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Nov. 15, 2021, 8:39 a.m. EST

10-Q: NEUROBO PHARMACEUTICALS, INC.

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and the audited financial statements and related notes for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K ("2020 Form 10-K") filed by the Company with the SEC on April 15, 2021, as amended.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), that are based on management's beliefs, assumptions and expectations and information currently available to management. All statements that address future operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation, our expectations regarding the potential impacts of the COVID-19 pandemic on our business operations, cash flow, business development, and employees, our ability to execute on our strategic realignments, our clinical activities, benefits of our proposed products to patients, our expectations with respect to product development and commercialization efforts, potentially competitive product offerings, the possibility that we may be unable to raise sufficient funds necessary for our anticipated operations, intellectual property protection, our ability to integrate acquired businesses, our expectations regarding anticipated synergies with and benefits from acquired businesses and other risks and uncertainties described in our filings with the SEC.

In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that might subsequently arise.

Forward-looking statements are subject to a number of risks and uncertainties that could cause actual events to adversely differ from the expectations indicated in these forward-looking statements, including without limitation, the risks and uncertainties described in our 2020 Form 10-K filed with the SEC on April 15, 2021, as amended on April 30, 2021, and in subsequent reports filed with or furnished to the SEC, which risk factors may by updated from time to time, and in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021. We operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation, the possibility that regulatory authorities do not accept our application or approve the marketing of our products, the possibility we may be unable to raise the funds necessary for the development and commercialization of our products, and those described in our filings with the SEC.

Overview

NeuroBo Pharmaceuticals, Inc. (the "Company," "we," "us" or "our") is a clinical-stage biotechnology company focused on developing and commercializing novel pharmaceuticals to treat neurodegenerative disorders affecting millions of patients worldwide. For more information on our business and our four product candidates,

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

ANA001, NB-01, NB-02 and Gemcabene, see "Business-Overview" in Part I, Item 1 of our Annual Report on From 10-K filed on April 15, 2021.

Recent Developments

Mergers

2020 Merger with ANA

On December 31, 2020, the Company acquired 100% of ANA Therapeutics, Inc., a Delaware corporation ("ANA"), pursuant to an Agreement and Plan of Merger, dated December 31, 2020 (the "2020 Merger Agreement" or "2020 Merger"). Pursuant to the 2020 Merger Agreement, NeuroBo issued to the stockholders of ANA 3,243,875 shares of its common stock. The 2020 Merger, which closed on December 31, 2020, was accounted for as an asset acquisition pursuant to Topic 805, Business Combinations, as substantially all of the fair value of the assets acquired were concentrated in a group of similar non-financial assets.

2019 Merger with Gemphire

On July 24, 2019, Gemphire and NeuroBo Pharmaceuticals, Inc. ("Private NeuroBo") entered into a definitive agreement, which was amended on October 29, 2019 (the "2019 Merger Agreement"). The merger closed on December 30, 2019, whereby Private NeuroBo merged with a wholly-owned subsidiary of the Company in an all-stock transaction (the "2019 Merger").

COVID-19

We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a lasting national or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

To date, except for the adjustments to scientific activity described under "Current Scientific Activity" below, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.

The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our service providers, suppliers, contract research organizations and our clinical trials, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statements, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.

Current Scientific Activity

In light of the present business environment, including the impact of the COVID-19 pandemic, we are currently conducting the scientific activities described below with a view toward conserving financial resources.

ANA001, our lead drug candidate, is a proprietary oral niclosamide formulation and was developed as a treatment for patients with moderate COVID-19. Niclosamide is a potential oral antiviral and anti-inflammatory agent with a long history of use and well-understood safety in humans. ANA001 is currently being studied in a Phase 2/3

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

clinical trial conducted in the United States. We expect to complete the Phase 2 portion of the study in the first quarter of 2022.

NB-01. For NB-01, we have determined that any attempt to conduct Phase 3 clinical trials, as previously announced, would be difficult if not impossible in the short or medium term. Accordingly, in the first quarter of 2020, we directed our contract research organization ("CRO") partners and other vendors working on the Phase 3 clinical trials of NB-01 to cease all work and we terminated our existing contract arrangements with each of them.

We are currently evaluating our options regarding the NB-01 asset:

Orphan drug. Development of NB-01 as an orphan drug is among the alternatives we are considering. We have identified one potential rare disease indication for NB-01, but we have not yet conducted feasibility studies for it. We believe that development for such indication would depend on our ability to renegotiate milestone payments under our exclusive license agreement with Dong-A ST to reflect the potential revenue from such indication. See the risk factor entitled "We have determined to postpone the initiation of Phase 3 clinical trials of NB-01 under present circumstances and we have terminated all of our agreements with contract research organizations related to NB-01. We may not be able to successfully develop NB-01 pursuant to other alternatives, including as an orphan drug or as a nutraceutical candidate," as previously reported in our 2020 Form 10-K.

Nutraceutical. We have considered marketing NB-01 as a nutraceutical (non-pharmaceutical) product, and we may re-explore this pathway if the identified rare disease indication for NB-01 does not proceed.

NB-02. In order to preserve operating capital, we have postponed continued work on the IND and the first human clinical trials for NB-02 until global health and macroeconomic conditions improve, with a view toward commencing clinical trial activity in 2022, subject to improvement of the constraints imposed by the COVID-19 pandemic. We are also considering engaging with a strategic partner to assist with clinical trials for NB-02.

Gemcabene. In May 2020, we received written communication from the FDA that the clinical development program for Gemcabene remains on a partial clinical hold. We are currently exploring additional therapeutic indications for Gemcabene that may strengthen our pipeline of assets to treat viral diseases, including COVID-19, either as a stand-alone treatment or in combination with ANA001.

As of September 30, 2021, we had cash of $7.0 million. Operating at such level of scientific activity, we expect that our cash, including the net proceeds from the Registered Offering, will be adequate to fund operations into the fourth quarter of 2022.

We will need to raise additional capital to fund continued operations at the current level through the fourth quarter of 2022 and beyond. Although we are exploring financing opportunities and carefully monitoring the capital markets, we do not yet have any commitments for additional financing and may not be successful in our efforts to raise additional funds. Any amounts raised will be used for further development of our product candidates and for other working capital purposes and, depending on the amount raised, for clinical activity on NB-02.

If we are unable to raise additional capital (which is not assured at this time, particularly as a result of recent depressed capital market conditions), our long-term business plan may not be accomplished, and we may be forced to cease, reduce, or delay operations. We have some ability to reduce costs further in late 2021 and 2022, thereby potentially lengthening our operational window further into the first quarter of 2023.

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplate our continuation as a going concern. We have not established a source of revenues and, as such, have been dependent on funding operations through the sale of equity securities. Since inception, we have experienced significant losses and incurred negative cash flows from operations. We expect to incur further losses over the next several years as we develop our business. We have spent, and expect to continue to spend, a substantial amount of funds in connection with implementing our business strategy.

We will need substantial additional funding to support our continuing operations and to pursue our business strategy and, in the meantime, we have reduced scientific activity (as indicated above) and we are carefully controlling expenses. Until such time as we can generate significant revenue from product sales, if ever, we expect to continue to finance our operations primarily through proceeds derived from the sale of equity.

These factors individually and collectively raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments or classifications that may result from our possible inability to continue as a going concern. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2020 includes an explanatory paragraph regarding the existence of substantial doubt about our ability to continue as a going concern.

Key operating data

We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $3.5 million and $3.1 million for the three months ended September 30, 2021 and 2020, respectively, and $10.7 million and $10.2 million for the nine months ended September 30, 2021 and 2020, respectively. To date, we have not generated any revenue from product sales, collaborations with other companies, government grants or any other source, and do not expect to generate any revenue in the foreseeable future.

As of September 30, 2021, we had an accumulated deficit of $77.2 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

? pursue clinical development for any of our current product candidates;

initiate preclinical studies and clinical trials with respect to any additional ? indications for our current product candidates and any future product candidates that we may pursue;

? acquire or in-license other product candidates and/or technologies;

? develop, maintain, expand and protect our intellectual property portfolio;

? hire additional clinical, scientific and commercial personnel;

establish a commercial manufacturing source and secure supply chain capacity ? sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;

? seek regulatory approvals for any product candidates that successfully complete clinical trials;

establish a sales, marketing and distribution infrastructure and/or enter into ? partnership arrangements to commercialize any products for which we may obtain regulatory approval; or

add administrative, operational, financial and management information systems ? and personnel, including personnel to support our product development and planned future commercialization efforts, and to support our transition to a public reporting company.

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Form 10-Q

Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs to operations as incurred. These expenses include:

? employee-related expenses, including salaries, related benefits and stock-based compensation, for employees engaged in research and development functions;

expenses incurred in connection with the clinical development of our product ? candidates, including under agreements with third parties, such as consultants and CROs;

the cost of manufacturing and storing drug products for use in our preclinical ? studies and clinical trials, including under agreements with third parties, such as consultants and Clinical Manufacturing Organizations ("CMOs");

? facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance;

? costs related to compliance with regulatory requirements; and

? payments made under third-party licensing agreements.

We recognize external development costs based on an evaluation of the progress toward completion of specific tasks using information provided to us by our service providers. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense when the goods have been delivered or the services have been performed, or when it is no longer expected that the goods will be delivered, or the services rendered.

Our direct research and development expenses consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our clinical development, quality assurance and quality control processes, manufacturing, and clinical development activities. Our direct research and development expenses also include fees incurred under third-party license agreements. We use our employee and infrastructure resources across multiple research and development projects. We do not allocate employee costs and costs associated with our facilities, including depreciation or other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track our costs by product candidate.

Clinical development activities are central to our business model. We do not believe that our historical costs are indicative of the future costs associated with these programs, nor do they represent the costs of other future programs we may initiate. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We have some control over the timing of these expenses, but costs may be difficult to control once clinical trials have commenced.

The successful development and commercialization of our product candidates are highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

the preclinical and clinical development of any of our product candidates. Additionally, because of the risks inherent in novel treatment discovery and development, we cannot reasonably estimate or know:

? the timing and progress of preclinical and clinical development activities;

? the number and scope of clinical programs that we decide to pursue;

? our ability to maintain our current development programs and to establish new ones;

? if we will be able to establish an appropriate safety profile with IND-enabling studies;

? successful patient enrollment in, and the initiation and completion of, clinical trials;

the successful completion of clinical trials with safety, tolerability and ? efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

? the receipt of regulatory approvals from applicable regulatory authorities;

? the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

? our ability to establish new licensing or collaboration arrangements;

if we will be able to establish agreements with third-party manufacturers for ? clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates is approved;

? development and timely delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;

? if we will be able to obtain, maintain, defend and enforce patent claims and other intellectual property rights;

? if we will be able to launch commercial sales of our product candidates, if approved, whether alone or in collaboration with others;

? if we will be able to maintain a continued acceptable safety profile of the product candidates following commercialization; or

? the effect of competing technological and market developments.

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, and audit services.

We anticipate that our general and administrative expenses will increase in the future as a result of accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

Interest Income

Interest income consists of bank interest earned on our cash and cash equivalents.

Other Expense, net

Other expense, net reflects non-operating expenses associated mainly with realized foreign currency exchange gains and losses.

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                                 NeuroBo Pharmaceuticals, Inc.
                                           Form 10-Q
        Results of Operations
        The following table summarizes our operating results for the periods indicated:
                                                 For the Three Months Ended             For the Nine Months Ended
                                                       September 30,                         September 30,
                                                2021         2020       Change        2021          2020       Change
                                                                            (in thousands)
        Operating expenses:
        Research and development              $   1,394    $   1,265    $   129    $    4,549    $    4,091    $   458
        General and administrative                2,070        1,795        275         6,171         6,110         61
        Total operating expenses                  3,464        3,060        404        10,720        10,201        519
        Loss from operations                    (3,464)      (3,060)      (404)      (10,720)      (10,201)      (519)
        Interest income                               3            6        (3)            14            34       (20)
        Other expense, net                            -            -          -             -           (1)          1
        Loss before income taxes                (3,461)      (3,054)      (407)      (10,706)      (10,168)      (538)
        Provision for income taxes                    -            -          -             -             -          -
        Net loss                              $ (3,461)    $ (3,054)    $ (407)    $ (10,706)    $ (10,168)    $ (538)
        


Comparison of Three Months Ended September 30, 2021 and 2020

Research and Development Expenses

Research and development expenses were $1.4 million for the three months ended September 30, 2021 as compared to $1.3 million for the three months ended September 30, 2020. The $0.1 million increase in the third quarter of 2021 was primarily attributed to an increase in clinical trial costs in 2021 on a net basis when compared to the comparable quarter in the prior year.

General and Administrative Expenses

General and administrative expenses were $2.1 million for the three months ended September 30, 2021, compared to $1.8 million for the three months ended September 30, 2020. The increase of $0.3 million in the current period was primarily due to an increase in legal and consulting costs of $0.2 million, payroll costs of $0.1 million, public company costs of $0.1 million and insurance costs of $0.1 million, offset in part by a reduction in facility related costs of $0.1 million and stock-based compensation of $0.1 million when compared to the comparable prior year period.

Interest Income

Interest income for the three month periods ended September 30, 2021 and 2020 was $3,000 and $6,000 related to cash deposits, respectively.

Comparison of Nine Months Ended September 30, 2021 and 2020

Research and Development Expenses

Research and development expenses were $4.5 million for the nine months ended September 30, 2021 as compared to $4.1 million for the nine months ended September 30, 2020. The $0.4 million increase during the nine months ended September 30, 2021 was primarily attributed to research and development costs associated for the development of ANA 001 in 2021 of approximately $2.6 million offset by CRO termination costs associated with the Phase 3 clinical trials of NB-01 in the amount of $1.3 million and the further development of Gemcabene under the CVR Agreement in the amount of $0.8 million that occurred during the comparable prior year period.

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

General and Administrative Expenses

General and administrative expenses were $6.2 million for the nine months ended September 30, 2021, compared to $6.1 million for the nine months ended September 30, 2020. The increase of $0.1 million was primarily due to payroll costs of $0.2 million, insurance costs of $0.4 million, consulting costs of $0.1 million and public company costs of $0.1 million, offset in part by a reduction in legal and accounting costs of $0.4 million and facility and other costs of $0.3 million when compared to the comparable prior year period.

Interest Income

Interest income for the nine month periods ended September 30, 2021 and 2020 was $14,000 and $34,000, respectively, related to cash deposits.

Other Expense, net

Other expense, net incurred during the nine month periods ended September 30, 2021 and 2020 was nominal.

Liquidity and Capital Resources

October 2021 Registered Offering

On October 1, 2021, the Company entered into a securities purchase agreement (the "October 2021 Securities Purchase Agreement") with several institutional investors for the purchase and sale in a registered direct offering ("Registered . . .

Nov 15, 2021

COMTEX_396964893/2041/2021-11-15T08:39:00

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