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May 22, 2020, 7:19 a.m. EDT


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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with (1) our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and the related notes and management's discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2019 included in our final prospectus for our initial public offering dated April 7, 2020, and filed with the Securities and Exchange Commission, or SEC, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act, on April 8, 2020, which we refer to as the Prospectus.

Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section titled "Risk Factors" set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled "Special Note Regarding Forward-Looking Statements." You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Since our inception in 2015, we have devoted the majority of our efforts into business planning, research and development of our product candidates, including by conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations. To date, we have not generated any revenue from product sales as none of our product candidates have been approved for commercialization. We have historically financed our operations primarily through the sale of convertible preferred stock and cash received from licensing agreements.

With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, our management team has met frequently to discuss the implementation of business continuity plans to address and mitigate the impact of the COVID-19 pandemic on our employees, our business, including our preclinical studies and clinical trials, supply chains and third-party providers. We are closely monitoring the COVID-19 situation as we continue to develop our business continuity plans and response strategy. On March 23, 2020, the governor of Massachusetts ordered the closure of all non-essential businesses effective March 24, 2020 through April 7, 2020, which was subsequently extended through May 18, 2020. On May 18, 2020, the governor of Massachusetts issued a new order implementing a phased re-opening of workplaces, effective May 18, 2020. Because of the nature of our operations, we are currently considered to be an essential business so, to date, our operations have only been partially affected by these orders. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on third-party businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we have closed our principal executive office, with our administrative employees continuing their work outside of our office and limited the number of staff in any given research laboratory. We are currently preparing plans to reopen our office to allow employees to return to the office, which will be based on a phased approach that is principles-based and local in design, with a focus on continuity of preclinical studies and clinical trial activities, employee safety and optimal work environment. While we are experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

Preclinical and Clinical Development

COVID-19 pandemic persists for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our product candidates, which would adversely impact our ability to carry out our clinical trials. Financial Impact

Under the terms of the Novo Nordisk Agreement, we received $20.0 million in 2018, $16.0 million of which represented the initial license fee and $4.0 million of which related to research funding ($2.0 million for each year of the two-year research program). Additionally, we are eligible to receive certain clinical and regulatory milestone payments for the first product, for which milestone payments are $176.0 million in the aggregate, assuming the first product achieves such milestones in three indications, certain clinical and regulatory milestone payments for the second and third products, for which milestone payments are $145.5 million in the aggregate for each product, assuming each of the second and third products achieves such milestones in three indications, and certain commercial milestone payments, for which milestone payments are $70.0 million in the aggregate. We are also eligible to receive a mid-single digit royalty on net sales of licensed products, which include combination products. The royalty rates may be reduced up to a specified percentage in the event that Novo Nordisk's commercialization of resulting products requires obtaining a license from a third-party to avoid infringement of third-party patents. Novo Nordisk's obligation to pay royalties to us under the Novo Nordisk Agreement expires on a licensed product-by-licensed product and country-by-country basis upon the later of expiry of the last valid claim of certain specified patents that cover such licensed product in such country and a number of years in the sub-teen double digits from first commercial sale of such product in such country.

?facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs;

?38.5% non-refundable tax offset for all other eligible research and development entities. Unused offset amounts may be able to be carried forward for use in future income years.

                                                                          THREE MONTHS ENDED MARCH 31,
                                                                           2020                    2019
        Research collaboration revenue                              $            -           $       2,500
        Total revenue                                                            -                   2,500
        Operating expenses:
        Research and development                                            (8,527)                 (4,867)
        General and administrative                                          (1,977)                   (491)
        Total operating expenses                                           (10,504)                 (5,358)
        Loss from operations                                               (10,504)                 (2,858)
        Other expense, net:
        Interest expense, net                                       $           (2)          $          (2)
        Research and development incentive income                                -                     180
        Change in fair value of preferred stock tranche obligation          (1,490)                   (604)
        Other (expense) income, net                                            (68)                    101
        Total other expense, net                                            (1,560)                   (325)
        Loss before income taxes                                           (12,064)                 (3,183)
        Income tax benefit                                                     172                       -
        Net loss                                                    $      (11,892)          $      (3,183)


pattern of our performance of the research and development activities required under the Novo Nordisk Agreement we recognized the total $20.0 million of the revenue over the two-year term of the agreement, resulting in $2.5 million of revenue being recognized for the three months ended March 31, 2019. All revenue under the Novo Nordisk Agreement was earned as of December 31, 2019; as such, we did not recognize any revenue for the three months ended March 31, 2020. Research and Development Expenses

May 22, 2020

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