Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the corresponding notes included in this Quarterly Report on Form 10-Q, as well as the audited condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those referenced or set forth under “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are a biopharmaceutical company on a mission to develop treatments for serious diseases. Zagociguat is a pioneering CNS-penetrant sGC stimulator that has shown rapid improvements across a range of endpoints reflecting multiple domains of disease activity, including mitochondrial disease-associated biomarkers. sGC stimulators are small molecules that act synergistically with NO as positive allosteric modulators of sGC to boost production of cGMP. cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions such as mitochondrial function, neuronal function, inflammation, and vascular dynamics.
We operate in one reportable business segment—human therapeutics.
Financial Overview
Research and Development Expense. Research and development expenses are incurred in connection with the discovery and development of our product candidates. These expenses consist primarily of the following costs: compensation, benefits and other employee-related expenses, research and development related facilities, third-party contracts relating to nonclinical study and clinical trial activities. All research and development expenses are charged to operations as incurred.
Zagociguat is an orally administered CNS-penetrant sGC stimulator. NO-sGC-cGMP is a fundamental signaling network, including in the brain where it is critical to basic CNS functions. Deficient NO-sGC-cGMP signaling is believed to play an important role in the pathogenesis of many neurological disorders. As an sGC stimulator, zagociguat amplifies endogenous NO signaling by acting as a positive allosteric modulator to sensitize the sGC enzyme to NO, and increase the production of cGMP. By compensating for deficient NO-sGC-cGMP signaling, zagociguat may have broad therapeutic potential as a treatment for people with serious diseases.
In January 2020, we announced positive results from our Phase 1 first-in-human study that provided the first clinical data supporting the development of zagociguat. The results from this study indicate that zagociguat was well tolerated. Pharmacokinetic data, obtained from both blood and cerebral spinal fluid, support once-daily dosing with or without food and demonstrated zagociguat penetration of the blood-brain-barrier with concentrations in the CSF expected to be pharmacologically active.
In October 2020, we announced positive topline results from our zagociguat Phase 1 translational pharmacology study in healthy elderly participants. Treatment with zagociguat for 15 days in this 24-subject study confirmed and extended results seen in the earlier first-in-human Phase 1 study: once-daily oral treatment demonstrated blood-brain barrier penetration with expected CNS exposure and target engagement. Results also showed significant improvements in neurophysiological and objective performance measures as well as decreases in inflammatory biomarkers associated with aging and neurodegenerative diseases. Zagociguat was safe and generally well tolerated in the study. These results, together with nonclinical data, support continued development of zagociguat as a potential new medicine for serious CNS diseases.
In June 2022, we announced positive topline clinical data for zagociguat in our signal-seeking clinical study for the potential treatment of MELAS. In this open-label, single-arm study of the oral, once-daily sGC stimulator in eight adults aged 18 or older with MELAS, improvements were seen across a range of endpoints reflecting multiple domains of disease activity, including mitochondrial disease-associated biomarkers such as
22
lactate and GDF-15, a broad panel of inflammatory biomarkers, cerebral blood flow, and functional connectivity between neural networks. These positive effects after 29 days of dosing were supported by correlations among several endpoints with each other and with zagociguat plasma concentrations. Zagociguat was well tolerated with no serious or severe adverse events and no events leading to discontinuation. Pharmacokinetics were consistent with the Phase 1 studies in healthy volunteers. The positive data from this study supports the potential of zagociguat to provide therapeutic benefit to people living with mitochondrial diseases, including MELAS.
In July 2022, we announced positive topline data from our signal-seeking clinical study of zagociguat for the potential treatment of CIAS. Data from the 14-day, double blind, randomized, placebo-controlled, multiple-ascending-dose study in 48 adults aged 18-50 with stable schizophrenia on a stable, single, atypical antipsychotic regimen demonstrated that once-daily zagociguat was safe and well tolerated, with no reports of serious adverse events, severe adverse events, or treatment discontinuation due to adverse events. We further announced that study data demonstrated a strong effect on cognitive performance after two weeks of 15mg once-daily dosing and that positive movement on inflammatory biomarkers was also observed. These signals on exploratory endpoints are consistent with the pro-cognitive and anti-inflammatory effects of zagociguat observed in preclinical studies and prior clinical trials and support the further development of oral, once-daily zagociguat.
In October 2022, the WHO International Nonproprietary Names committee and the United States Adopted Name Council selected zagociguat as a nonproprietary name for CY6463.
In March 2023, we announced that given the significant capital and capabilities necessary to ensure that the MELAS Phase 2b study is executed efficiently and with the highest quality, and the currently unfavorable capital market conditions, we are actively evaluating the best combination of capital, capabilities, and transactions available to us to advance the development of zagociguat and our other clinical development candidates and to maximize shareholder value.
On March 31, 2023, we entered into a stock purchase agreement with the Company’s Chief Executive Office ("CEO") pursuant to which the CEO will make an equity investment in the Company of $5 million in cash for common stock or nonvoting convertible preferred stock of the Company, the purchase price, consistent with Nasdaq rules, to be at or above the market price at the time of signing that agreement. The closing of the equity investment will take place six business days after the signing of the Asset Purchase Agreement, or May 11, 2023.
On May 11, 2023, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with an investor group which includes the CEO, JW Celtics Investment Corp. (“Buyer Parent”) and JW Cycler Inc. (“Buyer”). Pursuant to the terms of the Asset Purchase Agreement and subject to the approval by Company's shareholders, the Company will receive proceeds of $8 million as cash consideration, reimbursement for certain operating expenses related to zagociguat and CY3018 for the period between signing and closing of the transaction and 10% of all of Buyer’s Parent outstanding equity securities upon the successful closing of the transaction.
On May 11, 2023, we announced topline data from our signal- seeking clinical study of zagociguat for the potential treatment of Alzheimer's disease with vascular pathology ("ADv"), which study was supported in part by a $2 million grant from the Alzheimer's Association’s Part the Cloud-Gates Partnership Grant Program (the "PTC Grant"). This exploratory, randomized, placebo-controlled, study of oral once-daily zagociguat was designed to evaluate safety, tolerability, and pharmacokinetics as well as explore the impact of zagociguat on biomarkers and cognitive performance over a twelve-week dosing period. The total number of enrolled participants was capped at 12 participants due to challenges associated with enrollment. Data from this study show that the safety and tolerability of profile once-daily zagociguat was consistent with prior studies. Given the small number of participants we are unable to draw any conclusions from the data generated in the study.
CY3018 is a CNS-targeted sGC stimulator in preclinical development that preferentially localizes to the brain and has a pharmacology profile that suggests its potential for the treatment of neuropsychiatric diseases and disorders.
Praliciguat is an orally administered, once-daily systemic sGC stimulator. On June 3, 2021, we entered into a license agreement with Akebia relating to the exclusive worldwide license to Akebia of our rights to the
23
development, manufacture, medical affairs and commercialization of pharmaceutical products containing praliciguat and other related products and forms, thereof enumerated in such agreement. Cyclerion is eligible to receive up to $585 million in total potential future development, regulatory, and commercialization milestone payments. Cyclerion is also eligible to receive tiered, sales-based royalties ranging from single-digit to high-teen percentages.
Olinciguat is an orally administered, once-daily, vascular sGC stimulator that was evaluated in a Phase 2 study of participants with sickle cell disease. We released topline results from this study in October 2020. We intend to out-license olinciguat to an entity with strong cardiovascular and/or cardiopulmonary capabilities.
The following table summarizes our research and development expenses, employee and facility related costs allocated to research and development expense, and discovery and pre-clinical phase programs, for the three months ended March 31, 2023 and 2022. The product pipeline expenses relate primarily to external costs associated with nonclinical studies and clinical trial costs, which are presented by development candidates.
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Three Months Ended March 31, |
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|
2023 |
|
|
2022 |
|
|
|
(in thousands) |
|
Product pipeline external costs: |
|
|
|
|
|
|
Zagociguat |
|
|
2,294 |
|
|
|
4,452 |
|
CY3018 |
|
|
58 |
|
|
|
933 |
|
Discovery research |
|
|
30 |
|
|
|
178 |
|
Total product pipeline external costs |
|
|
2,382 |
|
|
|
5,563 |
|
Personnel and related internal costs |
|
|
1,073 |
|
|
|
3,284 |
|
Facilities and other |
|
|
318 |
|
|
|
896 |
|
Total research and development expenses |
|
$ |
3,773 |
|
|
$ |
9,743 |
|
Securing regulatory approvals for new drugs is a lengthy and costly process. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product candidate development efforts and our business overall.
Given the inherent uncertainties of pharmaceutical product development, we cannot estimate with any degree of certainty how our programs will evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them. As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently unable to estimate precisely when, if ever, our discovery and development candidates will be approved. We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data.
The successful development of our product candidates is highly uncertain and subject to a number of risks including, but not limited to:
•There is substantial doubt regarding our ability to continue as a going concern. We will need to raise additional funding, which may not be available on acceptable terms, or if at all. Failure to obtain necessary capital may force us to delay, limit or terminate our development efforts or other operations.
•Cyclerion works closely with its clinical trial sites and investigators to deliver trials in a manner consistent with the safety of study participants and healthcare professionals.
•The duration of clinical trials may vary substantially according to the type and complexity of the product candidate and may take longer than expected.
•The United States FDA and comparable agencies outside the United States. impose substantial and varying requirements on the introduction of therapeutic pharmaceutical products, which typically require lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures.
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•Data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity. Data obtained from these activities also are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.
•The duration and cost of discovery, nonclinical studies and clinical trials may vary significantly over the life of a product candidate and are difficult to predict.
•The costs, timing and outcome of regulatory review of a product candidate may not be favorable, and, even if approved, a product may face post-approval development and regulatory requirements.
•The emergence of competing technologies and products and other adverse market developments may reduce or eliminate the potential value of our pipeline.
•The continuing impact of COVID-19, which could continue to adversely affect our programs and operations, including our development activities, corporate development, and other activities.
As a result of the factors listed in the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and elsewhere in this Quarterly Report on Form 10-Q, we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates, including as licensed to third parties, or when, or to what extent, we may generate revenues from the commercialization and sale of our product candidates. Development timelines, probability of success and development costs vary widely. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the data from the studies of each product candidate, the competitive landscape and ongoing assessments of such product candidate’s commercial potential.
General and Administrative Expense. General and administrative expenses consists primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, business development, and human resource functions. Other costs include the legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting and legal services. We record all general and administrative expenses as incurred.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with GAAP. The preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of expenses during the reported periods. We base our estimates on our historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from our estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.
We believe that our application of accounting policies requires significant judgments and estimates on the part of management and is the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 2, Summary of Significant Accounting Policies, of the consolidated financial statements elsewhere in this Quarterly Report on Form 10-Q.
All research and development expenses are expensed as incurred. We defer and capitalize nonrefundable advance payments we make for research and development activities until the related goods are received or the related services are performed. A discussion of our critical accounting policies and estimates may be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading Critical Accounting Policies and Estimates.
25
Results of Operations
The revenue and expenses reflected in the consolidated financial statements may not be indicative of revenue and expenses that will be incurred by us in the future. The following discussion summarizes the key factors we believe are necessary for an understanding of our consolidated financial statements.
Revenues and Expenses
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|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
|
(dollars in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from development agreement |
|
|
— |
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|
|
225 |
|
|
|
(225 |
) |
|
|
(100 |
)% |
Revenue from grants |
|
|
— |
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|
|
486 |
|
|
|
(486 |
) |
|
|
(100 |
)% |
Total revenues |
|
|
— |
|
|
|
711 |
|
|
|
(711 |
) |
|
|
(100 |
)% |
Cost and expenses: |
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|
|
|
|
|
|
|
|
Research and development |
|
|
3,773 |
|
|
|
9,743 |
|
|
|
(5,970 |
) |
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|
(61 |
)% |
General and administrative |
|
|
3,269 |
|
|
|
3,952 |
|
|
|
(683 |
) |
|
|
(17 |
)% |
Total cost and expenses |
|
|
7,042 |
|
|
|
13,695 |
|
|
|
(6,653 |
) |
|
|
(49 |
)% |
Loss from operations |
|
|
(7,042 |
) |
|
|
(12,984 |
) |
|
|
5,942 |
|
|
|
(46 |
)% |
Interest and other income (expenses), net |
|
|
88 |
|
|
|
6 |
|
|
|
82 |
|
|
|
1367 |
% |
Net loss |
|
$ |
(6,954 |
) |
|
$ |
(12,978 |
) |
|
$ |
6,024 |
|
|
|
(46 |
)% |
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Revenues. The decrease in revenue of approximately $0.7 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, can be attributed to the revenue from the PTC Grant and the Akebia Supply Agreement recognized in 2022.
Research and development expense. The decrease in research and development expense of approximately $6.0 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was driven by a decrease of approximately $2.2 million in external research costs related to the completion of the zagociguat clinical trials in CIAS and MELAS in 2022. a decrease of approximately $0.9 million for CY3018 costs, a decrease of approximately $0.1 million in discovery research, a decrease of approximately $1.6 million in other employee-related expenses primarily due to the workforce reduction in November 2022, a decrease of approximately $0.6 million in non-cash stock-based compensation, and a decrease of approximately $0.6 million in professional services.
General and administrative expense. The decrease in general and administrative expenses of approximately $0.7 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by a decrease in non-cash stock-based compensation.
Interest and other income (expenses), net. Interest and other income (expenses), net increased by approximately $0.1 million for the three months ended March 31, 2023, compared to the three months ended March 31, 2022 due to an increase in interest income driven by higher interest rates.
Liquidity and Capital Resources
On September 3, 2020, the Company entered into the Sales Agreement with Jefferies with respect to the ATM Offering under the Shelf. Under the ATM Offering, the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million through Jefferies as its sales agent. The Company will pay Jefferies cash commissions of 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement. The Company has sold 3,353,059 shares of its common stock for net proceeds of $12.5 million under the ATM Offering since entering into the Sales Agreement, with no shares of common stock issued or sold under the ATM Offering during the three months ended March 31, 2023.
On June 7, 2021, we closed on a private placement of 5,735,988 shares of our common stock, pursuant to a Common Stock Purchase Agreement, for total gross proceeds of approximately $18 million. There were no material
26
fees or commissions related to the transaction. The Company intends to use the proceeds to fund working capital and other general corporate purposes.
Our ability to continue to fund our operations and meet capital needs will depend on our ability to generate cash from operations and access to capital markets and other sources of capital, as further described below. We anticipate that our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures and other general corporate purposes.
On March 31, 2023, we had approximately $7.2 million of unrestricted cash and cash equivalents. Our cash equivalents include amounts held in U.S. government money market funds. We invest cash in excess of immediate requirements in accordance with our investment policy, which requires all investments held by us to be at least “AAA” rated or equivalent, with a remaining final maturity when purchased of less than twelve months, so as to primarily achieve liquidity and capital preservation.
Going Concern
The Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future partnerships, equity or debt issuances, and the potential milestones from the Akebia agreement cannot be considered probable at this time because these plans are not entirely within the Company’s control and/or have not been approved by the Board of Directors as of the date of these consolidated financial statements.
The Company has incurred recurring losses since its inception, including a net loss of $7.0 million for the three months ended March 31, 2023. In addition, as of March 31, 2023, the Company had an accumulated deficit of $266.1 million. The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities as of March 31, 2023 will not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements and the Company will need to obtain additional funding. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The 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 the uncertainties described above.
Continued Nasdaq Listing
On June 1, 2022, the Company received a notice from the Nasdaq Stock Market ("Nasdaq") notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company's common stock listed on Nasdaq has been below the minimum $1.00 per share required for continued listing on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the "Bid Price Requirement").
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a period of 180 calendar days, or until November 28, 2022, to regain compliance with the Bid Price Requirement. The Company did not regain compliance with the Bid Price Requirement by the initial compliance date. On November 29, 2022,
27
Nasdaq notified the Company that it is eligible for an additional 180 calendar day period, or until May 29, 2023 (the "Extended Compliance Date"), to regain compliance with the Bid Price Requirement. Nasdaq’s determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the Bid Price Requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. Effective November 25, 2022, the Company transferred its listing of the Company’s common stock from the Nasdaq Global Market to the Nasdaq Capital Market, a continuous trading market that operates in substantially the same manner as the Nasdaq Global Market. The Company’s common stock continues to trade under the symbol “CYCN”.
To date, the Company has not regained compliance with the Bid Price Requirement. If at any time before May 29, 2023, the bid price of the Company's common stock closes at a $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq will provide written notification to the Company that it has regained compliance with the Bid Price Requirement. If the Company does not regain compliance with the Bid Price Requirement by the end of the second compliance period, the Company's stock will be subject to delisting.
On April 3, 2023, the Company filed with the SEC a definitive proxy statement for its annual meeting of stockholders to be held on May 15, 2023, at which meeting the Company is seeking stockholder approval of a reverse stock split with the primary intent of increasing the price of its common stock to meet the price criteria for continued listing on Nasdaq. The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Requirement, including initiating a reverse stock split. However, there can be no assurance on how stockholders will vote on such proposal or that the Company will be able to regain compliance with the Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules.
Cash Flows
The following is a summary of cash flows for the three months ended March 31, 2023 and 2022:
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|
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|
Three Months Ended March 31, |
|
|
Change |
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|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
|
(dollars in thousands) |
|
Net cash used in operating activities |
|
$ |
(6,214 |
) |
|
$ |
(12,835 |
) |
|
$ |
6,621 |
|
|
|
(52 |
)% |
Cash Flows from Operating Activities
Net cash used in operating activities was $6.2 million for the three months ended March 31, 2023 compared to $12.8 million for the three months ended March 31, 2022. The decrease in net cash used in operations of $6.6 million primarily relates to a decrease in our net loss of $6.0 million, a decrease in working capital accounts of $2.0 million, partially offset by a decrease of stock-based compensation of $1.4 million.
Funding Requirements
We expect our expenses to fluctuate as we engage in preclinical activities and clinical trials of our product candidates, continue to maintain out-license opportunities and seek to broaden our portfolio through in-licensing of complementary CNS assets. Based on our cash and cash equivalents position as of March 31, 2023 and our planned operating expenses and capital expenditure requirements there is substantial doubt regarding our ability to continue as a going concern for a period of one year after the date of this Quarterly Report on Form 10-Q. We will need to raise additional capital in upcoming periods which may not be available on acceptable terms, if at all. Failure to obtain necessary capital when needed may delay current development of our product candidates, halt new development phases, or other operations.
Because of the many risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements. Our
28
expenses will fluctuate, and our future funding requirements will depend on, and could increase or decrease significantly as a result of many factors including the:
•scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;
•costs, timing and outcome of regulatory review of our product candidates;
•costs of future activities, including medical affairs, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
•cost and timing of necessary actions to support our strategic objectives;
•costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and
•timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.
A change in any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing of the development of that product candidate.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation or other preferences that adversely affect the rights of holders of common stock. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in increased fixed payment obligations.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Commitments and Obligations
Tax-related Obligations
We exclude assets, liabilities or obligations pertaining to uncertain tax positions from our summary of contractual commitments and obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of March 31, 2023, we had no uncertain tax positions.
Other Funding Commitments
As of March 31, 2023, we had, and continue to have, several ongoing studies in various clinical trial stages. Our most significant clinical trial spending is with clinical research organizations, or CROs. The contracts with CROs generally are cancellable, with notice, at our option and do not have any significant cancellation penalties.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance.
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New Accounting Pronouncements
For a discussion of new accounting pronouncements see Note 2, Summary of Significant Accounting Policies, of the consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.