What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-11 · 55 added, 84 removed, 179 unchanged (44% of the section changed)

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Recent Developments

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 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 31 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 the 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 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.

Completion of Phase 2b Clinical Trial

On October 2, 2023, we discontinued our Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, targeting the treatment of patients with CDI and anticipate advancing to Phase 3 clinical trials more expeditiously than originally planned.

We made the decision to discontinue the Phase 2b clinical trial in consultation with our medical and scientific advisors and statisticians based upon observed aggregate blinded data and other factors, including the cost to maintain clinical trial sites and slow enrollment due to COVID-19.

The Company determined that the Phase 2b clinical trial has performed as anticipated for each of ibezapolstat, our lead antibiotic candidate, and vancomycin, the control agent and a standard of care to treat patients with CDI, with high rates of clinical cure observed across the trial and no emerging safety concerns reported to date.

Accordingly, the Independent Data Monitoring Committee will not be required to perform an interim analysis of the Phase 2b clinical trial data as originally planned but is supportive of the Company’s decision to early discontinue the Phase 2b clinical trial and will remain involved for the Company’s Phase 3 clinical trials.

Prior to discontinuing the Phase 2b clinical trial, the Company notified FDA of its decision to early discontinue the trial.

The trial was not discontinued due to safety concerns.

Top-Line Ibezapolstat Phase 2 Efficacy Results

On November 2, 2023, the Company announced top-line Phase 2 efficacy and safety results from the clinical trial of ibezapolstat in patients with CDI.

The overall observed Clinical Cure rate in the combined Phase 2 trials in patients with CDI was 96% (25 out of 26 patients), based on 10 out of 10 patients (100%) in Phase 2a in the modified intent to treat population, plus 15 out of 16 (94%) patients in Phase 2b in the per protocol population, who experienced Clinical Cure during treatment with ibezapolstat.

Ibezapolstat was well-tolerated, with three patients each experiencing one mild adverse event assessed by the blinded investigator to be drug-related.

All three events were gastrointestinal in nature and resolved without treatment.

There were no drug-related treatment withdrawals or no drug-related serious adverse events, or other safety findings of concern.

In the Phase 2b vancomycin control arm, 14 out of 14 patients experienced clinical cure.

The Company is confident that based on the pooled Phase 2 ibezapolstat clinical cure rate of 96% and the historical vancomycin cure rate of approximately 81% (Vancocin® Prescribing Information, January 2021), we will demonstrate non-inferiority of ibezapolstat to vancomycin in Phase 3 trials in accordance with the applicable FDA Guidance for Industry (October, 2022).

The Phase 2b clinical trial met the protocol primary objective of assessing the primary efficacy endpoint of the Clinical Cure rate after 10 days of oral treatment.

Further analyses will be forthcoming regarding secondary and exploratory endpoints, including Sustained Clinical Cure data, Extended Clinical Cure data up to 94 days and comparative effects on the gut microbiome.

The Company is currently preparing for an End-of-Phase 2 Meeting with FDA and advancement to Phase 3.

Warrant Exercise and Share Issuance

As of November 13, 2023, the Company had 13,767,977 shares of common stock issued and outstanding which is an increase of 762,849 shares as of September 30, 2023, primarily due to certain warrant exercises that resulted in the issuance of 682,769 shares.

The Company received approximately $2.2 million in proceeds from these warrant exercises.

2023 Registered Direct Offering

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The pre-funded warrants sold to the 2023 Investor have an exercise price of $0.0001 and were immediately exercisable.

As of June 30, 2023, all of the pre-funded warrants were exercised.

As of September 30, 2023, all of the pre-funded warrants were exercised.

The gross proceeds to the Company from the registered direct offering were approximately $4.0 million and net proceeds after deducting the placements agent’s fees and other offering expenses payable by the Company were approximately $3.5 million.

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The 2023 Placement Agent Agreement also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.

2022 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 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.

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 June 30, 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.

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 were exercisable commencing on January 27, 2023 and will expire on May 18, 2029.

The series B warrants were exercisable commencing on January 27, 2023 and will expire on May 18, 2029.

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 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 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.

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.

Our common stock began trading on the Nasdaq Capital Market on June 25, 2021.

Effects of Coronavirus (COVID-19) on Our Business

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Clinical and preclinical development timelines, the probability of success and the amount of development costs can differ materially from expectations.

We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or

program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in our executive, finance and other administrative functions.

General and administrative expenses consist primarily of salaries and employee-related costs, including share-based compensation, for personnel in our executive, finance and other administrative functions.

Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs.

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Results of Operations

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

The following table presents a summary of the changes in our results of operations for the three months ended June 30, 2023 compared with the three months ended June 30, 2022:

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

The following table presents a summary of the changes in our results of operations for the three months ended September 30, 2023 compared with the three months ended September 30, 2022:

Three Months Ended

September 30,

(in thousands)

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Research and Development Expenses

Research and development expenses were $1.7 million for the three months ended June 30, 2023 and $0.9 million for the three months ended June 30, 2022, an increase of $0.8 million due to Phase 2b clinical trial related costs and increased consulting costs.

Research and development expenses were $1.3 million for the three months ended September 30, 2023 and $1.6 million for the three months ended September 30, 2022, a decrease of $0.3 million due to the timing of Phase 2b clinical trial related costs.

General and Administrative Expenses

General and administrative expenses were $1.7 million for the three months ended June 30, 2023 and $1.7 million for the three months ended June 30, 2022.

The decrease of $0.1 million in professional fees was offset by the increase of $0.1 million in employee related compensation expenses.

Net loss was $3.4 million for the three months ended June 30, 2023, and $2.6 million for the three months ended June 30, 2022, an increase of $0.8 million, due to the reasons stated above.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

The following table presents a summary of the changes in our results of operations for the six months ended June 30, 2023 compared with the six months ended June 30, 2022:

Six Months Ended

General and administrative expenses were $1.8 million for the three months ended September 30, 2023 and $2.0 million for the three months ended September 30, 2022, a decrease of $0.2 million.

The decrease was primarily due to $0.2 million decrease in professional fees.

Net loss was $3.1 million for the three months ended September 30, 2023, and $3.5 million for the three months ended September 30, 2022, a decrease of $0.4 million, due to the reasons stated above.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

The following table presents a summary of the changes in our results of operations for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022:

Nine Months Ended

September 30,

(in thousands)

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Research and Development Expenses

Research and development expenses were $2.8 million for the six months ended June 30, 2023 and $1.7 million for the six months ended June 30, 2022, an increase of $1.1 million due to Phase 2b clinical trial related costs and increased consulting costs.

Research and development expenses were $4.1 million for the nine months ended September 30, 2023 and $3.3 million for the nine months ended September 30, 2022, an increase of $0.8 million due to Phase 2b clinical trial related costs and increased consulting costs.

General and Administrative Expenses

General and administrative expenses were $3.6 million for the six months ended June 30, 2023 and $3.6 million for the six months ended June 30, 2022.

The decrease of $0.2 million in professional fees was offset by the increase of $0.2 million in employee related compensation expenses.

Net loss was $6.3 million for the six months ended June 30, 2023, and $5.3 million for the six months ended June 30, 2022, an increase of $1.0 million, due to the reasons stated above.

General and administrative expenses were $5.4 million for the nine months ended September 30, 2023 and $5.5 million for the nine months ended September 30, 2022, a decrease of $0.1 million.

The decrease was primarily due to $0.3 million decrease in professional fees offset by $0.2 million increase in share-based compensation.

Net loss was $9.4 million for the nine months ended September 30, 2023, and $8.8 million for the nine months ended September 30, 2022, an increase of $0.6 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 $44.9 million as of June 30, 2023.

Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $48 million as of September 30, 2023.

We have funded our operations primarily from equity issuances.

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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 June 30, 2023, we had working capital of $6.2 million, consisting primarily of $9.1 million of cash and $0.1 million of prepaid expenses, offset by $3.0 million of accounts payable and accrued expenses.

As of September 30, 2023, we had working capital of $3.9 million, consisting primarily of $7.1 million of cash and $0.1 million of prepaid expenses, offset by $3.2 million of accounts payable and accrued expenses.

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

For the six months ended

For the nine months ended

September 30,

(in thousands)

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Financing activities

Net increase/(decrease) in cash

Net decrease in cash

Net Cash Used in Operating Activities

Net cash used in operating activities was $3.5 million for the six months ended June 30, 2023.

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 $1.7 and increase in accounts payable and accrued expenses of $0.9 million and decrease in prepaid expenses of $0.2 million.

Net cash used in operating activities was $3.9 million for the six months ended June 30, 2022.

The net loss was greater than the net cash used in operating activities by $1.4 million, primarily attributable to share-based compensation and share-based vendor payments of $1.7 million, offset by a decrease in accrued expenses of $0.4 million.

Net cash used in operating activities was $5.6 million for the nine months ended September 30, 2023.

The net loss was greater than the net cash used in operating activities by $3.8 million, primarily attributable to share-based compensation and share-based vendor payments of $2.5 million and an increase in accounts payable and accrued expenses of $1.2 million and decrease in prepaid expenses of $0.1 million.

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 an increase in accrued expenses of $0.3 million.

Net Cash Provided by Financing Activities

Net cash provided from financing activities was $3.5 million for the six months ended June 30, 2023, which was attributable to the net proceeds from the registered direct offering.

There was no cash provided from financing activities for the six months ended June 30, 2022.

Net cash provided from financing activities was $3.5 million for the nine months ended September 30, 2023, which was attributable to the net proceeds from the 2023 registered direct offering.

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 2022 registered direct offering.

Critical Accounting Policies and Estimates

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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements.

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

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

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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 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.

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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.

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 share-based compensation expense and our results of operations.

Share-Based Payments to Vendors

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Recent Accounting Pronouncements

The Financial Accounting Standards Board has issued certain accounting pronouncements as of June 30, 2023 that will become effective in subsequent periods;

The Financial Accounting Standards Board has issued certain accounting pronouncements as of September 30, 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