The following discussion and analysis of our financial condition and results of
operations should be read together with our financial statements and related
notes appearing elsewhere in this Annual Report on Form 10-K. Some of the
information contained in this discussion and analysis or set forth elsewhere in
this Annual Report on Form 10-K, including information with respect to our plans
and strategy for our business and financing needs, includes forward-looking
statements that involve risks and uncertainties and should be read together with
the "Risk Factors" section of this Annual Report on Form 10-K for a discussion
of important factors that could cause actual results to differ materially from
the results described in or implied by the forward-looking statements contained
in the following discussion and analysis. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those discussed below and elsewhere in this
Annual Report and in other reports we file with the
Overview
We are focused on creating value through improving the intracellular delivery of critical therapeutics through our paradigm-changing lipid nanocrystal (LNC) drug delivery platform and its application to overcome current challenges in safely and effectively delivering small molecules, nucleic acids, gene therapies, proteins/peptides, and vaccines. We are also focused on creating value through finding a partner to continue the development of LYPDISO, our proprietary, next-generation prescription omega-3 drug, which we believe is differentiated from all other prescription omega-3 products and positioned to potentially demonstrate superior cardioprotective effects.
Key elements of our strategy include:
? Advancing our clinical stage assets based on our LNC platform delivery
technology and continuing to expand utilization of this promising technology
into areas of innovative medicine. .
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? Delivering efficacy data for MAT2203 in the EnACT study for the treatment of
cryptococcal meningitis, which would highlight the safety and efficacy of this
promising drug, while highlighting the ability of our LNC platform technology
to deliver potent medicines across the blood-brain barrier following oral
administration.
? Progressing the development of MAT2501 through extensive preclinical toxicology
and efficacy studies in NTM infections and completing a single ascending dose
pharmacokinetic study in healthy volunteers later in 2021, all with the
financial support of the
? Expanding the application of our LNC platform delivery technology through
collaborations with sophisticated and well-resourced biotech and pharmaceutical
companies in areas of innovative medicine.
We have incurred losses for each period from inception. Our net loss was
approximately
Financial Operations Overview Revenue
During the years ended
Research and Development Expenses
Research and development expenses consist of costs incurred for the development of product candidates LYPDISO, MAT2203, MAT2501 and advancement of our LNC platform delivery technology, which include:
? the cost of conducting pre-clinical work;
? the cost of acquiring, developing and manufacturing pre-clinical and human
clinical trial materials;
? costs for consultants and contractors associated with Chemistry and
Manufacturing Controls (CMC), pre-clinical and clinical activities and
regulatory operations;
? expenses incurred under agreements with contract research organizations, or
CROs, including the
? employee-related expenses, including salaries and stock-based compensation
expense for those employees involved in the research and development process.
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The table below summarizes our direct research and development expenses for our
product candidates and development platform for the years ended
Years Ended December 31, (in thousands) 2020 2019 Direct research and development expenses: Manufacturing process development$ 1,421 $ 1,081 Preclinical trials 744 1,538 Clinical development 5,149 2,565 Regulatory 95 190 Internal staffing, overhead and other 6,950 5,861 Total research & development$ 14,359 $ 11,235
Research and development activities are central to our business model. We expect
our research and development expenses to increase because product candidates in
later stages of clinical development generally have higher development costs
than those in earlier stages of clinical development, primarily due to the
increased size and duration of later-stage human trials. In addition, we will
look to strategically expand the use of our drug platform technology through
additional development work. During 2021, we will be focused on advancing our
lead product candidates, MAT2203, to efficacy data in the treatment of CM,
accelerating the preclinical development of MAT2501 and also expanding
application of our LNC platform delivery technology through collaborations with
third parties. We have also initiated a process to identify a suitable partner
to continue the development of LYPDISO following the announcement of topline
date from the ENHANCE-IT study in
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions. Other general and administrative expenses include facility costs, insurance, investor relations expenses, professional fees for legal, patent review, consulting and accounting/audit services. We anticipate that our general and administrative expenses will increase during 2021 due to the increased expenses related to employee compensation and insurance costs.
Sale of Net Operating Losses (NOLs)
Income obtained from selling unused net operating losses (NOLs) and unused
research tax credits under the New Jersey Technology Business Tax Certificate
Program was approximately
Other Income, net
Other income, net is largely comprised of interest income (expense) and franchise taxes.
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Application of Critical Accounting Policies and Accounting Estimates
A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
For a description of our significant accounting policies, refer to "Note 3 -
Summary of Significant Accounting Policies." Of these policies, the following
are considered critical to an understanding of our Consolidated Financial
Statements as they require the application of the most difficult, subjective and
complex judgments; (i) Stock-based compensation, (ii) Fair value measurements,
(iii) Research and development costs, (iv)
Current Operating Trends
Our current R&D efforts are focused on advancing our lead LNC product candidates, MAT2203, through clinical development toward an initial indication for the treatment of CM, accelerating preclinical development of MAT2501 with the assistance of the CFF, and expanding application of our LNC platform delivery technology through collaborations with third parties. Our R&D expenses consist of manufacturing work and the cost of active pharmaceutical ingredients and excipients used in such work, fees paid to consultants for work related to clinical trial design and regulatory activities, fees paid to providers for conducting various clinical studies as well as for the analysis of the results of such studies, and for other medical research addressing the potential efficacy and safety of our drugs. We believe that significant investment in product development is a competitive necessity, and we plan to continue these investments in order to be in a position to realize the potential of our product candidates and proprietary technologies.
We expect that most of our R&D expenses in the near-term future will be incurred in support of our current and future preclinical and clinical development programs rather than technology development. These expenditures are subject to numerous uncertainties relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology and efficacy. At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials for each drug candidate. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants, contracts or other agreements. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources on more promising products. Completion of clinical trials may take several years, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate.
The commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays. In addition, we may encounter regulatory delays or rejections as a result of many factors, including results that do not support the intended safety or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing and costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business, financial condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows from the relevant drug or program would be delayed or would not occur.
Results of Operations
Years Ended
The following table summarizes our operating expenses for the years ended
Years Ended December 31, 2020 2019 Revenues$ 158 $ 90 Expenses: Research and development$ 14,359 $ 11,235 General and administrative 10,006 7,776 Operating Expenses$ 24,365 $ 19,011
Sale of net operating losses (NOLs)
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Revenues. We generated approximately
Research and Development expenses. R&D expense for the year ended
General and Administrative expenses. General and administrative expense for the
year ended
Sale of net operating losses (NOLs). The Company recognized approximately
Liquidity and capital resources
Sources of Liquidity
We have funded our operations since inception primarily through private
placements of our preferred stock and our common stock and common stock
warrants. As of
As of
2020 At-The-Market Sales Agreement
On
78 2020 Common Stock Offering
On
2019 Common Stock Offering
On
2018 Series B Preferred Stock Offering
On
Cash Flows
The following table sets forth the primary sources and uses of cash for each of the period set forth below (in thousands):
Years Ended December 31 2020 2019 Cash used in operating activities$ (17,368 ) $ (14,092 ) Cash used in investing activities (40,667 ) (6,011 ) Cash provided by financing activities 48,047 29,852 Net (decrease)/increase in cash and cash equivalents and restricted cash$ (9,988 ) $ 9,749 Operating Activities
Net cash used in operating activities for the year ended
Investing Activities
Approximately
79 Financing Activities
Net cash provided by financing activities was approximately
Funding Requirements and Other Liquidity Matters
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
? conduct further preclinical and clinical studies of MAT2203, our lead product
candidate, even is such studies are primarily financed with non-dilutive
funding from
? support the conduct of further preclinical studies of MAT2501, even if such
studies are primarily financed with non-dilutive funding from the CFF;
? seek to discover and develop additional product candidates;
? seek regulatory approvals for any product candidates that successfully complete
clinical trials;
? require the manufacture of larger quantities of product candidates for clinical
development and potentially commercialization;
? maintain, expand and protect our intellectual property portfolio;
? hire additional clinical, quality control and scientific personnel; and
? add operational, financial and management information systems and personnel,
including personnel to support our product development and planned future
commercialization efforts and personnel and infrastructure necessary to help us
comply with our obligations as a public company.
We expect that our existing cash, cash equivalents and marketable securities,
coupled with the approximately
Until such time, if ever, that we can generate product revenues sufficient to
achieve profitability, we expect to finance our cash needs through a combination
of private and public equity offerings, debt financings, government or other
third-party funding, collaborations and licensing arrangements. We do not have
any committed external source of funds other than limited grant funding from the
CFF and
If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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Contractual Obligations and Commitments
Refer to Note 10 - "Commitments" in the accompanying notes to the consolidated financial statements for a discussion of the Company's contractual obligations and commitments.
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 under
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 3 - "Significant Accounting Policies," in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements.
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