What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-15 compared with 2022-03-16 · 84 added, 61 removed, 164 unchanged (47% of the section changed)

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Accordingly, we encourage investors, the media, and others interested in us to review the information that it shares on the Investors section of our website, www.acurxpharma.com.

We are a clinical stage biopharmaceutical company developing a new class of antibiotics for infections caused by bacteria listed as priority pathogens by the World Health Organization (“WHO”), the U.S.

Acurx Pharmaceuticals, Inc., (the “Company”), a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a clinical stage biopharmaceutical company developing a new class of antibiotics for infections caused by bacteria listed as priority pathogens by the World Health Organization (“WHO”), the U.S.

Centers for Disease Control and Prevention (“CDC”) and the U.S.

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According to the WHO, the current clinical development pipeline remains insufficient to tackle the challenge of the increasing emergence and spread of antimicrobial resistance.

Our approach is to develop antibiotic candidates that block the DNA polymerase IIIC (“Pol IIIC”).

We believe we are developing the first Pol IIIC inhibitor to enter clinical trials.

Our approach is to develop a new class of antibiotic candidates that block the DNA polymerase IIIC (“Pol IIIC”).

We believe we are developing the first Pol IIIC inhibitor to enter clinical trials and have clinically validated the bacterial target by demonstrating the efficacy of our lead antibiotic candidate in a Phase 2a clinical trial.

Pol IIIC is the primary catalyst for DNA replication of several Gram-positive bacterial cells.

Our research and development pipeline includes clinical stage and early stage antibiotic candidates that target Gram-positive bacteria for oral and/or parenteral treatment of infections caused by Clostridium difficile (“C.

difficile”), Enterococcus (including vancomycin-resistant strains (“VRE”)), Staphylococcus (including methicillin-resistant strains (“MRSA”)), and Streptococcus (including antibiotic resistant strains).

difficile”), Enterococcus (including vancomycin-resistant strains (“VRE”)), Staphylococcus (including methicillin-resistant strains), and Streptococcus (including antibiotic resistant strains).

Pol IIIC is required for the replication of DNA in certain Gram-positive bacterial species.

By blocking this enzyme, our antibiotic candidates are believed to be bactericidal and inhibit proliferation of several common bacterial pathogens, including both sensitive and resistant C.

difficile, MRSA, vancomycin-resistant Enterococcus, penicillin-resistant Streptococcus pneumonia (“PRSP”) and other resistant bacteria.

By blocking this enzyme, our antibiotic candidates are believed to be bactericidal and inhibit proliferation of several common Gram-positive bacterial pathogens, including both sensitive and resistant C.

difficile, methicillin-resistant Staphylococcus aureus (“MRSA”), vancomycin-resistant Enterococcus, penicillin-resistant Streptococcus pneumonia (“PRSP”) and other resistant bacteria.

We intend to “de-risk” this new class of antibiotics through our drug development activities and potentially partner with a fully-integrated pharmaceutical company for late-stage clinical trials and commercialization.

Our lead antibiotic candidate, ibezapolstat (formerly named ACX- 362E), has a novel mechanism of action that targets the Pol IIIC enzyme, a previously unexploited scientific target.

On December 3, 2021, we commenced enrollment in a double-blind, active controlled clinical trial of ibezapolstat versus vancomycin, the standard of care to treat C.

difficile infections (“CDI”), pursuant to the trial design provided below.

Phase 2a clinical efficacy of our lead antibiotic validate the Pol IIIC bacterial target.

On December 3, 2021, we commenced enrollment in a Phase 2b 64-patient,

randomized (1-to-1), non-inferiority, double-blind, trial of oral ibezapolstat compared to oral vancomycin, a standard of care to treat C.

difficile infections (“CDI”).

Prior to that, we completed our Phase 2a clinical trial of ibezapolstat to treat patients with CDI and reported the top-line data in November 2020.

The Phase 2a clinical trial was terminated early based upon the recommendation of our Scientific Advisory Board (the “SAB”).

The SAB reviewed the study data presented by management, including adverse

events and efficacy outcomes, and discussed its clinical impressions.

The SAB reviewed the study data presented by management, including adverse events and efficacy outcomes, and discussed its clinical impressions.

The SAB unanimously supported the early termination of the Phase 2a trial after 10 patients were enrolled in the trial instead of 20 patients as originally planned.

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Our Phase 2b clinical trial commenced enrollment on December 3, 2021.

The SAB is comprised of seven scientists and clinicians who have significant expertise in the scientific disciplines required for the research and development of antibiotics.

The members of the SAB serve at the pleasure of management, are paid in cash on an hourly basis for their services and do not receive equity compensation.

Generally, the SAB is consulted by management during the process of designing our preclinical and clinical trials as well as in the process of analyzing data generated from these trials, although the SAB’s services are not limited to such activities.

Currently available antibiotics used to treat CDI infections utilize other mechanisms of action.

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Recent Developments

Based on the blinded observed data from the ongoing Phase 2b clinical trial to date, in January 2023, the Company filed a protocol amendment to its Investigational New Drug Application (IND) with FDA to allow for an Independent Data Monitoring Committee (IDMC) to review interim clinical data.

If acceptable to FDA, the IDMC will review the clinical data upon enrollment of 36 patients in the Phase 2b clinical trial.

The Company currently has enrolled 25 patients in the Phase 2b clinical trial.

The IDMC will determine and recommend to the Company whether the most appropriate course of action forward is to early terminate the Phase 2b clinical trial (as the Company had done with the Phase 2a clinical trial) or to continue patient enrollment.

The Company intends to report available data promptly after the IDMC conducts this interim review.

The Company assembled its IDMC in the first quarter of 2023 for this purpose.

Referring Physician Program and Trial Site Expansion

In July 2022, we launched an innovative patient enrollment acceleration program (“Referring Physician Program”) to optimize patient enrollment in our ongoing Phase 2b clinical trial of ibezapolstat in patients with CDI.

Our newly instituted Referring Physician Program involves principal investigators and study coordinators of our clinical trial sites reaching out to potential Referring Physicians (“RPs”) within an approximately twenty-five mile radius of our clinical trial sites.

In each case, our scientific team has identified all of these potential RPs as high-prescribing physicians of the most commonly used antibiotics for treatment of CDI over a recent twelve-month period.

According to the physician prescribing data available to us from an industry-standard source, identified RPs in the aggregate of just fourteen of our currently activated clinical trial sites treated a total of over 30,000 patients in a recent one-year period, suggesting that a substantial number of subjects could potentially be available for referral to one of

these fourteen clinical trial sites if the patients qualify.

The first tranche of this program has been activated with seventeen of our clinical trial sites and any further increases, if any, will follow after the review by IDMC of interim data from the Phase 2b clinical trial.

We believe the Referring Physician Program, which has a number of other supportive elements, will enhance the rate of enrollment potentially mitigating or partially mitigating the countervailing enrollment disruption caused by the COVID-19 pandemic.

Additionally, in July 2022, we increased the number of clinical trial sites participating in our Phase 2b clinical trial from the original twelve clinical trial sites to twenty eight.

Registered Direct Offering

On July 25, 2022, we entered into securities purchase agreements (the “Purchase Agreements”) with David P.

Luci, our President and Chief Executive Officer, Robert J.

DeLuccia, our Executive Chairman, Carl V.

Sailer, a member of our board of directors (collectively, the “Affiliate Investors”), and a single U.S.

institutional investor (the “Investor”) pursuant to which we issued and sold in a registered direct offering an aggregate of 1,159,211 shares of our common stock, par value $0.001 per share and pre-funded warrants to purchase an aggregate of 130,769 shares of our common stock.

The Affiliate Investors purchased an aggregate of 59,211 shares of common stock at a purchase price of $3.80 per share.

The Investor purchased an aggregate of 1,100,000 shares of common stock at a purchase price of $3.25 per share and an aggregate of 130,769 pre-funded warrants at a purchase price of $3.2499 per pre-funded warrant.

The pre-funded warrants sold to the Investor have an exercise price of $0.0001, were immediately exercisable and may be exercised at any time until fully exercised.

As of December 31, 2022, all of the pre-funded warrants were exercised.

The gross proceeds to us from the registered direct offering were $4.2 million and net proceeds after deducting the placement agents’ fees and other offering expenses payable by us were approximately $3.7 million.

The securities were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No.

333-265956) previously filed with the SEC on July 1, 2022, and which was declared effective by the SEC on July 11, 2022.

In a concurrent private placement, we issued to the Affiliate Investors and the Investor, series A warrants to purchase 1,289,980 shares of our common stock and series B warrants to purchase 1,289,980 shares of our common stock, all of which are deemed equity classified.

We issued an aggregate of 59,211 series A warrants and an aggregate of 59,211 series B warrants to the Affiliate Investors with an exercise price per share of $3.55.

Additionally, we issued an aggregate of 1,230,769 series A warrants and an aggregate of 1,230,769 series B warrants to the Investor with an exercise price per share of $3.25.

The series A warrants are exercisable commencing on January 27, 2023 and will expire on January 27, 2028.

The series B warrants are exercisable commencing on January 27, 2023 and will expire on January 27, 2024.

The registered direct offering and concurrent private placement closed on July 27, 2022.

On July 25, 2022, we entered into a co-placement agent agreement (the “Placement Agent Agreement”), with A.G.P./Alliance Global Partners (“AGP”) and Maxim Group LLC (“Maxim”, and together with AGP, the “Placement Agents”) in connection with the registered direct offering pursuant to which we paid the Placement Agents a cash fee of $287,874 and issued to the Placement Agents an aggregate of 63,018 warrants to purchase shares of common stock (which is 5% of the aggregate number of shares of common stock and pre-funded warrants sold in the registered direct offering to the Investor and 2.5% of the aggregate number of shares of common stock sold to the Affiliate Investors).

The warrants will have an exercise price of $3.60 per share (representing 110% of the weighted average public offering price of the aggregate number of shares of common stock sold in the registered direct offering to the Investor and Affiliate Investors), are exercisable beginning January 27, 2023, and will expire on July 27, 2027.

Initial Public Offering

On June 29, 2021, we completed our IPO, in which we issued and sold 2,875,000 shares of our common stock, including the full exercise by the underwriters of their option to purchase 375,000 additional shares of our common stock, at a public offering price of $6.00 per share, which resulted in net cash proceeds of $14.8 million after deducting underwriting discounts and commissions and offering expenses.

The proceeds from the IPO are being used (i) to complete the Phase 2b clinical trial of ibezapolstat in patients with CDI, (ii) to complete pre-clinical development of ACX-375C and (iii) for general corporate purposes, which may include, without limitation, expenditures relating to research, development and clinical trials other than those specified above, manufacturing, capital expenditures, hiring additional personnel, acquisitions of new technologies or products, the payment, repayment, refinancing, redemption or repurchase of existing or future indebtedness, obligations or capital stock, and working capital.

The proceeds from the IPO are being used (i) to

complete the Phase 2b clinical trial of ibezapolstat in patients with CDI, (ii) to complete pre-clinical development of ACX-375C and (iii) for general corporate purposes, which may include, without limitation, expenditures relating to research, development and clinical trials other than those specified above, manufacturing, capital expenditures, hiring additional personnel, acquisitions of new technologies or products, the payment, repayment, refinancing, redemption or repurchase of existing or future indebtedness, obligations or capital stock, and working capital.

Prior to the IPO, we converted from a Delaware limited liability company into a Delaware corporation, and our previously outstanding Class A membership interests and Class B membership interests were converted to shares of common stock pursuant to a conversion ratio of one-half of one share of common stock for each Class A membership interest or Class B membership interest outstanding, resulting in the conversion of 14,082,318 Class A membership interests and Class B membership interests into 7,041,208 shares of common stock.

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Vaccines for COVID-19 continue to be administered in the United States and other countries around the world, but the extent and rate of vaccine adoption, the long-term efficacy of these vaccines and other factors remain uncertain.

Authorities throughout the world have implemented measures to contain or mitigate the spread of the virus, including physical distancing, travel bans and restrictions, closure of non-essential businesses, quarantines, work-from-home directives, mask requirements, shelter-in-place orders and vaccination programs.

While the rollout of vaccines has begun, the timing of vaccinations, herd immunity, and the lifting of shelter-in-place and similar restrictions and movement restrictions are unknown.

The impact of COVID-19 and its variants has been and remains unpredictable.

Authorities throughout the world have implemented measures to contain or mitigate the spread of the virus, including at various times physical distancing, travel bans and restrictions, closure of non-essential businesses, quarantines, work-from-home directives, mask requirements, shelter-in-place orders and vaccination programs.

Despite these efforts, COVID-19 has persisted, has mutated into new variants, and is expected to become endemic.

Additionally, new waves of COVID-19 or its variants could cause the reinstatement of such limitations.

The impact of COVID-19 and its variants, including direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages, have been and remain unpredictable.

Since the start of the COVID-19 pandemic, we continued to enroll patients in our Phase 2a and Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, although enrollment rates decreased significantly compared to expectations at certain of our clinical trial sites.

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The following table summarizes our results of operations for the years ended December 31, 2022 and 2021:

For the years ended

(in thousands)

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Research and Development Expenses.

Research and development expenses were $2.0 million for the year ended December 31, 2021, and $2.2 million for the year ended December 31, 2020, a decrease of $0.2 million primarily due to a decrease in consulting related costs of $0.5 million offset by an increase in manufacturing related costs of $0.3 million relating to the Phase 2b clinical trial.

Research and development expenses were $4.8 million for the year ended December 31, 2022, and $2.0 million for the year ended December 31, 2021, an increase of $2.8 million primarily due to increase in consulting related costs for the Phase 2b clinical trial.

General and Administrative Expenses.

General and administrative expenses were $7.3 million for the year ended December 31, 2022, and $10.8 million for the year ended December 31, 2021.

General and administrative expenses increased by approximately $8.4 million primarily due to increases in share-based compensation and executive compensation settled in membership interests of $5.3 million, increases in compensation related expenses of $0.9 million, and increases in professional fees of $2.2 million as a result of increased legal, accounting and consulting work.

Net loss was $12.7 million for the year ended December 31, 2021, compared to $4.6 million for the year ended December 31, 2020, an increase of $8.1 million, primarily due to increases in general and administrative expenses for the reasons stated above.

General and administrative expenses decreased by approximately $3.5 million primarily due to $1.3 million decrease in professional fees, $2.3 million decrease in share-based compensation costs, offset by $0.1 million increase in insurance costs.

Net loss was $12.1 million for the year ended December 31, 2022, compared to $12.7 million for the year ended December 31, 2021, a decrease of $0.6 million, primarily due to the reasons stated above.

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future.

As of December 31, 2021, we had cash of approximately $13.0 million.

Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $38.6 million as of December 31, 2022.

We have funded our operations primarily from equity issuances.

We received net cash proceeds of approximately $12.9 million from equity financings closed between March 2018 and October 2020.

On June 29, 2021, we completed our IPO resulting in net proceeds of approximately $14.8 million after deducting underwriter discounts of $1.4 million and offering costs of approximately $1.1 million.

On July 27, 2022, we completed a registered direct offering and concurrent private placement resulting in net proceeds of approximately $3.7 million after deducting placement agents commission of $0.3 million and offering costs of $0.2 million.

Based upon our lack of revenue expected for the foreseeable future, and because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities.

As of December 31, 2022, we had working capital of $7.3 million, consisting primarily of $9.1 million of cash and $0.3 million of prepaid expenses, offset by $2.1 million of accounts payable and accrued expenses.

Sources of Liquidity

To date, we have financed our operations principally through private placements of equity issuances and the IPO.

To date, we have financed our operations principally through private placements of equity issuances, the IPO, and a registered direct offering.

Class A Membership Financings

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All of our equity financings were consummated at a price ranging from $1.00 per Class A Membership Interest (March 2018) to $3.25 per Class A Membership Interest (July 2020 and October 2020).

Warrant coverage was provided in all but our most-recent financing and the warrant coverage in our early-stage financings ranged from 25%

warrant coverage to 50% warrant coverage, in each case, with a conversion price equal to the issue price in each offering.

Warrant coverage was provided in all but our most-recent financing and the warrant coverage in our early-stage financings ranged from 25% warrant coverage to 50% warrant coverage, in each case, with a conversion price equal to the issue price in each offering.

Paycheck Protection Program Loan

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In June 2021, we completed the IPO and issued and sold an aggregate 2,875,000 shares of common stock, which included 375,000 shares of our common stock issued pursuant to the underwriters’ option to purchase additional shares, at a public offering price of $6.00 per share, for net cash proceeds of $14.8 million after deducting underwriting discounts and commissions and other offering costs.

Registered Direct Offering

In July 2022, we completed a registered direct offering and a concurrent private placement, issuing 1,159,211 shares of common stock and 130,769 pre-funded warrants and series A warrants to purchase 1,289,980 shares of common stock and series B warrants to purchase 1,289,980 shares of common stock for gross proceeds of approximately $4.2 million.

The following table sets forth a summary of the net cash flow activity for the years ended December 31, 2022 and 2021:

For the year ended

(in thousands)

Net cash provided by (used in):

Net cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Net increase in cash

Net (decrease) / increase in cash

Operating Activities

Net cash used in operating activities was $7.5 million for the year ended December 31, 2022, primarily attributable to the net loss of $12.1 million, offset by share-based compensation of $2.9 million, share-based payments to vendors of $0.4 million and an increase of $1.3 million in accounts payable and accrued expenses.

Net cash used in operating activities was $5.0 million for the year ended December 31, 2021, primarily attributable to the net loss of $12.7 million, offset by share-based compensation of $5.2 million, share-based payments to vendors of $1.6 million and $0.9 million of share-based executive compensation.

The net cash used in operating activities for the year ended December 31, 2020 was $3.4 million, which was primarily attributable to the net loss of $4.6 million, offset by share-based executive compensation of $0.8 million, share-based compensation of $0.7 million, and share based-payments to vendors of $0.6 million, which was paid in restricted Class A membership interests, and a decrease in accounts payable and accrued expenses of $0.8 million.

Investing Activities

Net cash provided by investing activities was none for the years ended December 31, 2021 and 2020.

Net cash provided by investing activities were none for the years ended December 31, 2022 and 2021.

Financing Activities

Net cash provided by financing activities was $3.7 million for the year ended December 31, 2022, which was attributable to the net proceeds from the registered direct offering.

Net cash provided by financing activities was $14.8 million for the year ended December 31, 2021, primarily due to the net proceeds from our IPO.

Net cash provided by financing activities was $4.0 million for the year ended December 31, 2020, primarily attributable to the net proceeds from our private placement offerings.

Funding Requirements

We believe that our existing cash, together with the net proceeds from our IPO, will be sufficient to meet our anticipated cash requirements for at least 12 months from the issuance of our financial statements for the year ended December 31, 2021.

We believe that our existing cash will not be sufficient to meet our anticipated cash requirements for at least 12 months from the issuance of our financial statements for the year ended December 31, 2022.

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially, including with regard to the impact of COVID-19 on our clinical trial enrollment.

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Use of Estimates

The preparation of financial statements in conformity with accounting standards generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Actual results could differ from those estimates.

Federal Income Taxes

We estimate an annual effective tax rate of 0% as we incurred losses for the year ended December 31, 2021 resulting in an estimated net loss for both financial statement and tax purposes.

Therefore, no current federal or state income tax expense has been recorded in the financial statements.

Based on our history of generating operating losses and our anticipation of operating losses for the foreseeable future, we have determined that it is more likely than not that the tax benefits from those net operating losses would not be realized and a full valuation allowance against all deferred tax assets has been recorded.

Should our assessment change, tax benefits associated with the historic net operating loss carryforwards would be limited due to the ownership change.

Prior to our corporate conversion in June 2021, we were organized as a limited liability company.

As such, we were not a tax paying entity for federal income tax purposes and, therefore, no income tax expense has been recorded in the financial statements.

Our income or losses were passed through to the members for inclusion in their respective income tax returns.

Concentration of Credit Risk

The Company maintains its cash balance in one financial institution.

The balance is insured up to the maximum allowable by the Federal Deposit Insurance Corporation (“FDIC”).

The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant risk of loss on cash.

At times, the cash balance may exceed the maximum insured limit of the FDIC.

As of December 31, 2021, the Company had cash of approximately $13.0 million in U.S.

bank accounts which was not fully insured by the FDIC.

Guaranteed Payments to Members

Prior to the corporate conversion, guaranteed payments to members of the Company that were designated to represent reasonable compensation for services rendered, were accounted for as Company expenses rather than an allocation of the Company’s net income.

Research and Development

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These amounts are deferred and expensed in the period the service is provided.

The Company incurred research and development expenses in the amount of $2.0 million and $2.2 million for the years ended December 31, 2021 and 2020, respectively.

Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to the Company by its vendors with respect to their actual costs incurred.

Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be.

The estimates are adjusted to reflect the best information available at the time of the financial statement issuance.

Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company's estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.

Share-Based Compensation

The Company accounts for the cost of services performed by officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award.

The Company accounts for the cost of services performed by employees, officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award.

The Company recognizes compensation expense based on the requisite service period.

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Treasury notes with comparable maturities.

We will continue to analyze the expected stock price volatility and will adjust our Black-Scholes option pricing assumptions as appropriate.

Any changes in the foregoing Black-Scholes assumptions, or if we were to elect to utilize an alternative method for valuing stock options granted to employees, officers and directors, could potentially impact our stock-based compensation expense and our results of operations.

Share-Based Payments to Vendors

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whichever is more readily determinable.

Such fair value is measured as of the date the services or the date performance by the other party is complete.

The Company recognizes the expense in the same period and in the same manner as if the Company had paid cash for the services.

The Company had a major vendor that accounted for approximately 42% and 40% of the research and development expenditures for the years ended December 31, 2021 and 2020, respectively.

The same vendor also accounted for approximately 5% and 6% of the total accounts payable and accrued expenses as of December 31, 2021 and 2020, respectively.

The Company continues to maintain this vendor relationship and anticipates incurring significant expenses with this vendor over the next 12 months.

The Company had an additional major vendor in 2021 that accounted for approximately 15% of the research and development expenditures for the year ended December 31, 2021.

The same vendor did not account for any portion of accounts payable and accrued expenses.

The Company continues to maintain this vendor relationship and anticipates incurring significant expenses with this vendor over the next 12 months

We also use Black-Scholes option pricing model for the purpose of estimating the fair value of options and warrants.

Changes in our Black-Scholes assumptions, or if we were to utilize an alternative method for valuing options or warrants issued to our vendors, could impact our expense and our results of operations

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-K

Item 7. Management’s Discussion and Analysis