What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-10 · 69 added, 80 removed, 159 unchanged (48% of the section changed)

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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 efficacy of our lead antibiotic candidate in a Phase 2a clinical trial.

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.

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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.

Phase 2a clinical data validate the efficacy of our lead antibiotic candidate as well as Pol IIIC as an appropriate bacterial target.

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.

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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.

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.

The early termination was further based on the evidence of meeting the treatment goals of eliminating the infection with an acceptable adverse event profile.

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Recent Developments

Referring Physician Program and Trial Site Expansion

ECCMID 2023 Scientific Conference Presentations

In April 2023 two presentations were provided by the Company at the 33rd Annual European Congress of Clinical Microbiology and Infectious Disease (ECCMID) in Copenhagen.

First, a scientific poster entitled "Novel Pharmacology and Susceptibility of Ibezapolstat Against C.

difficile Isolates with Reduced Susceptibility to C.

difficile-directed Antibiotics"

was co-presented by Dr.

Kevin Garey, Professor and Chair, University of Houston College of Pharmacy, and the Principal Investigator for microbiome aspects of our ibezapolstat clinical trial program, and by Dr.

Eugénie Bassères, Research Scientist Faculty at the University of Houston.

Second, Executive Chairman, Robert J.

DeLuccia, presented an update on the Company's preclinical, systemic oral and IV program for treatment of other gram-positive infections caused by MRSA, VRE and DRSP at the "Pipeline Corner"

featured session at ECCMID, organized by Dr.

Ursula Theuretzbacher, a world-renowned microbiology expert involved in antibacterial drug research, discovery and development strategies and policies for clinical and public health needs.

Protocol Amendment, Referring Physician Program and Trial Site Expansion

On March 16, 2023, the Company announced that 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 with the U.S.

Food and Drug Administration (“FDA”) to allow for an Independent Data Monitoring Committee (“IDMC”) to review interim clinical data.

The FDA accepted the Company’s protocol amendment in March 2023 which will allow the IDMC to review the clinical data upon enrollment of 36 patients in the Phase 2b clinical trial.

The Company currently has enrolled 26 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 during this first quarter of 2023 for this purpose.

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 C.

difficile Infection 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 four of our clinical trial sites and is planned to be followed up later this year with a second tranche of twelve to twenty clinical trial sites as we expand our participating sites from sixteen up to thirty.

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.

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 target number of clinical trial sites participating in our Phase 2b clinical trial from a targeted twenty-four clinical trial sites up to thirty clinical trial sites and we are continuing to onboard clinical trial sites to reach our target.

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

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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 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 September 30, 2022, all of the pre-funded warrants were exercised.

As of March 31, 2023, 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.

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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 will be exercisable commencing on January 27, 2023 and will expire on January 27, 2028.

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

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

The series B warrants were 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), will be exercisable beginning January 27, 2023, and will expire on July 27, 2027.

The warrants 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.

On June 29, 2021, we completed our initial public offering (“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.

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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.

Other areas of our business experienced no change, including our research and development activities with key vendors.

We believe that the COVID-19 pandemic has highlighted the importance of antibiotic development in responding to global health issues particularly because many hospitalized COVID-19 patients were also prescribed antibiotics which only accelerates the current antimicrobial resistance crisis described by several regulatory bodies worldwide.

The extent to which the COVID-19 pandemic will ultimately continue to impact our business, results of operations, financial condition and cash flows depends on future developments that are highly uncertain, rapidly evolving and difficult to predict at this time.

Given the global economic slowdown, the overall disruption of global supply chains and distribution systems and the other risks and uncertainties associated with the COVID-19 pandemic, our business, financial condition, results of operations and growth prospects could be materially and adversely affected.

The extent to which the COVID-19 pandemic will ultimately impact our business, results of operations, financial condition and cash flows depends on future developments that are highly uncertain, rapidly evolving and difficult to predict at this time.

While we are not experiencing material adverse impacts at this time given the global economic slowdown, the overall disruption of global supply chains and distribution systems and the other risks and uncertainties associated with the COVID-19 pandemic, our business, financial condition, results of operations and growth prospects could be materially and adversely affected.

While we believe that we are well positioned for the future as we navigate the crisis and prepare for an eventual return to a more normal operating environment, we continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans and response strategy.

In May 2020, we received a Paycheck Protection Program loan (“PPP Loan”) under the Coronavirus Aid, Relief, and Economic Security Act, as administered by the U.S.

Small Business Administration (“SBA”) in the amount of $66,503.

The PPP Loan carried an annual interest rate of 0.98% and matures two (2) years from issuance.

On April 13, 2021, the SBA authorized the full forgiveness of the PPP Loan.

Upon forgiveness of the PPP Loan, we reduced the liability and recorded a gain on the forgiveness of the PPP Loan in our statement of operations.

Components of our Results of Operations

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Research and development expenses include:

● external research and development expenses incurred under agreements with contract research organizations, or CROs, and consultants to conduct our preclinical, toxicology and other preclinical studies;

● external research and development expenses incurred under agreements with contract research organizations (“CROs”) and consultants to conduct our preclinical, toxicology and other preclinical studies;

● laboratory supplies;

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Results of Operations

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

The following table presents a summary of the changes in our results of operations for the three months ended September 30, 2022 compared with the three months ended September 30, 2021:

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

The following table presents a summary of the changes in our results of operations for the three months ended March 31, 2023 compared with the three months ended March 31, 2022:

Three Months Ended

September 30,

(in thousands)

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Research and Development Expenses

Research and development expenses were $1.6 million for the three months ended September 30, 2022 and $1.1 million for the three months ended September 30, 2021, an increase of $0.5 million due to Phase 2b clinical trial related costs and increased consulting costs.

General and Administrative Expenses

General and administrative expenses were $2.0 million for the three months ended September 30, 2022 and $3.5 million for the three months ended September 30, 2021, a decrease of $1.5 million.

The decrease was primarily due to a $0.2 million decrease in legal fees and $1.3 million decrease in share-based compensation costs.

Net loss was $3.5 million for the three months ended September 30, 2022, and $4.6 million for the three months ended September 30, 2021, a decrease of $1.1 million, due to the reasons stated above.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

The following table presents a summary of the changes in our results of operations for the nine months ended September 30, 2022 compared with the nine months ended September 30, 2021:

Nine Months Ended

September 30,

(in thousands)

OPERATING EXPENSES:

Research and Development

General and Administrative

TOTAL OPERATING EXPENSES

Gain on forgiveness of Paycheck Protection Program Loan

Research and Development Expenses

Research and development expenses were $3.3 million for the nine months ended September 30, 2022, and $1.3 million for the nine months ended September 30, 2021, an increase of $2.0 million due to Phase 2b clinical trial related costs and increased consulting costs.

Research and development expenses were $1.0 million for the three months ended March 31, 2023 and $0.8 million for the three months ended March 31, 2022, an increase of $0.2 million due to Phase 2b clinical trial related costs and increased consulting costs.

General and Administrative Expenses

General and administrative expenses were $5.5 million for the nine months ended September 30, 2022 and $8.9 million for the nine months ended September 30, 2021, a decrease of $3.4 million.

The decrease was primarily due to a $1.1 million decrease in professional fees, $2.3 million decrease in share-based compensation costs, $0.3 million decrease in other compensation related costs, offset by $0.3 million increase in filing and insurance costs.

Net loss was $8.8 million for the nine months ended September 30, 2022, and $10.1 million for the nine months ended September 30, 2021, a decrease of $1.3 million, due to the reasons stated above.

General and administrative expenses were $1.9 million for the three months ended March 31, 2023 and $1.9 million for the three months ended March 31, 2022.

Net loss was $2.9 million for the three months ended March 31, 2023, and $2.7 million for the three months ended March 31, 2022, an increase of $0.2 million, due to the reasons stated above.

Liquidity and Capital Resources

Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $35.3 million as of September 30, 2022.

Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $41.5 million as of March 31, 2023.

We have funded our operations primarily from equity issuances.

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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.

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 fees 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 September 30, 2022, we had working capital of $9.8 million, consisting primarily of $10.6 million of cash and $0.3 million of prepaid expenses, offset by $1.1 million of accounts payable and accrued expenses.

As of March 31, 2023, we had working capital of $5.3 million, consisting primarily of $7.2 million of cash and $0.2 million of prepaid expenses, offset by $2.1 million of accounts payable and accrued expenses.

The following table sets forth selected cash flow information for the periods indicated:

For the nine months ended

September 30,

For the three months ended

(in thousands)

Net cash (used in) provided by:

Net cash used in:

Operating activities

Financing activities

Net (decrease) / increase in cash

Net decrease in cash

Net Cash Used in Operating Activities

Net cash used in operating activities was $6.0 million for the nine months ended September 30, 2022.

The net loss was greater than the net cash used in operating activities by $2.8 million, primarily attributable to share-based compensation and share-based vendor payments of $2.5 million and increase in accrued expenses of $0.3 million.

Net cash used in operating activities was $3.5 million for the nine months ended September 30, 2021.

The net loss was greater than the net cash used in operating activities by $6.6 million, primarily attributable to share-based compensation and share-based vendor payments of $6.9 million and an increase in accounts payable of $0.2 million, offset by an increase in prepaid expense of $0.5 million

Net cash used in operating activities was $1.9 million for the three months ended March 31, 2023.

The net loss was greater than the net cash used in operating activities by $1.0 million, primarily attributable to share-based compensation and share-based vendor payments of $0.9 million.

Net cash used in operating activities was $1.9 million for the three months ended March 31, 2022.

The net loss was greater than the net cash used in operating activities by $0.8 million, primarily attributable to share-based compensation and share-based vendor payments of $0.9 million, offset by a decrease in accrued expenses of $0.2 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $3.7 million for the nine months ended September 30, 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 nine months ended September 30, 2021, which was attributable to the net proceeds from the Company’s IPO.

There was no cash provided from financing activities for the three months ended March 31, 2023 and 2022, respectively.

Critical Accounting Policies and Estimates

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On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation.

We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the

results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2, “Summary of Significant Accounting Policies”, we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.

The Company estimates an annual effective tax rate of 0% as the Company incurred net losses for the nine months ended September 30, 2022 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 the Company’s history of generating operating losses and its anticipation of operating losses for the foreseeable future, the Company has 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 the Company’s assessment change, tax benefits associated with the historic net operating loss carryforwards could be limited due to future ownership changes.

Prior to the Company’s corporate conversion in June 2021, the Company was organized as a limited liability company.

As such, the Company was not a tax paying entity for federal income tax purposes and, therefore, no income tax expense had been recorded in the financial statements.

Income or losses of the Company was passed through to the members for inclusion in their respective income tax returns.

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 $3,321,623 and $1,313,954 for the nine months ended September 30, 2022 and 2021, 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.

The Company's estimate of the status and timing of services performed could differ from the actual status and timing of services performed.

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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Option valuation models require the input of highly subjective assumptions including the expected price volatility.

The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially

affect the fair value computation using the Black-Scholes option pricing model.

The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model.

Because there is no public market for the Company’s stock options and very little historical experience with the Company’s stock, similar public companies were used for the comparison of volatility and the dividend yield.

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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

The Company accounts for the cost of services performed by vendors in exchange for an award of Company membership interests, common stock, or stock options, based on the grant-date fair value of the award or the fair value of the services rendered;

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 accounts for the cost of services performed by vendors in exchange for an award of our common stock or stock options, based on the grant-date fair value of the award or the fair value of the services rendered, whichever is more readily determinable.

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.

Other Company Information

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Recent Accounting Pronouncements

The Financial Accounting Standards Board has issued certain accounting pronouncements as of September 30, 2022 that will become effective in subsequent periods;

The Financial Accounting Standards Board has issued certain accounting pronouncements as of March 31, 2023 that will become effective in subsequent periods;

however, we do not believe that any of those pronouncements would have significantly affected our financial accounting measurements or disclosures had they been in effect, or that they will have a significant impact on us at the time they become effective.

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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