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RL DEFA14A: Additional proxy soliciting materials -
definitive.fromPatent rights
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission file number 001-34655
AVEO PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
04-3581650 |
(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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30 Winter Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(857) 400-0101
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, $0.001 par value |
AVEO |
Nasdaq Capital Market |
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
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No
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Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
☒
No
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
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Number of shares of the registrant’s Common Stock, $0.001 par
value, outstanding on August 1, 2022: 34,614,284
AVEO PHARMACEUTICALS, INC.
TABLE OF CONTENTS
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Page
No.
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Item 1. |
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Item 2. |
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Item 3. |
Quantitative and Qualitative Disclosures About Market
Risk |
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Item 4. |
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Item 1A. |
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Item 6. |
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References to AVEO
Throughout this Form 10-Q, the words “we,” “us,” “our” and “AVEO”,
except where the context requires otherwise, refer to AVEO
Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our
board of directors” refers to the board of directors of AVEO
Pharmaceuticals, Inc.
Cautionary Note Regarding Forward-Looking Statements and Industry
Data
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995, which involve risks and
uncertainties. All statements other than statements of historical
fact contained in this report are statements that could be deemed
forward-looking statements, including without limitation statements
with respect to the plans, strategies and objectives of management
for future operations; statements concerning product research,
development and commercialization plans, timelines and anticipated
results; statements of expectation or belief; statements with
respect to clinical trials and studies; statements with respect to
the therapeutic potential of product candidates; any expectations
of revenue, expenses, earnings or losses from operations, or other
financial results; and statements of assumptions underlying any of
the foregoing. Without limiting the foregoing, the words
“anticipates”, “believes”, “could”, “estimates”, “expects”,
“intends”, “may”, “plans”, “seeks”, “will”, “strategy”,
“potential”, “should”, “would” and other similar language, whether
in the negative or affirmative, are intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. Forward-looking
statements may include, but are not limited to, statements
about:
•our
plans to commercialize FOTIVDA;
•our
manufacturing, marketing and sales capabilities and
strategy;
•the
rate and degree of market acceptance and clinical utility of our
products;
•our
plans to expand the commercial opportunity of tivozanib for the
treatment of RCC;
•our
plans to develop our clinical stage assets and commercialize our
product candidates;
•our
plans to position our clinical stage assets for further development
by partners and to retain the North American oncology commercial
rights;
•our
plans to potentially acquire or in-license additional commercial
stage assets;
•the
initiation, timing, progress and results of future clinical trials,
and our development programs;
•our
ability to secure new collaborations, maintain existing
collaborations or obtain additional funding;
•the
potential of ficlatuzumab, AV-380 or other product candidates that
we in-license, or may elect to in-license, or may acquire in the
future;
•impacts
resulting from the COVID-19 pandemic and responsive actions
relating thereto;
•the
timing or likelihood of regulatory filings and
approvals;
•the
implementation of our business model, strategic plans for our
business, product candidates and technology;
•our
competitive position;
•developments
and projections relating to our competitors and our
industry;
•our
intellectual property position;
•our
estimates of the period in which we anticipate that existing cash,
cash equivalents and investments will enable us to fund our current
and planned operations; and
•our
estimates regarding expenses, future revenue, capital requirements
and needs for additional financing.
Our actual results may differ materially from those indicated by
these forward-looking statements as a result of various important
factors. We therefore caution you against relying on any of these
forward-looking statements. Important factors that could cause
actual results to differ materially from those in these
forward-looking statements include the factors discussed below
under the heading “Risk Factor Summary,” and the risk factors
detailed further in Item 1A., “Risk Factors” of Part II of this
report and in our U.S. Securities and Exchange Commission reports
filed after this report.
This report also includes statistical and other industry and market
data that we obtained from industry publications and research,
surveys and studies conducted by third parties as well as our own
estimates. All the market data used in this report involve a number
of assumptions and limitations, and you are cautioned not to give
undue weight to such data. Industry publications and third-party
research, surveys and studies generally indicate that their
information has been obtained from sources believed to be reliable,
although they do not guarantee the accuracy or completeness of such
information. Our estimates of the potential market opportunities
for our product candidates include several key assumptions based on
our industry knowledge, industry publications, third-party research
and other surveys, which may be based on a small sample size and
may fail to accurately reflect market opportunities. While we
believe that our internal assumptions are reasonable, no
independent source has verified such assumptions.
The forward-looking statements included in this quarterly report
represent our estimates as of the filing date of this quarterly
report. We specifically disclaim any obligation to update these
forward-looking statements in the future. These forward-looking
statements should not be relied upon as representing our estimates
or views as of any date subsequent to the date of this quarterly
report.
Risk Factor Summary
Investment in our securities involves risk. You should carefully
consider the following summary of what we believe to be the
principle risks facing our business, in addition to the risks
described more fully in Item 1A., “Risk Factors” of Part II of this
Quarterly Report on Form 10-Q and other information included in
this report. The risks and uncertainties described below are not
the only risks and uncertainties we face. Additional risks and
uncertainties not presently known to us or that we presently deem
less significant may also impair our business
operations.
If any of the following risks occur, our business, financial
condition and results of operations and future growth prospects
could be materially and adversely affected, and the actual outcomes
of matters as to which forward-looking statements are made in this
report could be materially different from those anticipated in such
forward-looking statements.
•We
have incurred significant operating losses, anticipate that we will
continue to incur significant operating expenses for the
foreseeable future and may never generate significant revenue or
achieve or sustain profitability.
•We
may require substantial additional funding to advance our pipeline
of clinical stage assets, and if we are unable to obtain this
necessary capital when needed, we could be forced to delay, limit,
reduce or terminate our research, product development or
commercialization efforts.
•If
we fail to comply with the covenants or payment obligations under
the 2020 Loan Facility, which could result in an event of default,
this could materially and adversely affect our business and our
financial condition.
•We
have only recently transitioned from a development stage
biopharmaceutical company to a commercial stage biopharmaceutical
company, which may make it difficult for you to evaluate the
success of our business to date and to assess our future
viability.
•We
depend heavily on the success of our commercial product, FOTIVDA,
and on our clinical stage assets, including tivozanib (in other
indications), ficlatuzumab, AV-380 and AV-203. If we are unable to
complete the clinical development of, obtain marketing approval for
or successfully commercialize our product candidates, our business
will be materially harmed.
•The
COVID-19 pandemic has adversely
affected our
ability to commercialize FOTIVDA, to manufacture clinical product,
and to initiate new trials or complete ongoing clinical trials
and
may have other adverse effects on our business and
operations.
•If
we or our collaborators experience delays or difficulties in the
enrollment of patients in clinical trials, receipt of necessary
regulatory approvals could be delayed or prevented.
•If
clinical trials of any product candidates that we, or any
collaborators, may develop fail to satisfactorily demonstrate
safety and efficacy to the FDA and other regulators, we may incur
additional costs or experience delays in completing, or ultimately
be unable to complete, the development and commercialization of
these product candidates.
•We
face substantial competition from existing approved products and
our competitors may also discover, develop or commercialize new
competing products before, or more successfully, than we
do.
•Adverse
events or undesirable side effects caused by, or other unexpected
properties of, product candidates that we develop may be identified
during development and could delay or prevent their marketing
approval or limit their use.
•We
rely in part on third parties to produce our preclinical and
clinical product candidate supplies and to conduct clinical trials
of our internally-developed product candidates, and those third
parties may not
perform satisfactorily, including by failing to deliver supplies on
time or to meet deadlines for the completion of such trials,
research or testing.
•We
rely on our licensee EUSA, over whom we have little control, for
the sales, marketing and distribution efforts associated with the
commercialization of FOTIVDA in the countries in the EUSA Licensed
Territory and any failure by EUSA to devote the necessary resources
and attention to market and sell FOTIVDA effectively and
successfully may materially impact our ability to generate revenue
from the EUSA Licensed Territory.
•Any
failure by a third-party manufacturer or a third-party supplier to
timely produce or provide required manufacturing supplies for us or
to safely store product candidate supplies and commercial supplies
of FOTIVDA may delay or impair our ability to manufacture product,
initiate or complete our clinical trials or commercialize our
product candidates.
•We
may not be successful in establishing or maintaining strategic
partnerships to execute our strategy to partner our clinical stage
assets and further the development of our therapeutic programs.
Additionally, if any of our current or future strategic partners
fails to perform its obligations or terminates the partnership, the
development and commercialization of the product candidates under
such agreement could be delayed or terminated and, such failures or
terminations could have a material adverse effect on our operations
and business.
•We
could be unsuccessful in obtaining or maintaining adequate market
exclusivity and/or patent protection for one or more of our product
candidates, or the scope of our patent protection could be
insufficiently broad, which could result in competition and a
decrease in the potential market share for our product
candidates.
|
|
|
|
|
|
Part I. |
Financial Information |
AVEO PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except par value amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022 |
|
December 31,
2021 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
70,168 |
|
|
$ |
70,542 |
|
Marketable securities |
6,992 |
|
|
16,784 |
|
Trade receivables, net |
15,279 |
|
|
9,811 |
|
Partnership receivables |
850 |
|
|
1,790 |
|
Inventory |
1,320 |
|
|
1,656 |
|
Clinical trial retainers |
894 |
|
|
1,181 |
|
Other prepaid expenses and other current assets |
2,085 |
|
|
2,972 |
|
Total current assets |
97,588 |
|
|
104,736 |
|
Property and equipment, net |
242 |
|
|
276 |
|
Operating lease right-of-use asset |
81 |
|
|
178 |
|
Other assets |
200 |
|
|
151 |
|
Total assets |
$ |
98,111 |
|
|
$ |
105,341 |
|
Liabilities and stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
3,605 |
|
|
$ |
2,712 |
|
Accrued clinical trial costs and contract research |
10,465 |
|
|
5,046 |
|
Accrued compensation and benefits |
4,237 |
|
|
4,963 |
|
Other accrued liabilities |
8,003 |
|
|
5,421 |
|
Operating lease liability |
5 |
|
|
11 |
|
Loans payable, net of discount |
5,182 |
|
|
— |
|
Deferred revenue |
— |
|
|
578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
31,497 |
|
|
18,731 |
|
Loans payable, net of discount |
33,247 |
|
|
37,960 |
|
|
|
|
|
|
|
|
|
Other liabilities, non-current (Note 6) |
2,780 |
|
|
2,780 |
|
Total liabilities |
67,524 |
|
|
59,471 |
|
Stockholders’ equity: |
|
|
|
Preferred stock, $.001 par value: 5,000 shares authorized at
June 30, 2022 and December 31, 2021; no shares issued and
outstanding at each of June 30, 2022 and December 31,
2021
|
— |
|
|
— |
|
Common stock, $.001 par value: 80,000 shares authorized at
June 30, 2022 and 50,000 at December 31, 2021; 34,614
shares issued and outstanding at June 30, 2022 and 34,475 at
December 31, 2021
|
35 |
|
|
34 |
|
Additional paid-in capital |
723,619 |
|
|
720,386 |
|
Accumulated other comprehensive loss |
(2) |
|
|
(3) |
|
Accumulated deficit |
(693,065) |
|
|
(674,547) |
|
Total stockholders’ equity |
30,587 |
|
|
45,870 |
|
Total liabilities and stockholders’ equity |
$ |
98,111 |
|
|
$ |
105,341 |
|
See
accompanying notes.
AVEO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenues: |
|
|
|
|
|
|
|
FOTIVDA U.S. product revenue, net |
$ |
25,006 |
|
|
$ |
6,735 |
|
|
$ |
45,092 |
|
|
$ |
7,801 |
|
Partnership licensing and royalty revenue |
298 |
|
|
821 |
|
|
1,132 |
|
|
1,675 |
|
|
25,304 |
|
|
7,556 |
|
|
46,224 |
|
|
9,476 |
|
Operating expenses: |
|
|
|
|
|
|
|
Cost of products sold |
3,065 |
|
|
822 |
|
|
5,499 |
|
|
960 |
|
Research and development |
12,318 |
|
|
6,878 |
|
|
22,478 |
|
|
12,675 |
|
Selling, general and administrative |
17,075 |
|
|
14,920 |
|
|
34,412 |
|
|
30,020 |
|
|
32,458 |
|
|
22,620 |
|
|
62,389 |
|
|
43,655 |
|
Loss from operations |
(7,154) |
|
|
(15,064) |
|
|
(16,165) |
|
|
(34,179) |
|
Other income (expense), net: |
|
|
|
|
|
|
|
Interest expense, net |
(1,165) |
|
|
(1,128) |
|
|
(2,353) |
|
|
(1,739) |
|
Change in fair value of PIPE Warrant liability |
— |
|
|
2,595 |
|
|
— |
|
|
199 |
|
|
|
|
|
|
|
|
|
|
(1,165) |
|
|
1,467 |
|
|
(2,353) |
|
|
(1,540) |
|
Net loss |
$ |
(8,319) |
|
|
$ |
(13,597) |
|
|
(18,518) |
|
|
$ |
(35,719) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share: |
|
|
|
|
|
|
|
Net loss per share |
$ |
(0.24) |
|
|
$ |
(0.40) |
|
|
$ |
(0.54) |
|
|
$ |
(1.16) |
|
Weighted average number of common shares outstanding |
34,503 |
|
|
34,362 |
|
|
34,489 |
|
|
30,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
AVEO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Comprehensive Income
(Loss)
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net loss |
$ |
(8,319) |
|
|
$ |
(13,597) |
|
|
$ |
(18,518) |
|
|
$ |
(35,719) |
|
Other comprehensive gain/(loss): |
|
|
|
|
|
|
|
Unrealized gain/(loss) on available-for-sale securities |
(3) |
|
|
— |
|
|
1 |
|
|
— |
|
Comprehensive loss |
$ |
(8,322) |
|
|
$ |
(13,597) |
|
|
$ |
(18,517) |
|
|
$ |
(35,719) |
|
See accompanying notes.
AVEO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Stockholders’
Equity
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
Additional Paid-in Capital |
|
Accumulated Other Comprehensive Income |
|
Accumulated
Deficit |
|
Total
Stockholders'
Equity |
|
Shares |
|
Par Value |
|
|
|
|
Balance at December 31, 2021 |
34,475 |
|
|
$ |
34 |
|
|
$ |
720,386 |
|
|
$ |
(3) |
|
|
$ |
(674,547) |
|
|
$ |
45,870 |
|
Stock-based compensation expense related to equity-classified
awards |
— |
|
|
— |
|
|
1,267 |
|
|
— |
|
|
— |
|
|
1,267 |
|
Unrealized gain on available-for-sale investments |
— |
|
|
— |
|
|
— |
|
|
4 |
|
|
— |
|
|
4 |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,199) |
|
|
(10,199) |
|
Balance at March 31, 2022 |
34,475 |
|
|
$ |
34 |
|
|
$ |
721,653 |
|
|
$ |
1 |
|
|
$ |
(684,746) |
|
|
$ |
36,942 |
|
Issuance of common stock under employee stock purchase
plan |
136 |
|
|
1 |
|
|
544 |
|
|
— |
|
|
— |
|
|
545 |
|
Exercise of stock options |
3 |
|
|
— |
|
|
16 |
|
|
— |
|
|
— |
|
|
16 |
|
Stock-based compensation expense related to equity-classified
awards |
— |
|
|
— |
|
|
1,406 |
|
|
— |
|
|
— |
|
|
1,406 |
|
Unrealized loss on available-for-sale investments |
— |
|
|
— |
|
|
— |
|
|
(3) |
|
|
— |
|
|
(3) |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,319) |
|
|
(8,319) |
|
Balance at June 30, 2022 |
34,614 |
|
|
$ |
35 |
|
|
$ |
723,619 |
|
|
$ |
(2) |
|
|
$ |
(693,065) |
|
|
$ |
30,587 |
|
See accompanying notes.
Condensed Consolidated Statements of Stockholders’
Equity
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
Additional Paid-in Capital |
|
Accumulated Other Comprehensive Income |
|
Accumulated
Deficit |
|
Total
Stockholders'
Equity |
|
Shares |
|
Par Value |
|
|
|
|
Balance at December 31, 2020 |
26,883 |
|
|
$ |
27 |
|
|
$ |
656,472 |
|
|
$ |
— |
|
|
$ |
(621,205) |
|
|
$ |
35,294 |
|
Issuance of common stock in a public offering (net of issuance
costs of $3.6 million)
|
6,900 |
|
|
7 |
|
|
51,711 |
|
|
— |
|
|
— |
|
|
51,718 |
|
Issuance of common stock from the SVB Leerink sales agreement (net
of issuance costs of $0.1 million)
|
331 |
|
|
— |
|
|
3,377 |
|
|
— |
|
|
— |
|
|
3,377 |
|
Issuance of common stock in connection with warrant
exercises |
247 |
|
|
— |
|
|
3,092 |
|
|
— |
|
|
— |
|
|
3,092 |
|
Stock-based compensation expense related to equity- classified
awards
|
— |
|
|
— |
|
|
1,204 |
|
|
— |
|
|
— |
|
|
1,204 |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(22,122) |
|
|
(22,122) |
|
Balance at March 31, 2021 |
34,361 |
|
|
$ |
34 |
|
|
$ |
715,856 |
|
|
$ |
— |
|
|
$ |
(643,327) |
|
|
$ |
72,563 |
|
Stock-based compensation expense related to equity- classified
awards
|
— |
|
|
— |
|
|
1,169 |
|
|
— |
|
|
— |
|
|
1,169 |
|
Issuance of common stock under employee stock purchase
plan |
13 |
|
|
— |
|
|
68 |
|
|
— |
|
|
— |
|
|
68 |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,597) |
|
|
(13,597) |
|
Balance at June 30, 2021 |
34,374 |
|
|
$ |
34 |
|
|
$ |
717,093 |
|
|
$ |
— |
|
|
$ |
(656,924) |
|
|
$ |
60,203 |
|
AVEO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
2022 |
|
2021 |
|
|
Operating activities |
|
|
|
|
|
Net loss |
$ |
(18,518) |
|
|
$ |
(35,719) |
|
|
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
Depreciation and amortization |
34 |
|
|
33 |
|
|
|
Stock-based compensation |
2,673 |
|
|
2,373 |
|
|
|
Non-cash interest expense |
469 |
|
|
428 |
|
|
|
Non-cash change in fair value of PIPE Warrant liability |
— |
|
|
(199) |
|
|
|
Amortization of premium and discount on investments |
57 |
|
|
10 |
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Trade receivables, net |
(5,468) |
|
|
(4,220) |
|
|
|
Partnership receivables |
940 |
|
|
(168) |
|
|
|
Inventory |
336 |
|
|
— |
|
|
|
Prepaid expenses and other current assets |
1,174 |
|
|
(685) |
|
|
|
Operating lease right-of-use asset |
48 |
|
|
227 |
|
|
|
Other non-current assets |
— |
|
|
(100) |
|
|
|
Accounts payable |
893 |
|
|
(219) |
|
|
|
Accrued clinical trial costs and contract research |
5,419 |
|
|
269 |
|
|
|
Accrued compensation and benefits |
(726) |
|
|
361 |
|
|
|
Other accrued liabilities |
2,582 |
|
|
1,955 |
|
|
|
Operating lease liability |
(6) |
|
|
(45) |
|
|
|
Deferred revenue |
(578) |
|
|
(987) |
|
|
|
Deferred research and development reimbursements |
— |
|
|
(128) |
|
|
|
Operating lease liability, non-current |
— |
|
|
(187) |
|
|
|
Net cash used in operating activities |
(10,671) |
|
|
(37,001) |
|
|
|
Investing activities |
|
|
|
|
|
Purchases of marketable securities |
(8,979) |
|
|
(28,195) |
|
|
|
Proceeds from maturities and sales of marketable
securities |
18,715 |
|
|
— |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
9,736 |
|
|
(28,195) |
|
|
|
Financing activities |
|
|
|
|
|
Proceeds from issuance of common stock, net of issuance
costs |
— |
|
|
55,095 |
|
|
|
|
|
|
|
|
|
Proceeds from warrant exercises |
— |
|
|
3,092 |
|
|
|
Proceeds from issuance of stock for stock-based compensation
arrangements |
561 |
|
|
68 |
|
|
|
Proceeds from issuance of loan payable |
— |
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of debt issuance costs |
— |
|
|
(85) |
|
|
|
Net cash provided by financing activities |
561 |
|
|
78,170 |
|
|
|
Net (decrease) increase in cash and cash equivalents |
(374) |
|
|
12,974 |
|
|
|
Cash and cash equivalents at beginning of period |
70,542 |
|
|
61,761 |
|
|
|
Cash and cash equivalents at end of period |
$ |
70,168 |
|
|
$ |
74,735 |
|
|
|
Supplemental cash flow information |
|
|
|
|
|
Cash paid for interest |
$ |
1,959 |
|
|
$ |
1,171 |
|
|
|
|
|
|
|
|
|
See accompanying notes.
AVEO Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(1) Organization
AVEO Pharmaceuticals, Inc. (the “Company”) is a commercial stage,
oncology-focused biopharmaceutical company committed to delivering
medicines that provide a better life for patients with cancer. The
Company currently markets FOTIVDA®
(tivozanib) in the United States. FOTIVDA is the Company's first
commercial product and was approved by the U.S. Food and Drug
Administration (“FDA”) for marketing and sale in the United States
on March 10, 2021 for the treatment of adult patients with relapsed
or refractory advanced (“R/R”) renal cell carcinoma (“RCC”)
following two or more prior systemic therapies. The Company markets
and sells FOTIVDA in the United States through its commercial
infrastructure, and has made FOTIVDA available to patients through
a network of specialty pharmacies and distributors. The Company
continues to develop tivozanib in immuno-oncology combinations and
other novel targeted combinations in RCC and other indications, and
the Company has other investigational programs in clinical
development.
FOTIVDA is an oral, next-generation vascular endothelial growth
factor receptor (“VEGFR”) tyrosine kinase inhibitor (“TKI”). The
FDA approval of FOTIVDA is based on the Company’s pivotal Phase 3
randomized, controlled, multi-center, open-label clinical trial
comparing tivozanib to an approved therapy, Nexavar® (sorafenib),
in RCC patients whose disease had relapsed or become refractory to
two or three prior systemic therapies, which the Company refers to
as the TIVO-3 trial. The approval is also supported by three
additional trials in RCC and includes safety data from over 1,000
clinical trial subjects.
Based on FOTIVDA’s demonstrated anti-tumor activity, tolerability
profile and reduction of regulatory T-cell production, the Company
and its collaboration partners are continuing to develop tivozanib
in RCC and in additional cancer indications with significant unmet
medical needs including, hepatocellular carcinoma (“HCC”) and
tumors that are resistant to immunotherapy, or immunologically cold
tumors, in combination with immune checkpoint inhibitors (“ICIs”).
In addition, the Company is evaluating tivozanib as a monotherapy
in cholangiocarcinoma (“CCA”). The Company and the Company's
collaboration partners or independent investigators sponsor the
development of tivozanib through preclinical studies and clinical
trials conducted under collaboration agreements and investigator
sponsored trial (“IST”) agreements or the Company's Cooperative
Research and Development Agreement (“CRADA”) with the National
Cancer Institute’s Surgical Oncology Program
(“NCI-SOP”).
The Company is also seeking to advance its pipeline of four wholly
owned immunoglobulin G1 (“IgG1”) monoclonal antibody product
candidates, ficlatuzumab, AV-380, AV-203 and AV-353,
to
position each product candidate for further development by partners
with the Company retaining all, or a portion of, the North American
oncology commercial rights related to these product
candidates.
As used throughout these consolidated financial statements, the
terms “AVEO” and the “Company” refer to the business of AVEO
Pharmaceuticals, Inc. and its three wholly owned subsidiaries, AVEO
Pharma Limited, AVEO Pharma (Ireland) Limited and AVEO Securities
Corporation.
Liquidity and Going Concern
In accordance with Accounting Standards Update (“ASU”) No.
2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern
(Subtopic 205-40), the Company has evaluated whether there are
conditions and events, considered in the aggregate, that raise
substantial doubt about the Company’s ability to continue as a
going concern within one year after the date that the consolidated
financial statements are issued. The Company’s financial statements
have been prepared on the basis of continuity of operations,
realization of assets and the satisfaction of liabilities in the
ordinary course of business. Through June 30, 2022, the
Company has financed its operations primarily through private
placements and public offerings of its common stock, license fees,
milestone payments and research and development funding from
strategic partners, FOTIVDA commercial sales receipts and debt
facilities. The Company has devoted substantially all of its
resources to its drug development efforts, comprising research and
development, manufacturing, conducting clinical trials for its
product candidates, commercializing FOTIVDA, protecting its
intellectual property and general and administrative functions
relating to these operations.
The future success of the Company is dependent on its ability to
continue to commercialize FOTIVDA in the United States, expand the
commercial opportunity of tivozanib for the treatment of RCC and to
position the Company’s other product candidates for further
development by partners
with the Company retaining all, or a portion of, the North American
oncology commercial rights related to these product
candidates.
Ultimately, the Company is focused on its ability to create
shareholder value. On March 10, 2021, the FDA approved
FOTIVDA
in the United States for the treatment of adult patients with R/R
RCC following two or more prior systemic therapies. The Company’s
future product revenues will depend upon the size of markets in
which FOTIVDA, and any future products, receive approval, and its
ability to achieve sufficient market acceptance, reimbursement from
third-party payors and adequate market share for FOTIVDA and any
future products in those markets. The likelihood of the Company’s
long-term success must be considered in light of the expenses,
difficulties and potential delays that may be encountered in the
development and commercialization of new pharmaceutical products,
competitive factors in the marketplace and the complex regulatory
environment in which the Company operates. Absent the realization
of sufficient revenues from product sales to support the Company’s
cost structure, the Company may never attain or sustain
profitability.
The Company has incurred recurring losses and cash outflows from
operations since its inception, including an accumulated deficit of
$693.1 million as of June 30, 2022. The Company anticipates
that it will continue to incur significant operating expenses for
the foreseeable future as it commercializes FOTIVDA in the United
States and continues its planned development activities for its
clinical and preclinical stage assets. The Company may require
substantial additional capital to continue to advance its pipeline
of clinical and preclinical stage assets to
position each product candidate for further development by
partners
and the timing and nature of these activities will be conducted
subject to the availability of sufficient financial resources, from
partnerships and product sales of FOTIVDA in the United
States.
As of August 4, 2022, the date of issuance of these
consolidated financial statements, the Company expects that its
cash, cash equivalents and marketable securities of $77.2 million
as of June 30, 2022, along with net
product revenues from product sales of FOTIVDA in the
United States, will be sufficient to fund its current operations
for more than twelve months from the date of filing this
Quarterly Report on Form 10-Q.
Management’s expectations with respect to its ability to fund
current planned operations is based on estimates that are subject
to risks and uncertainties, including, without limitation, risks
related to its ability to generate sufficient product revenue from
sales of FOTIVDA in the United States and to effectively manage
expenses. If actual results are different from management’s
estimates, the Company may need to seek additional strategic or
financing opportunities sooner than would otherwise be expected.
However, there is no guarantee that any of these strategic or
financing opportunities would be executed or executed on favorable
terms, and some could be dilutive to existing stockholders. If the
Company is unable to obtain additional capital on a timely basis,
it may be forced to significantly curtail, delay or discontinue one
or more of its planned research or development programs or be
unable to expand its operations or otherwise capitalize on the
commercialization of its product.
(2) Basis of Presentation
These consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, AVEO Pharma Limited,
AVEO Pharma (Ireland) Limited and AVEO Securities Corporation. The
Company has eliminated all significant intercompany accounts and
transactions in consolidation.
The accompanying condensed consolidated financial statements have
been prepared in accordance with United States generally accepted
accounting principles (“GAAP”) for interim financial information
and with the instructions to Form 10-Q and Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments, consisting of normal
recurring accruals and revisions of estimates, considered necessary
for a fair presentation of the condensed consolidated financial
statements have been included. Interim results for the three and
six months ended June 30, 2022 are not necessarily indicative
of the results that may be expected for the fiscal year ending
December 31, 2022 or any other future period.
The information presented in the condensed consolidated financial
statements and related footnotes at June 30, 2022, and for the
three and six months ended June 30, 2022 and 2021, is
unaudited, and the condensed consolidated balance sheet amounts and
related footnotes as of December 31, 2021 have been derived
from the Company’s audited financial statements. For further
information, refer to the consolidated financial statements and
accompanying footnotes included in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2021, which
was filed with the U.S. Securities and Exchange Commission (“SEC”)
on March 14, 2022.
(3) Significant Accounting Policies
Revenue Recognition
Under Accounting Standards Codification (“ASC”) 606 (“ASC
606”),
Revenue from Contracts with Customers,
the Company recognizes revenue when its customers obtain control of
promised goods or services, in an amount that reflects the
consideration which the Company determines it expects to receive in
exchange for those goods or services. To determine revenue
recognition for arrangements that the Company determines are within
the scope of ASC 606, the Company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify
the performance obligation(s) in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the
performance obligation(s) in the contract; and (v) recognize
revenue when (or as) the Company satisfies its performance
obligation(s). As part of the accounting for these arrangements,
the Company must make significant judgments, including identifying
performance obligations in the contract, estimating the amount of
variable consideration to include in the transaction price and
allocating the transaction price to each performance
obligation.
Net Product Revenue
The Company sells its products principally through a limited
distribution network comprised of two specialty pharmacies,
Biologics and Onco360, and the following specialty
distributors:
Amerisource Specialty Distribution, Oncology Supply, McKesson
Plasma and Biologics, McKesson Specialty and Cardinal
Specialty
(collectively with the specialty pharmacies, the “Customers” and
each a “Customer”).
These Customers subsequently resell the Company’s products to
health care providers and patients. In addition to distribution
agreements with Customers, the Company enters into arrangements
with health care providers and payors that provide for
government-mandated and/or privately-negotiated rebates,
chargebacks and discounts with respect to the purchase of the
Company’s products. Revenues from product sales are recognized when
the Customer obtains control of the Company’s product, which occurs
at a point in time, typically upon delivery to the
Customer.
Product Sales Discounts and Allowances
The Company records revenues from product sales at the net sales
price (transaction price), which includes estimates of variable
consideration for which reserves are established primarily from
discounts, chargebacks, rebates, co-pay assistance, returns and
other allowances that are offered within contracts between the
Company and its Customers, health care providers, payors and other
indirect customers relating to the sales of its products. These
reserves are based on the amounts earned or to be claimed on the
related sales and are classified as reductions of trade receivables
(if the amount is deductible by the Customer from payments to the
Company) or a current liability (if the amount is payable by the
Company to a third party or Customer). Where appropriate, these
estimates take into consideration a range of possible outcomes that
are probability-weighted for relevant factors such as current
contractual and statutory requirements, specific known market
events and trends, industry data, forecasted Customer buying and
payment patterns, and the Company’s historical experience that will
develop over time as FOTIVDA is the Company’s first commercial
product. Overall, these reserves reflect the Company’s best
estimates of the amount of consideration to which it is entitled
based on the terms of its contracts. The amount of variable
consideration that is included in the transaction price may be
constrained, and is included in the net sales price only to the
extent that it is probable that a significant reversal in the
amount of the cumulative revenue recognized will not occur in a
future period. Actual amounts of consideration ultimately received
may differ from the Company’s estimates. If actual results in the
future vary from the Company’s estimates, the Company will adjust
these estimates, which would affect U.S. net product revenues and
earnings in the period such variances become known.
Chargebacks:
Chargebacks are discounts that occur when contracted customers
purchase directly from a specialty distributor. Contracted
customers, which currently consist primarily of Public Health
Service institutions, Federal government entities purchasing via
the Federal Supply Schedule, Group Purchasing Organizations and
health maintenance organizations, generally purchase the product at
a discounted price. The specialty distributor, in turn, charges
back to the Company the difference between the price initially paid
by the specialty distributor and the discounted price paid to the
specialty distributor by its contracted customer. The allowance for
chargebacks is based on actual chargebacks received and an estimate
of sales by the specialty distributor to its contracted
customers.
Discounts for Prompt Payment:
The Customers receive a discount of 2% for prompt payment. The
Company expects its Customers will earn 100% of their prompt
payment discounts and, therefore, the Company deducts the full
amount of these discounts from total product sales when revenues
are recognized.
Rebates:
Allowances for rebates include mandated discounts under the
Medicaid Drug Rebate Program, Medicare Part D Coverage Gap
Discounts Program, other government programs and commercial
contracts. Rebate amounts owed
after the final dispensing of the product to a benefit plan
participant are based upon contractual agreements or legal
requirements with public sector benefit providers, such as
Medicaid. In addition, in the United States during 2020, the
Medicare Part D prescription drug benefit mandated participating
manufacturers to fund 70% of the Medicare Part D insurance coverage
gap for prescription drugs sold to eligible patients. The allowance
for rebates is based on statutory or contractual discount rates and
expected utilization. The Company’s estimates for the expected
utilization of rebates are based on Customer and payer data
received from the specialty pharmacies and distributors and
historical utilization rates that will develop over time as FOTIVDA
is the Company’s first commercial product. Rebates are generally
invoiced by the payor and paid in arrears, such that the accrual
balance consists of an estimate of the amount expected to be
incurred for the current quarter’s shipments to the Customers, plus
an accrual balance for known or estimated prior quarters’ unpaid
rebates. If actual future rebates vary from estimates, the Company
may need to adjust its accruals, which would affect U.S. net
product revenues in the period of adjustment.
Co-payment Assistance:
Patients who have commercial insurance and meet certain eligibility
requirements may receive co-payment assistance. The Company accrues
a liability for co-payment assistance based on actual program
participation and estimates of program redemption using Customer
data provided by the third party that administers the copay
program.
Other Customer Credits:
The Company pays fees to its Customers for account management, data
management and other administrative services. To the extent the
services received are distinct from the sale of products to its
Customers, the Company classifies these payments in selling,
general and administrative expenses in its Consolidated Statements
of Income.
The following table summarizes net product revenues for FOTIVDA in
the United States earned in the three and six months ended
June 30, 2022 and 2021, respectively (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Product revenues: |
|
|
|
|
|
|
|
|
|
Gross product revenues |
$ |
30,404 |
|
|
$ |
7,993 |
|
|
$ |
55,048 |
|
|
$ |
9,249 |
|
|
|
Discounts and allowances |
(5,398) |
|
|
(1,258) |
|
|
(9,956) |
|
|
(1,448) |
|
|
|
Net product revenues |
$ |
25,006 |
|
|
$ |
6,735 |
|
|
$ |
45,092 |
|
|
$ |
7,801 |
|
|
|
The following table summarizes the percentage of total product
revenues for FOTIVDA in the United States by any Customer who
individually accounted for 10% or more of total product revenues
earned in the three and six months ended June 30, 2022 and
2021, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Affiliates of McKesson Corporation |
38 |
% |
|
41 |
% |
|
40 |
% |
|
40 |
% |
|
|
Affiliates of AmerisourceBergen Corporation |
29 |
% |
|
25 |
% |
|
28 |
% |
|
24 |
% |
|
|
OncoMed Specialty, LLC (Onco360) |
24 |
% |
|
24 |
% |
|
23 |
% |
|
25 |
% |
|
|
Affiliates of Cardinal Health Specialty |
9 |
% |
|
10 |
% |
|
9 |
% |
|
11 |
% |
|
|
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
Product Sales Discounts and Allowances
The activities and ending allowance balances for each significant
category of discounts and allowances for FOTIVDA (which constitute
variable consideration) for the six months ended June 30, 2022
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chargebacks, Discounts for
Prompt Pay and Other Allowances |
|
Rebates, Customer Fees / Credits
and Co-Pay Assistance |
|
Totals |
Balance at December 31, 2021
|
$ |
1,193 |
|
|
$ |
1,170 |
|
|
$ |
2,363 |
|
Provision related to sales made in: |
|
|
|
|
|
Current period |
5,960 |
|
|
4,146 |
|
|
10,106 |
|
Prior periods |
(136) |
|
|
(14) |
|
|
(150) |
|
Payments and customer credits issued |
(5,390) |
|
|
(3,004) |
|
|
(8,394) |
|
Balance at June 30, 2022
|
$ |
1,627 |
|
|
$ |
2,298 |
|
|
$ |
3,925 |
|
The allowances for chargebacks, discounts for prompt payment and
other allowances are recorded as a reduction of trade receivables,
net, and the remaining reserves are recorded as rebates and fees
due to customers in other current accrued liabilities in the
accompanying Consolidated Balance Sheets.
Collaboration Revenues
The Company’s historical revenues have been generated primarily
through collaborative research, development and commercialization
agreements. The terms of these agreements generally contain
multiple promised goods and services, which may include (i)
licenses, or options to obtain licenses, to the Company’s
technology, (ii) research and development activities to be
performed on behalf of the collaborative partner and (iii) in
certain cases, services in connection with the manufacturing of
preclinical and clinical material. Payments to the Company under
these arrangements typically include one or more of the following:
non-refundable, upfront license fees; option exercise fees; funding
of research and/or development efforts; milestone payments; and
royalties on future product sales.
Collaboration Arrangements Within the Scope of ASC 808,
Collaborative Arrangements
The Company analyzes its collaboration arrangements to assess
whether such arrangements involve joint operating activities
performed by parties that are both active participants in the
activities and exposed to significant risks and rewards dependent
on the commercial success of such activities and are therefore
within the scope of ASC Topic 808,
Collaborative Arrangements
(“ASC 808”). This assessment is performed throughout the life of
the arrangement based on changes in the responsibilities of all
parties in the arrangement. For collaboration arrangements that are
deemed to be within the scope of ASC 808, the Company first
determines which elements of the collaboration are deemed to be
within the scope of ASC 808 and those that are more reflective of a
vendor-customer relationship and therefore within the scope of ASC
606. The Company’s policy is generally to recognize amounts
received from collaborators in connection with joint operating
activities that are within the scope of ASC 808 as a reduction in
research and development expense.
Arrangements Within the Scope of ASC 606, Revenue from Contracts
with Customers
Once a contract is determined to be within the scope of ASC 606,
the Company assesses the goods or services promised within the
contract and determines those that are performance obligations.
Arrangements that include rights to additional goods or services
that are exercisable at a customer’s discretion are generally
considered options. The Company assesses if these options provide a
material right to the customer and if so, they are considered
performance obligations. The exercise of a material right is
accounted for as a contract modification for accounting
purposes.
The Company assesses whether each promised good or service is
distinct for the purpose of identifying the performance obligations
in the contract. This assessment involves subjective determinations
and requires management to make judgments about the individual
promised goods or services and whether such are separable from the
other aspects of the contractual relationship. Promised goods and
services are considered distinct provided that: (i) the customer
can benefit from the good or service either on its own or together
with other resources that are readily available to the customer
(that is,
the good or service is capable of being distinct) and (ii) the
entity’s promise to transfer the good or service to the customer is
separately identifiable from other promises in the contract (that
is, the promise to transfer the good or service is distinct within
the context of the contract). In assessing whether a promised good
or service is distinct, the Company considers factors such as the
research, manufacturing and commercialization capabilities of the
collaboration partner and the availability of the associated
expertise in the general marketplace. The Company also considers
the intended benefit of the contract in assessing whether a
promised good or service is separately identifiable from other
promises in the contract. If a promised good or service is not
distinct, an entity is required to combine that good or service
with other promised goods or services until it identifies a bundle
of goods or services that is distinct.
The transaction price is then determined and allocated to the
identified performance obligations in proportion to their
standalone selling prices (“SSP”) on a relative SSP basis. SSP are
determined at contract inception and are not updated to reflect
changes between contract inception and when the performance
obligations are satisfied. Determining SSP for performance
obligations requires significant judgment. In developing SSP for a
performance obligation, the Company considers applicable market
conditions and relevant entity-specific factors, including factors
that were contemplated in negotiating the agreement with the
customer and estimated costs. The Company validates SSP for
performance obligations by evaluating whether changes in the key
assumptions used to determine SSP will have a significant effect on
the allocation of arrangement consideration between multiple
performance obligations.
If the consideration promised in a contract includes a variable
amount, the Company estimates the amount of consideration to which
it will be entitled in exchange for transferring the promised goods
or services to a customer. The Company determines the amount of
variable consideration by using the expected value method or the
most likely amount method. The Company includes the unconstrained
amount of estimated variable consideration in the transaction
price. The amount included in the transaction price is constrained
to the amount for which it is probable that a significant reversal
of cumulative revenue recognized will not occur. At the end of each
subsequent reporting period, the Company re-evaluates the estimated
variable consideration included in the transaction price and any
related constraint, and if necessary, adjusts its estimate of the
overall transaction price. Any such adjustments are recorded on a
cumulative catch-up basis in the period of adjustment.
In determining the transaction price, the Company adjusts
consideration for the effects of the time value of money if the
timing of payments provides the Company with a significant benefit
of financing. The Company does not assess whether a contract has a
significant financing component if the expectation at contract
inception is such that the period between payment by the licensees
and the transfer of the promised goods or services to the licensees
will be one year or less. The Company assessed each of its revenue
generating arrangements in order to determine whether a significant
financing component exists and concluded that a significant
financing component does not exist in any of its
arrangements.
The Company then recognizes as revenue the amount of the
transaction price that is allocated to the respective performance
obligation when (or as) each performance obligation is satisfied at
a point in time or over time, and if over time based on the use of
an output or input method.
Licenses of Intellectual Property:
The terms of the Company’s license agreements include the license
of functional intellectual property, given the functionality of the
intellectual property is not expected to change substantially as a
result of the Company’s ongoing activities. If the license to the
Company’s intellectual property is determined to be distinct from
the other performance obligations identified in the arrangement,
the Company recognizes revenues from the portion of the transaction
price allocated to the license when the license is transferred to
the licensee and the licensee is able to use and benefit from the
license. For licenses that are bundled with other promises (that
is, for licenses that are not distinct from other promised goods
and services in an arrangement), the Company utilizes judgment to
assess the nature of the combined performance obligation to
determine whether the combined performance obligation is satisfied
over time or at a point in time and, if over time, the appropriate
method of measuring progress for purposes of recognizing revenue.
The Company evaluates the measure of progress each reporting period
and, if necessary, adjusts the measure of performance and related
revenue recognition.
Research and Development Funding:
Arrangements that include payment for research and development
services are generally considered to have variable consideration.
If and when the Company assesses the payment for these services is
no longer subject to the constraint on variable consideration, the
related revenue is included in the transaction price.
Milestone payments:
At the inception of each arrangement that includes non-refundable
payments for contingent milestones, including preclinical research
and development, clinical development and regulatory, the Company
evaluates whether the milestones are considered probable of being
achieved and estimates the amount to be included in the transaction
price using the most likely amount method. If it is probable that a
significant revenue reversal would not occur, the associated
milestone value is included in the transaction price. Milestone
payments that are not within the control of the
Company or the licensee, such as regulatory approvals, are not
considered probable of being achieved until those approvals are
received. At the end of each reporting period, the Company
re-evaluates the probability of the achievement of contingent
milestones and the likelihood of a significant reversal of such
milestone revenue, and if necessary, adjusts its estimate of the
overall transaction price. Any such adjustments are recorded on a
cumulative catch-up basis, which would affect collaboration and
licensing revenue in the period of adjustment. This quarterly
assessment may result in the recognition of revenue related to a
contingent milestone payment before the milestone event has been
achieved.
Royalties:
For arrangements that include sales-based royalties, including
milestone payments based on the level of sales, and the license is
deemed to be the predominant item to which the royalties relate,
the Company recognizes revenue at the later of (i) when the related
sales occur or (ii) when the performance obligation to which some
or all of the royalty has been allocated has been satisfied (or
partially satisfied).
The following table summarizes the total collaboration revenues
earned in the three and six months ended June 30, 2022 and
2021, respectively, by partner (in thousands). Refer to Note
4,
“Collaborations and License Agreements”
regarding specific details.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
EUSA |
$ |
298 |
|
|
$ |
821 |
|
|
$ |
1,132 |
|
|
$ |
1,675 |
|
|
|
Total |
$ |
298 |
|
|
$ |
821 |
|
|
$ |
1,132 |
|
|
$ |
1,675 |
|
|
|
Trade Receivables
Trade receivables, net, includes amounts billed to Customers for
product sales of FOTIVDA. The Company records trade receivables net
of chargebacks, cash discounts for prompt payment and any
allowances for credit losses. The Company considers its historical
losses, if any, adjusted to account for current conditions, and
reasonable and supportable forecasts of future economic conditions
affecting its customers to estimate credit losses. The Customers
are specialty pharmacies and specialty distributors, and
accordingly, the Company considers the risk of potential credit
losses to be low.
Inventory
Inventory is valued at the lower of cost or net realizable value.
The Company analyzes its inventory levels quarterly and writes down
inventory subject to expiry or in excess of expected requirements,
or that has a cost basis in excess of its expected net realizable
value. These write downs are charged to cost of products sold in
the accompanying Consolidated Statements of Income.
The Company’s active pharmaceutical ingredient has a long shelf
life and the Company’s finished drug product has a five-year
expiry, however the realizability of inventory is subject to
forecasted future sales of FOTIVDA in the United States. The
Company’s forecasted sales currently support the realizability of
the Company’s inventory but are uncertain and could change in the
future, which would require the Company to write down the value of
such inventory.
The following table summarizes the Company’s inventory balances as
of June 30, 2022 and December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022 |
|
December 31,
2021 |
Raw materials |
$ |
— |
|
|
$ |
— |
|
Work in process |
862 |
|
|
1,656 |
|
Finished goods |
458 |
|
|
— |
|
Total |
$ |
1,320 |
|
|
$ |
1,656 |
|
Cost of Products Sold
Cost of products sold is related to the Company's product revenues
for FOTIVDA and consists primarily of tiered royalty payments the
Company is required to pay to Kyowa Kirin Co. (“KKC”) on all net
sales of tivozanib in the Company’s North American territory, which
range from the low to mid-teens as a percentage of net sales. Refer
to Note 4,
“Collaborations and License Agreements”
regarding specific details. Cost of products sold also consists of
the cost of manufacturing, indirect labor costs, any write-downs
related to expiring or excess inventory, shipping and other
third-party logistics and distribution costs for the Company’s
products.
The Company considered regulatory approval of its product candidate
to be uncertain and product manufactured prior to regulatory
approval could not have been sold unless regulatory approval was
obtained. As such, the manufacturing costs for FOTIVDA incurred
prior to regulatory approval were not capitalized as inventory, but
were expensed as research and development expenses. The Company’s
initial commercial supply of FOTIVDA was manufactured prior to FDA
market approval on March 10, 2021 and had been expensed to research
and development expenses. In 2021, subsequent to the FDA’s market
approval of FOTIVDA, the Company conducted resupply manufacturing
of tivozanib in connection with upcoming drug expirations beginning
in the fourth quarter of 2022 and capitalized these costs as
inventory. In the second quarter of 2022, the Company changed its
salable inventory to the resupply and began recognizing cost of
products sold related to inventory.
Research and Development Expenses
Research and development expenses are charged to expense as
incurred. Research and development expenses consist of costs
incurred in performing research and development activities,
including (i) internal costs for salaries, bonuses, benefits,
stock-based compensation, research-related overhead and allocated
expenses for facilities and information technology, and (ii)
external costs for clinical trials, drug manufacturing and
distribution, preclinical studies, upfront license payments,
milestones and sublicense fees related to in-licensed products and
technology, consultants and other contracted services.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase and an
investment in a United States government money market fund to be
cash equivalents. Changes in the balance of cash and cash
equivalents may be affected by changes in investment portfolio
maturities, as well as actual cash disbursements to fund
operations.
The Company’s cash is deposited in highly-rated financial
institutions in the United States. The Company invests in United
States government money market funds, high-grade, short-term
commercial paper, corporate bonds and other United States
government agency securities, which management believes are subject
to minimal credit and market risk. The carrying values of the
Company’s cash and cash equivalents approximate fair value due to
their short-term maturities.
The Company did not have any restricted cash balances at
June 30, 2022.
Marketable Securities
Marketable securities consist primarily of investments which have
expected average maturity dates in excess of three months. The
Company invests in high-grade corporate obligations, including
commercial paper, and U.S. government and government agency
obligations that are classified as available-for-sale. Since these
securities are available to fund current operations they are
classified as current assets on the consolidated balance
sheets.
Marketable securities are stated at fair value, including accrued
interest, with their unrealized gains and losses included as a
component of accumulated other comprehensive income or loss, which
is a separate component of stockholders’ equity. The fair value of
these securities is based on quoted prices and observable inputs on
a recurring basis. The cost of marketable securities is adjusted
for amortization of premiums and accretion of discounts, with such
amortization and accretion recorded as a component of interest
expense, net. Realized gains and losses are determined on the
specific identification method. Unrealized gains and losses are
included in other comprehensive loss until realized, at which point
they would be recorded as a component of interest expense,
net.
Below is a summary of cash, cash equivalents and marketable
securities at June 30, 2022 and December 31, 2021 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Unrealized
Gains |
|
Unrealized
Losses |
|
Fair
Value |
June 30, 2022 |
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
Cash and money market funds |
$ |
70,168 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70,168 |
|
Total cash and cash equivalents |
70,168 |
|
|
— |
|
|
— |
|
|
70,168 |
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
Government agency securities due within 1 year |
$ |
6,994 |
|
|
$ |
— |
|
|
$ |
(2) |
|
|
$ |
6,992 |
|
|
|
|
|
|
|
|
|
Total marketable securities |
6,994 |
|
|
— |
|
|
(2) |
|
|
6,992 |
|
Total cash, cash equivalents and marketable securities |
$ |
77,162 |
|
|
$ |
— |
|
|
$ |
(2) |
|
|
$ |
77,160 |
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
Cash and money market funds |
$ |
70,542 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70,542 |
|
Total cash and cash equivalents |
70,542 |
|
|
— |
|
|
— |
|
|
70,542 |
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
Corporate debt securities due within 1 year |
$ |
16,787 |
|
|
$ |
— |
|
|
$ |
(3) |
|
|
$ |
16,784 |
|
Total marketable securities |
16,787 |
|
|
— |
|
|
(3) |
|
|
16,784 |
|
Total cash, cash equivalents and marketable securities |
$ |
87,329 |
|
|
$ |
— |
|
|
$ |
(3) |
|
|
$ |
87,326 |
|
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
credit risk primarily consist of cash and cash equivalents,
marketable securities and accounts receivable. The Company
maintains deposits in highly-rated, federally-insured financial
institutions in excess of federally insured limits. The Company’s
investment strategy is focused on capital preservation. The Company
invests in instruments that meet the high credit quality standards
outlined in the Company’s investment policy. This policy also
limits the amount of credit exposure to any one issue or type of
instrument.
The Company’s trade receivables, net, includes amounts billed to
Customers for product sales of FOTIVDA. The Customers are a limited
group of specialty pharmacies and specialty distributors, and
accordingly, the Company considers the risk of potential credit
losses to be low.
The Company’s partnership receivables include amounts due to the
Company from licensees and collaborators. The Company has not
experienced any material losses related to partnership receivables
from individual licensees or collaborators.
Fair Value Measurements
The fair value of the Company’s financial assets and liabilities
reflects the Company’s estimate of amounts that it would have
received in connection with the sale of the assets or paid in
connection with the transfer of the liabilities in an orderly
transaction between market participants at the measurement date. In
connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable
inputs (market data obtained from sources independent from the
Company) and to minimize the use of unobservable inputs (the
Company’s assumptions about how
market participants would price assets and liabilities). The
following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs
used in order to value the assets and liabilities:
Level 1.Quoted
prices in active markets for identical assets or liabilities. An
active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
Level 2.Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities
in markets that are not active.
Level 3.Unobservable
inputs based on the Company’s assessment of the assumptions that
market participants would use in pricing the asset or
liability.
Financial assets and liabilities are classified in their entirety
within the fair value hierarchy based on the lowest level of input
that is significant to the fair value measurement. The Company
measures the fair value of its marketable securities by taking into
consideration valuations obtained from third-party pricing sources.
The pricing services utilize industry standard valuation models,
including both income and market-based approaches, for which all
significant inputs are observable, either directly or indirectly,
to estimate fair value. These inputs include reported trades of and
broker-dealer quotes on the same or similar securities, issuer
credit spreads, benchmark securities and other observable
inputs.
As of June 30, 2022, the Company had financial assets valued
based on Level 1 inputs consisting of cash and cash equivalents in
a U.S. government money market fund and had financial assets based
on Level 2 inputs consisting of government-agency securities.
During the three and six months ended June 30, 2022, the
Company did not have any transfers of financial assets between
Levels 1 and 2.
As of June 30, 2022, the Company did not have any financial
liabilities recorded at fair value.
The loan payable (discussed in Note 6), which is classified as a
Level 3 liability, has a variable interest rate and the carrying
value approximates its fair value. As of June 30, 2022, the
carrying value was approximately $38.4 million.
The following table summarizes the financial assets and liabilities
measured at fair value on a recurring basis at June 30, 2022
and December 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of June 30, 2022
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Financial assets carried at fair value: |
|
|
|
|
|
|
|
Cash and money market funds |
$ |
70,168 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70,168 |
|
Total cash and cash equivalents |
$ |
70,168 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70,168 |
|
Marketable securities: |
|
|
|
|
|
|
|
Government agency securities due within 1 year |
$ |
— |
|
|
$ |
6,992 |
|
|
$ |
— |
|
|
$ |
6,992 |
|
|
|
|
|
|
|
|
|
Total marketable securities |
$ |
— |
|
|
$ |
6,992 |
|
|
$ |
— |
|
|
$ |
6,992 |
|
Total cash, cash equivalents and marketable securities |
$ |
70,168 |
|
|
$ |
6,992 |
|
|
$ |
— |
|
|
$ |
77,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2021
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Financial assets carried at fair value: |
|
|
|
|
|
|
|
Cash and money market funds |
$ |
70,542 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70,542 |
|
Total cash and cash equivalents |
$ |
70,542 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70,542 |
|
Marketable securities: |
|
|
|
|
|
|
|
Corporate debt securities due within 1 year |
$ |
— |
|
|
$ |
16,784 |
|
|
$ |
— |
|
|
$ |
16,784 |
|
Total marketable securities |
$ |
— |
|
|
$ |
16,784 |
|
|
$ |
— |
|
|
$ |
16,784 |
|
Total cash, cash equivalents and marketable securities |
$ |
70,542 |
|
|
$ |
16,784 |
|
|
$ |
— |
|
|
$ |
87,326 |
|
Basic and Diluted Net Loss per Common Share
Basic net income (loss) per share attributable to the Company’s
common stockholders is based on the weighted-average number of
common shares outstanding during the period. Diluted net income
(loss) per share attributable to the Company’s common stockholders
is based on the weighted-average number of common shares
outstanding during the period plus additional weighted-average
common equivalent shares outstanding during the period when the
effect is dilutive.
For the three and six months ended June 30, 2022 and 2021,
diluted net loss per share is the same as basic net loss per share
as the inclusion of weighted-average shares of common stock
issuable upon the exercise of outstanding stock options and
warrants until the expirations of the Offering Warrants on
April 8, 2021 and the PIPE Warrants on May 16, 2021 would
be anti-dilutive.
The following table summarizes outstanding securities not included
in the computation of diluted net loss per common share as the
effect would have been anti-dilutive for the three and six months
ended June 30, 2022 and 2021, respectively (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at
June 30,
|
|
2022 |
|
2021 |
|
|
Stock options outstanding |
5,366 |
|
|
3,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
5,366 |
|
|
3,242 |
|
|
|
Stock-Based Compensation
Under the Company’s stock-based compensation programs, the Company
periodically grants stock options and restricted stock to
employees, directors and nonemployee consultants. The Company also
issues shares under an employee stock purchase plan. The fair value
of each award is recognized in the Company’s statements of
operations over the requisite service period for such
award.
Awards that vest as the recipient provides service are expensed on
a straight-line basis over the requisite service period. The
Company uses the Black-Scholes option pricing model to value stock
option awards without market conditions, which requires the Company
to make certain assumptions regarding the expected volatility of
its common stock price, the expected term of the option grants, the
risk-free interest rate and the dividend yield with respect to its
common stock. The Company calculates volatility using its
historical stock price data. Due to the lack of the Company’s own
historical data, the Company elected to use the “simplified” method
for “plain vanilla” options to estimate the expected term of the
Company’s stock option grants. Under this approach, the
weighted-average expected life is presumed to be the average of the
vesting term and the contractual term of the option. The risk-free
interest rate used for each grant is based on the United States
Treasury yield curve in effect at the time of grant for instruments
with a similar expected life. The Company utilizes a dividend yield
of zero based on the fact that the Company has never paid cash
dividends and has no present intention to pay cash
dividends.
The fair value of equity-classified awards to employees and
directors is measured at fair value on the date the awards are
granted. During the three and six months ended June 30, 2022
and 2021, the Company recorded the following stock-based
compensation expense (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Research and development |
$ |
224 |
|
|
$ |
289 |
|
|
$ |
436 |
|
|
$ |
644 |
|
|
|
Selling, general and administrative |
$ |
1,182 |
|
|
$ |
880 |
|
|
2,237 |
|
|
1,729 |
|
|
|
Total |
$ |
1,406 |
|
|
$ |
1,169 |
|
|
$ |
2,673 |
|
|
$ |
2,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
The Company provides for income taxes using the asset-liability
method. Under this method, deferred tax assets and liabilities are
recognized based on differences between financial reporting and tax
bases of assets and liabilities, and are measured using the enacted
tax rates and laws that will be in effect when the differences are
expected to reverse. The Company calculates its provision for
income taxes on ordinary income based on its projected annual tax
rate for the year. Uncertain tax positions are recognized if the
position is more-likely-than-not to be sustained upon examination
by a tax authority. Unrecognized tax benefits represent tax
positions for which reserves have been established. As of
June 30, 2022, the Company is forecasting an effective tax
rate of 0% for the year ending December 31, 2022. The Company
maintains a full valuation allowance on all deferred tax
assets.
Segment and Geographic Information
Operating segments are defined as components of an enterprise
engaging in business activities for which discrete financial
information is available and regularly reviewed by the chief
operating decision maker in deciding how to allocate resources and
in assessing performance. The Company views its operations and
manages its business in one operating segment principally in the
United States. As of June 30, 2022 and 2021, the Company had
no net assets located outside of the United States.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
certain reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial
statements, the assessment of the Company’s ability to continue as
a going concern and the reported amounts of revenues and expenses
during the reporting periods. Significant items subject to such
estimates and assumptions include revenue recognition, clinical
trial costs and contract research accruals, measurement of trade
receivables net, measurement of stock-based compensation and
estimates of the Company’s capital requirements over the next
twelve months from the date of issuance of the consolidated
financial statements. The Company bases its estimates on historical
experience and various other assumptions that management believes
to be reasonable under the circumstances. Material changes in these
estimates could occur in the future. Changes in estimates are
recorded or reflected in the Company’s disclosures in the period in
which they become known. Actual results could differ from those
estimates if past experience or other assumptions do not turn out
to be substantially accurate.
Accrued Clinical Trial Costs and Contract Research
Liabilities
During each of the three and six months ended June 30, 2022
and 2021, the Company had arrangements with multiple contract
research organizations (“CROs”) whereby these organizations commit
to performing services for the Company over multiple reporting
periods. The Company recognizes the expenses associated with these
arrangements based on its expectation of the timing of the
performance of components under these arrangements by these
organizations. Generally, these components consist of the costs of
setting up the trial, monitoring the trial, closing the trial and
preparing the resulting data. Costs related to patient enrollment
in clinical trials are accrued as patients are enrolled in the
trial.
In addition to fees earned by the CROs to manage the Company’s
clinical trials, the CROs are also responsible for managing
payments to the clinical trial sites on the Company’s behalf. There
can be significant lag time in clinical trial sites invoicing the
CROs. The date on which services are performed, the level of
services performed and the cost of such services are often
determined based on subjective judgments. The Company makes these
judgments based upon the facts and circumstances known to it, such
as the terms of the contract and its knowledge of activity that has
been incurred, including the number of active clinical sites, the
number of patients enrolled, the activities to be performed for
each patient, including patient treatment and any imaging, if
applicable, and the duration for which the patients will be
enrolled in the trial. In the event that the Company does not
identify some costs which have begun to be incurred, or the Company
under or overestimates the level of services performed or the costs
of such services in a given period, its reported expenses for such
period would be understated or overstated. The Company currently
reflects the effects of any changes in estimates based on changes
in facts and circumstances directly in its operations in the period
such change becomes known.
With respect to financial reporting periods presented in
this
Quarterly Report on Form 10-Q,
the timing of the Company’s actual costs incurred have not differed
materially from its estimated timing of such costs.
(4) Collaborations and License Agreements
Collaboration Agreement
AstraZeneca
In December 2018, the Company entered into a clinical supply
agreement (the “AstraZeneca Agreement”) with a wholly owned
subsidiary of AstraZeneca to evaluate the safety and efficacy of
AstraZeneca’s IMFINZI (durvalumab), a human monoclonal antibody
directed against PD-L1, in combination with tivozanib as a
first-line treatment or following bevacizumab and atezolizumab
treatment for patients with advanced, unresectable HCC in an
open-label, multi-center, randomized Phase 1b/2 clinical trial (the
“DEDUCTIVE trial”). The Company serves as the study sponsor; each
party contributes the clinical supply of its study drug; key
decisions are made by both parties by consensus; and external study
costs are otherwise shared equally. The Company and AstraZeneca
have decided to close the cohort B portion of the DEDUCTIVE trial,
which was previously expected to be enrolled in the second half of
2022, while focusing on data maturing from the cohort A portion of
the DEDUCTIVE trial.
The Company is accounting for the joint development activities
under the AstraZeneca Agreement as a joint risk-sharing
collaboration in accordance with ASC 808
because both the Company and AstraZeneca are active participants in
the oversight of the DEDUCTIVE trial via their participation on a
joint steering committee and are exposed to significant risk and
rewards in connection with the activity based on their obligation
to share in the costs. AstraZeneca does not meet the definition of
a “Customer,” thus the joint development activities under the
AstraZeneca Agreement are not accounted for under ASC
606.
Payments from AstraZeneca with respect to its share of the external
costs for the DEDUCTIVE trial incurred by the Company pursuant to a
joint development plan are recorded as a reduction in research and
development expenses due to the joint risk-sharing nature of the
activities that is not representative of a vendor-customer
relationship.
The Company records reimbursements from AstraZeneca for external
study costs as a reduction in research and development expense
during the period that reimbursable expenses are incurred. As a
result of the cost sharing provisions in the AstraZeneca Agreement,
the Company’s research and development expenses were reduced by
approximately $0.2 million and $0.3 million in the three months
ended June 30, 2022 and 2021, respectively, and by $0.4
million and by $0.5 million in the six months ended June 30,
2022 and 2021, respectively. The amount due to the Company from
AstraZeneca pursuant to the cost-sharing provision was
approximately $0.4 million as of June 30, 2022.
Out-License Agreements
EUSA
In December 2015, the Company entered into a license agreement with
EUSA Pharma (UK) Limited (“EUSA” and the “EUSA Agreement”), under
which the Company granted to EUSA the exclusive, sublicensable
right to develop, manufacture and commercialize tivozanib in the
territories of Europe (excluding Russia, Ukraine and the
Commonwealth of Independent States), Latin America (excluding
Mexico), Africa and Australasia (collectively, the “EUSA Licensed
Territories”) for all diseases and conditions in humans, excluding
non-oncologic diseases or conditions of the eye. In March of 2022,
EUSA was acquired by Recordati, S.p.A (“Recordati”). As a result of
the acquisition, all rights and obligations under the EUSA
Agreement are transferred to Recordati.
EUSA has made research and development reimbursement and milestone
payments to the Company totaling $12.5 million, including (i)
a $2.5 million upfront payment upon the execution of the EUSA
Agreement in December 2015, (ii) a $4.0 million research and
development payment in September 2017 upon its receipt of marketing
approval from the European Commission in August 2017 for FOTIVDA
(tivozanib) for the treatment of RCC, and (iii) three $2.0 million
milestones upon its receipt of reimbursement approvals in each of
(a) February 2018 from the National Institute for Health and Care
Excellence (“NICE”) in the United Kingdom, (b) November 2018 from
the German Federal Association of the Statutory Health Insurances
(“GKV-SV”) in Germany and (c) February 2019 from the Ministry of
Health, Consumer Affairs and Social Welfare (“MSCBS”) in Spain.
These reimbursement milestones payments were received in March
2018, December 2018 and May 2019, respectively. In addition, in
September 2017, EUSA elected to opt-in to co-develop the Phase 2
clinical trial of tivozanib in combination with OPDIVO (nivolumab)
in the first-line and the second-line treatment of RCC (the “TiNivo
trial”). EUSA made an additional research and development
reimbursement payment to the Company of $2.0 million in October
2017, in advance of the completion of the TiNivo trial for its
approximate 50% share of the total costs of the TiNivo
trial.
As of June 30, 2022, the Company is eligible to receive (i) a
$2.0 million milestone payment with respect to reimbursement
approval in each of France and Italy, (ii) an additional $2.0
million for the grant of marketing approval for RCC in the three
licensed countries outside of the EU, as mutually agreed by the
parties, of which two approvals have been obtained in New Zealand
in July 2019 and in South Africa in September 2020, (iii) a payment
of $2.0 million per indication in connection with a filing by
EUSA with the European Medicines Agency (“EMA”) for marketing
approval for tivozanib for the treatment of each of up to three
additional indications, (iv) $5.0 million per indication in
connection with the EMA’s grant of marketing approval for each of
up to three additional indications, and (v) up to $335.0 million
upon EUSA’s achievement of certain sales thresholds. In addition,
the Company is also eligible to receive tiered double-digit
royalties on net sales, if any, of licensed products in the EUSA
Licensed Territories ranging from a low double digit up to
mid-twenty percent depending on the level of annual net sales. No
milestone payments nor any research and development reimbursement
payments were earned in the three and six months ended
June 30, 2022 and 2021. The Company is also eligible to
receive an additional research and development reimbursement
payment of up to $20.0 million, for the Company’s Phase 3
randomized, controlled, multi-center, open-label clinical trial
comparing tivozanib to an approved therapy, sorafenib
(Nexavar®),
in RCC patients whose disease had relapsed or become refractory to
two or three prior systemic therapies (the “TIVO-3 trial”), if
Recordati elects to opt-in to that study.
Pursuant to the KKC Agreement (as defined below), the Company is
required to pay KKC a 30% sublicense fee related to earned
milestone payments and royalties from EUSA. However, research and
development reimbursement payments by EUSA are excluded from the
30% sublicense fee due to KKC, subject to certain limitations. If
Recordati elects to opt-in to the TIVO-3 trial, only approximately
$8.7 million of the $20.0 million research and development payment
would be subject to the 30% sublicense fee due to KKC. The $2.0
million milestone payments the Company earned in each of February
2018, November 2018 and February 2019 upon EUSA’s reimbursement
approval for FOTIVDA from the NICE in the United Kingdom, the
GKV-SV in Germany and the MSCBS in Spain, respectively, for the
first-line treatment of RCC were subject to the 30% KKC sublicense
fee, or $0.6 million, each. The sub-license fees for EUSA’s
reimbursement approvals in the United Kingdom, Germany and Spain
were paid in April 2018, January 2019 and June 2019,
respectively.
Recordati, following its acquisition of EUSA, is obligated to use
commercially reasonable efforts to seek regulatory approval for and
commercialize tivozanib throughout the EUSA Licensed Territories in
RCC. Recordati has responsibility for all activities and costs
associated with the further development, manufacture, regulatory
filings and commercialization of tivozanib in the EUSA Licensed
Territories.
Accounting Under ASC 606
Under ASC 606, the upfront consideration and regulatory milestones
included in the $12.5 million aggregate transaction price, as
described above, were being recognized as collaboration and
licensing revenue over the Company’s estimated substantive
performance period. Under ASC 606, upon the achievement of a
regulatory milestone, the amount that represented the cumulative
catch-up for the period from contract execution in December 2015
through the date of the milestone achievement was recognized as
collaboration and licensing revenue, with the balance classified as
deferred revenue and recognized as collaboration and licensing
revenue over the remainder of the performance period. As of March
31, 2022, the Company determined that it has fulfilled its
performance obligations under the contract in accordance with ASC
606 as the license was previously transferred and the Company is
not currently providing substantive support under the EUSA
Agreement. The Company recognized license and collaboration revenue
of $0.0 million and approximately $0.5 million in the three
months ended June 30, 2022 and 2021, respectively, and
approximately $0.6 million and $1.0 million in the six months ended
June 30, 2022 and 2021, respectively.
None of the remaining regulatory-related milestones are included in
the transaction price as these milestone amounts were fully
constrained. As part of its evaluation of the constraint, the
Company considered multiple factors: (i) the remaining
reimbursement and marketing approvals in RCC are outside of the
control of EUSA and vary on a country-by-country basis; (ii)
milestones related to the submission filings for EMA approval of
tivozanib in up to three additional indications are contingent upon
the success of future clinical trials in additional indications, if
any, and are outside of the control of EUSA; (iii) milestones
related to the marketing approval by the EMA for tivozanib in up to
three additional indications are contingent upon the success of the
corresponding future clinical trials, if any, and are outside of
the control of EUSA; and (iv) efforts by EUSA. The Company will
assess any substantive performance obligations in connection with
the achievement of future regulatory-related milestones. If the
Company does not have any substantive performance obligations, the
full amount of the milestone will be recognized in the period the
milestone is achieved.
Any consideration related to sales-based milestones (including
royalties) will be recognized when the related sales occur as these
amounts have been determined to relate predominantly to the license
granted to EUSA and therefore are recognized at the later of when
the performance obligation is satisfied (or partially satisfied) or
the related sales occur. The
Company will re-evaluate the transaction price, including its
estimated variable consideration for milestones included in the
transaction price and all constrained amounts, in each reporting
period and as uncertain events are resolved or other changes in
circumstances occur.
In November 2017, the Company began earning sales royalties upon
EUSA’s commencement of the first commercial launch of
FOTIVDA
with the initiation of product sales in Germany. EUSA has received
reimbursement approval for and commercially launched FOTIVDA in
Germany, the United Kingdom and Spain, as well as in some
additional non-EU5 countries. EUSA is working to secure
reimbursement approval in Italy and France and commercially launch
FOTIVDA in additional EUSA licensed territories. The Company
recognized royalty revenue of approximately $0.3 million in each of
the three months ended June 30, 2022 and 2021 and
approximately $0.5 million and $0.7 million in the six months
ended June 30, 2022 and 2021, respectively.
The Company recognized total revenues under the EUSA Agreement of
approximately $0.3 million and $0.8 million in the three months
ended June 30, 2022 and 2021, respectively, and approximately
$1.1 million and $1.7 million in the six months ended
June 30, 2022 and 2021, respectively. The amount due to the
Company from EUSA pursuant to the EUSA Agreement was approximately
$0.3 million as of June 30, 2022.
Biodesix
In April 2014, the Company entered into a worldwide co-development
and collaboration agreement (the “Biodesix Agreement”) with
Biodesix, Inc. (“Biodesix”) to develop and commercialize
ficlatuzumab, the Company’s potent humanized immunoglobulin
G1
(“IgG1”)
monoclonal antibody that targets HGF. Under the Biodesix Agreement,
prior to the first commercial sale of ficlatuzumab, each party had
the right to elect to discontinue its funding obligation for
further development or commercialization efforts with respect to
ficlatuzumab in exchange for reduced economics in the program,
which is referred to as an “Opt-Out.” In September 2020, the
Company regained full global rights to ficlatuzumab, effective
December 2, 2020, when Biodesix exercised its “Opt-Out” rights
under the Biodesix Agreement.
Pursuant to the terms of the Biodesix Agreement, as a result of
Biodesix’s election to Opt-Out, Biodesix will (i) continue to be
responsible for reimbursement of development costs with respect to
the ongoing open label Phase 2 investigator-sponsored clinical
trial of ficlatuzumab in combination with ERBITUX® (cetuximab) in
HNSCC (the “Phase 2 HNSCC Trial”), (ii) cease to be entitled to 50%
sharing of profits resulting from commercialization of
ficlatuzumab, (iii) be entitled to a low double digit royalty on
future product sales and 25% of future licensing revenue less
approximately $2.5 million that Biodesix would be required to
pay to the Company pursuant to the October 2016 amendment to the
Biodesix Agreement and excluding contributions to research and
development expenses and (iv) remain responsible for development
obligations under the Biodesix Agreement with respect to VeriStrat.
Biodesix and the Company also remain obligated to negotiate a
commercialization agreement to delineate their rights and
obligations in the event of any commercialization of VeriStrat with
ficlatuzumab. As a result of Biodesix’s decision to Opt-Out, the
Company now has worldwide licensing rights and sole decision-making
authority with respect to further development and commercialization
of ficlatuzumab. The payment obligations between the parties under
the Biodesix Agreement are in effect until completion of the Phase
2 HNSCC Trial.
Biogen Idec International GmbH
In March 2009, the Company entered into an exclusive option and
license agreement with Biogen regarding the development and
commercialization of the Company’s discovery-stage ErbB3-targeted
antibodies, including AV-203, for the potential treatment and
diagnosis of cancer and other diseases outside of North America
(the “Biogen Agreement”). Under the Biogen Agreement, the Company
was responsible for developing ErbB3 antibodies through completion
of the first Phase 2 clinical trial designed in a manner that, if
successful, would generate data sufficient to support advancement
to a Phase 3 clinical trial.
In March 2014, the Company and Biogen amended the Biogen Agreement
(the “Biogen Amendment”). Pursuant to the Biogen Amendment, Biogen
agreed to the termination of its rights and obligations under the
Biogen Agreement, including Biogen’s option to (i) obtain a
co-exclusive (with the Company) worldwide license to develop and
manufacture ErbB3 targeted antibodies and (ii) obtain exclusive
commercialization rights to ErbB3 products in countries in the
world other than North America. As a result, the Company has
worldwide rights to AV-203. Pursuant to the Biogen Amendment, the
Company is obligated to use reasonable efforts to seek a
collaboration partner for the purpose of funding further
development and commercialization of ErbB3 targeted antibodies. The
Company is also obligated to pay Biogen a percentage of milestone
payments received by the Company from future partnerships after
March 28, 2016 and single digit royalty payments on net sales
related to the sale of ErbB3 products, if any, up to a cumulative
maximum amount of $50.0 million.
In-License Agreements
St. Vincent’s
In July 2012, the Company entered into a license agreement with St.
Vincent’s, under which the Company obtained an exclusive, worldwide
sublicensable right to research, develop, manufacture and
commercialize products for human therapeutic, preventative and
palliative applications that benefit from inhibition or decreased
expression or activity of growth differentiation factor-15
(“GDF15”), which is also referred to as MIC-1 (the “St. Vincent’s
Agreement”). Under the St. Vincent’s Agreement, St. Vincent’s also
granted the Company non-exclusive rights for certain related
diagnostic products and research tools.
In order to sublicense certain necessary intellectual property
rights to Novartis AG in August 2015, the Company amended and
restated the St. Vincent’s Agreement and made an additional upfront
payment to St. Vincent’s of $1.5 million. As of June 30, 2022,
the Company is required to make future milestone payments, up to an
aggregate total of
$12.1 million,
upon the earlier of the achievement of specified development and
regulatory milestones or a specified date for the first indication,
and upon the achievement of specified development and regulatory
milestones for the second and third indications, for licensed
therapeutic products, some of which payments may be increased by a
mid to high double-digit percentage rate for milestone payments
made after the Company grants any sublicense, depending on the
sublicensed territory. In February 2022, the Company paid a
$2.3 million time-based milestone obligation which became due
to St. Vincent’s in January 2022. The Company will also be required
to pay St. Vincent’s tiered royalty payments equal to a
low-single-digit percentage of any net sales it or its sublicensees
make from licensed therapeutic products. The royalty rate escalates
within the low-single-digit range during each calendar year based
on increasing licensed therapeutic product sales during such
calendar year.
The St. Vincent’s Agreement remains in effect until the later of
ten years after the date of first commercial sale of licensed
therapeutic products in the last country in which a commercial sale
is made, or expiration of the last-to-expire valid claim of the
licensed patents, unless we elect, or St. Vincent’s elects, to
terminate the St. Vincent’s Agreement earlier. We have the right to
terminate the St. Vincent’s Agreement on six months’ notice if we
terminate our GDF15 research and development programs as a result
of the failure of a licensed therapeutic product in preclinical or
clinical development, or if we form the reasonable view that
further GDF15 research and development for the treatment of
cachexia is not commercially viable, and we are not then in breach
of any of our obligations under the St. Vincent’s
Agreement.
Kyowa Kirin Co. (KKC)
In December 2006, the Company entered into an agreement with KKC
(the “KKC Agreement”), under which it obtained an exclusive,
sublicensable license to develop, manufacture and commercialize
tivozanib in all territories in the world except for Asia and the
Middle East, where KKC retained the rights to tivozanib. Under the
KKC Agreement, the Company obtained exclusive rights to tivozanib
in its territory under certain KKC patents, patent applications and
know-how for the diagnosis, prevention and treatment of all human
diseases and conditions (the “Field”). On August 1, 2019, the
Company entered into an amendment to the KKC Agreement pursuant to
which KKC repurchased the non-oncology rights to tivozanib in the
Company’s territory, excluding the rights the Company has
sublicensed to EUSA under the EUSA Agreement. The Company has
upfront, milestone and royalty payment obligations to KKC under the
KKC Agreement related to the amended Field for oncology development
by the Company, and following the amendment, KKC also has upfront,
milestone and royalty payment obligations to the Company related to
non-oncology development by KKC in the Company’s territory.
Pursuant to the amendment to the KKC Agreement, KKC made a
non-refundable upfront payment to the Company in the amount of
$25.0 million that was received in September 2019, and KKC waived
the one-time milestone payment of $18.0 million which would have
otherwise been payable by the Company upon obtaining marketing
approval on March 10, 2021 for tivozanib in the United States.
KKC is required to make milestone payments to the Company of up to
an aggregate of $390.7 million upon the successful achievement of
certain development and sales milestones of tivozanib in
non-oncology indications, of which the Company received a $2.8
million milestone payment in August 2020.
KKC Agreement
Upon entering into the KKC Agreement in 2006, the Company made an
upfront payment in the amount of $5.0 million. In March 2010, the
Company made a milestone payment to KKC in the amount of $10.0
million in connection with the dosing of the first patient in the
Company’s clinical trial of tivozanib for the first-line treatment
of RCC, which we refer to as our TIVO-1 trial. In December 2012,
the Company made a $12.0 million milestone payment to KKC in
connection with the acceptance by the FDA of the Company’s 2012 New
Drug Application filing for tivozanib. Pursuant to the amendment to
the KKC Agreement, KKC waived the one-time milestone payment
of
$18.0 million which would have
otherwise been payable by the Company upon obtaining marketing
approval on March 10, 2021 for tivozanib in the United States.
Each milestone under the KKC Agreement was a one-time only payment
obligation.
The Company has no remaining development and commercialization
milestone payments due to KKC under the KKC Agreement.
The Company is required to pay tiered royalty payments on net sales
it makes of tivozanib in its North American territory, which range
from the low to mid-teens as a percentage of net sales. The royalty
rate escalates within this range based on increasing tivozanib
sales. The Company’s royalty payment obligations in a particular
country in its territory begin on the date of the first commercial
sale of tivozanib in that country, and end on the later of twelve
years after the date of first commercial sale of tivozanib in that
country or the date of the last to expire of the patents covering
tivozanib that have been issued in that country. On March 10,
2021, the FDA approved
FOTIVDA
in the United States for the treatment of adult patients with R/R
RCC following two or more prior systemic therapies. On
March 22, 2021, the Company commenced product sales of FOTIVDA
in the United States. The Company recognized approximately $3.0
million and $0.8 million in the three months ended June 30,
2022 and 2021, respectively, and $5.4 million and $0.9 million
in
the six months ended June 30, 2022 and 2021,
respectively,
in royalties due to KKC on net product sales of FOTIVDA in the
United States
in its Statement of Operations
as a component of cost of products sold.
If the Company sublicenses any of its rights to tivozanib to a
third party, as it has done with EUSA, the sublicense defines the
payment obligations of the sublicensee, which may vary from the
milestone and royalty payment obligations under the KKC Agreement
relating to rights the Company retains. The Company is required to
pay KKC a fixed 30% of amounts the Company receives from its
sublicensees, including upfront license fees, milestone payments
and royalties, but excluding amounts the Company receives for
research and development reimbursement payments or equity
investments, subject to certain limitations.
In connection with the EUSA Agreement, the Company is required to
pay KKC the 30% sublicense fee related to earned milestone payments
and royalties from EUSA. However, research and development
reimbursement payments by EUSA are excluded from the 30% sublicense
fee, subject to certain limitations. If Recordati elects to opt-in
to the TIVO-3 trial, only approximately $8.7 million of the $20.0
million research and development payment would be subject to the
30% sublicense fee due to KKC. Refer to the section above, “Out
License Agreements
– EUSA”,
for further discussion of the actual 30% sublicense fees incurred
and paid to-date to KKC.
The
Company and KKC each have access to and can benefit from the other
party’s clinical data and regulatory filings with respect to
tivozanib and biomarkers identified in the conduct of activities
under the KKC Agreement,
as related to the amended Field for oncology development. Under the
KKC Agreement, the Company is obligated to use commercially
reasonable efforts to develop and commercialize tivozanib in its
territory.
The KKC Agreement will remain in effect until the expiration of all
of the Company’s royalty and sublicense revenue obligations,
determined on a product-by-product and country-by-country basis,
unless terminated earlier. If the Company fails to meet its
obligations under the KKC Agreement and is unable to cure such
failure within specified time periods, KKC can terminate the KKC
Agreement, resulting in a loss of our rights to tivozanib and an
obligation to assign or license to KKC any intellectual property or
other rights the Company may have in tivozanib, including its
regulatory filings, regulatory approvals, patents and trademarks
for tivozanib.
August 1, 2019 Amendment to the KKC Agreement
In addition to the non-refundable upfront payment to the Company
pursuant to the amendment to the KKC Agreement in the amount of
$25.0 million and the waiver of the $18.0 million milestone for
United States approval of tivozanib, the Company earned and
received a
$2.8 million development milestone payment in August 2020 pursuant
to the amendment to the KKC Agreement upon the acceptance of KKC’s
investigational new drug (“IND”),
application for a non-oncology use of tivozanib by the
Pharmaceuticals and Medical Devices Agency of Japan on August 2,
2020. KKC is also required to make remaining milestone payments to
the Company of up to an aggregate of $387.9 million upon the
successful achievement of certain development and sales milestones
of tivozanib in non-oncology indications. KKC is required to make
tiered royalty payments to the Company on net sales of tivozanib in
non-oncology indications in the Company’s territory, which range
from high single digit to low double digits as a percentage of net
sales. The royalty rate escalates within this range based on
increasing tivozanib sales, subject to certain adjustments. KKC’s
royalty payment obligations in a particular country in the
Company’s territory begin on the date of the first commercial sale
of tivozanib in that country, and end on the later of the
expiration date of the last valid claim of a patent application or
patent owned by KKC covering tivozanib or 10 years after the date
of first commercial sale of tivozanib in non-oncology indications
in that country. No milestone payments were earned in the three and
six months ended June 30, 2022 and 2021.
If KKC sublicenses any of its rights to tivozanib to a third-party,
KKC is required to pay the Company a percentage of amounts received
from the respective sublicensees related to the Company’s
territory, including upfront license fees, milestone payments and
royalties, but excluding amounts received in respect of research
and development reimbursement payments or equity investments,
subject to certain limitations.
Accounting Analysis Under the August 1, 2019 Amendment to the KKC
Agreement
Following the repurchase of non-oncology rights by KKC, the amended
KKC Agreement is accounted for as two distinct agreements: (i) the
KKC Agreement by which the Company has upfront, milestone and
royalty payment obligations to KKC related to the Company’s
oncology development of tivozanib in the amended Field for the
Company’s territory that continues to be accounted for under ASC
730,
Research and Development,
and (ii) the amended KKC Agreement by which KKC has upfront,
milestone and royalty payment obligations to the Company related to
its non-oncology development of tivozanib for the Company’s
territory that will be accounted for under ASC
606.
The Company evaluated the amendment to the KKC Agreement under ASC
606 and determined that KKC met the definition of a “Customer” as
the Company considers the licensing or sale of intellectual
property rights to be an output of the Company’s ordinary
activities and is central to the operations of the Company. The
Company determined that the amendment to the KKC Agreement
contained a single performance obligation related to the Company’s
transfer of rights to non-oncology intellectual property and
know-how to KKC, excluding the rights the Company has sublicensed
to EUSA under the EUSA Agreement. In addition, the Company
determined that the $25.0 million non-refundable upfront payment
received from KKC in September 2019 constituted the amount of the
consideration to be included in the transaction price and
attributed this amount to the Company’s single performance
obligation. The Company satisfied this performance obligation
during the third quarter of 2019. Accordingly, the Company
recognized the $25.0 million in consideration as revenue in the
third quarter of 2019. The Company concluded the performance
obligation was satisfied at a point in time because any know-how or
clinical data generated from the Company’s ongoing oncology
development of tivozanib would not benefit KKC’s non-oncology
development of tivozanib.
In the third quarter of 2020, the Company increased the transaction
price to $27.8 million to include the $2.8 million development
milestone that was earned in August 2020 upon the acceptance of
KKC’s IND application for a non-oncology use of tivozanib by the
Pharmaceuticals and Medical Devices Agency of Japan. Accordingly,
the Company recognized the $2.8 million in consideration as revenue
in the third quarter of 2020 as the Company did not have any
ongoing performance obligations under the amendment to the KKC
Agreement.
None of KKC’s remaining development and regulatory milestones to
the Company related to its non-oncology development of tivozanib
for the Company’s territory were included in the transaction price,
as these milestone amounts were fully constrained. As part of its
evaluation of the constraint, the Company considered multiple
factors: (i) regulatory approvals are outside of the control of
KKC; (ii) certain development and regulatory milestones are
contingent upon the success of future clinical trials, if any,
which is out of the control of KKC; and (iii) efforts by KKC. Any
consideration related to development and regulatory milestones owed
by KKC to the Company will be recognized when the corresponding
milestones are no longer constrained as the Company does not have
any ongoing performance obligations. Any consideration related to
sales-based milestones (including royalties) will be recognized
when the related sales occur as these amounts have been determined
to relate predominantly to the intellectual property transferred to
KKC and therefore are recognized at the later of when the
performance obligation is satisfied or the related sales
occur.
(5) Other Accrued Liabilities
Other accrued expenses consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022 |
|
December 31,
2021 |
FOTIVDA U.S. Product Royalties |
3,001 |
|
|
2,011 |
|
FOTIVDA Federal Rebates, Customer Credits and Co-Pay
Assistance |
2,298 |
|
|
1,170 |
|
Professional Fees |
1,937 |
|
|
1,107 |
|
Other |
767 |
|
|
1,133 |
|
Total |
8,003 |
|
|
5,421 |
|
(6) Hercules Loan Facility
On May 28, 2010, the Company entered into a loan and security
agreement (the “First Loan Agreement”) with Hercules Capital Inc.
and certain of its affiliates (“Hercules”). The First Loan
Agreement was subsequently amended in March 2012, September 2014,
May 2016 and amended and restated in December 2017 (the “2017 Loan
Agreement” and as amended by the 2020 Loan Amendment (as defined
below), the 2021 Loan Amendment (as defined below) and the 2022
Loan Amendment (as defined below) the “Loan
Agreement”).
On August 7, 2020, the Company entered into a first amendment to
the 2017 Loan Agreement (the “2020 Loan Amendment”) to provide the
Company,
subject to certain terms and conditions, with an additional term
loan in an aggregate principal amount of up to $35.0 million (the
“2020 Loan Facility”) in up to four tranches to be used to
refinance outstanding loans under the 2017 Loan Agreement, and for
general working capital purposes. The Company received the initial
$15.0 million of the 2020 Loan Facility upon the closing of the
2020 Loan Amendment, of which approximately $9.7 million was used
to retire the then outstanding balance under the 2017 Loan
Agreement and of which approximately $5.3 million was new loan
funding which was used for general working capital
purposes.
The remainder of the loan amount is available to the Company, at
its option, subject to certain terms and conditions, including upon
the achievement of the following milestones: (i) the second tranche
in the initial amount of $10.0 million (“Tranche Two”) was
available through June 30, 2021 upon achieving FDA approval of
FOTIVDA (“Performance Milestone I”), (ii) the third tranche of $5.0
million (“Tranche Three”) was initially available from July 1, 2021
through January 31, 2022 assuming the Company was to achieve $20.0
million in U.S. net product revenues from sales of FOTIVDA, by no
later than December 31, 2021 (“Performance Milestone II”), and
(iii) the fourth tranche of $5.0 million (“Tranche Four”) was
initially available through June 30, 2022 contingent upon the
achievement of both Performance Milestone I and Performance
Milestone II, and subject to the consent of Hercules.
The 2020 Loan Amendment also amended the 2017 Loan Agreement by:
(i) extending maturity until September 1, 2023, which is extendable
to September 1, 2024 at the Company’s option assuming the Tranche
Three funding has occurred, (ii) providing for an interest-only
period beginning on the closing date of 2020 Loan Amendment and
ending on September 30, 2021, which period may be extended through
September 30, 2022 provided the Company achieves Performance
Milestone I and further extendable through March 31, 2023 after the
Tranche Three funding has occurred, if at all, and (iii) revising
the per annum interest rate to the greater of (x) 9.65% and (y) an
amount equal to 9.65% plus the prime rate as reported in the Wall
Street Journal minus 3.25% as determined daily, provided however,
that the per annum interest rate shall not exceed 15%. Principal
payments were scheduled to commence on October 1, 2021 at the
earliest, as described above. The interest rate as of June 30,
2022 was 11.15% based upon increases in the prime rate during 2022,
in March, May and June.
Per the terms of the 2020 Loan Facility, principal will be repaid
in equal monthly installments following the conclusion of the
interest-only period. The Company may prepay all of the outstanding
principal and accrued interest under the 2020 Loan Facility,
subject to a prepayment charge up to 3.0% in the first year
following the closing of the 2020 Loan Amendment, decreasing to
2.0% in year two and 1.0% in year three. The Company is obligated
to make an end-of-term payment of 6.95% of the aggregate amount of
loan funding received under the 2020 Loan Facility on the earlier
of the maturity of the loan or the date on which the Company
prepays any outstanding loan balance. The approximate $0.8 million
end-of-term payment under the 2017 Loan Agreement continued to be
due and was paid on July 1, 2021. In connection with the 2020 Loan
Amendment, the Company incurred approximately $0.3 million in loan
issuance costs paid directly to Hercules, which are accounted for
as a loan discount. The 2020 Loan Amendment was accounted for as a
loan modification in accordance with ASC 470-50.
The 2020 Loan Facility includes various financial and operating
covenants, including that the Company maintain an unrestricted cash
position of at least $10.0 million through the date the Third
Tranche funding is received and at least $5.0 million thereafter
through the maturity of the loan. The Company was also required to
achieve greater than or equal to 75% of its forecasted U.S. net
product revenues from its sales of tivozanib over a six month
trailing period, as defined and measured on a monthly basis,
effective upon the earlier of receiving Third Tranche funding and
the month of April 2022.
On February 1, 2021, the Company entered into the second
amendment to the 2017 Loan Agreement (the “2021 Loan Amendment”),
which increased the 2020 Loan Facility from up to $35.0 million to
up to $45.0 million following FDA approval of FOTIVDA. The 2021
Loan Amendment makes certain changes to the 2020 Loan Amendment,
including, among other things, (i) increasing Tranche Two funding
upon achieving Performance Milestone I from $10.0 million to $20.0
million, thereby increasing the total amount of then unfunded term
loan commitments under the 2020 Loan Facility from $20.0 million to
$30.0 million, (ii) increasing the amount of U.S. net product
revenues from sales of FOTIVDA required to achieve Performance
Milestone II from $20.0 million to $35.0 million and changing the
deadline for achieving
Performance Milestone II from December 31, 2021 to April 1,
2022 and (iii) increasing the amount of the financial covenant for
the maintenance of an unrestricted cash position from at least
$10.0 million to at least $15.0 million from the date the Tranche
Two funding is received until the date the Tranche Three funding is
received and at least $10.0 million thereafter through the maturity
of the Loan Agreement. In connection with the 2021 Loan Amendment,
the Company incurred approximately $0.1 million in loan issuance
costs paid directly to Hercules, which are accounted for as a loan
discount.
On March 11, 2021, the Company completed the $20.0 million
drawdown of Tranche Two funding under the 2021 Loan Amendment that
was made available in connection with the achievement of
Performance Milestone I upon FDA approval of FOTIVDA on
March 10, 2021. The achievement of Performance Milestone I
extended the interest-only period by twelve months from
September 30, 2021 to September 30, 2022 and increased
the amount of unrestricted cash required for the Company to satisfy
the minimum financial covenant during the period between receiving
Tranche Two funding and Tranche Three funding from $10.0 million to
$15.0 million.
On December 22, 2021, the Company completed the $5.0 million
drawdown of Tranche Three funding under the 2021 Loan Amendment
that was made available in connection with the achievement of
Performance Milestone II upon the achievement of $35.0 million
in U.S. net product revenues from sales of FOTIVDA. The achievement
of Performance Milestone II extended the interest-only period by
six months from September 30, 2022 to March 31, 2023, extended the
loan maturity by one year from September 1, 2023 to September 1,
2024 and decreased the amount of unrestricted cash required for the
Company to satisfy the minimum financial covenant from
$15.0 million to $10.0 million thereafter through the
maturity of the Loan Agreement.
On March 8, 2022, the Company entered into the third amendment to
the 2017 Loan Agreement (the “2022 Loan Amendment”). The 2022 Loan
Amendment (i) changed the operating covenant to decrease the
achievement of greater than or equal to 75% of the Company's
forecasted U.S. net product revenues from its sales of tivozanib
over a six-month trailing period to 65%, as defined and measured on
a monthly basis, and extended the month of commencement from April
2022 to June 2022, (ii) added a cash waiver, at the Company's
election, in the event its actual U.S. net product revenues from
its sales of tivozanib over a six-month trailing period are below
the monthly minimum operating covenant of 65%, such that the
Company's unrestricted cash position is equal to or greater than
the then total outstanding principal under the Loan Agreement for
each day of such month, (iii) changed Tranche Four funding, in the
amount
of $5.0 million, that was subject to the consent of Hercules
to the achievement of $30.0 million in net product revenues
from sales of FOTIVDA over a trailing three-month period, or
Performance Milestone III, and extended the availability of Tranche
Four funding from June 30, 2022 to December 15, 2022, and (iv)
increased the amount of unrestricted cash required for the Company
to satisfy the minimum financial covenant from $10.0 million
to $15.0 million upon the earlier of receiving the Tranche
Four funding or January 1, 2023, through the maturity of the Loan
Agreement.
As of June 30, 2022, the total outstanding principal under the
Loan Agreement was $40.0 million, principal payments are scheduled
to commence on April 1, 2023 and the corresponding end-of-term
payments under the Loan Agreement, in the aggregate amount of
approximately $2.8 million, are due upon the current loan maturity
date of September 1, 2024. As of June 30, 2022, $5.0
million remains available to the Company in committed funding under
the Loan Agreement, in Tranche Four funding in connection with the
achievement of Performance Milestone III for
$30.0 million in net product revenues from sales of FOTIVDA
over a trailing three-month period by December 15, 2022.
The unamortized discount to be recognized over the remainder of the
loan period was approximately $1.6 million and $2.0 million as of
June 30, 2022 and December 31, 2021, respectively. Per
the Loan Agreement, the end-of-term payment of approximately $0.8
million was paid on July 1, 2021, as scheduled.
The Loan Agreement is secured by substantially all of the Company’s
assets, excluding intellectual property. The Loan Agreement
provides that certain events shall constitute a default by the
Company, including failure by the Company to pay amounts under the
Loan Agreement when due; breach or default in the performance of
any covenant under the Loan Agreement by the Company, subject to
certain cure periods; insolvency of the Company and certain other
bankruptcy proceedings involving the Company; default by the
Company of obligations involving indebtedness in excess of
$500,000; and the occurrence of an event or circumstance that would
have a material adverse effect upon the business of the Company. As
of June 30, 2022, the Company was in compliance with all loan
covenants, Hercules has not asserted any events of default and the
Company does not believe that there has been a material adverse
effect as defined in the Loan Agreement.
The Company has determined that the risk of subjective acceleration
under the material adverse events clause is remote and therefore
has classified the outstanding principal as a long-term liability
based on the timing of scheduled principal payments.
Future minimum payments, including interest and principal, under
the loans payable outstanding as of June 30, 2022 are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
Year Ending December 31:
|
|
Amount |
|
|
|
2022 (remaining six months) |
|
$ |
2,255 |
|
2023 |
|
22,927 |
|
2024 |
|
24,666 |
|
|
|
$ |
49,848 |
|
Less amount representing interest |
|
(7,068) |
|
Less unamortized discount |
|
(1,571) |
|
Less deferred charges |
|
(2,780) |
|
Less loans payable current, net of discount |
|
(5,182) |
|
Loans payable non-current, net of discount |
|
$ |
33,247 |
|
(7) Common Stock
In June 2022, the Company amended its certificate of incorporation,
which increased the number of authorized shares of common stock,
$0.001 par value, by 30,000,000 from 50,000,000 shares to
80,000,000 shares. The amendment was approved by the Company’s
board of directors on April 9, 2022 and adopted by its stockholders
on June 7, 2022 at the Company’s 2022 annual meeting of
stockholders.
As of June 30, 2022, the Company had 80,000,000 authorized
shares of common stock, $0.001 par value, of which 34,614,284
shares were issued and outstanding.
Public Offering – March 2021
On March 26, 2021, the Company completed an underwritten public
offering of 6,900,000 shares of its common stock, including the
full exercise by the underwriters of their option to purchase an
additional 900,000 shares, at the public offering price of $8.00
per share for gross proceeds of approximately $55.2 million. The
net offering proceeds to the Company were approximately $51.7
million after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company.
Universal Shelf Registration Statement
On November 9, 2020, the Company filed a shelf registration
statement on Form S-3 with the SEC, which covers the offering,
issuance and sale of up to $300.0 million of its common stock,
preferred stock, debt securities, warrants and/or units (the “2020
Shelf”). The 2020 Shelf (File No. 333-249982) was declared
effective by the SEC on November 18, 2020 and was filed to replace
the Company’s then existing shelf registration statement, which was
terminated. As of June 30, 2022, there was approximately
$213.0 million available for future issuance of common stock,
preferred stock, debt securities, warrants and/or
units.
Sales Agreement with SVB Leerink
In February 2018, the Company entered into a
sales agreement with SVB Leerink LLC (“SVB Leerink” and the “SVB
Leerink Sales Agreement”) pursuant to which the Company may issue
and sell shares of its common stock from time to time up to an
aggregate amount of $50.0 million, at its option, through SVB
Leerink as its sales agent, with any sales of common stock through
SVB Leerink being made by any method that is deemed an
“at-the-market offering” as defined in Rule 415 promulgated under
the Securities Act of 1933, as amended (the “Securities Act”), or
in other transactions pursuant to an effective shelf registration
statement on Form S-3. The Company agreed to pay SVB Leerink a
commission of up to 3% of the gross proceeds of any sales of common
stock pursuant to the SVB Leerink Sales Agreement. The Company sold
470,777 shares, 1,251,555 shares, 1,070,175 shares and 330,688
shares pursuant to the SVB Leerink Sales Agreement, resulting in
proceeds net of commissions of approximately $10.3 million, $7.5
million, $5.9 million and $3.4 million in the fourth quarter of
2018, February 2019, November 2020 and March 2021, respectively. As
of June 30, 2022, approximately $22.2 million was available
for issuance in connection with future stock sales pursuant to the
SVB Leerink Sales Agreement.
(8) Stock-based Compensation
Stock Incentive Plan
The Company previously maintained the 2010 Stock Incentive Plan
(the “2010 Plan”) for employees, consultants, advisors and
directors, as amended in March 2013, June 2014 and June
2017.
In April 2019, the Company’s board of directors adopted the 2019
Equity Incentive Plan (as amended, the “2019 Plan”) and on June 12,
2019 the stockholders approved the 2019 Plan at the Annual Meeting
of Stockholders. The 2019 Plan provides similar terms as the 2010
Plan, including: (i) a provision for the grant of equity awards
such as stock options and restricted stock; (ii) that the exercise
price of incentive stock options cannot be less than 100% of the
fair market value of the common stock on the date of the grant for
participants who own less than 10% of the total combined voting
power of stock of the Company and not less than 110% for
participants who own more than 10% of the total combined voting
power of the stock of the Company; (iii) that options and
restricted stock granted under the 2019 Plan vest over periods as
determined by the Company's board of directors, which generally are
equal to four years; and (iv) that options granted under the 2019
Plan expire over periods as determined by the Company’s board of
directors, which generally are ten years from the date of grant. In
April 2020, the Company's board of directors adopted an amendment
to the 2019 Plan to increase the total number of shares reserved
under the Plan by 1,300,000 shares, among other things. This
amendment was approved by stockholders on June 10, 2020 at the
Company’s 2020 annual meeting of stockholders. In April 2021, the
Company's board of directors adopted an additional amendment to the
2019 Plan to increase the total number of shares reserved under the
Plan by 2,200,000. This amendment was approved by stockholders on
June 9, 2021 at the Company’s 2021 annual meeting of stockholders.
In April 2022, the Company's board of directors adopted an
additional amendment to the 2019 Plan to increase the total number
of shares reserved under the 2019 Plan by 4,000,000. This amendment
was approved by stockholders on June 7, 2022 at the Company’s 2022
annual meeting of stockholders.
Awards may be made under the 2019 Plan for up to the sum of (i)
8,500,000 shares of common stock and (ii) such additional number of
shares of common stock (up to 1,068,901 shares) as is equal to (x)
the number of shares of common stock reserved for issuance under
the 2010 Plan that were available for grant under the 2010 Plan
immediately prior to the date the 2019 Plan was approved by the
Company’s stockholders and (y) the number of shares of common stock
subject to awards outstanding under the 2010 Plan, which awards
expire, terminate or are otherwise surrendered, cancelled,
forfeited or repurchased by the Company pursuant to a contractual
repurchase right. As of June 30, 2022, there were
4,187,992
shares of common stock available for future issuance under the 2019
Plan and no shares of common stock available for future issuance
under the 2010 Plan.
The following table summarizes stock option activity during the six
months ended June 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at January 1, 2022
|
3,156,379 |
|
|
$ |
9.45 |
|
|
7.55 |
|
$ |
5,720 |
|
Granted |
2,334,656 |
|
|
3.76 |
|
|
|
|
|
Exercised |
(3,005) |
|
|
5.26 |
|
|
|
|
|
Forfeited |
(121,534) |
|
|
13.94 |
|
|
|
|
|
Outstanding at June 30, 2022
|
5,366,496 |
|
|
$ |
6.88 |
|
|
8.06 |
|
$ |
7,264,545 |
|
Exercisable at June 30, 2022
|
1,885,155 |
|
|
$ |
9.81 |
|
|
6.12 |
|
$ |
940,678 |
|
The aggregate intrinsic value is based upon the Company’s closing
stock price of $6.56 on June 30, 2022.
The fair value of stock options, subject only to service or
performance conditions, that are granted to employees is estimated
on the date of grant using the Black-Scholes option-pricing model.
The following tables summarize the assumptions used in the
Black-Scholes option-pricing model in the three and six months
ended June 30, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
2022 |
|
2021 |
|
|
Volatility factor |
97.42% - 102.52%
|
|
100.74% - 102.63%
|
|
|
Expected term (in years) |
5.50 - 6.25
|
|
5.50 - 6.25
|
|
|
Risk-free interest rates |
2.53% - 3.36%
|
|
0.96% - 1.17%
|
|
|
Dividend yield |
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, |
|
2022 |
|
2021 |
|
|
Volatility factor |
97.19% - 102.52%
|
|
56.17% - 102.66%
|
|
|
Expected term (in years) |
5.50 - 6.25
|
|
5.50 - 6.25
|
|
|
Risk-free interest rates |
1.69% - 3.36%
|
|
0.06% - 1.17%
|
|
|
Dividend yield |
— |
|
— |
|
|
Based upon these assumptions, the weighted-average grant date fair
value of stock options granted during the six months ended
June 30, 2022 and 2021 was $2.97 and $6.81,
respectively.
As of June 30, 2022, there was $14.0 million of total
unrecognized stock-based compensation expense related to stock
options granted to employees under the Plan. The expense is
expected to be recognized over a weighted-average period of
3.05 years.
Employee Stock Purchase Plan
In February 2010, the Company's board of directors adopted the 2010
Employee Stock Purchase Plan, as amended in March 2013 and in
November 2017, (the “ESPP”). In April 2021, the Company's board of
directors adopted an amended and restated ESPP (the “A&R ESPP”)
to, among other things, increase the total number of shares
reserved under the ESPP by 500,000 shares. Pursuant to the A&R
ESPP the Company may sell up to an aggregate of 576,400 shares of
Common Stock. The A&R ESPP was approved by stockholders on June
9, 2021 at the Company’s 2021 annual meeting of stockholders. In
April 2022, the Company's board of directors adopted an amendment
to the A&R ESPP to increase the total number of shares reserved
under the A&R ESPP by 300,000 shares, pursuant to which the
Company may sell up to an aggregate of 876,400 shares of Common
Stock. This amendment was approved by stockholders on June 7, 2022
at the Company’s 2022 annual meeting of stockholders. The A&R
ESPP allows eligible employees to purchase common stock at a price
per share equal to 85% of the lower of the fair market value of the
common stock at the beginning or end of each six-month period
during the term of the A&R ESPP. As of June 30, 2022,
there were 575,834 shares available for future issuance under the
A&R ESPP.
Pursuant to the A&R ESPP, the Company sold a total of 136,569
and 13,220 shares of common stock during the six months ended
June 30, 2022 and 2021, respectively, at a purchase price of
$3.39 and $4.38, respectively, which represents 85% of the closing
price of the Company's common stock on the applicable purchase
date. The total stock-based compensation expense recorded as a
result of the A&R ESPP was $0.1 million and $0.2 million
during the three and six months ended June 30, 2022,
respectively. The total stock-based compensation expense recorded
as a result of the A&R ESPP was a nominal amount during the
three and six months ended June 30, 2021.
(13) Legal Proceedings
As of the date of filing this Quarterly Report on Form 10-Q, there
are no material outstanding legal proceedings against the Company
or its current officers or directors.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our
financial condition and results of operations together with our
consolidated financial statements and the related notes appearing
elsewhere in this report. Some of the information contained in this
discussion and analysis or set forth elsewhere in this report,
including information with respect to our plans and strategy for
our business and related financing, includes forward-looking
statements that involve risks and uncertainties. You should read
the “Risk Factors” section in Part II, Item 1A of this report for a
discussion of important factors that could cause actual results to
differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion
and analysis.
Overview
We are a commercial stage, oncology-focused biopharmaceutical
company committed to delivering medicines that provide a better
life for patients with cancer. We currently market
FOTIVDA®
(tivozanib) in the United States. FOTIVDA is our first commercial
product and was approved by the U.S. Food and Drug Administration,
or FDA, for marketing and sale in the United States on March 10,
2021 for the treatment of adult patients with relapsed or
refractory advanced, or R/R, renal cell carcinoma, or RCC,
following two or more prior systemic therapies. We market and sell
FOTIVDA in the United States through our commercial infrastructure,
and have made FOTIVDA available to patients through a network of
specialty pharmacies and distributors. We continue to develop
tivozanib in immuno-oncology combinations and other novel targeted
combinations in RCC and other indications, and we have other
investigational programs in clinical development.
FOTIVDA is an oral, next-generation vascular endothelial growth
factor receptor, or VEGFR, tyrosine kinase inhibitor, or TKI. The
FDA approval of FOTIVDA is based on our pivotal Phase 3 randomized,
controlled, multi-center, open-label clinical trial comparing
tivozanib to an approved therapy, Nexavar®
(sorafenib), in RCC patients whose disease had relapsed or become
refractory to two or three prior systemic therapies, which we refer
to as the TIVO-3 trial. The approval is also supported by three
additional trials in RCC and includes safety data from over 1,000
clinical trial subjects.
In June 2022, the
National Comprehensive Cancer Network®, or NCCN, elevated FOTIVDA®
(tivozanib) to a Category 1 status as a subsequent therapy for RCC
patients who have received two or more prior therapies in its
latest Kidney Cancer Treatment Guidelines. The NCCN Clinical
Practice Guidelines, or the NCCN Guidelines, are a recognized
standard for clinical policy in cancer care and are developed
through review of evidence and recommendations from physicians and
oncology researchers. We believe the NCCN Guidelines are recognized
and followed by both academic and community oncologists when
selecting appropriate therapeutic options for their patients, in
addition to reimbursement and treatment pathways, and
FOTIVDA’s
elevated status
may positively impact prescribing decisions by physicians and the
commercialization of FOTIVDA.
Based on third party data, we believe we took a leadership position
in the number of new third-line R/R RCC patient starts during the
first quarter of 2022 and remained a leader in new third-line R/R
RCC patient starts during the second quarter of 2022. We believe
that remaining a leader in new patient starts is a leading
indicator of progress toward our objective to become the market
share leader and the standard of care in the third-line R/R RCC
setting.
Restrictions related to the ongoing COVID-19 pandemic have posed
challenges for gaining in-person access to customers, prescribers
and other healthcare professionals
and certain institutions remain closed to industry
representatives.
Notwithstanding these challenges,
as
of
June 30, 2022,
prescriptions for FOTIVDA and product revenues have increased
quarter over quarter since the beginning of our commercial launch.
We aim to continue to deliver quarter over quarter U.S. net revenue
and underlying prescription demand growth as we continue to execute
on our commercial strategy to support the adoption of FOTIVDA in
appropriate patients.
We believe there is significant commercial opportunity for FOTIVDA
in RCC in the United States. Based on third party estimates, the
current U.S. market for R/R RCC therapy is more than $1.7 billion,
including $1.3 billion in the second line and $480.0 million in the
third and fourth lines. Data from the TIVO-3 trial demonstrated the
superior efficacy and improved tolerability of FOTIVDA when
compared to an approved VEGFR TKI in the RCC patients whose disease
had relapsed or become refractory to two or three prior systemic
therapies, and we believe that FOTIVDA could become a standard of
care in the United States in the third line relapsed or refractory
advanced setting. Further, we are seeking to generate data to
support regulatory approval of tivozanib in combination with
nivolumab in the second line R/R RCC setting, which represents a
larger market opportunity than the third line R/R RCC setting,
through our Phase 3 clinical trial designed to evaluate the safety
and efficacy of tivozanib in combination with nivolumab as compared
to tivozanib monotherapy in RCC patients who have progressed
following one or two lines of therapy, one of which was an immune
checkpoint inhibitor, or ICI, which we refer to as the TiNivo-2
trial. We
currently expect enrollment in the TiNivo-2 trial to be completed
in the second quarter of 2023.
We and our collaboration partners are also developing tivozanib
in
combination with ICIs and a hypoxia inducible factor 2α, or HIF2α,
inhibitor to support the expansion of tivozanib's potential utility
in RCC.
Based on FOTIVDA’s demonstrated anti-tumor activity, tolerability
profile and reduction of regulatory T-cell production, we and our
collaboration partners are continuing to develop tivozanib in RCC
and in additional cancer indications with significant unmet medical
needs including hepatocellular carcinoma, or HCC, and tumors that
are resistant to immunotherapy, or immunologically cold tumors, in
combination with ICIs. In addition, we are evaluating tivozanib as
a monotherapy in cholangiocarcinoma, or CCA. We and our
collaboration partners or independent investigators sponsor the
development of tivozanib through preclinical studies and clinical
trials conducted under collaboration agreements and investigator
sponsored trial, or IST, agreements or our Cooperative Research and
Development Agreement, or CRADA, with the National Cancer
Institute’s Surgical Oncology Program, or NCI-SOP.
We are also seeking to advance our pipeline of four wholly owned
IgG1, monoclonal antibody product candidates, ficlatuzumab, AV-380,
AV-203 and AV-353, to position each product candidate for further
development by partners with us retaining all, or a portion of, the
North American oncology commercial rights related to these product
candidates.
Business Update Regarding COVID-19
The COVID-19 pandemic has and will continue to affect economies and
businesses around the world. We continue to closely monitor the
impact of the COVID-19 pandemic on all aspects of our business,
including the impact on our employees, patients, communities and
business operations to varying degrees. We have and may continue to
experience disruptions in the future that could directly or
indirectly impact our results of operations, including product
revenue and our financial condition. Although we do not currently
expect that the ongoing COVID-19 pandemic will have a material
impact on our business plans or results of operations, we are
unable to predict the impact that the COVID-19 pandemic will have
on our operating results and financial condition due to numerous
uncertainties. These uncertainties include the duration, scope and
severity of the pandemic, the duration and extent of travel
restrictions and social distancing in the United States and other
countries, business closures and business disruptions, its impact
and the economic impact on local, regional, national and
international markets, the effectiveness of actions taken in the
United States and other countries to contain and treat the disease,
periodic and seasonal spikes in infection rates, new strains of the
virus that cause outbreaks of COVID-19 and the broad availability
of effective vaccines and antiviral treatments, among others. The
situation surrounding the COVID-19 pandemic remains fluid and
continues to rapidly evolve, and we are actively managing our
response and assessing potential impacts to our operating results
and financial condition, as well as adverse developments in our
business. For further information regarding the impact of the
COVID-19 pandemic on us, see “Part II. Item 1A - Risk Factors”
included in this Quarterly Report on Form 10-Q.
Financial Overview
We do not have a history of generating operating profits and, as of
June 30, 2022, we had an accumulated deficit of
$693.1 million, a portion of which consist of net operating losses
that we believe can be used as tax credits to offset future
revenues.
We anticipate that we will continue to incur significant operating
expenses for the foreseeable future as we seek to successfully
commercialize FOTIVDA in the United States and continue our planned
development activities for our clinical and preclinical stage
assets.
We may require substantial additional capital to continue to
advance our pipeline of clinical and preclinical stage assets, and
the timing and nature of these activities will be conducted subject
to the availability of sufficient financial resources, principally
product sales of FOTIVDA in the United States. Please see “Part I.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Liquidity and Capital Resources
—Liquidity and Going Concern” of this Quarterly Report for a
further discussion of our funding requirements.
Revenue
Prior to the commercial launch of FOTIVDA in March 2021, our
revenues were historically generated primarily through
collaborative research, development and commercialization
agreements. Payments to us under these arrangements typically
include one or more of the following: non-refundable, upfront
license fees; option exercise fees; funding of research and/or
development efforts; milestone payments; and royalties on future
product sales. In November 2017, we began earning sales royalties
upon EUSA Pharma (UK) Limited’s, or EUSA’s, commencement of the
first commercial launch of FOTIVDA.
On March 10, 2021, the FDA approved
FOTIVDA
in the United States for the treatment of adult patients with R/R
RCC following two or more prior systemic therapies.
We commenced commercial sales of our first product FOTIVDA
in
the United States on March 22, 2021. We expect that any revenue we
generate will fluctuate from quarter to quarter and year to year as
a result of the timing and amount of the payments that we receive
upon the sales of FOTIVDA and any future products, to the extent
any are successfully commercialized, and license fees, research and
development reimbursements, milestones, royalties and other
payments received under our strategic partnerships. If we or our
collaboration partners fail to complete the development of our
product candidates in a timely manner or to obtain or maintain
regulatory approval for them, our ability to generate future
revenue, and our results of operations and financial position,
would be materially adversely affected.
Research and Development Expenses
Research and development expenses have historically consisted of
expenses incurred in connection with the discovery and development
of our product candidates. We recognize research and development
expenses as they are incurred. These expenses consist primarily
of:
•employee-related
expenses, including salaries, bonuses, benefits, stock-based
compensation and research-related overhead;
•external
development-related expenses, including clinical trials,
preclinical studies, consultants and other outsourced
services;
•costs
of acquiring and manufacturing drug development related materials
and related distribution;
•costs
associated with our regulatory and quality assurance operations and
medical affairs;
•upfront
license payments, milestones, sublicense fees and royalties related
to in-licensed products and technology; and
•allocated
expenses for facilities and information technology.
Research and development expenses is net of amounts reimbursed
under our clinical supply agreement with a wholly owned subsidiary
of AstraZeneca for their respective share of development costs
incurred by us in connection with our open-label, multi-center,
randomized Phase 1b/2 clinical trial to evaluate the safety and
efficacy of AstraZeneca’s IMFINZI (durvalumab), a human monoclonal
antibody directed against PD-L1, in combination with tivozanib as a
first-line treatment or following bevacizumab and atezolizumab
treatment for patients with advanced, unresectable HCC, which we
refer to as our DEDUCTIVE trial.
Currently, we track direct external
development expenses and direct salary on a program-by-program
basis and allocate general-related expenses, such as indirect
compensation, benefits and consulting fees, to each program based
on the personnel resources allocated to such program. Facilities,
IT costs and stock-based compensation are not allocated amongst
programs and are considered overhead.
Uncertainties of Estimates Related to Research and Development
Expenses
The process of conducting preclinical studies and clinical trials
necessary to obtain FDA approval for each of our product candidates
is costly and time-consuming. The probability of success for each
product candidate and clinical trial may be affected by a variety
of factors, including, among others, the risk benefit profile of
the product candidates’ clinical activity, investment in the
program, competition, manufacturing capabilities and commercial
viability.
At this time, we cannot reasonably estimate or know the nature,
specific timing and estimated costs of the efforts that will be
necessary to complete the development of our product candidates, or
the period, if any, in which material net cash inflows may commence
from sales of any approved products. This uncertainty is due to the
numerous risks and uncertainties associated with developing drugs,
including the uncertainty of:
•our
ability to establish and maintain strategic partnerships to execute
our strategy to partner our clinical stage assets, the terms of
those strategic partnerships and the success of those strategic
partnerships, if any, including the timing and amount of payments
that we might receive from strategic partners;
•the
scope, progress, results and costs of preclinical development,
laboratory testing and clinical trials for any product
candidate;
•the
progress and results of our clinical trials;
•the
costs, timing and outcome of regulatory review of our product
candidates;
•the
emergence of competing technologies and products and other adverse
market developments;
•the
costs of preparing, filing and prosecuting patent applications and
maintaining, enforcing and defending intellectual property-related
claims; and
•additional
manufacturing requirements.
As a result of the uncertainties associated with developing drugs,
including those discussed above, we are unable to determine the
exact duration and completion costs of current or future clinical
stages of our product candidates, or when, or to what extent, we
will generate revenues from the commercialization and sale of any
of our product candidates for which we may obtain regulatory
approval. Development timelines, probability of success and
development costs vary widely. We anticipate that we will make
determinations as to which additional programs to pursue and how
much funding to direct to each program on an ongoing basis in
response to the scientific and clinical success, if any, of each
product candidate, as well as ongoing assessment of each product
candidate’s commercial potential. We will need to raise substantial
additional capital in the future in order to fund the development
of our preclinical and clinical product candidates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of
compensation, benefits and travel for employees in executive,
finance, legal, human resource and commercial functions. Other
selling, general and administrative expenses include professional
fees for audit, tax, general legal, patent legal, investor
relations, commercial, consulting services and directors’ fees, as
well as facility and information technology-related costs not
otherwise included in research and development
expenses.
Interest Expense, Net
Interest expense consists of interest, amortization of debt
discount and amortization of deferred financing costs associated
with our loans payable, and is shown net of interest income, which
consists of interest earned on our cash, cash equivalents and
marketable securities. The primary objective of our investment
policy is capital preservation.
Income Taxes
We calculate our provision for income taxes on ordinary income
based on our projected annual tax rate for the year. As of
June 30, 2022, we are forecasting an effective tax-rate of 0%
for the year ending December 31, 2022, and since we maintain a
full valuation allowance on all of our deferred tax assets, we have
recorded no income tax provision or benefit in the current
quarter.
Critical Accounting Policies and Significant Judgments and
Estimates
Our discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements
and the notes thereto included elsewhere in this Quarterly Report
on Form 10-Q, which have been prepared in accordance with
accounting principles generally accepted in the United States, or
GAAP. The preparation of financial statements in conformity with
GAAP requires us to make estimates and assumptions that affect
certain reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial
statements, the assessment of our ability to continue as a going
concern, and the reported amounts of revenues and expenses during
the reporting periods. Significant items subject to such estimates
and assumptions include revenue recognition, clinical trial costs
and contract research accruals, measurement of trade receivables
net, measurement of stock-based compensation and estimates of our
capital requirements over the next twelve months from the date of
issuance of the consolidated financial statements. We base our
estimates on historical experience and various other assumptions
that we believe to be reasonable under the circumstances. Material
changes in these estimates could occur in the future. Changes in
estimates are recorded or reflected in our disclosures in the
period in which they become known. Actual results may differ from
our estimates if past experience or other assumptions do not turn
out to be substantially accurate. Our significant accounting
policies and
critical accounting estimates are described in the notes to our
consolidated financial statements appearing elsewhere in this
Quarterly Report on Form 10-Q.
Results of Operations
Comparison of Three and Six Months Ended June 30, 2022 and
2021
Revenues (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change |
|
Six Months Ended
June 30, |
|
Change |
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
FOTIVDA U.S. product revenue, net |
$ |
25,006 |
|
|
$ |
6,735 |
|
|
$ |
18,271 |
|
|
271 |
% |
|
$ |
45,092 |
|
|
$ |
7,801 |
|
|
|
|
$ |
37,291 |
|
|
478 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership revenue - EUSA |
298 |
|
|
821 |
|
|
(523) |
|
|
(64) |
% |
|
1,132 |
|
|
1,675 |
|
|
|
|
(543) |
|
|
(32) |
% |
|
|
|
|
Total revenues |
$ |
25,304 |
|
|
$ |
7,556 |
|
|
$ |
17,748 |
|
|
235 |
% |
|
$ |
46,224 |
|
|
$ |
9,476 |
|
|
|
|
$ |
36,748 |
|
|
388 |
% |
|
|
|
|
Our total revenues increased by $17.7 million, or 235%, to
$25.3 million in the three months ended June 30, 2022, from
$7.6 million in the same period in 2021, and by $36.7 million, or
388%, to $46.2 million in the six months ended June 30,
2022 from $9.5 million in the same period in 2021, principally due
to the commencement of sales of our first commercial product
FOTIVDA in the United States on March 22, 2021
for the treatment of adult patients with relapsed or refractory
advanced RCC following two or more prior systemic
therapies.
Partnership revenues from EUSA decreased by $0.5 million, or 64%,
to $0.3 million in the three months ended June 30, 2022, from $0.8
million in the same period in 2021, principally due to a decrease
of $0.5 million in collaboration and licensing
revenue.
Partnership revenues from EUSA decreased by $0.5 million, or 32%,
to $1.1 million in the six months ended June 30, 2022 from
$1.7 million in the same period in 2021, principally due to
decreases of $0.4 million in collaboration and licensing revenue
and $0.1 million in royalties.
Under Accounting Standards Codification,
Revenue from Contracts with Customers,
or ASC 606, the $12.5 million in total research and
development reimbursement and milestone payments by EUSA to the
Company was being recognized as collaboration and licensing revenue
over the Company’s estimated substantive performance period. As of
March 31, 2022, the Company determined that it has fulfilled
its performance obligations in accordance with ASC 606 as the
Company is not currently providing substantive support under the
license agreement with EUSA, or the EUSA Agreement. Accordingly,
the $12.5 million in deferred revenue for total research and
development reimbursement and milestone payments was fully
amortized as of March 31, 2022.
Refer to Note 4
“Collaborations and License Agreements
– EUSA”, to our condensed consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q regarding
the specific application of ASC 606 to the EUSA
Agreement.
FOTIVDA U. S. Product Revenue, Net (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change |
|
Six Months Ended
June 30, |
|
Change |
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
Gross product revenue |
$ |
30,404 |
|
|
$ |
7,993 |
|
|
$ |
22,411 |
|
|
280 |
% |
|
$ |
55,048 |
|
|
$ |
9,249 |
|
|
|
|
$ |
45,799 |
|
|
495 |
% |
|
|
|
|
Discounts and allowances |
(5,398) |
|
|
(1,258) |
|
|
(4,140) |
|
|
329 |
% |
|
(9,956) |
|
|
(1,448) |
|
|
|
|
(8,508) |
|
|
588 |
% |
|
|
|
|
Product revenue, net |
$ |
25,006 |
|
|
$ |
6,735 |
|
|
$ |
18,271 |
|
|
271 |
% |
|
$ |
45,092 |
|
|
$ |
7,801 |
|
|
|
|
$ |
37,291 |
|
|
478 |
% |
|
|
|
|
Our product revenues, net increased by $18.3 million, or 271%, to
$25.0 million in the three months ended June 30, 2022, from $6.7
million in the same period in 2021, and by $37.3 million, or 478%,
to $45.1 million in the six months ended June 30, 2022 from
$7.8 million in the same period in 2021, principally due to
increases in the number of units sold to specialty pharmacies and
specialty distributors that were driven by a strong uptake in the
adoption of FOTIVDA following the commercial launch in the United
States on March 22, 2021. In the second quarter of 2022, 1.157
commercial
prescriptions were filled, representing a 309% increase from 283
commercial prescriptions filled during the same period in 2021. In
the first half of 2022, 2.134 commercial prescriptions were filled,
representing a 654% increase from 283 commercial prescriptions
filled during the same period and following FOTIVDA’s approval in
March 2021.
We anticipate FOTIVDA U.S. net product revenues will be in the
range of
$100.0 million to $110.0 million in
2022.
Cost of Products Sold (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
Six Months Ended
June 30, |
|
Change |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
Cost of products sold |
$ |
3,065 |
|
|
$ |
822 |
|
|
|
|
$ |
2,243 |
|
|
273 |
% |
|
|
|
|
|
$ |
5,499 |
|
|
$ |
960 |
|
|
$ |
4,539 |
|
|
473 |
% |
Gross margin % |
88 |
% |
|
88 |
% |
|
|
|
|
|
— |
% |
|
|
|
|
|
88 |
% |
|
88 |
% |
|
|
|
— |
% |
We commenced sales of our first commercial product FOTIVDA in the
United States on March 22, 2021 for the treatment of adult patients
with relapsed or refractory advanced RCC following two or more
prior systemic therapies. Cost of products sold is related to our
product revenues for FOTIVDA and consists primarily of tiered
royalty payments we are required to pay to Kyowa Kirin Co., or KKC,
on all net sales of tivozanib in our North American territory,
which range from the low to mid-teens as a percentage of net sales.
Cost of products sold also consists of the cost of inventory sold,
indirect labor costs, and shipping and other third-party logistics
and distribution costs for FOTIVDA.
We consider regulatory approval of our product candidates to be
uncertain and product manufactured prior to regulatory approval may
not be sold unless regulatory approval is obtained. As such, the
manufacturing costs for FOTIVDA incurred prior to regulatory
approval were not capitalized as inventory but were expensed as
research and development expenses, which favorably impacted our
gross margin. Our initial commercial supply of FOTIVDA was
manufactured prior to FDA market approval on March 10, 2021 and had
been expensed to research and development expenses. In 2021,
subsequent to the FDA’s market approval of FOTIVDA, we conducted
resupply manufacturing of tivozanib in connection with upcoming
drug expirations beginning in the fourth quarter of 2022 and
capitalized these costs as inventory. In the second quarter of
2022, we changed our salable inventory to the resupply and began
recognizing cost of products sold related to
inventory.
We anticipate that gross margins will continue to be in the
mid-to-high 80th
percentile in 2022.
Research and Development Expenses (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change |
|
Six Months Ended
June 30, |
|
Comparison |
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
Tivozanib |
$ |
7,157 |
|
|
$ |
4,627 |
|
|
$ |
2,530 |
|
|
55 |
% |
|
$ |
10,999 |
|
|
$ |
8,483 |
|
|
|
|
$ |
2,516 |
|
|
30 |
% |
|
|
|
|
Ficlatuzumab |
3,549 |
|
|
533 |
|
|
3,016 |
|
|
566 |
% |
|
6,482 |
|
|
983 |
|
|
|
|
5,499 |
|
|
559 |
% |
|
|
|
|
AV-380 Program in Cachexia |
1,206 |
|
|
1,218 |
|
|
(12) |
|
|
(1) |
% |
|
4,095 |
|
|
1,985 |
|
|
|
|
2,110 |
|
|
106 |
% |
|
|
|
|
Other |
406 |
|
|
500 |
|
|
(94) |
|
|
(19 |
%) |
|
902 |
|
|
1,224 |
|
|
|
|
(322) |
|
|
(26) |
% |
|
|
|
|
Total research and development expenses |
$ |
12,318 |
|
|
$ |
6,878 |
|
|
$ |
5,440 |
|
|
79 |
% |
|
$ |
22,478 |
|
|
$ |
12,675 |
|
|
|
|
$ |
9,803 |
|
|
77 |
% |
|
|
|
|
Our total research and development expenses increased by $5.4
million, or 79%, to $12.3 million in the three months ended June
30, 2022 from $6.9 million in the same period in 2021.
Our total research and development expenses increased by $9.8
million, or 77%, to $22.5 million in the six months ended
June 30, 2022 from $12.7 million in the same period in
2021.
Tivozanib expenses increased by $2.5 million, or 55%, in the three
months ended June 30, 2022 as compared to the same period in
2021,principally due to increases of $1.5 million in costs incurred
in connection with the TiNivo-2 trial
that was initiated in the third quarter of 2021, $0.6 million in
clinical drug supply manufacturing, and $0.4 million in costs
incurred with other support activities.
Tivozanib expenses increased by $2.5 million, or 30%, in the six
months ended June 30, 2022 as compared to the same period in
2021, principally due to increases of $1.8 million in costs
incurred in connection with the TiNivo-2 trial that was initiated
in the third quarter of 2021 and $0.6 million in clinical drug
supply manufacturing.
AV-380 expenses were
$1.2 million
and remained flat in the
three months ended June 30, 2022 as compared to the same period in
2021, and increased by $2.1 million, or 106%,
in the six months ended June 30, 2022 as compared to the same
period in
2021,
principally related to a $2.3 million time-based milestone
obligation that became due to St. Vincent’s in January 2022,
partially offset by $0.2 million in costs incurred in the six
months ended June 30, 2021 in connection with the Phase 1 clinical
trial of AV-380 in healthy volunteers that were not incurred in the
same period in 2022.
Ficlatuzumab expenses increased by $3.0 million, or 566%, in
the
three months ended June 30, 2022 as compared to the same period in
2021, and by $5.5 million, or 559%,
in the six months ended June 30, 2022 as compared to the same
period in 2021,
principally related to costs incurred in connection with the
manufacturing of drug substance for clinical drug supply for a
potential registrational clinical trial of ficlatuzumab in
combination with cetuximab in patients with human papillomavirus,
or HPV, negative recurrent or metastatic, or R/M, head and neck
squamous cell carcinoma, or HNSCC patients, that we plan to
initiate in the first half of 2023.
We anticipate that research and development expenses will continue
to increase during the remainder of 2022, principally related to
the enrollment of the TiNivo-2 Trial for the treatment of RCC
patients who have progressed following one or two lines of therapy,
one of which was an immune checkpoint inhibitor, or ICI, a Phase 1b
clinical trial in AV-380 in cancer patients that we plan to
initiate in the second half of 2022, and co-funding pursuant to the
clinical trial collaboration and supply agreement with NiKang
Therapeutics Inc. for a Phase 2 clinical trial to evaluate
tivozanib in combination with NKT2152 in clear cell RCC patients
who have not responded to or relapsed from prior therapies. These
increases in 2022 research and development expenses will be
partially offset by lower costs, principally related to the TIVO-3
Trial that closed in the second half of 2021 following the FDA’s
approval of FOTIVDA on March 10, 2021. We anticipate that research
and development expenses will be approximately $50.0 million
in 2022, a reduction from our prior range of $60.0 million to
$70.0 million, as we focus our spending on clinical
development programs to expand the commercial opportunity of
tivozanib for the treatment of RCC and to position our other
product candidates for further development by partners and minimize
our research and development expenses while
retaining all, or a portion of, the North American oncology
commercial rights related to these product candidates. The timing
and nature of contemplated activities in 2022 will be conducted
subject to the availability of sufficient financial
resources.
Selling, General and Administrative Expenses (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
Six Months Ended June 30, |
|
Change |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
Selling, general and administrative expenses |
$ |
17,075 |
|
|
$ |
14,920 |
|
|
|
|
$2,155
|
|
14 |
% |
|
|
|
|
|
$ |
34,412 |
|
|
$ |
30,020 |
|
|
$ |
4,392 |
|
|
15 |
% |
Selling, general and administrative expenses increased by $2.2
million, or 14%, to $17.1 million in the
three months ended June 30, 2022
from $14.9 million in the same period in 2021. The $2.2
million increase was
principally due to increases totaling $2.7 million, including: (i)
$0.5 million in connection with compensation costs related to our
commercial infrastructure (ii) $1.4 million in connection with
external initiatives related to the commercialization of FOTIVDA,
and (iii) $0.8 million in general and administrative-related
compensation costs. These increases were partially offset by a $0.5
million decrease in general and administrative-related professional
fees.
Selling, general and administrative expenses increased by $4.4
million, or 15%, to $34.4 million in the
six months ended June 30, 2022 from $30.0 million in the same
period in 2021. The $4.4 million increase was principally due to
increases totaling $5.4 million, including: (i) $1.9 million in
connection with compensation costs related to a full six months of
growth in our commercial infrastructure, including the hiring of
our salesforce in the first quarter of 2021, (ii) $2.2 million in
connection with external initiatives related to a full six months
of commercialization following the launch of FOTIVDA on March 22,
2021, and (iii) $1.3 million in general and administrative-related
compensation costs. These increases were partially offset by a $1.0
million decrease in general and administrative-related professional
fees.
We anticipate that selling, general and administrative expenses
associated with the commercialization of FOTIVDA, principally
related to our sales force, our marketing, market access and
commercial capabilities, and general and administrative support
will stay at current levels for the remainder of 2022.
We anticipate that selling, general and administrative expenses
will be approximately $70.0 million, including approximately
$50.0 million in commercial expenses and approximately
$20.0 million in general and administrative
expenses.
Change in Fair Value of Expired PIPE Warrant Liability (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
Six Months Ended June 30, |
|
Change |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
Change in fair value of expired PIPE Warrant liability |
$ |
— |
|
|
$ |
2,595 |
|
|
|
|
$ |
(2,595) |
|
|
(100 |
%) |
|
|
|
|
|
$ |
— |
|
|
$ |
199 |
|
|
$ |
(199) |
|
|
(100) |
% |
In May 2016, we issued warrants in connection with a private
placement financing, or the PIPE Warrants, and recorded the
warrants as a liability. The PIPE Warrants were exercisable for a
period of five years from the date of issuance until their
scheduled expiration on May 16, 2021. The PIPE Warrants were
subject to revaluation at each balance sheet date and any changes
in fair value were recorded as a non-cash gain or (loss) in our
Statement of Operations as a component of other income
(expense).
In the three months ended June 30, 2021, we recorded an
approximate non-cash gain of $2.6 million in our Statement of
Operations attributable to the decrease in the fair value of the
PIPE Warrant liability that resulted from the expiration of the
PIPE Warrants on May 16, 2021, including reversals of the $2.4
million non-cash loss recognized in the first quarter of 2021 and
the $0.2 million fair value of the PIPE Warrant liability as of
December 31, 2020.
In the six months ended June 30, 2021, we recorded an
approximate non-cash gain of $0.2 million in our Statement of
Operations attributable to the decrease in the fair value of the
PIPE Warrant liability that resulted from the expiration of the
PIPE Warrants on May 16, 2021.
Interest Expense, net (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
Six Months Ended
June 30, |
|
Change |
|
2022 |
|
2021 |
|
|
|
$ |
|
% |
|
|
|
|
|
2022 |
|
2021 |
|
$ |
|
% |
Interest expense, net |
$ |
(1,165) |
|
|
$ |
(1,128) |
|
|
|
|
$ |
(37) |
|
|
3 |
% |
|
|
|
|
|
(2,353) |
|
|
$ |
(1,739) |
|
|
$ |
(614) |
|
|
35 |
% |
Interest expense, net remained flat, in the three months ended June
30, 2022 and increased by $0.6 million ,or 35%, to $2.4 million in
the six months ended June 30, 2022 from $1.7 million as
compared to the same period in 2021, principally due to higher loan
balances under the 2020 Loan Amendment and 2021 Loan Amendment, as
defined below, that were entered into with Hercules Capital Inc.
and certain of its affiliates, or Hercules, on August 7, 2020 and
February 1, 2021, respectively and higher interest rates due to
corresponding increases in the prime rate. See “Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Liquidity and Capital Resources — Hercules
Loan Facility” below for a description of the 2020 Loan Amendment
and 2021 Loan Amendment.
We anticipate that interest expense, net will continue to increase
during the remainder of 2022 due to the $40.0 million loan balance
as of June 30, 2022, the extended interest-only period through
March 2023 pursuant to the 2020 Loan Amendment and 2021 Loan
Amendment with Hercules, and the increase in the interest rate from
the initial 9.65% to 11.15% as of June 30, 2022 due to increases in
the prime interest rate.
Liquidity and Capital Resources
We have financed our operations to date primarily through private
placements and public offerings of our common stock, license fees,
milestone payments, royalty payments and research and development
funding from strategic partners, loan proceeds and sales revenues
of our first commercial product FOTIVDA in the United
States.
As of June 30, 2022 we had cash, cash equivalents and
marketable securities of approximately $77.2 million. See “Part I.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Liquidity and Capital
Resources —Liquidity and Going Concern” below and Note 1 to the
consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-Q for a further discussion of our
liquidity.
The following table sets forth the primary sources and uses of cash
for each of the periods set forth below (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
2022 |
|
2021 |
|
|
Net cash used in operating activities |
$ |
(10,671) |
|
|
$ |
(37,001) |
|
|
|
Net cash provided by (used in) investing activities |
9,736 |
|
|
(28,195) |
|
|
|
Net cash provided by financing activities |
561 |
|
|
78,170 |
|
|
|
Net (decrease) increase in cash and cash equivalents |
$ |
(374) |
|
|
$ |
12,974 |
|
|
|
Our operating activities used cash of $10.7 million and $37.0
million in the six months ended June 30, 2022 and 2021,
respectively.
Cash used in operations was principally due to our net loss
adjusted for non-cash items and changes in working
capital.
Our investing activities provided cash of $9.7 million and used
$28.2 million in the six months ended June 30, 2022 and 2021,
respectively, principally due to net changes in the purchases and
maturities of marketable securities.
Our financing activities provided cash of $0.6 million and $78.2
million in the six months ended June 30, 2022 and 2021,
respectively. In 2022, we received $0.6 million in proceeds in
connection with the issuance of common stock under our Amended and
Restated 2019 Employee Stock Purchase Plan, as amended. In 2021, we
raised approximately $78.1 million in funding, including
approximately (i) $51.7 million in net proceeds from the sale of
approximately 6.9 million shares of our common stock in an
underwritten public offering in March 2021, (ii) $19.9 million in
new loan funding pursuant to the 2020 Loan Amendment and 2021 Loan
Amendment with Hercules in March 2021 related to the achievement of
the milestone for FDA approval of FOTIVDA, net of transaction
costs, (iii) $3.4 million in net proceeds from the sale of
approximately 0.3 million shares of our common stock in March 2021
pursuant to our “at-the-market” sales agreement with SVB Leerink
LLC, or SVB Leerink, which we refer to as the SVB Leerink Sales
Agreement, and (iv) $3.1 million in proceeds from the exercise of
Offering Warrants.
Hercules Loan Facility ($45 million Loan Facility - $5 million
Committed Funding Remaining)
On May 28, 2010, we entered into a loan and security agreement, or
the First Loan Agreement with Hercules. The First Loan Agreement
was subsequently amended in March 2012, September 2014, May 2016
and amended and restated in December 2017, or the 2017 Loan
Agreement.
We entered into the first amendment to the 2017 Loan Agreement, or
the 2020 Loan Amendment, on August 7, 2020, the second amendment to
the 2017 Loan Agreement, or the 2021 Loan Amendment, on February 1,
2021 and the third amendment to the 2017 Loan Agreement, or the
2022 Loan Amendment, on March 8, 2022, which we collectively refer
to as the Loan Agreement to provide a $45.0 million loan
facility.
On March 8, 2022, we entered into the 2022 Loan Amendment, which
(i) changed the operating covenant to decrease the achievement of
greater than or equal to 75% of our forecasted net product revenues
from our sales of tivozanib over a six-month trailing period to
65%, as defined and
measured on a monthly basis, and extended the month of commencement
from April 2022 to June 2022, and (ii) added a cash waiver, at our
election, in the event our actual U.S. net product revenues from
our sales of tivozanib over a six-month trailing period are below
the monthly minimum operating covenant of
65%,
such that our unrestricted cash position is equal to or greater
than the then total outstanding principal under the Loan Agreement
for each day of such month, (iii) changed Tranche Four funding, in
the
amount of $5.0 million, that was subject to the consent of
Hercules to the achievement of $30.0 million in net product
revenues from sales of FOTIVDA over a trailing three-month period,
or Performance Milestone III, and extended the availability of
Tranche Four funding from June 30, 2022 to December 15, 2022, and
(iv) increased the amount of unrestricted cash required for us to
satisfy the minimum financial covenant from $10.0 million to
$15.0 million upon the earlier of receiving the Tranche Four
funding or January 1, 2023, through the maturity of the Loan
Agreement.
As of June 30, 2022, the total outstanding principal under the
Loan Agreement was $40.0 million, principal payments are scheduled
to commence on April 1, 2023 and the corresponding end-of-term
payments under the Loan Agreement, in the aggregate amount of
approximately $2.8 million, are due upon the current loan maturity
date of
September 1, 2024. The interest rate as of June 30, 2022
was 11.15% based upon increases in the prime rate during 2022, in
March, May and June. As of June 30, 2022, $5.0 million remains
available to us in committed funding under the Loan Agreement for
Tranche Four funding in connection with the achievement of
Performance Milestone III for
$30.0 million
in U.S. net product revenues from sales of FOTIVDA over a trailing
three-month period.
Per the terms of the Loan Agreement, principal will be repaid in
equal monthly installments following the conclusion of the
interest-only period. We may prepay all of the outstanding
principal and accrued interest under the Loan Agreement, subject to
a prepayment charge up to 3.0% in the first year following the
closing of the 2020 Loan Amendment, decreasing to 2.0% in year two
and 1.0% in year three. We are obligated to make an end-of-term
payment of 6.95% of the aggregate amount of loan funding received
under the Loan Agreement on the earlier of the maturity of the loan
or the date on which we prepay any outstanding loan
balance.
The Loan Agreement also includes various other affirmative and
negative covenants, including covenants to deliver certain
financial reports; to maintain insurance coverage; and to refrain
from transferring assets, incurring additional indebtedness,
engaging in mergers or acquisitions, paying dividends or making
other distributions, making investments, creating liens, and
suffering a change in control, in each case subject to certain
exceptions.
Obligations under the Loan Agreement are secured by substantially
all of our assets, excluding intellectual property. The Loan
Agreement provides that certain events shall constitute a default
by us, including failure by us to pay amounts under the Loan
Agreement when due; breach or default in the performance of any
covenant under the Loan Agreement by us, subject to certain cure
periods; our insolvency and certain other bankruptcy proceedings
involving us; our default of obligations involving indebtedness in
excess of $0.5 million; and the occurrence of an event or
circumstance that would have a material adverse effect upon our
business.
We have determined that the risk of subjective acceleration under
the material adverse events clause included in the Loan Agreement
is remote and, therefore, have classified the outstanding principal
amount in long-term liabilities based on the timing of scheduled
principal payments. As of June 30, 2022, we were in compliance
with all of the loan covenants and, through the date of this
filing, the lenders have not asserted any events of default under
the Loan Agreement. We do not believe that there has been a
material adverse change as defined in the 2020 Loan
Facility.
See Note 6 “Hercules
Loan Facility”
to the consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-Q for a further discussion of our Loan
Agreement with Hercules.
Public Offering – March 2021
On March 26, 2021, we completed an underwritten public offering of
6,900,000 shares of our common stock, including the full exercise
by the underwriters of their option to purchase an additional
900,000 shares, at the public offering price of $8.00 per share for
gross proceeds of approximately $55.2 million. The net offering
proceeds to us were approximately $51.7 million after deducting
underwriting discounts and commissions and estimated offering
expenses payable by us.
Sales Agreement with SVB Leerink ($22 Million Availability Future
Stock Sales)
In February 2018, we entered into the SVB Leerink Sales Agreement
with SVB Leerink pursuant to which we may issue and sell shares of
our common stock from time to time up to an aggregate amount of
$50.0 million, at our option, through SVB Leerink as our sales
agent, with any sales of common stock through SVB Leerink being
made by any method that is deemed an “at-the-market offering” as
defined in Rule 415 promulgated under the Securities Act of 1933,
as amended, or in other transactions. Any such shares of common
stock will be sold pursuant to a prospectus supplement filed under
the 2020 Shelf, as defined below. We agreed to pay SVB Leerink a
commission of up to 3% of the gross proceeds of any sales of common
stock pursuant to the SVB Leerink Sales Agreement. We sold 470,777
shares, 1,251,555 shares, 1,070,175 shares and 330,688 shares
pursuant to the SVB Leerink Sales Agreement, resulting in
approximate proceeds net of commissions of $10.3 million, $7.5
million, $5.9 million and $3.4 million in the fourth quarter of
2018, February 2019, November 2020 and March 2021, respectively. As
of June 30, 2022, approximately $22.2 million was available
for issuance in connection with future stock sales pursuant to the
SVB Leerink Sales Agreement.
Universal Shelf Registration Statement
On November 9, 2020, we filed a shelf registration statement on
Form S-3 with the SEC, which covers the offering, issuance and sale
of up to $300.0 million of our common stock, preferred stock, debt
securities, warrants and/or
units, or the 2020 Shelf. The 2020 Shelf (File No. 333-249982) was
declared effective by the SEC on November 18, 2020 and was filed to
replace our then existing shelf registration statement, which was
terminated. As of June 30, 2022, there was approximately
$213.0 million available for future issuance of our common stock,
preferred stock, debt securities, warrants and/or
units.
Liquidity and Going Concern
We have devoted substantially all of our resources to our drug
development efforts, comprised of research and development,
manufacturing, conducting clinical trials for our product
candidates, protecting our intellectual property and general and
administrative functions relating to these operations. Our future
success is dependent on our ability to commercialize FOTIVDA in the
United States and develop our clinical stage assets and,
ultimately, upon our ability to create shareholder
value.
On March 10, 2021, the FDA approved FOTIVDA
in the United States for the treatment of adult patients with R/R
RCC following two or more prior systemic therapies. We anticipate
that we will continue to incur significant operating expenses for
the foreseeable future as we commercialize FOTIVDA in the United
States and continue our planned development activities for our
clinical and preclinical stage assets. Our future product revenues
will depend upon the size of markets in which FOTIVDA, and any
future products, have received approval, and our ability to achieve
sufficient market acceptance, reimbursement from third-party payers
and adequate market share for FOTIVDA and any future products in
those markets. The likelihood of our long-term success must be
considered in light of the expenses, difficulties and potential
delays that may be encountered in the development and
commercialization of new pharmaceutical products, competitive
factors in the marketplace and the complex regulatory environment
in which we operate. Absent the realization of sufficient revenues
from product sales to support our cost structure, we may never
attain or sustain profitability. We may require substantial
additional funding to continue to advance our pipeline of clinical
and preclinical stage assets, and the timing and nature of these
activities will be conducted subject to the availability of
sufficient financial resources, principally product sales of
FOTIVDA in the United States.
During the six months ended June 30, 2022, we received an
aggregate of approximately $42.8 million in funding, including
approximately $40.7 million in net cash receipts from the product
sales of FOTIVDA in the United States and approximately $2.1
million in partnership cost sharing payments.
We believe that our $77.2 million in cash, cash equivalents and
marketable securities as of June 30, 2022, along with net
product revenues from product sales of FOTIVDA in the United States
will enable us to maintain our current operations for more than 12
months following the filing of this Quarterly Report on Form
10-Q.
In 2022, we anticipate that FOTIVDA U.S. net product revenue will
be in the range of
$100.0 million
to
$110.0 million. We anticipate that selling, general and
administrative expenses will be approximately $70.0 million in
2022, including approximately $50.0 million in commercial
expenses and approximately $20.0 million in general and
administrative expenses. In 2022, we anticipate that research and
development expenses will now be approximately $50.0 million,
a reduction from our prior guidance range of $60.0 million to
$70.0 million, as we focus our spending on clinical
development programs to expand the commercial opportunity of
tivozanib for the treatment of RCC and to position our other
product candidates for further development by partners and minimize
our research and development expenses while retaining all, or a
portion of, the North American oncology commercial rights related
to these product candidates.
However, there are numerous risks and uncertainties associated with
research, development and commercialization of pharmaceutical
products, including, without limitation, risks related to our
ability to generate product revenue from sales of FOTIVDA in the
United States, which became commercially available in the United
States on March 22, 2021. Accordingly, our future funding
requirements may vary from our current expectations and will depend
on many factors, including, but not limited to:
•the
cost of commercialization activities of FOTIVDA in the United
States and any of our product candidates that may be approved for
sale, including marketing, sales and distribution
costs;
•the
cost of manufacturing FOTIVDA in the United States, our product
candidates and any additional products we may successfully
commercialize;
•the
impact of COVID-19 on our operations, business and
prospects;
•our
ability to expand the commercial opportunity of tivozanib for the
treatment of RCC;
•our
ability to position our product candidates for further development
by partners and the financial terms of such
agreements;
•our
ability to establish and maintain strategic partnerships to execute
our strategy to partner our clinical stage assets or other
arrangements, including our ability to potentially acquire or
in-license one or more additional commercial stage assets, and the
financial terms of such agreements;
•the
number and characteristics of the product candidates we
pursue;
•the
scope, progress, results and costs of researching and developing
our product candidates, and of conducting preclinical and clinical
trials;
•the
timing of, and the costs involved in, completing our clinical
trials and obtaining regulatory approvals for our product
candidates;
•the
costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims, including litigation costs
and the outcome of such litigation;
•the
absence of any breach, acceleration event or event of default under
our 2020 Loan Facility, or under any other agreements with third
parties;
•the
cost and outcome of any legal actions against us;
•the
timing, receipt and amount of sales of, or royalties on, tivozanib
and our future products, if any; and
•general
economic, industry and market conditions.
We may require substantial additional funding to potentially
acquire or in-license additional commercial stage assets and to
continue to advance our pipeline of clinical and preclinical stage
assets. We may seek to sell additional equity or debt securities or
obtain additional credit facilities. The sale of additional equity
or convertible debt securities may result in additional dilution to
our stockholders. If we raise additional funds through the issuance
of debt securities or preferred stock or through additional credit
facilities, these securities and/or the loans under credit
facilities could provide for rights senior to those of our common
stock and could contain covenants that would restrict our
operations. Additional funds may not be available when we need
them, on terms that are acceptable to us, or at all. For example,
we may never achieve the milestone specified in the Loan Agreement
that would allow us to access the remaining $5.0 million in
available credit. We also expect to seek additional funds through
arrangements with collaborators, licensees or other third parties.
These arrangements would generally require us to relinquish or
encumber rights to some of our technologies or product candidates,
and we may not be able to enter into such arrangements on
acceptable terms, if at all. If we are unable to raise substantial
additional funding to advance our pipeline of clinical and
preclinical stage assets to position each for partnership
opportunities that may further advance these product candidates,
whether on terms that are acceptable to us, or at all or if we were
to default under the 2020 Loan Facility, and Hercules accelerated
the then remaining principal payments and fees due under the loan,
then we may be required to:
•delay,
limit, reduce or terminate our clinical trials, preclinical studies
or other development activities for one or more of our product
candidates; and/or
•delay,
limit, reduce or terminate our establishment of sales and marketing
capabilities or other activities that may be necessary to
commercialize our product candidates, if approved.
Contractual Obligations and
Commitments
There have been no additional material changes to our contractual
obligations and commitments outside the ordinary course of business
from those disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2021 filed with the SEC on March 14, 2022,
except as discussed below.
Winter Street Lease
In March 2020, we entered into a sublease agreement for office
space located at 30 Winter Street in Boston, Massachusetts (the
“Winter Street Sublease”) that is scheduled to expire in November
2022. On April 4, 2022, in advance of this expiration, we entered
into an office lease agreement (the “Office Lease”) with the
landlord to continue leasing our current 6,465 square foot office
space at 30 Winter Street in Boston, Massachusetts for an
additional two (2) years beginning on November 30, 2022 and ending
on November 29, 2024. Under the Office Lease, we will continue to
lease the office space for $50.00 per square foot, or approximately
$0.3 million in base rent for the first year and $51.00 per square
foot, or approximately $0.3 million for the remaining year until
the expiration date, each exclusive of operating expenses and
taxes.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
We are a smaller reporting company, as defined by Rule 12b-2 of the
Securities Exchange Act of 1934, as amended, and are not required
to provide the information required under this Item 3.
Item 4. Controls and
Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of
June 30, 2022. In designing and evaluating our disclosure
controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and
our management necessarily applied its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures were (1) designed to ensure that material information
relating to us is made known to our management including our
principal executive officer and principal financial officer by
others, particularly during the period in which this report was
prepared and (2) effective, in that they provide reasonable
assurance that information required to be disclosed by us in the
reports the Company files or submit under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and
15(d)-15(f) promulgated under the Exchange Act, during the quarter
ended June 30, 2022 that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
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PART II. |
Other Information |
Item 1A. Risk Factors
You should carefully consider the risks described below in addition
to the other information set forth in this Quarterly Report on Form
10-Q, including the Management’s Discussion and Analysis of
Financial Condition and Results of Operations section and the
consolidated financial statements and related notes. These risks,
some of which have occurred and any of which may occur in the
future, can have a material adverse effect on our business,
financial condition, results of operations or the price of our
publicly traded securities. The risks described below are not the
only risks we face. Additional risks and uncertainties not
currently known to us, or that we currently deem to be immaterial,
may occur or become material in the future and adversely affect our
business, reputation, financial condition, results of operations or
the price of our publicly traded securities. Therefore, historical
operating results, financial and business performance, events and
trends are often not a reliable indicator of future operating
results, financial and business performance, events or trends. If
any of the following risks occurs, our business, financial
condition, and results of operations and future growth prospects
could be materially and adversely affected.
Risks Related to Our Financial Position and Need for Additional
Capital
We have incurred significant operating losses since inception and
anticipate that we will continue to incur significant operating
expenses for the foreseeable future. It is uncertain if we will
ever achieve or sustain profitability.
We have a history of incurring operating losses and as of
June 30, 2022, we had an accumulated deficit of
$693.1 million.
To date, we have not generated significant revenues from the sale
of products. Our operating losses have resulted principally from
costs incurred in our discovery and development activities. On
March 10, 2021, the FDA approved FOTIVDA
in the United States for the treatment of adult patients with R/R
RCC following two or more prior systemic therapies. We anticipate
that we will continue to incur significant operating expenses for
the foreseeable future as we commercialize FOTIVDA in the United
States and continue our planned development activities for our
clinical stage assets. Our future product revenues will depend upon
the size of markets in which FOTIVDA, and any future products, have
received approval, and our ability to achieve sufficient market
acceptance, reimbursement from third-party payers and adequate
market share for FOTIVDA and any future products in those markets.
The likelihood of our long-term success must be considered in light
of the expenses, difficulties and potential delays to be
encountered in the development and commercialization of new
pharmaceutical products, competitive factors in the marketplace and
the complex regulatory environment in which we
operate.
If we do not effectively manufacture, market and sell FOTIVDA in
the United States and if we do not successfully develop, obtain and
maintain regulatory approval for our existing and future pipeline
of product candidates we may never generate sufficient revenues
from product sales to support our cost structure in order to attain
or sustain profitability on a quarterly or annual basis. Our
failure to become and remain profitable would depress the market
price of our common stock and could impair our ability to raise
capital, expand our business, diversify our product offerings or
continue our operations.
We may require substantial additional funding to advance our
pipeline of clinical stage assets, and a failure to obtain this
necessary capital when needed would force us to delay, limit,
reduce or terminate our research, product development or
commercialization efforts.
We believe that our
$77.2 million
in cash, cash equivalents and marketable securities as of
June 30, 2022, along with net product revenues from product
sales of FOTIVDA in the United States, would enable us to maintain
our current operations for more than 12 months following the filing
of this Quarterly Report on Form 10-Q.
However, there are numerous risks and uncertainties associated with
the research, development and commercialization of pharmaceutical
products including, without limitation, risks related to our
ability to generate product revenue from sales of FOTIVDA in the
United States, which became commercially available in the United
States in March 2021. Accordingly, our future capital requirements
may vary from our current expectations and depend on many factors,
including but not limited to:
•the
cost of commercialization activities of FOTIVDA in the United
States and any of our product candidates that may be approved for
sale, including marketing, sales and distribution
costs;
•the
cost of manufacturing FOTIVDA in the United States, our product
candidates and any additional products we may successfully
commercialize;
•the
impact of COVID-19 on our operations, business and
prospects;
•our
ability to establish and maintain strategic partnerships,
licensing, collaboration or other arrangements and the financial
terms of such agreements;
•the
number of product candidates we pursue as well as the development
needs and opportunities for each product candidate;
•the
scope, progress, results and costs of researching and developing
our product candidates and of conducting preclinical and clinical
trials;
•the
timing of, and the costs involved in, completing our clinical
trials and obtaining regulatory approvals for our product
candidates;
•the
costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims, including litigation costs
and the outcome of such litigation;
•the
absence of any breach, acceleration event or event of default under
our 2020 Loan Facility (as defined below), or under any other
agreements with third parties;
•the
cost and outcome of any legal actions against us;
•the
timing, receipt and amount of sales of, or royalties on, FOTIVDA
and our future products, if any;
•and
general economic, industry and market conditions, including,
without limitation, the current adverse impact of the COVID-19
pandemic and political and economic instability caused by the
current armed conflict between Russia and Ukraine and economic
sanctions adopted in response to the conflict.
We may require substantial additional funding to advance our
pipeline of clinical stage assets. We may seek to sell additional
equity or debt securities or obtain additional credit facilities.
The sale of additional equity or convertible debt securities may
result in additional dilution to our stockholders. If we raise
additional funds through the issuance of debt securities or
preferred stock or through additional credit facilities, these
securities and/or the loans under credit facilities could provide
for rights senior to those of our common stock and could contain
covenants that would restrict our operations. Additional funds may
not be available when we need them, on terms that are acceptable to
us, or at all. For example, we may never achieve the milestone
specified in the 2020 Loan Facility that would allow us to access
the remaining $5.0 million in available credit. We also expect to
seek additional funds through arrangements with partners,
licensees, collaborators or other third parties. These arrangements
would generally require us to relinquish or encumber rights to some
of our technologies or product candidates, and we may not be able
to enter into such arrangements on acceptable terms, if at
all.
If we are unable to raise substantial additional funding to advance
our pipeline of clinical stage assets, whether on terms that are
acceptable to us, or at all, or if we were to default under the
2020 Loan Facility and Hercules accelerates the then remaining
principal payments and fees due under the 2020 Loan Facility, then
we may be required to:
•delay,
limit, reduce or terminate our clinical trials or other development
activities for one or more of our product candidates;
and/or
•delay,
limit, reduce or terminate our establishment of sales and marketing
capabilities or other activities that may be necessary to
commercialize our product candidates, if approved.
Failure to comply with the covenants or payment obligations under
the Loan Agreement governing our 2020 Loan Facility could result in
an event of default, which could materially and adversely affect
our business and our financial condition.
The Loan Agreement governing our 2020 Loan Facility includes
certain financial and operational covenants and provides for
certain occurrences that constitute events of default. Certain of
those covenants may be out of our control, such as failure to
achieve net product revenue at a certain percentage of projected
net product revenue. Potential events of default also include
circumstances occurring that would have a material adverse effect
on our business, our insolvency or bankruptcy or default on our
other obligations or agreements. If we fail to make payments when
due, breach any operational covenant or have any event of default,
Hercules could require us to immediately repay all outstanding
principal and accrued interest on the loan, plus a prepayment
charge, which could have a material adverse effect on our business
and financial condition.
We have only recently transitioned from a development stage
biopharmaceutical company to a commercial stage biopharmaceutical
company, which may make it difficult for you to evaluate the
success of our business to date and to assess our future
viability.
Other than the marketing approvals for FOTIVDA received by our
partner EUSA and the FDA marketing approval for FOTIVDA received in
the United States in March 2021, all of our product candidates are
in the development stage. We have only recently demonstrated our
ability, or our ability to arrange for a third party, to
manufacture a commercial scale medicine and conduct the sales and
marketing activities necessary to commercialize a product.
Consequently, any predictions you make about our future success or
viability may not be as accurate as they could be if we had more
experience commercializing FOTIVDA. In addition, as a relatively
new commercial stage business, we may
encounter unforeseen expenses, difficulties, complications, delays
and other known and unknown factors. To be profitable, we will need
to continue to successfully transition from a company with a
research and development focus to a company capable of supporting
commercial activities. Ultimately, we may not be successful in such
a transition.
We rely on a limited number of key customers, the importance of
which may vary dramatically from year to year, and a loss of one or
more of these key customers may adversely affect our operating
results.
Four customers accounted for approximately all of our U.S net
product revenues for FOTIVDA in the quarter ended June 30,
2022. One large specialty distributor accounted for 40% of our U.S.
net product revenues for FOTIVDA in the quarter ended June 30,
2022, and we anticipate this customer will continue to be a
significant contributor to our U.S. net product revenues for
FOTIVDA for the remainder of 2022. The loss of a significant amount
of business from one of our major customers would materially and
adversely affect our results of operations until such time, if
ever, as we are able to replace the lost business. Significant
customers in any one period may not continue to be significant
customers in other periods. In any given year, there is a
possibility that a single specialty pharmacies and specialty
distributors may account for 50% or more of our U.S. net product
revenues for FOTIVDA. To the extent that we are dependent on any
single customer, we are subject to the risks faced by that customer
to the extent that such risks impede the customer's ability to stay
in business and make timely payments to us.
Risks Related to Development and Commercialization of Our Product
Candidates
In the near term, we are substantially dependent on the success of
FOTIVDA (tivozanib). If we are unable to successfully commercialize
FOTIVDA or maintain marketing approval for FOTIVDA in its approved
indication, or if we are unable to complete planned or ongoing
clinical development of tivozanib to obtain marketing approval for
tivozanib in other indications, either alone or with our
collaborators, or if we experience significant delays in doing so,
our business could be substantially harmed.
Our prospects are substantially dependent on our ability to
successfully commercialize FOTIVDA in the United States and
maintain marketing approval for FOTIVDA in the United States, or
through EUSA, which was acquired by Recordati S.p.A., or Recordati,
in March 2022, in those countries outside the United States where
FOTIVDA is currently approved. While we recorded a growing number
of
commercial prescriptions during the six month period ended
June 30, 2022, factors beyond our control may result in
decreases in commercial prescriptions each month or each quarter.
If commercial prescription demand becomes stagnant or decreases it
would substantially impact our revenues from product sales,
adversely affect our profitability on a quarterly or annual basis
and depress the market price of our common stock.
We are also dependent on the success of the continued clinical
development of tivozanib and our ability to obtain additional
marketing approvals for tivozanib in one or more other
indications.
The success of FOTIVDA will depend on a number of factors,
including the following:
•our
ability to successfully commercialize FOTIVDA in the United
States;
•our
ability to enhance commercial awareness of FOTIVDA;
•commercial
acceptance by physicians, patients, third-party payors and others
in the medical community;
•our
ability to gain access to customers during the COVID-19
pandemic;
•our
ability to successfully enroll and complete clinical trials of
tivozanib, including the TiNivo-2 Trial;
•a
continued acceptable safety, tolerability and efficacy profile that
is satisfactory to applicable regulatory authorities following any
marketing approval;
•timely
receipt of marketing approvals from applicable regulatory
authorities such as the FDA;
•the
performance of the contract research organizations, or CROs, we
have hired to manage our clinical trials, as well as that of our
collaborators, investigator sponsors and other third-party
contractors;
•the
extent of any future post-marketing approval commitments to
applicable regulatory authorities;
•maintenance
of existing or establishment of new supply arrangements with
third-party raw materials suppliers and manufacturers including
with respect to the supply of active pharmaceutical ingredient for
tivozanib and finished drug product that is appropriately packaged
for sale;
•adequate
ongoing availability of raw materials and drug product for clinical
development and any commercial sales;
•obtaining
and maintaining patent, trade secret protection and regulatory
exclusivity, both in the United States and internationally,
including our ability to maintain our license agreement with
KKC;
•protection
of our rights in our intellectual property portfolio, including our
ability to maintain our license agreement with KKC;
and
•our
ability to compete with other therapies.
Many of these factors are beyond our control. If we are unable to
continue to successfully commercialize FOTIVDA in the United States
or to develop or receive marketing approval for tivozanib in other
indications, on our own or with our collaborators, or experience
delays as a result of any of these factors or otherwise, our
business could be substantially harmed.
FOTIVDA, or any one of our product candidates that may receive
marketing approval in the future, may fail to achieve the degree of
market acceptance by physicians, patients, third-party payors and
others in the medical community necessary for commercial success
and the market opportunity for FOTIVDA or any one of our product
candidates may be smaller than our estimates.
FOTIVDA, or any one of our product candidates that may be approved
in the future by the appropriate regulatory authorities for
marketing and sale, may fail to gain sufficient market acceptance
by physicians, patients, third-party payors and others in the
medical community. Physicians are often reluctant to switch their
patients from existing therapies even when new and potentially more
effective or convenient treatments enter the market. There are
already a number of therapies on the market competitive to FOTIVDA,
as well as our other product candidates, in indications we intend
to target.
Efforts to educate the medical community and third-party payors on
the benefits of our product candidates have required significant
resources and may not ultimately be successful. Restrictions
related to the ongoing
COVID-19 pandemic have impeded our ability to gain in-person access
to customers, prescribers, other healthcare professionals and to
certain institutions that remain closed to industry
representatives.
We believe these access challenges caused by the COVID-19 pandemic
and the emergence of SARs-CoV-2 variants have potentially slowed
the commercial launch trajectory of FOTIVDA which we believe is
causing a protracted launch curve as compared to the pre-COVID open
access environment.
While we have designed our strategic commercial approach to be
optimized for remote as well as in-person customer engagement
capabilities and expanded our digital marketing strategies in light
of the restrictions necessitated by the COVID-19 pandemic, changes
to standard sales and marketing practices, including the shift from
in-person to video and virtual interactions with healthcare
professionals, have caused, and may continue to cause, challenges
for the successful commercialization of FOTIVDA.
If FOTIVDA, or any of our product candidates that may be approved
for marketing and sale in the future, does not achieve an adequate
level of market acceptance, we may not generate significant
revenues and we may not become profitable. The degree of market
acceptance of FOTIVDA, or any of our product candidates that may be
approved for marketing and sale in the future, will depend on a
number of factors, including:
•the
advantages of the product compared to competitive
therapies;
•the
number of competitors approved for similar uses;
•our
ability to gain access to customers during the COVID-19
pandemic;
•the
relative promotional effort and marketing success of us as compared
with our competitors;
•how
the product is positioned in physician treatment guidelines and
pathways;
•the
prevalence and severity of any side effects;
•the
efficacy and safety of the product;
•our
ability to offer the product for sale at competitive
prices;
•the
product’s tolerability, convenience and ease of administration
compared to alternative treatments;
•the
willingness of the target patient population to try, and of
physicians to prescribe, the product;
•limitations
or warnings, including use restrictions, contained in the product’s
approved labeling;
•the
strength of sales, marketing and distribution support;
•the
timing of market introduction of our approved products as well as
competitive products;
•adverse
publicity about the product or favorable publicity about
competitive products;
•potential
product liability claims;
•changes
in the standard of care for the targeted indications of the
product; and
•availability
and amount of coverage and reimbursement from government payors,
managed care plans and other third-party payors.
In addition, the potential market opportunities for FOTIVDA and our
product candidates are difficult to estimate precisely. Our
estimates of the potential market opportunities are predicated on
many assumptions, including industry knowledge and publications,
third-party research reports and other surveys. While we believe
that our internal assumptions are reasonable, these assumptions
involve the exercise of significant judgment on the part of our
management, are inherently uncertain and the reasonableness of
these assumptions has not been assessed by an independent source.
If any of the assumptions prove to be inaccurate, the actual
markets for our product candidate could be smaller than our
estimates of the potential market opportunities.
If the FDA, EMA or other comparable foreign regulatory authorities
approve generic versions of FOTIVDA®,
the sales of FOTIVDA®could
be adversely affected.
Once a new drug application, or NDA, is approved, the product
covered thereby becomes a “reference listed drug” in the FDA’s
publication, “Approved Drug Products with Therapeutic Equivalence
Evaluations,” commonly known as the Orange Book. Manufacturers may
seek approval of generic versions of reference listed drugs through
submission of abbreviated new drug applications, or ANDAs, in the
United States. In support of an ANDA, a generic manufacturer need
not conduct clinical trials to assess safety and efficacy. Rather,
the applicant generally must show that its product has the same
active ingredient(s), dosage form, strength, route of
administration and conditions of use or labelling as the reference
listed drug and that the generic version is bioequivalent to the
reference listed drug, meaning it is absorbed in the body at the
same rate and to the same extent. Generic products may be
significantly less costly to bring to market than the reference
listed drug and companies that produce generic products are
generally able to offer them at lower prices. Thus, following the
introduction of a generic drug, a significant percentage of the
sales of any branded product or reference listed drug is typically
lost to the generic product.
The FDA may not approve an ANDA for a generic product until any
applicable period of non-patent exclusivity for the reference
listed drug has expired. The FDA provides a period of five years of
non-patent exclusivity for a new drug containing a new chemical
entity. Specifically, in cases where such exclusivity has been
granted, as is the case with FOTIVDA®,
an ANDA may not be submitted to the FDA until the expiration of
five years, e.g., March 10, 2026, for FOTIVDA®,
unless the submission is accompanied by a Paragraph IV
certification that a patent covering the reference listed drug is
either invalid or will not be infringed by the generic product, in
which case the applicant may submit its application four years
following approval of the reference listed drug,
e.g.,
March 10, 2025, for FOTIVDA®.
Generic drug manufacturers may seek to launch generic products
following the expiration of the applicable exclusivity period for
FOTIVDA, even if we still have regulatory exclusivity and/or patent
protection for such products. Competition that FOTIVDA could face
from generic versions could materially and adversely affect our
future revenue,
profitability, and cash flows and substantially limit our ability
to obtain a return on the investments we have made in developing
FOTIVDA.
In addition to our dependence on the success of FOTIVDA, we depend
on the success of our clinical stage assets, including tivozanib
(in other indications), ficlatuzumab, AV-380 and AV-203.
Preclinical studies and clinical trials of our product candidates
may not be successful. If we are unable to complete the clinical
development of, obtain marketing approval for or successfully
commercialize our product candidates, either alone or with a
collaborator, or if we experience significant delays in doing so,
our business will be materially harmed.
We and any collaborators, including our partners and sublicensees,
are not permitted to commercialize, market, promote or sell any
product candidate in the United States without obtaining marketing
approval from the FDA. Foreign regulatory authorities, such as the
European Medicines Agency, or the EMA, impose similar requirements.
We and our collaborators must complete extensive preclinical
development and clinical trials that demonstrate the safety and
efficacy of our product candidates in humans before we can obtain
these approvals. Despite our efforts to design satisfactory
clinical trial protocols, we cannot guarantee that the clinical
trial protocols of any of our ongoing clinical trials will satisfy
the rigorous standards of the FDA and/or the EMA to support a
marketing approval. If we seek to amend the clinical trial
protocols for any of our clinical trials this may delay site
enrollment and completion, as in the case of the TiNivo-2 Trial
where we made a clinical trial protocol amendment. The TiNivo-2
trial protocol was amended based on (i) emerging evidence that the
lower 0.89 mg dose was effective in combination with an ICI, (ii)
that the lower dose may optimize the risk/benefit profile and
result in better tolerability for the combination and (iii) the
FDA’s recommendation to investigate an optimal dose of tivozanib in
the combination setting under its Project Optimus initiative. We
cannot be certain that this amendment to the TiNivo-2 protocol will
satisfy the FDA's Project Optimus initiative to investigate the
optimal dose of tivozanib in the combination setting and, if it
does not, we may be required to conduct additional clinical trials
which would delay and adversely impact the timing of marketing
approval of tivozanib in combination with nivolumab or other
therapies.
We depend heavily on the success of our clinical stage assets and
our clinical trials may not be successful. If delays in
manufacturing, trial site initiation or patient enrollment occur,
whether due to the impacts of the ongoing COVID-19 pandemic or
otherwise, our clinical stage assets will develop at a slower pace
than we had planned. For example, the delivery of the clinical
supply of ficlatuzumab for a potential registrational clinical
trial of ficlatuzumab in R/M HNSCC was significantly delayed due to
the shortage of key raw materials and manufacturing supplies also
used in COVID-19 vaccine manufacturing which required us to delay
the start date of this potential registrational clinical trial
until 2023.
Preclinical and clinical testing is expensive, is difficult to
design and implement, can take many years to complete and is
inherently uncertain as to outcome. We cannot guarantee that any
clinical trials will be conducted as planned or completed on
schedule, if at all, particularly given that many of our clinical
trial sites are research hospitals that have imposed restrictions
on entry and other activity as a result of the COVID-19 pandemic.
The preclinical and clinical development of our product candidates
is susceptible to the risk of failure inherent at any stage of
product development. For example, in December 2020, the FDA
approved our IND application for AV-380 for the potential treatment
of cancer cachexia. In October 2021, we completed enrollment for a
Phase 1 clinical trial in healthy subjects. Initial data observed a
satisfactory reduction of GDF15 in subjects and no drug related
adverse events were identified. However, operational errors at the
trial site have caused data integrity concerns and we have notified
the FDA. We plan to discuss with the FDA the suitability of the
data for regulatory purposes and our ability to publish the data
from this trial. We do not expect the data quality issues in the
Phase 1 clinical trial to impact our plans to initiate a Phase 1b
clinical trial in cancer patients in the second half of 2022. We
cannot be certain that the data integrity concerns related to the
Phase 1 clinical trial will not ultimately delay the development of
our AV-380 program.
Moreover, we, or any collaborators, may experience any of a number
of possible unforeseen adverse events in connection with clinical
trials, many of which are beyond our control,
including:
•we,
or our collaborators, may fail to demonstrate efficacy in a
clinical trial or across a broad population of
patients;
•the
supply or quality of raw materials, manufactured product candidates
or other materials necessary to conduct clinical trials of our
product candidates may be significantly delayed, insufficient,
inadequate or not available at an acceptable cost, or we may
experience interruptions in supply, due to challenges related to
the COVID-19 pandemic, global supply chain disruptions caused by
the ongoing conflict between Russia and Ukraine or
otherwise;
•it
is possible that even if one or more of our product candidates has
a beneficial effect, that effect (a) will not be detected during
preclinical or clinical evaluation or (b) may indicate an apparent
positive effect of a product candidate that is greater than the
actual positive effect as a result of one or more of a variety of
factors, including the size, duration, design, measurements,
conduct or analysis of our clinical trials;
•we
may fail to detect toxicity or intolerability of our product
candidates, or mistakenly believe that our product candidates are
toxic or not well tolerated when that is not in fact the
case;
•adverse
events or undesirable side effects caused by, or other unexpected
properties of, any product candidates that we may develop could
cause us, any collaborators, an institutional review board or
regulatory authorities to interrupt, delay or halt clinical trials
of one or more of our product candidates and could result in a more
restrictive label or the delay or denial of marketing approval by
the FDA or comparable foreign regulatory authorities;
•if
any of our product candidates is associated with adverse events or
undesirable side effects or has properties that are unexpected, we,
or any collaborators, may need to abandon development or limit
development of that product candidate to certain uses or
subpopulations in which the undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable
from a risk-benefit perspective;
•regulators
or institutional review boards may not authorize us, any
collaborators or our or their investigators to commence a clinical
trial or conduct a clinical trial at a prospective trial
site;
•we,
or any collaborators, may have delays in reaching or fail to reach
agreement on acceptable clinical trial contracts or clinical trial
protocols with prospective trial sites;
•clinical
trials of our product candidates may produce unfavorable or
inconclusive results, including with respect to the safety,
tolerability, efficacy or pharmacodynamic and pharmacokinetic
profile of the product candidate;
•we,
or any collaborators, may decide, or regulators may require us or
them, to conduct additional clinical trials or abandon product
development programs;
•the
number of patients required for clinical trials of our product
candidates may be larger than we, or any collaborators, anticipate,
patient enrollment in these clinical trials may be slower than we,
or any collaborators, anticipate or participants may drop out of
these clinical trials at a higher rate than we, or any
collaborators, anticipate;
•our
estimates of the patient populations available for study may be
higher than actual patient numbers and result in our inability to
sufficiently enroll our trials;
•the
cost of planned clinical trials of our product candidates may be
greater than we anticipate;
•our
third-party contractors or those of any collaborators, including
those manufacturing our product candidates or components or
ingredients thereof or conducting clinical trials on our behalf or
on behalf of any collaborators, may fail to comply with regulatory
requirements, including Good Manufacturing Practices (“GMPs”), Good
Clinical Practices (“GCPs”) or Good Laboratory Practices (“GLPs”),
or meet their contractual obligations to us or any collaborators in
a timely manner or at all;
•patients
that enroll in a clinical trial may misrepresent their eligibility
to do so or may otherwise not comply with the clinical trial
protocol, resulting in the need to increase the needed enrollment
size for the clinical trial, extend the clinical trial’s duration,
or drop the patients from the final efficacy analysis for the
clinical trial, which can negatively affect the statistical power
of the results;
•our
decision, or a decision by regulators or institutional review
boards, that may require us to suspend or terminate clinical
research for various reasons, including noncompliance with
regulatory requirements or their standards of conduct, a finding
that the participants are being exposed to unacceptable health
risks, undesirable side effects or other unexpected characteristics
of the product candidate or findings of undesirable effects caused
by a chemically or mechanistically similar product or product
candidate;
•the
FDA or comparable foreign regulatory authorities may disagree with
our, or any collaborators’, clinical trial designs or our or their
interpretation of data from preclinical studies and clinical
trials;
•the
FDA or comparable foreign regulatory authorities may fail to
approve or subsequently find fault with the manufacturing processes
or facilities of third-party manufacturers with which we, or any
collaborators, enter into agreements for clinical and commercial
supplies;
•the
approval policies or regulations of the FDA or comparable foreign
regulatory authorities may significantly change in a manner
rendering our clinical data insufficient to obtain marketing
approval; and
•constraints
on our, or any collaborators’, ability to conduct or complete
clinical trials for our product candidates due to the COVID-19
pandemic, including slowdowns in patient enrollment, or necessary
supplies, restrictions on patient monitoring at hospital clinical
trial sites, closures of third-party facilities, and other
disruptions to clinical trial activities.
Product development costs for us and our collaborators will
increase if we experience delays in testing or pursuing marketing
approvals, and we may be required to obtain additional funds to
complete clinical trials and prepare for possible
commercialization. We do not know whether any clinical trials will
begin as planned, will need to be restructured or will be completed
on schedule or at all. Significant clinical trial delays also could
shorten any periods during which we may have the exclusive right to
commercialize our product candidates or allow our competitors to
bring products to market before we do, which could impair our
ability to successfully commercialize our product candidates and
may harm our business and results of operations. In addition, many
of the factors that lead to clinical trial delays may ultimately
lead to the denial of marketing approval of any of our product
candidates.
If the commercial launch of FOTIVDA for which we recruited a sales
force and established marketing, market access and medical affairs
teams and distribution capabilities is not successful for any
reason, we could incur substantial costs and our investment would
be lost if we cannot retain or reassign our sales, marketing,
market access and medical affairs personnel.
To achieve commercial success for FOTIVDA, we have expended and
anticipate that we will continue to expend significant resources to
support our sales force, marketing, market access and medical
affairs teams and distribution capabilities. There are risks
involved with establishing our own sales, marketing, distribution,
training and support capabilities. For example, recruiting and
training sales and marketing personnel is expensive and time
consuming and could delay our ability to focus on other priorities.
If the commercial launch of FOTIVDA is not successful for any
reason, this would be costly, and our investment would be lost if
we cannot retain or reassign our sales, marketing, market access
and medical affairs personnel or terminate on favorable terms any
agreements entered into with third parties to support our
commercialization efforts.
Factors that may inhibit or limit our efforts to commercialize
FOTIVDA on our own include:
•our
inability to train and retain adequate numbers of effective sales,
marketing, training and support personnel;
•the
inability of sales personnel to obtain access to physicians,
including key opinion leaders, or to educate an adequate number of
physicians of the benefits of FOTIVDA over alternative treatment
options;
•limited
access to our customers due to the COVID-19 pandemic;
and
•unforeseen
costs and expenses associated with establishing and maintaining an
independent sales, marketing, training and support
organization.
If our salesforce, marketing, market access and medical affairs
teams and distribution capabilities fail, or are otherwise
unsuccessful, it would materially adversely impact the
commercialization of FOTIVDA, impact our ability to generate
revenue and harm our business.
If we fail to develop, acquire, in-license and commercialize other
product candidates or additional commercial stage assets, we may be
unable to grow our business.
Although the commercialization of FOTIVDA and the continued
development of tivozanib is our primary focus, as part of our
growth strategy, we are developing a pipeline of product candidates
and we may seek to acquire or in-license additional commercial
stage products. We may be unable to identify, acquire or in-license
on favorable terms one or more additional commercial stage
products. Further, our commercial infrastructure may be
unsuccessful in commercially launching any additional commercial
stage products we acquire.
Our earlier stage product candidates and any earlier stage product
candidates we acquire or in-license will require additional,
time-consuming and costly development efforts, by us or by our
collaborators, prior to commercial sale, including preclinical
studies, clinical trials and approval by the FDA and/or applicable
foreign regulatory authorities. All product candidates are prone to
the risks of failure that are inherent in pharmaceutical product
development, including the possibility that the product candidate
will not be shown to be sufficiently safe and/or effective for
approval by regulatory authorities. In addition, we cannot assure
you that any such products that are approved will be manufactured
or produced economically, successfully commercialized or widely
accepted in the marketplace, or will be more effective than other
commercially available alternatives.
We may not obtain additional marketing approvals for tivozanib in
other indications or initial approval for our other product
candidates.
We may not obtain additional marketing approvals for our product
candidates. It is possible that the FDA or comparable foreign
regulatory agencies may refuse to accept for substantive review any
future application that we or a collaborator may submit to market
and sell our product candidates, or that any such agency may
conclude after review of our or our collaborator’s data that such
application is insufficient to obtain marketing approval of our
product candidate.
If the FDA or other comparable foreign regulatory agency does not
accept or approve any future application to market and sell any of
our product candidates, such regulators may require that we conduct
additional clinical trials, preclinical studies or manufacturing
validation studies and submit that data before they will reconsider
our application. Depending on the extent of these or any other
required trials or studies, approval of any application that we
submit may be delayed by several years, or may require us or our
collaborator to expend more resources than we or they have
available. It is also possible that additional trials or studies,
if performed and completed, may not be considered sufficient by the
FDA or other foreign regulatory agency to approve our applications
for marketing and commercialization.
Any delay in obtaining, or an inability to obtain, marketing
approvals would prevent us or our collaborators from
commercializing tivozanib in other indications or our product
candidates and generating revenues. If any of these outcomes occur,
we would not be eligible for certain milestone and royalty revenue
under our partnership agreements, our collaborators could terminate
our partnership agreements and we may be forced to abandon our
development efforts for our product candidates, any of which could
significantly harm our business.
Results of early clinical trials may not be predictive of results
of later clinical trials, and interim results of clinical trials
may not be predictive of the final results or the success of
clinical trials.
The outcome of early clinical trials, such as our DEDUCTIVE trial
and our ficlatuzumab
trials in HNSCC, pancreatic cancer and acute myeloid leukemia, or
AML, may not be predictive of the success of later clinical trials.
Many companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in late-stage clinical trials
after achieving positive results in earlier development, and we
have, and could in the future, face similar setbacks. In addition,
interim results and analyses of clinical trials do not necessarily
predict the final results or the success of a trial once it is
complete.
While the design of a clinical trial may help to establish whether
its results will support approval of a product, flaws in the design
of a clinical trial may not become apparent until the clinical
trial is well advanced. We have limited experience in designing
clinical trials and may be unable to design and execute a clinical
trial to support marketing approval. In addition, preclinical and
clinical data are often susceptible to varying interpretations and
analyses. Many companies that believed their product candidates
performed satisfactorily in preclinical studies and clinical trials
have nonetheless failed to obtain marketing approval for the
product candidates. Even if we, or any collaborators, believe that
the results of clinical trials for our product candidates warrant
marketing approval, the FDA or comparable foreign regulatory
authorities may disagree and may not grant marketing approval of
our product candidates. For example, in June 2013, we suffered such
a setback when the FDA issued a complete response letter, or the
2013 CRL, informing us that it
would not approve tivozanib for the first-line treatment of RCC
based solely on the data from the TIVO-1 trial, and recommended
that we perform an additional clinical trial adequately sized to
assure the FDA that tivozanib did not adversely affect overall
survival, or OS. We then designed and initiated our TIVO-3 trial to
address the FDA’s concerns about the negative OS trend expressed in
the 2013 CRL, which took time and resources and delayed our efforts
to obtain marketing approval for tivozanib in the United
States.
If we fail to receive positive results in clinical trials of our
product candidates, the development timeline and regulatory
approval and commercialization prospects for our most advanced
product candidates, and, correspondingly, our business and
financial prospects would be negatively impacted.
If we or our collaborators experience delays or difficulties in the
enrollment of patients in clinical trials, receipt of necessary
regulatory approvals could be delayed or prevented.
We or our collaborators may not be able to initiate or continue
clinical trials for our product candidates if we are unable to
locate and enroll a sufficient number of eligible patients to
participate in clinical trials. Patient enrollment is a significant
factor in the timing of clinical trials, and is affected by many
factors, including:
•the
impact of the COVID-19 pandemic;
•the
size and nature of the patient population;
•the
severity of the disease under investigation;
•the
availability of approved therapeutics for the relevant
disease;
•the
evolving standard of care landscape;
•the
proximity of patients to clinical sites;
•the
design of and eligibility criteria for the trial;
•efforts
to facilitate timely enrollment; and
•competing
clinical trials.
In addition, participation in our clinical trials will be affected
by clinicians’ and patients’ perceptions as to the potential
advantages and risks of the drug being studied and the drug being
provided as a control in relation to other available therapies,
including any new drugs that may be approved or any changes to the
standard of care for the indications we are investigating. For
example, changes in the standard of care in HCC have extended
treatment time with first line therapies and reduced the presence
of a sufficient patient pool suitable for the DEDUCTIVE trial,
which delayed patient enrollment for the trial.
If approved, our product candidates, such as ficlatuzumab, AV-380,
or AV-203, that are licensed and regulated as biologics may face
competition from biosimilars approved through an abbreviated
regulatory pathway.
The Biologics Price Competition and Innovation Act of 2009, or
BPCIA, was enacted as part of the Patient Protection and Affordable
Care Act, or the ACA, to establish an abbreviated pathway for the
approval of biosimilar and interchangeable biological products. The
regulatory pathway establishes legal authority for the FDA to
review and approve biosimilar biologics, including the possible
designation of a biosimilar as “interchangeable” based on its
similarity to an approved biologic. Under the BPCIA, our antibody
product candidates, for example, ficlatuzumab, AV-380 or AV-203, if
approved by the FDA, would benefit from 12 years of data
exclusivity from the time of first licensure. While the FDA could
not accept an application for a biosimilar or interchangeable
product based on our biologic product candidates, such as
ficlatuzumab, AV-380 or AV-203, as the reference biological product
until four years after the date of first licensure of our product
candidate, during this 12-year period of exclusivity, another party
may still independently develop and receive approval of a competing
biologic, so long as its BLA does not rely on our product
candidate’s data or submit the application as a biosimilar
application. The law is complex and is still being interpreted and
implemented by the FDA. As a result, its ultimate impact,
implementation, and meaning are subject to uncertainty, and any new
policies or processes adopted by the FDA could have a material
adverse effect on the future commercial prospects for our
biological products.
We believe that any of the biological product candidates we develop
under a BLA, such as ficlatuzumab, AV-380 or AV-203, should qualify
for the 12-year period of exclusivity.
However, there is a risk that this exclusivity could be shortened
due to congressional action or otherwise, or that the FDA will not
consider the subject product candidates to be reference products
for competing products, potentially creating the opportunity for
biosimilar competition sooner than anticipated.
Moreover, the extent to which a biosimilar, once approved, will be
substituted for any one of the reference products in a way that is
similar to traditional generic substitution for non-biological
products will depend on a number of marketplace and regulatory
factors that are still developing.
Nonetheless, the approval of a biosimilar to our biologic product
candidates, such as ficlatuzumab, AV-380 or AV-203, would have a
material adverse impact on our business due to increased
competition and pricing pressure.
Even if a product candidate receives marketing approval, we or
others may later discover that the product is less effective than
previously believed or causes undesirable side effects that were
not previously identified, which could compromise our ability or
that of any collaborators to market the product, and could cause
regulatory authorities to take certain regulatory
actions.
It is possible that our clinical trials may indicate an apparent
positive effect of a product candidate that is greater than the
actual positive effect, if any, or alternatively fail to identify
undesirable side effects. For example, despite the recent FDA
marketing approval of FOTIVDA in the United States, we, or others,
may discover that FOTIVDA is less effective or tolerable than
previously believed. If, we, or others, discover that a product is
less effective than previously believed or causes undesirable side
effects that were not previously identified, any of the following
adverse events could occur:
•regulatory
authorities may withdraw their approval of the product or seize the
product;
•we,
or any of our collaborators, may be required to recall the product,
change the way the product is administered or conduct additional
clinical trials;
•