |
| (791 | ) | |
| (791 | ) |
Balance, September 30, 2022 | |
$ | (936 | ) | |
$ | (936 | ) |
| |
| | | |
| | |
Balance, December 31, 2020 | |
$ | 228 | | |
$ | 228 | |
Net unrealized loss on securities available-for-sale | |
| (230 | ) | |
| (230 | ) |
Net current period other comprehensive income | |
| (230 | ) | |
| (230 | ) |
Balance, September 30, 2021 | |
$ | (2 | ) | |
$ | (2 | ) |
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 nine months ended September 30, 2022 and 2021.
The
following table contains information about the Company’s stock plan at September 30, 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 | * | |
| 32,463 | ** | |
| 13,140 | |
* |
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 September 30, | | |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Research and Development | |
$ | 554 | | |
$ | 467 | | |
$ | 1,660 | | |
$ | 1,411 | |
General and Administrative | |
| 859 | | |
| 594 | | |
| 2,228 | | |
| 1,806 | |
Total | |
$ | 1,413 | | |
$ | 1,061 | | |
$ | 3,888 | | |
$ | 3,217 | |
As
of September 30, 2022, total compensation costs related to unvested awards not yet recognized was approximately $8.1 million and the
weighted-average periods over which the awards are expected to be recognized was 2.4 years.
Stock
Options
The
following table summarizes the activity for Company’ stock options for the nine months ended September 30, 2022:
Schedule of Stock Option Activity
| |
Stock Options | |
Outstanding at December 31, 2021 | |
| 28,184 | |
Granted | |
| 1,095 | |
Exercised | |
| (195 | ) |
Forfeited | |
| (165 | ) |
Cancelled | |
| - | |
Expired | |
| (1,137 | ) |
Outstanding at September 30, 2022 | |
| 27,782 | |
Restricted
Stock Awards
During
the nine months ended September 30, 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 the 2021 restricted awards as general and administrative expense of $29 thousand and $85 thousand for
the three and nine months ended September 30, 2021, respectively. As of September 30, 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. For the three and nine
months ended September 30, 2022, the Company prepaid $2.0 million to Thermo Fisher Scientific for expenses to be incurred during beginning
phases of the agreement activities. During the three and nine months ended September 30, 2022, the Company expensed $7 thousand and $45
thousand, respectively. At September 30, 2022, $1,955 thousand is included in prepaid expenses and other current assets.
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; |
|
|
● |
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; |
|
|
● |
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) platform delivery 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, all with the financial support of the CFF. |
We
have incurred losses for each period from our inception. For the nine months ended September 30, 2022 and 2021, our net loss was approximately
$17.4 million and $16.6 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 and nine months ended September 30, 2022, we generated approximately $1.1 million and $2.1 million, respectively, in contract
research revenue resulting from the research collaboration with BioNTech SE and $0 and $33 thousand during the three and nine months
ended September 30, 2021, respectively, 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 platform delivery technology, which include:
● |
the
cost of conducting pre-clinical work; |
|
|
● |
the
cost of acquiring, developing and manufacturing pre-clinical and human clinical trial materials; |
|
|
● |
costs
for consultants and contractors associated with Chemistry and Manufacturing Controls (CMC), pre-clinical and clinical activities
and regulatory operations; |
|
|
● |
expenses
incurred under agreements with contract research organizations, or CROs, including the National Institutes of Health (NIH), that
conduct our pre-clinical or clinical trials; |
|
|
● |
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
and nine months ended September 30, 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
September 30, | | |
Nine months ended
September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Direct research and development expenses: | |
| | | |
| | | |
| | | |
| | |
Manufacturing process development | |
$ | 417 | | |
$ | 844 | | |
$ | 1,988 | | |
$ | 1,572 | |
Preclinical trials | |
| 86 | | |
| 99 | | |
| 711 | | |
| 101 | |
Clinical development | |
| 492 | | |
| 586 | | |
| 1,702 | | |
| 1,652 | |
Regulatory | |
| 160 | | |
| 44 | | |
| 562 | | |
| 129 | |
Internal staffing, overhead and other | |
| 2,552 | | |
| 3,048 | | |
| 7,848 | | |
| 6,889 | |
Total research and development | |
$ | 3,707 | | |
$ | 4,621 | | |
$ | 12,811 | | |
$ | 10,343 | |
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 LNC platform delivery technology through additional development work. During 2022, we are 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.
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 research and development tax credits under the New Jersey Technology Business
Tax Certificate Transfer Program was approximately $1.7 million and $1.3 million for the nine months ended September 30, 2022 and 2021,
respectively.
Other
Income, net
Other
income, net is largely comprised of interest income/(expense) and dividends.
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, (v) Basic and diluted
net loss per common share, and (vi) Revenue recognition.
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
Comparison
of the three months ended September 30, 2022 to the three months ended September 30, 2021
The
following tables summarizes our revenues and operating expenses for the periods presented:
| |
Three Months Ended September 30, | |
| |
2022 | | |
2021 | |
Revenues | |
$ | 1,063 | | |
$ | - | |
| |
| | | |
| | |
Expenses: | |
| | | |
| | |
Research and development | |
$ | 3,707 | | |
$ | 4,621 | |
General and administrative | |
| 2,818 | | |
| 2,257 | |
Operating Expenses | |
$ | 6,525 | | |
$ | 6,878 | |
Revenues.
During the three months ended September 30, 2022 we generated $1.1 million from the exclusive research collaboration with BioNTech
SE and no revenue during the same period in 2021.
Research
and Development expenses. Research and Development (R&D) expense for the three months ended September 30, 2022 and 2021 was
approximately $3.7 million and $4.6 million, respectively. The decrease in R&D expenses was primarily due to the expense related
to the issuance of common stock pursuant to the Aquarius Merger Agreement in 2021 and decreased manufacturing expenses partially offset
by higher compensation expense related to increased head count in 2022.
General
and Administrative expenses. General and administrative expense for the three months ended September 30, 2022 and 2021 was approximately
$2.8 million and $2.3 million, respectively. The increase in general and administrative expense was primarily due to increased compensation
expense related to increased head count.
Comparison
of the nine months ended September 30, 2022 to the nine months ended September 30, 2021
| |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Revenues | |
$ | 2,125 | | |
$ | 33 | |
| |
| | | |
| | |
Expenses: | |
| | | |
| | |
Research and development | |
$ | 12,811 | | |
$ | 10,343 | |
General and administrative | |
| 8,424 | | |
| 7,711 | |
Operating Expenses | |
$ | 21,235 | | |
$ | 18,054 | |
| |
| | | |
| | |
Sale of net operating losses (NOLs) | |
$ | 1,734 | | |
$ | 1,328 | |
Revenues.
During the nine months ended September 30, 2022 and 2021, we generated revenue of approximately $2.1 million and $33 thousand.
The amount earned during the current year consists of contract research revenue resulting from the research collaboration with BioNTech
SE while the amount earned during the prior year resulted from the feasibility study agreement with Genentech Inc.
Research
and Development expenses. Research and Development (R&D) expense for the nine months ended September 30, 2022 and 2021 was
approximately $12.8 million and $10.3 million, respectively. The increase in R&D expenses was primarily due to the increased clinical
trials and manufacturing costs related to the advancement of our product candidates and higher compensation expense in 2022 partially
offset by a non-recurring expense related to the Aquarius Merger Agreement in 2021.
General
and Administrative expenses. General and administrative expense for the nine months ended September 30, 2022 and 2021 was approximately
$8.4 million and $7.7 million, respectively. The increase in general and administrative expense was primarily due to higher compensation
expense.
Sale
of net operating losses (NOLs). The Company recognized approximately $1.7 million and $1.3 million for the nine months ended
September 30, 2022 and 2021, respectively, in connection with the sale of state net operating losses and research and development tax
credits to third parties under the New Jersey Technology Business Tax Certificate Transfer Program.
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 September
30, 2022, we have raised a total of approximately $156.7 million in gross proceeds and approximately $143.9 million, net, from sales
of our equity securities.
As
of September 30, 2022, we had cash, cash equivalents and marketable debt securities totaling approximately $33.1 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:
| |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Cash used in operating activities | |
$ | (14,857 | ) | |
$ | (11,266 | ) |
Cash provided by investing activities | |
| 4,919 | | |
| 16,713 | |
Cash provided by financing activities | |
| 84 | | |
| 6,957 | |
Net (decrease)/increase in cash and cash equivalents and restricted cash | |
$ | (9,854 | ) | |
$ | 12,404 | |
Operating
Activities
Net
cash used in operating activities was approximately $14.9 million and $11.3 million for the nine months ended September 30, 2022 and
2021, respectively. Net losses of approximately $17.4 million and $16.6 million for the nine months ended September 30, 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 and into 2023 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
$4.9 million of net cash was provided by investing activities for the nine months ended September 30, 2022, while approximately $16.7
million of net cash was provided by investing activities for the nine months ended September 30, 2021. The decrease of cash provided
by investing activities of approximately $11.8 million was primarily due to the approximately $19.5 million decrease in proceeds received
from maturities of our marketable debt securities, offset by a decrease of approximately $8.3 million in purchases of marketable debt
securities and the purchase of approximately $0.6 million of leasehold improvements and equipment as compared to the nine months ended
September 30, 2021.
Financing
Activities
Net
cash provided by financing activities was approximately $0.1 million and $7.0 million for the nine months ended September 30, 2022 and
2021, respectively. The decrease of approximately $6.9 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 nine months ended September 30, 2022, and a decrease
in the receipt of proceeds of approximately $1.3 million from the exercise 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 the 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 Thermo Fisher Scientific 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.