What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-10 · 143 added, 66 removed, 286 unchanged (42% of the section changed)

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We plan to submit a New Drug Application, or NDA, for AXS-05 for the treatment of MDD supported by the positive results from the ASCEND and GEMINI trials.

AXS-05 is currently in a Phase 3, open-label, long-term safety extension study in patients with MDD and TRD known as the COMET trial to further support the NDA filing.

Additionally, AXS-05 is in three Phase 2 open-label efficacy sub-studies of the COMET trial which will evaluate the efficacy and safety of AXS-05 in three clinically pertinent MDD patient populations:

A Phase 3, open-label, long-term safety study with AXS-05 in patients with MDD and TRD known as the COMET trial was recently completed.

Additionally, three Phase 2 open-label efficacy sub-studies of the COMET trial have recently completed.

These sub-studies evaluated the efficacy and safety of AXS-05 in three clinically pertinent MDD patient populations:

the COMET-TRD trial in treatment resistant MDD (TRD), the COMET-AU trial in antidepressant unresponsive MDD, and the COMET-SI trial in MDD with suicidal ideation.

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We plan to submit an NDA for AXS-07 for the acute treatment of migraine supported by the positive results from the MOMENTUM and INTERCEPT trials.

AXS-07 is currently in a Phase 3 open-label, long-term safety extension study in patients with migraine known as the MOVEMENT trial to further support the NDA filing.

An open-label, long-term, safety study of AXS-07 in patients with migraine known as the MOVEMENT trial has recently completed.

AXS-09 is an oral, investigational NMDA receptor antagonist with multimodal activity consisting of esbupropion and DM, which is being developed for the treatment of CNS disorders.

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We have incurred significant operating expenses and net losses since inception.

We incurred net losses of $50.8 million and $24.4 million for the six months ended June 30, 2020 and 2019, respectively.

Our accumulated deficit as of June 30, 2020 was $226.7 million, and we expect to incur significant expenses and increasing operating losses for the foreseeable future.

We incurred net losses of $73.7 million and $43.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Our accumulated deficit as of September 30, 2020 was $249.6 million, and we expect to incur significant expenses and increasing operating losses for the foreseeable future.

We expect to continue to incur expenses in connection with the development of our product candidates, including with respect to conducting clinical trials and seeking regulatory approval for our current product candidates and any other product candidates that we develop or in-license and advance to clinical development.

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Year to Date and Recent Developments

In March 2020, we announced topline results of the STRIDE-1 Phase 3 trial of AXS-05 in TRD.

In April 2020, we announced that AXS-05 met the primary endpoint in the ADVANCE-1 Phase 2/3 trial in AD agitation.

In June 2020, we received FDA Breakthrough Therapy designation for AXS-05 for the treatment of AD agitation.

In July 2020, we completed a successful FDA pre-NDA meeting for AXS-05 for the treatment of MDD.

In August 2020, we announced the initiation of three Phase 2 open-label efficacy sub-studies of our COMET trial which will evaluate the efficacy and safety of AXS-05 in three clinically pertinent MDD patient populations:

(i) the COMET-TRD trial in treatment resistant MDD (TRD), (ii) the COMET-AU trial in antidepressant unresponsive MDD, and (iii) the COMET-SI trial in MDD with suicidal ideation.

In August 2020, we announced our initiation of the MERIT (Mechanistic Evaluation of Response in TRD) trial, a Phase 2, double-blind, placebo-controlled, randomized withdrawal study in patients with TRD.

In August 2020, we confirmed pivotal status and advancement of AXS-05 for the treatment of AD agitation based on successful FDA Breakthrough Therapy meeting.

In September 2020, we presented new data from our GEMINI Phase 3 trial with AXS-05 demonstrating rapid and significant improvements in patient-reported outcomes in MDD.

In April 2020, we announced that AXS-07 met the co‑primary endpoints in the INTERCEPT Phase 3 trial in the early treatment of migraine.

In August 2020, we announced that we completed a successful FDA pre-NDA-meeting for AXS-07 for the acute treatment of migraine.

In September 2020, we presented new data from our MOMENTUM Phase 3 trial with AXS-07 demonstrating rapid onset of action and reduced symptom recurrence in the acute treatment of migraine.

AXS-12 and AXS-14

In January 2020, we entered into an exclusive license agreement with Pfizer Inc.

for Pfizer's clinical and nonclinical data, and intellectual property for reboxetine, the active pharmaceutical ingredient in AXS-12, and esreboxetine, the active pharmaceutical ingredient in AXS-14.

In August 2020, we received FDA Breakthrough Therapy designation for AXS-12 for the treatment of narcolepsy.

In September 2020, we announced the expedited development of AXS-12 for the treatment of narcolepsy based on an FDA Breakthrough Therapy meeting.

Corporate/Financings

In February 2020, we promoted Mark Jacobson from his role of Senior Vice President, Operations to the role of Chief Operating Officer.

In March 2020, we announced topline results of the STRIDE-1 Phase 3 trial of AXS-05 in TRD.

In April 2020, we announced that AXS-07 met the co‑primary endpoints in the INTERCEPT Phase 3 trial in the early treatment of migraine.

In April 2020, we disclosed that Myrtle Potter will not stand for re-election as a director at our 2020 Annual Meeting of Stockholders because of her other professional responsibilities.

In April 2020, we announced that AXS-05 met the primary endpoint in the ADVANCE-1 Phase 2/3 trial in AD agitation.

In June 2020, we received FDA Breakthrough Therapy designation for AXS-05 for the treatment of AD.

In June 2020, we entered into a 12-month lease at 22 Cortlandt Street, New York, NY 10007 effective as of August 1, 2020.

In July 2020, we completed a successful FDA pre-NDA meeting for AXS-05 for the treatment of MDD.

In August 2020, we received FDA Breakthrough Therapy designation for AXS-12 for the treatment of narcolepsy.

In August 2020, we announced the initiation of three Phase 2 open-label efficacy sub-studies of the COMET trial which will evaluate the efficacy and safety of AXS-05 in three clinically pertinent MDD patient populations:

the COMET-TRD trial in treatment resistant MDD (TRD), the COMET-AU trial in antidepressant unresponsive MDD, and the COMET-SI trial in MDD with suicidal ideation.

In August 2020, we announced the initiation of the MERIT (Mechanistic Evaluation of Response in TRD) trial, a Phase 2, double-blind, placebo-controlled, randomized withdrawal study in patients with TRD.

In September 2020, we disclosed that David Marek agreed to continue his employment as Chief Commercial Officer of the Company through December 31, 2020.

Marek intends to pursue other professional and personal endeavors.

In September 2020, we entered into a $225 million term loan facility with Hercules Capital, Inc., or Hercules, and repaid and retired our term loan facility with Silicon Valley Bank, or SVB.

In November 2020, we announced the partnership with Veeva Systems to build our Digital-Centric Commercialization (DCC™) platform.

Financial Overview

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This process may result in actual results differing materially from those estimated amounts used in the preparation of our unaudited interim consolidated financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

The following table summarizes our research and development expenses for our primary programs for the three and six months ended June 30, 2020 and 2019:

The following table summarizes our research and development expenses for our primary programs for the three and nine months ended September 30, 2020 and 2019:

Three months ended

Six months ended

Nine months ended

September 30,

Other research and development

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Interest income (expense)

Interest income (expense) primarily consists of cash interest and non-cash costs related to our term loan with SVB (see “Liquidity and Capital Resources” below for a further discussion) and also the interest we receive from SVB on our cash sweep account.

Interest income (expense) primarily consists of cash interest and non-cash costs related to our previous term loan with SVB and current term loan with Hercules (see “Liquidity and Capital Resources” below for a further discussion) and also the interest we receive from SVB on our cash sweep account.

We record costs incurred in connection with the issuance of debt as a direct deduction from the debt liability.

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Three months ended

Six months ended

Nine months ended

September 30,

Operating expenses:

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Interest income (expense)

Comparison of the Three Months Ended June 30, 2020 and 2019

Loss on extinguishment of debt

Comparison of the Three Months Ended September 30, 2020 and 2019

Research and Development Expenses.

Our research and development expenses for the three months ended June 30, 2020 were $10.5 million, compared to $11.0 million for the three months ended June 30, 2019, a decrease of $0.5 million.

Our research and development expenses for the three months ended September 30, 2020 were $14.8 million, compared to $15.8 million for the three months ended September 30, 2019, a decrease of $1.0 million.

The decrease was driven by the completion of several of our clinical trials which were ongoing in the comparable prior period.

General and Administrative Expenses.

Our general and administrative expenses for the three months ended June 30, 2020 was $7.2 million, compared to $2.4 million for the three months ended June 30, 2019, an increase of $4.8 million.

Our general and administrative expenses for the three months ended September 30, 2020 were $6.3 million, compared to $3.1 million for the three months ended September 30, 2019, an increase of $3.2 million.

The change was primarily due to an increase in stock compensation expense, along with the build-out of the commercial function.

Interest Income (Expense).

Interest income (expense) for the three months ended June 30, 2020 was an expense of $0.5 million, compared to an expense of $0.3 million for the three months ended June 30, 2019, an increase of $0.2 million.

The interest expense incurred during these periods was consistent, however, the interest income earned during the three months ended June 30, 2020 was lower by $0.2 million due to a lower interest rate on our cash sweep account.

Comparison of the Six Months Ended June 30, 2020 and 2019

Interest income (expense) for the three months ended September 30, 2020 was an expense of $0.6 million, compared to an expense of $0.3 million for the three months ended September 30, 2019, an increase of $0.3 million.

The interest expense incurred during these periods was fairly consistent, however, the offset of interest income earned during the three months ended September 30, 2020 was lower by $0.2 million due to a lower interest rate on our cash sweep account.

Tax credit income for the three months ended September 30, 2019 was $0.1 million.

This represents the receipt by Axsome Therapeutics Australia PTY LTD, our Australian subsidiary, of the Australia Tax Incentive Credit related to the 2018 research and development expenses incurred for our product candidates.

Loss on extinguishment of debt.

In September 2020, we entered into a Loan and Security Agreement, or the Loan Agreement, with Hercules for a term loan of up to $225.0 million, which we refer to as the 2020 Term Loan.

A portion of the first tranche which was funded upon execution of the 2020 Term Loan was used to repay our 2019 Term Loan with SVB.

As a result of the repayment of the 2019 Term Loan, we recorded a loss on the extinguishment of debt of approximately $1.2 million representing the difference between the amount paid to SVB and the carrying amount of the 2019 Term Loan.

Included in the loss on extinguishment of debt is the prepayment premium, the unamortized discount and the write-off of deferred financing costs.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Research and Development Expenses.

Our research and development expenses for the six months ended June 30, 2020 were $38.1 million, compared to $18.6 million for the six months ended June 30, 2019, an increase of $19.5 million.

Our research and development expenses for the nine months ended September 30, 2020 were $52.9 million, compared to $34.4 million for the nine months ended September 30, 2019, an increase of $18.5 million.

R&D expense during the 2020 fiscal year included a one-time charge of $10.2 million for the Pfizer license agreement, of which $7.2 million was non-cash related.

The remaining increase was due primarily to ongoing spend for our active clinical trials during the first half of the year which include the STRIDE-1, ADVANCE-1, and INTERCEPT trials, close-out costs for our previously completed GEMINI, MOMENTUM, and CONCERT trials, along with costs associated with the AXS-05 and AXS-07 open-label safety studies.

The remaining increase was due primarily to ongoing spend for our active clinical trials in the beginning of the year which include the STRIDE-1, ADVANCE-1, and INTERCEPT trials, close-out costs for our previously completed GEMINI, MOMENTUM, and CONCERT trials, along with costs associated with the AXS-05 and AXS-07 open-label safety studies, COMET and MERIT studies, and study costs related to our new drug application submission for AXS-05 and AXS-07.

General and Administrative Expenses.

Our general and administrative expenses for the six months ended June 30, 2020 was $12.2 million, compared to $5.3 million for the six months ended June 30, 2019, an increase of $6.9 million.

Our general and administrative expenses for the nine months ended September 30, 2020 was $18.5 million, compared to $8.4 million for the nine months ended September 30, 2019, an increase of $10.1 million.

The change was primarily due to an increase in stock compensation expense, along with the build-out of the commercial function.

Interest Income (Expense).

Interest income (expense) for the six months ended June 30, 2020 and 2019 was an expense of $0.5 million which is related to the interest expense and amortization of the debt discount associated with our March 2019 loan and security agreement with SVB for $20 million.

Interest income (expense) for the nine months ended September 30, 2020 was an expense of $1.1 million, compared to an expense of $0.9 million for the nine months ended September 30, 2019, an increase of $0.2 million.

The increase was driven by a higher outstanding principal amount on our debt in 2020 as compared to 2019.

Tax credit income for the nine months ended September 30, 2019 was $0.1 million.

Loss on extinguishment of debt.

In September 2020, we entered into the Loan Agreement with Hercules.

A portion of the first tranche which was funded upon execution of the 2020 Term Loan was used to repay our 2019 Term Loan with SVB.

Included in the loss on extinguishment of debt is the prepayment premium, the unamortized discount and the write-off of deferred financing costs.

Liquidity and Capital Resources

Since our inception through June 30, 2020, we have financed our operations primarily through proceeds from equity offerings and debt borrowings.

Since our inception through September 30, 2020, we have financed our operations primarily through proceeds from equity offerings and debt borrowings.

See discussion below.

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We received gross proceeds of approximately $16.1 million and net proceeds of approximately $14.8 million, net of underwriting discounts and offering expenses.

In October 2017, we entered into an “at-the-market” sales agreement, or the 2017 Sales Agreement, with Leerink Partners LLC, or now known as SVB Leerink , pursuant to which we could sell up to $30 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings.

In October 2017, we entered into an “at-the-market” sales agreement, or the 2017 Sales Agreement, with Leerink Partners LLC, now known as SVB Leerink , pursuant to which we could sell up to $30 million of shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings.

In January 2019, we raised approximately $25.8 million in gross proceeds through the sale of 3,164,015 shares under the 2017 Sales Agreement.

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The 2,966,667 shares of common stock sold in the 2018 Registered Direct Offering were offered and sold by us directly to the RDO Investors, without a placement agent, underwriter, broker or dealer.

In March 2019, we entered into a loan and security agreement with SVB and WestRiver Innovation Lending Fund VIII, L.P., or WestRiver, for a term loan up to $24.0 million, which completely replaces the Original Term Loan and the First Amendment to the Original Term Loan.

The initial tranche of $20.0 million was funded shortly after executing the loan agreement.

The second tranche of $4.0 million is available to be drawn, at our option, subject to the achievement of positive data, on or prior to August 15, 2019, with respect to our ongoing Phase 2 clinical trial for AXS-12 in narcolepsy, sufficient to submit a Phase 3 protocol to FDA, provided that we have not received any objections from the FDA within thirty days after submission of such Phase 3 protocol A portion of the initial tranche was used to satisfy our existing obligations under our November 2016 term loan facility with SVB, as amended in November 2018, and such obligations are considered fully repaid and extinguished.

The second tranche of $4.0 million, or the Term B Loan Advance, was available to be drawn, at our option, subject to the achievement of a pre-determined clinical milestone related to our clinical trial for AXS-12 in narcolepsy.

A portion of the initial tranche was used to satisfy our existing obligations under our November 2016 term loan facility with SVB, as amended in November 2018, and such obligations are considered fully repaid and extinguished.

In May 2019, we entered into a Sales Agreement with SVB Leerink, or the May 2019 Sales Agreement, pursuant to which we could sell up to $50 million in shares of our common stock from time to time through SVB Leerink, acting as our sale’s agent, in one or more at-the-market offerings utilizing the 2016 Shelf Registration Statement (as defined below).

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In July 2019, we entered into the first amendment to the 2019 Term Loan, or the First Amendment to the 2019 Term Loan.

Under the First Amendment to the 2019 Term Loan, the interest-only monthly payment period of the 2019 Term Loan was extended to 18 months after the date of the 2019 Term Loan, which may be further extended to 24 months upon receipt by us of the Term B Loan Advance.

Our ability to draw down the Term B Loan Advance was extended to December 31, 2019, subject to our achievement of the Milestone Event prior to or on December 31, 2019.

Under the First Amendment to the 2019 Term Loan, the interest-only monthly payment period of the 2019 Term Loan was extended to 18 months after the date of the 2019 Term Loan, which was extendable to 24 months upon receipt by us of the Term B Loan Advance.

Our ability to draw down the Term B Loan Advance was extended to December 31, 2019, subject to our achievement of a pre-determined milestone event prior to or on December 31, 2019.

We did not draw down on the Term B Loan Advance, and therefore, the interest-only monthly payment period was not extended.

The Loan Advances mature on February 1, 2023.

See the subsection titled “July 2019 First Amendment to Loan and Security Agreement – Silicon Valley Bank” under the “Contractual Obligations and Commitments” section below for a further description of the First Amendment to the 2019 Term Loan.

The Loan Advances were set to mature on February 1, 2023;

however, the 2019 Term Loan was fully paid and our obligations under the 2019 Term Loan were fully extinguished in connection with our establishment of the 2020 Term Loan.

See the subsection below titled “July 2019 First Amendment to Loan and Security Agreement – Silicon Valley Bank” under the “Contractual Obligations and Commitments” section below for a further description of the First Amendment to the 2019 Term Loan.

On December 5, 2019, we filed an automatic shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an unlimited amount, which we refer to as the 2019 Shelf Registration Statement.

It was declared effective by the SEC upon filing.

The 2019 Shelf Registration Statement was automatically was declared effective by the SEC upon filing.

In December 2019, we entered into a new Sales Agreement with SVB Leerink, or the December 2019 Sales Agreement, pursuant to which we may sell up to $80 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement.

SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the December 2019 Sales Agreement.

We received approximately $12.4 million in gross proceeds through the sale of 141,678 shares, of which net proceeds were approximately $12.1 million during the six months ended June 30, 2020.

We received approximately $12.4 million in gross proceeds through the sale of 141,678 shares, of which net proceeds were approximately $12.1 million during the nine months ended September 30, 2020.

In December 2019, we completed an underwritten public offering, whereby we sold 2,300,000 shares of our common stock at a public offering price of $87.00 per share.

We received gross proceeds of approximately $200.1 million and net proceeds of approximately $187.1 million, after deducting underwriting discounts and offering expenses.

In September 2020, we entered into the Loan Agreement with Hercules for the 2020 Term Loan, which consists of several tranches in an aggregate amount of up to $225.0 million.

The first tranche consists of term loans in the amount of $60.0 million, of which $50.0 million was funded shortly after executing the Loan Agreement and the remaining $10.0 million is available at our option at any time through September 15, 2021.

A portion of the initial tranche was used to repay the 2019 Term Loan along with associated final payment fees.

The remaining $115 million may be drawn at our option, in three separate tranches, as described below under “Contractual Obligations - September 2020 Loan and Security Agreement – Hercules.” The 2020 Term Loan bears interest at a calculated prime-based variable rate currently at 9.15%.

It matures in October 2025 and has an initial interest-only payment period of 30 months, which may be extended to up to 48 months upon the drawing of future tranches.

In the future, we may conduct additional offerings of one or more of the securities covered by the 2019 Shelf Registration Statement in such amounts, prices and terms to be announced when and if the securities are offered.

At the time any of our securities covered by the 2019 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

We believe our currently available cash will be sufficient to fund our anticipated operating cash requirements for at least two years from the date of this report.

We believe our currently available cash along with the committed capital from the Hercules facility will be sufficient to fund our anticipated operating cash requirements into at least 2024.

Because the process of evaluating product candidates in clinical trials is costly and the timing of progress in these trials is uncertain, it is possible that the assumptions upon which we have based this estimate may prove to be wrong, and we could use our capital resources sooner than we currently expect .

The following table summarizes our primary sources and uses of cash for the periods indicated:

Six months ended June 30,

Nine months ended September 30,

Net cash (used in) provided by:

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Operating Activities.

Cash used in operating activities for the six months ended June 30, 2020 was $42.2 million as compared to $18.2 million for the six months ended June 30, 2019.

Cash used in operating activities for the nine months ended September 30, 2020 was $57.9 million as compared to $28.8 million for the nine months ended September 30, 2019.

The increase of $29.1 million in net cash used included the upfront cash payment of $3.0 million to Pfizer along with a higher cash outlay as a result of the multiple product candidates that were in clinical trials.

Investing Activities.

Cash used in investing activities for the purchase of property and equipment was less than $0.1 million for the six months ended June 30, 2020 and 2019.

Cash used in investing activities for the purchase of property and equipment was less than $0.1 million for the nine months ended September 30, 2020 and 2019.

Financing Activities.

Cash provided by financing activities was $12.9 million for the six months ended June 30, 2020, which included net proceeds from the sale of common stock through our Sales Agreement with Leerink of $12.1 million and proceeds from the issuance of common stock upon exercise of employee stock options of $0.8 million.

For the six months ended June 30, 2019, cash provided by financing activities was $58.0 million, which included net proceeds from the sale of common stock through our Sales Agreement with Leerink of $44.5 million, proceeds from the 2019 Term Loan of $20.0 million, and proceeds from issuance of common stock upon exercise of options and warrants of $0.7 million.

Cash provided by financing activities was $40.3 million for the nine months ended September 30, 2020, which included proceeds from the 2020 Term Loan of $50.0 million, net proceeds from the sale of common stock through our Sales Agreement with Leerink of $12.1 million and proceeds from the issuance of common stock upon exercise of employee stock options of $1.0 million.

These proceeds were offset by the repayment of the 2019 Term Loan with SVB of $21.7 million and payment of financing costs related to Hercules loan of $1.1 million.

For the nine months ended September 30, 2019, cash provided by financing activities was $58.5 million, which included net proceeds from the sale of common stock through our Sales Agreement with Leerink of $44.5 million, proceeds from the 2019 Term Loan of $20.0 million, and proceeds from issuance of common stock upon exercise of options and warrants of $1.1 million.

These proceeds were offset by the repayment on our 2016 Amended Term Loan of $7.2 million.

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In January 2020, we entered into a license agreement with Pfizer.

Under the terms of our exclusive license agreement with Pfizer, Pfizer received 82,019 shares of our common stock having a stated value of $8.0 million, based on the average closing price of the Company’s common stock for the ten prior trading days of $97.54, in consideration for the license and rights.

Under the terms of our exclusive license agreement with Pfizer, Pfizer received 82,019 shares of our common stock having a stated value of $8.0 million, based on the average closing price of our common stock for the ten prior trading days of $97.54, in consideration for the license and rights.

Pfizer also received an upfront cash payment of $3.0 million.

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The amount, timing, and likelihood of such payments are not known.

In connection with the 2020 Term Loan, Antecip consented to the collateral assignment of one of the license agreements, among other things, under a direct agreement with us and Hercules.

November 2016 Loan and Security Agreement—Silicon Valley Bank

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We were permitted to prepay all, but not less than all, of the 2016 Original Term Loan subject to a prepayment premium of 3.0% of the outstanding principal if prepaid within two years of the effective date of the loan, 2.0% of the outstanding principal if prepaid during the third year of the loan, and 1.0% of the outstanding principal if prepaid after the third year.

The term loan was collateralized by a security interest in all of our assets except intellectual property.

Our intellectual property was subject to a negative pledge.

In connection with the loan, SVB and Life Science Loans, LLC, received warrants to purchase an aggregate 65,228 shares of our common stock at an exercise price of $7.41 per share, which were exercisable for seven years from the date of issuance.

The 2016 Original Term Loan was collateralized by a security interest in all of our assets except intellectual property.

Our intellectual property was also subject to a negative pledge.

In connection with the 2016 Original Term Loan, SVB and Life Science Loans, LLC, or Life Science, received warrants to purchase an aggregate 65,228 shares of our common stock at an exercise price of $7.41 per share, which were exercisable for seven years from the date of issuance.

All of the warrants issued to SVB and Life Science were subsequently exercised.

We allocated the proceeds of $10.0 million based on the relative fair values of the debt instrument and the warrant instrument.

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In November 2018, we amended the 2016 Original Term Loan to provide an additional $4 million growth capital loan, related to our narcolepsy clinical program with AXS-12.

The additional capital was available to be drawn, at our option, subject to the achievement of a specified clinical milestone.

In connection with the 2016 Amended Term Loan, SVB and WestRiver received warrants to purchase an aggregate 15,750 shares of our common stock at an exercise price of $3.06 per share, which are exercisable for seven years from the date of issuance.

Our obligations under the 2016 Amended Term Loan, along with the ability to draw down on the additional $4.0 million tranche, were considered to be performed and completed in connection with the establishment of the 2019 Term Loan during March 2019.

The additional capital was available to be drawn, at our option, subject to the achievement of a pre-specified clinical milestone.

In connection with the 2016 Amended Term Loan, SVB and WestRiver received warrants to purchase an aggregate 15,750 shares of our common stock at an exercise price of $3.06 per share, which were exercisable for seven years from the date of issuance.

All of the warrants issued to SVB and West River in connection with the 2016 Amended Term Loan were subsequently exercised.

March 2019 Loan and Security Agreement—Silicon Valley Bank

In March 2019, we entered into the 2019 Term Loan with SVB and WestRiver consisting of an initial $20.0 million tranche, which was funded shortly upon closing, with the remaining $4.0 million available to be drawn, at our option, subject to the achievement of positive data, on or prior to August 15, 2019, with respect to our Phase 2 clinical trial for AXS-12 in narcolepsy, sufficient to submit a Phase 3 protocol to the FDA, provided that we have not received any objections from the FDA within thirty days after submission of such Phase 3 protocol.

A portion of the first tranche was used to satisfy our then-existing obligations under our 2016 Amended Term Loan and such obligations are considered to be fully repaid and completed.

The 2019 Term Loan accrues interest on the unpaid principal balance of the outstanding loan advances at a floating per annum rate equal to the greater of (i) seven and one-half of one percent (7.50%) and (ii) two percent (2.0%) above the prime rate and is payable monthly.

In March 2019, we entered into the 2019 Term Loan with SVB and WestRiver, which consisted of an initial $20.0 million tranche, which was funded upon closing, with the remaining $4.0 million available to be drawn, at our option, subject to the achievement of a pre-specified clinical milestone related to our Phase 2 clinical trial for AXS-12 in narcolepsy.

A portion of the first tranche was used to satisfy our then-existing obligations under our 2016 Amended Term Loan and such obligations were subsequently considered to be fully repaid and completed.

The 2019 Term Loan accrued interest on the unpaid principal balance of the outstanding loan advances at a floating per annum rate equal to the greater of (i) seven and one-half of one percent (7.50%) and (ii) two percent (2.0%) above the prime rate and was payable monthly.

The 2019 Term Loan initially had an interest-only monthly payment period for twelve months which was extendable to 18 months upon drawing of the second tranche.

Following the interest only payment period, we will begin making monthly payments of principal and interest and these payments will continue until the maturity date of February 1, 2023.

Following the interest only payment period, we were scheduled to begin making monthly payments of principal and interest and these payments would have continued until the maturity date of February 1, 2023;

however, the 2019 Term Loan, as amended, was fully paid and our obligations under the 2019 Term Loan were fully extinguished in connection with our establishment of the 2020 Term Loan.

In addition, we were initially required to pay a final payment fee of 6.0% of the principal amount extended to us on the date of repayment of the outstanding loan, which was increased to 6.3% in connection with the First Amendment to the 2019 Term Loan, as described below.

We were initially permitted to prepay all, but not less than all, of the 2019 Term Loan, subject to a prepayment premium of 3.0% of the outstanding principal if prepaid within one year of the effective date of the loan, 2.0% of the outstanding principal if prepaid after the first anniversary of the effective date but on prior to the second anniversary of the effective date, and 1.0% of the outstanding principal if prepaid after the second anniversary of the effective date.

The term loan is collateralized by a security interest in all of our assets except intellectual property.

Our intellectual property is subject to a negative pledge.

The term loan was collateralized by a security interest in all of our assets except intellectual property.

Our intellectual property was subject to a negative pledge.

In connection with the 2019 Term Loan, SVB and WestRiver received warrants, or the March 2019 Warrants, to purchase an aggregate 70,000 shares of our common stock at an exercise price of $8.10 per share, which are exercisable for seven years from the date of issuance.

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In July 2019, we entered into the First Amendment to the 2019 Term Loan.

Our ability to draw down the Term B Loan Advance was extended to December 31, 2019, subject to our achievement of the Milestone Event prior to or on December 31, 2019.

Under the First Amendment to the 2019 Term Loan, the interest-only monthly payment period of the 2019 Term Loan was extended to 18 months after the date of the 2019 Term Loan, which was available to be further extended to 24 months upon receipt by us of the Term B Loan Advance.

Our ability to draw down the Term B Loan Advance was extended to December 31, 2019, subject to our achievement of a pre-specified milestone prior to or on December 31, 2019.

We did not draw down on the Term B Loan Advance, and therefore, the interest-only monthly payment period was not extended.

The Loan Advances mature on February 1, 2023.

Pursuant to the 2019 Term Loan, as amended by the First Amendment to the 2019 Term Loan, following the interest-only payment period, we will begin making monthly payments of principal in equal monthly installments for 30 consecutive months (provided, that, upon the occurrence of the Milestone Event, the repayment schedule will be decreased to 24 consecutive months) and monthly payments of interest, until the Maturity Date.

Interest will accrue on the unpaid principal balance of the outstanding Loan Advances at a floating per annum rate equal to the greater of (i) seven and one-half of one percent (7.50%) and (ii) two percent (2.0%) above the prime rate.

The Loan Advances were scheduled to mature on February 1, 2023 ;

however, the 2019 Term Loan , as amended, was fully paid and our obligations under the 2019 Term Loan were fully extinguished in connection with our establishment of the 2020 Term Loan .

Pursuant to the 2019 Term Loan, as amended by the First Amendment to the 2019 Term Loan, following the interest-only payment period, we were set to begin making monthly payments of principal in equal monthly installments for 30 consecutive months (provided, that, upon the occurrence of the pre-specified milestone , the repayment schedule would have been decreased to 24 consecutive months) and monthly payments of interest, until the maturity date .

Interest accrued on the unpaid principal balance of the outstanding Loan Advances at a floating per annum rate equal to the greater of (i) seven and one-half of one percent (7.50%) and (ii) two percent (2.0%) above the prime rate.

The First Amendment to the 2019 Term Loan increased the final payment fee, payable upon our repayment of the Loan Advances from 6.0% to 6.30% of the original principal amount of the Loan Advances.

We may prepay all, but not less than all of the Loan Advances, subject to a prepayment fee of 3.0% of any amount prepaid prior to the first anniversary of July 25, 2019, or the First Amendment Effective Date, 2.0% of the amount prepaid if the prepayment occurs after the first anniversary of the First Amendment Effective Date through and including the second anniversary of the First Amendment Effective Date, or 1.0% of the amount prepaid if the prepayment occurs after the second anniversary of the First Amendment Effective Date, but prior to the Maturity Date.

We paid the final payment fee of 6.3% on the $20.0 million advance for a total of $1.26 million.

We were permitted to prepay all, but not less than all of the Loan Advances, subject to a prepayment fee of 3.0% of any amount prepaid prior to the first anniversary of July 25, 2019, or the First Amendment Effective Date, 2.0% of the amount prepaid if the prepayment occurs after the first anniversary of the First Amendment Effective Date through and including the second anniversary of the First Amendment Effective Date, or 1.0% of the amount prepaid if the prepayment occurs after the second anniversary of the First Amendment Effective Date, but prior to the maturity date .

These percentages are unchanged from the original 2019 Term Loan.

We paid the prepayment fee of 2.0% on the $20.0 million advance for a total of $0.4 million.

In connection with the First Amendment to the 2019 Term Loan, the March 2019 Warrants were amended to fix the number of shares that may be issued upon exercise of each such March 2019 Warrant at 29,167 shares of common stock, and SVB and WestRiver were issued the July 2019 Warrants, which become exercisable only upon funding of the Term B Loan Advance, to purchase 5,750 shares of our common stock at a price per share equal to $25.71.

The July 2019 Warrants replace the portion of the March 2019 Warrants that could originally be earned by SVB and WestRiver upon funding of the Term B Loan Advance.

Since we did not draw down the Term B Loan Advance, SVB did not earn the July 2019 Warrants.

The July 2019 Warrants replaced the portion of the March 2019 Warrants that could originally be earned by SVB and WestRiver upon funding of the Term B Loan Advance.

Because we did not draw down the Term B Loan Advance, SVB did not earn the July 2019 Warrants.

September 2020 Loan and Security Agreement – Hercules

In September 2020, we entered into the Loan Agreement with Hercules , in its capacity as administrative agent and collateral agent and as a lender, and the other financial institutions that may from time to time become parties to the Loan Agreement as lenders, which we collectively refer to as the Lenders .

The Loan Agreement provides for term loans in an aggregate principal amount of up to $225.0 million under multiple tranches.

The tranches consist of (i) a first tranche consisting of term loans in an aggregate principal amount of $60.0 million, of which $50.0 million , or the First Advance , was funded at closing , and of which the remaining $10.0 million is available at our option at any time through September 15, 2021;

(ii) subject to the approval of our AXS-05 product candidate for the treatment of major depressive disorder , or the First Milestone, a second tranche consisting of additional term loans in an aggregate principal amount of up to $35.0 million, available at our option beginning on the date that the First Milestone is achieved through the earlier of (A) 181 days following such date and (B) June 30, 2022;

(iii) subject to the approval of our AXS-07 product candidate for the treatment of migraine , or the Second Milestone, a third tranche consisting of additional term loans in an aggregate principal amount of up to $20.0 million, available at our option beginning on the date that the Second Milestone is achieved through the earlier of (A) 181 days following such date and (B) June 30, 2022;

(iv) subject to the achievement of either the First Milestone or the Second Milestone and so long as we are in compliance with a required ratio of Lender indebtedness to net product revenue, a fourth tranche consisting of additional term loans in an aggregate principal amount of up to $60.0 million, available at our option beginning on January 1, 2022 and continuing through March 31, 2023;

and (v) subject to approval by the Lenders’ in their discretion, a fifth tranche of additional term loans in an aggregate principal amount of up to $50.0 million, available through December 31, 2023.

We intend to use the proceeds of the Term Loan Advances for working capital and general corporate purposes.

In addition, approximately $21.5 million of the proceeds from the First Advance was used to satisfy in full and retire our indebtedness under the 2019 Term Loan, as amended .

The outstanding principal balance of the term loans bears interest at an annual rate equal to the greater of either (i) the prime rate as reported in The Wall Street Journal plus 5.90% or (ii) 9.15%, subject to an ability by us, during certain periods , each such period a PIK Deferral Period, to request a reduction of the then-effective cash-pay interest rate by up to 1.00% per annum , which we refer to as the Cash Interest Reduction Amount.

Accrued interest is payable monthly following the funding of each term loan.

During each PIK Deferral Period, the term loans will bear cash-pay interest, at the reduced amount, and will accrue paid-in-kind interest at a rate equal to the Cash Interest Reduction Amount multiplied by 1.15, which amount will be capitalized and added to the outstanding principal balance of the term loans on each monthly interest payment date during the PIK Deferral Period.

We are required to repay the term loans in equal installments of principal and interest commencing on May 1, 2023 through October 1, 2025 , which is the Maturity Date.

However, if either the First Milestone or the Second Milestone are achieved prior to May 1, 2023, and no default exists, the amortization commencement date will be automatically extended to November 1, 2023;

if both the First Milestone and the Second Milestone are achieved prior to November 1, 2023, and no default exists, the amortization commencement date will be further automatically extended to May 1, 2024 and if any term loans are funded under the fourth tranche noted above prior to May 1, 2024, and no default exists, the amortization commencement date will be further automatically extended to November 1, 2024.

On the Maturity Date, all unpaid term loans will be due and payable.

As collateral for the obligations, we have granted to Hercules a senior security interest in all our right, title, and interest in, to and under all of our property, inclusive of intellectual property, which includes one of our existing license agreements with Antecip., subject to limited exceptions.

Antecip consented to the collateral assignment of the License Agreement, among other things, under a Direct Agreement with us and Hercules.

The Loan Agreement contains customary representations, warranties and covenants, including covenants by us limiting additional indebtedness, liens (including a negative pledge on intellectual property and other assets), guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes.

At the initial closing, there were no applicable financial covenants contained in the Loan Agreement.

Only after additional amounts are drawn down by us in the future, if we decide to do so, under the terms set forth in the Loan Agreement, there will be certain limited financial covenants that will apply, including:

● Effective upon the date the outstanding principal amount of the advances under the Loan Agreement equals or exceeds $55.0 million, which has not yet occurred, we at all times thereafter must maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than or equal to $15.0 million, plus the amount of our accounts payable under U.S.

GAAP not paid after the 180th day following the invoice for such account payable which amount we refer to as the Qualified Cash A/P Amount.

● Effective upon the later of (i) the last calendar month of the calendar quarter that is twelve months following the earlier of (x) the date that the First Milestone is achieved and (y) the date that the Second Milestone is achieved, or (ii) the date on which the outstanding principal amount of the term loan advances under the Loan Agreement is equal to or greater than $65.0 million, we are required to (A) ensure that at all times its market capitalization exceeds $2.0 billion, and that it maintains cash in an account which Hercules has a first priority security interest in an amount not less than 65% of the sum of the outstanding principal amount of the term loan advances plus the Qualified Cash A/P Amount, (B) ensure that at all times that it maintains cash in an account which Hercules has a first priority security interest in an amount not less than 100% of the sum of the outstanding principal amount of the term loan advances plus the Qualified Cash A/P Amount, or (C) achieve at least 60% of the net product revenue solely from the sale of AXS-05 and AXS-07 (which may include royalty, profit sharing, or sales-based milestone revenue recognized in accordance with GAAP, but will not include any upfront or non-sales-based milestone payments under business development or licensing transactions), measured on a trailing six-month basis as of the date of our most recent quarterly financial statement, determined on a quarterly basis.

● R estrictions on our ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.

Our obligations under the Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, insolvency and a material adverse change in our business, operations or financial or other condition.

In addition, we are required to pay a final payment fee equal to the greater of (A) $2,910,000 and (B) 4.85% of the aggregate amount of all term loan advances minus the aggregate amount of repayments made.

The final payment fee is being accreted and amortized into interest expense using the effective interest rate method over the term of the loan.

We may, at our option prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.0% of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the initial closing , (ii) 1.5% of the principal amount prepaid if the prepayment occurs on or after the first anniversary and prior to the second anniversary of the initial closing , and (iii) 1.0% of the principal amount prepaid if the prepayment occurs on or after the second anniversary and prior to the third anniversary of the initial closing .

Impact of the CARES Act

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247d), in response to the COVID-19 outbreak.

March 11, 2020, the WHO declared COVID-19 a pandemic.

On March 11, 2020, the WHO declared COVID-19 a pandemic.

Operations and Liquidity

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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