INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve a number of risks and uncertainties. We
caution readers that any forward-looking statement is not a guarantee of future
performance and that actual results could differ materially from those contained
in the forward-looking statement. These statements are based on current
expectations of future events. Such statements include, but are not limited to,
statements about future financial and operating results, plans, objectives,
expectations and intentions, costs and expenses, interest rates, outcome of
contingencies, financial condition, results of operations, liquidity, business
strategies, cost savings, objectives of management and other statements that are
not historical facts. You can find many of these statements by looking for words
like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,”
“could,” “plan,” “intend” or similar expressions in this Quarterly Report on
Form 10-Q or in documents incorporated by reference into this Quarterly Report
on Form 10-Q. We intend that such forward-looking statements be subject to the
safe harbors created thereby. Examples of these forward-looking statements
include, but are not limited to:
• progress and preliminary and future results of any clinical trials;
• anticipated regulatory filings, requirements and future clinical trials;
• our expectations regarding the impact of the macroeconomic and geopolitical
environment, including inflation, pandemics and geopolitical conflict, and
their potentially material adverse impact on our business and the execution
of our preclinical studies and clinical trials;
• the performance of, and our ability to obtain sufficient supply of
cytisinicline in a timely manner from, third-party suppliers and
manufacturers;
• timing and plans for the expansion of our focus to address other methods of
nicotine addiction;
• timing and amount of future contractual payments, product revenue and
operating expenses; and
• market acceptance of our products and the estimated potential size of these
markets.
These forward-looking statements are based on the current beliefs and
expectations of our management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results may differ materially from current
expectations and projections. Factors that might cause such a difference include
those discussed in Item 1A “Risk Factors,” as well as those discussed elsewhere
in the Quarterly Report on Form 10-
reliance on these forward-looking statements, which speak only as of the date of
this Quarterly Report on Form 10-Q or, in the case of documents referred to or
incorporated by reference, the date of those documents.
All subsequent written or oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated
events, except as may be required under applicable
update one or more forward-looking statements, no inference should be drawn that
we will make additional updates with respect to those or other forward-looking
statements.
Overview
We are a clinical-stage pharmaceutical company committed to the global
development and commercialization of cytisinicline for smoking cessation and
nicotine addiction. With more than one billion smokers globally and over 30
million smokers in
preventable disease and death, responsible for more than eight million deaths
annually worldwide. Our primary focus is to address this global epidemic.
We also plan to expand our focus to address other methods of nicotine addiction
such as e-cigarettes/vaping. The use of e-cigarettes continues to be widespread,
with most recent reports from the
indicating nearly 11 million adult users in
2019. While e-cigarettes have been historically viewed as less harmful than
combustible cigarettes, their long-term safety remains controversial. In a
recent study that we conducted surveying approximately 500 users of nicotine
vaping devices or e-cigarettes, approximately 73% of participants responded that
they intend to quit vaping within the next three to twelve months. Of those who
intended to quit even sooner, within the next 3 months, more than half stated
they would be extremely likely to try a new prescription product to help them do
so. We believe that cytisinicline, if approved, could be the first prescription
drug indicated for vape and e-cigarette users who are ready to quit their
nicotine addiction.
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Our management team has significant experience in growing emerging companies
focused on the development of under-utilized pharmaceutical compounds to meet
unmet medical needs. We intend to use this experience to develop and ultimately
commercialize cytisinicline either directly or via strategic collaborations.
Cytisinicline is an established smoking cessation treatment that has been
approved and marketed in Central and
for over 20 years. We are evaluating an improved dosing and administration of
cytisinicline that is expected to improve compliance and outcomes for smokers.
We have an exclusive license and supply agreement with Sopharma for the
development and commercialization of cytisinicline outside of Sopharma’s
territories which are predominately located in Central and
estimated that over 20 million people have used Sopharma’s cytisinicline product
to help treat nicotine addiction, including over 2,700 smokers in
investigator-conducted, Phase 3 clinical trials in
Cytisinicline is a naturally occurring, plant-based alkaloid. Cytisinicline is
structurally similar to nicotine and has a well-defined, dual-acting mechanism
of action that is both agonistic and antagonistic. It is believed to aid in
smoking cessation and the treatment of nicotine addiction by interacting with
nicotine receptors in the brain by reducing the severity of nicotine withdrawal
symptoms through agonistic effects on nicotine receptors and by reducing the
reward and satisfaction associated with nicotine through antagonistic
properties.
In 2018, the
non-proprietary, or generic, name for the substance also known as cytisine.
We have no products approved for commercial sale and have not generated any
revenue from product sales to date. We have never been profitable and have
incurred operating losses in each year since inception. Our net loss was
million
we had an accumulated deficit of
balance of
million
operating activities was
Substantial doubt exists as to our ability to continue as a going concern. Our
ability to continue as a going concern is subject to material uncertainty and
dependent on our ability to obtain additional financing. We expect to incur
significant expenses and increasing operating losses for at least the next
several years as we continue our clinical development of, and seek regulatory
approval for, cytisinicline and add personnel necessary to operate as a public
company with an advanced clinical candidate. We expect that our operating losses
will fluctuate significantly from quarter to quarter and year to year due to
timing of clinical development programs and efforts to achieve regulatory
approval. Without additional funds, we may be forced to delay, scale back or
eliminate some of our research and development activities or other operations
and potentially delay product development in an effort to provide sufficient
funds to continue our operations. If any of these events occurs, our ability to
achieve our development and commercialization goals would be adversely affected.
Our current resources are insufficient to fund our planned operations for the
next twelve months. We will continue to require substantial additional capital
to continue our clinical development activities. Accordingly, we will need to
raise substantial additional capital to continue to fund our operations from the
sale of our securities, partnering arrangements or other financing transactions
in order to finance the commercialization of our product candidate. The amount
and timing of our future funding requirements will depend on many factors,
including the pace and results of our clinical development efforts. The
uncertainty with respect to our operations and the market generally due to the
COVID-19 pandemic and increasing interest rates and inflation may also make it
challenging to raise additional capital on favorable terms, if at all. Failure
to raise capital as and when needed, on favorable terms or at all, will have a
negative impact on our financial condition and our ability to develop our
product candidate.
Our accompanying financial results have been prepared assuming we will continue
to operate as a going concern, which contemplates the realization of assets and
liabilities and commitments in the normal course of business. The financial
results do not include any adjustments to the amounts and classification of
assets and liabilities that might be necessary should we be unable to continue
as a going concern. Such adjustments could be material.
Cytisinicline Ongoing and Recent Clinical Developments
Company-Sponsored Clinical Trials for a Smoking Cessation Indication
Completed Phase 3 ORCA-2 Trial
In
clinical trial. ORCA-2 was initiated in
and safety of 3 mg cytisinicline dosed three times daily compared to placebo in
810 adult smokers at 17 clinical sites in
were randomized to one of three study arms to determine the smoking
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cessation efficacy and safety profile of cytisinicline when administered for
either 6 or 12 weeks, compared to placebo. All subjects received standard
behavioral support and were assigned to one of the following groups:
• Arm A: 12 weeks of placebo • Arm B: 6 weeks of cytisinicline, followed by 6 weeks of placebo • Arm C: 12 weeks of cytisinicline
The ORCA-2 study had two independent primary endpoints that evaluated the
success of smoking abstinence for both 6-week and 12-week durations of
cytisinicline treatment, compared to placebo. The primary endpoints for ORCA-2
were biochemically verified continuous abstinence measured during the last 4
weeks of each treatment duration. Both the 6- and 12-week cytisinicline
treatments demonstrated significantly better quit rates than placebo with odds
ratios of 8.0 and 6.3, respectively. The odds ratio, or OR, is a standard
measure of association between an exposure (cytisinicline treatment) and an
outcome (continuous smoking abstinence).
• Subjects who received 12 weeks of cytisinicline treatment had 6.3 times
higher odds, or likelihood, to have quit smoking during the last 4 weeks of
treatment compared to subjects who received placebo (p<0.0001). The
abstinence rate during weeks 9-12 was 32.6% for cytisinicline compared to
7.0% for placebo.
• Subjects who received 6 weeks of cytisinicline treatment had 8 times higher
odds, or likelihood, to have quit smoking during the last 4 weeks of
treatment compared to subjects who received placebo (p<0.0001). The
abstinence rate during weeks 3-6 was 25.3% for cytisinicline compared to
4.4% for placebo.
[[Image Removed]]
The secondary endpoints measured continuous abstinence after treatment out to 24
weeks. Both the 6- and 12-week secondary endpoints for continuous abstinence
demonstrated significantly better quit rates for cytisinicline treated subjects
than placebo. The continuous abstinence rate from week 9 to 24 was 21.1% for the
12-week cytisinicline arm compared to 4.8% for placebo, with an odds ratio of
5.3 (p<0.0001). The continuous abstinence rate from week 3 to 24 was 8.9% for
the 6-week cytisinicline arm compared to 2.6% for placebo, with an odds ratio of
3.7 (p=0.0016).
A third secondary endpoint compared the two cytisinicline treatment arms and
evaluated for an increased risk in relapse from week 6 to week 24 when subjects
were switched to placebo during week 6 to week 12 (Arm B) instead of receiving
cytisinicline for another 6
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weeks during week 6 to week 12 (Arm C). The analysis showed that there was no
increased risk of smoking relapse in subjects who had successfully quit smoking
by week 3 through week 6 if they received placebo instead of continuing
cytisinicline from week 6 to week 12.
Cytisinicline was well tolerated with no treatment-related serious adverse
events reported. The most commonly reported adverse events (occurring greater
than 5% overall in the study) for placebo, 6-week cytisinicline, and 12-week
cytisinicline, respectively, were:
Placebo 6-Weeks Cytisinicline 12-Weeks Cytisinicline
Insomnia 4.8% 8.6% 9.6%
Abnormal Dreams 3.0% 8.2% 7.8%
Headaches 8.1% 6.7% 7.8%
Nausea 7.4% 5.9% 5.6%
We will continue to analyze the ORCA-2 results and expect to submit these data
for publication and presentation at future medical conferences.
Ongoing Phase 3 ORCA-3 Trial
In
confirmatory Phase 3 trial required for registrational approval of cytisinicline
in
Phase 3 trial will evaluate the efficacy and safety of 3 mg cytisinicline dosed
three times daily compared to placebo in 750 adult smokers at 19 clinical sites.
ORCA-3 participants will be randomized to one of three study arms to evaluate
cytisinicline administered for either 6 or 12 weeks, compared to placebo. All
subjects will receive standard behavioral support and will be assigned to one of
the following groups:
• Arm A: 12 weeks of placebo • Arm B: 6 weeks of cytisinicline, followed by 6 weeks of placebo • Arm C: 12 weeks of cytisinicline
The primary outcome measure of success in the ORCA-3 trial is biochemically
verified continuous abstinence during the last four weeks of treatment in the 6
and 12-week cytisinicline treatment arms compared with placebo. Each treatment
arm will be compared independently to the placebo arm, and the trial will be
determined to be successful if either or both of the cytisinicline treatment
arms show a statistical benefit compared to placebo. Secondary outcome measures
will be conducted to assess continued abstinence rates through six months from
the start of study treatment. In
reached its enrollment target of 750 adult smokers. We expect topline ORCA-3
data results to be reported in the second quarter of 2023.
Completed Phase 2 ORCA-1 Trial
In
trial and defined the dose selection of 3 mg, three times daily, or TID, for our
Phase 3 development. ORCA-1 was the first trial in our
Cytisinicline for Addiction Program, or ORCA Program, that aims to evaluate the
effectiveness of cytisinicline for smoking cessation, nicotine addiction
therapy, and potential benefit in other indications.
ORCA-1 was initiated in
States
standard declining titration schedule as well as a more simplified TID dosing
schedule, both over 25 days. The trial was randomized and blinded to compare the
effectiveness of the cytisinicline doses and schedules to respective placebo
groups. Subjects were treated for 25 days, provided behavioral support, and
followed up for an additional four weeks to assess continued smoking abstinence
after the 25-day treatment.
The primary endpoint in the study was the reduction in daily smoking, a
self-reported measure. Three of the four cytisinicline treatment arms
demonstrated a statistically significant reduction, p<0.05, compared to placebo.
The fourth arm trended to significance (p= 0.052). Across all treatment arms,
over the 25-day treatment period, subjects on cytisinicline experienced a 74-80%
median reduction in the number of cigarettes smoked, compared to a 62% reduction
in the placebo arms.
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The secondary endpoint of the trial was a 4-week continuous abstinence rate,
which is the relevant endpoint for regulatory approval. All cytisinicline
treatment arms showed significant improvements in abstinence rates compared to
the placebo arms. The most impressive results were observed in the 3 mg TID
cytisinicline arm which demonstrated a 50% abstinence rate at week 4, compared
to 10% for placebo (p<0.0001) and a continuous abstinence rate, weeks 5 through
8, of 30% for cytisinicline compared to 8% for placebo (p= 0.005). Smokers in
the 3 mg TID arm had an OR of 5.04 (95% CI: 1.42, 22.32) for continuous
abstinence from week 5 to week 8, compared with placebo, meaning, smokers
receiving 3 mg cytisinicline TID were 5 times more likely to stop smoking
compared to subjects on placebo.
At week 4, all four cytisinicline arms demonstrated statistically significant
(p<0.05) reductions in expired carbon monoxide, or CO, a biochemical measure of
smoking activity. Expired CO levels had declined by a median of 71-80% in the
cytisinicline treatment arms, compared to only 38% in the placebo arms. The
greater reductions in expired CO levels for the cytisinicline arms versus
placebo suggest that placebo-treated subjects may have over-reported their
reduction in cigarettes smoked or overcompensated with greater inhalation while
smoking fewer cigarettes.
Cytisinicline was well-tolerated with no serious adverse effects, or SAEs,
reported. The most commonly reported (>5%) adverse effects, or AEs, across all
cytisinicline treatment arms versus placebo arms were abnormal dreams, insomnia,
upper respiratory tract infections, and nausea. In the 3 mg TID treatment arm
versus placebo arms, the most common AEs were abnormal dreams, insomnia, and
constipation (each 6% vs 2%), upper respiratory tract infections (6% vs 14%),
and nausea (6% vs 10%), respectively. Compliance with study treatment was
greater than 94% across all arms.
We presented the ORCA-1 results in
of the
Norway
Research
mg TID for Phase 3 development. Overall, the 3 mg dose administered TID
demonstrated the best overall safety and efficacy when compared to the 1.5 mg
dose or the declining titration schedule evaluated in ORCA-1. At the SRNT
European meeting held in
that showed cytisinicline treatment had an earlier onset of sustained abstinence
compared to placebo and that the cytisinicline TID schedule appeared
more effective for achieving sustained abstinence in smokers who had
previously failed to quit on varenicline compared to the declining titration
schedule.
In
Administration
Phase 3 clinical program using the simplified 3 mg TID dosing schedule. The FDA
agreed that the 3 mg TID dosing schedule was acceptable.
Other Clinical Trials
We are in the process of initiating clinical studies to evaluate renal
impairment and QT interval prolongation. Plans for both studies, required for
the NDA, were first discussed with the FDA as part of an end of Phase 2 meeting
in 2018, followed by more detailed review and agreement with the FDA during
2022. These studies are expected to run in parallel with the ORCA-3 trial with
results anticipated to be available by mid-2023.
Company-Sponsored Clinical Trials for an E-cigarette (nicotine vaping) Cessation Indication Ongoing Phase 2 ORCA-V1 Clinical Trial InJuly 2021 , we announced that we were awarded a grant from theNational Institute on Drug Abuse , or NIDA, of theNational Institutes of Health , orNIH , to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. This initial grant award, in the amount of$320,000 , commenced onAugust 1, 2021 , and was utilized to complete critical regulatory and clinical operational activities, such as protocol finalization, clinical trial site identification, and submission of an Investigational New Drug Application, or IND, to the FDA for investigating cytisinicline in nicotine e-cigarette users. InNovember 2021 , we announced that the FDA had completed their review and accepted the IND application to investigate cytisinicline as a cessation treatment in this population. InJune 2022 , following NIDA/NIH review of completed milestones, we announced that we were awarded the next grant funding from NIDA in the amount of approximately$2.5 million to conduct the ORCA-V1 Phase 2 Clinical trial.
In
ORCA-V1 will evaluate the efficacy and safety of 3 mg cytisinicline dosed 3
times daily compared to placebo in approximately 150 adult e-cigarette users at
five clinical trial locations in
randomized to receive cytisinicline or placebo for 12 weeks in combination with
standard cessation behavioral support. In
trial had reached its enrollment target of 150 e-cigarette users. We expect
topline ORCA-V1 data results to be reported in the second quarter of 2023.
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The full grant award of
the total ORCA-V1 clinical study costs. The Primary Investigators for the grant
are our Chief Medical Officer, Dr.
Professor of Medicine at
and Treatment Center
Other Recent Investigator-Sponsored Clinical Trials
In
investigator-sponsored Phase 3 RAUORA trial. RAUORA was a non-inferiority study
comparing cytisinicline to Chantix (varenicline) in M?ori (indigenous New
Zealanders) and wh?nau (family) of M?ori. The study was led by Dr.
Walker
2,140 subjects. In total, 1,105 M?ori or wh?nau expressed interest in
participating in the study and a total of 679 were randomized to receive either
cytisinicline or varenicline. The average age of participants in the trial was
43 years and approximately 70% of the participants were women.
The study compared cytisinicline administered on a schedule of 25 days of
declining titration followed by twice-daily dosing for a total of 12 weeks with
varenicline administered on a schedule of seven days of inclining titration
followed by twice-daily dosing for a total of 12 weeks. The primary endpoint was
a comparison of biochemically confirmed continuous abstinence rates at six
months, and the trial was designed to assess if the two agents were non-inferior
to each other.
The primary endpoint of the non-inferiority trial was to demonstrate that
cytisinicline quit rates would be no less than 10% lower than the quit rates for
varenicline. Topline results indicated that the RAUORA trial achieved its
primary endpoint in showing that cytisinicline plus behavioral support was at
least as effective as varenicline plus behavioral support at six months.
Cytisinicline met the pre-specified non-inferiority endpoint and was trending
towards superiority with an Absolute Risk Difference of +4.29 in favor of
cytisinicline (95% CI -0.22 to 8.79), demonstrating a 4.29% improvement in quit
rates in favor of cytisinicline. Specifically, continuous abstinence rates at
six months, verified by expired CO, were 12.1% for cytisinicline compared to
7.9% for varenicline. The Relative Risk was 1.55 on an intent-to-treat basis,
indicating that subjects in the cytisinicline arm were approximately one and a
half times more likely to have quit smoking at six months compared to subjects
who received varenicline.
Additionally, significantly fewer overall AEs were reported in
cytisinicline-treated subjects (Relative Risk 0.56, 95% CI 0.49 to 0.65,
p<0.001). Notably, of the subjects who experienced adverse events, cytisinicline
subjects reported significantly less nausea, insomnia and vivid dreams (p<0.05).
The final RAUORA trial results and additional analyses were presented at the
SRNT European Annual Meeting in
Addiction in
of Cambridge Department of Biochemistry
in vitro binding characteristics of cytisinicline compared to varenicline at the
human 5-HT3 receptor. Using a radioligand antagonist displacement design, the
study reported an IC50 of 0.50 mM for cytisinicline and 0.25 µM for varenicline,
representing a 2000-greater fold agonist binding affinity to the 5-HT3 receptor
for varenicline compared to cytisinicline. Agonist activation of 5-HT3 receptors
in the brain stem has been shown to induce nausea and vomiting. The data
demonstrating the difference in binding potency at the 5-HT3 receptor provide
potential rationale for the lower overall incidence of adverse events reported
for cytisinicline compared to varenicline.
Non-clinical Studies
Non-clinical toxicology studies were sponsored by the
Complementary
cytisinicline as a smoking cessation treatment. We filed this IND application
for cytisinicline with the FDA in 2017, which included the NCCIH sponsored
non-clinical studies. Additional NCCIH and NCI sponsored non-clinical toxicology
studies were later submitted in support for initiating our Phase 3 program.
Non-clinical toxicology studies that are required for a New Drug Application, or
NDA, include two longer-term chronic toxicology studies and two carcinogenicity
studies, which were completed as company-sponsored studies and submitted to the
FDA.
Impact of COVID-19 Pandemic
As a result of the COVID-19 pandemic, we have experienced disruptions in our
operations, liquidity, supply chain, facilities, and clinical trials. We may in
the future experience more significant delays in enrollment, participant dosing,
distribution of clinical trial materials, study monitoring and data analysis
that could materially adversely impact our business, results of operations and
overall financial performance in future periods. Specifically, we may experience
impact from changes in how we and companies worldwide conduct business due to
the COVID-19 pandemic, including but not limited to restrictions on travel and
in-person meetings, delays in site activations and enrollment of clinical
trials, prioritization of hospital resources toward pandemic effort, delays in
review by the
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FDA, and disruptions in our supply chain for our product candidates. The extent
of the impact on the COVID-19 pandemic on our operational and financial
performance is uncertain and cannot be predicted. As of the filing date of this
Quarterly Report on Form 10-Q, the extent to which the COVID-19 pandemic has
impacted our financial condition, results of operations or guidance has been
minimal. The effect of any additional COVID-19 pandemic issues will not be fully
reflected in our results of operations and overall financial performance until
future periods. See the section titled “Risk Factors” for further discussion of
the possible impact of the COVID-19 pandemic on our business.
License & Supply Agreements
Sopharma License and Supply Agreements
We are party to a license agreement, or the Sopharma License Agreement, and a
supply agreement, or the Sopharma Supply Agreement, with Sopharma. Pursuant to
the Sopharma License Agreement, we were granted access to all available
manufacturing, efficacy and safety data related to cytisinicline, as well as a
granted patent in several European countries related to new oral dosage forms of
cytisinicline providing enhanced stability. Additional rights granted under the
Sopharma License Agreement include the exclusive use of, and the right to
sublicense, certain cytisinicline trademarks in all territories described in the
Sopharma License Agreement. Under the Sopharma License Agreement, we agreed to
pay a nonrefundable license fee. In addition, we agreed to make certain royalty
payments equal to a mid-single digit percentage of all net sales of
cytisinicline products in our territory during the term of the Sopharma License
Agreement, including those sold by a third party pursuant to any sublicense
which may be granted by us. To date, any amounts paid to Sopharma pursuant to
the Sopharma License Agreement have been immaterial.
In
Bristol
Bristol License Agreement
the
research activities into cytisinicline and its derivatives, including a number
of patent applications related to novel approaches to cytisinicline binding at
the nicotinic receptor level.
In consideration of rights granted by the
nominal license fee and agreed to pay amounts of up to
aggregate, tied to a financing milestone and to specific clinical development
and commercialization milestones resulting from activities covered by the
commercialize any product candidates subject to the
License Agreement
digits and payments up to a percentage in the mid-teens of any sublicense
income, subject to specified exceptions, based upon net sales of such licensed
products.
On
to the
human medicinal uses of cytisinicline across all therapeutic categories from the
derivatives. In consideration of rights granted by the amended
Bristol License Agreement
the execution of the amended
additional amounts of up to
milestone and to specific clinical development and commercialization milestones
resulting from activities covered by the amended
Agreement
License Agreement
financing, development and commercialization milestones. Additionally, if we
successfully commercialize any product candidate subject to the amended
License Agreement
digits and payments up to a percentage in the mid-teens of any sublicense
income, subject to specified exceptions, based upon net sales of such licensed
products. Up to
Research and Development Expenses
Research and development, or R&D, expenses consist primarily of costs for
clinical trials, contract manufacturing, personnel costs, milestone payments to
third parties, facilities, regulatory activities, non-clinical studies and
allocations of other R&D-related costs. External expenses for clinical trials
include fees paid to clinical research organizations, clinical trial site costs
and patient treatment costs.
We manage our clinical trials through contract research organizations and
independent medical investigators at our sites and at hospitals and expect this
practice to continue. Due to our ability to utilize resources across several
projects, we do not record or
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maintain information regarding the indirect operating costs incurred for our R&D
programs on a program-specific basis. In addition, we believe that allocating
costs on the basis of time incurred by our employees does not accurately reflect
the actual costs of a project.
We expect our R&D expenses to increase for the foreseeable future as we continue
to conduct our ongoing non-clinical studies, and initiate new clinical trials
and registration-enabling activities. The process of conducting clinical trials
and non-clinical studies necessary to obtain regulatory approval is costly and
time consuming and we may never succeed in achieving marketing approval for
cytisinicline. (See “Item 1A. Risk Factors-Risks Related to the Development of
Our Product Candidate Cytisinicline.”)
Successful development of cytisinicline is highly uncertain and may not result
in an approved product. We cannot estimate completion dates for development
activities or when we might receive material net cash inflows from our R&D
projects, if ever. We anticipate we will make determinations as to which
markets, and therefore, which regulatory approvals, to pursue and how much
funding to direct toward achieving regulatory approval in each market on an
ongoing basis in response to our ability to enter into new strategic alliances
with respect to each program or potential product candidate, the scientific and
clinical success of each future product candidate, and ongoing assessments as to
each future product candidate’s commercial potential. We will need to raise
additional capital and may seek additional strategic alliances in the future in
order to advance our various programs.
Our projects or intended R&D activities may be subject to change from time to
time as we evaluate results from completed studies, our R&D priorities and
available resources.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
costs for our personnel in executive, finance and accounting, corporate
communications and other administrative functions, as well as consulting costs,
including market research, business consulting, human resources and intellectual
property. Other costs include professional fees for legal and auditing services,
insurance and facility costs.
Results of Operations
For the three and nine months ended
Research and development expenses
Our R&D expenses for our clinical development program for the three and nine
months ended
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Clinical development programs:
Cytisinicline $ 9,869 $ 4,591 $ 21,464 $ 19,460
Total research and development expenses
R&D expenses for the three and nine months ended
million
The increase in the three and nine months ended
to the same periods in 2021 was primarily due to timing of the initiation of our
Phase 3 ORCA-3 trial, which initiated in
which initiated in
initiated in
General and administrative expenses
Our general and administrative expenses for the three and nine months ended
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Total general and administrative expenses
General and administrative expenses for the three and nine months ended
from
30, 2021
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increase was primarily due to higher clinical trial media and awareness
expenses, employee expenses associated with stock-based compensation, higher
legal expenses as a result of increased patent application activities and
increase in insurance premiums.
Liquidity and Capital Resources
We have incurred an accumulated deficit of
2022
operate our business and continue or expand our R&D activities and other
operations. We have not generated any revenue from product sales to date, and we
may not generate product sales revenue in the near future, if ever. As of
and a positive working capital balance of
existing cash, cash equivalents and restricted cash, will be sufficient for us
to fund our current operating expenses and capital expenditures into 2023.
The financial results have been prepared assuming we will continue to operate as
a going concern, which contemplates the realization of assets and liabilities
and commitments in the normal course of business.
Substantial doubt exists as to our ability to continue as a going concern. Our
ability to continue as a going concern is subject to material uncertainty and
dependent on our ability to obtain additional financing. There is no assurance
that we will obtain financing from other sources. The uncertainty with respect
to our operations and the capital markets market generally may make it
challenging to raise additional capital on favorable terms, if at all. The
uncertainty with respect to our operations and the market generally due to the
COVID-19 pandemic and increasing interest rates and inflation may also make it
challenging to raise additional capital on favorable terms, if at all. We have
historically financed our operations through equity and debt financings. Without
additional funds, we may be forced to delay, scale back or eliminate some of our
research and development activities or other operations and potentially delay
product development in an effort to provide sufficient funds to continue our
operations. If any of these events occur, our ability to achieve our development
and commercialization goals would be adversely affected. In addition, we expect
to incur significant expenses and increasing operating losses for at least the
next several years as we continue our clinical development of, and seek
regulatory approval for, cytisinicline and add personnel necessary to operate as
a public company with an advanced clinical candidate. We expect that our
operating losses will fluctuate significantly from quarter to quarter and year
to year due to timing of clinical development programs and efforts to achieve
regulatory approval.
Our current resources are insufficient to fund our planned operations for the
next twelve months. We will continue to require substantial additional capital
to continue our clinical development activities. Accordingly, we will need to
raise substantial additional capital to continue to fund our operations from the
sale of our securities, partnering arrangements or other financing transactions
in order to finance the commercialization of our product candidate. The amount
and timing of our future funding requirements will depend on many factors,
including the pace and results of our clinical development efforts. Failure to
raise capital as and when needed, on favorable terms or at all, will have a
negative impact on our financial condition and our ability to develop our
product candidate.
The consolidated financial results do not include any adjustments to the amounts
and classification of assets and liabilities that might be necessary should we
be unable to continue as a going concern. Such adjustments could be material.
We did not have during the periods presented, and we do not currently have, any
commitments or obligations, including contingent obligations, arising from
arrangements with unconsolidated entities or persons that have or are reasonably
likely to have a material current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, cash requirements or capital resources.
On
pursuant to which we sold an aggregate of 3,285,714 shares of our common stock,
including 428,571 shares subject to the underwriter’s option to purchase
additional shares, or the May Shares. The May Shares were sold at the public
offering price of
The underwritten public offering raised total gross proceeds of approximately
discounts and commissions and offering expenses, we received net proceeds of
approximately
offering expenses have been charged against the gross proceeds.
Convertible Debt and Term Loan
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On
debt agreement, or Original Debt Agreement, with
and
As part of the Original Debt Agreement, the Lenders funded
form of convertible indebtedness, or Convertible Debt, at closing. On
2022
SVB for the remaining
pursuant to which SVB provided a commitment to extend term loans having an
aggregate original principal amount of up to
(ii) a first amendment to the Original Debt Agreement, or the Amendment, and as
amended by the Amendment, the Debt Agreement.
Under the terms of the agreement, the Convertible Debt matures on
2023
approval on or prior to
interest at the aggregate of (a) a floating rate per annum equal to the greater
of (i) 2.25% and (ii) the prime rate minus 1.0%, which interest is payable in
cash monthly in arrears, and (b) 7.0% per annum, which interest shall compound
monthly.
Subject to certain terms and conditions, the Lenders may convert all or any part
of the outstanding Convertible Debt and accrued and unpaid interest at any time
prior to maturity into shares of our common stock at a conversion price equal to
all outstanding Convertible Debt, including accrued and unpaid interest, will
mandatorily convert into shares of our common stock, at the conversion price, on
such date, if any, when the closing price per share of our common stock has been
equal to or greater than
such date.
We have the right, or Call Right, at any time to repay and retire all (but not
less than all) of the outstanding Convertible Debt and accrued and unpaid
interest, if any, prior to its conversion by payment of a premium determined
based on the date of such repayment equal to:
• 125% of the principal amount of the Convertible Debt including accrued
paid-in-kind interest, or PIK, if the Call Right is exercised on or
before the 18-month anniversary of the date of the Debt Agreement; and
• 150% of the principal amount of the Convertible Debt including accrued
PIK, if the Call Right is exercised after the 18-month anniversary of the
date of the Debt Agreement,
in either case together with all accrued and unpaid interest on the principal
balance of the Convertible Debt. If the Call Right is exercised by us, the
Lenders will retain certain lookback rights in the event we enter into an
agreement to be acquired in the twelve months following the exercise of the Call
Right. We agreed to grant the Lenders a security interest in virtually all of
our assets, including our patents and other intellectual property as security
for our obligations under the Debt Agreement.
Subject to the terms and conditions of the Loan Agreement, we may borrow term
loans under the Loan Agreement until
Loan Agreement will incur interest at a floating rate equal to the greater of
3.50% and the
interest only payments through
outstanding loans under the Loan Agreement will be repaid in 24 consecutive
equal monthly installments of principal plus accrued and unpaid interest. The
Term Loans mature on
date, repayment of the Term Loans in full, acceleration of the loans or
termination of the Loan Agreement, we will be required to pay a final payment
equal to the aggregate principal amount of the Term Loan advances extended by
SVB multiplied by 6.0%. Our obligations under the Loan Agreement are secured by
substantially all of our assets, other than our intellectual property.
Upon and after borrowing under the Loan Agreement, we must comply with certain
financial covenants as set forth in the Loan Agreement and the Amendment,
including a minimum liquidity ratio of at least 1.25 to 1.00, or at our election
after receiving at least
sale of equity securities, a minimum market capitalization of at least
million
covenants, including covenants regarding the incurrence of additional
indebtedness or liens, investments, transactions with affiliates, delivery of
financial statements, payment of taxes, maintenance of insurance, dispositions
of property, mergers or acquisitions, among other customary covenants. We are
also restricted from paying dividends or making other distributions or payments
on its capital stock, subject to limited exceptions. The Loan Agreement includes
customary representations and warranties, events of default and termination
provisions. In addition to the financial covenants described above, the
Amendment makes certain other changes to the Original Debt Agreement related to
our entry into the Loan Agreement. No amounts have been drawn on the Term Loans.
At-the-Market Sales Agreement
On
or ATM, with
shares of common stock with an aggregate offering price of up to
During the nine months ended
common stock pursuant to the ATM, which resulted in gross proceeds of
million
2022
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offered and sold an aggregate of 200,000 shares of our common stock. These
aggregate sales resulted in gross proceeds to us of approximately
and offering expenses of
stock having an aggregate value of approximately
available for sale under the ATM.
Cash Flows
Cash Used in Operating Activities
For the nine months ended
activities was
as compared to the 2021 period was primarily due to the timing of the initiation
of our Phase 3 ORCA-3 trial, which initiated in
trial, which initiated in
which initiated in
Cash Provided in Financing Activities
For the nine months ended
activities was
ended
sales under our employee stock purchase plan and warrant exercises. Net cash
provided by financing activities in the nine months ended
relates to proceeds received from our
exercises.
Commitments and Contingencies
We previously disclosed certain contractual obligations and contingencies and
commitments relevant to us within the financial statements and Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our
Annual Report on Form 10-K for the year ended
the
“Contractual Obligations” table in Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” of our 2021 Form
10-K. For more information regarding our current contingencies and commitments,
see Note 8 to the financial statements included above.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with
management to make estimates and assumptions that affect reported amounts and
related disclosures. We have discussed those estimates that we believe are
critical and require the use of complex judgment in their application in our
audited financial statements for the year ended
Report on Form 10-K filed with the
2021
the methodologies or assumptions we apply under them.
New Accounting Standards
See Note 2, “Accounting Policies,” of the consolidated financial statements for
information related to the adoption of new accounting standards in 2022, none of
which had a material impact on our financial statements, and the future adoption
of recently issued accounting standards, which we do not expect to have a
material impact on our financial statements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that
material information required to be disclosed in our periodic reports filed or
submitted under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, is recorded, processed, summarized and reported within the time periods
specified in the
are also designed to ensure that information required to be disclosed in the
reports we file or submit under the Exchange Act are accumulated and
communicated to our management, including our principal executive officer and
principal financial officer as appropriate, to allow timely decisions regarding
required disclosure.
During the quarter ended
the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based upon that evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were
effective, as of the end of the period covered by this report.
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Changes in Internal Control Over Financial Reporting
We have not made any changes to our internal control over financial reporting
(as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the
quarter ended
reasonably likely to materially affect, our internal control over financial
reporting.
Limitations on Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or
our internal controls will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected.
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