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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

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: 001-38981

 

Mirum Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

83-1281555

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

950 Tower Lane, Suite 1050, Foster City, California

94404

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 667-4085

 

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

 

MIRM

 

The Nasdaq Global 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 August 1, 2022 the registrant had 32,751,748 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

90

Item 3.

Defaults Upon Senior Securities

90

Item 4.

Mine Safety Disclosures

90

Item 5.

Other Information

90

Item 6.

Exhibits

91

Signatures

92

 

i


 

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

 

An investment in shares of our common stock involves a high degree of risk. Below is a list of the more significant risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part I, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.

LIVMARLI® (maralixibat) oral solution (“Livmarli”) is our only U.S. Food and Drug Administration (“FDA”) approved product and the success of our business depends, in part, on our ability to market and sell Livmarli profitably.
As a company we currently have limited marketing and sales experience. If we are unable to adequately maintain and scale our marketing and sales capabilities or enter into or maintain rights pursuant to agreements with third parties to market and sell our products, we may not be able to generate viable product revenues. Even if we adequately establish and further maintain such capabilities, market acceptance of our products may be lower than expected.
Livmarli may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.
We rely completely on third parties to supply, manufacture and distribute drug supplies for Livmarli, including certain sole-source suppliers and manufacturers.
We have a very limited operating history, and we have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
Our business depends, in part, on the success of our product candidates, each of which requires significant clinical testing before we can seek regulatory approval and potentially launch commercial sales.
We have encountered and may continue to encounter delays and difficulties enrolling patients in our clinical trials, and as a result, our clinical development activities could be delayed or otherwise adversely affected.
Our product candidates are subject to extensive regulation and compliance, which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.
Our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates, which could prevent or delay regulatory approval and commercialization.
Clinical drug development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results.
Any delays in the commencement or completion, or termination or suspension, of our clinical trials could result in increased costs for us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.
Our applications for marketing authorization with regulatory authorities may not be accepted or may require additional studies, regulatory actions, or manufacturing requirements to be completed before marketing authorization is granted.
Even if we obtain regulatory approval for our product candidates, our product candidates may not gain market acceptance among physicians, patients, tertiary care centers, transplant centers and others in the medical community.
We face significant competition from other biotechnology and pharmaceutical companies with products that may directly or indirectly compete with ours, and our operating results will suffer if we fail to compete effectively.
We will need substantial additional financing to continue our commercialization efforts for Livmarli, develop our product candidates and implement our operating plans. If we fail to obtain additional financing, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.
If we are unable to obtain and maintain sufficient intellectual property protection for Livmarli and our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize Livmarli and our other product candidates, if approved, may be adversely affected.

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,268

 

 

$

31,340

 

Short-term investments

 

 

69,685

 

 

 

125,201

 

Accounts receivable

 

 

13,990

 

 

 

3,267

 

Inventory

 

 

4,524

 

 

 

1,513

 

Prepaid expenses and other current assets

 

 

3,778

 

 

 

5,271

 

Total current assets

 

 

147,245

 

 

 

166,592

 

Restricted cash equivalents

 

 

100,000

 

 

 

100,000

 

Long-term investments

 

 

 

 

 

4,983

 

Property and equipment, net

 

 

832

 

 

 

981

 

Operating lease right-of-use assets

 

 

1,362

 

 

 

1,569

 

Intangible assets, net

 

 

46,072

 

 

 

18,740

 

Other assets

 

 

1,722

 

 

 

1,786

 

Total assets

 

$

297,233

 

 

$

294,651

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

8,119

 

 

$

9,166

 

Accrued expenses

 

 

34,539

 

 

 

30,723

 

Operating lease liabilities

 

 

752

 

 

 

711

 

Derivative liability

 

 

1,764

 

 

 

1,996

 

Total current liabilities

 

 

45,174

 

 

 

42,596

 

Revenue interest liability, net

 

 

135,716

 

 

 

129,923

 

Operating lease liabilities, noncurrent

 

 

1,517

 

 

 

1,903

 

Other liabilities

 

 

4,139

 

 

 

17

 

Total liabilities

 

 

186,546

 

 

 

174,439

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized,
   and
zero shares issued and outstanding as of June 30, 2022
   and December 31, 2021, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares
   authorized;
32,744,923 shares issued and 32,689,255 shares outstanding,
   excluding
55,668 shares subject to repurchase as of June 30, 2022;
   and
30,705,060 shares issued and 30,582,596 shares outstanding,
   excluding
122,464 shares subject to repurchase as of December 31, 2021

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

431,573

 

 

 

377,403

 

Accumulated deficit

 

 

(320,687

)

 

 

(257,159

)

Accumulated other comprehensive loss

 

 

(202

)

 

 

(35

)

Total stockholders’ equity

 

 

110,687

 

 

 

120,212

 

Total liabilities and stockholders’ equity

 

$

297,233

 

 

$

294,651

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

17,484

 

 

$

 

 

$

28,376

 

 

$

 

License revenue

 

 

 

 

 

11,000

 

 

 

2,000

 

 

 

11,000

 

Total revenue

 

 

17,484

 

 

 

11,000

 

 

 

30,376

 

 

 

11,000

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

2,524

 

 

 

 

 

 

4,948

 

 

 

 

Research and development

 

 

25,432

 

 

 

35,048

 

 

 

49,520

 

 

 

73,182

 

Selling, general and administrative

 

 

20,969

 

 

 

13,353

 

 

 

40,085

 

 

 

22,832

 

Total operating expenses

 

 

48,925

 

 

 

48,401

 

 

 

94,553

 

 

 

96,014

 

Loss from operations

 

 

(31,441

)

 

 

(37,401

)

 

 

(64,177

)

 

 

(85,014

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

293

 

 

 

80

 

 

 

362

 

 

 

229

 

Interest expense

 

 

(3,875

)

 

 

(4,776

)

 

 

(7,649

)

 

 

(8,157

)

Change in fair value of derivative liability

 

 

232

 

 

 

(1,272

)

 

 

232

 

 

 

(938

)

Other income (expense), net

 

 

1,299

 

 

 

(514

)

 

 

1,145

 

 

 

(530

)

Net loss before income taxes

 

 

(33,492

)

 

 

(43,883

)

 

 

(70,087

)

 

 

(94,410

)

(Benefit) provision for income taxes

 

 

(6,570

)

 

 

11

 

 

 

(6,559

)

 

 

16

 

Net loss

 

$

(26,922

)

 

$

(43,894

)

 

$

(63,528

)

 

$

(94,426

)

Net loss per share, basic and diluted

 

$

(0.84

)

 

$

(1.45

)

 

$

(2.00

)

 

$

(3.13

)

Weighted-average shares of common stock outstanding, basic

 

 

32,164,174

 

 

 

30,274,749

 

 

 

31,732,596

 

 

 

30,190,352

 

Weighted-average shares of common stock outstanding, diluted

 

 

32,179,171

 

 

 

30,274,749

 

 

 

31,740,136

 

 

 

30,190,352

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(26,922

)

 

$

(43,894

)

 

$

(63,528

)

 

$

(94,426

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale investments

 

 

(22

)

 

 

(16

)

 

 

(115

)

 

 

(90

)

Cumulative translation adjustments

 

 

(49

)

 

 

3

 

 

 

(52

)

 

 

(6

)

Comprehensive loss

 

$

(26,993

)

 

$

(43,907

)

 

$

(63,695

)

 

$

(94,522

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance as of December 31, 2021

 

 

30,582,596

 

 

$

3

 

 

$

377,403

 

 

$

(257,159

)

 

$

(35

)

 

$

120,212

 

Issuance of common stock in connection with
   equity award plans

 

 

100,951

 

 

 

 

 

 

1,477

 

 

 

 

 

 

 

 

 

1,477

 

Issuance of common stock in at-the-market offerings,
   net of issuance costs of $
601

 

 

995,897

 

 

 

 

 

 

17,384

 

 

 

 

 

 

 

 

 

17,384

 

Restricted common stock vested in the period

 

 

33,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

6,561

 

 

 

 

 

 

 

 

 

6,561

 

Net loss

 

 

 

 

 

 

 

 

 

 

(36,606

)

 

 

 

 

 

(36,606

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(96

)

 

 

(96

)

Balance as of March 31, 2022

 

 

31,712,842

 

 

$

3

 

 

$

402,825

 

 

$

(293,765

)

 

$

(131

)

 

$

108,932

 

Issuance of common stock in connection with asset acquisition

 

 

609,305

 

 

 

 

 

 

15,585

 

 

 

 

 

 

 

 

 

15,585

 

Issuance of common stock in connection with
   equity award plans

 

 

92,593

 

 

 

 

 

 

1,408

 

 

 

 

 

 

 

 

 

1,408

 

Issuance of common stock in at-the-market offerings,
   net of issuance costs of $
184

 

 

165,018

 

 

 

 

 

 

3,905

 

 

 

 

 

 

 

 

 

3,905

 

Restricted common stock vested in the period

 

 

33,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in connection with employee stock purchase plan

 

 

76,099

 

 

 

 

 

 

1,032

 

 

 

 

 

 

 

 

 

1,032

 

Stock-based compensation

 

 

 

 

 

 

 

 

6,818

 

 

 

 

 

 

 

 

 

6,818

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(26,922

)

 

 

 

 

 

(26,922

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(71

)

 

 

(71

)

Balance as of June 30, 2022

 

 

32,689,255

 

 

$

3

 

 

$

431,573

 

 

$

(320,687

)

 

$

(202

)

 

$

110,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance as of December 31, 2020

 

 

29,776,544

 

 

$

3

 

 

$

345,180

 

 

$

(173,171

)

 

$

83

 

 

$

172,095

 

Issuance of common stock in connection with
   common stock option exercises

 

 

12,535

 

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Issuance of common stock in public offering,
   net of issuance costs of $
476

 

 

375,654

 

 

 

 

 

 

7,038

 

 

 

 

 

 

 

 

 

7,038

 

Restricted common stock vested in the period

 

 

33,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,285

 

 

 

 

 

 

 

 

 

5,285

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(50,532

)

 

 

 

 

 

(50,532

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(83

)

 

 

(83

)

Balance as of March 31, 2021

 

 

30,198,129

 

 

$

3

 

 

$

357,583

 

 

$

(223,703

)

 

$

 

 

$

133,883

 

Issuance of common stock in connection with
   common stock option exercises

 

 

41,668

 

 

 

 

 

 

295

 

 

 

 

 

 

 

 

 

295

 

Restricted common stock vested in the period

 

 

33,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in connection with employee stock purchase plan

 

 

43,976

 

 

 

 

 

 

643

 

 

 

 

 

 

 

 

 

643

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,823

 

 

 

 

 

 

 

 

 

4,823

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(43,894

)

 

 

 

 

 

(43,894

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(13

)

Balance as of June 30, 2021

 

 

30,317,173

 

 

$

3

 

 

$

363,344

 

 

$

(267,597

)

 

$

(13

)

 

$

95,737

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

Mirum Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(63,528

)

 

$

(94,426

)

Reconciliation of net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

13,379

 

 

 

10,108

 

Depreciation and amortization

 

 

941

 

 

 

169

 

Amortization of operating lease right-of-use assets

 

 

207

 

 

 

191

 

Net accretion of discounts on investments

 

 

(103

)

 

 

(22

)

Non-cash interest expense related to revenue interest liability

 

 

7,649

 

 

 

8,157

 

Change in fair value of derivative liability

 

 

(232

)

 

 

938

 

Change in fair value of contingent liabilities associated with acquisition

 

 

(1,299

)

 

 

 

Deferred income taxes associated with an acquisition

 

 

(6,580

)

 

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(10,723

)

 

 

 

Prepaid expenses and other current assets

 

 

1,493

 

 

 

103

 

Inventory

 

 

(1,247

)

 

 

 

Other assets

 

 

(272

)

 

 

(162

)

Accounts payable, accrued expenses and other liabilities

 

 

819

 

 

 

9,856

 

Operating lease liabilities

 

 

(345

)

 

 

(321

)

Net cash used in operating activities

 

 

(59,841

)

 

 

(65,409

)

Investing activities

 

 

 

 

 

 

Purchase of investments

 

 

(14,812

)

 

 

(129,336

)

Proceeds from maturities of investments

 

 

75,300

 

 

 

70,100

 

Proceeds from paydown of investments

 

 

 

 

 

2,000

 

Purchase of property and equipment

 

 

(17

)

 

 

(3

)

Net cash provided by (used in) investing activities

 

 

60,471

 

 

 

(57,239

)

Financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock in at-the-market offerings, net of issuance costs

 

 

21,289

 

 

 

 

Proceeds from issuance of common stock in public offerings, net of issuance costs

 

 

 

 

 

6,914

 

Proceeds from issuance of common stock pursuant to equity award plans

 

 

3,917

 

 

 

1,018

 

Proceeds from revenue interest liability, net of issuance costs

 

 

 

 

 

64,574

 

Payments on revenue interest liability

 

 

(1,856

)

 

 

 

Net cash provided by financing activities

 

 

23,350

 

 

 

72,506

 

Effect of exchange rate on cash, cash equivalents and restricted cash equivalents

 

 

(52

)

 

 

(6

)

Net increase (decrease) in cash, cash equivalents and restricted cash equivalents

 

 

23,928

 

 

 

(50,148

)

Cash, cash equivalents and restricted cash equivalents at beginning of period

 

 

131,340

 

 

 

142,086

 

Cash, cash equivalents and restricted cash equivalents at end of period

 

$

155,268

 

 

$

91,938

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Inventory purchases included in accrued liabilities

 

$

1,764

 

 

$

 

Transaction costs from acquisition in accrued liabilities

 

$

176

 

 

$

 

Operating cash flows paid for operating lease

 

$

438

 

 

$

426

 

Issuance of common stock in exchange for acquired intangible assets

 

$

15,585

 

 

$

 

Contingent milestone liability for common stock issuance for acquired intangible assets

 

$

4,600

 

 

$

 

Indemnification Holdback liability in exchange for acquired intangible assets

 

$

831

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

Mirum Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Mirum Pharmaceuticals, Inc. (the “Company”) was incorporated in the State of Delaware on May 2, 2018, and is headquartered in Foster City, California. The Company is a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases.

The Company received U.S. Food and Drug Administration (“FDA”) approval for LIVMARLI® (maralixibat) oral solution (“Livmarli”), the first and only FDA-approved medication for the treatment of cholestatic pruritus in patients with Alagille syndrome (“ALGS”) one year of age and older, on September 29, 2021.

The Company’s development pipeline consists of two clinical-stage product candidates, Livmarli and volixibat. The Company commenced significant operations in November 2018.

The Company views its operations and manages its business as one operating segment.

Liquidity

The Company has a limited operating history, has incurred significant operating losses since its inception, and the revenue and income potential of the Company’s business and market are unproven. As of June 30, 2022, the Company had an accumulated deficit of $320.7 million and cash, cash equivalents, restricted cash equivalents and investments of $225.0 million. The Company believes that its cash, unrestricted cash equivalents and investments of $125.0 million as of June 30, 2022, provide sufficient capital resources to continue its operations for at least 12 months from the issuance date of the accompanying unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim 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 consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. The operating results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2021, as filed with the SEC on March 9, 2022.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. These estimates and assumptions are based upon historical experience, knowledge of current events and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ materially from those estimates.

In December 2019, a novel strain of coronavirus, which causes COVID-19, was identified. Due to the rapid and global spread of the virus, on March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. To slow the proliferation

6


 

of COVID-19, governments have implemented extraordinary measures, which include the mandatory closure of businesses, restrictions on travel and gatherings, and quarantine and physical distancing requirements.

There were no significant estimates contained in the preparation of the Company’s unaudited condensed consolidated financial statements or impacts to the Company’s unaudited condensed consolidated financial statements that were directly a result of the COVID-19 pandemic or the ongoing Ukraine-Russia conflict. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the six months ended June 30, 2022, as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in the Company’s audited consolidated financial statements included in the Annual Report, except as discussed below.

Cash, Cash Equivalents and Restricted Cash Equivalents

The Company considers all highly liquid investments that are readily convertible into cash without penalty and with original maturities of three months or less at the date of purchase to be cash equivalents. The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents are valued at cost, which approximate their fair value.

Restricted cash equivalents consists of deposits placed in a segregated bank account as required under the terms of the Company’s Revenue Interest Purchase Agreement (“RIPA”), as amended September 2021, with Mulholland SA LLC, an affiliate of Oberland Capital LLC, as agent for the purchasers party thereto (the “Purchasers”), and the Purchasers in connection with the sale of a Rare Pediatric Disease Priority Review Voucher in December 2021.

The following table provides a reconciliation of cash, cash equivalents and restricted cash equivalents reported within the unaudited condensed consolidated balance sheets that together reflect the same amounts shown in the unaudited condensed consolidated statements of cash flows (in thousands):

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

55,268

 

 

$

31,340

 

Restricted cash equivalents

 

 

100,000

 

 

 

100,000

 

Total cash, cash equivalents, and restricted cash equivalents

 

$

155,268

 

 

$

131,340

 

 

Intangible Assets, Net

The Company accounts for acquisitions of an asset that does not (or a group of assets that do not) meet the definition of a business using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the asset (or assets) acquired on the basis of its (or their) relative fair value(s) on the measurement date. No goodwill is recognized in an asset acquisition.

Intangible assets are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. The evaluation of intangible assets includes assessing the amortization period for which the asset is expected to contribute to the future cash flows of the Company. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis when the Company is unable to reliably estimate the pattern of cash flow. The Company tests its finite lived intangible assets for impairment annually and if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If it is determined that the asset becomes impaired, the carrying value is written down to its fair value with the related impairment charge recognized in the unaudited condensed consolidated statements of operations in the period in which the impairment occurs. The Company has not recorded any impairments to its intangible assets.

The following table provides detail of the carrying amount of the Company's intangible assets (in thousands):

 

 

June 30, 2022

 

 

Gross Carrying Value

 

Accumulated Amortization

 

Net Carrying Amount

 

Intangible asset - milestone payments

$

19,000

 

$

(779

)

$

18,221

 

Intangible assets - Satiogen acquisition

 

28,107

 

 

(256

)

 

27,851

 

Total intangible assets

$

47,107

 

$

(1,035

)

$

46,072

 

 

7


 

 

December 31, 2021

 

 

Gross Carrying Value

 

Accumulated Amortization

 

Net Carrying Amount

 

Intangible asset - milestone payments

$

19,000

 

$

(260

)

$

18,740

 

Total intangible assets

$

19,000

 

$

(260

)

$

18,740

 

 

Amortization expense was $0.5 million and $0.8 million for the three and six months ended June 30, 2022 and was included in cost of sales on our accompanying unaudited condensed consolidated statements of operations. There was no expense recorded for the three and six months ended June 30, 2021.

The following table summarizes the estimated future amortization expense associated with our intangible assets as of June 30, 2022 (in thousands):

 

 

Amount

 

2022 (remaining six months)

$

2,083

 

2023

 

4,165

 

2024

 

4,165

 

2025

 

4,165

 

2026

 

4,165

 

Thereafter

 

27,329

 

 

$

46,072

 

 

Product Sales, Net

The Company recognizes product sales, net when the customer obtains control of our product, which occurs at a point in time, typically upon delivery of the Company's product to the customer.

Revenues