false84-46202062022Q20001808898--06-30P5Y 0001808898 2021-12-31 0001808898 2021-06-30 0001808898 2021-07-01 2021-12-31 0001808898 2020-07-01 2020-12-31 0001808898 2021-10-01 2021-12-31 0001808898 2020-10-01 2020-12-31 0001808898 2021-07-01 2022-06-30 0001808898 2022-02-10 0001808898 2020-07-01 2020-09-30 0001808898 2021-07-01 2021-09-30 0001808898 2021-08-01 2021-08-31 0001808898 2019-12-06 0001808898 2020-06-30 0001808898 2020-12-31 0001808898 2020-09-30 0001808898 2021-09-30 0001808898 us-gaap:SoftwareDevelopmentMember 2021-12-31 0001808898 us-gaap:EquipmentMember 2021-12-31 0001808898 us-gaap:ComputerEquipmentMember 2021-12-31 0001808898 us-gaap:LeaseholdImprovementsMember 2021-12-31 0001808898 bntc:FrancisAbourizkLightowlersMember 2021-12-31 0001808898 us-gaap:SoftwareDevelopmentMember 2021-06-30 0001808898 us-gaap:EquipmentMember 2021-06-30 0001808898 us-gaap:ComputerEquipmentMember 2021-06-30 0001808898 us-gaap:LeaseholdImprovementsMember 2021-06-30 0001808898 bntc:PreFundedWarrantsMember 2021-06-30 0001808898 bntc:FrancisAbourizkLightowlersMember 2021-06-30 0001808898 us-gaap:CommonStockMember 2020-10-01 2020-12-31 0001808898 us-gaap:AdditionalPaidInCapitalMember 2020-10-01 2020-12-31 0001808898 us-gaap:ResearchAndDevelopmentExpenseMember 2020-10-01 2020-12-31 0001808898 us-gaap:GeneralAndAdministrativeExpenseMember 2020-10-01 2020-12-31 0001808898 us-gaap:RetainedEarningsMember 2020-10-01 2020-12-31 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-10-01 2020-12-31 0001808898 us-gaap:ResearchAndDevelopmentExpenseMember 2021-10-01 2021-12-31 0001808898 us-gaap:GeneralAndAdministrativeExpenseMember 2021-10-01 2021-12-31 0001808898 us-gaap:EmployeeStockOptionMember 2021-10-01 2021-12-31 0001808898 us-gaap:AdditionalPaidInCapitalMember 2021-10-01 2021-12-31 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-10-01 2021-12-31 0001808898 us-gaap:RetainedEarningsMember 2021-10-01 2021-12-31 0001808898 us-gaap:ResearchAndDevelopmentExpenseMember 2020-07-01 2020-12-31 0001808898 us-gaap:GeneralAndAdministrativeExpenseMember 2020-07-01 2020-12-31 0001808898 bntc:BenitecBiopharmaProprietaryLimitedBblMember 2021-07-01 2021-12-31 0001808898 bntc:BenitecAustraliaProprietaryLimitedMember 2021-07-01 2021-12-31 0001808898 bntc:BenitecLimitedMember 2021-07-01 2021-12-31 0001808898 bntc:BenitecIncMember 2021-07-01 2021-12-31 0001808898 bntc:BenitecLlcMember 2021-07-01 2021-12-31 0001808898 bntc:RnaiTherapeuticsIncMember 2021-07-01 2021-12-31 0001808898 bntc:TacereTherapeuticsIncMember 2021-07-01 2021-12-31 0001808898 bntc:BenitecBiopharmaProprietaryLimitedMember 2021-07-01 2021-12-31 0001808898 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember srt:MinimumMember 2021-07-01 2021-12-31 0001808898 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember srt:MaximumMember 2021-07-01 2021-12-31 0001808898 bntc:LabEquipmentMember srt:MinimumMember 2021-07-01 2021-12-31 0001808898 bntc:LabEquipmentMember srt:MaximumMember 2021-07-01 2021-12-31 0001808898 us-gaap:ComputerEquipmentMember srt:MinimumMember 2021-07-01 2021-12-31 0001808898 srt:MaximumMember us-gaap:ComputerEquipmentMember 2021-07-01 2021-12-31 0001808898 us-gaap:LeaseholdsAndLeaseholdImprovementsMember 2021-07-01 2021-12-31 0001808898 us-gaap:ResearchAndDevelopmentExpenseMember 2021-07-01 2021-12-31 0001808898 us-gaap:GeneralAndAdministrativeExpenseMember 2021-07-01 2021-12-31 0001808898 bntc:FrancisAbourizkLightowlersMember 2021-07-01 2021-12-31 0001808898 us-gaap:EmployeeStockOptionMember 2021-07-01 2021-09-30 0001808898 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-07-01 2021-09-30 0001808898 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001808898 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001808898 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001808898 bntc:PreFundedWarrantsMember 2020-10-06 2020-10-06 0001808898 us-gaap:IPOMember 2020-10-06 2020-10-06 0001808898 us-gaap:OverAllotmentOptionMember 2020-10-06 2020-10-06 0001808898 us-gaap:OverAllotmentOptionMember 2020-10-06 0001808898 us-gaap:IPOMember 2020-10-06 0001808898 bntc:PreFundedWarrantsMember 2020-10-06 0001808898 us-gaap:IPOMember 2021-04-30 2021-04-30 0001808898 us-gaap:OverAllotmentOptionMember 2021-04-30 2021-04-30 0001808898 us-gaap:OverAllotmentOptionMember 2021-04-30 0001808898 us-gaap:IPOMember 2021-04-30 0001808898 us-gaap:CommonStockMember 2021-07-01 2022-06-30 0001808898 bntc:PurchaseWarrantsMember 2019-12-06 0001808898 us-gaap:CommonStockMember 2020-04-22 0001808898 us-gaap:CommonStockMember 2020-04-22 2020-04-22 0001808898 us-gaap:EmployeeStockOptionMember 2020-07-01 2021-06-30 0001808898 srt:MinimumMember 2021-12-08 0001808898 srt:MaximumMember 2021-12-08 0001808898 bntc:Amended2020EquityAndIncentiveCompensationPlanMember 2021-12-08 0001808898 us-gaap:CommonStockMember 2020-12-31 0001808898 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001808898 us-gaap:RetainedEarningsMember 2020-12-31 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001808898 us-gaap:EmployeeStockOptionMember 2021-12-31 0001808898 us-gaap:CommonStockMember 2021-12-31 0001808898 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001808898 us-gaap:RetainedEarningsMember 2021-12-31 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001808898 us-gaap:CommonStockMember 2021-06-30 0001808898 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001808898 us-gaap:RetainedEarningsMember 2021-06-30 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001808898 us-gaap:EmployeeStockOptionMember 2021-06-30 0001808898 us-gaap:EmployeeStockOptionMember 2021-09-30 0001808898 us-gaap:CommonStockMember 2021-09-30 0001808898 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0001808898 us-gaap:RetainedEarningsMember 2021-09-30 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-09-30 0001808898 us-gaap:CommonStockMember 2020-06-30 0001808898 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001808898 us-gaap:RetainedEarningsMember 2020-06-30 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001808898 us-gaap:CommonStockMember 2020-09-30 0001808898 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001808898 us-gaap:RetainedEarningsMember 2020-09-30 0001808898 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 iso4217:USD xbrli:shares utr:Year xbrli:pure iso4217:USD xbrli:shares
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31,
2021
 
☐
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
001-39267
 
 
BENITEC BIOPHARMA INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
84-462-0206
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
3940 Trust Way, Hayward, California 94545
(Address of principal executive offices & zip code)
(510)
780-0819
(Registrant’s telephone number including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.0001
 
BNTC
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer   ☐    Accelerated filer   ☐
Non-accelerated filer   ☒    Smaller reporting company   ☒
Emerging growth company   ☐     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☐ or No ☒
We had 8,171,690 shares of our common stock outstanding as of the close of business on February 10, 2022.
 
 
 
BENITEC BIOPHARMA INC.
INDEX TO FORM
10-Q
 
     2  
     4  
ITEM 1.
  Financial Statements (unaudited)      4  
  Consolidated Balance Sheets as of December 31, 2021 (Unaudited) and June 30, 2021      4  
  Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended December 31, 2021 and 2020 (Unaudited)      5  
  Consolidated Statements of Stockholders’ Equity for the Six Months Ended December 30, 2021 and 2020 (Unaudited)      6  
  Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2021 and 2020 (Unaudited)      8  
  Notes to Consolidated Financial Statements (Unaudited)      9  
ITEM 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations      23  
ITEM 3.
  Quantitative and Qualitative Disclosures About Market Risk      41  
ITEM 4.
  Controls and Procedures      41  
  
ITEM 1.
  Legal Proceedings      42  
ITEM 1A.
  Risk Factors      42  
ITEM 2.
  Unregistered Sales of Equity Securities and Use of Proceeds      42  
ITEM 3.
  Defaults Upon Senior Securities      42  
ITEM 4.
  Mine Safety Disclosures      42  
ITEM 5.
  Other Information      42  
ITEM 6.
  Exhibits      43  
     44  
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. All statements, other than statements of historical fact included in this Report, are forward-looking statements. When used in this Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” or the negative of these terms, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following:
 
  •
the success of our plans to develop and potentially commercialize our product candidates;
 
  •
the timing of the initiation and completion of preclinical studies and clinical trials;
 
  •
the timing and sufficiency of patient enrollment and dosing in any future clinical trials;
 
  •
the timing of the availability of data from clinical trials;
 
  •
the timing and outcome of regulatory filings and approvals;
 
  •
unanticipated delays;
 
  •
sales, marketing, manufacturing and distribution requirements;
 
  •
market competition and the acceptance of our products in the marketplace;
 
  •
regulatory developments in the United States of America;
 
  •
the development of novel AAV vectors;
 
  •
the plans of licensees of our technology;
 
  •
the clinical utility and potential attributes and benefits of ddRNAi and our product candidates, including the potential duration of treatment effects and the potential for a “one shot” cure;
 
  •
our dependence on our relationships with collaborators and other third parties;
 
  •
expenses, ongoing losses, future revenue, capital needs and needs for additional financing, and our ability to access additional financing given market conditions and other factors, including our capital structure;
 
  •
the length of time over which we expect our cash and cash equivalents to be sufficient to execute on our business plan;
 
  •
our intellectual property position and the duration of our patent portfolio;
 
  •
the impact of local, regional, and national and international economic conditions and events; and
 
  •
the impact of the current
COVID-19
pandemic, the disease caused by the
SARS-CoV-2
virus, which may adversely impact our business and preclinical and future clinical trials;
as well as other risks detailed under the caption “Risk Factors” in this Report and in other reports filed with the SEC. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Report, we caution you that these statements are based on a combination of facts and important factors currently known by us and our expectations of the future, about which we cannot be certain.
 
2
We have based the forward-looking statements included in this Report on information available to us on the date of this Report or on the date thereof. Except as required by law we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including annual reports on Form
10-K,
quarterly reports on Form
10-Q
and current reports on Form
8-K.
All forward-looking statements included herein or in documents incorporated herein by reference are expressly qualified in their entirety by the cautionary statements contained or referred to elsewhere in this Report.
 
3
PART I—FINANCIAL INFORMATION
 
ITEM 1.
  
Financial Statements
BENITEC BIOPHARMA INC.
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
 
    
December 31,
   
June 30,
 
    
2021
   
2021
 
    
(Unaudited)
       
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 12,329     $ 19,769  
Trade and other receivables
     5       25  
Prepaid and other assets
     338       814  
    
 
 
   
 
 
 
Total current assets
     12,672       20,608  
Property and equipment, net
     268       375  
Deposits
     25       9  
Other assets
     161       185  
Right-of-use
assets
     888       202  
    
 
 
   
 
 
 
Total assets
   $ 14,014     $ 21,379  
    
 
 
   
 
 
 
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Trade and other payables
   $ 1,946     $ 880  
Accrued employee benefits
     321       276  
Lease liabilities, current portion
     213       213  
    
 
 
   
 
 
 
Total current liabilities
     2,480       1,369  
Lease liabilities, less current portion
     698       —    
    
 
 
   
 
 
 
Total liabilities
     3,178       1,369  
    
 
 
   
 
 
 
Commitments and contingencies (Note 1
0
)
            
Stockholders’ equity:
                
Common stock, $0.0001 par
value-40,000,000
shares authorized; 8,171,690 shares issued and outstanding at December 31, 2021 and June 30, 2021
     1       1  
Additional
paid-in
capital
     152,093       151,583  
Accumulated deficit
     (139,985 )      (130,119 ) 
Accumulated other comprehensive loss
     (1,273 )      (1,455 ) 
    
 
 
   
 
 
 
Total stockholders’ equity
     10,836       20,010  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 14,014     $ 21,379  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
4
BENITEC BIOPHARMA INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
 
    
Three Months Ended
   
Six Months Ended
 
    
December 31,
   
December 31,
 
    
2021
   
2020
   
2021
   
2020
 
Revenue:
                                
Licensing revenues from customers
   $ 25     $ 1     $ 25     $ 56  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
     25       1       25       56  
Operating expenses
                                
Royalties and license fees
     —         (19 )      —         114  
Research and development
     3,146       1,168       5,926       1,942  
General and administrative
     1,714       2,111       3,756       3,948  
    
 
 
   
 
 
           
 
 
 
Total operating expenses
     4,860       3,260       9,682       6,004  
    
 
 
   
 
 
           
 
 
 
Loss from operations
     (4,835 )      (3,259 )      (9,657)       (5,948 ) 
Other income (loss):
                                
Foreign currency transaction gain (loss)
     48       —         (193 )      (54 ) 
Interest expense, net
     (11 )      (2 )      (12)       (3 ) 
Other income, net
     —         10       —         36  
Unrealized loss on investment
     (23 )      (1 )      (5)       (1 ) 
    
 
 
   
 
 
           
 
 
 
Total other income (loss), net
     14       7       (210 )      (22 ) 
    
 
 
   
 
 
           
 
 
 
Net loss
   $ (4,821 )    $ (3,252 )    $ (9,867 )    $ (5,970 ) 
    
 
 
   
 
 
           
 
 
 
Other comprehensive income:
                                
Unrealized foreign currency translation
(loss) 
gain
     (57 )      208       182       386  
    
 
 
   
 
 
           
 
 
 
Total other comprehensive
(loss) 
income
     (57 )      208       182       386  
    
 
 
   
 
 
           
 
 
 
Total comprehensive loss
   $ (4,878 )    $ (3,044 )    $ (9,685 )    $ (5,584 ) 
    
 
 
   
 
 
           
 
 
 
Net loss
   $ (4,821 )    $ (3,252 )    $ (9,867 )    $ (5,970 ) 
    
 
 
   
 
 
           
 
 
 
Net loss per share:
                                
Basic and diluted
   $ (0.59 )    $ (0.76 )    $ (1.21 )    $ (2.21 ) 
    
 
 
   
 
 
           
 
 
 
Weighted average number of shares outstanding: basic and diluted
     8,171,690       4,300,073       8,171,690       2,704,223  
    
 
 
   
 
 
           
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
5
BENITEC BIOPHARMA INC.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share amounts)
 
 
  
Common Stock
 
  
Additional
Paid-in

Capital
 
 
Accumulated
Deficit
 
 
Accumulated
Other
Comprehensive
Loss
 
 
Total
Stockholders’
Equity
 
 
  
Shares
 
  
Amount
 
Balance at June 30, 2020
     1,108,374      $ 1      $ 128,826     $ (116,636 )    $ (1,953 )    $ 10,238  
Share-based compensation
     —          —          38       —         —         38  
Forfeiture of share-based payments
     —          —          (14 )      14       —         —    
Foreign currency translation gain
     —          —          —         —         178       178  
Net loss
     —          —          —         (2,718 )              (2,718 ) 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2020
     1,108,374     
1     
128,850    
(119,340 )   
(1,775 )   
 

7,736  
Issuance of common stock and
pre-funded
warrants sold for cash, net of issuance costs of $1,643
     3,150,514        3        9,848       —         —         9,851  
Exercise of
pre-funded
warrants
     281,581        —          —         —         —         —    
Share-based compensation
     —          —          82       —         —         82  
Forfeiture of share-based payments
     —          —          (385 )      385       —         —    
Foreign currency translation gain
     —          —          —         —         208       208  
Net loss
     —          —          —         (3,252 )      —         (3,252 ) 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at December 31, 2020
     4,540,469      $ 4      $ 138,395     $ (122,207 )    $ (1,567 )    $ 14,625  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
6
BENITEC BIOPHARMA INC.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share amounts)
 
 
  
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated
Deficit
 
 
Accumulated
Other
Comprehensive
Loss
 
 
Total
Stockholders’
Equity
 
 
  
Shares
 
  
Amount
 
Balance at June 30, 2021
     8,171,690      $ 1      $ 151,583      $ (130,119 )    $ (1,455 )    $ 20,010  
Share-based compensation
     —          —          271        —         —         271  
Foreign currency translation gain
     —          —          —          —         239       239  
Net loss
     —          —          —          (5,045 )      —         (5,045 ) 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
     8,171,690     
1     
151,854     
(135,164 )   
(1,216 )      15,475  
Share-based compensation
     —          —          239        —         —         239  
Foreign currency translation loss
     —          —          —          —         (57 )      (57 ) 
Net loss
     —          —          —          (4,821 )      —         (4,821 ) 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Balance at December 31, 2021
     8,171,690      $ 1      $ 152,093      $ (139,985 )    $ (1,273 )    $ 10,836  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
7
BENITEC BIOPHARMA INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
    
Six Months Ended
 
    
December 31,
 
    
2021
   
2020
 
Cash flows from operating activities:
                
Net loss
   $ (9,867 )    $ (5,970 ) 
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
     107       112  
Amortization of
right-of-use
assets
     108       95  
Unrealized loss on investment
     5       1  
Share-based compensation expense
     510       120  
Changes in operating assets and liabilities:
                
Trade and other receivables
     —         28  
Other assets
     470       424  
Trade and other payables
     1,146       (427 ) 
Accrued employee benefits
     (5 )      25  
Lease liabilities
     (96 )      (94 ) 
    
 
 
   
 
 
 
Net cash used in operating activities
     (7,622 )      (5,686 ) 
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchases of property and equipment
     —         (347 ) 
    
 
 
   
 
 
 
Net cash used in investing activities
     —         (347 ) 
Cash flows from financing activities:
                
Proceeds from issues of shares and
pre-funded
warrants
     —         11,494  
Shares and
pre-funded
warrant issuance costs
     —         (1,643 ) 
 
 
 
 
 
 
 
 
 
Net cash provided by financing activities
     —         9,851  
    
 
 
   
 
 
 
Effects of exchange rate changes on cash and cash equivalents
     182       391  
    
 
 
   
 
 
 
Net increase (decrease) in cash and cash equivalents
     (7,440 )      4,209  
Cash and cash equivalents, beginning of period
     19,769       9,801  
    
 
 
   
 
 
 
Cash and cash equivalents, end of period
   $ 12,329     $ 14,010  
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
                
Re-measurement
of operating lease
right-of-use
assets and liabilities
   $ 794     $ —    
    
 
 
   
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
8
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Business
Benitec Biopharma Inc. (the “Company”) is a corporation formed under the laws of Delaware, United States of America, on November 22, 2019 and listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BNTC”. Benitec Biopharma Inc. is the parent entity of a number of subsidiaries including the previous parent entity Benitec Biopharma Limited (“BBL”). BBL was incorporated under the laws of Australia in 1995 and was listed on the Australian Securities Exchange, or ASX, from 1997 until April 15, 2020. On August 14, 2020, BBL reorganized as a Proprietary Limited company and changed its name to Benitec Biopharma Proprietary Limited. The Company’s business focuses on the development of novel genetic medicines. Our proprietary platform, called
DNA-directed
RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes.
During the year ended June 30, 2021, the Company completed an organization restructuring as part of the commercial desire to provide a more efficient structure for the future as the Company transitioned its operations to the US.
The Company’s fiscal year end is June 30. References to a particular “fiscal year” are to our fiscal year end June 30 of that calendar year.
The consolidated financial statements of Benitec Biopharma Inc. are presented in United States dollars and consist of Benitec Biopharma Inc. and its wholly owned subsidiaries:
 
    
Principal place of
business/country of
incorporation
Benitec Biopharma Proprietary Limited (“BBL”)
   Australia
Benitec Australia Proprietary Limited
   Australia
Benitec Limited
   United Kingdom
Benitec, Inc.
   USA
Benitec LLC
   USA
RNAi Therapeutics, Inc.
   USA
Tacere Therapeutics, Inc.
   USA
Benitec IP Holdings, Inc.
   USA
 
9
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company’s consolidated financial statements contained in this Quarterly Report on Form
10-Q
have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information and with the instructions to Form
10-Q
and Article 8 of U.S. Securities and Exchange Commission “SEC”) Regulation
S-X.
Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Interim financial results are not necessarily indicative of results anticipated for the full year. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in the Company’s Annual Report on Form
10-K
for the year ended June 30, 2021.
Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative GAAP recognized by the FASB to be applied to
non-governmental
entities.
Principles of Consolidation
The consolidated financial statements include the Company’s accounts and the accounts of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s consolidated financial statements include the estimates of useful lives of property and equipment, valuation of the operating lease liability and related
right-of-use
asset, allowance for uncollectable receivables, valuation of equity-based instruments issued for other than cash, the valuation allowance on deferred tax assets. foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates, and accrued research and development expenses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
 
10
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on single-source vendors and collaborators, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance with government regulations and the need to obtain additional financing to fund operations.
There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.
Moreover, the current
COVID-19
pandemic, which is impacting worldwide economic activity, poses risks that the Company or its employees, contractors, suppliers, and other partners may be prevented or inhibited from conducting business activities for an indefinite period of time which may delay the
start-up
and conduct of the Company’s clinical trials, and negatively impact manufacturing and testing activities performed by third parties. Any significant delays may impact the use and sufficiency of the Company’s existing cash reserves, and the Company may be required to raise additional capital earlier than it had previously planned. The Company may be unable to raise additional capital if and when needed, which may result in delays or suspension of its development plans. The extent to which the pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.
Foreign Currency Translation and Other Comprehensive Income (Loss)
The Company’s functional currency and reporting currency is the United States dollar. BBL’s functional currency is the Australian dollar (AUD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive loss.” Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive loss as other comprehensive income (loss).
Other comprehensive income for all periods presented includes only foreign currency translation gains.
 
11
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Fair Value Measurements
The Company measures its financial assets and liabilities in accordance with GAAP using ASC 820,
Fair Value Measurements.
For certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities.
The Company follows accounting guidance for financial assets and liabilities. ASC 820 defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
 
Level 1:    Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:    Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:    Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the consolidated balance sheets. There were no cash equivalents as of December 31, 2021 and June 30, 2021.
Concentrations of Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits at federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Trade and Other Receivables
As amounts become uncollectible, they will be charged to an allowance and operations in the period when a determination of collectability is made. Any estimates of potentially uncollectible customer accounts receivable will be made based on an analysis of individual customer and historical
write-off
experience. The Company’s analysis includes the age of the receivable account, creditworthiness of the customer and general economic conditions.
 
12
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals, and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the respective accounts, and any gain or loss is included in operations. Depreciation and amortization of property and equipment is calculated using the straight-line basis over the following estimated useful lives:​​​​​​​
 
    Software   
3-4
years
    Lab equipment   
3-7
years
    Computer hardware   
3-5
years
    Leasehold improvements    shorter of the lease term or estimated useful lives
Impairment of Long-Lived Assets
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the period and which are unpaid. Due to their short-term nature, they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Leases
At lease commencement, the Company records a lease liability based on the present value of lease payments over the expected lease term. The Company calculates the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily determined. In that case, the Company uses its incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments over the expected lease term. The Company records a corresponding
right-of-use
lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date.
After lease commencement, the Company measures its leases as follows: (i) the lease liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement; and (ii) the
right-of-use
lease asset based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement. Any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Rent expense is recorded on a straight-line basis over the expected lease term.
 
13
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Basic and Diluted Net Loss Per Share
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding plus potential common shares. Stock options, warrants and convertible instruments are considered potential common shares and are included in the calculation of diluted net loss per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted net income (loss) per share when their effect is anti-dilutive. As of December 31, 2021, and June 30, 2021, there were 845,159 and 809,159 potential common shares, respectively, that were excluded from the calculation of diluted net loss per share because their effect was anti-dilutive.
Revenue Recognition
The Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company applies judgement in determining whether contracts entered into fall within the scope of ASC 606—
Revenue from Contracts with Customers
(“ASC 606”). In doing so, management considers the commercial substance of the transaction and how risks and benefits of the contract accrue to the various parties to the contract.
Management has also made the judgement that the grant of the license and transfer of associated
know-how
and materials are accounted for as one performance obligation as they are not considered to be distinct; they are highly interrelated and could not provide benefits to the customer independently from each other. Judgements were made in relation to the transfer of the license and
know-how
and whether this should be recognized over time or a point in time. The point in time has been determined with regard to the point at which the transfer of
know-how
has substantially been completed and the customer has control of the asset and the ability to direct the use of and receive substantially all of the remaining benefits.
Licensing revenues
Revenue from licensees of the Company’s intellectual property reflects the transfer of a right to use the intellectual property as it exists at the point in time in which the license is transferred to the customer. Consideration can be variable and is estimated using the most likely amount method and is constrained to the extent that it is probable that a significant reversal will not occur. Revenue is recognized as or when the performance obligations are satisfied.
 
14
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
The Company recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the consolidated balance sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognizes either a contract asset or a receivable in its consolidated balance sheet, depending on whether something other than the passage of time is required before the consideration is due.
Royalties
Revenue from licensees of the Company’s intellectual property reflect a right to use the intellectual property as it exists at the point in time in which the license is granted. Where consideration is based on sales of product by the licensee, revenue is recognized when the customer’s subsequent sales of products occur.
Services revenue
Revenue is earned (constrained by variable considerations) from the provision of research and development services to customers. Services revenue is recognized when performance obligations are either satisfied over time or at a point in time. Generally, the provision of research and development services under a contract with a customer will represent satisfaction of a performance obligation over time where the Company retains the right to payment for services performed but not yet completed.
Research and Development Expense
Research and development costs are expensed when incurred. These costs have been recognized as an expense when incurred. Research and development expenses relate primarily to the cost of conducting clinical and
pre-clinical
trials.
Pre-clinical
and clinical development costs are a significant component of research and development expenses. Estimates have been used in determining the expense liability under certain clinical trial contracts where services have been performed but not yet invoiced. Gen
e
rally, the costs, and therefore estimates, associated with clinical trial contracts are based on the number of patients, drug administration cycles, the type of treatment and the outcome since the length of time before actual amounts can be determined will vary depending on length of the patient cycles and the timing of the invoices by the clinical trial partners.
 
15
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Share-based Compensation Expense
The Company records share-based compensation in accordance with ASC 718,
Stock Compensation
. ASC 718 requires the fair value of all share-based compensation awarded to employees and
non-employees
to be recorded as an expense over the shorter of the service period or the vesting period. The Company determines employee and
non-employee
share-based compensation based on the grant-date fair value using the Black-Scholes Option Pricing Model.
Income Taxes
The Company is subject to Australia and United States income tax laws. The Company follows ASC 740
Accounting for Income Taxes
, when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized.
For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU
No. 2016-13:
Financial Instruments—Credit Losses
(Topic 326). This ASU represents a significant change in the accounting for credit losses model by requiring immediate recognition of management’s estimates of current expected credit losses (CECL). Under the prior model, losses were recognized only as they were incurred. The Company has determined that it has met the criteria of a smaller reporting company (“SRC”) as of November 15, 2019. As such, ASU
2019-10:
Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases: Effective Dates
amended the effective date for the Company to be for reporting periods beginning after December 15, 2022. The Company will adopt this ASU effective July 1, 2023.
3. Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the six months ended December 31, 2021, and 2020, the Company incurred a net loss of $9.9 million and $6.0 million and used net cash of $7.6 million and $5.7 million in operations, respectively. The Company expects to continue to incur additional operating losses in the foreseeable future.
As of December 31, 2021, the Company had $12.3 million in cash and cash equivalents. The Company has performed a review of the cash flow forecasts and believes that the current funding will be sufficient for a period of at least twelve months from the date of this Report.
 
16
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
The Company’s ability to continue as a going concern is dependent upon its ability to generate revenue and obtain adequate financing. While the Company believes in its ability to generate revenue and raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern due to unsuccessful product development or commercialization, or the inability to obtain adequate financing in the future.
4. Prepaid and other assets
 
(US$’000)
  
December 31,
2021
    
June 30,
2021
 
Prepaid expenses
   $ 472      $ 967  
Security deposit
     15        15  
Market value of listed shares
     12        17  
    
 
 
    
 
 
 
Total other assets
     499        999  
Less:
non-current
portion
     (161 )       (185 ) 
    
 
 
    
 
 
 
Current portion
   $ 338      $ 814  
    
 
 
    
 
 
 
 
17
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
5. Property and equipment, net
 
(US$’000)
  
December 31,
2021
    
June 30,
2021
 
Software
   $ 14      $ 14  
Lab equipment
     1,328        1,329  
Computer hardware
     26        26  
Leasehold improvements
     24        24  
    
 
 
    
 
 
 
Total property and equipment, gross
     1,392        1,393  
Accumulated depreciation and amortization
     (1,124 )       (1,018 ) 
    
 
 
    
 
 
 
Total property and equipment, net
   $ 268      $ 375  
    
 
 
    
 
 
 
Depreciation expense was $55 thousand and $107 thousand for the three and six months ended December 31, 2021, and $67 thousand and $112 thousand, respectively, for the same periods in 2020.
6. Trade and other payables
 
(US$’000)
  
December 31,
2021
    
June 30,
2021
 
Trade payable
   $ 682      $ 274  
Accrued license fees
     136        140  
Accrued professional fees
     55        13  
Accrued research and development
     738        279  
Accrued bonuses
     112        —    
Other payables
     223        174  
    
 
 
    
 
 
 
Total
   $ 1,946      $ 880  
    
 
 
    
 
 
 
7. Leases
The Company has entered into an operating lease for office space under an agreement that expires in 2022. The lease requires the Company to pay utilities, insurance, taxes and other operating expenses. The Company’s lease does not contain any residual value guarantees or material restrictive covenants. During August 2021, the Company extended the lease through June 2025.
The tables below show the changes during the three months ended December 31, 2021:
 
(US$’000)
  
Operating
lease
right-of-

use assets
 
Balance at July 1, 2021
   $ 202  
Re-measurement
during the period
     794  
Amortization of right of use asset
     (108 ) 
    
 
 
 
Operating lease
right-of-use
asset at December 31, 2021
   $ 888  
    
 
 
 
 
18
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
(US$’000)
  
Operating
lease
liabilities
 
Balance at July 1, 2021
   $ 213  
Re-measurement
during the period
     794  
Principal payments on operating lease liabilities
     (96 ) 
    
 
 
 
Operating lease liabilities at December 31, 2021
     911  
Less:
non-current
portion
     (698 ) 
    
 
 
 
Current portion at December 31, 2021
   $ 213  
    
 
 
 
As of December 31, 2021, th
e
 Company’s operating lease has a remaining lease term of 3.45 years and a discount rate of 4.67%. The maturities of the operating lease liabilities are as follows:
 
(US$’000)
   December
31,
2021 		 
2022
     251  
2023
     290  
2024
     300  
2025
     152  
    
 
 
 
Total operating lease payments
     993  
Less imputed interest
     (82 ) 
    
 
 
 
Present value of operating lease liabilities
   $ 911  
    
 
 
 
The Company recorded lease liabilities and
right-of-use
lease assets for the lease based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate. Rent expense was $0.1 million for the three and six months ended December 31, 2021 and 2020, respectively, and $0.1 million, respectively, for the same periods in 2020.
 
 
19
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
8. Stockholders’ equity
Common Stock
On October 6, 2020, the Company announced the closing of an underwritten public offering of 2,666,644 shares of its common stock at a price to the public of $3.10 per share. The Company also announced that the underwriter fully exercised its over-allotment option to purchase 483,870 additional shares of its common stock at the offering price of $3.10 per share. The gross and net proceeds were $11.5 million and $9.9 million, respectively.
On April 30, 2021, the Company announced the closing of an underwritten public offering of 3,036,366 shares of its common stock at a price to the public of $4.25 per share. The Company also announced that the underwriter exercised the over-allotment option to purchase 317,274 additional shares of its common stock at the offering price of $4.25 per share. The gross and net proceeds were $14.3 million and $12.7 million, respectively.
On December 8, 2021, the stockholders of the Company approved an amendment (the “Charter Amendment”) to the Company’s Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of common stock of the Company
from 10,000,000 to 40,000,000.
The Charter Amendment was filed with the Secretary of State of the State of Delaware and became effective on December 17, 2021.
Warrants
On December 6, 2019, the Investors were issued 4 Purchase Warrants that were exercisable into 214,190 fully paid shares of common stock should the Purchase Warrants be exercised in full (“Purchase Warrants”). The exercise price for the Purchase Warrants is US$10.50 per share issued on exercise of
a Purchase Warrant. The Purchase Warrants are exercisable, in whole or in part, any time from the date of issue until the fifth anniversary of the date of issue (December 6, 2024). On April 22, 2020, the Company issued 37,417 shares of common stock in connection with a cashless exercise of Purchase Warrants exercisable for 107,095
shares of common stock. The Company did not have an effective registration statement registering the resale of the Warrant Shares by the Holder at the time the Holder wanted to exercise the warrant, therefore, the Holder carried out a cashless exercise. The formula
for conducting a cashless exercise was outlined in the Warrant agreement. Based on this formula, the Holder would have been entitled to receive
 
107,095
 
shares of common stock if they had exercised the Purchase Warrants for cash. Because of the cashless exercise, the holder received 37,417 shares. As of December 31, 2021, there were 107,095 of the warrants still outstanding.
On October 6, 2020, the Company announced the closing of an underwritten public offering of 559,162 shares of common stock underlying
pre-funded
warrants initially purchased for $3.09 per share and immediately exercisable at $0.01 per share
(“Pre-Funded
Warrants”). All 559,162
Pre-Funded
Warrants issued had been exercised as of June 30, 2021.
The activity related to warrants during for the six months ended December 31, 2021, is summarized as follows:
 
     Common
Stock
from
Warrants 		     Weighted-
average
Exercise
Price
(per
share) 		 
Outstanding at July 1, 2021
     107,095      $ 10.50  
    
 
 
    
 
 
 
Outstanding and exercisable at December 31, 2021
     107,095      $ 10.50  
 
20
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Equity Incentive Plan
Employee Share Option Plan
In connection with its
re-domiciliation
to the United States, the Company assumed BBL’s obligations with respect to the settlement of options that were issued by BBL prior to the
re-domiciliation
pursuant to the Benitec Officers’ and Employees’ Share Option Plan (the “Share Option Plan”). This includes the Company’s assumption of the Share Option Plan and all award agreements pursuant to which each of the options were granted. Each option when exercised entitles the option holder to one share in the Company. Options are exercisable on or before an expiry date, do not carry any voting or dividend rights and are not transferable except on death of the option holder or in certain other limited circumstances. Employee options vest one third on each anniversary of the applicable grant date for three years. If an employee dies, retires or otherwise leaves the Company and certain exercise conditions have been satisfied, generally, the employee has 12 months to exercise their options or the options are cancelled. Since the
re-domiciliation,
no new options have been or will be issued under the Share Option Plan.
Equity and Incentive Compensation Plan
On December 9, 2020, the Company’s stockholders approved the Company’s 2020 Equity and Incentive Compensation Plan and, on December 8, 2021, the Company’s stockholders approved an amendment to increase the maximum number of shares that may be issued under such plan to 1,850,000 (as amended, the “2020 Plan”). The 2020 Plan provides for the grant of various equity awards. Currently, only stock options are issued under the 2020 Plan. Each option when exercised entitles the option holder to one share of the Company’s common stock. Options are exercisable on or before an expiry date, do not carry any voting or dividend rights, and are not transferable except on death of the option holder or in certain other limited circumstances. Employee stock options vest in increments of
one-third
on each anniversary of the applicable grant date for three years.
Non-employee
director options vest in increments of
one-third
on the day prior to each of the Company’s next three annual stockholder meetings following the grant date. If an option holder dies or terminates employment or service due to Disability (as defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 12 months to exercise their options or the options are cancelled. If an option holder otherwise leaves the Company, other than for a termination by the Company for Cause (as defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 90 days to exercise their options or the options are cancelled. Future equity grants will be made under the 2020 Plan.
Equity Awards
The activity related to equity awards, which are comprised of stock options during the six months ended December 31, 2021, is summarized as follows:
 
     Stock
Options 		     Weighted-
average
Exercise
Price 		     Weighted-
average
Remaining
Contractual
Term 		     Aggregate
Intrinsic
Value 		 
Outstanding at July 1, 2021
     702,064      $ 7.16        8.07 years      $ —    
    
 
 
    
 
 
                   
Outstanding at September 30, 2021
     702,064     
7.16        7.82 years      $ —    
Granted
     36,000        2.99        9.93 years      $ —    
    
 
 
    
 
 
                   
Outstanding at December 31, 2021
     738,064        6.95        7.68 years      $ —    
Exercisable at December 31, 2021
     229,333      $ 13.59        7.20 years      $ —    
    
 
 
    
 
 
                   
 
21
BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
 
Share-Based Compensation Expense
The classification of share-based compensation expense is summarized as follows:
 
    
Three Months Ended
December 31,
    
Six Months Ended
December 31,
 
(US$’000)   
2021
    
2020
    
2021
    
2020
 
Research and development
   $ 80      $ 6      $ 161      $ 15  
General and administrative
     159        76        349        105  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total share-based compensation expense
   $ 239      $ 82      $ 510      $ 120  
    
 
 
    
 
 
    
 
 
    
 
 
 
As of December 31, 2021, there was $0.8 million of unrecognized share-based compensation expense related to stock options issued under the Share Option Plan and the 2020 Plan.
9. Income taxes
For the three and six months ended December 31, 2021, and 2020, the Company did not recognize a provision or benefit for income taxes as it has incurred net losses. In addition, the net deferred tax assets generated from net operating losses are fully offset by a valuation allowance as the Company believes it is more likely than not that the benefit will not be realized.
10. Commitments and contingencies
Contract commitments
The Company enters into contracts in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
Contingencies
From time to time, the Company may become subject to claims and litigation arising in the ordinary course of business. The Company is not a party to any material legal proceedings, nor is it aware of any material pending or threatened litigation.
11. Related party transactions
During the six months ended December 31, 2021, the Company had entered into a related party transaction with Francis Abourizk Lightowlers for legal fees totaling $1 thousand. Peter Francis, a
non-executive
director of the Company is a partner at Francis Abourizk Lightowlers. As of December 31, 2021 and June 30, 2021 there were amounts due to this related party of $0 and $2 thousand, respectively, included in trade and other payables on the accompanying consolidated balance sheet.
12. Subsequent events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form
10-Q,
and determined that there have been no events that have occurred that would require adjustments or disclosures in the consolidated financial statements.
 
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of financial condition and operating results together with our consolidated financial statements and the related notes and other financial information included elsewhere in this document.
Overview
We endeavor to become the leader in discovery, development, and commercialization of therapeutic agents capable of addressing significant unmet medical need via the application of the silence and replace approach to the treatment of genetic disorders.
Benitec Biopharma Inc. (“Benitec” or the “Company” or in the third person, “we” or “our”) is a development-stage biotechnology company focused on the advancement of novel genetic medicines with headquarters in Hayward, California. The proprietary platform, called
DNA-directed
RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease- causing genes following a single administration. The Company is developing a ddRNAi-based therapeutic
(BB-301)
for the treatment of Oculopharyngeal Muscular Dystrophy (OPMD), a chronic, life-threatening clinical indication.
BB-301
is a ddRNAi-based genetic medicine currently under development by Benitec.
BB-301
is an AAV-based gene therapy designed to both silence the expression of mutant disease-causing genes (to slow, or halt, the biological mechanisms underlying disease progression in OPMD) and simultaneously replace the mutant genes with wild type genes (to drive restoration of function in diseased cells). This fundamental therapeutic approach to disease management is called “silence and replace”. The silence and replace mechanism offers the potential to restore the normative physiology of diseased tissues and to improve treatment outcomes for patients suffering from the chronic and, potentially, fatal effects of OPMD.
BB-301
has been granted Orphan Drug Designation in the United States and the European Union.
The targeted gene silencing effects of RNAi, in conjunction with the durable transgene expression achievable via the use of modified viral vectors, imbues the silence and replace approach with the potential to produce long-term silencing of disease-causing genes along with simultaneous replacement of wild type gene function following a single administration of the proprietary genetic medicine. We believe that this novel mechanistic profile of the current and future investigational agents developed by Benitec could facilitate the achievement of robust and durable clinical activity while greatly reducing the frequency of drug administration traditionally expected for medicines employed for the management of chronic diseases. Additionally, the achievement of long-term gene silencing and gene replacement may significantly reduce the risk of patient
non-compliance
during the course of medical management of potentially fatal clinical disorders.
 
23
COVID-19
COVID-19
has been declared a pandemic by the World Health Organization and has spread to nearly every country, including Australia and the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in, and will likely continue to result in, significant disruptions to businesses and capital markets around the world. The extent to which the coronavirus impacts us will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and its variants, and the actions to contain the coronavirus or treat its impact, including the effectiveness and adoption of vaccines for the virus, among others.
Certain of our research and development efforts are conducted globally, including the ongoing development of our silence and replace therapeutic for the treatment of Oculopharyngeal Muscular Dystrophy (OPMD), and will be dependent upon our ability to initiate preclinical and clinical studies despite the ongoing
COVID-19
pandemic.
As we continue to actively advance our development programs, including our ongoing Toxicology and Biodistribution study for BB-301, we are in close contact with our principal investigators and preclinical trial sites, which are primarily located in France, and are assessing the impact of
COVID-19
on our studies and the expected development timelines and costs on an ongoing basis. In light of developments relating to the
COVID-19
global pandemic since the beginning of the outbreak, the focus of healthcare providers and hospitals on fighting the virus, and consistent with the FDA’s industry guidance for conducting clinical trials, we have experienced delays to the original timeline regarding the initiation and anticipated completion of the ongoing
BB-301
Clinical Trial Application (CTA)-enabling and Investigational New Drug Application (IND)-enabling development work. The initiation of the
BB-301
Pilot Dosing Study in Beagle dogs, which represents a key component of the
CTA-enabling
and
IND-enabling
work, was delayed by several months, however, the study has been completed without incident. The acquisition of chemical reagents, biological reagents and laboratory supplies which are essential for the conduct of basic laboratory research, nonclinical studies and GMP manufacturing of
BB-301,
has also become challenging due to the disruption of global supply chains inherent to the production of these materials. We will continue to evaluate the impact of the
COVID-19
pandemic on our business and expect to reevaluate the timing of our anticipated preclinical and clinical milestones as we learn more and the impact of
COVID-19
on our industry becomes clearer.
We have also implemented a rotation system whereby staff work from home and attend the laboratory on designated days which may result in a reduction of laboratory work and a halt of
non-essential
business travel. As we transition our employees back to our premises, there is a risk that
COVID-19
infections occur at our offices or laboratory facilities and significantly affect our operations. Additionally, if any of our critical vendors are impacted, our business could be affected if we become unable to timely procure essential equipment, supplies or services in adequate quantities and at acceptable prices.
 
24
Development Programs
Our Pipeline
The following table sets forth the current product candidates and their development status:
Table 1. Pipeline: Oculopharyngeal Muscular Dystrophy
 
BB-301
We are developing
BB-301
for the treatment of Oculopharyngeal Muscular Dystrophy, and
BB-301
is currently undergoing evaluation in
CTA-enabling
and
IND-enabling
studies.
BB-301
is the lead investigational agent under development by Benitec, and the key attributes of OPMD and
BB-301
are outlined in in Figure 3.
Figure 3. Overview of the
BB-301
Program
 
 
25
BB-301
is a
first-in-class
genetic medicine employing the “silence and replace” approach for the treatment of OPMD. OPMD is an insidious, autosomal- dominant, late-onset, degenerative muscle disorder that typically presents in patients at
40-to-50
years of age. The disease is characterized by progressive swallowing difficulties (dysphagia) and eyelid drooping (ptosis). OPMD is caused by a specific mutation in the poly(A)-binding protein nuclear 1 gene (PABPN1). OPMD is a rare disease, however, patients have been diagnosed with OPMD in at least 33 countries. Patient populations suffering from OPMD are well-identified and significant geographical clustering has been noted for patients with this disorder, both of which could simplify clinical development and global commercialization efforts for
BB-301.
PABPN1 is a ubiquitous factor that promotes the interaction between the poly(A) polymerase and CPSF (cleavage and polyadenylation specificity factor) and, thus, controls the length of mRNA poly(A) tails, mRNA export from the nucleus, and alternative poly(A) site usage. The characteristic genetic mutation underlying OPMD results in trinucleotide repeat expansion(s) within exon 1 of PABPN1 and results in an expanded poly-alanine tract at the
N-terminal
end of PABPN1. The mutation generates a protein with an
N-terminal
expanded poly-alanine tract of up to 18 contiguous alanine residues, and the mutant protein is prone to the formation of intranuclear aggregates designated as “intranuclear inclusions” (INIs). The INIs that sequester wildtype PABPN1 could also contribute to the “loss of function” phenotype associated with OPMD.
No therapeutic agents are approved for the treatment of OPMD. Additionally, there are no surgical interventions available with the capacity to alter the long-term deterioration of swallowing function which comprises the key element of the natural history of OPMD.
BB-301
has received Orphan Drug Designation in the United States and the European Union and, upon achievement of regulatory approval for
BB-301
in these respective jurisdictions, the Orphan Drug Designations would provide commercial exclusivity independent of intellectual property protection. While OPMD is a rare medical disorder, we believe the commercial opportunity for a safe and efficacious therapeutic agent in this clinical indication exceeds $1 billion over the course of the commercial life of the product.
Benitec has previously outlined the core
CTA-enabling
and
IND-enabling
studies required by global regulatory agencies to support the initiation of
BB-301
clinical trials in OPMD patients, and these studies include a
BB-301
Pilot Dosing Study (the “Pilot Dosing Study”) in large animals and a classical
12-week
GLP Toxicology and Biodistribution Study for
BB-301.
BB-301
is directly injected into the pharyngeal muscles known to underlie the morbidity and mortality which characterizes the natural history of OPMD.
As referenced above, the
BB-301
Pilot Dosing Study in large animals was the first of two
CTA-enabling
and
IND-enabling
studies conducted by Benitec. This study was carried out under the guidance of the scientific team at Benitec, with key elements of the study design and execution conducted in close collaboration with a team of leading experts in both medicine and surgery that have been deeply engaged in the treatment of OPMD patients for several decades. The
BB-301
Pilot Dosing Study and the GLP Toxicology and Biodistribution Study for
BB-301
were conducted in canine subjects in order to:
 
  •  
Support the validation and optimization of the newly designed route and method of
BB-301
administration,
 
  •  
Confirm the efficiency of vector transduction and transgene expression in the key tissue compartments underlying the natural history of OPMD,
 
  •  
Confirm the optimal
BB-301
doses in advance of initiation of human clinical studies,
 
  •  
Facilitate the observation of key toxicological data-points.
The
BB-301
Pilot Dosing Study was designed as an
8-week
study in Beagle dogs to confirm the transduction efficiency of
BB-301
upon administration via direct intramuscular injection into specific anatomical regions of the pharynx through the use of an open surgical procedure. This new method and route of
BB-301
administration was developed in collaboration with key surgical experts in the field of Otolaryngology, and this novel method of
BB-301
dosing will significantly enhance the ability of treating physicians to accurately administer the AAV-based investigational agent to the muscles that underlie the characteristic deficits associated with disease progression in OPMD. It is important to note that prior
BB-301
non-clinical
studies have reproducibly validated the robust biological activity achieved following direct intramuscular injection of the
AAV-based
agent. As an example, direct injection of
BB-301
into the tibialis anterior muscles of A17 mice facilitated robust transduction of the targeted skeletal muscle cells and supported complete remission of the OPMD disease phenotype in this animal model.
 
26
Benitec conducted the
BB-301
Pilot Dosing Study in Beagle dog subjects to demonstrate that direct intramuscular injection of BB-301 via the use of a proprietary dosing device in an open surgical procedure could safely achieve the following goals:
 
  •  
Biologically significant and dose-dependent levels of
BB-301
tissue transduction (i.e., delivery of the multi-functional BB-301 genetic construct into the target pharyngeal muscle cells),
 
  •  
Broad-based and dose-dependent expression of the three distinct genes comprising the
BB-301
gene construct within the pharyngeal muscle cells, and
 
  •  
Durable, and biologically significant levels of, target gene knock-down (i.e., inhibition of the expression of the gene of interest) within the pharyngeal muscle cells.
The Pilot Dosing Study evaluated the safety and biological activity of two concentrations of
BB-301
(1.0+E13 vg/mL and 3.0+E13 vg/mL) across three distinct doses (1.0+E13 vg/mL and 3.0+E13 vg/mL with a low injection volume, and 3.0+E13 vg/mL with a high injection volume) following direct intramuscular injection into the Hypopharyngeus (HP) muscles and the Thyropharyngeus (TP) muscles of Beagle dogs via the use of a proprietary delivery device employed in an open surgical procedure. The HP muscle in Beagle dogs corresponds to the Middle Pharyngeal Constrictor muscle in human subjects, and the TP muscle in Beagle dogs corresponds to the Inferior Pharyngeal Constrictor muscle in human subjects.
BB-301
was injected only on Day 1 of the Pilot Dosing Study, and the corresponding canine pharyngeal muscles were harvested for molecular analyses after 8 weeks of observation post-injection.
BB-301
dosing was carried out by both a veterinary surgeon and an Otolaryngologist with extensive experience regarding the provision of palliative surgical care for OPMD patients.
Molecular analyses are ongoing for the canine subjects treated in the
BB-301
Pilot Dosing Study, and the interim data-points highlighted below are derived from completed analyses of pharyngeal muscle tissues isolated from 16 Beagle dog subjects (of the
24-subject
Beagle dog study population). The final
data-set
derived from the completed molecular analyses of the pharyngeal muscle tissues of the canine subjects treated on the Pilot Dosing Study is expected to be released during 2022.
The preliminary results are summarized below:
Figure 4. Pharyngeal Muscle Tissue Transduction Levels Achieved by
BB-301
 
Regarding Gene Expression Levels Observed for
BB-301
Within the Pharyngeal Muscle Tissues (Figure 5, Figure 6, Figure 7):
 
27
  •  
BB-301
encodes two distinct siRNA species (i.e., siRNA13 and siRNA17) which are each, independently, capable of inhibiting (i.e., “silencing”) the expression of the mutant form of the PABPN1 protein and the wild type (i.e., endogenous) form of the PABPN1 protein (importantly, the mutant form of the PABPN1 protein underlies the development, and progression, of OPMD). 
 
  •  
BB-301
also codes for a wild type version of the PABPN1 protein whose intracellular expression is unaffected by the inhibitory activities of siRNA13 and siRNA17; this “codon optimized” transcript drives the expression of a PABPN1 protein (i.e., coPABPN1) which serves to replenish the endogenous form of the PABPN1 protein and to replace the mutant form of PABPN1 that underlies the development and progression of OPMD in diseased tissues.
 
  •  
For comparative purposes, it should be noted that the average range of expression for wild type PABPN1 within the pharyngeal muscle cells of Beagle dogs is 4.5 copies per
cell-to-7.8
copies per cell.
Figure 5. siRNA13 Expression Levels Achieved by
BB-301
within Pharyngeal Muscle Tissues
 
 
28
Figure 6. siRNA17 Expression Levels Achieved by
BB-301
within Pharyngeal Muscle Tissues
 
Figure 7. coPABPN1 Expression Levels Achieved by
BB-301
within Pharyngeal Muscle Tissues
 
 
29
Regarding Wild Type PABPN1 Silencing (i.e. target “knock-down”) Observed for
BB-301
Within the Pharyngeal Muscle Tissues (Figure 8):
 
  •  
As noted above,
BB-301
encodes two distinct siRNA species (i.e. siRNA13 and siRNA17) which are each, independently, capable of inhibiting (i.e., “silencing”) the expression of all forms of the PABPN1 protein (siRNA13 and siRNA17 silence the expression of both wild type PABPN1 [wtPABPN1] and mutant PABPN1).
 
  •  
While the Beagle dog subjects treated in the current
BB-301
Pilot Dosing Study do not express mutant PABPN1, the level of
BB-301-driven
gene silencing for the PABPN1 target can be indirectly assessed in these study subjects due to the equivalent inhibitory effects of siRNA13 and siRNA17 on both wtPABPN1 and mutant PABPN1.
 
  •  
Thus, the wtPABPN1 silencing activity observed in the current
BB-301
Pilot Dosing Study serves as a surrogate for the silencing activity that would be anticipated in the presence of mutant PABPN1.
 
  •  
BB-301
has been evaluated in prior
non-clinical
studies in animals that both express mutant PABPN1 and manifest the key signs and symptoms of OPMD; in the animal model of OPMD (i.e. the A17 mouse model), the achievement of PABPN1 silencing levels of 31% inhibition (or higher) led to resolution of OPMD disease symptoms and the elimination of the histopathological hallmarks of OPMD.
Figure 8. PABPN1 Silencing (i.e. “target knock-down”) Achieved by
BB-301
within Pharyngeal Muscle Tissues
 
 
30
There are key methodological distinctions between the current
BB-301
Pilot Dosing Study conducted by Benitec as compared to the prior
BB-301
Beagle dog dosing study carried out independently by the previous
BB-301
licensee. The
BB-301
dosing study conducted by the prior
BB-301
licensee employed
non-ideal
routes and methods of
BB-301
administration to the target pharyngeal muscle tissues and employed similarly limited analytical methods at the completion of the dosing phase of the study. Subsequently, the Benitec team worked to optimize the route and method of administration of
BB-301
and to refine the core analytical methods employed following the completion of dosing of the large animal subjects.
The current proprietary method of
BB-301
delivery to the key pharyngeal muscles of study subjects and the proprietary molecular analytical methods employed to assay the pharyngeal muscle tissues of study subjects, both methods having been developed by the Benitec team, led to the observation of broad-based transduction of the targeted pharyngeal muscle tissues (Figure 9, represents individual sections of the TP muscle following
BB-301
dosing). Critically, the Benitec-developed methods also facilitated the achievement of a
228-fold
improvement (+22,647%) in
BB-301
transduction of the HP muscle and a
113-fold
improvement (+11,163%) in
BB-301
transduction of the TP muscle relative to the levels of
BB-301
transduction observed by the previous
BB-301
licensee (Figure 10).
Figure 9.
BB-301
Transduction Levels Achieved for Individual Sections of the TP Muscle Following
BB-301
dosing
 
 
31
Figure 10. Impact of Benitec-Designed Methodological Improvements to the
BB-301
Large Animal Study Design on the Relative Pharyngeal Muscle Tissue Transduction Levels Achieved
 
Following the disclosure of the positive interim
BB-301
Pilot Dosing Study results, Benitec completed a Scientific Advice meeting with The National Agency for the Safety of Medicines and Health Products in France (L’Agence nationale de sécurité du médicament et des produits de santé or “ANSM”) in the first half of 2021.
The Scientific Advice meeting was conducted to review and confirm the adequacy of:
 
  •  
The
non-clinical
data derived from the evaluation of
BB-301
in both the murine
proof-of
concept studies and the Pilot Dosing study in Beagle dogs
 
  •  
The experimental, analytical, and statistical methods comprising the
12-week
BB-301
GLP Toxicology and Biodistribution study in Beagle dogs
 
  •  
The
large-scale
manufacturing plan for clinical grade
BB-301
drug product for use in the Phase 1b/2a clinical study in OPMD patients
 
  •  
The design of the Phase 1b/2a clinical study slated for initiation during 2022
The
BB-301
Pilot Dosing Study was viewed as an appropriate dose range finding study. The interim data derived from the Pilot Dosing Study regarding
BB-301
pharyngeal muscle tissue transduction,
BB-301
transgene expression and the resulting knock-down of wild type PABPN1 supported the adequacy of the data derived from this study to inform the choice of
BB-301
doses for use in the GLP Toxicology and Biodistribution Study. The design of the GLP Toxicology and Biodistribution study was viewed as appropriate to support
first-in-human
testing of
BB-301.
Pending the final results of the ongoing GLP Toxicology and Biodistribution study, the
BB-301
Pilot Dosing Study data and the murine
proof-of-concept
study data are sufficient to inform the choice of the
BB-301
drug doses that will be evaluated in the upcoming Phase 1b/2a study. As
BB-301
drug product has been reproducibly manufactured at
large-scale
in the past, the manufacturing plan for clinical grade
BB-301
drug product is known to be able to be conducted under GMP conditions with a production process analogous to that employed in prior
large-scale
production runs. Finally, the design of the Phase 1b/2a clinical trial can support the evaluation of
BB-301
safety and clinical efficacy in key populations of OPMD patients.
Regarding our regulatory interactions with the FDA, Benitec completed a Type C meeting in the fourth quarter of 2021. Regarding our regulatory interactions with Health Canada, Benitec completed a
pre-CTA
meeting in the fourth quarter of 2021. Benitec continues to plan for the initiation of the
First-in-Human
clinical study of
BB-301
in OPMD patients during 2022.
 
32
Royalties, milestone payments and other license fees
We are required to pay royalties, milestone payments and other license fees in connection with our licensing of intellectual property from third parties, including as discussed below.
We have collaborated with Biomics Biotechnologies Co., Ltd., or Biomics, pursuant to several collaboration agreements in relation to single-stranded RNA and shRNA sequences for treatment of hepatitis B. In July 2015, we entered into an
earn-out
agreement with Biomics which confirmed Benitec’s ownership of certain patents resulting from the collaboration in exchange for an upfront payment and equity issuance to Biomics and a share of certain future licensing revenue received by Benitec.
 
33
Foreign Currency Translation and Other Comprehensive Income (Loss)
The Company’s functional currency and reporting currency is the United States dollar. BBL’s functional currency is the Australian dollar (AUD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive loss.” Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive loss as other comprehensive income (loss).
Other comprehensive income for all periods presented includes only foreign currency translation gains.
October 2020 Capital Raise
On October 6, 2020, the Company announced the closing of an underwritten public offering of common stock and common stock equivalents. The Company received gross proceeds of approximately $11.5 million and net proceeds of approximately $9.9 million from the offering.
April 2021 Capital Raise
On April 30, 2021, the Company announced the closing of an underwritten public offering of common stock and common stock equivalents. The Company received gross proceeds of approximately $14.3 million and net proceeds of approximately $12.7 million from the offering.
Results of Operations
Revenues
The Company has not generated any revenues from the sales of products. Revenues from licensing fees are included in the revenue from customers line item on our consolidated statements of operations and comprehensive loss. Our licensing fees have been generated through the licensing of our ddRNAi technology to biopharmaceutical companies. The following table sets forth a summary of our revenues for each of the periods set forth below:
 
     Three Months Ended
December 31, 		     Six Months Ended
December 31, 		 
    
2021
    
2020
    
2021
    
2020
 
                             
    
(US$’000)
 
Revenues:
                                   
Licensing revenues from customers
   $ 25      $ 1      $ 25      $ 56  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total revenues
   $ 25      $ 1      $ 25      $ 56  
    
 
 
    
 
 
    
 
 
    
 
 
 
Revenues from customers
During the six months ended December 31, 2021 and 2020, respectively, the Company recognized $25 thousand and $56 thousand in customer revenues. For the three months ended December 31, 2021 and 2020, respectively, the Company recognized $25 thousand and $1 thousand in customer revenues. The increase in revenues from customers is due to the increase in licensing revenues in the current period.
 
34
Royalties and License Fees
Royalties and license fees consist primarily of payments we are required to remit for royalties and other payments related to
in-licensed
intellectual property. Under our
in-license
agreements, we may pay
up-front
fees and milestone payments and be subject to future royalties. We cannot precisely predict the amount, if any, of royalties we will owe in the future, and if our calculations of royalty payments are incorrect, we may owe additional royalties, which could negatively affect our results of operations. As our product sales increase, we may, from time to time, disagree with our third-party collaborators as to the appropriate royalties owed, and the resolution of such disputes may be costly, may consume management’s time, and may damage our relationship with our collaborators. Furthermore, we may enter into additional license agreements in the future, which may also include royalty, milestone and other payments.
Research and Development Expenses
Research and development expenses relate primarily to the cost of conducting clinical and
pre-clinical
trials.
Pre-clinical
and clinical development costs are a significant component of research and development expenses. The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of
pre-clinical
studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in trade and other payables on the consolidated balance sheets and within research and development expenses on the consolidated statements of operations and comprehensive loss.
The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel, and equity-based compensation expense. General and administrative expenses also include facility expenses, professional fees for legal, consulting, accounting and audit services and other related costs.
We anticipate that our general and administrative expenses may increase as the Company focuses on the continued development of the
pre-clinical
OPMD program. The Company also anticipates an increase in expenses relating to accounting, legal and regulatory-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and other similar costs.
Operating Expenses
The following tables sets forth a summary of our expenses for each of the periods:
 
     Three Months Ended
December 31, 		     Six Months Ended
December 31, 		 
    
2021
    
2020
    
2021
    
2020
 
                             
    
(US$’000)
 
Operating Expenses:
           
Royalties and license fees
   $ —        $ (19 )     $ —        $ 114  
Research and development
     3,146        1,168        5,926        1,942  
General and administrative
     1,714        2,111        3,756        3,948  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total operating expenses
   $ 4,860      $ 3,260      $ 9,682      $ 6,004  
  
 
 
    
 
 
    
 
 
    
 
 
 
 
35
During the three and six months ended December 31, 2021, respectively, we incurred $0 in royalties and license fees, as compared to $(19) and $114 thousand, respectively, for the comparable periods ended December 31, 2020.
During the three and six months ended December 31, 2021, respectively, we incurred $3.1 million and $5.9 million in research and development expenses, as compared to $1.2 million and $1.9 million, respectively, for the comparable periods ended December 31, 2020. The increase in research and development expenses is primarily related to the commencement of the
BB-301
Regulatory Toxicology Study in Beagles at Charles River Laboratories in Evreux, France. As planned, the Company began incurring more costs related to the execution of two large nonclinical studies in Beagles, along with the commercial-scale
GMP-grade
manufacturing of
BB-301,
all of which is required to facilitate the CTA filing and the IND filing for
BB-301
during 2022.
General and administrative expense was $1.7 million and $3.8 million for the three and six months ended December 31, 2021, as compared to $2.1 million and $3.9 million for the comparable periods ended December 31, 2020. The increase for the three and six month periods was due to increases in insurance, consultants, legal and accounting fees.
Other Income (Expense)
The following tables sets forth a summary of our other income (loss) for each of the periods:
 
     Three Months Ended
December 31, 		     Six Months Ended
December 31, 		 
    
2021
    
2020
    
2021
    
2020
 
                             
    
(US$’000)
 
Other Income (Loss):
           
Foreign currency transaction gain (loss)
   $ 48      $ —        $ (193 )     $ (54 ) 
Interest expense, net
     (11 )       (2 )       (12 )       (3 ) 
Other income, net
     —          10        —          36  
Unrealized loss on investment
     (23 )       (1 )       (5 )       (1 ) 
  
 
 
    
 
 
    
 
 
    
 
 
 
Total other income (loss), net
   $ 14      $ 7      $ (210 )     $ (22 ) 
  
 
 
    
 
 
    
 
 
    
 
 
 
The other income (loss), net during the three and six months ended December 31, 2021, respectively, totaled $14 thousand and $(210) thousand, which consists of foreign currency transaction loss, interest expense, other income, and unrealized gain on investment. During the three and six months ended December 31, 2020, respectively, other income (expense), net totaled $7 thousand and $(22) thousand. Foreign currency transaction gain has increased due to a change in foreign exchange rates. Other income, net decreased due to no longer receiving
COVID-19
stimulus incentives from the Australian government in 2021. Unrealized loss on investment had an increase for the three and six months ended December 31, 2021, compared to the three and six months ended December 31, 2020.
Liquidity and Capital Resources
The Company has incurred cumulative losses and negative cash flows from operations since our predecessor’s inception in 1995. The Company had accumulated losses of $140 million as of December 31, 2021. We expect that our research and development expenses may increase due to the continued development of the OPMD program. It is also likely that there will be an increase in the general and administrative expenses due to the obligations of being a domestic public company in the United States.
We had no borrowings as of December 31, 2021 and do not currently have a credit facility.
As of December 31, 2021, we had cash and cash equivalents of approximately $12.3 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash and cash equivalents are held in bank accounts.
 
36
The following table sets forth a summary of the net cash flow activity for each of the periods set forth below:
 
     Six Months Ended
December 31, 		 
    
2021
    
2020
 
    
(US$’000)
 
Net cash provided by (used in):
     
Operating activities
   $ (7,622 )     $ (5,686 ) 
Investing activities
     —          (347 ) 
Financing activities
     —          9,851  
Effects of exchange rate changes on cash and cash equivalents
     182        391  
  
 
 
    
 
 
 
Net (decrease) increase in cash
   $ (7,440 )     $ 4,209  
  
 
 
    
 
 
 
Operating activities
Net cash used in operating activities for the six months ended December 31, 2021 and 2020 was $7.6 million and $5.7 million, respectively. Net cash used in operating activities was primarily the result of our net loss and change in working capital and a decrease in payables.
Investing activities
Net cash used in investing activities for the six months ended December 30, 2021 and 2020 was $0 and $0.3 million, respectively. The change was primarily related to a decrease in purchases of equipment in 2021 as there were none compared to purchases of $0.3 million in the same period of 2020.
Financing activities
Net cash provided by financing activities was $0 and $9.9 million for the six months ended December 31, 2021 and 2020, respectively. Cash from financing activities in 2020 were related to the issuance of common stock, including $11.5 million in gross proceeds from the October 2020 Capital Raise, partially offset by $1.6 million in share issuance costs.
The future of the Company as an operating business will depend on its ability to manage operating costs and budgeted amounts and obtain adequate financing. While we continue to progress discussions and advance opportunities to engage with pharmaceutical companies and continue to seek licensing partners for ddRNAi in disease areas that are not our focus, there can be no assurance as to whether we will enter into such arrangements or what the terms of any such arrangement could be.
While we have established some licensing arrangements, we do not have any products approved for sale and have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.
Unless and until we establish significant revenues from licensing programs, strategic alliances or collaboration arrangements with pharmaceutical companies, or from product sales, we anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of product candidates and begin to prepare to commercialize any product that receives regulatory approval. We are subject to the risks inherent in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We estimate that our cash and cash equivalents will be sufficient to fund the Company’s operations at least for the next twelve months.
 
37
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
 
  •
the timing and costs of our planned clinical trials for our ddRNAi and silence and replace product candidates;
 
  •
the timing and costs of our planned preclinical studies for our ddRNAi and silence and replace product candidates;
 
  •
the number and characteristics of product candidates that we pursue;
 
  •
the outcome, timing and costs of seeking regulatory approvals;
 
  •
revenue received from commercial sales of any of our product candidates that may receive regulatory approval;
 
  •
the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;
 
  •
the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
 
  •
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and
 
  •
the extent to which we need to
in-license
or acquire other products and technologies.
Contractual Obligations and Commercial Commitments
On October 1, 2016, the Company entered into an operating lease for office space in Hayward, California that originally expired in April 2018. The Company has entered into lease amendments that extended the lease through June 2025.
The Company enters into contracts in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
Critical Accounting Policies and Significant Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form
10-Q
describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies.
 
38
A critical accounting policy is defined as one that is both material to the presentation of the Company’s consolidated financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on the Company’s financial condition or results of operations. Specifically, these policies have the following attributes: (1) the Company is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates the Company could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on the Company’s financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. The Company bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as the Company’s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties are discussed in the section above entitled “Risk Factors.” Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that the Company’s consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States of America and provide a meaningful presentation of the Company’s financial condition and results of operations.
Management believes that the following are critical accounting policies:
Research and Development Expense
Research and development expenses relate primarily to the cost of conducting clinical and
pre-clinical
trials.
Pre-clinical
and clinical development costs are a significant component of research and development expenses. The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of
pre-clinical
studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in trade and other payables on the consolidated balance sheets and within research and development expenses on the consolidated statements of operations and comprehensive loss.
The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred.
Share-based Compensation Expense
The Company records share-based compensation in accordance with ASC 718,
Stock Compensation
. ASC 718 requires the fair value of all share-based employee compensation awarded to employees and
non-employees
to be recorded as an expense over the shorter of the service period or the vesting period. The Company determines employee and
non-employee
share-based compensation based on grant-date fair value using the Black-Scholes Option Pricing Model.
Recent Accounting Pronouncements
Accounting Standards recently adopted
None.
 
39
New Accounting Standards and Interpretations not yet mandatory or early adopted
ASU
2016-13
-In June 2016, the FASB issued ASU
No. 2016-13:
“
Financial Instruments-Credit Losses
(Topic 326)”. This ASU represents a significant change in the accounting for credit losses model by requiring immediate recognition of management’s estimates of current expected credit losses (CECL). Under the prior model, losses were recognized only as they were incurred. The Company has determined that it has met the criteria of a smaller reporting company (“SRC”) as of November 15, 2019. As such, ASU
2019-10:
“
Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases: Effective Dates”
amended the effective date for the Company to be for reporting periods beginning after December 15, 2022. The Company will adopt this ASU effective July 1, 2023.
 
40
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information pursuant to this Item.
Item 4. Controls and Procedures
We have established disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended). As of the end of the period covered by this Report we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule
13a-15
of the Securities and Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures are effective.
There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We do not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
 
41
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not a party to any material legal proceedings.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Item 1A of the Company’s Annual Report on Form
10-K
for the fiscal year ended June 30, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
 
42
Item 6. Exhibits.
 
Number   
Description of Document
   
3.1    Amended and Restated Certificate of Incorporation of Benitec Biopharma Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on April 15, 2020)
   
3.2    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Benitec Biopharma Inc., effective December 17, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on December 21, 2021)
   
10.1    First Amendment to Benitec Biopharma Inc. 2020 Equity and Incentive Compensation Plan, dated as of December 8, 2021 (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on October 22, 2021)
   
31.1    Statement of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
   
31.2    Statement of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
   
32.1    Statement of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
   
32.2    Statement of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
   
101.INS    Inline XBRL Instance Document*
   
101.SCH    Inline XBRL Taxonomy Extension Schema Document*
   
101.CAL    Inline XBRL Calculation Linkbase Document*
   
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document*
   
101.LAB    Inline XBRL Label Linkbase Document*
   
101.PRE    Inline XBRL Taxonomy Presentation Linkbase Document*
   
104    Cover Page Interactive Data File—the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
 
*
Filed herewith.
**
Furnished, not filed.
 
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
 
            Benitec Biopharma Inc.
Dated: February
14
, 2022 		           
           
/s/ Jerel Banks
            Jerel Banks
           
Executive Chairman and Chief Executive Officer
(principal executive officer)
       
           
/s/ Megan Boston
            Megan Boston
            Executive Director (principal financial and accounting officer)
 
44
Benitec Biopharma (NASDAQ:BNTC)
Historical Stock Chart
From Mar 2024 to Apr 2024 Click Here for more Benitec Biopharma Charts.
Benitec Biopharma (NASDAQ:BNTC)
Historical Stock Chart
From Apr 2023 to Apr 2024 Click Here for more Benitec Biopharma Charts.