RENOVORX, INC. Unless the context otherwise requires, all references in this section to the
"Company," "we," "us," or "our" refer to
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our plans, estimates, and beliefs that involve risks and uncertainties, including those described in the section titled "Forward Looking Statements." Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled "Risk Factors" included elsewhere in this Annual Report.
Overview
We are a clinical-stage biopharmaceutical company focused on developing
therapies for the local treatment of solid tumors. We are currently conducting a
Phase III registrational trial for our lead product candidate RenovoGem™. Our
therapy platform, RenovoRx Trans-Arterial Micro-Perfusion, or RenovoTAMP™®,
utilizes approved chemotherapeutics with validated mechanisms of action and
well-established safety and side effect profiles, with the goal of increasing
their efficacy, improving their safety, and widening their therapeutic window by
combining such chemotherapeutics with our proprietary drug delivery system.
RenovoTAMP combines our patented
As previously disclosed, in
We are also planning to evaluate RenovoGem in a second indication in a Phase II/III trial in extrahepatic (or outside the liver) cholangiocarcinoma (or eCCA), cancer that occurs in the bile ducts that lead out of the liver and join with the gallbladder. After significant input from key opinion leaders across the spectrum of relevant medical specialties and feedback from the FDA, we submitted the protocol for a Phase II/III eCCA clinical trial to FDA. If FDA does not object to our study protocol, we anticipate launching the eCCA trial and enrolling the first patient this year. In addition, we may evaluate RenovoGem in other indications, potentially including locally advanced lung cancer, locally advanced uterine tumors, and glioblastoma (an aggressive type of cancer that can occur in the brain or spinal cord). To date, we are focused on developing drug/device candidates with gemcitabine, but in the future, we may develop other product candidates with other chemotherapeutic agents for intra-arterial delivery via our RenovoTAMP therapy platform.
Since our inception, we have devoted substantially all of our efforts to
developing our cancer therapy platform and product candidates, raising capital
and organizing and staffing our Company. To date, we have financed our
operations primarily through issuance of convertible preferred stock with net
proceeds of
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We have incurred significant operating losses and generated negative cash flows
from operations since our inception. As of
? Advance clinical development of RenovoGem and our platform technology by
continuing to enroll patients in our ongoing Phase III TIGeR-PaC clinical
trial, expanding the number of clinical trials including our planned clinical
trial in HCCA, and advancing RenovoGem through preclinical and clinical
development in additional indications;
? Hire additional research, development, engineering, and general and
administrative personnel;
? Maintain, expand, enforce, defend, and protect our intellectual property
portfolio; and
? Expand our operational, financial and management systems and increase
personnel, including personnel to support our clinical development,
manufacturing and commercialization efforts and our operations as a public
company.
In addition to the variables described above, if and when any of our product candidates successfully complete development, we will incur substantial additional costs associated with establishing a sales, marketing, medical affairs and distribution infrastructure to commercialize products for which we may obtain marketing approval, regulatory filings, marketing approval, and post-marketing requirements, in addition to other commercial costs. We cannot reasonably estimate these costs at this time.
Due to our recurring operating losses and the expectation that we will continue
to incur net losses in the future, we will be required to raise additional
capital to complete the development and commercialization of our product
candidates. We have historically financed our operations primarily through
private sales of our equity, debt financing and the sale of common stock and
warrants in our initial public offering, or IPO. To raise additional capital, we
may seek to sell additional equity and/or debt securities, obtain a credit
facility or other loan or enter into collaborations, licenses or other similar
arrangements, which we may not be able to do on favorable terms, or at all. For
example, we have filed an omnibus shelf registration statement on Form S-3 that
provides for aggregate offerings of up to
Our financial statements as of
As a result, we will require significant additional funding to support our continuing operations. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through private or public equity financings, debt financings and collaborations, licenses or other similar arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interests of our stockholders will be diluted and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts and additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements or other strategic transactions in the future, we may have to relinquish valuable rights to our technologies or future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through private or public equity financings or debt financings when needed, we may be required to delay, limit, reduce or terminate development or future commercialization efforts, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we might have to liquidate our assets and the value we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements, and our shareholders may lose their entire investment in our common stock.
Impact of COVID-19
The ongoing COVID-19 global and national health emergency has caused significant
disruption in the international and
In response to public health directives and orders and to help minimize the risk of the virus to employees, we have taken precautionary measures, including implementing hybrid work policies for certain employees. The ongoing COVID-19 global pandemic also has negatively affected, and we expect will continue to negatively affect, our clinical studies. For example, we have faced challenges in conducting our clinical trials, including recruiting subjects and accommodating patient visits. Additionally, our service providers and their operations may be disrupted, temporarily closed or experience worker or supply shortages, which could result in additional disruptions or delays in shipments of purchased materials or the continued development of our product candidates. To date, we have not suffered material supply chain disruptions.
We are not able to estimate the duration of the pandemic and the potential
impact on our business. As the COVID-19 global pandemic continues to evolve, it
could result in significant long-term disruption of global financial markets,
including a period of a rising rate of inflation, reducing our ability to raise
additional capital when needed and on acceptable terms, if at all, which could
negatively affect our liquidity. The extent to which the COVID-19 pandemic
impacts our clinical development and regulatory efforts will depend on future
developments that are highly uncertain and cannot be predicted with confidence,
such as the duration of the continued outbreak, new travel restrictions,
quarantines and social distancing requirements in
Components of Our Results of Operations
Revenue
We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for several years, if at all. If our development efforts for our current or future product candidates are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements.
61 Operating Expenses Research and Development
Research and development expenses consist of costs related to the research and development of our platform technology. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors and consultants. We outsource a substantial portion of our clinical trial activities, utilizing the service of third-party clinical trial sites and contract research organizations to assist us with the execution of our clinical trials. In addition, we have FDA 510(k) clearance for the RenovoCath delivery device, which comprises part of the RenovoGem product. Accordingly, we are able to charge our clinical trial sites for the RenovoCath delivery device. To date, payments from clinical trial sites in consideration for RenovoCath delivery devices have been adequate to cover our direct manufacturing costs. Any payments we receive from clinical trial sites as consideration for use of RenovoCath delivery devices offset our research and development expenses. We expect our research and development expenses to increase for the foreseeable future as we continue the development of our product candidates and enroll subjects in our ongoing Phase III clinical trial, initiate new clinical trials and pursue regulatory approval of our product candidates. It is difficult to predict with any certainty the duration and costs of completing our current or future clinical trials of our product candidates or if, when or to what extent we will achieve regulatory approval and generate revenue from the commercialization and sale of our product candidates. The duration, costs and timing of clinical trials and other development of our product candidates will depend on a variety of factors, including uncertainties in clinical trial enrollment, timing and extent of future clinical trials, development of new product candidates and significant and changing government regulation. We may never succeed in achieving regulatory approval for any of our product candidates.
Our research and development expenses include:
? expenses incurred under agreements with clinical trial sites, contract
research organizations, and consultants that are involved in conducting our
clinical trials;
? costs of acquiring and developing clinical trial materials;
? personnel costs, including salaries, benefits, bonuses, and stock-based
compensation for employees engaged in preclinical and clinical research and
development;
? costs related to compliance with regulatory requirements;
? third-party vendor costs related to manufacturing materials and testing;
? costs related to preclinical studies and pilot testing;
? travel expenses; and
? allocated general and administrative expenses which includes facilities and
other indirect administrative expenses to support research and development
activities.
Research and development costs are expensed as incurred. Costs for certain development activities, such as clinical trials and preclinical studies, are recognized based on evaluation of progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by third party vendors.
Due to the ongoing impact of the COVID-19 pandemic and work-from-home policies and other operational limitations mandated by federal, state, and local governments as a result of the pandemic, certain of our research and development activities were delayed and may be further delayed until we and our vendors return to pre-pandemic operations and capacity.
General and Administrative
General and administrative expenses consist of salaries, benefits, and
stock-based compensation for personnel in executive, finance and administrative
functions, professional services and associated costs related to accounting,
tax, audit, legal, intellectual property and other matters, consulting costs,
conferences, travel and allocated expenses for rent, insurance and other general
overhead costs. We expect to continue to incur additional expenses as a result
of operating as a public company, including costs to comply with the rules and
regulations of the
Other Income (Expenses), Net Interest Income (Expense) Net
Interest expense consists of charges relating to the amortization of the debt
discount and debt issuance costs as well as interest on prior amounts
outstanding on our convertible notes. In
Interest income is earned from cash deposited in our short-term marketable securities and money market account.
Other Income (Expense), Net
Other income, net primarily represents the mark-to-market adjustment on the
derivative liability resulting from the 2020 and 2021 Convertible Notes. Upon
the completion of our IPO in
Gain on Loan Extinguishment
The gain on loan extinguishment for the year ended
Income Tax Expense
We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. Deferred income tax assets and liabilities are recorded net and classified as noncurrent on the balance sheets. A valuation allowance is provided against our deferred income tax assets when their realization is more likely than not.
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We are subject to income taxes in the federal and state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, we recognize tax liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is more-likely-than-not (greater than 50%) of being realized upon settlement. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
On
Results of Operations
Comparison of the Years Ended
The following table summarizes the significant components of our results of operations for the periods presented (in thousands, except percentages):
Increase /
Years Ended December 31, (Decrease)
2022 2021 $ %
Operating expenses:
Research and development $ 4,301 $ 3,039 $ 1,262 42 %
General and administrative 5,649 2,632 3,017 115 %
Total operating expenses 9,950 5,671 4,279 75 %
Loss from operations (9,950 ) (5,671 ) (4,279 ) 75 %
Other income (expense), net
Interest income (expense), net 57 (834 ) 891 107 %
Other income (expense), net 4 119 (115 ) (97 )%
Gain on loan extinguishment - 62 (62 ) (100 )%
Total other income (expense), net 61 (653 ) 714 109 %
Net loss $ (9,889 ) $ (6,324 ) $ (3,565 ) (56 )%
Research and Development
The following table summarizes our research and development expenses (in
thousands):
Increase /
Years Ended December 31, (Decrease)
2022 2021 $
Preclinical research and development $ 1,861 $ 861 $ 1,000
Clinical development 1,548 1528 20
Personnel 690 583 107
Regulatory 343 300 43
Clinical site payments for
RenovoCath devices (141 ) (233 ) 92
Total research and development
Research and development expenses were
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General and Administrative Expenses
The following table summarizes our general and administrative expenses (in
thousands):
Increase /
Years Ended December 31, (Decrease)
2022 2021 $
Professional services and other
1,916 998 918
Legal fees 567 270 297
Total general and administrative
General and administrative expenses were
Interest (Expense) Income, Net (in thousands)
Increase /
Years Ended December 31, (Decrease)
2022 2021 $
Interest income (expense), net
Interest income was
Other Income (Expense), Net (in thousands)
Increase /
Years Ended December 31, (Decrease)
2022 2021 $
Other income (expense), net
Other income, net was nil for the year ended
Gain on Loan Extinguishment (in thousands)
Increase /
Years Ended December 31, (Decrease)
2022 2021 $
Gain on loan extinguishment $ - $ 62 $ (62 ) The gain on loan extinguishment was nil for the year ended
Liquidity and Capital Resources
For the years ended
Based on our operating plans, we do not expect that our current cash and cash
equivalents as of
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The Company has filed an omnibus shelf registration statement on Form S-3 that
provides for the aggregate offerings of up to
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and we have incurred significant operating losses and negative cash flows from operations. We anticipate that we will continue to incur net losses for the foreseeable future. We do not have any products that have achieved regulatory marketing approval and we do not expect to generate revenue from sales of any product candidates for several years, if ever.
We have financed our operations primarily through the issuance and sale of
convertible preferred stock and convertible debt. Through the date of this
report, we have raised an aggregate of
On
Cash Flows
Our primary uses of cash are to fund our operations including research and development and general and administrative expenses. We will continue to incur operating losses in the future and expect that our research and development and general and administrative expenses will continue to increase as we continue our research and development efforts with respect to clinical development of our product candidates and further develop our platform. We have used a substantial portion of the net proceeds of the IPO, in combination with our existing cash and cash equivalents, for these purposes and for the increased expenses associated with being a public company. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
The following table summarizes our cash flows for the periods indicated (in thousands):
2022 2021
Net cash (used in) provided by:
Operating activities $ (8,811 ) $ (5,916 )
Investing activities (2,032 ) (15 )
Financing activities 42 19,328
Increase (decrease) in cash and cash equivalents
Cash Used in Operating Activities
Net cash used in operating activities for the year ended
Cash Used in Investing Activities
Net cash used in investing activities for the year ended
Cash Provided by Financing Activities
Net cash provided by financing in the year ended
Contractual Obligations and Other Commitments
As of the date of this report, we have no contractual obligations or other
commitments. In
Critical Accounting Policies and Significant Judgments and Estimates
The accompanying management's discussion and analysis of our financial condition
and results of operations are based upon our financial statements and the
related disclosures, which have been prepared in accordance with accounting
principles generally accepted in
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A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective, or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (i) we are required to make assumptions about matters that are highly uncertain at the time of the estimate? and (ii) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Clinical Trial Expenses
We make payments in connection with our Phase III clinical trial under contracts with clinical trial sites and contract research organizations that support conducting and managing clinical trials. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. A portion of the obligation to make payments under these contracts depends on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably estimable. If the amounts we are obligated to pay under clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), the accruals are adjusted accordingly. Revisions to contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.
Stock-Based Compensation
We estimate the fair value of stock options using the Black-Scholes option pricing model, which incorporates various assumptions including those related to the fair value of our common stock, volatility, expected term, and risk-free interest rate. Compensation related to service-based awards is recognized starting on the grant date on a straight-line basis over the vesting period, which is generally four years, see "Note 8. Equity Inventive Plan - Stock-Based Compensation and Common Stock Warrants" in Notes to Financial Statements.
Determining the grant date fair value of options using the Black-Scholes option pricing model requires management to make assumptions and judgments. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously. The assumptions and estimates are as follows:
Fair Value of Common Stock-Given the absence of a public trading market, pre-IPO, our Board considered numerous objective and subjective factors to determine the fair value of our common stock at each grant date. These factors included but were not limited to: (i) contemporaneous third-party valuations of common stock; (ii) the prices for preferred stock sold to outside investors; (iii) the rights and preferences of preferred stock relative to common stock; (iv) the lack of marketability of our common stock; (v) developments in the business; and (vi) the likelihood of achieving a liquidity event, such as an IPO or sale of the business, given prevailing market conditions. The methodology to determine the fair value of our common stock included estimating the fair value of the enterprise using the "backsolve" method, which is a market approach that assigns an implied enterprise value by accounting for all share class rights and preferences based on the latest round of financing. The total equity value implied was then applied in the context of an option pricing model to determine the value of each class of our shares.
For grants issued post-IPO, we rely on the closing price of our common stock as reported on the date of grant to determine the fair value of our common stock, as shares of our common stock are traded in the public market.
Expected Term-The expected term represents the period that the stock-based awards are expected to be outstanding. We determine the expected term using the simplified method for pre-IPO and post-IPO awards. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.
Expected Volatility-Given the absence of a public trading market, pre-IPO and post IPO, the expected volatility was estimated by taking the average historic price volatility for industry peers, consisting of several public companies in our industry that are either similar in size, stage, or financial leverage, over a period equivalent to the expected term of the awards.
Risk-Free Interest Rate-The risk-free interest rate is calculated using the
average of the published interest rates of
Dividend Rate-The dividend yield assumption is zero as we have no plans to make dividend payments.
Convertible Instruments and Embedded Derivatives
We evaluate all of our agreements to determine whether such instruments have
derivatives or contain features that qualify as embedded derivatives. We account
for certain redemption features that are associated with the terms of
convertible notes as liabilities at fair value and adjusts the instruments to
their fair value at the end of each reporting period. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each reporting
date, with changes in the fair value reported in other income (expenses), net in
the statements of operations. Derivative instrument liabilities are classified
in the balance sheets as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date. Our derivative financial instruments were related to the
2020 and 2021 Convertible Notes, which contained certain redemptive features. On
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Emerging Growth Company and Smaller Reporting Company Status
We are an "emerging growth company" as defined in the Jumpstart Our Business
Startups Act of 2012, as amended, or the JOBS Act. Under the JOBS Act, companies
have extended transition periods available for complying with new or revised
accounting standards. We have elected this exemption to delay adopting new or
revised accounting standards. We will remain an emerging growth company until
the earlier of (1)
? we may present only two years of audited financial statements, plus unaudited
condensed financial statements for any interim period, and related
Management's Discussion and Analysis of Financial Condition and Results of
Operations;
? we may avail ourselves of the exemption from the requirement to obtain an
attestation and report from our auditors on the assessment of our internal
control over financial reporting pursuant to the Sarbanes-Oxley Act;
? we may provide reduced disclosure about our executive compensation
arrangements; and
? we do not require stockholder non-binding advisory votes on executive
compensation or golden parachute arrangements.
We have elected to take advantage of certain of the reduced disclosure obligations in this Annual Report on Form 10-K and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
We are also a "smaller reporting company," meaning that the market value of our
stock held by non-affiliates plus the proposed aggregate amount of gross
proceeds to us as a result of this offering is less than
Recently Issued and Adopted Accounting Pronouncements
See "Note 2. Summary of Significant Accounting Policies" in Notes to Financial Statements, to our audited financial statements included elsewhere in this Annual Report on Form 10-K for more information.
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