UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 MARCH 31, 2020

OR

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: 001-36003

 

CONATUS PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

20-3183915

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

16745 W. Bernardo Dr., Suite 250

 

San Diego, CA

92127

(Address of Principal Executive Offices)

(Zip Code)

 

(858) 376-2600

(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 per share

CNAT

The Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      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, a 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       No  

As of April 27, 2020, the registrant had 33,170,487 shares of common stock ($0.0001 par value) outstanding.

 

 

 

 

 


 

CONATUS PHARMACEUTICALS INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

3

 

 

 

 

Condensed Balance Sheets

3

 

 

 

 

Condensed Statements of Operations and Comprehensive Loss

4

 

 

 

 

Condensed Statements of Stockholders’ Equity

5

 

 

 

 

Condensed Statements of Cash Flows

6

 

 

 

 

Notes to Condensed Financial Statements

7

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

15

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

21

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

21

 

 

PART II. OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

22

 

 

 

ITEM 1A.

RISK FACTORS

22

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

23

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

23

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

23

 

 

 

ITEM 5.

OTHER INFORMATION

23

 

 

 

ITEM 6.

EXHIBITS

23

 

 

EXHIBIT INDEX

24

 

 

SIGNATURES

26

 

2


 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

FINANCIAL STATEMENTS

Conatus Pharmaceuticals Inc.

Condensed Balance Sheets

(In thousands, except par value data)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,049

 

 

$

20,703

 

Collaboration receivables

 

 

 

 

 

122

 

Prepaid and other current assets

 

 

591

 

 

 

781

 

Total current assets

 

 

18,640

 

 

 

21,606

 

Other assets

 

 

147

 

 

 

221

 

Total assets

 

$

18,787

 

 

$

21,827

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

665

 

 

$

1,064

 

Accrued compensation

 

 

251

 

 

 

238

 

Current portion of lease liabilities

 

 

229

 

 

 

338

 

Total current liabilities

 

 

1,145

 

 

 

1,640

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized; no shares issued and

   outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized; 33,170 shares issued

   and outstanding at March 31, 2020 and  December 31, 2019

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

219,134

 

 

 

218,198

 

Accumulated deficit

 

 

(201,495

)

 

 

(198,014

)

Total stockholders’ equity

 

 

17,642

 

 

 

20,187

 

Total liabilities and stockholders’ equity

 

$

18,787

 

 

$

21,827

 

 

See accompanying notes to condensed financial statements.

 

3


 

Conatus Pharmaceuticals Inc.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Collaboration revenue

 

$

 

 

$

7,024

 

Total revenues

 

 

 

 

 

7,024

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

66

 

 

 

9,383

 

General and administrative

 

 

3,533

 

 

 

2,591

 

Total operating expenses

 

 

3,599

 

 

 

11,974

 

Loss from operations

 

 

(3,599

)

 

 

(4,950

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

58

 

 

 

200

 

Other income (expense)

 

 

60

 

 

 

3

 

Total other income

 

 

118

 

 

 

203

 

Net loss

 

 

(3,481

)

 

 

(4,747

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on marketable securities

 

 

 

 

 

20

 

Comprehensive loss

 

$

(3,481

)

 

$

(4,727

)

Net loss per share, basic and diluted

 

$

(0.10

)

 

$

(0.14

)

Weighted average shares outstanding used in computing

   net loss per share, basic and diluted

 

 

33,170

 

 

 

33,165

 

 

See accompanying notes to condensed financial statements.

 

4


 

Conatus Pharmaceuticals Inc.

Condensed Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

33,170

 

 

$

3

 

 

$

218,198

 

 

$

 

 

$

(198,014

)

 

$

20,187

 

Share-based compensation

 

 

 

 

 

 

 

 

936

 

 

 

 

 

 

 

 

 

936

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,481

)

 

 

(3,481

)

Balance at March 31, 2020

 

 

33,170

 

 

$

3

 

 

 

219,134

 

 

$

 

 

$

(201,495

)

 

$

17,642

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

33,165

 

 

$

3

 

 

$

214,042

 

 

$

(17

)

 

$

(186,629

)

 

$

27,399

 

Share-based compensation

 

 

 

 

 

 

 

 

926

 

 

 

 

 

 

 

 

 

926

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,747

)

 

 

(4,747

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Balance at March 31, 2019

 

 

33,165

 

 

$

3

 

 

 

214,968

 

 

$

3

 

 

$

(191,376

)

 

$

23,598

 

 

See accompanying notes to condensed financial statements.

 

5


 

Conatus Pharmaceuticals Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(3,481

)

 

$

(4,747

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

20

 

Stock-based compensation expense

 

 

936

 

 

 

926

 

Amortization of premiums and discounts on marketable securities, net

 

 

 

 

 

(94

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Collaboration receivables

 

 

122

 

 

 

(183

)

Prepaid and other current assets

 

 

191

 

 

 

453

 

Accounts payable and accrued expenses

 

 

(399

)

 

 

1,133

 

Accrued compensation

 

 

13

 

 

 

(1,295

)

Deferred revenue

 

 

 

 

 

(3,164

)

Lease liabilities, net

 

 

(36

)

 

 

(13

)

Net cash used in operating activities

 

 

(2,654

)

 

 

(6,964

)

Investing activities

 

 

 

 

 

 

 

 

Maturities of marketable securities

 

 

 

 

 

19,000

 

Purchase of marketable securities

 

 

 

 

 

(4,424

)

Capital expenditures

 

 

 

 

 

(9

)

Net cash provided by investing activities

 

 

 

 

 

14,567

 

Net (decrease) increase in cash and cash equivalents

 

 

(2,654

)

 

 

7,603

 

Cash and cash equivalents at beginning of period

 

 

20,703

 

 

 

11,565

 

Cash and cash equivalents at end of period

 

$

18,049

 

 

$

19,168

 

 

See accompanying notes to condensed financial statements.

 

6


 

Conatus Pharmaceuticals Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

 

1.

Organization and Basis of Presentation

Conatus Pharmaceuticals Inc. (the Company) was incorporated in the state of Delaware on July 13, 2005. The Company is a biotechnology company that has been focused on the development and commercialization of novel medicines to treat chronic diseases with significant unmet need. In December 2016, the Company entered into an Option, Collaboration and License Agreement (the Collaboration Agreement) with Novartis Pharma AG (Novartis) for the development and commercialization of emricasan, an orally active pan-caspase inhibitor, for the treatment of patients with chronic liver disease.

In June 2019, the Company announced that top-line results from its ENCORE-LF clinical trial of emricasan did not meet the primary endpoint. Consequently, the Company and Novartis have no further development plans for emricasan, and the Company and Novartis entered into an amendment to the Collaboration Agreement, pursuant to which the Company and Novartis mutually agreed to terminate the Collaboration Agreement, effective September 30, 2019. In order to extend the Company’s resources, the Company commenced a restructuring plan in June 2019 that included reducing staff and suspending development of its inflammasome disease candidate, CTS-2090, and commenced a second restructuring plan in September 2019 that included reducing additional staff to further extend the Company’s resources. Both restructuring plans were substantially complete as of December 31, 2019. The Company engaged a financial advisor to assist in the exploration and evaluation of strategic alternatives to enhance shareholder value, including a merger, an acquisition or sale of assets or a dissolution and liquidation of the Company. On January 28, 2020, Conatus, Chinook Merger Sub, Inc. (Merger Sub), and Histogen Inc. (Histogen) entered into the Merger Agreement, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Histogen, with Histogen continuing as Conatus’ wholly owned subsidiary and the surviving corporation of the merger.

As of March 31, 2020, the Company has devoted substantially all of its efforts to product development and has not realized product sales revenues from its planned principal operations. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and, as of March 31, 2020, had an accumulated deficit of $201.5 million. The Company expects to continue to incur net losses for at least the next several years. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. If the Company is unable to generate revenues adequate to support its cost structure, the Company may need to raise additional equity or debt financing or seek to complete one of the strategic alternatives described above.

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K filed with the SEC on March 11, 2020.

 

 

 

2.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash. Additionally, the Company established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

 

7


 

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts.

Marketable Securities

The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. The Company invests its excess cash balances primarily in corporate debt securities and money market funds with strong credit ratings. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses for the three-month periods ended March 31, 2020 and 2019.

The Company had no investments in marketable securities at March 31, 2020 and December 31, 2019.

Fair Value of Financial Instruments

The carrying amounts of prepaid and other current assets, and accounts payable and accrued expenses are reasonable estimates of their fair value because of the short maturity of these items.

Stock-Based Compensation

Stock-based compensation expense for stock option grants and restricted stock units (RSUs) under the Company’s equity plans is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period of the stock-based award, and forfeitures are recognized as they occur. Stock-based compensation expense for employee stock purchases under the Company’s 2013 Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, employee exercise behavior, forfeiture rates and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

 

Revenue Recognition

Under the relevant accounting literature, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The Company performs the following five steps in order to determine revenue recognition for contracts: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the entity satisfies a performance obligation.

At contract inception, the Company identifies the performance obligations in the contract by assessing whether the goods or services promised within each contract are distinct. Revenue is then recognized for the amount of the transaction price that is allocated to the respective performance obligation when, or as, the performance obligation is satisfied.

In a contract with multiple performance obligations, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price(s) may include estimates regarding forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a performance obligation and, therefore, revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in a contract, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from the allocated transaction price. The Company evaluates the measure of progress at each reporting period and, if necessary, adjusts the measure of performance and related revenue or expense recognition as a change in estimate.

8


 

At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being reached. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or a collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or a collaboration partner’s control, such as operational developmental milestones and any related constraint, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which will affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and a license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied. To date, the Company has not recognized any royalty revenue from collaborative arrangements.

In December 2016, the Company entered into the Collaboration Agreement and an Investment Agreement (the Investment Agreement) with Novartis. The Company concluded that there were two significant performance obligations under the Collaboration Agreement: the license and the research and development services, but that the license is not distinct from the research and development services as Novartis cannot obtain value from the license without the research and development services, which the Company is uniquely able to perform.

The Company concluded that progress towards completion of the performance obligations related to the Collaboration Agreement is best measured in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses. The Company periodically reviews and updates the estimated collaboration expenses, when appropriate, which adjusts the percentage of revenue that is recognized for the period. While such changes to the Company’s estimates have no impact on the Company’s reported cash flows, the amount of revenue recorded in the period could be materially impacted. The transaction price to be recognized as revenue under the Collaboration Agreement consists of the upfront payment, option exercise fee, deemed revenue from the premium paid by Novartis under the Investment Agreement and estimated reimbursable research and development costs. Certain expenses directly related to execution of the Collaboration Agreement were capitalized as assets on the balance sheet and are being expensed in a manner consistent with the methodology used for recognizing revenue.

The Collaboration Agreement was terminated, effective September 30, 2019, and the Company will not receive any future milestone, royalty or profit and loss sharing payments under the Collaboration Agreement.

See Note 5 – Collaboration and License Agreements for further information.

Research and Development Expenses

All research and development costs are expensed as incurred.

Income Taxes

The Company’s policy related to accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of December 31, 2019, there are no unrecognized tax benefits included in the condensed balance sheet that would, if recognized, affect the Company’s effective tax rate, and the Company has noted no material changes through March 31, 2020. The Company has not recognized interest and penalties in the condensed balance sheets or condensed statements of operations and comprehensive loss. The Company is subject to U.S. and California taxation. As of December 31, 2019, the Company’s tax years beginning 2005 to date are subject to examination by taxing authorities.

Comprehensive Loss

The Company is required to report all components of comprehensive loss, including net loss, in the condensed financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the condensed statements of operations and comprehensive loss for all periods presented.

9


 

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is used in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating primarily in the United States.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities have been excluded from the computation of diluted net loss per share in the periods in which they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive (in thousands):

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Warrants to purchase common stock

 

 

13

 

 

 

13

 

Common stock options issued and outstanding

 

 

1,161

 

 

 

6,759

 

RSUs outstanding

 

 

1,453

 

 

 

 

ESPP shares pending issuance

 

 

 

 

 

20

 

Total

 

 

2,627

 

 

 

6,792

 

 

 

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. As of March 31, 2020, Conatus has not early adopted this ASU. The ASU is currently not expected to have a material impact on its financial statements.

 

 

 

3.

Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1:

Includes financial instruments for which quoted market prices for identical instruments are available in active markets.

 

 

Level 2:

Includes financial instruments for which there are inputs other than quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transaction (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

 

Level 3:

Includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including management’s own assumptions.

 

10


 

Below is a summary of assets, consisting of cash and cash equivalents, measured at fair value as of March 31, 2020 and December 31, 2019 (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

March 31, 2020

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs (Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

1,154

 

 

$

1,154

 

 

$

 

 

$

 

Money market funds

 

 

16,895

 

 

 

16,895

 

 

 

 

 

 

 

Total

 

$

18,049

 

 

$

18,049

 

 

$

 

 

$

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

December 31, 2019

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs (Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

594

 

 

$

594

 

 

$

 

 

$

 

Money market funds

 

 

20,109

 

 

 

20,109

 

 

 

 

 

 

 

Total

 

$

20,703

 

 

$

20,703

 

 

$

 

 

$

 

 

4.Stockholders’ Equity

Common Stock

On August 2, 2018, the Company entered into an At Market Issuance Sales Agreement (the Sales Agreement) with Stifel, Nicolaus & Company, Incorporated (Stifel), pursuant to which the Company may sell from time to time, at its option, up to an aggregate of $35.0 million of shares of its common stock through Stifel, as sales agent. Sales of the Company’s common stock made pursuant to the Sales Agreement, if any, will be made on The Nasdaq Capital Market (Nasdaq), under the Company’s Registration Statement on Form S-3 filed on August 17, 2017 and declared effective by the SEC on November 9, 2017, by means of ordinary brokers’ transactions at market prices. Additionally, under the terms of the Sales Agreement, the Company may also sell shares of its common stock through Stifel, on Nasdaq or otherwise, at negotiated prices or at prices related to the prevailing market price. The Company will pay a commission rate equal to up to 3.0% of the gross sales price per share sold. As of March 31, 2020, no shares were issued pursuant to the Sales Agreement.

Warrants

In 2013, the Company issued warrants exercisable for 111,112 shares of Series B preferred stock, at an exercise price of $0.90 per share, to Oxford Finance LLC and Silicon Valley Bank in conjunction with the Company’s entry into a loan and security agreement (Lender Warrants). Upon completion of the Company’s initial public offering, the Lender Warrants became exercisable for 13,468 shares of common stock at an exercise price of $7.43 per share. The Lender Warrants will expire on July 3, 2023.

Stock Options

The following table summarizes the Company’s stock option activity under all stock option plans for the three months ended March 31, 2020 (options in thousands):

 

 

 

Total

Options

 

 

Weighted-

Average

Exercise

Price

 

Balance at December 31, 2019

 

 

1,299

 

 

$

3.82

 

Forfeited/cancelled/expired

 

 

(138

)

 

 

4.34

 

Balance at March 31, 2020

 

 

1,161

 

 

$

3.76

 

 

11


 

Restricted Stock Units

In August 2019, the Company effected a one-time option exchange, wherein certain employees were offered the opportunity to exchange eligible outstanding stock options, whether vested or unvested, with exercise prices that are significantly higher than the current fair market value of the Company’s common stock for the grant of a lesser number of RSUs. The participants received one new RSU for every two stock options tendered for exchange. As a result, 3,200,375 stock options were exchanged for 1,600,186 RSUs. The RSUs have a one-year vesting schedule or vest upon a Change of Control, an employee’s termination without Cause, or resignation for Good Reason as defined in the 2013 Incentive Award Plan. The one-time option exchange was accounted for as a modification of the original award, and the difference in the fair value of the cancelled options immediately prior to the cancellation and the fair value of the modified options resulted in incremental value of approximately $0.1 million, which was calculated using the Black-Scholes model. Total stock-based compensation expense to be recognized over the requisite service period is equal to remaining unrecognized expense for the exchanged option, as of the exchange date, plus the incremental value of the modification to the award and is expected to be recorded over the one-year service term commencing August 1, 2019.  At March 31, 2020 and December 31, 2019, 1,453,311 RSUs were outstanding, none of which were vested at such dates.

Stock-Based Compensation

The Company recorded stock-based compensation of $0.9 million for the three months ended March 31, 2020 and 2019.

Common Stock Reserved for Future Issuance

The following shares of common stock were reserved for future issuance at March 31, 2020 (in thousands):

 

Warrants to purchase common stock

 

 

13

 

Common stock options issued and outstanding

 

 

1,161

 

Common stock authorized for future option grants

 

 

4,090

 

RSUs outstanding

 

 

1,453

 

Common stock authorized for the ESPP

 

 

489

 

Total

 

 

7,206

 

 

 

 

5.

Collaboration and License Agreements

In December 2016, the Company entered into the Collaboration Agreement, pursuant to which the Company granted Novartis an exclusive option to collaborate with the Company to develop products containing emricasan. Pursuant to the Collaboration Agreement, the Company received a non-refundable upfront payment of $50.0 million from Novartis.

In May 2017, Novartis exercised its option under the Collaboration Agreement. In July 2017, the Company received a $7.0 million option exercise payment, at which time the license under the Collaboration Agreement became effective (the License Effective Date). The Company and Novartis entered into an amendment to the Collaboration Agreement, pursuant to which they mutually agreed to terminate the Collaboration Agreement in September 2019. The Company accounted for the termination of the Collaboration Agreement as a contract modification of an existing contract as the remaining services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied as of the contract modification date. 

Under the Collaboration Agreement, the Company was eligible to receive up to an aggregate of $650.0 million in milestone payments over the term of the Collaboration Agreement, contingent on the achievement of certain development, regulatory and commercial milestones, as well as royalties or profit and loss sharing on future product sales in the United States, if any.

Novartis was to pay 50% of the Company’s Phase 2b and observational study costs pursuant to an agreed upon budget. Upon completion of the Phase 2b trials, Novartis would have assumed 100% of the observational study costs and full responsibility for emricasan’s Phase 3 development and all combination product development. Due to the termination of the Collaboration Agreement, the Company will not receive any future milestone, royalty or profit and loss sharing payments under the Collaboration Agreement.

Under the Collaboration Agreement, there were two significant performance obligations: the license and the research and development services, but the license was not distinct from the research and development services as Novartis could not obtain value from the license without the research and development services, which the Company was uniquely able to perform. The Company concluded that progress towards completion of the performance obligations related to the Collaboration Agreement was best measured in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses. The transaction price recognized as revenue under the Collaboration Agreement consists of the upfront payment, option exercise fee, deemed revenue from

12


 

the premium paid by Novartis under the Investment Agreement and estimated reimbursable research and development costs. Certain expenses directly related to execution of the Collaboration Agreement were capitalized as assets on the balance sheet and are being expensed in a manner consistent with the methodology used for recognizing revenue.  During the three months ended June 30, 2019, as a result of the decision to discontinue the development of emricasan, the Company significantly reduced the transaction price and the total reimbursable research and development expenses under the Collaboration Agreement.  The net effect of these changes resulted in the recognition of a cumulative catch-up in revenue of $4.6 million, which was recorded as a change in estimate during the three months ended June 30, 2019.

As of December 31, 2019, all deferred revenue and deferred expenses related to the Collaboration Agreement were recognized.

 

 

6.

Commitments

Leases

The Company determines if an arrangement is a finance lease, operating lease or short-term lease at inception, or as applicable, and accounts for the arrangement under the relevant accounting literature. Currently, the Company is only party to a non-cancelable office space operating lease and short-term lease arrangements. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate of 12%, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company’s short-term leases are not subject to recognition of a ROU asset or liability or straight-line lease expense requirements.

In February 2014, the Company entered into a noncancelable operating lease agreement (the Lease) for certain office space with a lease term from July 2014 through December 2019 and a renewal option for an additional five years. In May 2015, the Company entered into a first amendment to the Lease (the First Lease Amendment) for additional office space starting in September 2015 through September 2020. The First Lease Amendment also extended the term of the Lease to September 2020. The monthly base rent under the Lease and the First Lease Amendment increases approximately 3% annually from approximately $33,000 in 2015 to approximately $39,000 in 2020.

In December 2019, and as amended in March 2020, the Company agreed to sublet the office space, in two phases, under the Lease through September 30, 2020, the reminder of the lease term.  As the carrying value of the ROU asset was in excess of its fair value, based on the sublease income to be received, an impairment loss was recorded on the ROU asset of approximately $50,000.

As of March 31, 2020, the Company’s ROU assets and liabilities related to the Lease and the First Lease Amendment are as follows (in thousands):

 

ROU assets (included in other assets)

 

$

147

 

 

 

 

 

 

Current portion of lease liabilities

 

$

229

 

Total lease liabilities

 

$

229

 

 

The following table reconciles the undiscounted cash flows for the periods presented below to the operating lease liabilities recorded in the condensed balance sheet as of March 31, 2020 (in thousands):

 

Total lease payments

 

 

234

 

Present value adjustment

 

 

(5

)

Total lease liabilities

 

$

229

 

 

Rent expense was as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating lease

 

$

95

 

 

$

95

 

Short-term leases

 

 

5

 

 

 

17

 

Total

 

$

100

 

 

$

112

 

 

13


 

Other Commitments

In July 2010, the Company entered into a stock purchase agreement with Pfizer Inc. (Pfizer), pursuant to which the Company acquired all of the outstanding stock of Idun Pharmaceuticals, Inc., which was subsequently spun off to the Company’s stockholders in January 2013. Under the stock purchase agreement, the Company may be required to make payments to Pfizer totaling $18.0 million upon the achievement of specified regulatory milestones.

 

 

7.

COVID-19 Pandemic

 

The continued spread of the COVID-19 pandemic is affecting the United States and global economies and may affect the Company’s operations. Additionally, while the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business.

14


 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis and the unaudited interim condensed financial statements included in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in Conatus’ annual report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 11, 2020.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding Conatus’ future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause Conatus’ actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this quarterly report are only predictions. Conatus has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that Conatus believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in Conatus’ forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, Conatus operates in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, Conatus does not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Overview

Conatus is a biotechnology company that has been focused on the development and commercialization of novel medicines to treat chronic diseases with significant unmet need. Conatus has been developing emricasan, an orally active pan-caspase inhibitor, for the treatment of patients with chronic liver disease. Emricasan is designed to reduce the activities of human caspases, which are enzymes that mediate inflammation and apoptosis. Conatus has also been developing CTS-2090, an orally active selective caspase inhibitor, for diseases involving inflammasome pathways.

In December 2016, Conatus entered into an Option, Collaboration and License Agreement, or the Collaboration Agreement, with Novartis Pharma AG, or Novartis, for the development and commercialization of emricasan. In June 2019, Conatus announced that top-line results from its ENCORE-LF clinical trial of emricasan did not meet the primary endpoint, and it was discontinuing further treatment of patients enrolled in the ENCORE-LF clinical trial. In addition, results from the 24-week extension in Conatus’ ENCORE-PH clinical trial of emricasan were consistent with results from the initial 24-week treatment period and did not meet predefined objectives. In March 2019, Conatus announced that top-line results from the ENCORE-NF clinical trial of emricasan also did not meet the primary endpoint. Conatus and Novartis entered into an amendment to the Collaboration Agreement, pursuant to which they mutually agreed to terminate the Collaboration Agreement in September 2019. Therefore, Conatus will not receive any future milestone, royalty or profit and loss sharing payments under the Collaboration Agreement. Conatus has discontinued development activities for emricasan and plans to re-position or partner emricasan, as well as its inflammasome disease candidate, CTS-2090.

In connection with the decision to discontinue development of emricasan, Conatus also commenced a restructuring plan in June 2019 that included reducing staff by approximately 40% and suspending development of CTS-2090, and a restructuring plan in September 2019 that included reducing staff by another approximately 40% in order to extend Conatus’ resources. Conatus also engaged a financial advisor to assist in the exploration and evaluation of strategic alternatives to enhance shareholder value, including a merger, an acquisition or sale of assets or a dissolution and liquidation of the company.

15


 

On January 28, 2020, Conatus, Chinook Merger Sub, Inc., or Merger Sub, and Histogen Inc., or Histogen, entered into the Merger Agreement, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Histogen, with Histogen continuing as Conatus’ wholly owned subsidiary and the surviving corporation of the merger.

At the effective time of the merger, or the Effective Time, each share of Histogen’s common stock and Histogen’s preferred stock outstanding immediately prior to the Effective Time (excluding certain shares to be canceled pursuant to the Merger Agreement, and shares held by Histogen stockholders who have exercised and perfected appraisal rights will be converted into the right to receive approximately 1.4750 shares of Conatus’ common stock, subject to adjustment to account for the reverse stock split of Conatus common stock that is expected to occur prior to and in connection with the Effective Time. Pursuant to the Conatus reverse stock split, the issued shares of Conatus’ common stock immediately prior to the split effective time will be reclassified into a smaller number of shares within a range, as determined by the Conatus Board of Directors, such that a stockholder of Conatus will own one new share of Conatus’ common stock for every 10 to 50 (or any number in between) shares of issued common stock held by that stockholder immediately prior to the split effective time. The exchange ratio is an estimate only and is based upon Conatus and Histogen’s capitalization at March 2, 2020. The final exchange ratio will be determined pursuant to a formula described in more detail in the Merger Agreement and in Conatus’ proxy statement/prospectus/information statement on Form S-4 (registration file number 333-236332) initially filed with the SEC on February 7, 2020, as amended, or the Form S-4, which formula accounts for adjustments due to changes in Conatus and Histogen’s capitalization prior to the consummation of the merger as well as the respective net cash balances of Conatus and Histogen prior to the merger. As a result of the merger, current holders of Histogen’s capital stock and options and warrants to purchase Histogen’s capital stock are expected to own, or hold rights to acquire, in the aggregate approximately 74% of the Fully-Diluted Common Stock of Conatus (which for these purposes is defined as the outstanding common stock of Conatus, including the shares of common stock issued in the merger, plus all shares of Conatus common stock subject to options and warrants of Conatus outstanding immediately prior to the merger, plus all shares of Histogen capital stock subject to options and warrants of Histogen converted into options and warrants of Conatus in connection with the merger) and Conatus’ current stockholders, optionholders and warrantholders are expected to own, or hold rights to acquire, in the aggregate approximately 26% of the Fully-Diluted Common Stock of Conatus, in each case, following the Effective Time. These estimates are subject to adjustment prior to the closing of the merger, including an upward adjustment to the extent that Conatus’ net cash at the Effective Time is less than $11.9 million or Histogen’s net cash at the Effective Time is more than negative $0.8 million (and as a result, Conatus stockholders could own less, and Histogen stockholders could own more, of the combined organization), or a downward adjustment to the extent that Conatus’ net cash at the Effective Time is more than $12.7 million or Histogen’s net cash at the Effective Time is less than negative $1.6 million (and as a result, Conatus stockholders could own more, and Histogen stockholders could own less, of the combined organization). The foregoing net cash amounts at which adjustments to the exchange ratio may be triggered reflect reductions for each company’s daily cash burn (as defined in the Merger Agreement) from January 31, 2020 through May 7, 2020, the date of the Conatus special meeting of stockholders, and will be further adjusted to reflect each company’s daily cash burn from May 7, 2020 until the closing date of the merger.

Consummation of the merger is subject to certain closing conditions, including, among other things, approval by Conatus’ and Histogen’s stockholders. Should the Merger Agreement be terminated prior to consummation, the Merger Agreement contains certain termination rights for both Conatus and Histogen, and further provides that, upon termination of the Merger Agreement under specified circumstances, either party may be required to pay the other party a termination fee of $500,000, and in some circumstances reimburse the other party’s expenses up to a maximum of $350,000.

At the Effective Time, the Conatus Board of Directors is expected to consist of eight members, six of whom will be designated by Histogen and two of whom will be designated by Conatus.

Despite devoting significant efforts to identify, evaluate and negotiate the Merger Agreement with Histogen, Conatus may not be successful in completing the merger. Further, even if the merger is completed, it ultimately may not deliver the anticipated benefits or enhance stockholder value. If the merger is not completed, Conatus cannot predict whether and to what extent Conatus would be successful in consummating an alternative transaction, the timing of such a transaction or Conatus’ future cash needs required to complete such a transaction, and Conatus may choose or be forced to dissolve and liquidate its assets.

 

Since Conatus’ inception, its primary activities have been organizational activities, including recruiting personnel, conducting research and development, including clinical trials, and raising capital. Conatus has no products approved for sale, and it has not generated any revenues from product sales to date. Conatus has never been profitable and has incurred significant operating losses since its inception. Conatus incurred net losses of $11.4 million and $18.0 million for the years ended December 31, 2019 and 2018, respectively, and $3.5 million for the three months ended March 31, 2020. As of March 31, 2020, Conatus has an accumulated deficit of $201.5 million.

16


 

Conatus has funded its operations since inception primarily through sales of equity securities and convertible promissory notes and payments made under the Collaboration Agreement. Conatus expects to continue to incur significant operating losses and negative cash flows from operating activities. In May 2017, Conatus completed a public offering of 5,980,000 shares of its common stock at a public offering price of $5.50 per share. Conatus received net proceeds of $30.6 million, after deducting underwriting discounts and commissions and offering-related transaction costs. Immediately following the offering, Conatus used $11.2 million of the net proceeds to repurchase and retire 2,166,836 shares of its common stock from funds affiliated with Advent Private Equity, or Advent, at a price of $5.17 per share. In August 2018, Conatus entered into an At Market Issuance Sales Agreement, or the 2018 Sales Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, pursuant to which Conatus may sell from time to time, at its option, up to an aggregate of $35.0 million of shares of its common stock in “at-the-market” offerings. As of the date of the filing of this Form 10-Q, no shares have been issued pursuant to the 2018 Sales Agreement.

As of March 31, 2020, Conatus had cash and cash equivalents of $18.0 million. Although it is difficult to predict future liquidity requirements, Conatus believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund its operations for at least the next 12 months from the date of the filing of this Form 10-Q. Conatus will need to raise additional capital to fund further operations. Conatus may obtain additional financing in the future through the issuance of its common stock in future public offerings, through other equity or debt financings or through collaborations or partnerships with other companies.

Successful transition to profitability is dependent upon achieving a level of revenues adequate to support Conatus’ cost structure. Conatus cannot assure you that it will ever be profitable or generate sustained positive cash flow from operating activities and, unless and until it does, it will need to raise substantial additional capital through equity or debt financings or through collaborations or partnerships with other companies. Conatus may not be able to raise additional capital on terms acceptable to it, or at all, and any failure to raise capital as and when needed could have a material adverse effect on its results of operations, financial condition and its ability to execute on its business plan.

 

Financial Overview

Revenues

Conatus’ revenues to date have been generated primarily from the Collaboration Agreement. Under the terms of the Collaboration Agreement, Conatus received an upfront payment of $50.0 million. In May 2017, Novartis exercised its option, and Conatus received a $7.0 million option exercise payment in July 2017. In September 2019, Conatus and Novartis entered into an amendment to the Collaboration Agreement, pursuant to which Conatus and Novartis mutually agreed to terminate the Collaboration Agreement.  Conatus was eligible to receive up to $650.0 million in additional payments for development, regulatory and commercial sales milestones, as well as royalties or profit and loss sharing on future product sales in the United States, if any. However, due to its termination, Conatus will not receive any future milestone, royalty or profit and loss sharing payments under the Collaboration Agreement.

Under the relevant revenue recognition guidance, Conatus recognizes collaboration revenue (i.e., the transaction price) in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses. Conatus periodically reviews and updates the total estimated collaboration expenses and the estimated transaction price, when appropriate, which adjusts the revenue recognized for the period on a cumulative catch-up basis as a change in estimate. Such changes could materially impact the amount of revenue recorded in the period.

Conatus has no products approved for sale, and Conatus has not generated any revenues from product sales to date. Conatus has not submitted any product candidate for regulatory approval. If Conatus fails to achieve clinical success for its product candidates in a timely manner and/or obtain regulatory approval for such product candidates, or to successfully develop other product candidates, its ability to generate future revenues would be materially adversely affected. Conatus has no further clinical development plans for and is not currently developing any other product candidates.

Research and Development Expenses

The majority of Conatus’ operating expenses to date have been incurred in research and development activities. Starting in late 2011, research and development expenses have been focused on the development of emricasan. Since acquiring emricasan in 2010, Conatus has incurred $168.5 million of research and development expenses in the development of emricasan through March 31, 2020. Conatus’ business model has been focused on the development of emricasan in various liver diseases in collaboration with Novartis and the development of CTS-2090 for diseases involving inflammasome pathways. Its research and development expenses consist primarily of:

 

expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants that conduct its clinical trials and its preclinical studies;

17


 

 

employee-related expenses, which include salaries and benefits;

 

the cost of finalizing its chemistry, manufacturing and controls, or CMC, capabilities and providing clinical trial materials; and

 

costs associated with other research activities and regulatory approvals.

Research and development costs are expensed as incurred.

Clinical development timelines, the probability of success and development costs can differ materially from expectations. The costs of clinical trials may vary significantly over the life of a project owing to factors that include but are not limited to the following:

 

per patient trial costs;

 

the number of patients that participate in the clinical trials;

 

the number of sites included in the clinical trials;

 

the countries in which the clinical trials are conducted;

 

the length of time required to enroll eligible patients;

 

the number of doses that patients receive;

 

the drop-out or discontinuation rates of patients;

 

potential additional safety monitoring or other studies requested by regulatory agencies;

 

the duration of patient follow-up; and

 

the efficacy and safety profile of the product candidate.

Conatus does not have any plans for further development of emricasan and has suspended development of its inflammasome disease candidate, CTS-2090.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance, business development and administrative functions. Other general and administrative expenses include costs related to being a public company, as well as insurance, facilities, travel, patent filing and maintenance, legal and consulting expenses.

Interest Income

Interest income consists primarily of interest income earned on Conatus’ cash, cash equivalents and marketable securities.

Other Income (Expense)

Other income (expense) includes non-operating transactions such as those caused by currency fluctuations between transaction dates and settlement dates.

Critical Accounting Policies and Significant Judgments and Estimates

Conatus’ management’s discussion and analysis of financial condition and results of operations is based on its condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Conatus to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by Conatus for changes in facts and circumstances, and material changes in these estimates could occur in the future. Conatus bases its estimates on historical experience and on various other factors that Conatus believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

18


 

There were no significant changes during the three months ended March 31, 2020 to the critical accounting policies described in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 11, 2020.

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019

Total Revenues

Total revenues were $0.0 million for the three months ended March 31, 2020, as compared to $7.0 million for the same period in 2019. The decrease of $7.0 million was due to the termination of the Collaboration Agreement in September 2019.

Research and Development Expenses

Research and development expenses were $0.1 million for the three months ended March 31, 2020, as compared to $9.4 million for the same period in 2019. The decrease of $9.3 million was due to discontinuation of developing the emricasan and CTS-2090 programs.

General and Administrative Expenses

General and administrative expenses were $3.5 million for the three months ended March 31, 2020, as compared to $2.6 million for the same period in 2019. The increase of $0.9 million was primarily due to higher legal expenses incurred in connection with the proposed merger with Histogen.  

Changes in components of Other Income (Expense) were as follows:

Interest Income

Interest income was $58,000 for the three months ended March 31, 2020, as compared to $200,000 for the same period in 2019. Interest income consisted of interest earned on Conatus’ cash, cash equivalents and marketable securities and fluctuates based on changes in investment balances and interest rates.

Other Income (Expense)

Other income was $60,000 for the three months ended March 31, 2020, as compared to $3,000 for the same period in 2019. Other income (expense) represents non-operating transactions such as sublease rental income, and in the 2019 period, expenses caused by currency fluctuations between transaction dates and settlement dates.

Liquidity and Capital Resources

Since inception, Conatus has incurred losses and negative cash flows from operating activities, except for the year ended December 31, 2016, where it had positive net cash flows from operating activities due to the upfront payment related to the Collaboration Agreement. As of March 31, 2020, Conatus had an accumulated deficit of $201.5 million. Conatus anticipates that it will continue to incur net losses as it evaluates and pursues strategic alternatives to enhance shareholder value.

Conatus has funded its operations since inception primarily through sales of equity securities and convertible promissory notes and payments made under the Collaboration Agreement.

In December 2016, Conatus entered into the Collaboration Agreement, pursuant to which it granted Novartis an exclusive option to collaborate with it for the global development and commercialization of emricasan. Under the Collaboration Agreement, Novartis paid Conatus an upfront payment of $50.0 million. In May 2017, Novartis exercised its option, and Conatus received a $7.0 million option exercise payment in July 2017. Concurrent with the entry into the Collaboration Agreement, Conatus entered into the Investment Agreement, whereby it agreed to sell and Novartis agreed to purchase, convertible promissory notes, in one or two closings, for an aggregate principal amount of up to $15.0 million. In February 2017, Conatus issued the Novartis Note in the principal amount of $15.0 million, pursuant to the Investment Agreement. The maturity date of the Novartis Note was December 31, 2019, and it bore interest on the unpaid principal balance at a rate of 6% per annum. In December 2018, Conatus, at its option, converted the entire outstanding principal of $15.0 million and accrued and unpaid interest of the Novartis Note into 2,882,519 shares of its common stock. Pursuant to the terms of the Novartis Note, the principal and accrued and unpaid interest converted into shares of Conatus’ common stock at a conversion price equal to 120% of the 20-day trailing average closing price per share of the common stock immediately prior to the conversion date.

19


 

On August 2, 2018, Conatus entered into the 2018 Sales Agreement, pursuant to which it may sell from time to time, at its option, up to an aggregate of $35.0 million of shares of its common stock through Stifel, as sales agent. Sales of its common stock made pursuant to the 2018 Sales Agreement, if any, will be made on The Nasdaq Capital Market, or Nasdaq, under its Registration Statement on Form S-3 filed on August 17, 2017 by means of ordinary brokers’ transactions at market prices. Additionally, under the terms of the 2018 Sales Agreement, Conatus may also sell shares of its common stock through Stifel, on Nasdaq or otherwise, at negotiated prices or at prices related to the prevailing market price. Conatus will pay a commission rate equal to up to 3.0% of the gross sales price per share sold. The 2018 Sales Agreement will automatically terminate upon the sale of an aggregate of $35.0 million of shares of Conatus’ common stock pursuant to the 2018 Sales Agreement. In addition, the 2018 Sales Agreement may be terminated by Conatus or Stifel at any time upon ten days’ notice to the other party, or by Stifel at any time in certain circumstances, including the occurrence of an event that would be reasonably likely to have a material adverse effect on its assets, business, operations, earnings, properties, condition (financial or otherwise), prospects, stockholders’ equity or results of operations. As of the date of the filing of this Quarterly Report on Form 10-Q, Conatus has not sold any shares under the 2018 Sales Agreement. In addition, under current regulations of the Securities and Exchange Commission, or the SEC, at any time during which the aggregate market value of its common stock held by non-affiliates, or public float, is less than $75.0 million, the amount Conatus can raise through primary public offerings of securities in any twelve-month period using shelf registration statements, including sales under the 2018 Sales Agreement, is limited to an aggregate of one-third of its public float. As of April 27, 2020, Conatus’ public float was 32.2 million shares, the value of which was $11.6 million based upon the closing price of its common stock of $0.35 per share on April 27, 2020. The value of one-third of its public float calculated on the same basis was $3.9 million.

On May 29, 2019, Conatus received a letter from the Nasdaq staff indicating that, for the prior thirty consecutive business days, the bid price for its common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(a)(1). Conatus had a period of 180 calendar days, or until November 25, 2019, to regain compliance. On November 25, 2019, Conatus filed an application to transfer the listing of its common stock from the Nasdaq Global Market to the Nasdaq Capital Market.

On November 27, 2019, Conatus received approval from Nasdaq to transfer the listing of Conatus’ common stock from the Nasdaq Global Market to the Nasdaq Capital Market. Conatus’ common stock was transferred to the Nasdaq Capital Market effective as of the open of business on November 29, 2019, and continues to trade under the symbol “CNAT.” The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Market and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements. In connection with the transfer to the Nasdaq Capital Market, Conatus has been granted an additional 180-day grace period, until May 25, 2020, to regain compliance with the minimum $1.00 per share requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5810(c)(3)(A).

On April 17, 2020, Conatus received a subsequent written notice from Nasdaq, indicating that Nasdaq filed an immediately effective rule change with the SEC on April 16, 2020. Pursuant to the rule change, Nasdaq tolled the compliance period for bid price and market value of publicly held shares requirements through June 30, 2020. Accordingly, since Conatus had 39 calendar days remaining in its bid price compliance period as of April 16, 2020, it will, upon reinstatement of the price-based requirements, still have 39 calendar days from July 1, 2020, or until August 10, 2020, to regain compliance. The Company can regain compliance, either during the suspension or during the compliance period resuming after the suspension, by evidencing compliance with the price-based requirements for a minimum of 10 consecutive trading days.

If compliance cannot be demonstrated by August 10, 2020, or Conatus does not comply with the terms of this extension, the Nasdaq staff will provide written notification that Conatus’ securities will be delisted. In the event of such a notification, Conatus may appeal the Nasdaq staff’s determination to delist its securities, but there can be no assurance the Nasdaq staff would grant Conatus’ request for continued listing.

At March 31, 2020, Conatus had cash and cash equivalents of $18.0 million. Conatus believes its existing cash and cash equivalents will be sufficient to fund its operations for at least the next 12 months from the date of the filing of this Form 10-Q. To fund further operations, Conatus will need to raise additional capital. Conatus plans to continue to fund losses from operations and capital funding needs through future equity and debt financing, as well as potential collaborations or partnerships with other companies. The sale of additional equity or convertible debt could result in additional dilution to its stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict its operations. No assurances can be provided that financing will be available in the amounts Conatus needs or on terms acceptable to it, if at all. If Conatus is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Conatus engaged a financial advisor to assist in the exploration and evaluation of strategic alternatives to enhance shareholder value, including a merger, an acquisition or sale of assets or a dissolution and liquidation of the company. On January 28, 2020, Conatus, Merger Sub, and Histogen entered into a Merger Agreement, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Histogen, with Histogen continuing as Conatus’ wholly owned subsidiary and the surviving corporation of the merger.

20


 

The following table sets forth a summary of the net cash flow activity for each of the periods set forth below (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net cash used in operating activities

 

$

(2,654

)

 

$

(6,964

)

Net cash provided by investing activities

 

 

 

 

 

14,567

 

Net increase (decrease) in cash and cash equivalents

 

$

(2,654

)

 

$

7,603

 

 

Net cash used in operating activities was $2.7 million and $7.0 million for the three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020, the primary use of cash was to fund Conatus’ operations. For the three months ended March 31, 2019, the primary use of cash was to fund its operations related to the development of emricasan, as well as internally developed product candidates.

Net cash provided by investing activities was $0.0 million and $14.6 million for the three months ended March 31, 2020 and 2019, respectively, which for the three months ended March 31, 2020, consisted primarily of proceeds from maturities of marketable securities, partially offset by cash used to purchase marketable securities.

Contractual Obligations and Commitments

As of March 31, 2020, there have been no material changes outside the ordinary course of Conatus’ business to the contractual obligations it reported in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments” in Conatus’ annual report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 11, 2020.

Off-Balance Sheet Arrangements

Conatus does not have any off-balance sheet arrangements (as defined by applicable regulations of the SEC) that are reasonably likely to have a current or future material effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources.

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

 

 

ITEM 4.

CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Conatus’ management, with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness of its 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 quarterly report on Form 10-Q. Based on such evaluation, its principal executive officer and principal financial officer have concluded that, as of such date, its disclosure controls and procedures were effective.

Inherent Limitations of Disclosure Controls and Procedures and Internal Control Over Financial Reporting

Conatus’ management, including its principal executive officer and principal financial officer, does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all error 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. 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, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There has been no change in Conatus’ internal control over financial reporting during the quarter ended March 31, 2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

 

21


 

PART II. OTHER INFORMATION

 

 

ITEM 1.

LEGAL PROCEEDINGS

Conatus is currently not a party to any material legal proceedings.

 

 

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors included in “Item 1A. Risk Factors” in Conatus’ annual report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 11, 2020, other than the risk factors below.

 

Risks Related to the Merger

 

The net cash balances of Conatus and Histogen at the closing of the merger could result in their respective securityholders owning a smaller or larger percentage of the combined organization and could even result in the termination of the Merger Agreement.

The estimates of the respective ownership percentages of the Conatus and Histogen securityholders contained in this quarterly report on Form 10-Q are subject to adjustment prior to closing of the merger, including an upward adjustment to the exchange ratio to the extent that Conatus’ net cash at the Effective Time is less than $11.9 million or Histogen’s net cash at the Effective Time is more than negative $0.8 million (in each case as net cash is defined in the Merger Agreement and as adjusted based on the closing date of the merger), or a downward adjustment to the exchange ratio to the extent that Conatus’ net cash at the Effective Time is more than $12.7 million or Histogen’s net cash at the effective time of the merger is less than negative $1.6 million (in each case as net cash is defined in the Merger Agreement and adjusted based on the closing date of the merger). As a result, Conatus and Histogen stockholders could own more or less, respectively, of the combined organization based on the final net cash positions of the companies. The foregoing net cash amounts at which adjustments to the exchange ratio may be triggered reflect reductions for each company’s daily cash burn (as defined in the Merger Agreement) from January 31, 2020 through May 7, 2020, the date of the Conatus special meeting of stockholders, and will be further adjusted to reflect each company’s daily cash burn from May 7, 2020 until the closing date of the merger.

As of January 31, 2020, Conatus’ net cash was approximately $14.5 million and Histogen’s net cash was approximately zero dollars (in each case, as net cash is defined in the Merger Agreement). Assuming the closing of the merger occurs on May 7, 2020, the target range of net cash required without a resulting change in the exchange ratio would be between approximately $11.9 million and $12.7 million for Conatus, and between approximately negative $1.6 million and negative $0.8 million for Histogen. Assuming Histogen holds an amount of net cash within its net cash target range of between negative $0.8 million and negative $1.6 million, each additional $1.0 million of net cash Conatus holds prior to the closing above Conatus’ net cash target of $12.3 million, which is the mid-point of its target net cash range, would result in a downward adjustment to the exchange ratio of approximately 0.0409, which would increase the relative ownership of Conatus’ current stockholder by approximately 0.54%; and each additional $1.0 million of net cash Conatus holds prior to the closing below Conatus’ net cash target of $12.3 million would result in a upward adjustment to the exchange ratio of approximately 0.0432 which would decrease the relative ownership of Conatus’ current stockholder by approximately 0.55%. Assuming Conatus holds an amount of net cash within its net cash target range of between $11.9 million and $12.7 million, each additional $1.0 million of net cash Histogen holds prior to the closing above Histogen’s net cash target of negative $1.2 million, which is the mid-point of its target net cash range, would result in an upward adjustment to the exchange ratio of approximately 0.0147, which would increase the relative ownership of Histogen’s current stockholder by approximately 0.19%; and each $1.0 million of net cash Histogen holds prior to the closing below Histogen’s net cash target of negative $1.2 million, would result in a downward adjustment to the exchange ratio of approximately 0.0148, which would decrease the relative ownership of Histogen’s current stockholder by approximately 0.19%. For example, if, prior to the closing, Conatus’ net cash were $1.0 million above its net cash target of $12.3 million (as further adjusted for cash burn if the merger closes after May 7, 2020) and Histogen’s net cash were $1.0 million below its net cash target of negative $1.2 million (as further adjusted for cash burn if the merger closes after May 7, 2020), then the Conatus stockholders immediately prior to the merger would own approximately 26.7% of the Fully-Diluted Common Stock of Conatus following the merger, and the Histogen stockholders immediately before the merger would own approximately 73.3% of the Fully-Diluted Common Stock of Conatus following the merger.

As April 1, 2020, Conatus estimates that it will hold net cash of between $12.75 million to $13.75 million as of an assumed closing date of May 7, 2020, the date of the Conatus special meeting, and Histogen estimates that it will hold net cash of between negative $3.75 million and negative $2.75 million as of an assumed closing date of May 7, 2020, the date of the Conatus special meeting. If, as of the assumed closing date of May 7, 2020, Conatus’ net cash is $13.25 million, the midpoint of its estimated net cash range, and Histogen’s net cash is negative $3.25 million, the midpoint of its estimated net cash range, after applying an exchange ratio of 1.4063, Conatus’ stockholders immediately prior to the merger would own approximately 26.9% of the Fully-Diluted Common Stock of Conatus following the merger and Histogen’s stockholders immediately prior to the merger would own approximately 73.1% of the Fully-Diluted Common Stock of Conatus following the merger.

22


 

Additionally, Conatus is required to have net cash of at least $12.5 million at the closing of the merger, as adjusted downward by approximately $7,000, which represents Conatus’ average daily net cash burn in December 2019, for each day after January 31, 2020 until the closing date of the merger. For example, if the merger is anticipated to close on May 7, 2020 and Conatus’ net cash falls below $11.8 million, Histogen could decide not to consummate the transaction and the Merger Agreement could be terminated. As of the date of this quarterly report on Form 10-Q, Conatus expects its net cash to be above the net cash required by the Merger Agreement at closing.

 

Risks Related to Ownership of Conatus’ Common Stock

The amended and restated certificate of incorporation of Conatus provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between Conatus and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with Conatus or its directors, officers or employees.

The amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on its behalf under Delaware statutory or common law, including any action asserting a breach of fiduciary duty, any action asserting a claim against Conatus arising pursuant to the Delaware General Corporation Law, its amended and restated certificate of incorporation, or any action asserting a claim against it that is governed by the internal affairs doctrine; provided, that, this provision does not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. The choice of forum provisions in the amended and restated certificate of incorporation may limit the ability of a stockholder to bring a claim in a judicial forum that it finds favorable for disputes with Conatus or its directors, officers or other employees, which may discourage such lawsuits against Conatus and its directors, officers and other employees. By agreeing to these provisions, however, stockholders will not be deemed to have waived Conatus’ compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions in Conatus’ amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, Conatus may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect its business and financial condition.

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Use of Proceeds

None.

Issuer Purchases of Equity Securities

None.

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

 

 

ITEM 5.

OTHER INFORMATION

None.

 

 

ITEM 6.

EXHIBITS

A list of exhibits is set forth on the Exhibit Index immediately preceding the signature page of this quarterly report on Form 10-Q and is incorporated herein by reference.

 

23


 

EXHIBIT INDEX

 

Exhibit

Number

 

Description 

 

 

 

    2.1*(1)

 

Agreement and Plan of Merger and Reorganization, dated as of January 28, 2020, by and among the Registrant, Chinook Merger Sub, Inc. and Histogen Inc.

 

 

 

    2.2(1)

 

Support Agreement, dated January 28, 2020 by and among Conatus Pharmaceuticals Inc., Histogen Inc. and certain stockholders of Conatus Pharmaceuticals Inc.

 

 

 

    2.3(1)

 

Support Agreement, dated January 28, 2020, by and among Conatus Pharmaceuticals Inc., Histogen Inc. and certain stockholders of Histogen Inc.

 

 

 

    3.1(2)

 

Amended and Restated Certificate of Incorporation

 

 

 

    3.2(2)

 

Amended and Restated Bylaws

 

 

 

    4.1(3)

 

Specimen Common Stock Certificate

 

 

 

    4.2(4)

 

First Amended and Restated Investor Rights Agreement, dated February 9, 2011

 

 

 

    4.3(3)

 

Form of Warrant issued to lenders under the Loan and Security Agreement, dated July 3, 2013, by and among the Registrant, Oxford Finance LLC, Silicon Valley Bank and the other lenders party thereto

 

 

 

  10.1(5)

 

Amendment to Employment Agreement, dated January 27, 2020, by and between Steven J. Mento, Ph.D. and the Registrant

 

 

 

  10.2(5)

 

Amendment to Employment Agreement, dated January 27, 2020, by and between Alfred P. Spada, Ph.D. and the Registrant

 

 

 

  10.3(5)

 

Amendment to Employment Agreement, dated January 27, 2020, by and between Keith W. Marshall, Ph.D. M.B.A. and the Registrant

 

 

 

  10.4(6)

 

First Amendment to Sublease Agreement, dated March 30, 2020, by and between Conatus Pharmaceuticals Inc. and Pacific Real Estate Partnership

 

 

 

  31.1

 

Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended

 

 

 

  31.2

 

Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended

 

 

 

  32.1**

 

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.2**

 

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

(1)

Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on January 28, 2020.

(2)

Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on August 1, 2013.

(3)

Incorporated by reference to Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-189305), filed with the SEC on July 8, 2013.

(4)

Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-189305), filed with the SEC on June 14, 2013.

(5)

Incorporated by reference to the Registrant’s Registration Statement on Form S-4 (Registration No. 333-236332), filed with the SEC on February 7, 2020.

(6)

Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 30, 2020.

*

The schedules to the agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished to the SEC upon request.

**

This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by

24


 

reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

25


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

CONATUS PHARMACEUTICALS INC.

 

 

 

Date: May 1, 2020

 

/s/ Steven J. Mento, Ph.D. 

 

 

Steven J. Mento, Ph.D.

 

 

President and Chief Executive Officer

 

 

(principal executive officer)

 

 

 

Date: May 1, 2020

 

/s/ Keith W. Marshall, Ph.D. 

 

 

Keith W. Marshall, Ph.D.

 

 

Executive Vice President, Chief Operating Officer and Chief Financial Officer

 

 

(principal financial officer)

 

26

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