What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-16 · 106 added, 53 removed, 161 unchanged (50% of the section changed)

9 unchanged sentences

We are currently focused on advancing a targeted immunotherapy drug candidate, ACU193, through clinical proof of mechanism trials in early AD patients.

We initiated a Phase 1 clinical trial of ACU193 in 2021, which we named “INTERCEPT-AD.”

This trial is enrolling patients with mild dementia or mild cognitive impairment due to AD, conditions referred to as “early AD.” INTERCEPT-AD

is a U.S.-based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose, or SAD, and multiple ascending dose, or MAD, cohorts involving a total of approximately 62 patients with early AD.

We initiated a Phase 1 clinical trial of ACU193 in 2021, which we named “INTERCEPT-AD.” This

trial is enrolling patients with mild dementia or mild cognitive impairment due to AD, conditions referred to as “early AD.” INTERCEPT-AD is

a U.S.-based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose, or SAD, and multiple ascending dose, or MAD, cohorts involving a total of approximately 62 patients with early AD.

The overall objective of the trial is to evaluate the safety and tolerability and establish clinical proof of mechanism of ACU193 administered intravenously.

3 unchanged sentences

Clinical scales typically used in AD trials as well as computerized cognitive testing are included as exploratory measures.

In October 2021, we announced the initial dosing of the first patient in the INTERCEPT-AD

trial and the subsequent successful sentinel safety review of the first two patients.

Due to delays in clinical trial site activation and patient enrollment that we believe are principally related to the effects of the COVID-19

pandemic, we are expanding the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

Clinical trial site activation and patient recruitment and enrollment is ongoing.

In October 2021, we announced the initial dosing of the first patient in the INTERCEPT-AD trial

and the subsequent successful sentinel safety review of the first two patients.

Due to delays in clinical trial site activation and patient enrollment that we believe were principally related to effects of the COVID-19 pandemic,

we have expanded the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

As of August 15, 2022, 15 clinical trial sites have been activated, and patient recruitment and enrollment is ongoing.

Based on current site activations and enrollment rates, we anticipate reporting our topline data from the INTERCEPT-AD

1 unchanged sentence

We have incurred net losses and negative cash flows from operations since our inception.

Our net losses were $9.1 million and $27.0 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $136.7 million.

Our net losses were $19.3 million and $88.4 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $146.9 million and working capital of $185.9 million.

Our net losses and cash flows from operations may fluctuate significantly from quarter-to-quarter

9 unchanged sentences

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all.

However, global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide, rising inflation and supply disruptions resulting from the effects of COVID-19, the ongoing conflict between Russia and Ukraine and related sanctions, and otherwise.

If these conditions persist and deepen, we could experience an inability to access additional capital, or our liquidity could otherwise be impacted.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or future commercialization efforts.

Our failure to raise capital or enter into such agreements as, and when needed, could have a material adverse effect on our business, results of operations and financial condition

As of March 31, 2022, we had cash, cash equivalents and marketable securities totaling $216.7 million.

Based on our current operating plan, we expect that our existing cash and cash equivalents and marketable securities will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least through 2025.

As of June 30, 2022, we had cash and cash equivalents and marketable securities totaling $209.9 million.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

See “—Liquidity and Capital Resources.”

Business Update

and Macroeconomic Update

In March 2020, the World Health Organization declared COVID-19

8 unchanged sentences

and the subsequent successful sentinel safety review of the first two patients.

Due to delays in clinical trial site activation and patient enrollment that we believe are principally related to effects of the COVID-19 pandemic,

we are expanding the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

Due to delays in clinical trial site activation and patient enrollment that we believe were principally related to effects of the COVID-19 pandemic,

we have expanded the anticipated number of trial sites to support our enrollment objectives and anticipated timelines.

However, we cannot assure that we will not experience additional delays in site activation or enrollment.

Clinical trial site activation and patient recruitment and enrollment is ongoing.

As of August 15, 2022, 15 clinical trial sites have been activated and patient recruitment and enrollment is ongoing.

Based on current site activations and enrollment rates, we anticipate reporting our topline data from this trial in the first half of 2023.

The ultimate impact of the COVID-19

pandemic on our business, results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions.

These developments and the impact of the COVID-19

pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted.

The ultimate impact of the

pandemic, geopolitical events such as the ongoing conflict between Russia and Ukraine and related sanctions, and macroeconomic events, including higher inflation and supply chain disruptions, on our business, results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions.

These developments and the impact on the financial markets and the overall economy are highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy are impacted for an extended period, our business, results of operations, financial position and cash flows may be materially adversely affected.

31 unchanged sentences

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Costs and operating expenses

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30,

Operating expenses

Research and development

3 unchanged sentences

Other income (expense)

Interest income, net

Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability

Other income, net

Total other income

Other comprehensive loss

Unrealized loss on marketable securities

Comprehensive loss

Research and Development Expenses

Research and development expenses were $7.3 million and $2.3 million for the three months ended June 30, 2022 and 2021, respectively.

The $5.1 million increase was due to increased costs both for our ongoing clinical trial, which was initiated in 2021 and started enrolling patients in the second half of 2021, as well as nonclinical research and development activity.

Increased costs were experienced with contract research organizations, or CROs, of $1.4 million, $1.0 million for materials, $0.9 million in drug safety testing, $0.9 million in consulting costs, $0.8 million in additional personnel expense, and $0.1 million for other miscellaneous research expenses.

In addition, we are experiencing an increase in costs of supply and labor, which we believe is due to the current economic environment and which we expect to continue in the near future.

General and Administrative Expenses

General and administrative expenses were $3.1 million and $1.2 million for the three months ended June 30, 2022 and 2021, respectively.

The $1.9 million increase was primarily due to a $0.8 million increase in personnel expenses, $0.7 million increase in insurance costs, and $0.2 million increases in both legal expenses and marketing costs.

Other Income (Expense)

Other income was $0.3 million for the three months ended June 30, 2022, which was primarily due to net interest income on the Company’s portfolio of marketable securities.

Other expense was $57.9 million for the three months ended June 30, 2021, was primarily due to increases in the fair values of the Series B tranche liability and the Series A-1 warrant

liability of $54.6 million and $3.3 million, respectively.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended June 30,

Operating expenses

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability

Interest income, net

5 unchanged sentences

Research and Development Expenses

Research and development expenses were $6.0 million and $2.6 million for the three months ended March 31, 2022 and 2021, respectively.

The $3.4 million increase was primarily due to increases of $1.5 million in consulting expenses, $0.8 million in contract research organization expenses, $0.6 million in personnel related expenses, $0.3 million in drug safety testing and $0.2 million in materials expenses.

The net increase in research and development expenses during the three months ended March 31, 2022 from the three months ended March 31, 2021 was primarily due to our ongoing clinical trial which was initiated in 2021.

Research and development expenses were $13.3 million and $4.8 million for the six months ended June 30, 2022 and 2021, respectively.

The $8.5 million increase was due to increased costs both for our ongoing clinical trial, which was initiated in 2021 and started enrolling patients in the second half of 2021, as well as nonclinical research and development activity.

Increased costs were experienced in consulting of $2.4 million, $2.1 million in CRO costs, $1.5 million in personnel costs, $1.2 million for materials, and $1.2 million for drug safety testing, as well as $0.1 million for other miscellaneous research expenses.

In addition, we are experiencing an increase in costs of supply and labor, which we believe is due to the current economic environment and which we expect to continue in the near future.

General and Administrative Expenses

General and administrative expenses were $3.2 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively.

The $2.0 million increase was primarily due to increases of $0.7 million in insurance expenses, $0.7 million in personnel expenses, $0.4 million in legal expenses, $0.1 million for investor relations and $0.1 million for other office expenses, including rent.

General and administrative expenses were $6.3 million and $2.4 million for the six months ended June 30, 2022 and 2021, respectively.

The $3.9 million increase was primarily due to increases of $1.5 million for both insurance and personnel costs, $0.5 million in legal expenses, $0.3 million in marketing costs, and $0.1 million in recruiting expenses.

The primary drivers of the higher general and administrative expenses were added headcount to support research and development efforts, as well as increased costs related to being a public company.

Other Income (Expense)

Other income was $0.1 million for the three months ended March 31, 2022, which was primarily due to net interest income on the Company’s portfolio of marketable securities.

Other expense was $23.2 million for the three months ended March 31, 2021, due almost entirely to the changes in the fair values of the Series A-1 warrant

liability and the Series B tranche rights.

Other income was $0.3 million for the six months ended June 30, 2022, which was primarily due to net interest income on the Company’s portfolio of marketable securities.

Other expense was $81.1 million for the six months ended June 30, 2021, due to increases in the fair values of the Series B tranche liability and Series A-1 warrant

liability of $76.2 million and $5.0 million, respectively.

Liquidity and Capital Resources

2 unchanged sentences

The aggregate net proceeds from our IPO, after underwriting discounts and commissions and other offering expenses of $15.4 million, were $168.6 million.

As of March 31, 2022, our cash, cash equivalents and marketable securities totaled $216.7 million.

As of June 30, 2022, our cash and cash equivalents and marketable securities totaled $209.9 million.

Our available-for-sale

marketable securities mature over the next one and one-half

We enter into contracts in the

normal course of business with contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, for clinical trials, nonclinical research studies and testing, manufacturing and other services and products for operating purposes.

marketable securities mature over the next 15 months.

We enter into contracts in the normal course of business with CROs and contract manufacturing organizations, or CMOs, for clinical trials, nonclinical research studies and testing, manufacturing and other services and products for operating purposes.

These contracts do not contain any minimum purchase commitments and are generally cancelable by us upon prior notice of 30 days.

1 unchanged sentence

Future minimum lease payments under our Indiana lease agreement total approximately $0.2 million.

Shelf Registration and At-The-Market

Equity Offering

On July 1, 2022, we filed a shelf registration statement on Form S-3, or the Registration Statement.

Pursuant to the Registration Statement, we may offer and sell securities having an aggregate public offering price of up to $200.0 million.

In connection with the filing of the Registration Statement, we also entered into a sales agreement with BofA Securities, Inc.

and Stifel, Nicolaus & Company, Incorporated, or the Sales Agents, pursuant to which we may issue and sell shares of our common stock for an aggregate offering price of up to $50.0 million under an at-the-market offering program, or ATM, which is included in the $200.0 million of securities that may be offered pursuant to the Registration Statement.

Pursuant to the ATM, we will pay the Sales Agents a commission rate equal to 3.0% of the gross proceeds from the sale of any shares of common stock.

We are not obligated to make any sales of shares of our common stock under the ATM.

We have not sold any shares of our common stock under the ATM, and whether we do so will depend on business considerations, market conditions and other factors.

The following table summarizes our sources and uses of cash (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

Operating Activities

Net cash used in operating activities was $8.3 million and $2.4 million for the three months ended March 31, 2022 and 2021, respectively.

Net cash used in operating activities during the three months ended March 31, 2022 primarily consisted of our net loss of $9.1 million, which was reduced by non-cash

adjustments of $0.6 million for stock-based compensation and $0.2 million for net accretion and amortization on marketable securities, plus cash used of $1.5 million in accrued expenses and other current liabilities mainly due to research and development and employee liabilities;

partially offset by $1.4 million of cash provided by prepaid expenses mainly associated with research and development and insurance, and $0.1 million from an increase in accounts payable.

Net cash used in operating activities during the three months ended March 31, 2021 was primarily due to our net loss of $27.0 million, including other expenses of $23.2 million related to the change in the fair values of the Series A-1

warrant liability and the Series B tranche liability, partially offset by increases in accounts payable of $0.4 million and accrued expenses and other current liabilities of $1.0 million.

Net cash used in operating activities was $14.8 million and $6.6 million for the six months ended June 30, 2022 and 2021, respectively.

Net cash used in operating activities during the six months ended June 30, 2022 primarily consisted of our net loss of $19.3 million, which was reduced by non-cash

adjustments of $1.3 million for stock-based compensation, $0.4 million for net accretion and amortization on marketable securities, and $0.1 million of amortization on our right-of-use

In addition, the change in operating assets and liabilities of $2.7 million was primarily due to a $3.3 million decrease in prepaid expenses primarily associated with research and development and insurance and a $0.6 million increase in accounts payable;

partially offset by a $1.0 million decrease in accrued expenses and other current liabilities mainly due to research and development and employee liabilities, a $0.1 million decrease in operating lease liability, and an increase in other assets of $0.1 million.

Net cash used in operating activities during the six months ended June 30, 2021 was primarily due to our net loss of $88.4 million, which included $81.2 million of expense related to the change in the fair values of the Series B tranche liability and the Series A-1 warrant

liability, plus $1.1 million of cash used for prepaid expenses associated with research and development activities;

partially offset by cash provided of $0.7 million for both accounts payable and accrued expenses and other current liabilities.

Investing Activities

Cash used in investing activities for the three months ended March 31, 2022 was $5.1 million and was predominantly related to purchases and maturities of marketable securities of $9.1 million and $4.0 million, respectively.

Cash used in invested activities for the three months ended March 31, 2021 was nil.

Cash provided by investing activities for the six months ended June 30, 2022 was $3.7 million and was predominantly related to maturities and sales of marketable securities of $15.8 million, partially offset by purchases of marketable securities of $12.1 million.

Cash used in investing activities for the six months ended June 30, 2021 was de minimis and was associated with computer hardware acquired.

Financing Activities

Net cash used in financing activities was de minimus for the six months ended June 30, 2022, and was due to the payment of deferred offering costs related to the Registration Statement, offset by exercise proceeds from employee stock options.

Net cash provided by financing activities was $31.7 million for the six months ended June 30, 2021 and was primarily due to the closing of the second tranche of our Series B convertible preferred stock for gross proceeds of $30.0 million, plus a total of $1.9 million received from the exercise of a Series A-1

preferred warrant, as well as exercises of common stock warrants, partially offset by $0.2 million of costs that were paid in connection with our IPO.

Funding Requirements

5 unchanged sentences

If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Based on our current operating plan, we expect that our existing cash and cash equivalents and our marketable securities will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least through 2025.

We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.

11 unchanged sentences

We do not have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect rights as a common stockholder.

Any debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.

5 unchanged sentences

A description of our significant accounting policies is included in our Annual Report.

You should read the unaudited condensed financial statements in conjunction with our audited financial statements and accompanying notes in our Annual Report.

Our significant accounting policies are more fully described in Note 2 to our unaudited condensed financial statements located in “Part I – Financial Information, Item 1.

Please read the unaudited condensed financial statements in conjunction with our audited financial statements and accompanying notes in our Annual Report.

Our critical accounting policies that require significant judgments and estimates are more fully described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgments and Use of Estimates” in our Annual Report and in Note 2 to our audited financial statements contained in our Annual Report.

There have been no significant changes to our critical accounting policies that require significant judgments and estimates from those disclosed in our Annual Report.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements applicable to us, adopted and not yet adopted as of the date of this report, is included in Note 2 to our unaudited condensed financial statements located in “Part I – Financial Information, Item 1.

Financial Statements” in this Quarterly Report on Form 10-Q.

22 unchanged sentences

is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year.

We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates

We may continue to be a smaller reporting company if either:

(i) the market value of our shares held by non-affiliates

is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates

is less than $700 million.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Quarterly Report on Form 10-Q

and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Quantitative and Qualitative Disclosures About Market Risk.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis