Item 1. Financial Statements
Item 1. Financial Statements.
Aura Biosciences, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
June 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
47,732
$
121,582
Marketable securities
114,281
67,229
Restricted cash and deposits
20
20
Prepaid expenses and other current assets
4,178
7,871
Total current assets
166,211
196,702
Restricted cash and deposits, net of current portion
768
768
Right of use assets - operating lease
20,003
20,671
Other long-term assets
700
423
Property and equipment, net
5,057
5,371
Total Assets
$
192,739
$
223,935
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
553
2,921
Short-term operating lease liability
3,008
2,963
Accrued expenses and other current liabilities
5,334
4,573
Total current liabilities
8,895
10,457
Long-term operating lease liability
17,407
17,895
Total Liabilities
26,302
28,352
Commitments and Contingencies (Note 12)
Stockholders’ Equity:
Common stock, $ 0.00001 par value, 150,000,000 authorized at June 30, 2023 and December 31, 2022, and 38,086,606 and 37,771,918 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively
—
—
Additional paid-in capital
413,325
406,555
Accumulated deficit
( 246,665
)
( 210,900
)
Accumulated other comprehensive loss
( 223
)
( 72
)
Total Stockholders’ Equity
166,437
195,583
Total Liabilities and Stockholders’ Equity
$
192,739
$
223,935
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
Aura Biosciences, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Operating Expenses:
Research and development
$
15,120
$
9,510
$
29,524
$
17,786
General and administrative
5,156
$
4,306
10,196
8,841
Total operating expenses
20,276
13,816
39,720
26,627
Total operating loss
( 20,276
)
( 13,816
)
( 39,720
)
( 26,627
)
Other income (expense):
Interest income, including amortization and accretion income
2,009
292
4,000
319
Other income (expense)
( 32
)
56
( 45
)
5
Total other income
1,977
348
3,955
324
Net loss
( 18,299
)
( 13,468
)
( 35,765
)
( 26,303
)
Net loss per common share—basic and diluted
( 0.48
)
( 0.46
)
( 0.95
)
( 0.90
)
Weighted average common stock outstanding—basic and diluted
37,855,533
29,251,480
37,820,104
29,232,661
Comprehensive loss:
Net loss
$
( 18,299
)
$
( 13,468
)
$
( 35,765
)
$
( 26,303
)
Other comprehensive items:
Unrealized loss on marketable securities
$
( 178
)
( 123
)
( 151
)
( 128
)
Total other comprehensive loss
( 178
)
( 123
)
( 151
)
( 128
)
Total comprehensive loss
$
( 18,477
)
$
( 13,591
)
$
( 35,916
)
$
( 26,431
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Aura Biosciences, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
Additional
Accumulated
Total
Common Stock
Paid-In
Accumulated
Other Comprehensive
Stockholders’
Shares
Amount
Capital
Deficit
Loss Amount
Equity
Balance, December 31, 2022
37,771,918
—
406,555
( 210,900
)
( 72
)
195,583
Stock-based compensation expense
—
—
1,913
—
—
1,913
Employee Stock Purchase Plan Issuance
6,635
—
56
—
—
56
Stock option exercises
21,549
—
145
—
—
145
Unrealized gain on marketable securities
—
—
—
—
27
27
Net loss
—
—
—
( 17,466
)
—
( 17,466
)
Balance, March 31, 2023
37,800,102
—
408,669
( 228,366
)
( 45
)
180,258
Stock-based compensation expense
—
—
1,931
—
—
1,931
Issuance of common stock under ATM facility
169,200
—
2,065
—
—
2,065
Stock option exercises
117,304
—
660
—
—
660
Unrealized loss on marketable securities
—
—
—
—
( 178
)
( 178
)
Net loss
—
—
—
( 18,299
)
—
( 18,299
)
Balance, June 30, 2023
38,086,606
—
413,325
( 246,665
)
( 223
)
166,437
Additional
Accumulated
Total
Common Stock
Paid-In
Accumulated
Other Comprehensive
Stockholders’
Shares
Amount
Capital
Deficit
Loss Amount
Equity
Balance, December 31, 2021
29,211,643
—
304,452
( 152,137
)
—
152,315
Stock-based compensation expense
—
—
1,594
—
—
1,594
Stock option exercises
5,593
—
17
—
—
17
Unrealized loss on marketable securities
—
—
—
—
( 5
)
( 5
)
Net loss
—
—
—
( 12,835
)
—
( 12,835
)
Balance, March 31, 2022
29,217,236
—
306,063
( 164,972
)
( 5
)
141,086
Stock-based compensation expense
—
—
1,287
—
—
1,287
Stock option exercises
49,612
—
309
—
—
309
Unrealized loss on marketable securities
—
—
—
—
( 123
)
( 123
)
Net loss
—
—
—
( 13,468
)
—
( 13,468
)
Balance, June 30, 2022
29,266,848
—
307,659
( 178,440
)
( 128
)
129,091
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Aura Biosciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2023
2022
Cash flows from operating activities:
Net loss
$
( 35,765
)
$
( 26,303
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
628
552
Accretion on marketable securities
( 2,032
)
( 143
)
Stock-based compensation expense
3,844
2,881
Non-cash lease expense
669
288
Changes in operating assets and liabilities:
Prepaid expenses and other assets
3,940
( 892
)
Other long-term assets
( 277
)
—
Accounts payable
( 2,382
)
( 1,515
)
Accrued expenses and other liabilities
761
( 404
)
Operating lease liabilities
( 443
)
( 292
)
Net cash used in operating activities
( 31,057
)
( 25,828
)
Cash flows from investing activities:
Purchases of property and equipment
( 302
)
( 673
)
Purchase of marketable securities
( 88,847
)
( 71,266
)
Maturities of marketable securities
43,677
3,000
Net cash used in investing activities
( 45,472
)
( 68,939
)
Cash flows from financing activities:
Proceeds from exercise of stock options
805
326
Proceeds from issuance of common stock under ATM facility, net of issuance costs
1,818
—
Proceeds from ESPP purchase
56
—
Net cash provided by financing activities
2,679
326
Net (decrease) increase in cash, cash equivalents and restricted cash
( 73,850
)
( 94,441
)
Cash, cash equivalents and restricted cash at beginning of period
122,370
149,211
Cash, cash equivalents and restricted cash at end of period
$
48,520
$
54,770
Supplemental disclosure of cash flow information:
Purchases of property and equipment in accounts payable and accrued expenses and other liabilities
$
13
$
426
Common stock issued under ATM settled in future period
$
247
$
—
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows (in thousands):
June 30,
2023
2022
Cash and cash equivalents, end of period
$
47,732
$
53,849
Short-term restricted cash, end of period
20
28
Long-term restricted cash, end of period
768
893
Cash, cash equivalents and restricted cash at end of period
$
48,520
$
54,770
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Aura Biosciences, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business
Aura Biosciences, Inc. (the “Company” or “Aura”) is a clinical-stage biotechnology company envisioning a new way to treat cancer. Leveraging its novel targeted oncology platform, the Company has the goal to develop a new standard of care across multiple cancer indications. Within these consolidated financial statements, unless the context otherwise requires, references to the Company or Aura refer to Aura Biosciences, Inc. and its subsidiaries on a consolidated basis. The Company’s initial focus is on ocular and urologic oncology where the disease is diagnosed early and there is a high unmet medical need for targeted local therapies. The Company’s proprietary platform enables the targeting of a broad range of solid tumors using Virus-Like Particles, or VLPs, that can be conjugated with drugs or loaded with nucleic acids to create Virus-Like Drug Conjugates, or VDCs. The Company’s VDCs are largely agnostic to tumor type and can recognize a subset of modified tumor associated glycosaminoglycans that are part of the heparan sulphate chain of HSPGs expressed on the cell surface of many tumor cells and in the tumor microenvironment. Bel-sar, the Company’s first VDC candidate, is being developed for the first-line treatment of early-stage choroidal melanoma, a rare disease with no drugs approved where the standard of care leaves many patients with blindness. The Company is also developing bel-sar for additional ocular oncology indications, including choroidal metastasis, and in non-muscle invasive bladder cancer, or NMIBC. Aura’s headquarters are located in Boston, Massachusetts.
The Company’s operations to date have consisted primarily of conducting research and development and raising capital.
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, the successful development and commercialization of products, fluctuations in operating results and financial risks, need for additional financing or alternative means of financial support or both to fund its current operating plan, protection of proprietary technology and patent risks, compliance with government regulations, dependence on key personnel and collaborative partners, competition, customer demand, management of growth, and the effectiveness of marketing by the Company.
Liquidity
Through June 30, 2023 , the Company has funded its operations primarily with proceeds from the initial and additional closings of its convertible preferred stock financings, and through its IPO, follow-on offering and at-the-market offering, or ATM. On December 5, 2022, the Company issued and sold 7,705,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $ 12.00 per share for aggregate gross proceeds of $ 92.5 million, or the Follow-On Offering. The Company received approximately $ 86.7 million in net proceeds from the Follow-On Offering after deducting underwriting discounts, commissions and offering expenses. On November 1, 2022, the Company filed a shelf registration statement on Form S-3, or the 2022 Shelf, with the SEC in relation to the registration of up to an aggregate offering price of $ 250.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. The Company also simultaneously entered into the Open Market Sale Agreement SM , or Sales Agreement, with Jefferies LLC, or the Sales Agent, to provide for the offering, issuance and sale by the Company of up to an aggregate of $ 75.0 million of common stock from time to time in the ATM under the 2022 Shelf and subject to the limitations thereof. The Company issued 169,200 shares of common stock at an average price of $ 12.58 for aggregate gross proceeds of $ 2.1 million during the six months ended June 30, 2023 under the ATM. In addition, t he Company issued 732,189 shares of common stock at an average price of $ 12.51 for aggregate gross proceeds of $ 9.2 million as of December 31, 2022 under the ATM. On November 2, 2021, the Company completed its IPO, in which it issued and sold 6,210,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $ 14.00 per share for aggregate gross proceeds of $ 86.9 million. The Company received approximately $ 78.3 million in net proceeds after deducting underwriting discounts, commissions and offering expenses. The Company has incurred recurring losses and negative operating cash flows from operations since its inception, including net losses of $ 35.8 million and $ 26.3 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, the Company had cash and cash equivalents and marketable securities of $ 162.0 million and an accumulated deficit of $ 246.7 million. The Company expects to continue to generate operating losses for the foreseeable future.
5
As of the issuance date of these unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023 , the Company expects that its cash and cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance of these consolidated financial statements. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company’s financial position, results of operations, and cash flows. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The unaudited condensed results of operations are not necessarily indicative of the operating results that may occur for the full fiscal year ending December 31, 2023 . Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission, or the SEC. Management believes that the disclosures provided here are adequate to make the information presented not misleading when these unaudited condensed consolidated financial statements are read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2022 , in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2023. There have been no changes to the Company’s significant accounting policies except as noted below.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which was subsequently amended in November 2018 through ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses.” ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. ASU No. 2018-19 further clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment from receivables of operating leases should be accounted for in accordance with Topic 842, Leases. As per the latest ASU 2020-02, FASB deferred the timelines for certain small public and private entities, thus the new guidance was adopted by the Company for the annual reporting period beginning January 1, 2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted the standard on January 1, 2023 and it did not have a material impact on its results of operations, financial condition, and financial statement disclosures.
6
3. Fair Value of Assets and Liabilities
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of June 30, 2023 and December 31, 2022 (in thousands):
Description
June 30,
2023
Quoted prices
active markets
for identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
other
observable
inputs
(Level 3)
Financial assets
Cash equivalents:
Money market funds
47,220
$
47,220
$
—
$
—
Marketable securities:
Commercial paper
48,048
—
48,048
—
Corporate bonds
15,500
—
15,500
—
U.S. Government agencies
46,504
—
46,504
—
Yankee bonds
2,934
—
2,934
—
Asset-backed securities
1,295
—
1,295
—
Total financial assets
$
161,501
$
47,220
$
114,281
$
—
Description
December 31,
2022
Quoted prices
active markets
for identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
other
observable
inputs
(Level 3)
Financial assets
Cash equivalents:
Money market funds
$
118,582
$
118,582
$
—
$
—
Marketable securities:
Commercial paper
27,476
—
27,476
—
Corporate bonds
18,099
—
18,099
—
U.S. Government agencies
21,654
—
21,654
—
Total financial assets
$
185,811
$
118,582
$
67,229
$
—
4. Property and Equipment, Net
Property and equipment, net, consisted of the following (in thousands):
June 30,
2023
December 31,
2022
Assets under construction
$
1,600
$
1,805
IT equipment
133
133
Lab equipment
7,786
7,297
$
9,519
$
9,235
Less—accumulated depreciation
( 4,462
)
( 3,864
)
Property and equipment, net
$
5,057
$
5,371
Depreciation expense was $ 0.3 million and $ 0.3 million for the three months ended June 30, 2023 and 2022, respectively. In addition, depreciation expense was $ 0.6 million and $ 0.6 million for the six months ended June 30, 2023 and 2022 , respectively.
7
5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
June 30,
2023
December 31,
2022
Prepaid insurance
$
864
$
2,174
Prepaid research and development expenses
2,326
4,982
Other
988
715
Prepaid expenses and other current assets
$
4,178
$
7,871
6. Marketable Securities
Marketable securities consist of the following (in thousands):
June 30, 2023
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Commercial paper
$
48,116
$
—
$
( 68
)
$
48,048
Corporate bonds
15,549
—
( 49
)
$
15,500
U.S. Government agencies
46,594
5
( 95
)
$
46,504
Yankee bonds
2,946
—
( 12
)
$
2,934
Asset-backed securities
1,300
—
( 5
)
$
1,295
Total
$
114,505
$
5
$
( 229
)
$
114,281
December 31, 2022
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Commercial paper
$
27,476
$
—
$
—
$
27,476
Corporate bonds
18,191
—
( 92
)
$
18,099
U.S. Government agencies
21,635
20
( 1
)
$
21,654
Total
$
67,302
$
20
$
( 93
)
$
67,229
As of June 30, 2023, the unrealized losses on the Company’s investments in commercial paper, corporate bonds, U.S. government agencies securities, Yankee bonds, and asset-backed securities were caused by interest rate increases. The current credit ratings are all within the guidelines of the investment policy of the Company and the Company does not expect the issuers to settle any security at a price less than the amortized cost basis of the investment. The Company does not intend to sell the investments and it is not probable that the Company will be required to sell the investments before recovery of their amortized cost basis.
As of June 30, 2023, 41 marketable securities with contractual maturities of one year or less were in an unrealized loss position totaling $ 0.2 million.
As of June 30, 2023, all marketable securities held by the Company had remaining contractual maturities of one year or less.
There were no impairments of the Company’s assets measured and carried at fair value dur ing the six months ended June 30, 2023 .
8
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
June 30,
2023
December 31,
2022
Accrued research and development expenses
$
2,468
$
1,543
Accrued compensation
2,100
2,705
Other
766
325
Accrued expenses and other current liabilities
$
5,334
$
4,573
8. Equity
The Company had 150,000,000 authorized shares of common stock, par value $ 0.00001 per share, of which 38,086,606 and 37,771,918 shares were issued and outstanding at June 30, 2023 and December 31, 2022, respectively. In addition, the Company had 10,000,000 authorized shares of preferred stock, par value $ 0.00001 per share, all of which shares of preferred stock will be undesignated. No authorized shares of preferred stock were issued and outstanding at June 30, 2023 and December 31, 2022.
Financings
On December 5, 2022, the Company issued and sold 7,705,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $ 12.00 per share for aggregate gross proceeds of $ 92.5 million in the Follow-On Offering. The Company received approximately $ 86.7 million in net proceeds from the Follow-On Offering after deducting underwriting discounts, commissions and offering expenses.
On November 1, 2022, the Company filed the 2022 Shelf with the SEC in relation to the registration of up to an aggregate offering price of $ 250.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. The Company also simultaneously entered into the Sales Agreement with the Sales Agent to provide for the offering, issuance and sale by the Company of up to an aggregate of $ 75.0 million of common stock from time to time in the ATM under the 2022 Shelf and subject to the limitations thereof. The Company issued 169,200 shares of common stock at an average price of $ 12.58 for aggregate gross proceeds of $ 2.1 million during the six months ended June 30, 2023 under the ATM. In addition, the Company issued 732,189 shares of common stock at an average price of $ 12.51 for aggregate gross proceeds of $ 9.2 million as of December 31, 2022 under the ATM .
9. Stock-Based Compensation
2018 Stock Option and Incentive Plan
On December 12, 2018, the Company adopted the Aura Biosciences, Inc. 2018 Equity Incentive Plan, or the 2018 Plan. The 2018 Plan will expire in 2028. Under the 2018 Plan, Aura may grant incentive stock options, non-qualified stock options, restricted and unrestricted stock awards and stock rights. The Board of Directors, or the Board, has determined not to make any further awards under the 2018 Plan as of November 2, 2021. However, the 2018 Plan will continue to govern outstanding equity awards granted thereunder.
2021 Stock Option and Incentive Plan
The 2021 Stock Option and Incentive Plan, or the 2021 Plan, was adopted by the Board on October 7, 2021, approved by the Company’s stockholders on October 22, 2021 and became effective on November 1, 2021. The 2021 Plan permits the granting of both options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and options that do not so qualify. The number of shares initially reserved for issuance under the 2021 Plan was 3,352,166 , which increased on January 1, 2022 and will continue to increase each January 1 thereafter, by 5 % of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee. The maximum number of shares of common stock that may be issued in the form of incentive stock options shall not exceed the initial limit, cumulatively increased on January 1, 2022 and on each January 1 thereafter by the lesser of the annual increase for such year or 3,352,166 shares of common stock. On January 1, 2023, the shares reserved for issuance was increased to 6,850,986 shares.
9
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan, or the ESPP, was adopted by the Board on October 7, 2021, approved by the Company’s stockholders on October 22, 2021 and became effective on November 1, 2021. A total of 335,217 shares of common stock were initially reserved for issuance under this plan, which increased on January 1, 2022 and will continue to increase each January 1 thereafter through January 1, 2031, by the least of (i) 335,217 shares of common stock, (ii) 1 % of the outstanding number of shares of common stock on the immediately preceding December 31 or (iii) such lesser number of shares of common stock as determined by the administrator of the ESPP. On January 1, 2023, the shares reserved for issuance was increased to 962,550 shares. The purchase price of the shares under the ESPP are at 85 % of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the purchase date. As of June 30, 2023, 955,915 shares were available to be issued under the ESPP. The Company recognized $ 0.03 million share-based compensation expense related to the ESPP for the six months ended June 30, 2023. The Company recognized $ 0.02 million share-based compensation expense related to the ESPP for the three months ended June 30, 2023.
Stock Options
With the transfer of the available options from the 2018 Plan to the 2021 Plan, there were 4,324,297 options and restricted stock units available for grant under the 2021 Plan at June 30, 2023.
The Board is authorized to administer the 2021 Plan. In accordance with the provisions of the 2021 Plan, the Board determines the terms of Aura options and other awards issued pursuant thereto, including the following:
▪ which employees, directors and consultants shall be granted awards;
▪ the number of shares of common stock subject to options and other awards;
▪ the exercise price of each option, which generally shall not be less than fair market value of the common stock on the date of grant;
▪ the termination or cancellation provisions applicable to options;
▪ the terms and conditions of other awards, including conditions for repurchase, termination or cancellation, issue price and repurchase price; and
▪ all other terms and conditions upon which each award may be granted in accordance with the 2018 Plan.
In addition, the Board may award restricted shares of common stock and restricted stock units to participants subject to such conditions and restrictions as it may determine. The Board or any committee to which the Board delegates authority may, with the consent of the affected plan participants, re-price or otherwise amend outstanding awards consistent with the terms of the 2021 Plan.
The following table summarizes stock option activity under the 2018 Plan and 2021 Plan for the six months ended June 30, 2023:
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
(years)
Aggregate Intrinsic
Value
(in thousands)
Outstanding at December 31, 2022
4,303,336
$
8.06
7.92
$
16,204
Granted
984,725
10.45
Exercised
( 138,853
)
5.80
Cancelled/Forfeited
( 521,690
)
10.87
Outstanding at June 30, 2023
4,627,518
$
8.32
7.59
$
21,242
Exercisable at June 30, 2023
2,432,054
$
6.79
6.58
$
14,655
The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2023 and 2022 was $ 7.66 and $ 11.56 per share, respectively. The fair value of options vested during the six months ended June 30, 2023 and 2022 was $ 3.4 million and $ 1.2 million, respectively. The total intrinsic value of options exercised was $ 0.9 million and $ 0.6 million for the six months ended June 30, 2023 and 2022, respectively.
10
The fair value of the stock options issued for the three and six months ended June 30, 2023 and 2022 was measured with the following weighted-average assumptions:
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Risk-free interest rate
3.69
%
3.09
%
3.57
%
2.53
%
Expected term (years)
5.91
5.84
6.02
5.90
Expected volatility of the underlying stock
85.43
%
76.85
%
84.97
%
75.44
%
Expected dividend rate
—
%
—
%
—
%
—
%
Restricted Stock Units
The Company has granted restricted stock units with service-based vesting conditions. Unvested shares of restricted common stock may not be sold or transferred by the holder.
A summary of the restricted stock units activity during the six months ended June 30, 2023 is as follows:
Restricted Stock Units
Weighted-
Average
Grant Date Fair Value
Unvested at December 31, 2022
153,950
$
14.00
Granted
598,445
10.17
Vested/Released
—
—
Forfeited
( 109,287
)
11.00
Unvested at June 30, 2023
643,108
$
10.95
As a result of the 2021 Equity Incentive Plan, the Company granted restricted stock units which vest in increments of 25 % annually over a period of four years . No restricted stock units vested during the six months ended June 30, 2023.
Stock-based Compensation Expense
The Company recorded stock-based compensation expense as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Research and development
$
709
$
465
$
1,476
$
1,020
General and administrative
1,222
822
2,368
1,861
Total
$
1,931
$
1,287
$
3,844
$
2,881
As of June 30, 2023, there was $ 14.2 million of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.5 years.
As of June 30, 2023, there was $ 6.0 million of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 3.14 years.
10. Common Stock Warrants
In February 2015 and May 2015, the Company issued warrants to purchase 1,650,098 and 887,536 shares of Series B convertible preferred stock, respectively, at an exercise price of $ 1.24235 per share (the “Series B Warrants” ). Each Series B Warrant was immediately exercisable and expires ten years from the original date of issuance. Pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity, the Series B Warrants were classified as a liability and were re-measured to fair value at each balance sheet date. A total of 173,827 of the Series B Warrants were outstanding and were converted into warrants to purchase 12,686 shares of common stock with an exercise price of $ 17.03 upon the completion of the IPO in November 2021. As a result, the 12,686 common stock warrants were converted into equity instruments and remain outstanding as of June 30, 2023 .
11
11. Compensation
In January 2012, the Company adopted the Aura Biosciences 401(k) Profit Sharing Plan and Trust (the “401(k) Plan”) for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. The Company makes matching contributions of 100 % of the first 6 % of employee contributions. The Company made matching contributions in the amount of $ 0.2 million and $ 0.1 million for the three months ended June 30, 2023 and 2022 , respectively. The Company made matching contributions in the amount of $ 0.4 million and $ 0.3 million for the six months ended June 30, 2023 and 2022 , respectively.
12. Commitments and Contingencies
Lease Commitments
The Company has historically entered into lease arrangements for its facilities. The Company has one operating lease for its office and laboratory facility with required future minimum payments as of June 30, 2023 and one operating lease that was terminated in August 2022.
On May 16, 2022, the Company entered into an office and laboratory lease in Boston, MA with an initial 10-year term and one renewal option to extend the lease for an additional seven years . The lease commenced on August 1, 2022 , and estimated payments due under the initial term total $ 35.2 million. The lease requires a letter of credit totaling $ 0.8 million which is classified as long-term restricted cash and deposits on the consolidated balance sheet. The landlord will reimburse the Company up to $ 0.5 million for certain costs related to expansion of the laboratory space. As of June 30, 2023, the Company has incurred $ 0.1 million of expenses related to the expansion, and has been reimbursed for $ 0.1 million of these expenses.
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s leases for the three and six months ended June 30, 2023 and 2022 (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Lease Cost
Operating lease costs
881
155
1,761
309
Variable lease costs
217
161
443
337
Short-term lease costs
2
2
4
4
Total lease costs
$
1,100
318
$
2,208
$
650
Cash paid for amounts included in the measurement of lease liabilities—operating leases
$
1,537
$
305
Weighted-average remaining lease term—operating leases (years)
9.09
1.08
Weighted-average discount rate—operating leases
10.71
%
3.51
%
The following table reconciles the future minimum commitments to the Company’s operating lease liabilities at June 30, 2023 (in thousands):
Operating lease payments as of June 30, 2023
2023
$
1,575
2024
3,205
2025
3,301
2026
3,400
2027
3,502
Thereafter
17,430
Total lease payments
32,413
Less: interest
( 11,998
)
Total operating lease liabilities at June 30, 2023
20,415
Less: current portion of lease liabilities
3,008
Lease liabilities, net of current portion
$
17,407
12
License Agreements
The Company has entered into the following key agreements that relate to the core technology under development:
LI-COR Exclusive License and Supply Agreement
In January 2014, the Company entered into an Exclusive License and Supply Agreement, or the LI-COR Exclusive License agreement with LI-COR, Inc. (LI-COR) for the license of IRDye 700DC and related licensed patents for the treatment and diagnosis of ocular cancers in humans as amended in January 2016, July 2017, April 2018 and April 2019. The LI-COR Exclusive License Agreement required a one-time upfront license issue fee of $ 0.1 million and aggregate milestone payments of up to $ 0.2 million upon certain regulatory and development milestones. The Company is also required to pay LI-COR low-single digit royalties on net sales. The term of the LI-COR Exclusive Agreement expires on a country-by-country basis, until the longer of (i) ten years from the first commercial sale of a licensed product in such country and (ii) the last to expire valid claim in such country.
The Company recognized no expenses related to this agreement and related amendments for the six months ended June 30, 2023 and 2022, respectively.
LI-COR Non-Exclusive License and Supply Agreement
In December 2014, the Company entered into a Non-Exclusive License Agreement with LI-COR for the supply of IRDye 700DX to the Company for the treatment and diagnosis of non-ocular solid tumor cancers in humans. Under the 2014 Non-Exclusive, the Company paid a license issue fee of $ 0.03 million on the effective date. The Company must also pay LI-COR a non-refundable, non-creditable fee of $ 0.03 million per each licensed product upon pre-IND designation, as defined of such licensed product, aggregate milestone payments of up to $ 0.3 million upon certain regulatory and development milestones; and during the term, the Company must pay LI-COR a low-single digit percentage royalty on net sales. LI-COR receives 10% of all sublicensee income within 30 days of the Company’s receipt from the sublicensee. The 2014 Non-Exclusive Agreement also required the Company to make certain payments upon the achievement of specified development and commercial milestones of up to $ 0.4 million in aggregate. During the six months ended June 30, 2023 and 2022, the Company recognized no milestones related to this agreement.
Life Technologies Corporation
In December 2014, the Company entered into a non-exclusive, perpetual license agreement with Life Technologies Corporation, or the Life Technologies, which allows for five licensed products. Under this agreement the Company is required to pay an initial license fee of $ 0.1 million for each product. An annual development fee of $ 0.1 million is due within a year from payment of the initial license fee and due annually or earlier of (i) payment of a commercialization fee or (ii) all development work is terminated. The commercialization fee is a one-time, non-refundable, non-creditable fee of $ 0.3 million due upon receipt of approval of a licensed product. In the event of a change of control, there will be a change of control fee of $ 0.2 million.
In January 2022, the Company entered into the First Amendment to the non-exclusive, perpetual license agreement with Life Technologies for use of the license in an additional indication. The cost of this amendment was a one-time fee of $ 0.05 million. During the six months ended June 30, 2023 and 2022 , the Company recognized $ 0 million and $ 0.05 million of expenses related to this agreement, respectively.
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Effective in September 2022, the Company entered into a new non-exclusive, perpetual license agreement with Life Technologies for licensed products. Under this agreement, the Company is required to pay an initial license fee of $ 0.4 million for the first licensed product and $ 0.5 million for each additional licensed product. In addition, the agreement allows the Company the right to sublicense which would lead to a $ 0.2 million payment for each sublicense per licensed product and a $ 0.03 million payment for use of the cell line document package. In the event of a change of control, there will be a change of control fee of $ 0.5 million. During the six months ended June 30, 2023 , the Company recognized no expenses related to this agreement.
National Institute of Health (NIH)-Collaboration Research and Development Agreement
In July 2011, the Company entered into a Collaboration Research and Development Agreement (CRADA), with Dr. John Schiller at the NIH, for a period of two years with the rights to an exclusive license to all technology generated within the collaboration. Under this agreement, the Company is required to make annual payments of $ 0.03 million to fund the research activities, the first payment of which was paid within 30 days of the effective date. Subsequent payments are due within 30 days of the anniversary of the effective date. This agreement was first amended in 2012, 2013, 2014, 2015, 2016, 2018 and most recently in September of 2020. During the six months ended June 30, 2023 and 2022, the Company paid no research collaboration fees related to this agreement.
A seventh amendment was made in October 2020, requiring payment of $ 0.04 million within 30 days of October 1, 2020, and another $ 0.03 million within 30 days of the 10th anniversary of the CRADA, which was paid in July 2021. This seventh amendment extended the term of the CRADA to September 30, 2022. The Company recognized no milestones related to this agreement and related amendments for the six months ended June 30, 2023 and 2022.
An eighth amendment was effective in September 2022, requiring payment of $ 0.04 million within 30 days of November 1, 2022, and payment of another $ 0.03 million within 30 days of the 12th anniversary of the CRADA, which will be in August 2023. This eighth amendment extended the term of the CRADA to September 30, 2024. During the six months ended June 30, 2023 , the Company recognized no expenses related to this agreement
National Institute of Health (NIH)-Exclusive Patent License Agreement
In September 2013, the Company entered into an exclusive patent license agreement, or the NIH Exclusive License Agreement, with the NIH, that required the Company to pay a license issue royalty of $ 0.1 million and reimburse the NIH for any patent expenses incurred. Under the agreement, the Company is required to make low single-digit percentage royalty payments based on specified levels of annual net sales of licensed products subject to certain specified reductions. The Company is required to make development and regulatory milestone payments of up to $ 0.7 million in aggregate and sales milestone payments up to $ 0.6 million in the aggregate. The Company is also required to pay NIH a mid-single to low teen-digit percentage of any sublicensing revenue the Company receives. Additionally, the Company’s payment obligations to the NIH are subject to an annual minimum royalty payment of low five figures. The Company recognized no patent licensing fees for the six months ended June 30, 2023 and 2022, respectively.
In 2015, 2018 and 2019, the Company amended its exclusive patent license to include updates on the status of the commercial development and update/expand the list of licensed patents and patent applications. Each of those amendments required a $ 0.03 million payment that the Company paid.
Inserm-Transfert License Agreement
In November 2009, the Company entered into an exclusive, royalty-bearing patent license agreement with Inserm-Transfert of France. The agreement expires on a country by country basis based on the last to expire any patent encompassed within the scope of the patent rights or 10 years from the date of the first commercial sales by the Company, whichever is later. The IND filing milestone of € 0.01 million was accrued in 2016 and paid in 2017 by the Company. The milestones for the successful Phase I, II and III clinical trials are based on receiving a final report and achieving the primary endpoints defined in that trial, and those milestones have not been achieved as of June 30, 2023. Upon the sublicense by the Company of a product for which royalties are payable under the agreement, low- to mid-single-digit royalty payments would be due by the Company. The non-milestone payments in this agreement are subject to an anti-stacking clause. The Company did no t incur any expense in the six months ended June 30, 2023 and 2022.
14
Clearside
In July 2019, the Company entered into an exclusive license agreement with Clearside Biomedical, Inc., or Clearside, for the license of Clearside’s Suprachoroidal Microneedle Technology for use in the treatment of indeterminate lesions and choroidal tumors. Upon execution of the License Agreement, the Company paid Clearside an upfront payment of $ 0.1 million which was expensed as incurred. Under the Clearside License Agreement, the Company is required to pay milestones up to $ 21.0 million in the aggregate upon the achievement of specified regulatory and development milestones, and upon the achievement of certain commercial sales milestones. The Company is also required to pay low to mid-single digit royalties on net sales. If the Company sublicenses a product for which royalties are payable, then the Company is required to pay the greater of 20 % received or low single digit royalties on net sales.
The Clearside License agreement expires on a country-by-country basis upon the later of the last to expire patent or ten years from the date of the first commercial sale of a product.
The Company recognized $ 0.4 million and $ 0 million in expense related to this agreement and related amendments for the six months ended June 30, 2023 and 2022 .
13. Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss per common share by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share for the periods presented since the effects of potentially dilutive securities are antidilutive given the net loss of the Company.
The Company has calculated basic and diluted net loss per share for the three and six months ended June 30, 2023 and 2022 as follows (in thousands, except share and per share data):
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Numerator:
Net loss
$
( 18,299
)
$
( 13,468
)
$
( 35,765
)
$
( 26,303
)
Denominator:
Weighted-average common stock outstanding—basic and diluted
37,855,533
29,251,480
37,820,104
29,232,661
Net loss per common share—basic and diluted
$
( 0.48
)
$
( 0.46
)
$
( 0.95
)
$
( 0.90
)
The following potentially dilutive securities were excluded from the computation of the diluted net loss per share for the periods presented because their effect would have been antidilutive:
Six Months Ended
June 30,
2023
2022
Stock options to purchase common stock
4,627,518
4,135,212
Restricted stock units that vest into common stock
643,108
206,933
Warrants to purchase common stock
12,686
12,686
Total potential dilutive shares
5,283,312
4,354,831
15
14. Income Taxes
The Company estimates an annual effective tax rate of 0 % for the year ending December 31, 2023 as the Company incurred losses for the six months ended June 30, 2023, and is forecasting additional losses through the remainder of fiscal year ending December 31, 2023, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2023. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method.
Due to the Company’s history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not.
As of June 30, 2023 , the Company had no unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.
15. Subsequent Events
Subsequent events have been evaluated through the date of filing of the unaudited condensed consolidated financial statements. The Company has not identified any subsequent events that require disclosure.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. You should carefully read the “Risk Factors” section of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”
Overview
We are a clinical-stage biotechnology company envisioning a new way to treat cancer. Leveraging our novel targeted oncology platform, we have the goal to develop a new standard of care across multiple cancer indications. Our initial focus is on ocular and urologic oncology where the disease is diagnosed early and there is a high unmet medical need for targeted local therapies. Our proprietary platform enables the targeting of a broad range of solid tumors using Virus-like Particles, or VLPs, that can be conjugated with drugs or loaded with nucleic acids to create Virus-like Drug Conjugates, or VDCs. Our VDCs are largely agnostic to tumor type and can recognize a subset of modified tumor associated glycosaminoglycans, or GAGs, that are part of the heparan sulphate chain of HSPGs expressed on the cell surface of many tumor cells and in the tumor microenvironment.
Bel-sar, our first VDC candidate, is being developed for the first-line treatment of early-stage choroidal melanoma, a rare disease with no drugs approved where the standard of care leaves many patients with blindness. We have received orphan drug designation for the treatment of uveal melanoma from the U.S Food and Drug Administration, or the FDA, and the European Medicines Agency, or EMA, and fast track designation from the FDA for the treatment of choroidal melanoma. We have completed a Phase 1b/2 trial using intravitreal administration that has demonstrated clinical proof of concept, assessed using endpoints in alignment with the feedback from the FDA. We are currently evaluating suprachoroidal, or SC, administration of bel-sar in a Phase 2 trial. Enrollment is complete in the Phase 2 trial, and updated efficacy data with 12 months median follow up of patients treated with the therapeutic regimen intended to be used in the Phase 3 trial is on track to be presented in the second half of 2023. In February 2023 we presented average nine-month interim safety and efficacy data from this ongoing trial at Macula Society’s Annual Meeting which demonstrated a favorable safety profile with no posterior inflammation and no treatment-related serious adverse events, or SAEs, reported as of January 10, 2023. The results, with an average of nine months of follow up in patients who received a therapeutic regimen with three cycles of therapy, and who match the criteria for the planned global Phase 3 trial (n=8), showed a statistically significant reduction in the tumor growth rate (-0.289 mm/yr, p = <0.0001) compared to each patient’s documented growth rate at study entry, and a 100% (8/8) tumor control. In addition, the visual acuity preservation in the group of patients was 88% (7/8), with the majority of patients being at high-risk for vision loss with tumors close to fovea or optic disk. We have selected the SC route to conduct our global Phase 3 trial in alignment with regulatory agencies. The Phase 3 clinical trial design incorporates guidance and feedback from the FDA following a Type C meeting. The Phase 3 trial is designed as a superiority trial comparing belzupacap sarotalocan (bel-sar) versus sham. The trial is a global Phase 3, randomized, multi-center, masked study, and it is intended to enroll approximately 100 patients randomized 2:1:2 to receive high dose regimen of bel-sar, low dose regimen of bel-sar with SC administration, or a sham control. The primary endpoint is time to tumor progression and the first key secondary endpoint is a composite time to event analysis that will compare the tumor control and visual acuity of the bel-sar high-dose regimen to sham when the last patient completes their 12 months of follow up. We are currently conducting start up activities for the global Phase 3 trial with the goal to dose our first patient in the second half of 2023. We are also developing bel-sar for additional ocular oncology indications and have an open IND in the United States for choroidal metastasis, supporting the potential of bel-sar to provide a novel treatment option that preserves vision for these patients. Choroidal metastasis is a high unmet medical need and the most common intraocular malignancy that is caused by multiple primary cancers in the body that metastasize to the eye (e.g., breast and lung cancer). These patients are treated by the same ocular oncologists that treat choroidal melanoma and there are no drugs approved that can treat the lesion in the eye and preserve vision. We received fast track designation from the FDA’s Division of Oncology and plan to initiate the Phase 2 trial in 2024.
In addition to our ocular oncology franchise, we are leveraging our targeted oncology platform to develop bel-sar in the field of urologic oncology with an initial indication for the treatment of non-muscle invasive bladder cancer, or NMIBC, where we received fast track designation by the FDA’s Division of Oncology. We initiated enrollment in a Phase 1 trial and we plan to present data from this trial in 2024.
17
We were incorporated as a Delaware corporation in 2009 and, as of August 1, 2022, our headquarters are located in Boston, Massachusetts. Since our inception, we have focused our efforts on identifying and developing potential product candidates, conducting preclinical studies and clinical trials, organizing and staffing our company, business planning, establishing our intellectual property portfolio, raising capital, conducting discovery, research and development activities and providing general and administrative support for these operations. We do not have any product candidates approved for sale and have not generated any revenue to date. We have funded our operations primarily through the sale of convertible preferred stock, common stock, and warrants. From inception through June 30, 2023, we have raised an aggregate of approximately $323.5 million of gross proceeds primarily from private placements of our equity and convertible preferred stock as well as through the issuance of our common stock. On December 5, 2022, we issued and sold 7,705,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $12.00 per share, for aggregate gross proceeds of $92.5 million, or the Follow-On Offering. We received approximately $86.7 million in net proceeds from the Follow-On Offering after deducting underwriting discounts, commissions and offering expenses. On November 1, 2022, we filed a shelf registration statement on Form S-3, or the 2022 Shelf, with the SEC in relation to the registration of up to an aggregate offering price of $250.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. We also simultaneously entered into an Open Market Sale Agreement SM , or the Sales Agreement, with Jefferies LLC, or the Sales Agent, to provide for the offering, issuance and sale by us of up to an aggregate of $75.0 million of its common stock from time to time in “at-the-market” offerings, or the ATM, under the 2022 Shelf and subject to the limitations thereof. We issued 169,200 shares of common stock at an average price of $12.58 for aggregate gross proceeds of $2.1 million during the six months ended June 30, 2023 under the ATM. In addition, we issued 732,189 shares of common stock at an average price of $12.51 for aggregate gross proceeds of $9.2 million as of December 31, 2022 under the ATM. In November 2021, we issued and sold 6,210,000 shares of our common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $14.00 per share for aggregate gross proceeds of $86.9 million in our initial public offering, or IPO. We received approximately $78.3 million in net proceeds from the IPO after deducting underwriting discounts, commissions and offering expenses.
We have incurred significant operating losses in every year since our inception in 2009 and have not generated any revenue. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net losses were $35.8 million and $26.3 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $246.7 million. In addition, our losses from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
We anticipate that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly as we advance the preclinical studies and clinical trials of our product candidates. In addition, we incur additional costs associated with operating as a public company. We expect that our expenses and capital requirements will increase substantially if and as we:
▪ conduct our current and future clinical trials of bel-sar;
▪ progress the preclinical and clinical development of new indications;
▪ establish our manufacturing capability, including developing our contract development and manufacturing relationships;
▪ seek to identify and develop additional product candidates;
▪ seek regulatory approval of our current and future product candidates;
▪ expand our operational, financial, and management systems and increase personnel, including personnel to support our preclinical and clinical development, manufacturing and commercialization efforts;
▪ maintain, expand and protect our intellectual property portfolio; and
▪ incur additional legal, accounting, or other expenses in operating our business, including the additional costs associated with operating as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.
18
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain marketing approval for our product candidates. The lengthy process of securing marketing approvals for new drugs requires the expenditure of substantial resources. Any delay or failure to obtain regulatory approvals would materially adversely affect the development efforts of our product candidates and our business overall. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of June 30, 2023, we had cash and cash equivalents and marketable securities of $162.0 million. We believe that our existing cash and cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources” below.
Components of Our Results of Operations
Revenue
Since inception, we have not generated any revenue and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for one or more of our product candidates are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements. We cannot predict if, and when, or to what extent, we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our bel-sar program, and include:
▪ employee-related expenses, including salaries, related-benefits and stock-based compensation expense for employees engaged in research and development functions;
▪ fees paid to consultants for services directly related to our product development and regulatory efforts;
▪ expenses associated with conducting preclinical studies and clinical trials performed by ourselves, outside vendors or academic collaborators;
▪ expenses incurred under agreements with contract research organizations, or CROs, as well as consultants that conduct and provide supplies for our preclinical studies and clinical trials;
▪ the cost of manufacturing bel-sar, including the potential cost of CMOs that manufacture product for use in our preclinical studies and clinical trials and perform analytical testing, scale-up and other services in connection with our development activities;
▪ costs associated with preclinical activities and clinical development activities;
▪ costs associated with our intellectual property portfolio;
▪ costs related to compliance with regulatory requirements; and
▪ allocated expenses for utilities and other facility-related costs.
We expense research and development costs as incurred. Costs for external research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. We allocate our direct external research and development costs across the entire bel-sar program. Preclinical expenses consist of external research and development costs associated with activities to support our current and future clinical programs, but are not allocated by specific indications due to the overlap of the potential benefit of those efforts across the entire bel-sar program.
19
Research and development activities are central to our business. We expect that our research and development expenses will increase for the foreseeable future as we continue clinical development for bel-sar and continue to discover and develop additional product candidates. If any of our product candidates enter into later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive and finance functions. General and administrative expenses also include professional fees for legal, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include allocated expenses for rent and maintenance of facilities and other operating costs not included in research and development.
We expect that our general and administrative expenses will increase in the near-term as we continue to build a team to support our administrative, accounting and finance, communications, legal and business development efforts. We expect to incur increased expenses associated with growth of the Company, including costs of accounting, audit, legal, regulatory and tax compliance services; director and officer insurance costs; and investor and public relations costs.
Other Income (Expense)
Our other income (expense) consists of accretion, interest income and realized losses on marketable securities, and interest income on our invested cash balances.
Income Taxes
Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in any year or for our earned research and development tax credits, due to the uncertainty of realizing a benefit from those items. As of December 31, 2022, we had federal gross operating loss carryforwards of approximately $155.1 million which may be available to offset future taxable income, of which $44.2 million begin to expire in 2029 and go through 2037 and $110.9 million do not expire. The state gross operating loss carryforwards of $127.5 million, which may be available to offset future taxable income and which would begin to expire in 2030, except for $0.7 million of state net operating losses, or NOLs, that do not expire. As of December 31, 2022, we had federal and state research and experimentation credit carryforwards of $6.4 million and $1.9 million, respectively, which may be available to offset future income tax liabilities and which would begin to expire in 2029 and 2028, respectively. Due to the degree of uncertainty related to the ultimate use of the deferred tax assets, we have fully reserved these tax benefits, as the determination of the realization of the deferred tax benefits was not determined to be more likely than not.
Results of Operations
Comparison of the Three Months Ended June 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:
Three Months Ended
June 30,
2023
2022
Change
(in thousands)
Operating expenses:
Research and development
$
15,120
$
9,510
$
5,610
General and administrative
5,156
4,306
850
Total operating expenses
20,276
13,816
6,460
Loss from operations
(20,276
)
(13,816
)
(6,460
)
Other income (expense):
Interest income, including amortization of discount
2,009
292
1,717
Other income (expense):
(32
)
56
(88
)
Total other income (expense)
1,977
348
1,629
Net loss
$
(18,299
)
$
(13,468
)
$
(4,831
)
20
Research and Development Expenses
The following table summarizes our research and development expenses for the three months ended June 30, 2023 and 2022:
Three Months Ended
June 30,
2023
2022
Change
(in thousands)
Preclinical
$
147
$
472
$
(325
)
Clinical trials
4,734
1,115
3,619
Manufacturing development
2,586
2,416
170
Personnel/overhead expenses
7,653
5,507
2,146
Total research and development expenses
$
15,120
$
9,510
$
5,610
Research and development expenses increased to $15.1 million for the three months ended June 30, 2023 from $9.5 million for the three months ended June 30, 2022, primarily due to ongoing clinical costs associated with the progression of our Phase 2 study and CRO costs associated with the start of our Phase 3 global trial, manufacturing and development costs for bel-sar, and higher personnel expenses from growing headcount.
General and Administrative Expenses
General and administrative expenses increased to $5.2 million for the three months ended June 30, 2023 from $4.3 million for the three months ended June 30, 2022, primarily driven by personnel expenses, as well as increases in general corporate expenses related to growth of the Company.
Comparison of the Six Months Ended June 30, 2023 and 2022
The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:
Six Months Ended
June 30,
2023
2022
Change
(in thousands)
Operating expenses:
Research and development
$
29,524
$
17,786
$
11,738
General and administrative
10,196
8,841
1,355
Total operating expenses
39,720
26,627
13,093
Loss from operations
(39,720
)
(26,627
)
(13,093
)
Other income (expense):
Interest income, including amortization of discount
4,000
319
3,681
Other income (expense):
(45
)
5
(50
)
Total other income (expense)
3,955
324
3,631
Net loss
$
(35,765
)
$
(26,303
)
$
(9,462
)
21
Research and Development Expenses
The following table summarizes our research and development expenses for the six months ended June 30, 2023 and 2022:
Six Months Ended
June 30,
2023
2022
Change
(in thousands)
Preclinical
$
406
$
777
$
(371
)
Clinical trials
7,617
2,311
5,306
Manufacturing development
6,554
4,204
2,350
Personnel/overhead expenses
14,947
10,494
4,453
Total research and development expenses
$
29,524
$
17,786
$
11,738
Research and development expenses increased to $29.5 million for the six months ended June 30, 2023 from $17.8 million for the six months ended June 30, 2022, primarily due to ongoing clinical costs associated with the progression of our Phase 2 study and CRO costs associated with the start of our Phase 3 global trial, manufacturing and development costs for bel-sar, and higher personnel expenses from growing headcount.
General and Administrative Expenses
General and administrative expenses increased to $10.2 million for the six months ended June 30, 2023 from $8.8 million for the six months ended June 30, 2022, primarily driven by personnel expenses, as well as increases in general corporate expenses related to growth of the Company.
Liquidity and Capital Resources
To date we have funded our operations primarily through the sale of convertible preferred stock, and common stock. Through June 30, 2023, we have raised an aggregate of approximately $323.5 million of gross proceeds primarily from private placements of our equity and convertible preferred stock and warrants, as well as through the issuance of our common stock. On December 5, 2022, we issued and sold 7,705,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $12.00 per share for aggregate gross proceeds of $92.5 million in the Follow-On Offering. We received approximately $86.7 million in net proceeds from the Follow-On Offering after deducting underwriting discounts, commissions and offering expenses. On November 1, 2022, we filed the 2022 Shelf with the SEC in relation to the registration of up to an aggregate offering price of $250.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. We also simultaneously entered into the Sales Agreement with the Sales Agent to provide for the offering, issuance and sale by us of up to an aggregate of $75.0 million of our common stock from time to time in the ATM under the 2022 Shelf and subject to the limitations thereof. We issued 169,200 shares of common stock at an average price of $12.58 for aggregate gross proceeds of $2.1 million during the six months ended June 30, 2023 under the ATM. In addition, we issued 732,189 shares of common stock at an average price of $12.51 for aggregate gross proceeds of $9.2 million as of December 31, 2022 under the ATM. In November 2021, we issued and sold a total of 6,210,000 shares in our IPO of our common stock, including the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $14.00 per share for aggregate gross proceeds of $86.9 million. We received approximately $78.3 million in net proceeds from the IPO after deducting underwriting discounts, commissions and offering expenses.
22
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Six Months Ended
June 30,
2023
2022
(in thousands)
Net cash used in operating activities
$
(31,057
)
$
(25,828
)
Net cash used in investing activities
(45,472
)
(68,939
)
Net cash provided by financing activities
2,679
326
Net decrease in cash, cash equivalents, and restricted cash
$
(73,850
)
$
(94,441
)
Operating Activities
During the six months ended June 30, 2023, net cash used in operating activities was $31.1 million primarily due to our net loss of $35.8 million and a decrease in accounts payable related to timing of vendor invoicing and payments, partially offset by an increase in stock compensation expense and prepaid expenses related to CRO costs associated with the start of our Phase 3 global trial.
During the six months ended June 30, 2022, net cash used in operating activities was $25.8 million, primarily due to our net loss of $26.3 million and decrease in accounts payable related to the timing of vendor invoicing and payments, partially offset by the non-cash charge related to stock compensation expense.
Investing Activities
Net cash used in investing activities during the six months ended June 30, 2023 was $45.5 million primarily due to purchases of marketable securities and property and equipment, partially offset by proceeds from sale and maturities of marketable securities.
Net cash used in investing activities during the six months ended June 30, 2022 was $68.9 million primarily due to purchases of marketable securities and property and equipment, partially offset by maturities of marketable securities.
Financing Activities
During the six months ended June 30, 2023, net cash provided by financing activities was $2.7 million from proceeds from stock options exercises and issuance of common stock under the ATM.
During the six months ended June 30, 2022, net cash provided by financing activities was $0.3 million from proceeds from stock options exercises.
23
Funding Requirements
Our plan of operation is to continue implementing our business strategy, continue research and development of bel-sar and any other product candidates we may acquire or develop and continue to expand our research pipeline and our internal research and development capabilities. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our current and future product candidates. In addition, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or terminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including:
▪ the scope, timing, progress, costs, and results of discovery, preclinical development, and clinical trials for our current and future product candidates;
▪ the number of clinical trials required for regulatory approval of our current and future product candidates;
▪ the costs, timing, and outcome of regulatory review of any of our current and future product candidates;
▪ the cost of manufacturing clinical and commercial supplies of our current and future product candidates;
▪ the costs and timing of future commercialization activities, including manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval;
▪ the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;
▪ our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement;
▪ the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
▪ expenses to attract, hire and retain, skilled personnel;
▪ the costs of operating as a public company;
▪ our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party and government payers;
▪ the effect of competing technological and market developments;
▪ the extent to which we acquire or invest in businesses, products, and technologies; and
▪ unfavorable global economic conditions, which may exacerbate the magnitude of the factors discussed above.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. As of June 30, 2023, we had cash and cash equivalents and marketable securities of $162.0 million. Based on our research and development plans, we believe that our existing cash and cash equivalents, will be sufficient to fund our operations into the second half of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations from the sale of additional equity or debt financings, or other capital which comes in the form of strategic collaborations, licensing, or other arrangements. In the event that additional financing is required, we may not be able to raise it on terms acceptable to us, or at all. If we raise additional funds through the issuance of equity or convertible preferred stock, it may result in dilution to our existing stockholders. Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations.
If we raise funds through strategic collaboration, licensing or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID-19 pandemic and otherwise. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
24
Material Cash Requirements
The following table summarizes our contractual obligations and commitments as of June 30, 2023.
Payments Due by Period
Total
Less than
1 Year
1 to 3
Years
3 to 5
Years
More than
5 Years
(in thousands)
Operating lease commitments
$
32,413
$
3,158
6,602
7,005
15,648
Total
$
32,413
$
3,158
$
6,602
$
7,005
$
15,648
(1) Amounts in the table above reflect payments due for our lease of office and lab space in Boston, Massachusetts, that expires in August 2032.
On May 16, 2022, the Company entered into an office and laboratory lease in Boston, Massachusetts with an initial 10-year term and one renewal option to extend the lease for an additional seven years. The lease commenced on August 1, 2022.
Except as disclosed in the table above, we have no long-term debt or finance leases and no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase-order basis. We enter into contracts in the normal course of business with equipment and reagent vendors, CROs, CMOs and other third parties for clinical trials, preclinical research studies and testing and manufacturing services. These contracts are cancelable by us upon prior notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. We have also acquired exclusive and non-exclusive rights to use, research, develop and offer for sale certain products and patents under license agreements. The license agreements obligate us to make payments to the licensors for license fees, milestones, license maintenance fees and royalties. These payments are not included in the preceding table as the amount and timing of such payments are not known.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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 evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. During the six months ended June 30, 2023, there were no material changes to our critical accounting policies from those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC.
Recent Accounting Pronouncements
We assessed the recent accounting pronouncements for the six months ended June 30, 2023 and determined no pronouncements have material impact to the condensed consolidated financial statements.
25
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits that an “emerging growth company” may take advantage of the extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. The JOBS Act also exempts us from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).
We will remain an “emerging growth company” until the earliest of: the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; or the last day of the fiscal year ending after the fifth anniversary of our IPO.
We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.
If we are a smaller reporting company at the time we cease to be an Emerging Growth Company, or EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.