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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 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: 001-38624
Vaccinex, Inc.
(Exact name of registrant as specified in its charter)
Delaware
|
16-1603202
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
1895 Mount Hope Avenue
Rochester, New York
|
14620
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code: (585)
271-2700
Securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934:
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $0.0001 par value
|
VCNX
|
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 May 12, 2022, the registrant had 42,664,051 shares of common
stock, $0.0001 par value per share, outstanding.
VACCINEX, INC.
FORM 10-Q
TABLE OF CONTENTS
2
PART I -
FINANCIAL INFORMATION
Item 1. Financial Statements
VACCINEX, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
|
|
As of
March 31, 2022
|
|
|
As of
December 31, 2021
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,803
|
|
|
$
|
8,589
|
|
Prepaid expenses and other current assets
|
|
|
963
|
|
|
|
816
|
|
Total current assets
|
|
|
17,766
|
|
|
|
9,405
|
|
Property and equipment, net
|
|
|
256
|
|
|
|
297
|
|
Operating lease right-of-use asset
|
|
|
99
|
|
|
|
141
|
|
TOTAL ASSETS
|
|
$
|
18,121
|
|
|
$
|
9,843
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
589
|
|
|
$
|
1,061
|
|
Accrued expenses
|
|
|
1,015
|
|
|
|
980
|
|
Current portion of long-term debt
|
|
|
74
|
|
|
|
74
|
|
Operating lease liability
|
|
|
99
|
|
|
|
141
|
|
Total current liabilities
|
|
|
1,777
|
|
|
|
2,256
|
|
Long-term debt
|
|
|
156
|
|
|
|
175
|
|
TOTAL LIABILITIES
|
|
|
1,933
|
|
|
|
2,431
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
Common stock, par value of $0.0001 per share; 100,000,000 shares
authorized
as of March 31, 2022, and December 31, 2021;
42,664,903 and 30,801,962
shares issued as of March 31, 2022 and December 31,
2021, respectively;
42,664,051 and 30,801,110 shares outstanding as of
March 31, 2022
and December 31, 2021, respectively
|
|
|
4
|
|
|
|
3
|
|
Additional paid-in capital
|
|
|
320,651
|
|
|
|
307,281
|
|
Treasury stock, at cost; 852 shares of common stock as of March 31,
2022 and
December 31, 2021, respectively
|
|
|
(11
|
)
|
|
|
(11
|
)
|
Accumulated deficit
|
|
|
(304,456
|
)
|
|
|
(299,861
|
)
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
16,188
|
|
|
|
7,412
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
18,121
|
|
|
$
|
9,843
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
VACCINEX, INC.
Condensed Consolidated Statements of Operations and Comprehensive
Loss (Unaudited)
(in thousands, except share and per share data)
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
850
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,966
|
|
|
|
5,513
|
|
General and administrative
|
|
|
1,628
|
|
|
|
1,577
|
|
Total costs and expenses
|
|
|
4,594
|
|
|
|
7,090
|
|
Loss from operations
|
|
|
(4,594
|
)
|
|
|
(6,240
|
)
|
Interest expense
|
|
|
(1
|
)
|
|
|
(332
|
)
|
Other income (expense), net
|
|
|
-
|
|
|
|
(2
|
)
|
Loss before provision for income taxes
|
|
|
(4,595
|
)
|
|
|
(6,574
|
)
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
(4,595
|
)
|
|
|
(6,574
|
)
|
Net loss attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
Net loss attributable to Vaccinex, Inc. common stockholders
|
|
$
|
(4,595
|
)
|
|
$
|
(6,574
|
)
|
Comprehensive loss
|
|
$
|
(4,595
|
)
|
|
$
|
(6,574
|
)
|
Net loss per share attributable to Vaccinex, Inc. common
stockholders, basic and diluted
|
|
$
|
(0.12
|
)
|
|
$
|
(0.26
|
)
|
Weighted-average shares used in computing net loss per share
attributable to
Vaccinex, Inc. common stockholders, basic and
diluted
|
|
|
38,758,283
|
|
|
|
25,216,788
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
VACCINEX, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
|
|
Common Stock
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Common
Stock
Shares
|
|
|
Amount
|
|
|
Accumulated
Deficit
|
|
|
Total
Vaccinex, Inc.
Stockholders’
Equity (Deficit)
|
|
|
Noncontrolling
Interests
|
|
|
Total
Stockholders’
Equity (Deficit)
|
|
Balance as of January 1, 2021
|
|
|
22,388,027
|
|
|
$
|
3
|
|
|
$
|
250,914
|
|
|
|
852
|
|
|
$
|
(11
|
)
|
|
$
|
(277,481
|
)
|
|
$
|
(26,575
|
)
|
|
$
|
23,963
|
|
|
$
|
(2,612
|
)
|
Issuance of Common Shares
|
|
|
5,937,900
|
|
|
|
—
|
|
|
|
31,863
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,863
|
|
|
|
—
|
|
|
|
31,863
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
104
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
104
|
|
|
|
—
|
|
|
|
104
|
|
Shares issued for compensation
|
|
|
9,979
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exchange of VX3 Units for common shares
|
|
|
109,900
|
|
|
|
—
|
|
|
|
2,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,000
|
|
|
|
(2,000
|
)
|
|
|
—
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,574
|
)
|
|
|
(6,574
|
)
|
|
|
—
|
|
|
|
(6,574
|
)
|
Balance as of March 31, 2021
|
|
|
28,445,806
|
|
|
$
|
3
|
|
|
$
|
284,881
|
|
|
|
852
|
|
|
$
|
(11
|
)
|
|
$
|
(284,055
|
)
|
|
$
|
818
|
|
|
$
|
21,963
|
|
|
$
|
22,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Common
Stock
Shares
|
|
|
Amount
|
|
|
Accumulated
Deficit
|
|
|
Total
Vaccinex, Inc.
Stockholders’
Equity
|
|
|
Noncontrolling
Interests
|
|
|
Total
Stockholders’
Equity
|
|
Balance as of January 1, 2022
|
|
|
30,801,962
|
|
|
$
|
3
|
|
|
$
|
307,281
|
|
|
|
852
|
|
|
$
|
(11
|
)
|
|
$
|
(299,861
|
)
|
|
$
|
7,412
|
|
|
$
|
—
|
|
|
$
|
7,412
|
|
Issuance of Common Shares
|
|
|
11,862,941
|
|
|
|
1
|
|
|
|
13,229
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,230
|
|
|
|
—
|
|
|
|
13,230
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
141
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
141
|
|
|
|
—
|
|
|
|
141
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,595
|
)
|
|
|
(4,595
|
)
|
|
|
—
|
|
|
|
(4,595
|
)
|
Balance as of March 31, 2022
|
|
|
42,664,903
|
|
|
$
|
4
|
|
|
$
|
320,651
|
|
|
|
852
|
|
|
$
|
(11
|
)
|
|
$
|
(304,456
|
)
|
|
$
|
16,188
|
|
|
$
|
—
|
|
|
$
|
16,188
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
VACCINEX, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,595
|
)
|
|
$
|
(6,574
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
41
|
|
|
|
55
|
|
Debt related charges included in interest expense
|
|
|
-
|
|
|
|
176
|
|
Stock-based compensation
|
|
|
141
|
|
|
|
104
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
149
|
|
Prepaid expenses and other current assets
|
|
|
(147
|
)
|
|
|
(383
|
)
|
Accounts payable
|
|
|
(472
|
)
|
|
|
70
|
|
Accrued expenses
|
|
|
35
|
|
|
|
(711
|
)
|
Net cash used in operating activities
|
|
|
(4,996
|
)
|
|
|
(7,114
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
-
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
3,519
|
|
|
|
31,863
|
|
Redemption of convertible debt
|
|
|
-
|
|
|
|
(5,956
|
)
|
Payments of long-term debt
|
|
|
(19
|
)
|
|
|
-
|
|
Proceeds from private offering of common stock
|
|
|
9,710
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
13,210
|
|
|
|
25,907
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
8,214
|
|
|
|
18,793
|
|
CASH AND CASH EQUIVALENTS–Beginning of period
|
|
|
8,589
|
|
|
|
10,596
|
|
CASH AND CASH EQUIVALENTS–End of period
|
|
$
|
16,803
|
|
|
$
|
29,389
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
VACCINEX, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note
1.
|
COMPANY AND NATURE OF BUSINESS
|
Vaccinex, Inc. (together with its subsidiaries, the “Company”) was
incorporated in Delaware in April 2001 and is headquartered in
Rochester, New York. The Company is a clinical-stage biotechnology
company engaged in the discovery and development of targeted
biotherapeutics to treat serious diseases and conditions with unmet
medical needs, including cancer, neurodegenerative diseases, and
autoimmune disorders. Since its inception, the Company has devoted
substantially all of its efforts toward product research,
manufacturing and clinical development, and raising capital.
The Company is subject to a number of risks and uncertainties
common to other early-stage biotechnology companies including, but
not limited to, dependency on the successful development and
commercialization of its product candidates, rapid technological
change and competition, dependence on key personnel and
collaborative partners, uncertainty of protection of proprietary
technology and patents, clinical trial uncertainty, fluctuation in
operating results and financial performance, the need to obtain
additional funding, compliance with governmental regulations,
technological and medical risks, management of growth and
effectiveness of marketing by the Company. The Company is also
subject to risks related to the ongoing COVID-19 pandemic,
discussed under “COVID-19 Pandemic” below. If the Company does not
successfully commercialize or partner any of its product
candidates, it will be unable to generate product revenue or
achieve profitability.
Going Concern
These condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business.
The Company has incurred significant losses and negative cash flows
from operations since inception and expects to incur additional
losses until such time that it can generate significant revenue
from the commercialization of its product candidates. The Company
had negative cash flow from operations of $5.0 million for the
three months ended March 31, 2022, and an accumulated deficit of
$304.5 million as of March 31, 2022. Given the Company’s projected
operating requirements and its existing cash and cash equivalents,
the Company is projecting insufficient liquidity to sustain its
operations through one year following the date that the condensed
consolidated financial statements are issued. These
conditions and events raise substantial doubt about the Company’s
ability to continue as a going concern.
In response to these conditions, management is currently evaluating
different strategies to obtain the required funding for future
operations. Financing strategies may include, but are not limited
to, the public or private sale of equity, debt financings or funds
from other capital sources, such as government funding,
collaborations, strategic alliances, or licensing arrangements with
third parties. There can be no assurances that the
Company will be able to secure additional financing, or if
available, that it will be sufficient to meet its needs or on
favorable terms. Because management’s plans have not yet
been finalized and are not within the Company’s control, the
implementation of such plans cannot be considered
probable. As a result, the Company has concluded that
management’s plans do not alleviate substantial doubt about the
Company’s ability to continue as a going concern.
The 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.
7
COVID-19 Pandemic
In order to mitigate the spread of COVID-19, governments have at
times imposed unprecedented restrictions on business operations,
travel, and gatherings, resulting in a global economic downturn and
other adverse economic and societal impacts. The Company has
complied with state reopening guidance and has allowed research and
development staff to begin working in the laboratory when necessary
and using recommended health and safety precautions. The
COVID-19 pandemic has impacted the expected timing of the Company’s
clinical trials, the economy, the biotechnology industry, and the
Company’s business. For example, the Company previously anticipated
initiating a trial of pepinemab in Alzheimer’s disease in mid-2020
but the initial enrollment date was delayed until the first half of
2021. In addition, to mitigate the impacts of the
COVID-19 pandemic, including impacts on the Company’s ability to
raise capital and to maintain its personnel, the Company applied
for and received a PPP Loan (See Note 9). The Company
may experience further disruptions as a result of the COVID-19
pandemic that could adversely impact its business, including
disruption of research and development activities, plans for
release of data, manufacturing, supply, and interactions with
regulators and other third parties, and difficulties in raising
additional capital. The extent to which the COVID-19
pandemic may impact the Company’s business will depend on future
developments, which are highly uncertain and cannot be predicted
with confidence.
Note
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Presentation and Consolidation
Through the period ended September 3, 2021, the Company’s accounts
included Vaccinex Products, LP, a Delaware limited partnership
(“Vaccinex Products”), and VX3 (DE) LP, a Delaware limited
partnership (“VX3”). Subsequently on September 3, 2021, Vaccinex
Products and VX3 were dissolved when all remaining partnership
interests were exchanged for shares of our common stock.
Accordingly, prior to dissolution, these condensed consolidated
financial statements reflect the accounts and operations of the
Company for the three months ended March 31, 2021and those of its
subsidiaries in which the Company had a controlling financial
interest.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”) for interim financial information (Accounting Standards
Codification (“ASC”) 270, Interim Reporting) and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, these financial statements do not include all of the
information necessary for a full presentation of financial
position, results of operations, and cash flows in conformity with
GAAP. In the opinion of management, the condensed consolidated
financial statements reflect all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation
of the results of the Company for the periods presented.
Intercompany transactions and balances have been fully eliminated
in consolidation.
These condensed consolidated financial statements should be read in
conjunction with the Company’s audited consolidated financial
statements and related notes included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2021,
filed with the SEC on March 31, 2022.
Use of Estimates
These condensed consolidated financial statements have been
prepared in conformity with U.S. GAAP. The preparation of financial
statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities as of the date of the condensed consolidated financial
statements and the reported amount of expenses during the reporting
period. Such management estimates include those relating to
assumptions used in the valuation of stock option awards, and
valuation allowances against deferred income tax assets. Actual
results could differ from those estimates.
8
Concentration of Credit Risk, Other Risks and Uncertainties
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents. Cash equivalents are deposited in interest-bearing
money market accounts. Although the Company deposits its cash with
multiple financial institutions, cash balances may occasionally be
in excess of the amounts insured by the Federal Deposit Insurance
Corporation. Management believes the financial risk associated with
these balances is minimal and has not experienced any losses to
date.
The Company depends on third-party manufacturers for the
manufacture of drug substance and drug product for clinical trials.
The Company also relies on certain third parties for its supply
chain. Disputes with these third- party manufacturers or shortages
in goods or services from third-party suppliers could delay the
manufacturing of the Company’s product candidates and adversely
impact its results of operations.
Convertible Instruments
The Company applies the accounting standards for derivatives and
hedging and for distinguishing liabilities from equity when
accounting for hybrid contracts that contain conversion options and
other embedded features. The accounting standards require companies
to bifurcate embedded features from their host instruments and
account for them as free-standing derivative financial instruments
according to certain criteria. The criteria include circumstances
in which (i) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the
economic characteristics and risks of the host contract, (ii) the
hybrid instrument that embodies both the embedded derivative
instrument and the host contract is not re-measured at fair value
under otherwise applicable generally accepted accounting principles
with changes in fair value reported in earnings as they occur and
(iii) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative
instrument.
The Company’s derivative instrument related to certain features
embedded within the Company’s 8% Original Issue Discount Senior
Secured Convertible Debenture (“the Debenture”) is discussed in
Note 10. The derivative is accounted for as a derivative liability
and remeasured to fair value as of each balance sheet date and the
related remeasurement adjustments are included in interest expense
in the Company’s condensed consolidated statement of operations and
comprehensive loss.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“the FASB”)
issued Accounting Standards Update (“ASU”) No. 2016-13,
“Measurement of Credit Losses on
Financial Instruments” to improve reporting requirements
specific to loans, receivables, and other financial instruments.
The new standard requires that credit losses on financial assets
measured at amortized cost be determined using an expected loss
model, instead of the current incurred loss model, and requires
that credit losses related to available-for-sale debt securities be
recorded through an allowance for credit losses and limited to the
amount by which carrying value exceeds fair value. The new standard
also requires enhanced disclosure of credit risk associated with
financial assets. The standard is effective for interim and annual
periods beginning after December 15, 2022 with early adoption
permitted. Based on the composition of the Company’s financial
assets, current market conditions and historical credit loss
activity, the adoption of this standard is not expected to have a
material impact on the Company’s condensed consolidated financial
statements.
9
Note 3. BALANCE SHEET COMPONENTS
Property and Equipment
Property and equipment consist of the following (in thousands):
|
|
As of
March 31, 2022
|
|
|
As of
December 31, 2021
|
|
Leasehold improvements
|
|
$
|
3,213
|
|
|
$
|
3,213
|
|
Research equipment
|
|
|
3,499
|
|
|
|
3,499
|
|
Furniture and fixtures
|
|
|
350
|
|
|
|
350
|
|
Computer equipment
|
|
|
284
|
|
|
|
284
|
|
Property and equipment, gross
|
|
|
7,346
|
|
|
|
7,346
|
|
Less: accumulated depreciation and amortization
|
|
|
(7,090
|
)
|
|
|
(7,049
|
)
|
Property and equipment, net
|
|
$
|
256
|
|
|
$
|
297
|
|
Depreciation expense related to property and equipment
was $41,000 and $55,000
for the three months ended March 31, 2022 and 2021,
respectively.
Accrued Expenses
Accrued expenses consist of the following (in thousands):
|
|
As of
March 31, 2022
|
|
|
As of
December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Accrued clinical trial cost
|
|
$
|
434
|
|
|
$
|
468
|
|
Accrued payroll and related benefits
|
|
|
354
|
|
|
|
409
|
|
Accrued consulting and legal
|
|
|
189
|
|
|
|
74
|
|
Accrued other
|
|
|
38
|
|
|
|
29
|
|
Accrued expenses
|
|
$
|
1,015
|
|
|
$
|
980
|
|
Note
4.
|
FAIR VALUE MEASUREMENTS OF FINANCIAL MEASUREMENTS
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring
Basis
Assets and liabilities recorded at fair value on a nonrecurring
basis in the condensed consolidated balance sheets are categorized
based upon the level of judgment associated with the inputs used to
measure their fair values. Financial instruments consist of cash,
accounts receivable, accounts payable, accrued liabilities, and
long-term debt. Cash, accounts receivable, accounts payable,
accrued liabilities, and debt, are stated at their carrying value,
which approximates fair value due to the short time to the expected
receipt or payment date of such amounts.
Assets and Liabilities Measured at Fair Value on a Recurring
Basis
Fair value measurement
standards also apply to certain financial assets and liabilities
that are measured at fair value on a recurring basis (each
reporting period). For the Company, these financial assets and
liabilities include its cash equivalents deposited in money market
funds and derivative instruments. The Company does not have any
nonfinancial assets or liabilities that are measured at fair value
on a recurring basis.
10
The following table sets forth the fair value of the Company’s
financial assets by level within the fair value hierarchy (in
thousands):
|
|
As of March 31, 2022
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market fund
|
|
$
|
14,298
|
|
|
$
|
14,298
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total Financial Assets
|
|
$
|
14,298
|
|
|
$
|
14,298
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
As of December 31, 2021
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market fund
|
|
$
|
426
|
|
|
$
|
426
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total Financial Assets
|
|
$
|
426
|
|
|
$
|
426
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company did not transfer any assets measured at fair value on a
recurring basis to or from Level 1 and Level 2 during
either of the three months ended March 31, 2022 and
2021.
11
Note
5.
|
LICENSE AND SERVICES AGREEMENT
|
In November 2017, the Company entered into a license agreement (the
“VX3 License Agreement”) with VX3, which was formed by a group of
Canadian investors including the Company’s majority stockholder,
FCMI Parent Co. (“FCMI Parent”). VX3 was created for the purpose of
funding the Company’s research and development activities for
pepinemab, the Company’s most advanced product candidate. Under the
VX3 License Agreement, the Company granted VX3 the license to use,
make, have made, sell, offer and import pepinemab for the treatment
of Huntington’s disease in the U.S. and Canada. In return, VX3
agreed to fund research and development activities with up to an
aggregate of $32.0 million in milestone payments to the Company and
to share any pepinemab profits and sublicensing revenue under the
agreement in an amount based on a calculation set forth in the
agreement. The Company also entered into a services agreement with
VX3 (the “Services Agreement”), pursuant to which the Company
carried out development activities for pepinemab for the treatment
of Huntington’s disease in the U.S. and Canada in exchange for
services payments from VX3.
The Company entered into an exchange agreement on August 13, 2018
with VX3 and its partners, including FCMI Parent, that provided
each VX3 partner with the right to exchange all, but not less than
all, of its partnership interests in VX3 for shares of the
Company’s common stock. The exchange agreement also provides that
FCMI Parent’s exercise of its option to exchange its VX3
partnership interests for shares of Company common stock would
trigger the exchange of all VX3 partnership interests for shares of
Company common stock.
In March 2021, one VX3 partner exchanged its partnership interest
in VX3 for 109,900 shares of the Company’s common
stock. This exchange resulted in a non-cash transaction,
increasing additional paid in capital and decreasing noncontrolling
interests by $2.0 million, respectively, in the Company’s
consolidated condensed financial statements for the three months
ended March 31, 2021.
Subsequently during 2021, exchange transactions were effected
whereby all remaining limited partnership interests in VX3 were
exchanged for 1,318,797 shares of our common stock in accordance
with the terms of the respective exchange agreement and Vaccinex
Products and VX3 were dissolved as of September 3, 2021 and the VX3
License Agreement and Service Agreement were
terminated.
Prior to the exchanges, the Company had a variable
interest in VX3 through FCMI Parent, which was majority owned and
controlled by the Company’s chairman, and which controlled 98% of
VX3’s voting interest as of March 31, 2021. VX3 did not
have any business operations or generate any income or expenses and
was primarily a funding mechanism specifically for the benefit of
the Company, as its only activities consisted of the receipt of
funding and the contribution of such funding to the
Company. Therefore, the Company determined that it was
the primary beneficiary of VX3 and that the operating results of
VX3 should be incorporated into the Company’s condensed
consolidated financial statements accordingly.
For the three months ended March 31, 2021, the Company did not
receive any amounts from VX3 or record any related capital
contributions from noncontrolling interests on the condensed
financial statements. Noncontrolling equity interests
did not participate in a proportionate share of the Company’s net
losses for the three month period ended March 31, 2021 pursuant to
the aforementioned partnership, license, services and exchange
agreements.
Note
6.
|
COLLABORATION AGREEMENTS
|
Surface Oncology, Inc.
In November 2017, the Company entered into a research collaboration
and license option agreement with Surface Oncology, Inc.
(“Surface”) to identify and select antibodies against two target
antigens, using the Company’s proprietary technology as described
in the agreement. The term for each research program is nine to
twelve months (not exceeding twelve months unless extended by
written agreement) including time necessary for any functional
assessment conducted by Surface following the commencement of the
research program. Surface will provide the Company material to
carry out the research activities. During the research program
term, the Company also may grant Surface a non-exclusive,
worldwide, limited-purpose license for each target to use the
Company’s research program materials for conducting the research
work pursuant to the agreement. The Company recorded
12
revenue of $850,000
for the three months
ended March 31, 2021,
related to its agreement with Surface,
all of
which was
for an exclusive product license.
This
agreement will expire upon the latest of the expiration of both
research programs and all evaluation and testing
periods.
Under the agreement, Surface may purchase exclusive options,
exercisable by providing a written notice to the Company, to obtain
(i) an exclusive product license to make, use, sell and import
products incorporating antibodies targeting the first antigen and
(ii) an exclusive research tool license to use antibodies
targeting the second antigen to perform
research. Surface purchased the first option and
exercised the second option and the Company entered into an
exclusive research tool license agreement with Surface in the third
quarter of 2019.
Note 7.
|
COMMITMENTS AND CONTINGENCIES
|
Sublicense Termination Payments
In 2006, the Company licensed certain technology to EUSA Pharma SAS
(“EUSA”), and in 2008, this technology was sublicensed by EUSA to
Glaxo Group Limited (“GSK”) for development. GSK terminated its
sub-license with EUSA in March 2010 and ownership of the technology
reverted back to the Company. The Company may be required to pay
EUSA up to $25.5 million plus ongoing royalty payments of 1%
of net sales upon the occurrence of certain events involving the
previously licensed technology, including a Phase 3 clinical
trial, Food and Drug Administration acceptance and approval and
product sales. The Company is not planning any further
commercialization efforts related to the previously licensed
technology, and therefore does not anticipate any of the
above-described amounts will be paid.
Other Contingencies
The Company is subject to claims and assessments from time to time
in the ordinary course of business. The Company records a provision
for a liability when it believes that it is both probable that a
liability has been incurred and the amount can be reasonably
estimated. Significant judgment is required to determine both
probability and the estimated amount.
In the normal course of business, the Company may become involved
in legal proceedings. The Company will accrue a liability for such
matters when it is probable that a liability has been incurred and
the amount can be reasonably estimated. When only a range of
possible loss can be established, the most probable amount in the
range is accrued. If no amount within this range is a better
estimate than any other amount within the range, the minimum amount
in the range is accrued. The accrual for a litigation loss
contingency might include, for example, estimates of potential
damages, outside legal fees and other directly related costs
expected to be incurred. As of March 31, 2022 and, December 31,
2021 the Company was not involved in any material legal
proceedings.
The Company leases its facilities from 1895 Management, Ltd., a New
York corporation controlled by an entity affiliated with a director
of the Company, under non-cancellable operating leases. Following
entry into a lease extension agreement in August 2020, the lease
agreement requires monthly rental payments of $14,511 through
October 31, 2022. The Company is responsible for all
maintenance, utilities, insurance and taxes related to the
facility. The Company has elected the practical expedient on not
separating lease components from non-lease components.
The leases do not provide an implicit rate so in determining the
present value of lease payments, the Company utilized its
incremental borrowing rate for the applicable lease, which was
7.0%. The Company recognizes lease expense on a straight-line basis
over the remaining lease term.
As of March 31, 2022, the future minimum payments for the operating
leases total $101,577 in 2022, less imputed interest of $2,328, for
an operating lease liability of $99,249 as of March 31, 2022. For
the three months ended March 31, 2022 and 2021, cash paid for
amounts included in the measurement of lease liabilities was
$43,500.
13
Lease expense incurred under the operating lease for each of the
three months ended March 31, 2022 and 2021 was $43,500 and is a
component of general and administrative expense.
On May 8, 2020, the Company received the PPP Loan in the amount of
$1,133,600. The PPP Loan originally matured on May 8, 2022, with no
principal payments required prior to the maturity date, and bearing
interest at an annual rate of 1.0%, with interest payments
commencing on November 8, 2020, less the amount of any potential
forgiveness. On November 8, 2021, the Company was
awarded loan forgiveness of $876,171 and the remaining balance of
the loan was refinanced. The loan has a maturity date of
May 8, 2025, bears interest of 1%, and is being repaid in monthly
payments of $6,334. The Company has recorded interest
expense of $1,000 and $3,000 for the three months ended March
31, 2022 and 2021, respectively on its condensed statement of
operations and comprehensive loss. loss,
respectively.
Note 10. CONVERTIBLE DEBENTURE
On July 30, 2020, the Company consummated the Convertible Debt
Financing pursuant to which the Company issued its Senior Secured
Convertible Debenture in the principal amount of $8,640,000 for a
purchase price of $8,000,000, which reflects an original issue
discount of approximately 8% (the “Debenture”), issued pursuant to
the Securities Purchase Agreement, dated as of July 30, 2020, with
3i, as collateral; agent (the “SPA”). The maturity date
of the Debenture was August 3, 2021, and the sale of the Debenture
occurred on August 3, 2020.
As of August 3, 2021, the Company repaid in full its 7% Original
Issue Discount Senior Secured Convertible Debenture due August 3,
2021 (the “Debenture”), issued pursuant to the Securities Purchase
Agreement, dated as of July 30, 2020, with 3i, LP, as collateral
agent (the “SPA”), by making a payment of $2,755,895, representing
all principal and interest due at maturity. The Company
has no further obligation under the Debenture and incurred no early
termination or prepayment penalties in connection with the
repayment.
As a result of the repayment of the Debenture, (i) the Security
Agreement dated as of July 31, 2020, between the Company and 3i,
LP, as collateral agent, pursuant to which the Company granted a
security interest in certain assets of the Company as collateral to
secure the Debenture, (ii) the stock underlying the Debenture, and
(iii) the SPA, were terminated.
Subject to the satisfaction of certain conditions, at any time, the
Company could have elected to redeem all or any portion of the
Debenture for an amount equal to 115% of the outstanding principal
balance being redeemed plus all accrued unpaid interest on the
amount being redeemed and an amount due under the Interest
Make-Whole (the “Optional Redemption”).
The Debenture also provided that in connection with future capital
raising transactions (subject to certain exceptions), the Company
must offer to use 20% of the funds raised to redeem amounts
outstanding under the Debenture (“Mandatory Redemption”). Any
redemption in this circumstance was to be at the election of the
holder. Consistent with the Optional Conversion or
Optional Redemption provisions, the Mandatory Redemption was
subject to the Interest Make-Whole. During the three
month period ended March 31, 2021, the Company made payments under
the Mandatory Redemption provision totaling $6,372,575 consisting
of $5,955,678 for principal repayments and $416,897 for accrued and
make-whole interest.
The Company incurred $50,000 in fees paid to 3i, LP (“3i”) in
connection with the issuance of the Debenture. These costs were
primarily allocated to the debt component and recognized as
additional debt discount. The Company amortized the debt discount,
including the initial value of the derivative liability of $65,000,
allocated fees of $50,000 and the original issuance discount of
$640,000, over the term of the Debenture using the effective
interest method. The annual effective interest rate was 16.54%.
Total interest expense under the Senior Secured Convertible
Debenture for the three months ended March 31, 2021 was
$150,545.
14
Note 11. COMMON STOCK
RESERVED FOR ISSUANCE
Common stock has been reserved for the following potential future
issuances:
|
|
As of
March 31, 2022
|
|
|
As of
December 31, 2021
|
|
Shares underlying outstanding stock options
|
|
|
1,161,345
|
|
|
|
1,154,563
|
|
Shares available for future stock option grants
|
|
|
1,005,564
|
|
|
|
396,324
|
|
Total shares of common stock reserved
|
|
|
2,166,909
|
|
|
|
1,550,887
|
|
Note
12.
|
STOCK-BASED COMPENSATION
|
2011 Employee Equity Plan
In connection with the adoption of the Company’s 2018 Omnibus
Incentive Plan (the “2018 Plan”) in August 2018, the Company ceased
granting stock options under the Company’s 2011 Employee Equity
Plan (the “2011 Plan”). However, the 2011 Plan will continue to
govern the terms and conditions of the outstanding stock options
previously granted thereunder. Any shares of stock related to
awards outstanding under the 2011 Plan that terminate by
expiration, forfeiture, cancellation, or otherwise without the
issuances of such shares will become available for grant under the
2018 Plan. Stock options granted under
the 2011 Plan expire in five or ten years from the date of
grant.
2018 Omnibus Incentive Plan
In August 2018, the Company’s board of directors adopted, and its
stockholders approved, the 2018 Plan, which allows for the granting
of stock, stock options, and stock appreciation rights awards to
employees, advisors and consultants. Stock options granted under
the 2018 Plan may be either incentive stock options or
non-statutory stock options. Incentive stock options may be granted
to employees, advisors and consultants at exercise prices of no
less than the fair value of the common stock on the grant date. If
at the time of grant, the optionee owns stock representing more
than 10% of the voting power of all classes of stock of the
Company, the exercise price must be at least 110% of the fair value
of the common stock on the grant date as determined by the board of
directors. Non-statutory stock options may be granted to employees,
advisors and consultants at exercise prices of less than the fair
market value of a share of common stock on the date the
non-statutory stock option is granted but shall under no
circumstances be less than adequate consideration as determined by
the board of directors for such a share. The vesting period of
stock option grants is determined by the board of directors,
ranging from zero to eight years. Stock options granted under the
2018 Plan expire in five or ten years from the date of grant.
The Company initially reserved 425,000 shares of common stock for
issuance, subject to certain adjustments, pursuant to awards under
the 2018 Plan. Any shares of common stock related to awards
outstanding under the 2011 Plan as of the effective date of the
2018 Plan, which thereafter terminate by expiration, forfeiture,
cancellation or otherwise without the issuance of such shares, will
be added to, and included in, the number of shares of common stock
available for grant under the 2018 Plan. In addition, effective
January 1, 2020 and continuing until the expiration of the 2018
Plan, the number of shares of common stock available for issuance
under the 2018 Plan will automatically increase annually by 2% of
the total number of issued and outstanding shares of the Company’s
common stock as of December 31st of the
immediately preceding year or such lesser number as the Company’s
board of directors may decide, which may be zero. Accordingly, on
January 1, 2022, 616,022 additional shares of common stock became
available for issuance under the 2018 Plan.
15
A summary of the Company’s stock option activity and related
information is as follows:
|
|
Stock
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
|
Aggregate
Intrinsic
Value (in thousands)
|
|
Balance as of January 1, 2022
|
|
|
1,154,563
|
|
|
$
|
5.55
|
|
|
|
6.9
|
|
|
$
|
-
|
|
Granted
|
|
|
10,032
|
|
|
|
1.32
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Forfeited
|
|
|
(3,250
|
)
|
|
|
5.27
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2022
|
|
|
1,161,345
|
|
|
$
|
5.51
|
|
|
|
6.7
|
|
|
$
|
4
|
|
Exercisable as of March 31, 2022
|
|
|
724,584
|
|
|
$
|
7.00
|
|
|
|
5.6
|
|
|
$
|
4
|
|
The weighted-average grant date fair value of stock options granted
to employees and directors for the three months ended March 31,
2022 and 2021 was $0.87 per share and $2.23 per share,
respectively. The aggregate grant date fair value of stock options
that vested during the three months ended March 31, 2022 and 2021
was $224,374 and $230,176, respectively.
The intrinsic value of stock options vested and exercisable and
expected to vest and become exercisable is calculated based on the
difference between the exercise price and the fair value of the
Company’s common stock as of March 31, 2022 and December 31, 2021.
The intrinsic value of exercised stock options is the difference
between the fair value of the underlying common stock and the
exercise price as of the exercise date.
As of March 31, 2022 and December 31, 2021, total unrecognized
compensation cost related to stock options granted to employees was
$489,986 and $621,996, respectively, which is expected to be
recognized over a weighted-average period of 2.19 and 2.1 years,
respectively.
The grant date fair value of employee stock options was estimated
using a Black-Scholes option-pricing model with the following
weighted-average assumptions:
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Expected term (in years)
|
|
|
6.0
|
|
|
|
6.0
|
|
Expected volatility
|
|
|
75
|
%
|
|
|
75
|
%
|
Risk-free interest rate
|
|
|
1.8
|
%
|
|
|
0.5
|
%
|
Expected dividend yield
|
|
|
-
|
%
|
|
|
-
|
%
|
Total stock-based compensation expense recognized in the condensed
consolidated statements of operations and comprehensive loss is as
follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Research and development
|
|
$
|
42
|
|
|
$
|
28
|
|
General and administrative
|
|
|
99
|
|
|
|
76
|
|
Total stock-based compensation expense
|
|
$
|
141
|
|
|
$
|
104
|
|
16
No provision for income taxes was recorded in either of the three
month periods ended March 31, 2022 and 2021. The Company remains in
a cumulative loss position with a full valuation allowance recorded
against its net deferred income tax assets as of March 31,
2022.
The Company evaluates tax positions for recognition using a
more-likely-than-not recognition threshold, and those tax positions
eligible for recognition are measured as the largest amount of tax
benefit that is greater than 50% likely of being realized upon the
effective settlement with a taxing authority that has full
knowledge of all relevant information. As of March 31, 2022 and
December 31, 2021, the Company had no unrecognized income tax
benefits that would affect the Company’s effective tax rate if
recognized.
Note
14.
|
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
The following weighted-average common stock equivalents were
excluded from the calculation of diluted net loss per share for the
periods presented as they had an anti-dilutive effect:
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Options to purchase common stock
|
|
|
1,153,444
|
|
|
|
826,748
|
|
Contingently issuable common stock prior to exchange of
Vaccinex Products, LP units
|
|
|
-
|
|
|
|
1,147,259
|
|
Contingently issuable common stock prior to exchange of
VX3 units
|
|
|
-
|
|
|
|
1,309,028
|
|
Note
15.
|
SEGMENT AND GEOGRAPHIC INFORMATION
|
The Company’s chief operating decision maker, its Chief Executive
Officer, reviews its operating results on an aggregate basis for
purposes of allocating resources and evaluating financial
performance. The Company has one business activity, the discovery
and development of targeted biotherapeutics to treat serious
diseases and conditions with unmet medical needs, and there are no
segment managers who are held accountable for operations or
operating results. Accordingly, the Company operates in one
reportable segment. As of March 31, 2022 and December 31, 2021, all
long-lived assets are located in the United States.
Note
16.
|
RELATED PARTY TRANSACTIONS
|
As discussed in Note 8, the Company leases its facility from 1895
Management, Ltd., a New York corporation controlled by an entity
affiliated with the Company’s chairman and major stockholder of the
Company. Rent expense incurred under the operating lease was
$43,500 for each of the three month periods ended March 31, 2022
and 2021.
As discussed in Note 6, in November 2017, the Company entered into
a research collaboration and license option agreement with Surface
to identify and select antibodies against two target antigens,
using the Company’s proprietary technology as described in the
agreement. J. Jeffrey Goater, a member of the Company’s board of
directors, served as the Chief Business Officer of Surface at that
time, and currently serves as the Chairman of the Board of Surface.
During the three months ended March 31, 2021, the Company recorded
revenue related to this agreement of $850,000, all of which was for
an exclusive product license. This agreement will expire upon the
latest of the expiration of both research programs and all
evaluation and testing periods.
On January 27, 2022, the Company entered into a stock purchase
agreement (as amended, the “Stock Purchase Agreement”) pursuant to
which the Company agreed to issue and sell to the investors named
therein an aggregate of 5,945,943 shares of common stock, par value
$0.0001 per share, of the Company (the “Common Stock”) at a
purchase price of $1.11 per share. On January 31, 2022,
the Stock Purchase Agreement was amended, pursuant to which the
Company agreed to issue and sell to additional investors, and the
additional investors (together with the original investor, the
“investors”) agreed to purchase from the Company, on the same terms
and conditions, and
17
aggregate of
2,801,801
shares of Common Stock. The closing of the sale of
shares under the Stock Purchase Agreement (“the private placement”)
occurred on January 31, 2022, and the Company issued an aggregate
of
8,747,744
shares of Common Stock with aggregate gross proceeds to the Company
of approximately $9.7
million. The Company intends to use the net proceeds
from the private placement to fund the ongoing development of its
lead drug candidate, pepinemab, in cancer and neurodegenerative
disease and for working capital and general corporate
purposes.
Several of the investors are affiliated with directors or officers
of the Company: Vaccinex (Rochester), L.L.C., which is controlled
by Maurice Zauderer, Ph.D., the Company’s president, chief
executive officer and a member of its board of directors; Friedberg
Global-Macro Hedge Fund Ltd., the investment manager of which is an
entity controlled by Albert D. Friedberg, chairman of the Company’s
board of directors; FCMI Parent Co., which is controlled by Mr.
Friedberg; and Benbow Estates Ltd., which is controlled by Jacob
Frieberg, one of the Company’s directors.
18
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
References in this Quarterly Report on Form 10-Q, or this Report,
to the “Company,” “we,” “our,” or “us” mean Vaccinex, Inc. and its
subsidiaries except where the context otherwise requires You should
read the following discussion and analysis of financial condition
and results of operations together with our condensed consolidated
financial statements and related notes included elsewhere in this
Report, as well as the audited financial statements, related notes
and Management’s Discussion and Analysis of Financial Condition and
Results of Operations and other disclosures included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2021, or
the Annual Report.
Cautionary Note Regarding Forward-Looking Statements
The following discussion and other parts of this Report contain
forward-looking statements that involve risk and uncertainties,
such as statements of our plans, objectives, expectations and
intentions. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “intends” or “continue,” or the negative
of these terms or other comparable terminology. Forward-looking
statements include, but are not limited to, statements about:
|
•
|
our ability to continue as a going
concern;
|
|
•
|
the impacts of the COVID-19 pandemic
on the expected timing and progress of our clinical trials, as well
as other impacts of the COVID-19 pandemic on the economy, our
industry, and our business, financial condition and results of
operations, including our ability to raise capital;
|
|
•
|
the sufficiency of the financing
arrangements we have entered into, that is intended to fund our
payroll and certain other operations for a limited period of time
and our ability to service our outstanding debt
obligations;
|
|
•
|
our estimates regarding our expenses,
future revenues, anticipated capital requirements and our needs for
additional financing;
|
|
•
|
the impact of inflation on our
expenses and business;
|
|
•
|
the implementation of our business
model and strategic plans for our business and
technology;
|
|
•
|
the timing and success of the
commencement, progress and receipt of data from any of our
preclinical and clinical trials;
|
|
•
|
our expectations regarding the
potential safety, efficacy or clinical utility of our product
candidates;
|
|
•
|
the expected results of any clinical
trial and the impact on the likelihood or timing of any regulatory
approval;
|
|
•
|
the difficulties in obtaining and
maintaining regulatory approval of our product
candidates;
|
|
•
|
the rate and degree of market
acceptance of any of our product candidates;
|
|
•
|
the success of competing therapies and
products that are or become available;
|
|
•
|
regulatory developments in the United
States and foreign countries;
|
|
•
|
current and future legislation
regarding the healthcare system;
|
|
•
|
the scope of protection we establish
and maintain for intellectual property rights covering our
technology;
|
|
•
|
developments relating to our
competitors and our industry;
|
|
•
|
our failure to recruit or retain key
scientific or management personnel or to retain our executive
officers;
|
|
•
|
the performance of third parties,
including collaborators, contract research organizations and
third-party manufacturers;
|
19
|
•
|
the development of our
commercialization capabilities, including the need to develop or
obtain additional capabilities; and
|
|
•
|
our use of the proceeds from the
offerings of our common stock.
|
Although we believe that the expectations reflected in the
forward-looking statements contained herein are reasonable, we
cannot guarantee future results, levels of activity, performance,
or achievements. These statements are only current predictions and
are subject to known and unknown risks, uncertainties and other
factors that may cause our or our industry’s actual results, levels
of activity, performance or achievements to be materially different
from those anticipated by the forward-looking statements. Factors
that could cause or contribute to such differences include, but are
not limited to, those discussed in the risk factors identified in
the “Risk Factors” section of this Report, and in Part II, Item 1A
of the Annual Report, as well as in our other filings with the
Securities and Exchange Commission, or SEC. The forward-looking
statements speak only as of the date they were made. Except as
required by law, after the date of this Report, we are under no
duty to update or revise any of the forward-looking statements,
whether as a result of new information, future events or otherwise.
We qualify all of our forward-looking statements by the foregoing
cautionary statements.
Company Overview
We are a clinical-stage biotechnology company engaged in the
discovery and development of targeted biotherapeutics to treat
serious diseases and conditions with unmet medical needs, including
cancer, neurodegenerative diseases, and autoimmune disorders. We
believe we are the leader in the field of semaphorin 4D, or SEMA4D,
biology and that we are the only company targeting SEMA4D as a
potential treatment for cancer, neurodegenerative diseases, or
autoimmune disorders. SEMA4D is an extracellular signaling molecule
that regulates the migration of immune and inflammatory cells to
sites of injury, cancer, or infection. We are leveraging our SEMA4D
antibody platform and our extensive knowledge of SEMA4D biology to
develop our lead product candidate, pepinemab, an antibody that we
believe utilizes novel mechanisms of action. We are focused on
developing pepinemab for the treatment of head and neck cancer (or
“HNSCC”), Huntington’s disease, and Alzheimer’s disease.
Additionally, third party investigators are studying pepinemab in
integrated biomarker “window of opportunity” studies in head and
neck cancer and melanoma. We have developed multiple proprietary
platform technologies and are developing product candidates to
address serious diseases or conditions that have a substantial
impact on day-to-day functioning and for which treatment is not
addressed adequately by available therapies. We employ our
proprietary platform technologies, including through our work with
our academic collaborators, to identify potential product
candidates for sustained expansion of our internal product pipeline
and to facilitate strategic development and commercial
partnerships.
Our lead platform technologies include our SEMA4D antibody platform
and our ActivMAb antibody discovery platform. Our lead product
candidate, pepinemab, is currently in clinical development for the
treatment of HNSCC, Huntington’s disease, and Alzheimer’s disease,
through our efforts or through investigator-sponsored trials, or
ISTs. Additional product candidates VX5 and VX25 are in earlier
stages of development and were selected using our ActivMAb and NKT
vaccine platforms, respectively. We believe our multiple platform
technologies position us well for continued pipeline expansion and
partnership opportunities going forward.
We have generated a limited amount of service revenue from
collaboration agreements but have not generated any revenue from
product sales to date. We continue to incur significant development
and other expenses related to our ongoing operations. As a result,
we are not and have never been profitable and have incurred losses
in each period since our inception. We reported a net loss of
$4.6 million and $6.6 million for the three months ended
March 31, 2022 and 2021, respectively. As of March 31, 2022 and
December 31, 2021, we had cash and cash equivalents of $16.8
million and $8.6 million, respectively. We expect to continue
to incur significant losses for the foreseeable future, and we
expect these losses to increase as we continue our research and
development of, and seek regulatory approvals for, our product
candidates. We may also encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors,
including as a result of the COVID-19 pandemic and inflation, that
may adversely affect our business. The size of our future net
losses will depend, in part, on the rate of future growth of our
expenses and our ability to generate revenues, if any.
20
Our recurring net
losses and negative cash flows from operations raised substantial
doubt regarding our ability to continue as a going concern within
one year after the issuance of our
condensed
consolidated financial statements. Until we can generate sufficient
revenue from the commercialization of our product candidates,
we expect to finance our
operations through the public or private sale of equity, debt
financings or other capital sources, such as government funding,
collaborations, strategic alliances or licensing arrangements with
third parties. For
example, we have
(i) entered into an Open Market Sale
Agreement with Jefferies LLC, or Jefferies, and filed a related
prospectus supplement pursuant to which we are able
to issue and sell up
$113.0 million of
shares of our common stock through Jefferies as sales agent, and (ii) in January
2022 entered into a stock purchase agreement pursuant to which we
agreed to issue and sell to the investors named therein an
aggregate of 8,747,744 shares of our common stock, par value
$0.0001 per share, at a purchase price of $1.11 per share with
aggregate gross proceeds to us of approximately $9.7
million. During the three months ended March 31,
2022, 3,115,197 shares of our common stock were sold
through the Open Market Sales Agreement for proceeds of $3,518,760,
net of commission. Our cash and
cash equivalents were $16.8
million and total current assets were
$17.8
million at March 31,
2022,
which
will be insufficient to fund our planned operations through one
year of the date that these condensed consolidated financial
statements are available for issuance.
See
Note 1 of our unaudited condensed consolidated financial
statements.
There can be no assurances that we will be
able to secure additional
financing when
needed, or if available, that
it will be sufficient to meet our needs or on favorable
terms.
In order to mitigate the spread of COVID-19, governments have
imposed unprecedented restrictions on business operations, travel,
and gatherings, resulting in a global economic downturn and other
adverse economic and societal impacts, which has had an adverse
impact on our strategic plans, certain of our clinical trial
operations, and our ability to raise additional capital necessary
to continue as a going concern. We had anticipated initiating a
phase 1/2a trial of pepinemab in Alzheimer’s disease in mid-2020
and commenced activating clinical sites to screen and enroll
patients in the second quarter of 2021, which efforts continued
into the second half of 2021. In addition, as discussed above, to
mitigate the impacts of the COVID-19 pandemic, including impacts on
our ability to raise capital and to maintain its personnel, we
applied for and received the PPP Loan. We may experience further
disruptions as a result of the COVID-19 pandemic that could
adversely impact our business, including disruption of research and
clinical development activities, plans for release of data,
manufacturing, supply, and interactions with regulators and other
third parties, and further difficulties in raising additional
capital. The extent to which the COVID-19 pandemic may impact our
business will depend on future developments, which are highly
uncertain and cannot be predicted with confidence.
Financial Overview
Revenue
To date, we have not generated any revenue from product
sales. Our ability to generate revenue and become
profitable depends on our ability to successfully obtain marketing
approval of and commercialize our product candidates. We do not
expect to generate product revenue in the foreseeable future as we
continue our development of, and seek regulatory approvals for, our
product candidates, and potentially commercialize approved
products, if any.
21
Operating Expenses
Research and Development. Research and development
expenses consist primarily of costs for our clinical trials and
activities related to regulatory filings, employee
compensation-related costs, supply expenses, equipment depreciation
and amortization, consulting and other miscellaneous costs. The
following table sets forth the components of our research and
development expenses and the amount as a percentage of total
research and development expenses for the periods
indicated.
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
(in thousands)
|
|
|
%
|
|
|
(in thousands)
|
|
|
%
|
|
Clinical trial costs
|
|
$
|
1,400
|
|
|
|
47
|
%
|
|
$
|
3,690
|
|
|
|
67
|
%
|
Wages, benefits, and related costs
|
|
|
1,026
|
|
|
|
35
|
%
|
|
|
1,042
|
|
|
|
19
|
%
|
Preclinical supplies and equipment
depreciation
|
|
|
395
|
|
|
|
13
|
%
|
|
|
503
|
|
|
|
9
|
%
|
Consulting, non-clinical trial
services, and other
|
|
|
145
|
|
|
|
5
|
%
|
|
|
278
|
|
|
|
5
|
%
|
Total research and development
expenses
|
|
$
|
2,966
|
|