What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-11 compared with 2022-05-12 · 70 added, 41 removed, 117 unchanged (49% of the section changed)

20 unchanged sentences

While the vaccination mandate remains subject to the interpretation of various government agencies and other entities, and questions remain regarding the specific application of the vaccination mandate, we are continuing to develop and implement health, safety, employment and operational protocols in order to timely comply with the vaccination mandate.

As of and for the three months ended March 31, 2022, the vaccination mandate has not had a material impact on our employees or operations.

Although operations have not been materially affected by the COVID-19 pandemic as of and for the three months ended March 31, 2022, at this time, however, there is uncertainty relating to the trajectory of the pandemic and the impact

of related responses, and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays.

As of and for the six months ended June 30, 2022, the vaccination mandate has not had a material impact on our employees or operations.

Although operations have not been materially affected by the COVID-19 pandemic as of and for the three and six months ended June 30, 2022, at this time, however, there is uncertainty relating to the trajectory of the pandemic and

the impact of related responses, and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

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Under the contract, MTEC paid us a firm fixed fee based upon the achievement of certain milestones for conduct and completion of a Phase 1/2 study and research and development work on the replication-deficient adenovirus 5 (“RD-Ad5”) vector vaccine platform.

For the three months ended March 31, 2021, we recognized approximately $0.5 million of grant revenue under the contract, which completed the full recognition of this award.

No revenue was recognized for this contract for the three months ended March 31, 2022.

For the six months ended June 30, 2021, we recognized approximately $0.5 million of grant revenue under the contract, which completed the full recognition of this award.

No revenue was recognized for this contract for the three and six months ended June 30, 2022.

In July 2016, we signed a five-year contract with Biomedical Advanced Research and Development Authority (“BARDA”).

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Each option, if exercised by BARDA, would have provided additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning in 2021.

For the three months ended March 31, 2021, we recognized approximately $0.2 million of grant revenue under the BARDA contract.

For the three months ended March 31, 2022, we have recognized de minimis grant revenue related to the close-out of the BARDA contract.

For the three and six months ended June 30, 2021, we recognized approximately $0.1 million and $0.3 million, respectively, of grant revenue under the BARDA contract.

For the three and six months ended June 30, 2022, we have recognized de minimis grant revenue related to the close-out of the BARDA contract.

BARDA did not extend the contract beyond the end of December 2021.

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Results of Operations

Comparison of the three months ended March 31, 2022 and 2021:

Comparison of the three months ended June 30, 2022 and 2021:

For the Three Months Ended

(in thousands, except percentages)

(in thousands)

Increase (Decrease)

2 unchanged sentences

General and administrative

Impairment loss on construction-in-progress

Total operating expenses

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Total other income (expense), net

Comparison of the six months ended June 30, 2022 and 2021:

For the Six Months Ended

(in thousands)

Increase (Decrease)

Operating expenses:

Research and development

General and administrative

Impairment loss on construction-in-progress

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Interest income

Other income (expense), net

Total other income (expense), net

Revenue consists primarily of research grants in the United States from MTEC for our T-COVID product candidate and BARDA for our NasoShield vaccine product candidate.

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Our T-COVID and NasoShield programs were discontinued as of the end of 2021.

Revenue decreased by $0.8 million, or 96%, for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The decrease was primarily the result of a decrease of $0.5 million in MTEC revenue attributable to the timing of clinical trial and the discontinuation of development work on the T-COVID program.

Revenue decreased by $0.1 million, or 94% for the three months ended June 30, 2022 and $0.9 million, or 96%, for the six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021.

The decrease was primarily the result of the discontinuation of development work on both T-COVID and NasoShield programs as described above.

Research and development expenses

Research and development operating expense increased by $3.2 million, or 27%, for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

Research and development expense increased by $2.7 million, or 21%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The increase was primarily the result of:

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● a net increase of $0.8 million due to development activities related to our other programs, along with costs associated with our pre-clinical projects and non-project specific research and development costs including employee compensation and facility costs;

● an increase of $2.9 million due to change in the fair value of contingent consideration liability with respect to the acquisition of pemvidutide, which was fully paid on June 10, 2022:

● a decrease of $8.7 million due primarily to development activities for our COVID-19 programs, which included AdCOVID and T-COVID (which were discontinued in 2021).

● a decrease of $2.7 million primarily due to a decrease in the fair value of contingent consideration liability with respect to the acquisition of pemvidutide.

Research and development expense increased by $5.9 million, or 24%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The increase was primarily the result of:

● an increase of $16.1 million due to the development activities for pemvidutide primarily due to the ongoing NAFLD trials and initiation of the MOMENTUM Phase 2 trial in obesity;

● an increase of $2.7 million due to development activities for HepTcell;

● a net increase of $1.2 million due to development activities related to our other programs, along with costs associated with our pre-clinical projects and non-project specific research and development costs including employee compensation and facility costs;

● an increase of $0.2 million due to change in the fair value of contingent consideration liability with respect to the acquisition of pemvidutide, which was fully paid on June 10, 2022:

● a decrease of $14.3 million due primarily to development activities for our COVID-19 programs, which included AdCOVID and T-COVID (which were discontinued in 2021).

General and administrative expenses

General and administrative expense increased by $0.6 million, or 16%, for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The increase is due primarily to an increase in stock compensation expense.

General and administrative expense increased by $0.8 million, or 21% for the three months ended June 30, 2022 and $1.4 million, or 18%, for the six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021.

The increase was due primarily to an increase in stock compensation and other labor related costs.

Impairment loss on construction-in-progress

Impairment loss on construction-in-progress of $8.1 million reported during the three and six months ended June 30, 2021 represents non-cash impairment charges recorded for assets that were previously capitalized in connection with the construction of the Lonza facility and subsequent discontinuation of AdCOVID.

There were no such impairment charges reported during the three and six months ended June 30, 2022.

Total other income (expense), net

Total other income (expense), net increased by $0.1 million during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The net increase is primarily due to changes in foreign currency conversion.

Total other income (expense), net increased by $0.3 million for each of the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021, respectively, primarily due to increase in interest income.

Liquidity and Capital Resources

Our primary sources of cash during the three months ended March 31, 2022 were from equity transactions and cash receipts of accounts receivable from research grants.

Our cash, cash equivalents and restricted cash were $180.0 million at March 31, 2022.

We believe, based on the operating cash requirements and capital expenditures expected for 2022 and 2023, our cash on hand at March 31, 2022, together with expected cash receipts from our income tax refunds and R&D incentives, are sufficient to fund operations for at least a twelve-month period from the issuance date of our March 31, 2022 consolidated financial statements.

Our primary sources of cash during the six months ended June 30, 2022 were from equity transactions.

Our cash, cash equivalents, restricted cash and short-term investments were $184.8 million as of June 30, 2022.

We believe, based on the operating cash requirements and capital expenditures expected for 2022 and 2023, our cash on hand as of June 30, 2022, together with expected cash receipts from our income tax refunds and R&D incentives, are sufficient to fund operations for at least a twelve-month period from the issuance date of our June 30, 2022 consolidated financial statements.

We have not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.

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We have incurred significant losses since we commenced operations.

As of March 31, 2022, we had an accumulated deficit of $312.6 million.

As of June 30, 2022, we had an accumulated deficit of $332.7 million.

In addition, we have not generated positive cash flows from operations.

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In order to address our capital needs, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.

On December 31, 2020, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on January 11, 2021.

This shelf registration statement covered the offering, issuance and sale by us of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”).

As of June 30, 2022, approximately $157.9 million remained available to be sold under the 2021 Shelf.

In June 2020, we were awarded $4.7 million from the U.S.

Army Medical Research & Development Command (“USAMRDC”) to fund our Phase 1/2 clinical trial of T-COVID.

The competitive award was granted by USAMRDC in collaboration with the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology

consortium working in partnership with the Department of Defense (“DoD”).

The competitive award was granted by USAMRDC in collaboration with the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology consortium working in partnership with the Department of Defense (“DoD”).

Through March 31, 2022, we have collected approximately $4.7 million in cash under the contract, which completed the full recognition of this award.

Through June 30, 2022, we have collected approximately $4.7 million in cash under the contract, which completed the full recognition of this award.

In July 2016, we signed a five-year contract with BARDA.

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Each option, if exercised by BARDA, would have provided additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning in 2021.

Through March 31, 2022, we have collected approximately $29.5 million in cash under the BARDA contract.

Through June 30, 2022, we have collected approximately $29.3 million in cash under the BARDA contract.

BARDA did not extend the contract beyond the end of December 2021.

The following table provides information regarding our cash flows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table provides information regarding our cash flows for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(in thousands)

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Operating Activities

Net cash used in operating activities was $13.5 million for the three months ended March 31, 2022 compared to $19.6 million during the three months ended March 31, 2021.

Net cash used in operating activities was $30.2 million for the six months ended June 30, 2022 compared to $38.5 million during the six months ended June 30, 2021.

The primary uses of cash from our operating activities include payments for labor and labor-related costs, professional fees, research and development costs associated with our clinical trials and other general corporate expenditures.

The decrease in cash used in operations of $6.0 million year over year is due to an increase in net loss as adjusted for non-cash items of $6.5 million and changes in working capital accounts of $12.6 million.

The decrease in cash used in operations of $8.3 million year over year is due to an increase in net loss as adjusted for non-cash items of $6.4 million offset by changes in working capital accounts of $14.7 million.

Investing Activities

Net cash (used in) provided by investing activities was minimal for the three months ended March 31, 2022 compared to $19.2 million during the three months ended March 31, 2021.

The net cash provided by investing activities during the three months ended March 31, 2021 was primarily due net proceeds from short-term investment activity, partially offset by purchases of property and equipment primarily associated with the COVID-19 vaccine programs.

Net cash used in investing activities was $49.0 million for the six months ended June 30, 2022 compared to $44.2 million net cash provided during the six months ended June 30, 2021.

The net cash used in investing activities during the six months ended June 30, 2022 was primarily due to purchase of short-term investments.

The net cash provided by investing activities during the six months ended June 30, 2021 was primarily due to net proceeds from short-term investment activity, partially offset by purchases of property and equipment.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2022 was $3.2 million compared to $34.4 million for the three months ended March 31, 2021.

The net cash provided by financing activities during the three months ended March 31, 2022 was primarily the result of the receipt of $3.0 million in proceeds from the issuance of common stock from our at-the-market offerings program.

The net cash provided by financing activities during the three months ended March 31, 2021 was primarily the result of the receipt of $34.2 million in proceeds from the issuance of common stock from our at-the-market offerings program.

Net cash provided by financing activities during the six months ended June 30, 2022 was $24.8 million compared to $52.4 million for the six months ended June 30, 2021.

The net cash provided by financing activities during the six

months ended June 30, 2022 was primarily the result of the receipt of $24.3 million in proceeds from the issuance of common stock from our at-the-market offerings program and $0.4 million in net proceeds from exercise of stock options.

The net cash provided by financing activities during the six months ended June 30, 2021 was primarily the result of the receipt of $52.4 million in proceeds from the issuance of common stock from our at-the-market offerings program.

Public Offering

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The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020.

The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

As of March 31, 2022, 760,870 of the Pre-Funded Warrants were exercised, leaving 869,566 remaining Pre-Funded Warrants unexercised.

The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by us.

As of June 30, 2022, 760,870 of the Pre-Funded Warrants were exercised, leaving 869,566 remaining Pre-Funded Warrants unexercised.

At-the-Market Offerings

On February 25, 2021, we entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C.

Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offerings program under which we may offer and sell, from time to time at its sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million through the Sale Agents.

During the three months ended March 31, 2022, we sold 335,485 shares of Common Stock under the 2021 Agreement resulting in approximately $3.0 million in net proceeds.

As of March 31, 2022, we sold 5,135,939 shares of Common Stock under the 2021 Agreement resulting in approximately $67.8 million in net proceeds, with $55.0 million remaining available to be sold under the 2021 Agreement.

Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offerings program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million through the Sales Agents from the 2021 Shelf.

During the six months ended June 30, 2022, we sold 2,493,202 shares of Common Stock under the 2021 Agreement resulting in approximately $24.3 million in net proceeds.

As of June 30, 2022, we sold 7,293,656 shares of Common Stock under the 2021 Agreement resulting in approximately $89.2 million in net proceeds, with $32.9 million remaining available to be sold under the 2021 Agreement.

Current Resources

We have financed our operations to date principally through our equity offerings and proceeds from issuances of our preferred stock, common stock and warrants.

At March 31, 2022, we had $180.0 million of cash, cash equivalents and restricted cash.

Accordingly, management believes that the Company has sufficient capital to fund its plan of operations for at least a twelve-month period from the issuance date of our March 31, 2022 financial statements.

As of June 30, 2022, we had $135.9 million of cash, cash equivalents and restricted cash and $48.9 million of short-term investments.

Accordingly, management believes that we have sufficient capital to fund our plan of operations for at least a twelve-month period from the issuance date of our June 30, 2022 financial statements.

However, in order to address our capital needs in the long-term, including potential future clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.

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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