UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 31, 2022, the registrant had
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
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our plans and expectations for the further clinical development of STS101; |
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our clinical and regulatory development plans for STS101; |
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the implementation of our business model and strategic plans for our business and STS101; |
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our expectations with regard to the data to be derived from our ongoing and planned clinical trials and timing of expected data announcements; |
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the impacts of the COVID-19 pandemic on our operations; |
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the timing of commencement of future nonclinical studies and clinical trials and research and development programs; |
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our intentions and our ability to establish collaborations and/or partnerships; |
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the timing or likelihood of regulatory filings and approvals for STS101; |
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our expectations regarding the potential market size and size of the potential patient populations for STS101, if approved for commercial use; |
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our commercialization, marketing and manufacturing plans and expectations; |
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the pricing and reimbursement of STS101, if approved; |
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the scope of protection we are able to establish and maintain for intellectual property rights covering STS101, including the projected terms of patent protection; |
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estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital; |
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our future financial performance; and |
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developments and projections relating to our competitors and our industry, including competing therapies and procedures. |
These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate and you should not rely upon forward-looking statements as predictions of future events. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section of this Quarterly Report on Form 10-Q titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. These forward-looking statements speak only as of the date of this Form Quarterly Report on 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Quarterly Report on Form 10-Q.
i
SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.
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We are a clinical-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred significant losses since our inception, and we anticipate that we will continue to incur significant losses for the foreseeable future, which, together with our limited operating history, makes it difficult to assess our prospects. |
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We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or commercialization efforts. |
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Our business is entirely dependent on the successful development, regulatory approval and commercialization of STS101, our only product candidate under development. |
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Previously, in our Phase 3 EMERGE study, STS101 did not demonstrate a statistically significant difference as compared to placebo on either of the co-primary endpoints. |
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Clinical development involves a lengthy and expensive process with an uncertain outcome, and delays can occur for a variety of reasons outside of our control. |
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We may be unable to obtain regulatory approval for STS101 under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of STS101 and adversely impact our potential to generate revenue, our business and our results of operations. |
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If we encounter difficulties with subject enrollment or completion in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected. |
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The ongoing COVID-19 pandemic and outbreak in the United States and related impacts on the global economy may adversely affect our business. |
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STS101 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any. |
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We may be unable to rely on Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FDCA), which could result in a longer development program and more costly trials than we anticipate. |
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Even if STS101 obtains regulatory approval, it may fail to achieve broad market acceptance. |
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We face, and will continue to face, significant competition in an environment of rapid technological and scientific change and our failure to effectively compete may prevent us from achieving significant market penetration for STS101, if approved. Most of our competitors have significantly greater resources than we have and we may not be able to successfully compete. |
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The successful commercialization of STS101 will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage, adequate reimbursement levels and implement pricing policies favorable for it. Failure to obtain or maintain coverage and adequate reimbursement for STS101, if approved, could limit our ability to market our product and decrease our ability to generate revenue. |
ii
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Table of Contents
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PART I. |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
20 |
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Item 4. |
20 |
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PART II. |
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Item 1. |
21 |
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Item 1A. |
21 |
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Item 2. |
62 |
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Item 3. |
62 |
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Item 4. |
62 |
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Item 5. |
62 |
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Item 6. |
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iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
SATSUMA PHARMACEUTICALS, INC.
Condensed Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
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September 30, |
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December 31, |
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2022 |
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2021 |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term marketable securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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— |
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Long-term marketable securities |
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— |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued and other current liabilities |
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Operating lease liability |
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— |
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Current portion of long-term debt |
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— |
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Total current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in-capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
1
SATSUMA PHARMACEUTICALS, INC.
Condensed Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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$ |
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$ |
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$ |
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$ |
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Loss from operations |
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( |
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( |
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( |
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( |
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Interest income |
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Interest expense |
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— |
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( |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Unrealized gain (loss) on marketable securities |
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( |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
2
SATSUMA PHARMACEUTICALS, INC.
Condensed Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)
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Common Stock |
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Additional Paid-In |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balances at January 1, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Balances at March 31, 2022 |
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( |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issuance of common stock under employee share purchase plan |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Balances at June 30, 2022 |
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( |
) |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Issuance of common stock as part of At-the-Market offering, net of issuance costs of $ |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Balances at September 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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3
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Common Stock |
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Additional Paid-In |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders’ |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balances at January 1, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock in private placement financing, net of issuance costs of $ |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Balances at March 31, 2021 |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balances at June 30, 2021 |
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( |
) |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balances at September 30, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
4
SATSUMA PHARMACEUTICALS, INC.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)
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Nine Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2022 |
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2021 |
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|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
Amortization of operating lease right-of-use asset |
|
|
|
|
|
|
— |
|
|
Non-cash interest expense, and amortization of debt discount and issuance costs |
|
|
|
|
|
|
|
|
|
Amortization of premiums / (accretion of discounts), net on marketable securities |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
( |
) |
|
Accrued and other current liabilities |
|
|
( |
) |
|
|
|
|
|
Operating lease liabilities, net |
|
|
( |
) |
|
|
— |
|
|
Other non-current liabilities |
|
|
— |
|
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from maturities of marketable securities |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
( |
) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Repayment of debt |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from private placement financing, net of issuance costs |
|
|
— |
|
|
|
|
|
|
Proceeds from At-the-Market offering, net |
|
|
|
|
|
|
— |
|
|
Proceeds from issuance of common stock under employee plans |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
— |
|
|
$ |
|
|
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset recorded on the adoption of ASC 842 |
|
$ |
|
|
|
$ |
— |
|
|
Operating lease right-of-use assets obtained in exchange for new lease liabilities |
|
$ |
|
|
|
$ |
— |
|
|
Purchases of property and equipment in accounts payable and accrued and other current liabilities |
|
$ |
— |
|
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
SATSUMA PHARMACEUTICALS, INC.
Notes to Unaudited Interim Condensed Financial Statements
|
Note 1. |
Organization and Summary of Significant Accounting Policies |
Description of the Business
Satsuma Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a novel therapeutic for the acute treatment of migraine. The Company’s product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered by a proprietary pre-filled, single-use, nasal delivery device. The Company, headquartered in South San Francisco, was incorporated in 2016 in the state of Delaware.
Private Placement
In February 2021, the Company entered into a Securities Purchase Agreement with certain purchasers, pursuant to which the Company agreed to sell and issue to certain purchasers an aggregate of
At-the-Market Equity Offering
In October 2020, the Company entered into a sales agreement (the “SVB Sales Agreement”) with SVB Securities LLC (formerly known as SVB Leerink LLC) (“SVB”) to sell shares of its common stock, from time to time, through an at-the-market (“ATM”) equity offering program under which SVB acted as its sales agent and pursuant to which the Company could sell common stock for aggregate gross sales proceeds of up to $
In November 2022, the Company entered into an At-the-Market Sales Agreement (the “Virtu Sales Agreement”), with Virtu Americas LLC (“Virtu”), to sell shares of its common stock, from time to time, through an ATM equity offering program under which Virtu will act as its sales agent and pursuant to which the Company may sell common stock for aggregate gross sales proceeds of up to $
Liquidity
The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, risks of clinical delays or failure, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on contract manufacturing organizations (“CMOs”) and contract research organizations (“CROs”), compliance with government regulations and the need to obtain additional financing to fund operations. STS101 is an investigational product candidate that will require completion of clinical development prior to any submission for regulatory approval and commercialization, if approved. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance and reporting.
The Company has incurred significant losses and negative cash flows from operations in all periods since its inception and had an accumulated deficit of $
6
As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of $
Basis of Presentation
The unaudited interim condensed financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), as defined by the Financial Accounting Standards Board, or the FASB.
Unaudited Interim Financial Information
The accompanying condensed balance sheet as of September 30, 2022, the condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, the condensed statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and the condensed statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2022 and the results of its operations for the three and nine months ended September 30, 2022 and 2021 and its cash flows for the nine months ended September 30, 2022 and 2021. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2022 and 2021 are also unaudited. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. The balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited interim condensed financial statements.
The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission, or the SEC, on March 15, 2022.
Use of Estimates
The preparation of unaudited interim condensed 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 interim condensed financial statements and the reported amounts of income and expenses during the reporting period. Such estimates include the accrual of research and development expenses, useful lives of property and equipment and the fair value of stock-based awards. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the impact of the COVID-19 pandemic and related impacts on the global economy which may delay the enrollment of subjects for our clinical trials and may disrupt our supply chain for development and manufacturing activities, and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.
Concentration of Credit Risk
The Company has no significant off-balance sheet concentrations of credit risk. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities. Substantially all the Company’s cash is held by one financial institution that management believes to be of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company invests its cash equivalents in marketable securities and money market funds. The Company has not experienced any credit losses on its deposits of cash or cash equivalents.
Leases
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) "Leases." Topic 842 supersedes the lease requirements in Accounting Standards Codification (“ASC”) Topic 840, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. In July 2018, the FASB issued ASU 2018-11, “Leases (ASC 842): Targeted Improvements,” which provides companies an optional adoption method to ASU 2016-02 whereby a company does not have to adjust comparative period financial statements for the new standard.
7
The reported results for the three and nine months ended September 30, 2022 reflect the application of ASC 842, while the comparative information has not been restated and continues to be reported under the related lease accounting standards in effect for those periods. The adoption of this update represents a change in accounting principle and resulted in the recognition of right-of-use ("ROU") assets and operating lease liabilities. The Company elected the package of practical expedients, which permits the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs incurred. The Company also elected the practical expedient to combine lease and non-lease components when determining the ROU asset and lease liability, as well as the practical expedient to exclude leases with an initial term of 12 months or less. The primary effect of adopting this standard relates to the recognition of operating leases on the condensed balance sheets and providing additional disclosures about the Company’s leasing activities.
The Company adopted ASC 842 effective January 1, 2022 using a modified retrospective method and did not restate comparative periods. The Company recognized ROU assets of $
Recent Accounting Pronouncements
New Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses, which was subsequently updated by ASU 2019-04, Codification Improvements to Topic 326, Financial Instrument - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. In November 2019, the FASB issued ASU No. 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. Early adoption is permitted. The Company is a SRC for fiscal year 2021. For the Company this standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. The adoption of this standard is not expected to have a material impact on the Company’s financial statements and related disclosures.
|
2. |
Fair Value Measurements |
The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the unaudited interim condensed financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
8
As of September 30, 2022, financial assets measured and recognized at fair value were as follows (in thousands):
|
|
|
Fair Value Measurements at September 30, 2022 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government bonds |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Corporate bonds |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Asset backed securities |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Money market funds (1) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total fair value of assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
(1) |
Included in cash and cash equivalents on the balance sheet. |
|
|
|
Fair Value Measurements at September 30, 2022 |
|
|||||||||||||
|
|
|
Amortized Cost |
|
|
||||||||||||