Company Quick10K Filing
Avenue Therapeutics
Price6.03 EPS-1
Shares17 P/E-5
MCap100 P/FCF-5
Net Debt-9 EBIT-20
TEV92 TEV/EBIT-4
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-30
10-Q 2019-09-30 Filed 2019-11-13
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-12
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-12
8-K 2020-06-16
8-K 2020-05-11
8-K 2020-04-23
8-K 2020-03-30
8-K 2020-02-13
8-K 2019-12-11
8-K 2019-11-04
8-K 2019-08-14
8-K 2019-08-01
8-K 2019-06-19
8-K 2019-06-03
8-K 2019-05-13
8-K 2019-04-30
8-K 2019-04-05
8-K 2019-03-12
8-K 2019-02-06
8-K 2018-11-14
8-K 2018-11-12
8-K 2018-08-14
8-K 2018-06-13
8-K 2018-05-25
8-K 2018-05-21
8-K 2018-05-03
8-K 2018-03-28
8-K 2018-03-01
8-K 2018-01-02

ATXI 10Q Quarterly Report

Note 1 &Mdash; Organization, Plan of Business Operations
Note 2 &Mdash; Significant Accounting Policies
Note 3 &Mdash; Accounts Payable and Accrued Expenses
Note 4 &Mdash; Stockholders' Equity
Item 2. Financial Information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors
Item 2. Recent Sales of Unregistered Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Financial Statements and Exhibits
EX-31.1 tm2014545d1_ex31-1.htm
EX-31.2 tm2014545d1_ex31-2.htm
EX-32.1 tm2014545d1_ex32-1.htm
EX-32.2 tm2014545d1_ex32-2.htm

Avenue Therapeutics Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 tm2014545d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to

 

Commission File Number 001-38114

 

AVENUE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   47-4113275
(State or other jurisdiction of incorporation or organization)   (I.R.S.  Employer Identification No.)

 

1140 Avenue of the Americas, Floor 9 New York, NY 10036

(Address of principal executive offices and zip code)

 

(781) 652-4500

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Class Trading Symbol(s) Exchange Name
Common Stock ATXI Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   x   No  ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   x   No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer” , “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer  ¨   Accelerated filer  ¨
Non-accelerated filer    x    Smaller reporting company  x
Emerging growth company x    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ¨   No  x

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Class of Common Stock   Outstanding Shares as of May 4, 2020
Common Stock, $0.0001 par value   16,682,803

 

 

 

 

 

AVENUE THERAPEUTICS, INC.

Form 10-Q

For the Quarter Ended March 31, 2020

 

Table of Contents

 

      Page No.
PART I. FINANCIAL INFORMATION
       
Item 1.   Unaudited Condensed Financial Statements  
       
    Condensed Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019 1
       
    Unaudited Condensed Statements of Operations for the three months ended March 31, 2020 and 2019 2
       
    Unaudited Condensed Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2020 and 2019 3
       
    Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2020 and 2019 4
       
    Notes to Unaudited Interim Condensed Financial Statements 5
       
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 8
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 12
       
Item 4.   Controls and Procedures 12
       
PART II. OTHER INFORMATION
       
Item 1.   Legal Proceedings 12
       
Item 1A.   Risk Factors 12
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 12
       
Item 3.   Defaults Upon Senior Securities 12
       
Item 4.   Mine Safety Disclosures 13
       
Item 5.   Other Information 13
       
Item 6.   Exhibits 13
       
Signatures     14

 

 

 

AVENUE THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

($ in thousands, except share and per share amounts)

  

   March 31,   December 31, 
   2020   2019 
   (unaudited)     
ASSETS          
Current Assets:          
Cash and cash equivalents  $6,574   $8,745 
Prepaid expenses and other current assets   122    170 
Total Assets  $6,696   $8,915 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current Liabilities:          
Accounts payable and accrued expenses  $790   $1,101 
Accounts payable and accrued expenses - related party   133    14 
Licenses payable   -    1,000 
Total current liabilities   923    2,115 
           
Total Liabilities   923    2,115 
           
Commitments and Contingencies          
          
Stockholders' Equity          
Preferred Stock ($0.0001 par value), 2,000,000 shares authorized          
Class A Preferred Stock, 250,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively   -    - 
Common Stock ($0.0001 par value), 50,000,000 shares authorized          
Common shares, 16,682,803 and 16,682,190 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively   2    2 
Additional paid-in capital   75,130    74,915 
Accumulated deficit   (69,359)   (68,117)
Total Stockholders' Equity   5,773    6,800 
Total Liabilities and Stockholders' Equity  $6,696   $8,915 

 

The accompanying notes are an integral part of these condensed financial statements.

 

1

 

 

AVENUE THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS

($ in thousands, except share and per share amounts)

(Unaudited)

 

   For the Three Months Ended 
   March 31,   March 31, 
   2020   2019 
Operating expenses:          
Research and development  $697   $10,241 

General and administrative

   577    1,119 
Loss from operations   (1,274)   (11,360)
           
Interest income   (32)   (91)
Net Loss  $(1,242)  $(11,269)
           
Net loss per common share outstanding, basic and diluted  $(0.08)  $(0.82)
           
Weighted average number of common shares outstanding, basic and diluted   16,474,655    13,742,649 

  

The accompanying notes are an integral part of these condensed financial statements.

 

2

 

 

AVENUE THERAPEUTICS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

($ in thousands, except share amounts)

(Unaudited)

 

Three months ended March 31, 2020

 

  

Class A Preferred

Shares

   Common Shares   Additional
paid-in
   Accumulated   Total
Stockholders'
 
   Shares   Amount   Shares   Amount   capital   deficit   equity 
Balance at December 31, 2019   250,000   $            -    16,682,190   $             2   $74,915   $(68,117)  $6,800 
Share based compensation   -    -    -    -    215    -    215 
Cashless exercise of warrants under the NSC Note   -    -    613    -    -    -    - 
Net loss   -    -    -    -    -    (1,242)   (1,242)
Balance at March 31, 2020   250,000   $-    16,682,803   $2   $75,130   $(69,359)  $5,773 

 

Three months ended March 31, 2019

 

  

Class A Preferred

Shares

   Common Shares  

Additional

paid-in

   Accumulated  

Total

Stockholders'

 
   Shares   Amount   Shares   Amount   capital   deficit   equity (deficit) 
Balance at December 31, 2018   250,000   $-    10,667,714   $1   $41,577   $(42,209)  $(631)
Share based compensation   -    -    -    -    751    -    751 
Issuance of common shares, net of costs   -    -    5,833,333    1    31,499    -    31,500 
Cashless exercise of warrants under the NSC Note   -    -    56,075    -    -    -    - 
Net loss   -    -    -    -    -    (11,269)   (11,269)
Balance at March 31, 2019   250,000   $-    16,557,122   $2   $73,827   $(53,478)  $20,351 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

3

 

 

 AVENUE THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in thousands)

 

   For the Three Months Ended 
   March 31, 2020   March 31, 2019 
Cash flows from operating activities:          
Net loss  $(1,242)  $(11,269)
Adjustments to reconcile net loss to net cash used in operating activities:          
Share based compensation   215    751 
Changes in operating assets and liabilities:          
Prepaid expenses and other current assets   48    (102)
Accounts payable and accrued expenses   (311)   5,453 
Accounts payable and accrued expenses - related party   119    (401)
Net cash used in operating activities   (1,171)   (5,568)
           
Cash flows from investing activities:          
Milestone payment for research and development licenses   (1,000)   - 
Net cash used in investing activities   (1,000)   - 
           
Cash flows from financing activities:          
Issuance of common shares   -    35,000 
Offering costs   -    (2,655)
Net cash provided by financing activities   -    32,345 
           
Net change in cash   (2,171)   26,777 
Cash and cash equivalents, beginning of period   8,745    2,671 
Cash and cash equivalents, end of period  $6,574   $29,448 
           
Non-cash financing activities:          
Unpaid offering costs  $-   $12 

 

The accompanying notes are an integral part of these condensed financial statements.

 

4

 

 

AVENUE THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

 

Note 1 — Organization, Plan of Business Operations

 

Avenue Therapeutics, Inc. (the “Company” or “Avenue”) was incorporated in Delaware on February 9, 2015, as a wholly owned subsidiary of Fortress Biotech, Inc. (“Fortress”), to develop and market pharmaceutical products for the acute care setting in the United States. The Company is focused on developing its product candidate, an intravenous (“IV”) formulation of tramadol HCI (“IV Tramadol”), for moderate to moderately severe post-operative pain.

 

Stock Purchase and Merger Agreement

 

On November 12, 2018, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”), entered into definitive agreements with two closing stages for a proposed acquisition of the Company for a total aggregate consideration of $215.0 million. The Stock Purchase and Merger Agreement (the “SPMA”) was approved by a majority of the Company’s stockholders, including a majority of its non-affiliated stockholders, at its special shareholder meeting on February 6, 2019. On February 8, 2019, InvaGen acquired 5,833,333 shares of the Company’s common stock at $6.00 per share (the “Stock Purchase Transaction”) for net proceeds of $31.5 million after deducting commission fees and other offering costs, representing a 33.3% stake in the Company’s capital stock on a fully diluted basis.

 

At the second stage closing, InvaGen will acquire the remaining shares of Avenue’s common stock, pursuant to a reverse triangular merger with Avenue remaining as the surviving entity, for up to $180.0 million in the aggregate (the “Merger Transaction”). The second stage closing is subject to the satisfaction of certain closing conditions, including conditions pertaining to U.S. Food and Drug Administration approval, labeling, scheduling and the absence of any Risk Evaluation and Mitigation Strategy or similar restrictions in effect with respect to IV Tramadol, as well as the expiration of any waiting period applicable to the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

Subject to the terms and conditions described in the SPMA, InvaGen may also provide interim financing to the Company in an amount of up to $7.0 million during the time period between the Stock Purchase Transaction (which occurred on February 8, 2019) and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to the Company’s stockholders by virtue of the Merger Transaction. There have been no amounts drawn upon this interim financing as of March 31, 2020.

 

Liquidity and Capital Resources

 

The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future as it executes on its product development plan and may never become profitable. As of March 31, 2020, the Company had an accumulated deficit of $69.4 million. The Company believes that its cash and cash equivalents as of March 31, 2020, as well as its access to potential interim financing from InvaGen and pledged financial support from Fortress, will enable the Company to continue to fund operations in the normal course of business for more than a twelve-month period from the date of filing this Quarterly Report on Form 10-Q.  However, changing circumstances, some of which may be beyond its control, could cause the Company to consume capital faster than it currently anticipates if certain milestone payments become due, and it may need to seek additional funds sooner than planned. If the amounts made available from InvaGen and Fortress are not sufficient, the Company would be required to obtain further funding through equity offerings, debt financings, collaborations and licensing arrangements or other sources.

 

In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its development timeline and its liquidity due to the worldwide spread of the COVID-19 virus. However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.

 

Note 2 — Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited interim condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.

 

5

 

 

AVENUE THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

  

Therefore, these unaudited interim condensed financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 2019, which were included in the Company’s Form 10-K, and filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2020. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

 

The Company has no subsidiaries.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

 

The Company’s significant accounting policies are described in Note 2 in its audited financial statements for the year ended December 31, 2019 included in the Company’s Form 10-K. With the exception of those noted below, there have been no material changes to the Company’s significant accounting policies.

 

Net loss per Share

 

Loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding, excluding unvested restricted stock and stock options and preferred shares, during the period. Since dividends are declared paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required.  

 

The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:

 

   For the Three Months Ended 
   March 31,   March 31, 
   2020   2019 
Unvested restricted stock units/awards   1,201,575    1,065,317 
Preferred shares   250,000    250,000 
Total potential dilutive effect   1,451,575    1,315,317 

 

Recent Accounting Pronouncements to be Adopted

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”) which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

 

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

 

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.  The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  At this time, the Company does not believe that the CARES Act will have a material impact on the Company’s income tax provision for 2020.  The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

 

6

 

 

AVENUE THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

 

Note 3 — Accounts Payable and Accrued Expenses

 

Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):

 

   As of March 31,   As of December 31, 
   2020   2019 
Accounts payable  $217   $354 
Accrued employee compensation   114    477 
Accrued contracted services and other   459    270 
Accounts payable and accrued expenses  $790   $1,101 

 

Note 4 — Stockholders’ Equity

 

Equity Incentive Plan

 

The Company has in effect the 2015 Incentive Plan (“2015 Incentive Plan”). The 2015 Incentive Plan was adopted in December 2015 by our stockholders. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to directors, officers, employees and consultants. The plan authorizes grants to issue up to 2,000,000 shares of authorized but unissued common stock and expires 10 years from adoption and limits the term of each option to no more than 10 years from the date of grant.

 

Restricted Stock Units and Restricted Stock Awards

 

The following table summarizes restricted stock unit and award activity for the three months ended March 31, 2020:

 

   Number of Units
and Awards
   Weighted
Average Grant
Date Fair Value
 
Unvested balance at December 31, 2019   1,045,162   $5.10 
Granted   156,413   $10.98 
Unvested balance at March 31, 2020   1,201,575   $5.86 

 

For the three months ended March 31, 2020 and 2019, stock-based compensation expenses associated with the amortization of restricted stock units and restricted stock awards for employees and non-employees were approximately $0.2 million and $0.8 million, respectively.

 

At March 31, 2020, the Company had unrecognized stock-based compensation expense related to restricted stock units and restricted stock awards of $0.9 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.0 years. This amount does not include, as of March 31, 2020, 467,586 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. The expense is recognized over the vesting period of the award. Stock-based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.

 

Stock Warrants

 

The following table summarizes the warrant activity for the three months ended March 31, 2020:

 

   Warrants   Weighted
Average Exercise
Price
  

Aggregate

Intrinsic Value
(in thousands)

 
Outstanding, December 31, 2019   16,454   $0.6079   $148 
Exercised   (613)  $0.0001    - 
Outstanding, March 31, 2020   15,841   $0.6315   $132 

 

7

 

 

Item 2.          Financial Information.

 

Management’s Discussion and Analysis of the Results of Operations

 

Forward-Looking Statements

 

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and the notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2019 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2020. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth in Item 1.A. “Risk Factors” of our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q and any updates to those risk factors contained in our subsequent periodic and current reports filed with the Securities and Exchange Commission, our actual results may differ materially from those anticipated in these forward-looking statements. 

 

Overview

 

We are a specialty pharmaceutical company that seeks to develop and commercialize our product principally for use in the acute/intensive care hospital setting. Our current product candidate is intravenous (IV) Tramadol, for the treatment of moderate to moderately severe post-operative pain. In 2016, we completed a pharmacokinetic (PK) study for IV Tramadol in healthy volunteers as well as an end of phase 2 (EOP2) meeting with the U.S. Food and Drug Administration (FDA). In the third quarter of 2017, we initiated a Phase 3 development program of IV Tramadol for the management of post-operative pain. Under the terms of certain agreements described herein, we have an exclusive license to develop and commercialize IV Tramadol in the United States. To date, we have not received approval for the sale of our product candidate in any market and, therefore, have not generated any sales revenue from our product candidate.

 

On June 26, 2017, we completed an initial public offering (IPO) of our common stock, resulting in net proceeds of approximately $34.2 million after deducting underwriting discounts, and other offering costs.

 

We have used the proceeds from our IPO to initiate our first Phase 3 trial of IV Tramadol in patients with moderate-to-severe pain following bunionectomy, which had its first patient dosed in September 2017. In May 2018, we announced the study met its primary endpoint and all key secondary endpoints.

 

In December 2018, we initiated the second Phase 3 trial in patients with moderate-to-severe pain following abdominoplasty upon successful completion of the bunionectomy study. In June 2019, we announced the study met its primary endpoint and all key secondary endpoints.

 

In December 2017, we initiated an open-label safety study, which was completed during the second quarter of 2019. The results showed that IV Tramadol is well-tolerated with a side effect profile consistent with known pharmacology.

 

In December 2019, we submitted a new drug application (NDA), for IV Tramadol to treat moderate to moderately severe postoperative pain pursuant to Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FDCA). In February 2020, the FDA accepted our NDA submission and set a Prescription Drug User Fee Act goal date of October 10, 2020.

 

On November 12, 2018, we entered into a Stock Purchase and Merger Agreement (SPMA) with InvaGen Pharmaceuticals Inc. (InvaGen), Madison Pharmaceuticals Inc. (Merger Sub), and Fortress Biotech, Inc. (Fortress), pursuant to which InvaGen agreed to purchase, for $35 million, common shares representing 33.3% of the fully diluted capitalization of the Company (the Stock Purchase Transaction) and subsequently acquire the remaining issued and outstanding capital stock of the Company for $180 million, subject to certain reductions, in a reverse subsidiary merger transaction (the Merger Transaction). Pursuant to the terms and subject to the conditions set forth in the SPMA, InvaGen will, at second closing, hold 100% of the issued and outstanding equity interests of the Company. Consummation of the Merger Transaction is conditioned, among other things, upon FDA approval of IV Tramadol, its labeling and scheduling and the absence of any Risk Evaluation and Mitigation Strategy restrictions in effect with respect to IV Tramadol, as well as the expiration of any waiting period applicable to the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

The aggregate consideration to be paid by InvaGen under the SPMA is $215 million in cash, subject to certain potential reductions, which InvaGen intends to have sufficient immediately available funds to pay. In addition, we are subject to certain lock-up restrictions and agreed not to (subject to customary exceptions), during the period commencing at the signing of the SPMA until the Merger Transaction, issue, buy, sell, or otherwise subject to a security interest, pledge, hypothecation, mortgage or lien, any securities of the Company.

 

8

 

 

The SPMA was approved by a majority of our stockholders, including a majority of our non-affiliated stockholders, at our special shareholder meeting on February 6, 2019. On February 8, 2019, the Company and InvaGen consummated the Stock Purchase Transaction whereby InvaGen acquired 5,833,333 shares of our common stock at $6.00 per share for total gross consideration of $35.0 million, representing a 33.3% stake in our capital stock on a fully diluted basis.

 

Our net loss for the three months ended March 31, 2020 and 2019 was approximately $1.2 million and $11.3 million, respectively. As of March 31, 2020, we had an accumulated deficit of approximately $69.4 million. Substantially all our net losses resulted from costs incurred in connection with our research and development program of IV Tramadol and from general and administrative costs associated with our operations.

 

We expect to continue to incur research and development costs and increased general and administration related costs and incur operating losses for at least the next several years as we develop and seek regulatory approval and commercialization for IV Tramadol in the U.S.

 

We may need to obtain additional capital through the sale of debt or equity financings or other arrangements to fund our operations, research and development activity or regulatory approval activity; however, there can be no assurance that we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit our ability to pay dividends or make other distributions to stockholders. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued.

 

We are a majority controlled subsidiary of Fortress.

 

Avenue Therapeutics, Inc. was incorporated in Delaware on February 9, 2015. Our executive offices are located at 1140 Avenue of the Americas, Floor 9, New York, NY 10036. Our telephone number is (781) 652-4500, and our email address is info@avenuetx.com.

 

Impact of COVID-19

 

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a global pandemic, which continues to spread throughout the United States and around the world. In the first quarter of 2020, the Company did not experience a significant impact on its business resulting from government restrictions on the movement of people, goods, and services. Management believes any disruption, when and if experienced, would be temporary, however, there is uncertainty around when any disruption might occur, the duration and the potential impact.

 

Critical Accounting Policies and Use of Estimates

 

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Our significant accounting policies are described in more detail in the notes to our unaudited condensed financial statements.

 

Results of Operations

 

General

 

At March 31, 2020, we had an accumulated deficit of $69.4 million, primarily as a result of expenditures for licenses acquired, for research and development and for general and administrative purposes. While we may in the future generate revenue from a variety of sources, including license fees, milestone payments, research and development payments in connection with strategic partnerships and/or product sales, our product candidate is still in development and may never be successfully developed or commercialized. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenues.

 

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Comparison of the Three Months Ended March 31, 2020 and 2019

 

   For The Three Months Ended   Change 
   March 31,   March 31,         
($ in thousands)  2020   2019   $   % 
Operating expenses:                    
Research and development  $697   $10,241   $(9,544)   (93)%
General and administrative   577    1,119    (542)  (48)%
Loss from operations   (1,274)   (11,360)   10,086    (89)%
                     
Interest income   (32)   (91)   (59)   (65)%
Net Loss  $(1,242)  $(11,269)  $10,027    (89)%

 

Research and Development Expenses

 

Research and development expenses primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings, laboratory costs and other supplies.

  

For the three months ended March 31, 2020 and 2019, research and development expenses were $0.7 million and $10.2 million, respectively. The decrease of $9.5 million is primarily due to decreases of $8.8 million associated with the completion of our abdominoplasty study, $0.5 million associated with the completion of our safety study, $0.1 million in personnel costs and $0.1 million in stock compensation costs.

  

We expect our research and development activities to continue as we develop our existing product candidate, reflecting costs associated with the following:

 

·employee-related expenses;
·license fees and milestone payments related to in-licensed product and technology;
·expenses incurred under agreements with contract research organizations, investigative sites and consultants that conduct our clinical trials;
·the cost of acquiring and manufacturing clinical trial materials; and
·costs associated with non-clinical activities, and regulatory approvals.

 

General and Administrative Expenses

 

General and administrative expenses consist principally of professional fees for legal and consulting services, market research, personnel-related costs, public reporting company related costs and other general operating expenses not otherwise included in research and development expenses.

 

For the three months ended March 31, 2020 and 2019, general and administrative expenses were $0.6 million and $1.1 million, respectively. General and administrative expenses decreased by $0.5 million primarily due to decreases of $0.4 million in non-cash stock compensation and $0.1 million in professional fees.

 

Interest Income

 

Interest income was $32,000 and $91,000 for the three months ended March 31, 2020 and 2019, respectively. The decrease in interest income was due to the reduction in cash and cash equivalents and short-term investments.

 

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Liquidity and Capital Resources

 

We have incurred substantial operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2020, we had an accumulated deficit of $69.4 million.

 

We have used the funds from our IPO and from the InvaGen share purchase to finance our operations and will continue to use the funds primarily for general corporate purposes, which may include financing our growth and developing our product candidate. We currently anticipate that our cash and cash equivalent balances at March 31, 2020 in addition to the SPMA with InvaGen which provides access to potential interim financing of up to $7.0 million up until the second stage closing and additional pledged financial support from Fortress, are sufficient to fund our anticipated operating cash requirements for approximately the next 12 months. If we cannot generate significant cash from our operations, we intend to obtain any additional funding we require through strategic relationships, public or private equity or debt financings, grants or other arrangements. However, changing circumstances, some of which may be beyond our control, could cause us to consume capital faster than we currently anticipate if certain milestone payments become due, and we may need to seek additional funds sooner than planned. If the amounts made available from InvaGen and Fortress are not sufficient, we would be required to obtain further funding through equity offerings, debt financings, collaborations and licensing arrangements or other sources.

 

In addition to the foregoing, based on our current assessment, we do not expect any material impact on our development timeline and our liquidity due to the worldwide spread of the COVID-19 virus. However, we are continuing to assess the effect on our operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.

  

Recently Adopted and Issued Accounting Pronouncements

 

See Footnote 2.

  

Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

   For The Three Months Ended 
   March 31, 
($ in thousands)  2020   2019 
Total cash (used in)/provided by:          
Operating activities  $(1,171)  $(5,568)
Investing activities   (1,000)   - 
Financing activities   -    32,345 
Net increase (decrease) in cash  $(2,171)  $26,777 

  

 Operating Activities

 

Net cash used in operating activities was $1.2 million for the three months ended March 31, 2020, primarily comprised of our $1.2 million net loss and decreases in operating assets and liabilities of $0.2 million partially offset by $0.2 million in share based compensation.

 

Net cash used in operating activities was $5.6 million for the three months ended March 31, 2019, primarily comprised of our $11.3 million net loss partially offset by $0.7 million in share based compensation and increases in operating assets and liabilities of $5.0 million.

 

Investing Activities

 

Net cash used in investing activities for the three months ended March 31, 2020 and 2019 was $1.0 million and $0, respectively. Net cash used in the three months ended March 31, 2020 was the milestone payment due to our licensor pursuant to our NDA submission.

 

Financing Activities

 

Net cash provided by financing activities for the three months ended March 31, 2020 and 2019 was $0 and $32.3 million, respectively. The source of the net cash provided in the 2019 period was related to our issuance of shares to InvaGen in connection with the SPMA.

 

Contractual Obligations and Commitments

 

There have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those disclosed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

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Off-Balance Sheet Arrangements

 

We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.

 

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

 

N/A.

 

Item 4.   Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Principal Financial Officer, to allow timely decisions regarding required disclosure.

  

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

  

With respect to the quarter ended March 31, 2020, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, the Company’s Chief Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

 

Management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

  

Changes in Internal Control over Financial Reporting:

  

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2020 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II.  Other Information

 

Item 1.          Legal Proceedings.

 

We are not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations.

 

Item 1A.       Risk Factors

 

Investing in our common stock is subject to a number of risks and uncertainties. You should carefully consider the risk factors described under the heading “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and in other reports we file with the SEC. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.  

 

Item 2.          Recent Sales of Unregistered Securities.

 

N/A.

 

Item 3.          Defaults Upon Senior Securities.

 

N/A.

 

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Item 4.          Mine Safety Disclosures.

 

N/A.

 

Item 5.          Other Information.

 

N/A.

 

   

Item 6.          Financial Statements and Exhibits

 

Exhibit No.   Description
     
31.1   Certification of Chief Executive Officer of Avenue Therapeutics, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 11, 2020.
31.2   Certification of Principal Financial Officer of Avenue Therapeutics, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 11, 2020.
32.1   Certification of Chief Executive Officer of Avenue Therapeutics, Inc. pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 11, 2020.
32.2   Certification of Principal Financial Officer of Avenue Therapeutics, Inc. pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 11, 2020.
101   The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Balance Sheets, (ii) the Condensed Statements of Operations, (iii) the Condensed Statements of Stockholders’ Equity, (iv) the Condensed Statements of Cash Flows, and (v) Notes to the Condensed Financial Statements.

 

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SIGNATURES

 

Pursuant to the requirements of the Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Avenue Therapeutics, Inc.
  (Registrant)
   
Date: May 11, 2020  By: /s/ Lucy Lu, M.D.
  Lucy Lu, M.D.
  President, Chief Executive Officer and Director
  (Principal Executive Officer)

   

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