transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
Reverse stock split
On June 7, 2018, the Company effected a one-for‑27.58621 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock. The par value per share and authorized shares of common and convertible preferred stock were not adjusted as a result of the reverse stock split. All common stock and common stock per share amounts within the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
Use of estimates
The condensed financial statements are prepared in conformity with GAAP. This process requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Significant accounting policies
The Company’s significant accounting policies are described in Note 3, “Summary of significant accounting policies,” in the Annual Report. There have been no material changes to the significant accounting policies during the six months ended June 30, 2019 with the exception of the following:
Revenue Recognition
Revenue is recognized in accordance with revenue recognition accounting guidance, which utilizes five steps to determine whether revenue can be recognized and to what extent: (i) identify the contract with a customer; (ii) identify the performance obligation(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) determine the recognition period.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606,
Revenue from Contracts with Customers,
the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Significant judgments exercised by management include the identification of performance obligations, and whether such promised goods or services are considered distinct. The Company evaluates promised goods or services on a contract by contract basis to determine whether each promise represents a good or service that is distinct or has the same pattern of transfer as other promises. A promised good or service is considered distinct if the customer can benefit from the good or service independently of other goods/services either in the contract or that can be obtained elsewhere, without regard to contract exclusivity, and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contact. If the good or service is not considered distinct, the Company combines such promises and accounts for them as a single combined performance obligation.
Recently adopted accounting pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, which amends the guidance for accounting for revenue from contracts with customers. This ASU supersedes the revenue recognition requirements in ASC Topic 605,
Revenue Recognition
, (“ASC 605”), and creates a new topic, ASC 606,
Revenue from Contracts with Customers
. Through subsequent targeted amendments, the FASB issued additional ASUs that delayed the effective date
of ASC 606 and clarified various aspects of the new revenue guidance, including principal versus agent considerations, identifying performance obligations, licensing, and other improvements and practical expedients. The Company adopted this new standard on January 1, 2019 using the modified retrospective transition method. The Company presents revenue from contracts with customers as collaboration revenue in the Company’s condensed statements of operations. The Company applied this new standard to all contracts with customers that were not complete as of the adoption date and has determined that no cumulative catch-up adjustment to accumulated deficit was required. See Note 4, “Research collaboration agreement with Allergan” for additional information regarding the Company’s single contract that falls within the scope of ASC 606.
The Company has determined that the accounting for the Company’s various grant agreements is outside the scope of ASC 606, as the government agencies granting the Company funds are not receiving reciprocal value for their contributions. There are currently no grants outstanding in 2019. Since the accounting for government grants falls outside the scope of ASC 606, the Company has classified the grant income earned in 2018 separate and apart from revenue earned from contracts with customers in the Company’s condensed statements of operations.
In June 2018, the FASB issued ASU 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
. This ASU expands the scope of Topic 718,
Compensation—Stock Compensation
to include share-based payments issued to nonemployees for goods or services. Under the new guidance, the existing employee guidance will apply to nonemployee share based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. The new accounting guidance will be effective for the Company on January 1, 2020. The Company has early adopted this new standard on January 1, 2019. The adoption did not have a material impact on the Company’s condensed financial statements.
Recently issued accounting pronouncement
In February 2016, the FASB issued ASU No. 2016‑02,
Leases
(“ASU 2016‑02”), which requires a lessee to recognize assets and liabilities on the balance sheet for operating leases and changes many key definitions, including the definition of a lease. The new standard includes a short‑term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize lease assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance. The new standard will be effective for the Company beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the potential impact ASU 2016‑02 may have on its condensed financial statements.
3. Supplemental financial information
Cash, cash equivalents and restricted cash
Cash and cash equivalents consist of cash and, if applicable, highly liquid investments with an original maturity of three months or less when purchased. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the condensed statements of cash flows (amounts in thousands).
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
Cash and cash equivalents
|
|
$
|
124,891
|
|
$
|
150,637
|
|
Short-term and long-term restricted cash
|
|
|
491
|
|
|
491
|
|
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows
|
|
$
|
125,382
|
|
$
|
151,128
|
|
that modulate NMDArs which require a license to be utilized by a third party, the Research and Development Services are not considered distinct.
|
|
·
|
|
Joint Steering Committee – the Company actively participates in a joint steering committee, which allows the Company and its collaboration partner to direct the progression and prioritization of the joint discovery programs. As the steering committee would not occur or benefit the customer without the use of the Research Licenses and the related Research and Development Services, and given the Company’s proprietary knowledge of the Research Licenses and the NMDAr technologies, this is not considered distinct.
|
The Company also evaluated whether the
option granted to the customer to acquire additional goods or services represented a material right at contract inception. Upon exercise, the Company is obligated to transfer control of all intellectual property relating to the optioned compound to Allergan, after which the Company has no further interest in, or continuing involvement with, such optioned compound. The Company evaluated the customer options for material rights, that is, whether the option was to acquire additional goods or services for free or at a discount, and concluded that the options are priced, at contract inception, at standalone selling price. Consequently, the customer options do not represent a performance obligation at the outset of the arrangement since they are contingent upon the option exercise which is outside of the Company’s control.
The Company has concluded that there is a single combined performance obligation (comprised of the Research Licenses, Research and Development Services and participation on the Joint Steering Committee) which is satisfied over time, as the research and development services are performed. The exercise of the option to acquire exclusive rights to develop and commercialize AGN-241751 or any future options exercised are not considered a performance obligation until the time of option exercise.
Transaction Price
The RCA includes both fixed and variable consideration. Fixed payments, such as contractually defined fees per full-time employee (“FTE”), are included in the transaction price at contract inception, while variable consideration, such as reimbursement for Research and Development Services, are estimated and then evaluated for constraints upon inception of the contract and evaluated on a quarterly basis thereafter. Research and Development Services are updated for actual invoices. There were no capitalized costs associated with obtaining the contract.
The Company concluded that it will use an input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. The Company uses fixed FTE efforts and variable out-of-pocket costs as actual costs incurred relative to the annual budget research plan measure progress towards fulfillment of the performance obligation.
An input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. The Company does not anticipate significant changes as the research plan is reviewed and adjusted annually and approved by the JSC. There are no significant financing components in the contract.
The Company has determined that the option fee is representative of standalone selling price and concluded that it will recognize revenue for the option fee at a point in time, on the date of exercise, due to the significant uncertainty of whether or not Allergan would exercise the option. The Company recognizes the option fee at a point in time because control of the underlying intellectual property transfers to the customer, and the customer is able to use and benefit from the license. The Company has no further rights, interests or remaining performance obligations associated with any optioned compound, once exercised.
During the three months ended June 30, 2019 and 2018, the Company recorded expenses of $1.8 million and $2.0 million, respectively, for certain development activities in accordance with the terms of the RCA, of which 50% was reimbursed by Allergan. The Company received reimbursements of $0.9 million and $1.0 million during the three months ended June 30, 2019 and 2018, respectively. During the six months ended June 30, 2019 and 2018, the Company recorded expenses of $3.6 million and $3.9 million, respectively, for certain development activities in accordance with the terms of the RCA, of which 50% was reimbursed by Allergan. The Company received reimbursements of
Non-cash restricted stock unit award expense recognized in the accompanying condensed statements of operations was $0.3 million and $0.0 million for the three and six months ended June 30, 2019 and 2018, respectively. At June 30, 2019, there was $4.0 million of unrecognized compensation related to 1,183,400 unvested restricted stock units that will be recognized as expense over a weighted-average period of 1.88 years.
8. Net loss per share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(12,131)
|
|
$
|
(13,335)
|
|
$
|
(28,842)
|
|
$
|
(25,007)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding—basic and diluted
|
|
|
33,493
|
|
|
7,275
|
|
|
33,442
|
|
|
6,332
|
|
Net loss per share attributable to common stockholders—basic and diluted
|
|
$
|
(0.36)
|
|
$
|
(1.83)
|
|
$
|
(0.86)
|
|
$
|
(3.95)
|
|
The following common stock equivalents outstanding as of June 30, 2019 and 2018, were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti‑dilutive (in thousands):
|
|
|
|
|
|
|
As of
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
Stock options issued and outstanding
|
|
4,876
|
|
3,412
|
Unvested restricted stock
|
|
1,239
|
|
341
|
Total
|
|
6,115
|
|
3,753
|
9. Income taxes
Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, including its net operating losses. Based on its history of operating losses, the Company believes that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of June 30, 2019 and December 31, 2018.
10. Commitments and contingencies
Contingencies
From time to time, the Company is subject to occasional lawsuits, investigations and claims arising out of the normal conduct of business. The Company has no significant pending or threatened litigation as of June 30, 2019.
Indemnifications
In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our condensed financial statements and accompanying footnotes appearing elsewhere in this Quarterly Report on Form 10‑Q and our audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2018, or Annual Report, filed with the Securities and Exchange Commission, or the SEC, on March 21, 2019.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10‑Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Because of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel, proprietary, synthetic small molecules for the treatment of brain and nervous system disorders. We focus our efforts on targeting and modulating N-methyl-D-aspartate receptors, or NMDArs, which are vital to normal and effective function of the brain and nervous system. We believe leveraging the therapeutic advantages of the differentiated modulatory mechanism of our compounds will drive a paradigm shift in the treatment of disorders of the brain and nervous system.
We are advancing a pipeline of distinct product candidates derived from our NMDAr modulator discovery platform. We currently have three wholly owned, clinical-stage product candidates in development for various central nervous system, or CNS, disorders. Each of our development-stage assets has unique pharmacological properties, including with regard to binding, NMDAr subtype selectivity, potency, and activity in preclinical behavioral models. These unique properties inform the identification of the indication(s) for which each product candidate is developed.
Our product candidate, NYX-2925, is a novel, oral small-molecule NMDAr modulator that has demonstrated effects on biomarkers of pain processing as well as alleviation of pain and other symptoms in clinical studies. NYX-2925 is currently in Phase 2 clinical development as a treatment for chronic pain. In June 2019, we reported positive results from a 23-patient, sequential design, Phase 2 neuroimaging biomarker study in which NYX-2925 was shown to have statistically significant effects on pain-processing biomarkers and patient-reported measures of pain and other fibromyalgia symptoms. NYX-2925 has also been evaluated in a Phase 2 study in patients with painful diabetic peripheral neuropathy, or DPN. In the total study population (N=300), the primary endpoint was not met; however, a post-hoc sub-group analysis revealed robust analgesic activity in a large subset of patients—patients with advanced DPN (i.e.
4 years since DPN diagnosis, N=127)—in which the preponderance of patients' pain is most likely to be centrally mediated and addressed by the central mechanism of NYX-2925. Together, the effects on neuroimaging biomarkers and the robust analgesic effects observed in these two studies strongly support the continued development of NYX-2925 for centralized chronic pain conditions. In a Phase 1 single- and multiple-ascending dose study, NYX-2925 demonstrated a predictable and dose-dependent pharmacokinetic profile, acheiving CNS exposure levels in line with brain exposure shown with preclinically efficacious doses. Additionally, NYX-2925 has demonstrated effects on NMDA receptor-dependent pathways across two Phase 1 EEG studies in healthy volunteers. Across all clinical studies conducted with NYX-2925 to date, it has been safe and well tolerated with no drug-related serious adverse events reported. We expect to initiate one Phase 2 study in patients with advanced DPN and another Phase 2 study in patients with fibromyalgia in the second half of 2019.
Our product candidate, NYX-783, is a novel, oral, small-molecule NMDAr modulator currently in Phase 2 clinical development for the treatment of post-traumatic stress disorder, or PTSD. NYX-783 has demonstrated robust activity in preclinical models of psychiatric disorders as well as models of fear conditioning and extinction learning. Based on these preclinical data and its mechanism of action, we believe NYX-783 has the potential to address the underlying learning and memory dysfunction that underpins PTSD. In a Phase 1 study conducted in healthy volunteers, NYX-783 was
shown to be safe and well tolerated with no related serious adverse events. In the same Phase 1 study, NYX-783 demonstrated a predictable, dose-dependent, linear pharmacokinetic profile, and also achieved CNS exposure levels in line with brain exposure shown with preclinically efficacious doses. We are currently evaluating NYX-783 in a 144-subject Phase 2 clinical study to assess its safety and efficacy in patients with PTSD. We expect to report data from this study in 2020.
Our product candidate, NYX-458, is a novel, oral, small-molecule NMDAr modulator in clinical development for the treatment of cognitive impairment associated with Parkinson’s disease. NYX-458 has exhibited marked effects on cognitive performance across a number of preclinical models. In studies conducted in non-human primates, NYX-458 has been shown to improve cognitive deficits akin to those seen in patients with Parkinson’s disease. In the studies, NYX-458 demonstrated rapid, robust, and long-lasting effects on attention, working memory, and cognitive flexibility, did not have any negative effects on motor symptoms, and did not interfere with the anti-parkinsonian effects of levodopa, the standard of care. In a Phase 1 study in healthy human volunteers NYX-458 was shown to be safe and well tolerated with no related serious adverse events. NYX-458 demonstrated a linear and predictable pharmacokinetic profile and was found to readily achieve CNS concentrations in line with concentrations of preclinically efficacious dose levels. In the second half of 2019, we expect to initiate a Phase 2 study in patients with Parkinson’s disease mild cognitive impairment.
Since our inception in June 2015, we have never generated revenue from the sale of our products and have incurred significant net losses. Our nominal revenues have been primarily derived from a research collaboration agreement with Allergan plc, or Allergan, a development services agreement with Allergan, and research and development grants from the U.S. government. While these revenues offset a small portion of the costs associated with our early stage research and discovery efforts, we do not rely on these revenues to fund our operations.
From our inception through June 30, 2019, we have raised an aggregate of $135 million of gross proceeds from sales of our convertible preferred stock and $117.8 million of gross proceeds from our initial public offering, or IPO.
See “Liquidity and capital resources.”
Our net losses were $53.3 million and $32.1 million for the years ended December 31, 2018 and 2017, respectively, and $28.8 million and $25.0 million for the six months ended June 30, 2019 and 2018, respectively. As June 30, 2019, we had an accumulated deficit of $134.4 million. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will continue to increase in connection with our ongoing activities.
We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, which we expect will take a number of years and the outcome of which is uncertain, or enter into collaborative agreements with third parties, the timing of which is largely beyond our control and may never occur. To fund our current and future operating plans, we may need additional capital, which we may obtain through one or more equity offerings, debt financings, or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts. We cannot assure that we will ever be profitable or generate positive cash flow from operating activities.
Financial operations overview
Revenues
We have not generated any revenue from product sales. We are unable to predict when, if ever, material net cash inflows will commence from sales of our products, if approved. Our revenue to date has been primarily derived from a research collaboration agreement with Allergan; a development services agreement with Allergan, which was put in place to
continue certain development activities for a pre-determined period of time following Allergan's acquisition of Naurex Inc. and research and development grants from the U.S. government which have no repayment or royalty obligations.
Operating expenses
Research and development expenses
Research and development activities account for a significant portion of our operating expenses. We expense research and development costs as incurred. Research and development expenses consist of costs incurred in connection with the development of our product candidates, including:
|
·
|
|
fees paid to consultants, sponsored researchers, contract manufacturing organizations, or CMOs, and contract research organizations, or CROs, including in connection with our preclinical and clinical studies, and other related clinical study fees, such as for investigator grants, patient screening, laboratory work, clinical study database management, and statistical compilation and analysis;
|
|
·
|
|
costs related to acquiring and maintaining preclinical and clinical study materials and facilities;
|
|
·
|
|
costs related to compliance with regulatory requirements; and
|
|
·
|
|
costs related to salaries, bonuses, and other compensation for employees in research and development functions.
|
At this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the development of our product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty related to:
|
·
|
|
future clinical study results; the scope, rate of progress, and expense of our ongoing as well as any additional preclinical studies, clinical studies and other research and development activities;
|
|
·
|
|
clinical study enrollment rate;
|
|
·
|
|
the manufacturing of our product candidates;
|
|
·
|
|
our ability to obtain, maintain, defend and enforce intellectual property protection for our product candidates;
|
|
·
|
|
significant and changing government regulation;
|
|
·
|
|
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers, developing and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;
|
|
·
|
|
the timing and receipt of any regulatory approvals; and
|
|
·
|
|
the risks disclosed in the section entitled “Risk Factors” included in our Annual Report.
|
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs, timing, and viability associated with the development of that product candidate.
We expect our research and development expenses to increase over the next several years as we continue to implement our business strategy, which includes advancing our product candidates into and through clinical development, expanding our research and development efforts, seeking regulatory approvals for any product candidates for which we successfully complete clinical studies, accessing and developing additional product candidates, and hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical studies. As such, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation. General and administrative expenses also include rent as well as professional fees for legal, consulting, accounting, and audit services.
In the future, we expect that our general and administrative expenses will increase as we continue to support our research and development and the potential commercialization of our product candidates, if approved. We also anticipate that we will incur increased accounting, audit, legal, tax, regulatory, compliance, and director and officer insurance costs, as well as investor and public relations expenses associated with maintaining compliance with exchange listing and SEC requirements.
Other income
Other income consists primarily of the interest income earned on our cash and cash equivalents.
Results of operations
Comparison of the three months ended June 30, 2019 and 2018
The following table summarizes our results of operations for the three months ended June 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
ended June 30,
|
|
Increase
|
|
|
2019
|
|
2018
|
|
(Decrease)
|
Collaboration revenue
|
|
$
|
925
|
|
$
|
2,017
|
|
$
|
(1,092)
|
Grant revenue
|
|
|
—
|
|
|
111
|
|
|
(111)
|
Total revenues
|
|
|
925
|
|
|
2,128
|
|
|
(1,203)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
9,481
|
|
|
13,686
|
|
|
(4,205)
|
General and administrative
|
|
|
4,171
|
|
|
2,022
|
|
|
2,149
|
Total operating expenses
|
|
|
13,652
|
|
|
15,708
|
|
|
(2,056)
|
Loss from operations
|
|
|
(12,727)
|
|
|
(13,580)
|
|
|
(853)
|
Other income
|
|
|
596
|
|
|
245
|
|
|
351
|
Net loss and comprehensive loss
|
|
$
|
(12,131)
|
|
$
|
(13,335)
|
|
$
|
(1,204)
|
Collaboration revenue
Collaboration revenue was $0.9 million and $2.0 million for the three months ended June 30, 2019 and 2018, respectively, and is attributable to the research collaboration with Allergan. The decrease was predominately attributable to the $1.0 million associated with Allergan’s exercise of its option in May 2018 to acquire exclusive rights to develop and commercialize AGN-241751.
Grant revenue
The decrease of $0.1 million of grant revenue was primarily driven by a reduction in our research and development costs incurred under our grants from the U.S. government as the activities underpinning our outstanding grants were completed in the first half of 2018, and accordingly, we did not generate any grant-related revenues for the three months ending June 30, 2019.
Research and development expenses
The following table summarizes our research and development expenses incurred during the three months ended June 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
ended June 30,
|
|
Increase
|
|
|
2019
|
|
2018
|
|
(Decrease)
|
NYX-2925
|
|
$
|
1,267
|
|
$
|
6,769
|
|
$
|
(5,502)
|
NYX-783
|
|
|
1,401
|
|
|
863
|
|
|
538
|
NYX-458
|
|
|
1,875
|
|
|
516
|
|
|
1,359
|
Preclinical research and discovery programs
|
|
|
1,378
|
|
|
2,266
|
|
|
(888)
|
Personnel and related costs
|
|
|
3,560
|
|
|
3,272
|
|
|
288
|
Total research and development expenses
|
|
$
|
9,481
|
|
$
|
13,686
|
|
$
|
(4,205)
|
Research and development expenses were $9.5 million for the three months ended June 30, 2019, compared to $13.7 million for the three months ended June 30, 2018. The decrease of $4.2 million was primarily due to the following:
|
·
|
|
approximately $5.5 million decrease for clinical, regulatory, and drug product costs related to NYX-2925, as a result of the completion of our enrollment efforts for our Phase 2 clinical study in patients with painful DPN in 2018 and enrollment efforts for our Phase 2 clinical study in patients with fibromyalgia completed in the first half of 2019, and two Phase 1 exploratory pharmacodynamic clinical studies that commenced and completed in 2018;
|
|
·
|
|
approximately $0.5 million increase for clinical, regulatory, and drug product costs related to the ongoing development of NYX-783 for the treatment of PTSD;
|
|
·
|
|
approximately $1.4 million increase for clinical, regulatory and drug product costs related to the ongoing development of NYX-458 for the treatment of Parkinson’s disease cognitive impairment;
|
|
·
|
|
approximately $0.9 million decrease for costs associated with our preclinical research efforts with external research organizations; and
|
|
·
|
|
approximately $0.3 million increase for costs related to employee compensation and related support.
|
General and administrative expenses
General and administrative expenses were $4.2 million for the three months ended June 30, 2019, compared to $2.0 million for the three months ended June 30, 2018. The increase of $2.2 million was primarily driven by $1.2 million for increased costs related to employee compensation, including $0.9 million of additional non-cash stock-based compensation expense, due to increased headcount, and $0.9 million of increased professional fees and insurance costs to support ongoing business operations, patent-related matters, and to comply with obligations associated with being a publicly traded company.
Other income
We recorded $0.6 million of other income for the three months ended June 30, 2019, compared to $0.2 million for the three months ended June 30, 2018. This was due to increased interest income earned on our cash and cash equivalents.
Comparison of the six months ended June 30, 2019 and 2018
The following table summarizes our results of operations for the six months ended June 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Six months
|
|
|
|
|
|
ended June 30,
|
|
Increase
|
|
|
2019
|
|
2018
|
|
(Decrease)
|
Collaboration revenue
|
|
$
|
1,815
|
|
$
|
2,951
|
|
$
|
(1,136)
|
Grant revenue
|
|
|
—
|
|
|
1,642
|
|
|
(1,642)
|
Total revenues
|
|
|
1,815
|
|
|
4,593
|
|
|
(2,778)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
21,971
|
|
|
25,911
|
|
|
(3,940)
|
General and administrative
|
|
|
9,896
|
|
|
4,071
|
|
|
5,825
|
Total operating expenses
|
|
|
31,867
|
|
|
29,982
|
|
|
1,885
|
Loss from operations
|
|
|
(30,052)
|
|
|
(25,389)
|
|
|
4,663
|
Other income
|
|
|
1,210
|
|
|
382
|
|
|
828
|
Net loss and comprehensive loss
|
|
$
|
(28,842)
|
|
$
|
(25,007)
|
|
$
|
3,835
|
Collaboration revenue
Collaboration revenue was $1.8 million and $3.0 million for the six months ended June 30, 2019 and 2018, respectively, and is attributable to the research collaboration with Allergan. The decrease was predominantly attributable to the $1.0 million associated with Allergan’s exercise of its option in May 2018 to acquire exclusive rights to develop and commercialize AGN-241751.
Grant revenue
The decrease of $1.6 million of grant revenue was primarily driven by a reduction in our research and development costs incurred under our grants from the U.S. government as the activities underpinning our outstanding grants were completed in the first half of 2018, and accordingly, we did not generate any grant-related revenue for the six months ending June 30, 2019.
Research and development expenses
The following table summarizes our research and development expenses incurred during the six months ended June 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Six months
|
|
|
|
|
|
ended June 30,
|
|
Increase
|
|
|
2019
|
|
2018
|
|
(Decrease)
|
NYX-2925
|
|
$
|
3,962
|
|
$
|
11,564
|
|
$
|
(7,602)
|
NYX-783
|
|
|
3,753
|
|
|
2,294
|
|
|
1,459
|
NYX-458
|
|
|
3,474
|
|
|
1,518
|
|
|
1,956
|
Preclinical research and discovery programs
|
|
|
3,095
|
|
|
4,094
|
|
|
(999)
|
Personnel and related costs
|
|
|
7,687
|
|
|
6,441
|
|
|
1,246
|
Total research and development expenses
|
|
$
|
21,971
|
|
$
|
25,911
|
|
$
|
(3,940)
|
Research and development expenses were $22.0 million for the six months ended June 30, 2019, compared to $25.9 million for the six months ended June 30, 2018. The decrease of $3.9 million was primarily due to the following:
|
·
|
|
approximately $7.6 million decrease for clinical, regulatory, and drug product costs related to NYX-2925, as a result of the completion of our enrollment efforts for our Phase 2 clinical study in patients with painful DPN in
|
2018 and for our Phase 2 clinical study in patients with fibromyalgia in the first half of 2019, and two Phase 1 exploratory pharmacodynamic clinical studies that were commenced and completed in 2018;
|
|
·
|
|
approximately $1.5 million increase for clinical, regulatory, and drug product costs related to the ongoing development of NYX-783 for the treatment of PTSD;
|
|
·
|
|
approximately $2.0 million increase for clinical, regulatory and drug product costs related to the ongoing development of NYX-458 for the treatment of Parkinson’s disease cognitive impairment;
|
|
·
|
|
approximately $1.0 million decrease for costs associated with our preclinical research efforts with external research organizations; and
|
|
·
|
|
approximately $1.2 million increase for costs related to employee compensation and related support.
|
General and administrative expenses
General and administrative expenses were $9.9 million for the six months ended June 30, 2019, compared to $4.1 million for the six months ended June 30, 2018. The increase of $5.8 million was primarily driven by $3.0 million for increased costs related to employee compensation, including $2.1 million of additional non-cash stock-based compensation expense, due to increased headcount, and $2.6 million of increased professional fees and insurance costs to support ongoing business operations, patent-related matters, and to comply with obligations associated with being a publicly traded company.
Other income
We recorded $1.2 million of other income for the six months ended June 30, 2019, compared to $0.4 million for the six months ended June 30, 2018. This was due to increased interest income earned on our cash and cash equivalents.
Liquidity and capital resources
From our inception through June 30, 2019, we have incurred significant operating losses and have funded our operations to date through proceeds from collaborations, grants, sales of convertible preferred stock, and our IPO. We have generated limited revenue to date from a research collaboration agreement with Allergan, a development services agreement with Allergan, and research and development grants from the U.S. government.
On June 25, 2018, we completed our IPO, pursuant to which we issued and sold 7,359,998 shares of our common stock at a price of $16.00 per share, which included 959,999 shares sold pursuant to the exercise of the underwriters’ option to purchase additional shares. We received $106.5 million of proceeds, net of underwriting discounts and commissions and other offering expenses.
As of June 30, 2019, we had cash and cash equivalents of $
124.9
million. We invest our cash equivalents in liquid money market accounts.
Funding requirements
Our primary uses of capital are, and we expect will continue to be, research and development services, compensation and related expenses, product manufacturing, laboratory and related supplies, legal and other regulatory expenses, patent prosecution filing and maintenance costs for our licensed intellectual property and general overhead costs. We expect to continue incurring significant expenses and operating losses for the foreseeable future. In addition, since the closing of our IPO, we have incurred, and expect to incur, additional costs associated with operating as a public company. We anticipate that our expenses will increase in connection with our ongoing activities, as we:
|
·
|
|
advance the clinical development of our lead product candidates;
|
|
·
|
|
continue to improve the manufacturing process for our product candidates; and manufacture clinical supplies as development progresses;
|
|
·
|
|
continue the research and development of our preclinical product candidates;
|
|
·
|
|
seek to identify and develop additional product candidates;
|
|
·
|
|
maintain, expend, and protect our intellectual property portfolio; and
|
|
·
|
|
improve our operational, financial, and management systems to support our clinical development and other operations.
|
Outlook
Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our cash and cash equivalents as of June 30, 2019 will be sufficient to fund our operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, which we expect will take a number of years and the outcome of which is uncertain, or enter into collaborative agreements with third parties, the timing of which is largely beyond our control and may never occur. We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future, which we may obtain through one or more equity offerings, debt financings, or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Cash flows
The following table summarizes our sources and uses of cash for each of the six months ended June 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
Net cash provided by (used in):
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(25,930)
|
|
$
|
(20,210)
|
Investing activities
|
|
|
(43)
|
|
|
(322)
|
Financing activities
|
|
|
227
|
|
|
107,486
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
$
|
(25,746)
|
|
$
|
86,954
|
Operating activities
During the six months ended June 30, 2019, our cash used in operating activities was primarily due to our net loss of $28.8 million as we incurred increased external research and development costs with our clinical studies during the six months ended June 30, 2019 and increased general and administrative costs, partially offset by non-cash charges of $4.5 million, consisting primarily of $4.3 million in non-cash stock-based compensation and $0.2 million in depreciation and amortization. Net cash provided by changes in our operating assets and liabilities consisted of a $1.7 million use of cash driven by an increase in prepaid expenses and other current assets, and decreases in accounts payable and accrued expenses and other liabilities partially offset by a $0.1 million decrease in accounts receivable.
During the six months ended June 30, 2018, our cash used in operating activities was primarily due to our net loss of $25.0 million, partially offset by non-cash charges of $1.5 million, consisting primarily of $1.3 million in non-cash stock-based compensation and $0.2 million in depreciation and amortization. Net cash provided by changes in our operating assets and liabilities consisted of a $3.4 million source of cash driven by decreases in prepaid expenses and
other assets, and increases in accounts payable and accrued expenses and other liabilities, partially offset by a $0.1 million increase in accounts receivable.
Investing activities
Net cash used in investing activities was less than $0.1 million during the six months ended June 30, 2019, consisting of purchases of property and equipment, primarily laboratory equipment and leasehold improvements.
Net cash used in investing activities was $0.3 million during the six months ended June 30, 2018, consisting of purchases of property and equipment, primarily laboratory equipment and leasehold improvements.
Financing activities
Net cash provided by financing activities was $0.2 million during the six months ended June 30, 2019, consisting of proceeds received from the exercise of stock options.
Net cash used in financing activities was $107.5 million during the six months ended June 30, 2018,
consisting of $109.5 million of IPO proceeds, net of underwriting discounts and commissions, offset by $2.9 million of offering costs related to our IPO of which $1.1 million had not been paid as of June 30, 2018 and additional costs of $0.2 million related to our Series B financing that closed in December 2017.
Critical accounting policies and significant judgments and estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with United States generally accepted accounting principles. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report. There were no material changes to our critical accounting policies through June 30, 2019 from those discussed in our Annual Report.
Recent accounting pronouncements
See Note 2 to our condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Contractual obligations and other commitments
For a discussion of contractual obligations and other commitments affecting us, see the discussion under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations – Contractual obligations and other commitments” included in our Annual Report.
There have been not been any material changes since December 31, 2018 to the Company’s contractual obligations and other commitments.
JOBS Act accounting election
Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act, an “emerging growth company” can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We intend to rely on this exemption. There are other exemptions and reduced reporting requirements provided by the JOBS Act that we are currently evaluating. For example, as an “emerging growth company,” we are exempt from Sections 14A(a) and (b) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
which would otherwise require us to (1) submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “golden parachutes;” and (2) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons
of our chief executive officer’s compensation to our median employee compensation. We also intend to rely on an exemption from the rule requiring us to provide an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002. We will continue to remain an “emerging growth company” until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.07 billion; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Off-balance sheet arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Information requested by this Item 3. Quantitative and Qualitative Disclosures about Market Risk is not applicable as we are electing scaled disclosure requirements available to smaller reporting companies with respect to this Item.
Item 4. Controls and Procedures.
The Company has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), to allow timely decisions regarding required disclosure. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective at the reasonable assurance level as of June 30, 2019.
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 three months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.