Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, (“Quarterly Report”), and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), on March 4, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. We undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise. You should read the “Risk Factors” section included in our Annual Report on Form 10-K filed with the SEC on March 4, 2021 and our subsequently filed Quarterly Reports on Form 10-Q for the periods ended March 31, 2021 and June 30, 2021, respectively, in addition to the "Risk Factors" and “Forward-Looking Statements” sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide technology platform. Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin (“FXN”), an essential protein, to the mitochondria of patients with Friedreich’s ataxia ("FA"). FA is a rare, progressive, and fatal disease in which patients are unable to produce enough FXN due to a genetic abnormality. There is currently no effective therapy for FA.
We have received orphan drug designation, fast track designation and rare pediatric disease designation, from the U.S. Food and Drug Administration (the "FDA") for CTI‑1601. In addition, we received orphan drug designation for CTI-1601 from the European Commission and a Priority Medicines ("PRIME") designation from the European Medicines Agency ("EMA"). The receipt of such designations or positive opinions may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA or EMA procedures and does not assure ultimate approval by the FDA or EMA.
Our cell penetrating peptide technology platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases. We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity.
CTI-1601 Program Update
On May 20, 2021 we announced that we had received an EMA PRIME designation for CTI-1601 in FA. Through PRIME, the EMA offers early and proactive support to medicine developers to optimize the generation of robust data on a medicine’s benefits and risks and enable accelerated assessment of medicines applications so that these medicines can reach patients earlier. The PRIME designation was based on both pre-clinical data as well as tolerability data from the CTI-1601 Phase 1 program in patients with FA.
In May 2021, we reported positive topline data from our Phase 1 FA program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021. Data from these trials demonstrate proof-of-concept by showing that daily subcutaneous injections of CTI-1601 for up to 13 days resulted in dose-dependent increases in FXN levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets). FXN levels achieved in peripheral tissues (buccal cells) following daily 50 mg and 100 mg subcutaneous injections of CTI-1601 were at or in excess of FXN levels that would be expected in phenotypically normal heterozygous carriers. There were no serious adverse events ("SAEs") associated with either the MAD or SAD trials.
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On May 25, 2021 the FDA placed a clinical hold on the CTI-1601 clinical program following our notification to the FDA of mortalities which occurred at the highest dose levels in an ongoing 180-day non-human primate ("NHP") toxicology study, which is designed to support extended dosing of patients with CTI-1601. In the clinical hold letter, the FDA stated that it needs a full study report from the ongoing NHP study and that we may not initiate additional interventional clinical trials until we have submitted the report and received notification from the FDA that additional clinical trials may commence. At the time of the FDA clinical hold, we had no interventional clinical trials with patients enrolled or enrolling and as of the date of this report, do not have interventional clinical trials with patients enrolled or enrolling.
In July 2021, we completed dosing in the NHP toxicology study discussed above. We are currently collecting and analyzing data from the study. There is no way to predict the timing of the FDA’s response (which we anticipate will not be received prior to the first quarter of 2022) or whether the FDA will require additional data or testing before lifting the clinical hold on CTI-1601in full or in part. While we expect to initiate our Jive open-label extension and pediatric MAD trials in the first half of 2022, the timing of these trials could be delayed or modified depending on the results of the NHP toxicology study and/or the FDA's response to these results and any other data we will provide in our complete response to the clinical hold.
Financial Overview and Liquidity
Since our inception, we have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, and providing general and administrative support for such operations.
We have never generated any revenue and have, to date, incurred net losses. We incurred net losses of approximately $41.5 million and $28.3 million for the nine months ended September 30, 2021, and 2020, respectively. As of September 30, 2021, we had an accumulated deficit of $107.1 million. Our losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with our operations. We expect to incur significant expenses and operating losses for the foreseeable future.
We expect to continue to incur expenses in connection with our ongoing activities, if and as we:
continue to advance the development of CTI-1601 through additional clinical trials;
seek to identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates;
seek to obtain regulatory approvals for our product candidates;
identify, acquire or in-license other product candidates and technologies;
maintain, leverage, and expand our intellectual property portfolio; and
expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.
As a result, we will need additional financing to support our continuing operations. Until such time that we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies or product candidates. In addition, we may never successfully complete development of any of our product candidates, obtain adequate patent protection for our technology, obtain necessary regulatory approvals for our product candidates, or achieve commercial viability for any approved product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability and may never do so.
At September 30, 2021, we had cash, cash equivalents and marketable debt securities totaling $78.0 million. In July 2021, we sold 2,342,720 shares of common stock for net proceeds of $19.9 million under the ATM
25
Agreement (as defined below) (See “Liquidity and Capital Resources and "Operating Capital Requirements”). We believe that, based on our current operating plan, our cash, cash equivalents and marketable debt securities as of the filing date of this Quarterly Report on Form 10-Q will enable us to fund operations for at least twelve months from the issuance of our interim financial statements for the quarterly period ended September 30, 2021.
COVID-19 Update
In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. The pandemic resulted in the temporary stoppage of our CTI-1601 Phase 1 clinical trials in patients with Friedreich’s ataxia in March 2020. In July 2020, we resumed these clinical trials, and have since completed dosing of both our SAD and MAD clinical trials. Vaccines manufactured by Moderna, Pfizer and Johnson & Johnson were introduced late in the fourth quarter of 2020 and became widely available by the end of the first quarter of 2021. While the vaccines have proven effective in reducing the severity and mortality of COVID-19 including the variants that have evolved to date, the overall vaccination rate in the United States has not reached the level required for herd immunity in some states, particularly in some regions of the country. The incidence of variants of COVID-19, has been increasing particularly among unvaccinated individuals and the recent delta variant is proving to be more easily spread than earlier variants. The low vaccination rate, the spread of the variants, the evolution of additional mutations against which the current vaccines may prove ineffective could again result in major disruptions to businesses and markets worldwide. Furthermore, the incidence of "breakthrough" infections even among vaccinated individuals have been increasing resulting in the need for booster doses which could make COVID-19 a long-term infectious disease concern. Our business, results of operations, financial condition and cash flows could be materially and adversely affected. Specifically, we could experience additional delays in future clinical trial timelines as a result of additional travel and hospital restrictions related to the COVID-19 pandemic which may be imposed or could experience supply shortages or manufacturer shutdowns impacting the manufacture of drug substance or drug product which could also impact clinical trial timelines. The financial statements do not reflect any adjustments as a result of the pandemic.
Merger with Zafgen
On December 17, 2019, we entered into an Agreement and Plan of Merger, (the “Merger Agreement”) with Zordich Merger Sub, Inc. (“Merger Sub”), our wholly owned subsidiary, Chondrial Therapeutics Inc. (“Chondrial”), and Chondrial Holding, LLC (“Holdings”) pursuant to which the Merger Sub merged with and into Chondrial, with Chondrial surviving the merger as our wholly owned subsidiary (the “Merger”). The Merger was completed on May 28, 2020 pursuant to the terms of the Merger Agreement.
Pursuant to the terms of the Merger Agreement, upon closing of the Merger, all of Chondrial’s outstanding common stock was exchanged for our common stock and all outstanding options exercisable for units of Holdings were exchanged for options to purchase our common stock. In addition, immediately prior to the closing of the Merger, we effected a 1 for 12 reverse stock split and changed our name from Zafgen, Inc. to Larimar Therapeutics, Inc. Following the Merger, the business conducted by Chondrial became our primary business.
The business combination was accounted for as a reverse acquisition in accordance with U.S. generally accepted accounting principles (“GAAP”). Under this method of accounting, Chondrial was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the merger: (i) former Chondrial stockholders owned a substantial majority of the voting rights in the combined company, (ii) the majority of the board of directors of the combined company was composed of directors designated by Chondrial under the terms of the Merger Agreement and (iii) existing members of Chondrial management became the management of the combined company. Accordingly, for accounting purposes, the business combination was treated as the equivalent of Chondrial issuing stock to acquire Zafgen’s net assets. As a result, as of the closing date of the Merger, Zafgen’s net assets were recorded at their acquisition-date fair values, which were then adjusted for the difference between the purchase price and the fair value of the assets acquired, in the financial statements of Chondrial and the reported operating results prior to the business combination are those of Chondrial. As the Merger has been accounted for as an asset acquisition, goodwill has not been recorded within the condensed combined balance sheet.
Private Placement
On May 28, 2020, we entered into a Securities Purchase Agreement with certain accredited investors for the sale by us in a private placement (the "Private Placement") of 6,105,359 shares of our common stock (the “Private Placement Shares”), and pre-funded warrants to purchase an aggregate of 628,403 shares of our common stock (the
26
“Pre-funded Warrants”). The Pre-Funded Warrants were immediately exercisable at an exercise price for $0.01 and are exercisable indefinitely. As of September 30, 2021, none of these Pre-Funded Warrants have been exercised.
The Private Placement closed on June 1, 2020. The aggregate gross proceeds for the issuance and sale of the Private Placement Shares and Pre-Funded common stock Warrants were $80.0 million and, after deducting certain of our expenses, the net proceeds we received in the Private Placement were $75.4 million. We are using the net proceeds from the Private Placement for research and development of our product candidates, working capital and general corporate purposes.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales, and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts result in clinical success and regulatory approval or collaboration agreements with third parties for our product candidates, we may generate revenue from those product candidates or collaborations.
Operating Expenses
The majority of our operating expenses since inception have consisted primarily of research and development activities, and general and administrative costs.
Research and Development Expenses
Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred. Research and development expenses consist primarily of:
third-party contract costs relating to research, formulation, manufacturing, non-clinical studies, and clinical trial activities;
employee related costs, including salaries, benefits and stock-based compensation expenses for employees engaged in scientific research and development functions;
external costs of outside consultants and vendors;
payments made under our third-party licensing agreements;
sponsored research agreements;
laboratory consumables; and
allocated facility-related costs.
Costs for certain activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators. Research and development activities are central to our business. We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials. As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of CTI-1601 or any other product candidates we develop. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of CTI-1601 or any other product candidates we develop will depend on a variety of factors, including:
the scope, rate of progress and expense of clinical trials and other research and development activities, including the ongoing impact of COVID-19 on these activities;
clinical trial results;
uncertainties in clinical trial enrollment rate or design;
27
significant and changing government regulation;
the timing and receipt of any regulatory approvals;
the influence of the FDA’s or other regulatory authority’s on our clinical trial design and timing;
establishing manufacturing capabilities or making arrangements with third-party manufacturers and risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;
the impact of the on-going COVID-19 pandemic including the mutations of the original virus that may prove more contagious and deadly;
our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates; and
our ability to recruit and retain key research and development personnel.
A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, consisting of salaries, related benefits and stock-based compensation, costs related to our executive, finance, information technology, and costs related to other administrative functions. General and administrative expenses also include insurance expenses and professional fees for auditing, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property. We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our condensed consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate these estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
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Research and Development Expenses
As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our accrued research and development expenses and evaluate payments made to vendors in advance of actual work activities being performed. This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our condensed consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
CROs, in connection with clinical trials;
vendors in connection with non-clinical development activities;
contract manufacturing organizations in connection with the production of non-clinical and clinical trial materials; and
vendors related to product candidate manufacturing, development, and distribution of clinical supplies.
We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs or CMOs that conduct and manage clinical trials or manufacture clinical trial material on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense, non-clinical expense, or manufacturing activities. Payments under some of these contracts depend on factors such as the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. In accruing CMO costs, we estimate the time period that manufacturing will be completed, the achievement of milestones and the percentage of completion of each specific CMO agreement. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us recognizing adjustments in future periods as additional information becomes available.
Stock-Based Compensation
We measure all stock-based awards granted to employees, non-employee consultants and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We account for forfeitures as they occur.
We classify stock-based compensation expense in our condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock. Therefore, we estimate our expected common stock price volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until we have adequate historical data regarding the volatility of our own traded stock price. The expected term of our stock options have been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.
29
Results of Operations
Comparison of three months ended September 30, 2021 and 2020
The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
2021
|
|
|
2020
|
|
|
(Decrease)
|
|
|
|
|
(in thousands)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
14,028
|
|
|
$
|
6,919
|
|
|
$
|
7,109
|
|
|
General and administrative
|
|
|
2,702
|
|
|
|
3,416
|
|
|
|
(714
|
)
|
|
Total operating expenses
|
|
|
16,730
|
|
|
|
10,335
|
|
|
|
6,395
|
|
|
Loss from operations
|
|
|
(16,730
|
)
|
|
|
(10,335
|
)
|
|
|
(6,395
|
)
|
|
Other income (expense), net
|
|
|
(75
|
)
|
|
|
61
|
|
|
|
(136
|
)
|
|
Net loss
|
|
$
|
(16,805
|
)
|
|
$
|
(10,274
|
)
|
|
$
|
(6,531
|
)
|
Research and development expenses
Research and development expenses for the three months ended September 30, 2021 increased $7.1 million compared to the three months ended September 30, 2020. The increase in research and development expenses compared to the prior year period was primarily driven by higher clinical supply manufacturing costs of $6.4 million, higher non-clinical and internal laboratory costs of $1.3 million, an increase of $0.3 million in personnel related costs due to headcount additions in our research and development functions, and an increase of $0.3 million in stock-based compensation expense associated with stock option grants made in the second half of 2020 and thus far in 2021, partially offset by a decrease of $1.4 million in clinical trial costs.
General and administrative expenses
General and administrative expenses for the three months ended September 30, 2021 decreased $0.7 million compared to the three months ended September 30, 2020. The decrease in general and administrative expenses as compared to the prior year period was primarily driven by a decrease of $1.1 million in professional fees primarily associated with accounting, legal and consulting fees, partially offset by an increase of $0.8 million in stock-based compensation expense associated with stock option grants made in the second half of 2020 and thus far in 2021. General and administrative expenses for the third quarter of 2020 included certain costs related to the Reverse Merger discussed above.
Results of Operations
Comparison of nine months ended September 30, 2021 and 2020
The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
2021
|
|
|
2020
|
|
|
(Decrease)
|
|
|
|
|
(in thousands)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
32,104
|
|
|
$
|
20,833
|
|
|
$
|
11,271
|
|
|
General and administrative
|
|
|
9,275
|
|
|
|
7,575
|
|
|
|
1,700
|
|
|
Total operating expenses
|
|
|
41,379
|
|
|
|
28,408
|
|
|
|
12,971
|
|
|
Loss from operations
|
|
|
(41,379
|
)
|
|
|
(28,408
|
)
|
|
|
(12,971
|
)
|
|
Other income (expense), net
|
|
|
(123
|
)
|
|
|
130
|
|
|
|
(253
|
)
|
|
Net loss
|
|
$
|
(41,502
|
)
|
|
$
|
(28,278
|
)
|
|
$
|
(13,224
|
)
|
30
Research and development expenses
Research and development expenses for the nine months ended September 30, 2021 increased $11.3 million compared to the nine months ended September 30, 2020. The increase in research and development expenses compared to the prior year period was primarily driven by higher clinical supply manufacturing costs of $4.5 million, higher non-clinical and internal laboratory costs of $2.9 million, an increase of $1.7 million in personnel related costs due to increased headcount in our research and development functions, an increase of $1.1 million in stock-based compensation expense associated with stock option grants made in the second half of 2020 and thus far in 2021, and an increase of $0.9 million in clinical trial costs.
General and administrative expenses
General and administrative expenses for the nine months ended September 30, 2021 increased $1.7 million compared to the nine months ended September 30, 2020. The increase in general and administrative expenses as compared to the prior year period was primarily driven by an increase of $1.8 million in stock-based compensation expense associated with stock option grants made in the second half of 2020 and thus far in 2021, and an increase of $1.2 million in costs required to function as a public company (nine months as a publicly-held company in 2021 compared to four months as a publicly-held company in 2020), an increase of $0.5 million in personnel related costs due to increased headcount, partially offset by a decrease of $1.4 million in professional fees primarily associated with accounting, legal and consulting fees. General and administrative expenses for the third quarter of 2020 included certain costs related to the Reverse Merger discussed above.
Liquidity and Capital Resources
Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Net cash used in operating activities
|
|
$
|
(34,187
|
)
|
|
$
|
(32,342
|
)
|
|
Net cash provided by investing activities
|
|
|
17,679
|
|
|
|
40,635
|
|
|
Net cash provided by financing activities
|
|
|
19,885
|
|
|
|
93,345
|
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
$
|
3,377
|
|
|
$
|
101,638
|
|
Net cash used in operating activities
During the nine months ended September 30, 2021, operating activities used $34.2 million of cash, resulting from our net loss of $41.5 million, adjusted for noncash expenses of $4.2 million. Our net loss was primarily attributable to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above. Noncash expenses primarily include stock-based compensation expense. For the nine months ended September 30, 2021 the change in operating assets and liabilities resulted in a source of cash of $3.1 million.
During the nine months ended September 30, 2020, operating activities used $32.3 million of cash, resulting from our net loss of $28.3 million, adjusted for noncash expenses of $1.3 million and changes in our operating assets and liabilities of $5.3 million. Noncash expenses primarily include stock-based compensation expense. The change in operating assets and liabilities was primarily due to a decrease in accounts payable following the payment of Merger-related expenses and certain other expenses that were accrued as of December 31, 2019.
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Net cash provided by investing activities
During the nine months ended September 30, 2021, investing activities provided $17.7 million of cash, resulting from a $26.3 million increase from maturities of marketable debt securities, which was partially offset by $1.7 million in purchases of new marketable debt securities.
During the nine months ended September 30, 2020, investing activities used $40.6 million of cash, resulting from a $41.9 million increase from our Merger, which was offset by transaction costs associated with the Merger of $1.2 million and $0.1 million from the purchase of equipment.
Net cash provided by financing activities
During the nine months ended September 30, 2021, financing activities provided $19.9 million of net cash, from sale of common stock under the ATM Agreement, after issuance costs.
During the nine months ended September 30, 2020, financing activities provided $93.3 million of net cash, consisting of proceeds from the sale of common stock and prefunded common stock warrants, after issuance costs, from the Private Placement discussed above of $75.4 million and contributions from Holdings of $18.0 million.
Operating Capital Requirements
CTI-1601 is currently in clinical development. We recently completed the dosing of two phase 1 clinical trials and, subject to resolution of the clinical hold with the FDA, and expect to initiate additional interventional studies of CTI-1601 in Friedreich ataxia in the first half of 2022; therefore, we expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that we will continue to incur expenses, if and as we seek to:
advance the development of CTI-1601 through additional clinical trials, including the cost of clinical materials as well as manufacturing scale up costs;
identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates;
obtain regulatory approvals for our product candidates;
identify, acquire or in-license other product candidates and technologies;
maintain, leverage, and expand our intellectual property portfolio; and
expand our operational, financial, management and commercial systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.
We expect to continue to generate operating losses for the foreseeable future. We completed the Merger on May 28, 2020 which, upon closing, provided cash, cash equivalents, restricted cash, and marketable debt securities of $42.9 million concurrent with the Private Placement which provided additional net proceeds of $75.4 million. In August 2020, we entered into an Equity Distribution Agreement (the "ATM Agreement") with an investment bank, in connection with the establishment of an “at-the-market” offering program under which we can sell up to an aggregate of $50,000,000 of shares of our common stock from time to time through this investment bank, as sales agent. In July 2021, we sold 2,342,720 shares under the ATM Agreement for net proceeds of $19.9 million. As of September 30, 2021, 2,354,244 shares of common stock have been sold under the Agreement for net proceeds of $20.1 million. As of September 30, 2021 and the date of this report, $29.2 million of common stock remains available for sale under the ATM Agreement.
We believe that, based on our current operating plan, our cash, cash equivalents and marketable debt securities as of the filing date of this Quarterly Report on Form 10-Q, will enable us to fund operations for at least twelve months from the issuance of our interim financial statements for the quarterly period ended September 30, 2021.
Until such time, if ever, as we can generate substantial revenue, we expect to seek additional funding through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances, and licensing arrangements. We may not be able to obtain financing on acceptable terms, or at all, and we may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or our existing stockholders’ rights. If we are unable to obtain additional funding, we will be forced to delay, reduce, or eliminate some or all of our
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research and development programs, product portfolio expansion or commercialization efforts, which would adversely affect our business, or we may be unable to continue operations.
Off-Balance Sheet Arrangements
During the periods presented we did not have, and we currently do not have, any off-balance sheet arrangements, as defined under applicable SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.
Recently Issued Accounting Pronouncements
Please read Note 2 to our condensed consolidated financial statements included in Part I of Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.
Other Company Information
None.
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