Overview
We are a pharmaceutical company developing therapeutics utilizing our proprietary long-term drug delivery platform, ProNeura®, for the treatment of select chronic diseases for which steady state delivery of a drug has the potential to provide an efficacy and/or safety benefit. ProNeura consists of a small, solid implant made from a mixture of ethylene-vinyl acetate, or EVA, and a drug substance. The resulting product is a solid matrix that is designed to be administered subdermally in a brief, outpatient procedure and is removed in a similar manner at the end of the treatment period.
Our first product based on our ProNeura technology was Probuphine®
(buprenorphine implant), which is approved in
In
Critical Accounting Policies and the Use of Estimates
The preparation of our financial statements in conformity with accounting
principles generally accepted in
Revenue Recognition
We generate revenue principally from collaborative research and development
arrangements, sales or licenses of technology, government grants, sales of
Probuphine materials to Molteni and Knight, and prior to the discontinued
operations, the sale of Probuphine in the
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our agreements, we perform the following steps for our revenue recognition: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.
19 Grant Revenue
We have contracts with NIDA, the
Net Product Revenue
Prior to the discontinuation of our commercialization activities relating to
Probuphine in the
Returns - Consistent with the provisions of ASC 606, we estimated returns at the
inception of each transaction, based on multiple considerations, including
historical sales, historical experience of actual customer returns, levels of
inventory in our distribution channel, expiration dates of purchased products
and significant market changes which could impact future expected returns to the
extent that we would not reverse any receivables, revenues, or contract assets
already recognized under the agreement. During the year ended
Rebates - Our provision for rebates was estimated based on our customers' contracted rebate programs and our historical experience of rebates paid.
Discounts - The provision was estimated based upon invoice billings, utilizing historical customer payment experience.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Our performance obligations include commercialization license rights, development services and services associated with the regulatory approval process.
We have optional additional items in contracts, which are accounted for as separate contracts when the customer elects such options. Arrangements that include a promise for future commercial product supply and optional research and development services at the customer's discretion are generally considered as options. We assess if these options provide a material right to the customer and, if so, such material rights are accounted for as separate performance obligations. If we are entitled to additional payments when the customer exercises these options, any additional payments are recorded in revenue when the customer obtains control of the goods or services.
Transaction Price
We have both fixed and variable consideration. Non-refundable upfront payments are considered fixed, while milestone payments are identified as variable consideration when determining the transaction price. Funding of research and development activities is considered variable until such costs are reimbursed at which point they are considered fixed. We allocate the total transaction price to each performance obligation based on the relative estimated standalone selling prices of the promised goods or services for each performance obligation.
20
At the inception of each arrangement that includes milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price. Milestone payments that are not within our control, such as approvals from regulators, are not considered probable of being achieved until those approvals are received.
For arrangements that include sales-based royalties or earn-out payments, including milestone payments based on the level of sales, and the license or purchase agreement is deemed to be the predominant item to which the royalties or earn-out payments relate, we recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty or earn-out payment has been allocated has been satisfied (or partially satisfied).
Allocation of Consideration
As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. Estimated selling prices for license rights are calculated using the residual approach. For all other performance obligations, we use a cost-plus margin approach.
Timing of Recognition
Significant management judgment is required to determine the level of effort required under an arrangement and the period over which we expect to complete our performance obligations under an arrangement. We estimate the performance period or measure of progress at the inception of the arrangement and re-evaluate it each reporting period. This re-evaluation may shorten or lengthen the period over which revenue is recognized. Changes to these estimates are recorded on a cumulative catch-up basis. If we cannot reasonably estimate when our performance obligations either are completed or become inconsequential, then revenue recognition is deferred until we can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. Revenue is recognized for licenses or sales of functional intellectual property at the point in time the customer can use and benefit from the license. For performance obligations that are services, revenue is recognized over time proportionate to the costs that we have incurred to perform the services using the cost-to-cost input method.
Inventories
Inventories are recorded at the lower of cost or net realizable value. Cost is based on the first in, first out method. We regularly review inventory quantities on hand and write down to its net realizable value any inventory that we believe to be impaired. The determination of net realizable value requires judgment including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market conditions and potential product obsolescence, among others.
Share-Based Payments
We recognize compensation expense for all share-based awards made to employees, directors and consultants. The fair value of share-based awards is estimated at the grant date based on the fair value of the award and is recognized as expense, net of estimated pre-vesting forfeitures, ratably over the vesting period of the award.
We use the Black-Scholes option pricing model to estimate the fair value method
of our awards. Calculating stock-based compensation expense requires the input
of highly subjective assumptions, including the expected term of the share-based
awards, stock price volatility, and pre-vesting forfeitures. We estimate the
expected term of stock options granted for the years ended
21 Income Taxes
We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.
We assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is not more likely than not that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.
Clinical Trial Accruals
We also record accruals for estimated ongoing clinical trial costs. Clinical trial costs represent costs incurred by CROs and clinical sites. These costs are recorded as a component of research and development expenses. Under our agreements, progress payments are typically made to investigators, clinical sites and CROs. We analyze the progress of the clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of accrued liabilities. Significant judgments and estimates must be made and used in determining the accrued balance in any accounting period. Actual results could differ from those estimates under different assumptions. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. The actual clinical trial costs for studies conducted in the past two years have not differed materially from the estimated projection of expenses.
Warrants Issued in Connection with Equity Financing
We generally account for warrants issued in connection with equity financings as a component of equity, unless there is a deemed possibility that we may have to settle warrants in cash. For warrants issued with deemed possibility of cash settlement, we record the fair value of the issued warrants as a liability at each reporting period and record changes in the estimated fair value as a non-cash gain or loss in the statements of operations.
Leases
We determine whether the arrangement is or contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in lease contracts is typically not readily determinable, and therefore, we utilize our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.
Lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on our balance sheet as right-of-use assets, operating lease liabilities, current and operating lease liabilities, non-current.
Liquidity and Capital Resources
We have funded our operations since inception primarily through the sale of our
securities and the issuance of debt, as well as with proceeds from warrant and
option exercises, corporate licensing and collaborative agreements, the sale of
royalty rights, sales of Probuphine and government-sponsored research grants. At
22 2022 2021 As of December 31: Cash and cash equivalents$ 2,937 $ 6,037 Working capital$ 973 $ 4,560 Current ratio 1.37:1 2.7:1
For the Years Ended
Net cash used in operating activities for the year ended
No net cash was used or provided by in investing activities during the year
ended
Net cash provided by financing activities for the year ended
In
In
At
Results of Operations
Year Ended
Revenues For the Years ended December 31, 2022 2021 Change (in thousands) Revenue: License revenue$ 60 $ 13$ 47 Product revenue - 236 (236 ) Grant revenue 497 1,277 (780 ) Total revenue$ 557 $ 1,526 $ (969 ) 23
License revenues for the years ended
Product revenues for the year ended
The decrease in grant revenue was primarily due to decreased activities related to the NIDA grant for the development of a nalmefene implant.
Operating Expenses For the Years ended December 31, 2022 2021 Change (in thousands) Operating expenses: Cost of goods sold $ -$ 199 $ (199 ) Research and development 4,758 5,692 (934 ) General and administrative 6,034 4,989 1,045
Total operating expenses
Cost of goods sold reflects costs and expenses associated with sales of
Probuphine product materials to Molteni and Knight for the EU and
The decrease in research and development costs was primarily associated with reduced activities related to non-clinical studies required for the IND submission as part of our NIDA grant for the development of a nalmefene implant, decreases in expenses related to initial non-clinical proof of concept studies related to our TP-2021 implant program and decreases in research and development personnel-related costs and other expenses. Other research and development expenses include internal operating costs such as research and development personnel-related expenses, non-clinical and clinical product development related travel expenses, and allocation of facility and corporate costs. As a result of the risks and uncertainties inherently associated with pharmaceutical research and development activities described elsewhere in this document, we are unable to estimate the specific timing and future costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. However, we anticipate that our research and development expenses will increase as we continue our current or any future ProNeura development programs to the extent these costs are not supported through grants or partners.
The increase in general and administrative expenses was primarily related to increases in non-cash stock-based compensation, employee related expenses and legal and other professional fees.
Other Expenses, Net For the Years ended December 31, 2022 2021 Change (in thousands) Other income (expense): Interest income, net$ 53 $ 1 $ 52 Other expense, net (24 ) (84 ) 60 Non-cash gain on debt extinguishment - 661 (661 ) Other income, net$ 29 $ 578 $ (549 )
The decrease in other income, net was primarily due to a gain on debt
extinguishment resulting from the
24
Net Loss and Net Loss per Share
Our net loss applicable to common stockholders for the year ended
Off-Balance Sheet Arrangements
We have never entered into any off-balance sheet financing arrangements and we have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
© Edgar Online, source