SATSUMA PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled "Risk Factors" and elsewhere in this report.
Overview
We are a development-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine. Our product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which is designed to be quickly and easily self-administered with a proprietary pre-filled, single-use, nasal delivery device. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients. However, broad use has been limited by invasive and burdensome administration and/or sub-optimal clinical performance of available injectable and liquid nasal spray products. STS101 is specifically designed to deliver the clinical advantages of DHE while overcoming these shortcomings. If we can timely secure a strategic transaction partner to continue development of STS101, and if such potential transaction partner can obtain regulatory approval for and successfully commercialize STS101, we believe STS101 has the potential to be an important and differentiated option for the acute treatment of migraine that can address the unmet needs of many people living with migraines.
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on written feedback provided to us by the FDA, we believe the results of our completed Phase 1 pharmacokinetic (PK) clinical trials and our ASCEND Phase 3 long-term safety trial are sufficient, in combination with information referenced from studies not conducted by Satsuma, to support FDA approval of STS101.
The FDA has communicated to us in multiple meetings that a pivotal efficacy
trial, such as the STS101 SUMMIT Phase 3 trial, which we completed and announced
results from in
The clinical portion of our STS101 NDA is supported primarily by clinical trial
results, generated with investigational product that incorporates our
second-generation, nasal delivery device, from (i) the Phase 1 comparative PK
study of STS101 that we completed in
We believe our second-generation nasal device, which we introduced into the
then-ongoing ASCEND trial in
In
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results of the Phase 3 SUMMIT trial, in which STS101 did not achieve statistical superiority to placebo on the co-primary outcome measures;
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our belief, based on review of the SUMMIT trial results in their entirety and our primary market research conducted subsequent to announcement of the SUMMIT trial results, that STS101, if approved and successfully commercialized, has the potential to be an important and differentiated option for the acute treatment of migraine that can address the unmet needs of many people living with migraines;
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the significant decrease in our stock price that occurred following our announcement of the SUMMIT trial results;
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current and anticipated future capital market conditions; and
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our projected need for substantial additional capital were we to continue to develop STS101 through potential regulatory approval and pursue independent commercialization of STS101.
Accordingly, key elements of our revised business plan and strategy are as follows:
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seek to conclude a strategic transaction with an industrial partner or financial sponsor on favorable terms under which a counterparty will financially support and assume responsibility for completing development of and commercializing STS101 (Potential Strategic Transaction);
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minimize cash expenditures and continue to invest in and advance the STS101
development program only to the extent necessary to maintain its viability until
such time as we may be able to conclude a Potential Strategic Transaction. To
this end, in
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STS101, and if the FDA accepts the NDA for substantive review, we anticipate the
FDA action date for the STS101 NDA will be in
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seek no further funding, as such funding, if available at all, would likely not be available on terms that would be acceptable or favorable to us.
There can be no assurance that we will be able to successfully execute our revised business plan and strategy, and in the event we are unable to timely conclude a Potential Strategic Transaction on acceptable terms, we may be forced to discontinue development of STS101, withdraw the STS101 NDA and pursue other strategic alternatives, such as dissolution and wind-down.
Our net losses were
Since our inception in
In
We do not have any products approved for sale and have not generated any product revenue since our inception. Our ability to generate revenues will depend on the successful development of STS101 and eventual commercialization of STS101 by a third party. We do not intend to seek further funding, as we believe such funding, if available at all, would likely not be available on terms that would be acceptable or favorable to us.
As of
Workforce Reduction
On
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estimate that we will incur aggregate charges in connection with the Workforce
Reduction of approximately
The foregoing estimates of the charges and expenditures that we expect to incur in connection with the Workforce Reduction, and the timing thereof, are subject to several assumptions and the actual amounts incurred may differ materially from these estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Workforce Reduction.
Components of Operating Results
Operating Expenses
Research and Development Expenses
All of our research and development expenses consist of expenses incurred in connection with the development of STS101 for the acute treatment of migraine. These expenses include:
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payroll and personnel-related expenses, including salaries, annual cash bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees;
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fees paid to third parties to conduct preclinical and clinical studies and other research and development activities, including contract research organizations, or CROs, contract manufacturing organizations, or CMOs, consultants, and other service providers; and
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costs for licenses and allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.
We expense both internal and external research and development expenses as they are incurred. We have entered into various agreements with third party vendors and CMOs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events or tasks, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued and other current liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we adjust the accrual accordingly. Payments made to CROs and CMOs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.
As we continue the development of STS101, we, an industrial partner or financial
sponsor will incur significantly lower research and development expenses, as we,
an industrial partner or financial sponsor refine the STS101 manufacturing
processes and seek regulatory approval of STS101 and as a result of the
workforce reduction announced in
General and Administrative Expenses
General and administrative expenses consist principally of payroll and personnel expenses, including salaries, annual cash bonuses, benefits, and stock-based compensation expenses, professional fees for legal, consulting,
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accounting and tax services, directors and officers insurance, allocated overhead, including rent, equipment, depreciation, information technology costs, and utilities, and other general operating expenses not otherwise classified as research and development expenses including expenses associated with pre-commercialization activities.
We anticipate that general and administrative expenses will decrease as the
result of the workforce reduction announced in
Interest Income
Interest income consists primarily of interest earned on our cash, cash equivalents and marketable securities.
Interest Expense
Interest expense consists primarily of interest related to our long-term debt and accretion of debt discount, debt issuance costs and final payment.
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):
Year Ended December 31,
2022 2021 Change % Change
Operating expenses:
Research and development $ 44,092 $ 37,635 $ 6,457 17 %
General and administrative 15,126 13,531 1,595 12 %
Impairment loss 11,729 - 11,729 100 %
Loss from operations (70,947 ) (51,166 ) (19,781 ) 39 %
Interest income 905 157 748 476 %
Interest expense (13 ) (163 ) 150 (92 %)
Net loss $ (70,055 ) $ (51,172 ) $ (18,883 ) 37 %
Research and Development Expenses
Research and development expenses increased from the year ended
General and Administrative Expenses
General and administrative expenses increased from the year ended
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and stock-based compensation expenses, a decrease of
Impairment Loss
During the year ended
Interest Income
Interest income increased from the year ended
Interest Expense
Interest expense decreased from the year ended
Liquidity and Capital Resources; Plan of Operations
Sources of Liquidity
We have historically financed our operations primarily through the issuance of common stock in our IPO, and private placements of equity securities and borrowings under our long-term debt facility. We have no products approved for sale, and we have not generated any revenue since inception. We expect to incur significant additional operating losses over at least the next several years.
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market accounts on
Future Funding Requirements
We have incurred net losses since our inception. Our net losses were
Based on our current plans and strategies, we anticipate our operating expenses will decrease as we do not plan to invest in commercializing STS101 and plan to pursue a Potential Strategic Transaction. While less than historically incurred, on-going expenses will be required to continue development of STS101 to maintain its viability for a Potential Strategic Transaction partner.
We do not intend to pursue further funding and, instead, are seeking to conclude a Potential Strategic Transaction with an industrial partner or financial sponsor that would fund further development and commercialization of STS101.
If we are unable to timely conclude a Potential Strategic Transaction, we would likely terminate development of STS101, withdraw our NDA and pursue other strategic alternatives, such as dissolution and wind-down. See "Risk Factors" for additional risks associated with substantial capital requirements.
Summary Statement of Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:
Year Ended December 31,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (51,516 ) $ (42,997 )
Investing activities 43,371 (50,777 )
Financing activities 8,739 73,283
Net increase (decrease) in cash and cash equivalents
Cash Flows Used in Operating Activities
Net cash used in operating activities was
Net cash used in operating activities was
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discounts on marketable securities of
Cash Flows Provided by (Used in) Investing Activities
Net cash provided by investing activities was
Net cash used in investing activities was
Cash Flows Provided by Financing Activities
Net cash provided by financing activities was
Net cash provided by financing activities was
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, manufacturing and testing and providing other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our financial statements have been prepared in accordance with
While our significant accounting policies are described in more detail in Note 1, Organization and Summary of Significant Accounting Policies, to the financial statements, we believe that the following accounting policy is the most critical to the judgement and estimates used in the preparation of our financial statements.
We monitor the activity under our various agreements with CROs, CMOs and other service providers to the extent possible through communication with each service provider, detailed invoice and task completion review, analysis of actual expenses against budget, pre-approval of any changes in scope, and review of contractual terms. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. These estimates may or may not match the actual services performed by the service providers. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative
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to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from our estimates, we will adjust the accrual or amount of prepaid expenses and other current assets accordingly.
JOBS Act Accounting Election
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.
Recent Accounting Pronouncements See "Organization and Summary of Significant Accounting Policies-Recent Accounting Pronouncements" in Note 1 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
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