|
|
|
|
Criteria |
Acceptable |
Unacceptable |
|
Excellent |
Good |
Poor |
Vocal cord position |
Abducted |
Intermediate |
Closed/Adducted |
Vocal cord movement |
None |
Moving |
Closing |
Ease of laryngoscopy* |
Easy |
Fair |
Difficult |
Airway reaction |
None |
Diaphragm |
Sustained >10s |
Limb movement |
None |
Slight |
Vigorous |
Viby-Mogensen 1996 |
*Ease of Laryngoscopy |
Scoring Intubation conditions |
-Easy: Jaw relaxed, no resistance to blade in the course of laryngoscopy |
Excellent: All qualities are excellent |
-Fair: Jaw not fully relaxed, slight resistance to blade |
Good: All qualities are either excellent or good |
-Difficult: Poor jaw relaxation, active resistance of the patient to laryngoscopy |
Poor: The presence of a single quality listed under “poor” |
|
Study Demographics
|
|
|
|
|
|
|
Rocuronium |
BX1000 |
|
0.6 mg/kg |
0.15 mg/kg |
0.25 mg/kg |
0.35 mg/kg |
Total |
|
(N=20) |
(N=20) |
(N=20) |
(N=20) |
(N=80) |
Subjects dosed n (%) |
20 (100.0) |
20 (100.0) |
20 (100.0) |
20 (100.0) |
80 (100.0) |
Subjects in Efficacy Evaluation n (%) |
19 (95.0)* |
20 (100.0) |
20 (100.0) |
20 (100.0) |
79 (97.5) |
Mean Age (yrs) |
37 |
38.2 |
40.5 |
39.5 |
38.8 |
n (%) Female |
18 (90.0) |
13 (65.0) |
13 (65.0) |
15 (75.0) |
59 (73.8) |
Race, n (%) |
|
|
|
|
|
White |
19 (95.0) |
19 (95.0) |
20 (100.0) |
19 (95.0) |
19 (95.0) |
Black or African American |
1 (5.0) |
- |
- |
1 (5.0) |
2 (2.5) |
Multiple |
- |
1 (5.0) |
- |
- |
1 (1.3) |
Mean Baseline BMI (kg/m2) |
26.1 |
28.2 |
26.2 |
25.9 |
26.6 |
|
|
|
|
|
|
*1 Subject experienced a delay in intubating condition assessments due to issues with the endotracheal tube |
|
31
Intubating Conditions at 60 Seconds
|
|
|
|
|
|
|
n (%) of Subjects |
|
Rocuronium |
BX1000 |
|
0.6 mg/kg |
0.15 mg/kg |
0.25 mg/kg |
0.35 mg/kg |
Total |
|
(N=19) |
(N=20) |
(N=20) |
(N=20) |
(N=79) |
Excellent or Good |
19 (100.0) |
20 (100.0) |
20 (100.0) |
20 (100.0) |
79 (100.0) |
Poor |
-- |
-- |
-- |
-- |
-- |
Not Done |
1* |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
*1 Subject experienced a delay in intubating condition assessments at 60, 90, and 120 seconds after NMB administration due to issues with the endotracheal tube, and therefore not included in the efficacy analyses |
Adverse Events - ≥5% of Total Population
|
|
|
|
|
|
|
n (%) of Subjects |
|
Rocuronium |
BX1000 |
|
0.6 mg/kg |
0.15 mg/kg |
0.25 mg/kg |
0.35 mg/kg |
Total |
Preferred Term |
(N=20) |
(N=20) |
(N=20) |
(N=20) |
(N=80) |
Subjects with ≥1 TEAE |
12 (60.0) |
11 (55.0) |
9 (45.0) |
9 (45.0) |
41 (51.3) |
Nausea |
5 (25.0) |
5 (25.0) |
2 (10.0) |
2 (10.0) |
14 (17.5) |
Hypotension |
2 (10.0) |
2 (10.0) |
2 (10.0) |
3 (15.0) |
9 (11.3) |
Constipation |
1 ( 5.0) |
1 ( 5.0) |
2 (10.0) |
2 (10.0) |
6 (7.5) |
Hypoxia |
1 ( 5.0) |
1 ( 5.0) |
2 (10.0) |
1 ( 5.0) |
5 (6.3) |
Vomiting |
1 ( 5.0) |
2 (10.0) |
1 ( 5.0) |
-- |
4 (5.0) |
Rash |
3 (15.0) |
-- |
1 ( 5.0) |
-- |
4 (5.0) |
|
|
|
|
|
|
No SAEs have been reported for any treatment group at this time. |
COVID-19 Impact
While the COVID-19 pandemic has stabilized within many global regions, it may cyclically continue to adversely affect our business, financial condition and results of operations. Although the Department of Health and Human Services announced that the federal public health emergency for COVID-19 ended on May 11, 2023, we expect the trends that emerged as a result of the pandemic may continue to result in disruptions to the global economy, as well as businesses and capital markets around the world. While the COVID-19 vaccines have proven effective in reducing the severity and mortality of COVID-19 including the variants that have evolved to date, the emergence of new variants, which could prove resistant to existing vaccines, could again result in major disruptions to businesses and markets worldwide. The extent to which the outbreak may affect our preclinical studies, clinical trials, business, financial condition, and results of operations will depend on future developments, which are uncertain and cannot be predicted at this time.
ANJESO Transfer Agreement
In March 2023, we entered into an Asset Transfer Agreement with Alkermes Pharma Ireland Limited, or Alkermes, or the Transfer Agreement. Under the terms of the Transfer Agreement, we transferred the rights to certain patents, trademarks, equipment, data and other rights related to ANJESO, or the Assets to Alkermes. We also withdrew the New Drug Application, or NDA, related to ANJESO and agreed, if elected by Alkermes at a later date, to transfer such withdrawn NDA to Alkermes at no additional cost.
32
2022 Reduction in Force
Due to our cash position, in March 2022, we implemented a reduction in workforce by approximately 66 employees (representing approximately 80% of our total workforce), including 43 members of our sales force. The reorganization was substantially completed by the end of the second quarter and approximately $4.1 million of charges were incurred for severance and other related costs. The reduction in force was designed to substantially reduce our operational expenses and conserve cash resources. Further, in September 2022, we terminated the remaining dedicated commercial team of 7 employees and incurred a third quarter charge of $0.2 million for severance and other related costs.
Discontinued Operation
Upon executing the Transfer Agreement, we met the criteria for discontinued operations related to our commercial business. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as a discontinued operation. Discontinued operations include results of our commercial business except for certain corporate overhead costs, which are included in continuing operations. See Note 4 to the Consolidated Financial Statements included in this Quarterly Report for additional information.
Financial Overview
Revenue
We sold ANJESO in the U.S. through a single third-party logistics provider, or 3PL, which takes title to and control of the goods and is considered our customer. We recognized revenue from ANJESO product sales at the point the title to the product is transferred to the customer and the customer obtained control of the product. The transaction price that was recognized as revenue for products included an estimate of variable consideration for reserves, which result from discounts, returns, chargebacks, rebates and other allowances that were offered within contracts between us and our end-user customers, wholesalers, group purchasing organizations and other indirect customers. In December 2022, we discontinued the commercialization of ANJESO and expect that the majority of expenses associated with the discontinuation were incurred by the end of the first quarter of 2023.
Cost of Sales
Historically, cost of sales included product costs, manufacturing costs, transportation and freight, royalty expense, qualification costs for a secondary manufacturing suite and indirect overhead costs associated with the manufacturing and distribution of ANJESO including supply chain and quality personnel costs. Cost of sales also included period costs related to certain manufacturing services and inventory adjustment charges. We discontinued commercialization of ANJESO in December 2022. We believe there is very modest inventory held at the wholesaler level and have notified wholesalers through our 3PL that we will accept product returns until June 30, 2023, which has been reserved for as of March 31, 2023.
Research and Development Expenses
Research and development expenses have consisted primarily of costs incurred in connection with the NMB portfolio and in previous years, the FDA required pediatric development of ANJESO activities. These expenses consist primarily of:
•expenses incurred under agreements with investigative sites, consultants and other service providers that conduct or support our clinical and pre-clinical trials;
•the cost of acquiring and manufacturing clinical trial drug supply and related manufacturing services;
•costs related to facilities, depreciation and other allocated expenses;
•costs associated with regulatory activities and responses to the FDA; and
•salaries and related costs for personnel in research and development and pre-commercial regulatory functions.
The majority of our external research and development costs have related to clinical trials, manufacturing of drug supply for pre-commercial products, analysis and testing of product candidates and patent costs. We expense costs related to clinical inventory and pre-commercial inventory until we receive approval from the FDA to market a product, at which time we commence capitalization of costs relating to that product to inventory. Costs related to facilities, depreciation and support are not charged to specific programs. Subsequent to regulatory approval of ANJESO and prior to the withdrawal of the NDA, we allocated or recategorized certain personnel and overhead expenses related to medical affairs, supply chain, quality and regulatory support functions that had previously been recorded within research and development, to cost of sales or selling, general and administrative expenses in support of the commercialization of ANJESO. Pre-commercial activities directly utilizing personnel and overhead expenses from the medical affairs, supply chain, quality and regulatory support function continue to be recorded within research and development.
33
The development of our other product candidates is highly uncertain and subject to a number of risks, including, but not limited to:
•the costs, timing and outcome of regulatory review of a product candidate;
•the duration of clinical trials, which varies substantially according to the type, complexity and novelty of the product candidate;
•substantial requirements on the introduction of pharmaceutical products imposed by the FDA and comparable agencies in foreign countries, which require lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures;
•the possibility that data obtained from pre-clinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity or may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval;
•risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;
•the emergence of competing technologies and products, including obtaining and maintaining patent protections, and other adverse market developments, which could impede our commercial efforts; and
•the other risks disclosed in the sections titled “Risk Factors” of our 2022 Annual Report and this Quarterly Report.
Development timelines, probability of success and development costs vary widely. As a result of the uncertainties discussed above, we will assess our product candidate’s commercial potential and our available capital resources. As a result of these uncertainties surrounding the timing and outcome of any approval, we are currently unable to estimate precisely when, if ever, any of our product candidates will generate revenues and cash flows.
We expect our research and development costs to relate to the development and commercialization scale-up of our NMB product candidate portfolio. We may elect to seek collaborative relationships in order to provide us with a diversified revenue stream and to help facilitate the development and commercialization of our product candidate pipeline.
Selling, General and Administrative Expenses
Selling, general and administrative expenses have consisted of sales and marketing expenses related to ANJESO and general and administrative expenses.
Sales and marketing expenses primarily consisted of compensation and benefits for our sales force and personnel that supported our sales and marketing efforts as well as third party consulting costs for the promotion and sale of ANJESO. In addition, sales and marketing expenses included expenses related to communicating the clinical and economic benefits of ANJESO and educational programs for our indirect customers.
General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance and information technology functions, and additionally in the prior year, the commercial portion of the medical affairs and regulatory functions. General and administrative expenses also include public company costs, directors and officer’s insurance, professional fees for legal, including patent-related expenses, consulting, auditing, and tax services.
Our selling, general and administrative expenses decreased in the quarter ended March 31, 2023 as a result of a reduction in personnel and public company costs, and we expect no future selling and commercial costs at this time. General and administrative expenses from continuing operations will remain relatively constant in the near term.
Change in Fair Value of Contingent Consideration
In connection with the Separation, we entered into an Assignment and a Partial Assignment, Assumption and Bifurcation Agreement, or the Alkermes Agreements, relating to the Purchase and Sale Agreement for the acquisition of certain assets, including the worldwide rights to injectable meloxicam and Societal CDMO’s development, formulation and manufacturing business from Alkermes, or the Alkermes Transaction, as amended in December 2018 and August 2020. Pursuant to the Alkermes Agreements, we were required to pay up to $140.0 million in milestone payments, including $10.0 million that was paid during 2019, $3.6 million paid in 2020, another $1.4 million paid in 2021, and $45.0 million over seven years beginning one year after approval, of which the first payment was made in the first quarter of 2021 and a partial payment was made on the second payment of $1.2 million, as well as net sales milestones and a royalty percentage of future product net sales related to injectable meloxicam between 10% and 12% (subject to a 30% reduction when no longer covered by patent), which was paid quarterly. The estimated fair value of the initial $54.6 million payment obligation was recorded as part of the purchase price for the Alkermes Transaction. We reevaluated the fair value each subsequent period.
As noted above, in March 2023, we entered into the Transfer Agreement. Under the terms of the Transfer Agreement, we transferred the rights to certain patents, trademarks, equipment, data and other rights related to ANJESO, or the Assets, to Alkermes. We also
34
withdrew the NDA related to ANJESO and agreed, if elected by Alkermes at a later date, to transfer such withdrawn NDA to Alkermes at no additional cost.
Additionally, under the Transfer Agreement, we granted Alkermes a non-exclusive, perpetual and irrevocable, royalty-free and fully paid-up worldwide license, to the additional intellectual property owned by the Company necessary to or useful to exploit ANJESO. In consideration of the transfer of the Assets, the parties agreed to the termination of (i) the Purchase and Sale Agreement, dated March 7, 2015 by and among Alkermes, the Company and the other parties thereto, or as amended, the PSA, (ii) the Asset Transfer and License Agreement, dated April 10, 2015 by and among Alkermes, the Company and the other parties thereto, or as amended, the ATLA; and (iii) the Development, Manufacturing and Supply Agreement, dated as of July 10, 2015 by and between the Company and Alkermes, or as amended, the Manufacturing Agreement, between the parties related to ANJESO (the PSA, ATLA and Manufacturing Agreement are collectively referred to herein as the ANJESO Agreements). In connection with the termination of the ANJESO Agreements, no further payments of any kind pursuant to the ANJESO Agreements will be payable by us to Alkermes and a result, we reversed the balance of contingent consideration recorded on our balance sheet as of March 31, 2023 of $19,900 within Income from discontinued operation on our Consolidated Statements of Operations.
Interest Expense
Interest expense for the periods presented primarily includes interest expense incurred on our Credit Agreement with MAM Eagle Lender, the amortization of related financing costs, and in the current year the resulting loss on extinguishment of debt from Amendment No. 5 of the MAM lender agreement.
Income Taxation
We maintained a valuation allowance against our deferred tax assets as of March 31, 2023 and December 31, 2022.
Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
(amounts in thousands) |
|
Operating expenses: |
|
|
|
|
|
|
Research and development |
|
|
2,917 |
|
|
|
694 |
|
Selling, general and administrative |
|
|
1,771 |
|
|
|
6,934 |
|
Change in warrant valuation |
|
|
— |
|
|
|
(5 |
) |
Total operating expenses |
|
|
4,688 |
|
|
|
7,623 |
|
Operating loss from continuing operations |
|
|
(4,688 |
) |
|
|
(7,623 |
) |
Other expense: |
|
|
|
|
|
|
Other expense, net |
|
|
(2,698 |
) |
|
|
(571 |
) |
Net loss from continuing operations |
|
|
(7,386 |
) |
|
|
(8,194 |
) |
Income (loss) on discontinued operation |
|
|
18,790 |
|
|
|
(4,615 |
) |
Net income (loss) |
|
$ |
11,404 |
|
|
$ |
(12,809 |
) |
Research and Development. Our research and development expenses were $2.9 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively. The increase of $2.2 million was primarily due to an increase in clinical and preclinical trials costs associated with our NMB program of $1.7 million and an increase in general expenses, including consulting and other outside service expenses, of $0.5 million.
Selling, General and Administrative. Our selling, general and administrative expenses were $1.8 million and $6.9 million for the three months ended March 31, 2023 and 2022, respectively. The decrease of $5.1 million was primarily a result of a reduction in personnel costs of $3.5 million, a decrease in public company costs of $0.7 million, a decrease in consulting expenses of $0.5 million, a decrease of $0.2 million in patent legal expenses and a decrease of $0.3 million in other costs.
Other Expense, net. Other expense was $2.7 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. The increase in other expense of $2.1 million was primarily due to the loss on extinguishment of debt as a result of the fifth amendment to the MAM credit agreement of $2.1 million.
35
Liquidity and Capital Resources
As of March 31, 2023, we had $3.8 million in cash and cash equivalents.
On May 1, 2023 we closed a best efforts public offering of: (i) 1,326,175 shares of our common stock, par value $0.01 per share and accompanying Series A-5 warrants to purchase 1,326,175 shares of Common stock and Series A-6 warrants to purchase 1,326,175 shares of common stock, at a combined public offering price of $1.15 per share and accompanying Series A warrants and (ii) Series D pre-funded warrants to purchase 2,152,087 shares of common stock and accompanying Series A-5 warrants to purchase 2,152,087 shares of common stock and Series A-6 warrants to purchase 2,152,087 shares of common stock at a combined public offering price of $1.14 per Series D pre-funded warrant and accompanying Series A warrants, which is equal to the public offering price per share of Common Stock and accompanying Series A warrants less the $0.01 per share exercise price of each such Series D pre-funded warrant. The Series A warrants have an exercise price of $1.15 per share of common stock. The Series A-5 warrants are exercisable upon issuance and expire on May 1, 2028. The Series A-6 warrants are exercisable upon issuance and expire on November 1, 2024. Subject to certain ownership limitations described in the Series D pre-funded warrants, the Series D pre-funded warrants were immediately exercisable and were fully exercised at a nominal consideration of $0.01 per share of common stock shortly after closing. As compensation to H.C. Wainwright & Co., LLC, as the exclusive placement agent in connection with the offering, we paid the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. We also issued to designees of the placement agent warrants to purchase up to 208,696 shares of common stock. These warrants have substantially the same terms as the Series A warrants, except that the placement agent warrants have an exercise price equal to $1.4375 per share and expire on April 26, 2028.
On December 6, 2022 we closed a best efforts public offering of: (i) 54,787 shares of our common stock, par value $0.01 per share and accompanying Series A-3 warrants to purchase 54,787 shares of common stock and Series A-4 warrants to purchase 54,787 shares of common stock, at a combined public offering price of $4.795 per share and accompanying series A warrants and (ii) series C pre-funded warrants to purchase 988,000 shares of common stock and accompanying series A-3 warrants to purchase 988,000 shares of common stock and series A-4 warrants to purchase 988,000 shares of common stock at a combined public offering price of $4.785 per series C pre-funded warrant and accompanying series A warrants, which was equal to the public offering price per share of common stock and accompanying series A warrants less the $0.01 per share exercise price of each such series C pre-funded warrant. The series A warrants have an exercise price of $4.50 per share of common stock. The series A-3 warrants are exercisable upon issuance and expire on December 6, 2027. The series A-4 warrants are exercisable upon issuance and expire on January 8, 2024. The exercise price of the series A warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the Series A Warrants. The Series C prefunded warrants have been exercised in full as of December 31, 2022. As compensation to H.C. Wainwright & Co., LLC as the exclusive placement agent in connection with the offering, we paid the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. We also issued to designees of the placement agent warrants to purchase up to 62,567 shares of common stock. The Placement Agent Warrants have substantially the same terms as the series A warrants, except that the placement agent warrants have an exercise price equal to $5.99375 per share and expire on December 2, 2027. Net proceeds after deducting underwriting discounts and commissions and offering expenses, was $4.0 million.
On September 1, 2022, we closed a best efforts public offering of: (i) 188,872 shares of its common stock, par value $0.01 per share and accompanying Series A-1 warrants to purchase 188,872 shares of Common stock and Series A-2 warrants, and together with the Series A-1 warrants to purchase 188,872 shares of Common Stock, at a combined public offering price of $21.00 per share and Series A warrants and (ii) Series B pre-funded warrants to purchase 106,607 shares of Common Stock and accompanying Series A-1 warrants to purchase 106,607 shares of Common Stock and Series A-2 warrants to purchase 106,607 shares of Common stock at a combined public offering price of $20.60 per Series B pre-funded warrant and Series A warrants, which is equal to the public offering price per share of Common Stock and accompanying Series A warrants less the $0.01 per share exercise price of each such Series B pre-funded warrant. The Series A warrants have an exercise price of $21.00 per share of Common Stock. The Series A-1 warrants are exercisable upon issuance and will expire five years from the date of issuance. The Series A-2 warrants are exercisable upon issuance and will expire thirteen months from the date of issuance. The exercise price of the Series A warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the Series A warrants. Subject to certain ownership limitations, the Series B pre-funded warrants were immediately exercisable and were exercised at a nominal consideration of $0.01 per share of Common Stock upon the closing of the transaction. As compensation to H.C. Wainwright & Co., LLC, as the exclusive placement agent in connection with the Offering, we paid a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. We also issued to designees of the placement agent warrants to purchase up to 17,728 shares of common stock. The placement agent warrants have substantially the same terms as the Series A warrants, except that the placement agent warrants have an exercise price equal to $26.25 per share and expire on August 29, 2027. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $5.0 million.
On May 17, 2022, we closed a registered direct offering of 41,152 shares of our common stock, par value $0.01 per share, and in a concurrent private placements, warrants exercisable for up to an aggregate of 41,152 shares of common stock at a combined offering price of $48.60 per share and associated warrant. The warrants have an exercise price of $43.60 per share. Each warrant is exercisable for one share of common stock and was exercisable immediately upon issuance. The warrants have a term of five years from the issuance date. As compensation to H.C. Wainwright & Co., LLC as placement agent in connection with the offering, we agreed to pay to the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering and certain expenses. We also issued to designees of the placement agent warrants to purchase up
36
to 6.0% of the aggregate number of shares of common stock sold in the transactions, or warrants to purchase up to 2,469 shares of common stock. The placement agent warrants have substantially the same terms as the warrants, except that the placement agent warrants have an exercise price equal to 125% of the offering price per share (or $60.75 per share). The placement agent warrants will expire on May 17, 2027. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $1.7 million.
On March 1, 2022, we closed an underwritten public offering of 45,791 shares of common stock, pre-funded warrants to purchase 41,929 shares of common stock at an exercise price of $0.01 per share and warrants to purchase 87,719 shares of common stock at an exercise price of $130.00 per share, as well as up to 13,158 additional shares of common stock and/or additional warrants to purchase up to 13,158 shares of common stock which may be purchased pursuant to a 30-day option to purchase additional securities granted to H.C. Wainwright & Co., LLC (the “Underwriter”) by us. The public offering price for each share of common stock and accompanying warrant to purchase one share of common stock was $114.00, and the public offering price for each pre-funded warrant and accompanying warrant was $113.60. As compensation to the Underwriter, we agreed to pay to the Underwriter a cash fee of 7.0% of the gross proceeds, plus a cash management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. We also issued to designees of the Underwriter warrants to purchase 5,263 shares of common stock at an exercise price of $142.50 per share. On February 28, 2022, the Underwriter partially exercised its option to purchase an additional 2,847 warrants. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $8.8 million.
On May 29, 2020, we entered in a $50.0 million Credit Agreement with MAM Eagle Lender, pursuant to which we have drawn $10.0 million as of the date of this Quarterly Report and may draw upon four additional tranches of term loans. The Tranche Two Loans in an amount not to exceed $5.0 million may be drawn upon on or before August 29, 2021 provided that we generate at least $5.0 million in net revenue in the three consecutive calendar months immediately preceding the date such Tranche Two Loans are funded. The Tranche Two Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Three Loans, Tranche Four Loans, or Tranche Five Loans, as applicable, provided that the Tranche Two Loans may not be drawn more than once. The Tranche Three Loans in an amount not to exceed $5.0 million may be drawn upon on or before November 29, 2021 provided that we generate at least $10.0 million in net revenue in the three consecutive calendar months immediately preceding such date such Tranche Three Loans are funded. The Tranche Three Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Four Loans or Tranche Five Loans, as applicable, provided that the Tranche Three Loans may not be drawn more than once. The Tranche Four Loans in an amount not to exceed $10.0 million may be drawn upon, subject to the consent of the Lenders, on or before August 29, 2022 provided that we generate at least $20.0 million in net revenue in the three consecutive calendar months immediately preceding the date such Tranche Four Loans are funded. The Tranche Four Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Five Loans provided that the Tranche Four Loans may not be drawn more than once. The Tranche Five Loans in an amount not to exceed $20.0 million may be drawn upon, subject to the consent of the Lenders, on or before March 1, 2023 provided that we generate at least $100.0 million in net revenue in the twelve consecutive calendar months immediately preceding the date such Tranche Five Loans are funded.
On August 1, 2022, we entered into Amendment No. 1 and Waiver to Credit Agreement, or the Amendment, with MAM Eagle Lender. Pursuant to the terms of the Amendment, the lenders waived any default under the credit agreement (including the imposition of a default interest rate with respect to the default) resulting from our failure to comply with the minimum cash covenant, or the Minimum Liquidity Covenant, which requires us to maintain at least $5.0 million in a liquidity account. In addition, the Amendment, among other items, (i) provides that 30% of any cash proceeds received by us from certain potential strategic licensing transactions shall be used to prepay amounts outstanding under the credit agreement; and (ii) decreases the amount of cash we are required to maintain pursuant to the Minimum Liquidity Covenant to $3.0 million for a period beginning on August 1, 2022, and ending on August 31, 2022, at which point the amount required pursuant to the Minimum Liquidity Covenant shall increase to $5.0 million.
On October 24, 2022, we entered into Amendment No. 2 and Waiver to Credit Agreement with MAM Eagle Lender. Pursuant to the terms of the amendment, the Credit Agreement is amended such that we must repay the principal thereunder (i) on the first business day of each month until the Interest Payment Date on December 1, 2022, in equal monthly installments of principal based on an amortization schedule of 36 months, (ii) an additional payment of principal in the amount of $0.3 million prior to December 31, 2022 and (iii) commencing on the Interest Payment Date on January 2, 2023 and on each Interest Payment Date thereafter until the obligations have been repaid in full, the principal amount of $0.5 million. In addition, the amendment decreases the minimum cash covenant we are required to maintain under the Credit Agreement to (i) $3.0 million for the period beginning on October 1, 2022, and ending on November 30, 2022, (ii) $4.5 million for the period beginning on December 1, 2022, and ending on February 28, 2023, and (iii) $4.0 million from and after March 1, 2023. Further, we have agreed that prior to December 31, 2022, we shall not, without the prior written consent of the Lenders, make or permit any payment under its agreements with Alkermes. In consideration for the amendment, we paid the Agent an amendment fee of $0.01 million and the Lender an amendment fee of $0.2 million.
On December 1, 2022, we entered into Amendment No. 3 to Credit Agreement with MAM Eagle Lender. Pursuant to the terms of the amendment, the amendment decreases the minimum cash covenant we are required to maintain under the credit agreement to (a) from October 1, 2022 to December 6, 2022 to not be less than $3.0 million at any time, (b) from December 7, 2022 to February 28, 2023 to not be less than $4.5 million, and (c) from and after March 1, 2023 to not be less than $4.0 million.
In January 2023, we entered into Amendment No. 4 to Credit Agreement with MAM Eagle Lender. Pursuant to the terms of the amendment, the credit agreement was amended such that we must make (i) a payment of principal in the amount of $0.5 million on
37
January 3, 2023, (ii) a payment of principal in the amount of $0.3 million on February 1, 2023 and March 1, 2023, and (iii) on the interest payment date on April 3, 2023 and on each interest payment date thereafter until the obligations are repaid in full, a payment in the principal amount of $0.5 million. In addition, the amendment decreases the minimum cash covenant we are required to maintain under the credit agreement, or the Minimum Liquidity Covenant, to (i) $3.0 million for the period beginning on October 1, 2022, and ending on December 6, 2022, (ii) $4.5 million for the period beginning on December 7, 2022, and ending on January 10, 2023, (iii) $2.225 million for the period beginning on January 11, 2023, and ending on February 28, 2023, and (iv) $3.0 million from and after March 1, 2023. Further, we have agreed that prior to April 30, 2023, we will not, without the prior written consent of MAM Eagle Lender, make or permit any payment under our agreements with Alkermes.
On March 29, 2023, we entered into Amendment No. 5 and Consent to Credit Agreement whereby MAM Eagle Lender consented to the transactions contemplated by the Transfer Agreement (as defined above) and agreed to release and discharge any liens granted or held by the lenders in respect of the assets discussed in the Transfer Agreement. The parties also agreed to, among other things, amend the minimum liquidity covenants under the Credit Agreement to require that we maintain $2.5 million of liquidity at all times.
We anticipate that our principal uses of cash in the future will be primarily to fund our operations, pipeline development activities, working capital needs, and other general corporate purposes.
We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. Based on our available cash as of March 31, 2023, we will need to raise additional capital in the next twelve months to continue as a going concern.
Sources and Uses of Cash
Cash used in operations was $3.9 million and $5.8 million for the three months ended March 31, 2023 and 2022, respectively, which represents our operating income (losses) less our non-cash items including: stock-based compensation, non-cash interest expense, depreciation, loss on extinguishment of debt, and changes in warrant valuations, as well as changes in operating assets and liabilities.
There was $3.2 million of net cash provided by financing activities in the three months ended March 31, 2023 consisting of proceeds of $4.3 million from warrant exercises, partially offset by $1.1 million in long-term debt principal payments. There was $9.1 million of net cash provided by financing activities for the three months ended March 31, 2022 consisting primarily of net proceeds of $9.1 million from public offerings of common stock and warrants.
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:
•our relationships with third parties, licensors, collaborators, and our employees;
•our ability to execute our strategic priorities;
•the scope, progress, results, and costs of development for our product candidates;
•the cost, timing and outcome of regulatory review of our product candidates;
•the cost of manufacturing scale-up, acquiring drug product and other capital equipment for our product candidates;
•the extent to which we in-license, acquire or invest in products, businesses and technologies;
•our ability to raise additional funds through equity or debt financings or the sale of certain assets;
•our ability to maintain listing on the Nasdaq Capital Market;
•our ability to comply with our debt covenants;
•our ability to achieve certain milestones to access and draw down additional tranches of debt under the Credit Agreement;
•the extent to which holders of our warrants exercise their warrants resulting in the payment of cash proceeds to us;
•the costs of preparing, submitting and prosecuting patent applications and maintaining, enforcing and defending intellectual property claims; and
•the effect of any changes in our effective tax rate due to changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, tax impacts and net operating loss utilization related to the Separation and changes in tax laws.
We may use existing cash and cash equivalents on hand, debt, equity financing, sale of assets or out-licensing revenue or a combination thereof to fund our operations or product acquisitions. If we increase our debt levels, we might be restricted in our ability to raise additional capital and might be subject to financial and restrictive covenants. Our shareholders may experience dilution as a result of the issuance of additional equity or debt securities. This dilution may be significant depending upon the amount of equity or debt securities that we issue and the prices at which we issue any securities.
38
Contractual Commitments
The table below reflects our contractual commitments as of March 31, 2023:
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|
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|
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|
|
|
|
Payments Due by Period (in 000s) |
|
Contractual Obligations |
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Total |
|
|
Less than 1 year |
|
|
1-3 years |
|
|
3-5 years |
|
|
More than 5 years |
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Debt Obligations (1): |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
$ |
6,656 |
|
|
$ |
6,000 |
|
|
$ |
656 |
|
|
$ |
— |
|
|
$ |
— |
|
Interest on Debt |
|
|
795 |
|
|
|
536 |
|
|
|
259 |
|
|
|
— |
|
|
|
— |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase Obligations (2): |
|
$ |
64 |
|
|
$ |
64 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Operating Leases (3) |
|
|
1,400 |
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|
|
332 |
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|
|
558 |
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|
|
510 |
|
|
|
— |
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Other Long-Term Liabilities: |
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Other License Commitments and Milestone payments (4) |
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|
16,395 |
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|
|
80 |
|
|
|
190 |
|
|
|
125 |
|
|
|
— |
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Employment Agreements (5) |
|
|
927 |
|
|
|
618 |
|
|
|
309 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total Contractual Obligations |
|
$ |
26,237 |
|
|
$ |
7,630 |
|
|
$ |
1,972 |
|
|
$ |
635 |
|
|
$ |
— |
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(1)Debt obligations consist of principal, an exit fee of 2.5% of that principal and interest on the $6.7 million outstanding term loan under our Credit Agreement. In accordance with U.S. GAAP, the future interest obligations are not recorded on our Consolidated Balance Sheet. See Note 10 to the Consolidated Financial Statements included in this Quarterly Report.
(2)These obligations consist of cancelable and non-cancelable purchase commitments related to development activities and other goods or services. In accordance with U.S. GAAP, these obligations are not recorded on our Consolidated Balance Sheets. See Note 11(c) to the Consolidated Financial Statements included in this Quarterly Report.
(3)We have become party to certain operating leases for the leased space in Malvern, Pennsylvania, and Dublin, Ireland, as well as for office equipment, for which the minimum lease payments are presented. See Note 8 to the Consolidated Financial Statements included in this Quarterly Report.
(4)We license the neuromuscular blocking agents, or NMBs, from Cornell University pursuant to a license agreement under which we are obligated to make annual license maintenance fee payments, milestone payments and patent cost payments and to pay royalties on net sales of the NMBs. The amount reflects only payment obligations that are fixed and determinable. We are unable to reliably estimate the timing of certain of these payments totaling a maximum of $16,000 across three compounds because they are dependent on the type and complexity of regulatory filing approvals in the U.S. and Europe and the number of product candidates approved, which have not been established, and as such are only included in the total. In accordance with U.S. GAAP, certain of these obligations are not recorded on our Consolidated Balance Sheets. See 11(a) to the Consolidated Financial Statements included in this Quarterly Report.
(5)We have entered into an employment agreement with one of our named executive officers. As of March 31, 2023, this employment agreement provided for, among other things, annual base salaries in an aggregate amount of not less than this amount, from that date through September 2024. In accordance with U.S. GAAP, these obligations are not recorded on our Consolidated Balance Sheets. See Note 11(d) to the Consolidated Financial Statements included in this Quarterly Report.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2022 Annual Report. In the three months ended March 31, 2023, there were no significant changes to the application of critical accounting policies previously disclosed in our 2022 Annual Report.