10-Q
1
d196840d10q.htm
10-Q
10-Q
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 001-39267
BENITEC BIOPHARMA INC.
(Exact name of registrant as specified in its charter)
Delaware
84-462-0206
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
3940 Trust Way, Hayward, California 94545
(Address of principal executive offices & zip code)
(510) 780-0819
(Registrants telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.0001
BNTC
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting
company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ☐ or No ☒
We had 7,854,416 shares of
our common stock outstanding as of the close of business on May 6, 2021.
Table of Contents
BENITEC BIOPHARMA INC.
INDEX TO FORM 10-Q
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
2
PART I-FINANCIAL INFORMATION
4
ITEM 1.
Financial Statements (unaudited)
4
Consolidated Balance Sheets as of March
31, 2021 (Unaudited) and June 30, 2020
4
Consolidated Statements of Operations and Comprehensive Loss for the Three and
Nine Months Ended March 31, 2021 and 2020 (Unaudited)
5
Consolidated Statements of Stockholders Equity for the Three and Nine Months
Ended March 31, 2021 and 2020 (Unaudited)
6
Consolidated Statements of Cash Flows for the Nine Months Ended March
31, 2021 and 2020 (Unaudited)
8
Notes to Consolidated Financial Statements (Unaudited)
9
ITEM 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations
24
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
40
ITEM 4.
Controls and Procedures
40
PART II-OTHER INFORMATION
ITEM 1.
Legal Proceedings
41
ITEM 1A.
Risk Factors
41
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
41
ITEM 3.
Defaults Upon Senior Securities
41
ITEM 4.
Mine Safety Disclosures
41
ITEM 5.
Other Information
41
ITEM 6.
Exhibits
42
SIGNATURES
43
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control.
Our forward-looking statements relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product
introductions, expansion plans and the adequacy of our funding. All statements, other than statements of historical fact included in this Report, are forward-looking statements. When used in this Report, the words could,
believe, anticipate, intend, estimate, expect, may, continue, predict, potential, project, or the negative of these terms, and
similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements involve known and unknown risks, uncertainties and other important factors that may
cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed
or implied by forward-looking statements include the following:
the success of our plans to develop and potentially commercialize our product candidates;
the timing of the initiation and completion of preclinical studies and clinical trials;
the timing and sufficiency of patient enrollment and dosing in any future clinical trials;
the timing of the availability of data from clinical trials;
the timing and outcome of regulatory filings and approvals;
unanticipated delays;
sales, marketing, manufacturing and distribution requirements;
market competition and the acceptance of our products in the marketplace;
regulatory developments in the United States of America;
the development of novel AAV vectors;
the plans of licensees of our technology;
the clinical utility and potential attributes and benefits of ddRNAi and our product candidates,
including the potential duration of treatment effects and the potential for a one shot cure;
our dependence on our relationships with collaborators and other third parties;
expenses, ongoing losses, future revenue, capital needs and needs for additional financing;
the length of time over which we expect our cash and cash equivalents to be sufficient to execute on our business
plan;
our intellectual property position and the duration of our patent portfolio;
the impact of local, regional, and national and international economic conditions and events; and
the impact of the current COVID-19 pandemic, the disease caused
by the SARS-CoV-2 virus, which may adversely impact our business and preclinical and future clinical trials;
as well as other risks detailed under the caption Risk Factors in this Report and in other reports filed with the SEC. Although we believe that we
have a reasonable basis for each forward-looking statement contained in this Report, we caution you that these statements are based on a combination of facts and important factors currently known by us and our expectations of the future, about which
we cannot be certain.
2
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We have based the forward-looking statements included in this Report on information
available to us on the date of this Report or on the date thereof. Except as required by law we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are
advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.
All forward-looking statements included herein or in documents incorporated herein by reference are expressly qualified in their entirety by
the cautionary statements contained or referred to elsewhere in this Report.
3
Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1.
Financial Statements
BENITEC BIOPHARMA INC.
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
March 31,
June 30,
2021
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
11,988
$
9,801
Trade and other receivables
10
59
Other current assets
409
949
Total current assets
12,407
10,809
Property and equipment, net
563
374
Deposits
9
9
Other assets
197
Right-of-use
assets
252
395
Total assets
$
13,428
$
11,587
Liabilities and Stockholders Equity
Current liabilities:
Trade and other payables
$
2,005
$
741
Accrued employee benefits
231
203
Lease liabilities, current portion
208
192
Total current liabilities
2,444
1,136
Lease liabilities, less current portion
54
213
Total liabilities
2,498
1,349
Commitments and contingencies (Note 12)
Stockholders equity:
Common stock, $0.0001 par value10,000,000 shares authorized; 4,818,050 and 1,108,374 shares
issued and outstanding at March 31, 2021 and June 30, 2020, respectively
5
1
Additional paid-in capital
138,632
128,826
Accumulated deficit
(126,116
)
(116,636
)
Accumulated other comprehensive loss
(1,591
)
(1,953
)
Total stockholders equity
10,930
10,238
Total liabilities and stockholders equity
$
13,428
$
11,587
The accompanying notes are an integral part of these consolidated financial statements.
4
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BENITEC BIOPHARMA INC.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in
thousands, except share and per share amounts)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2021
2020
2021
2020
Revenue:
Revenues from customers
$
1
$
28
$
57
$
137
Total revenues
1
28
57
137
Operating expenses
Royalties and license fees
7
47
122
(233
)
Research and development
2,758
805
4,700
2,095
General and administrative
1,029
1,287
4,976
3,669
Total operating expenses
3,794
2,139
9,798
5,531
Loss from operations
(3,793
)
(2,111
)
(9,741
)
(5,394
)
Other income (loss):
Foreign currency transaction gain (loss)
(112
)
(7
)
(167
)
4
Interest income (expense), net
(2
)
16
(5
)
52
Other income, net
37
Unrealized loss on investment
(2
)
(3
)
(1
)
Total other income (loss), net
(116
)
9
(138
)
55
Net loss
$
(3,909
)
$
(2,102
)
$
(9,879
)
$
(5,339
)
Other comprehensive income (loss):
Unrealized foreign currency translation gain (loss)
(24
)
(901
)
362
(869
)
Total other comprehensive income (loss)
(24
)
(901
)
362
(869
)
Total comprehensive loss
$
(3,933
)
$
(3,003
)
$
(9,517
)
$
(6,208
)
Net loss
$
(3,909
)
$
(2,102
)
$
(9,879
)
$
(5,339
)
Net loss per share:
Basic and diluted
$
(0.82
)
$
(1.96
)
$
(2.93
)
$
(5.36
)
Weighted average number of shares outstanding: basic and diluted
4,747,059
1,070,957
3,375,228
995,246
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Stockholders Equity
(Unaudited)
(in
thousands, except share amounts)
Common Stock
Additional
Paid-in
Accumulated
Accumulated
Other
Comprehensive
Total
Stockholders
Shares
Amount
Capital
Deficit
Loss
Equity
Balance at June 30, 2019
856,765
$
1
$
127,327
$
(108,870
)
$
(1,864
)
$
16,594
Common stock sold for cash, net of issuance costs of $240
186,666
1,720
1,720
Issuance of pre-purchased warrants, net of issuance costs
of $240
50
50
Share-based compensation
55
55
Forfeiture of share-based payments
(61
)
61
Foreign currency translation loss
(304
)
(304
)
Net loss
(1,147
)
(1,147
)
Balance at September 30, 2019
1,043,431
$
1
$
129,091
$
(109,956
)
$
(2,168
)
$
16,968
Exercise of pre-funded warrants
27,526
Share-based compensation
37
37
Forfeiture of share-based payments
(319
)
319
Foreign currency translation gain
336
336
Net loss
(2,090
)
(2,090
)
Balance at December 31, 2019
1,070,957
$
1
$
128,809
$
(111,727
)
$
(1,832
)
$
15,251
Share-based compensation
88
88
Foreign currency translation gain
(901
)
(901
)
Net loss
(2,102
)
(2,102
)
Balance at March 31, 2020
1,070,957
$
1
$
128,897
$
(113,829
)
$
(2,733
)
$
12,336
The accompanying notes
are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Stockholders Equity
(Unaudited)
(in
thousands, except share amounts)
Common Stock
Additional
Paid-in
Accumulated
Accumulated
Other
Comprehensive
Total
Stockholders
Shares
Amount
Capital
Deficit
Loss
Equity
Balance at June 30, 2020
1,108,374
$
1
$
128,826
$
(116,636
)
$
(1,953
)
$
10,238
Share-based compensation
38
38
Forfeiture of share-based payments
(14
)
14
Foreign currency translation gain
178
178
Net loss
(2,718
)
(2,718
)
Balance at September 30, 2020
1,108,374
$
1
$
128,850
$
(119,340
)
$
(1,775
)
$
7,736
Issuance of common stock and pre-funded warrants sold for
cash, net of issuance costs of $1,643
3,150,514
3
9,848
9,851
Exercise of pre-funded warrants
281,581
Share-based compensation
82
82
Forfeiture of share-based payments
(385
)
385
Foreign currency translation gain
208
208
Net loss
(3,252
)
(3,252
)
Balance at December 31, 2020
4,540,469
$
4
$
138,395
$
(122,207
)
$
(1,567
)
$
14,625
Exercise of pre-funded warrants
277,581
1
2
3
Share-based compensation
235
235
Foreign currency translation loss
(24
)
(24
)
Net loss
(3,909
)
(3,909
)
Balance at March 31, 2021
4,818,050
$
5
$
138,632
$
(126,116
)
$
(1,591
)
$
10,930
The accompanying notes are an integral part of these consolidated financial statements.
7
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BENITEC BIOPHARMA INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in
thousands)
Nine Months Ended
March 31,
2021
2020
Cash flows from operating activities:
Net loss
$
(9,879
)
$
(5,339
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
179
150
Amortization of
right-of-use assets
143
138
Loss on disposal of fixed assets
1
Unrealized loss on investment
3
1
Share-based compensation expense
355
180
Changes in operating assets and liabilities:
Trade and other receivables
21
2,494
Other assets
377
(69
)
Trade and other payables
1,214
(1,197
)
Accrued employee benefits
55
Lease liabilities
(143
)
(749
)
Net cash used in operating activities
(7,675
)
(4,390
)
Cash flows from investing activities:
Purchases of property and equipment
(362
)
(82
)
Proceeds from disposal of property and equipment
1
Net cash used in investing activities
(362
)
(81
)
Cash flows from financing activities:
Proceeds from issues of shares and pre-funded
warrants
11,497
2,250
Shares and pre-funded warrant issuance costs
(1,643
)
(480
)
Net cash provided by financing activities
9,854
1,770
Effects of exchange rate changes on cash and cash equivalents
370
(1,617
)
Net increase (decrease) in cash and cash equivalents
2,187
(4,318
)
Cash and cash equivalents, beginning of period
9,801
15,718
Cash and cash equivalents, end of period
$
11,988
$
11,400
Supplemental disclosure of cash flow information:
Initial measurement of operating lease right-of-use assets and liabilities
$
$
(579
)
The accompanying notes are an integral part of these consolidated financial statements.
8
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Business
Benitec Biopharma Inc. (the Company) is a corporation formed under the laws of Delaware, United States of America, on
November 22, 2019 and listed on the Nasdaq Capital Market (Nasdaq) under the symbol BNTC. Benitec Biopharma Inc. is the parent entity of a number of subsidiaries including the previous parent entity Benitec Biopharma
Limited (BBL). BBL was incorporated under the laws of Australia in 1995 and was listed on the Australian Securities Exchange, or ASX, from 1997 until April 15, 2020. On August 14, 2020, BBL reorganized as a Proprietary Limited
company and changed its name to Benitec Biopharma Proprietary Limited. The Companys business focuses on the development of novel genetic medicines. Our proprietary platform, called DNA-directed RNA
interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes.
On November 27, 2019, BBL announced its intention to re-domicile from Australia to the United
States of America. BBL implemented a Scheme of Arrangement pursuant to which Benitec Biopharma Inc, a newly incorporated company for the purpose of effecting the re-domiciliation, acquired all BBL shares and
BBL became a wholly-owned subsidiary of Benitec Biopharma Inc.. BBL shareholders received one Benitec Biopharma Inc. share for every 300 BBL shares. Holders of BBLs American Depository Shares, or ADSs (each of which represented 200 ordinary
shares), received two shares of the Companys common stock for every three ADSs held. The re-domiciliation was completed on April 15, 2020 following approval by BBL shareholders at a Scheme Meeting
held on March 26, 2020 and by the Supreme Court of Queensland on March 30, 2020.
In accordance with the U.S. Securities and
Exchange Commissions (SEC) Staff Accounting Bulletin Topic 4C, all issued and outstanding shares of the Companys common stock have been retroactively adjusted in these consolidated financial statements to reflect the 300:1
ratio and share consolidation as if it occurred on July 1, 2019.
The terms the Company, we, us,
our and similar terms used herein refer (i), prior to the re-domiciliation to BBL, an Australian corporation, and its subsidiaries, and (ii), following the
re-domiciliation, to Benitec Biopharma Inc., a Delaware corporation, and its subsidiaries (including BBL).
The Companys fiscal year end is June 30. References to a particular fiscal year are to our fiscal year end June 30 of
that calendar year.
The consolidated financial statements of Benitec Biopharma Inc. are presented in United States dollars and consist of
Benitec Biopharma Inc. and its wholly owned subsidiaries:
Principal place of
business/country of
incorporation
Ownership
Fiscal Year
2020
Ownership
Fiscal Year
2019
Benitec Biopharma Proprietary Limited (BBL)
Australia
100
%
Benitec Australia Proprietary Limited
Australia
100
%
100
%
Benitec Limited
United Kingdom
100
%
100
%
Benitec, Inc.
USA
100
%
100
%
Benitec LLC
USA
100
%
100
%
RNAi Therapeutics, Inc.
USA
100
%
100
%
Tacere Therapeutics, Inc.
USA
100
%
100
%
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
The Company is continuing to monitor the impact of the pandemic of the novel strain of
coronavirus COVID-19 (COVID-19) on all aspects of its business, including how it will impact our employees, suppliers, vendors and business partners. While
the Company did experience some disruption from COVID-19 including disruption of the timing and completion of certain pre-clinical trials we are unable to predict the
overall impact that COVID-19 will have on our financial position and operating results due to numerous uncertainties.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The
Companys consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the U.S.
(GAAP) for interim financial information and with the instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, certain information
and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Interim
financial results are not necessarily indicative of results anticipated for the full year. These consolidated financial statements should be read in conjunction with the Companys audited financial statements and accompanying notes included in
the Companys Annual Report on Form 10-K for the year ended June 30, 2020.
Reference is
frequently made herein to the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC). This is the source of authoritative US GAAP recognized by the FASB to be applied to non-governmental entities.
Principles of Consolidation
The consolidated financial statements include the Companys accounts and the accounts of its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated.
Use of Estimates
The preparation of the Companys consolidated financial statements requires management to make estimates and assumptions that impact the
reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Companys consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the
Companys consolidated financial statements include the estimates of useful lives of property and equipment, valuation of the operating lease liability and related
right-of-use asset, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the valuation allowance on deferred tax
assets and foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates. These estimates and assumptions are based on current facts, historical experience and various other factors believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may
differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Companys future results of operations will be affected.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.
Foreign Currency Translation and Other Comprehensive Income (Loss)
The Companys functional currency and reporting currency is the United States dollar. BBLs functional currency is the Australian
dollar (AUD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are
translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders equity as Accumulated other
comprehensive income (loss). Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive income (loss) as other comprehensive income (loss).
Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Fair Value Measurements
The
Company measures its financial assets and liabilities in accordance with US GAAP using ASC 820, Fair Value Measurements. For certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable,
the carrying amounts approximate fair value due to their short maturities.
The Company follows accounting guidance for financial assets
and liabilities. ASC 820 defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value
into three broad levels. The following is a brief description of those three levels:
Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs in which little or no market data exists, therefore developed using estimates and
assumptions developed by us, which reflect those that a market participant would use.
As of March 31, 2021, and
June 30, 2020, the Company had no financial assets or liabilities measured at fair value on a recurring basis.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with
financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the consolidated balance sheets.
Concentrations of Risk
Financial
instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits at federally insured financial institutions in excess of federally insured
limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Trade and Other Receivables
As amounts become uncollectible, they will be charged to an allowance and operations in the period when a determination of collectability is
made. Any estimates of potentially uncollectible customer accounts receivable will be made based on an analysis of individual customer and historical write-off experience. The Companys analysis includes
the age of the receivable account, creditworthiness of the customer and general economic conditions.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs are
expensed as incurred; additions, renewals, and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the respective accounts,
and any gain or loss is included in operations. Depreciation and amortization of property and equipment is calculated using the straight-line basis over the following estimated useful lives:
Software
3-4 years
Lab equipment
3-7 years
Computer hardware
3-5 years
Leasehold improvements
shorter of the lease term or estimated useful lives
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Impairment of Long-Lived Assets
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the
assets expected future discounted cash flows or market value, if readily determinable.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the period and which are unpaid. Due to
their short-term nature, they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Leases
At lease commencement, the
Company records a lease liability based on the present value of lease payments over the expected lease term. The Company calculates the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily
determined. In that case, the Company uses its incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments over the expected lease term. The
Company records a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to
the lessor prior to the lease commencement date.
After lease commencement, the Company measures its leases as follows: (i) the lease
liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement; and (ii) the right-of-use lease asset
based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement. Any lease incentives
received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Rent expense is recorded on a straight-line basis over the expected lease term.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding
during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding plus potential common shares. Stock options, warrants and convertible instruments are
considered potential common shares and are included in the calculation of diluted net income (loss) per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted net
income (loss) per share when their effect is anti-dilutive. As of March 31, 2021, and 2020, there were 694,388 and 324,903 potential common shares, respectively, that were excluded from the calculation of diluted net income (loss) per share
because their effect was anti-dilutive.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Revenue Recognition
The Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company applies judgement in determining whether contracts entered into fall within the scope of ASC 606 Revenue from Contracts
with Customers (ASC 606). In doing so, management considers the commercial substance of the transaction and how risks and benefits of the contract accrue to the various parties to the contract.
Management has also made the judgement that the grant of the license and transfer of associated
know-how and materials are accounted for as one performance obligation as they are not considered to be distinct; they are highly interrelated and could not provide benefits to the customer independently from
each other. Judgements were made in relation to the transfer of the license and know-how and whether this should be recognized over time or a point in time. The point in time has been determined with regard to
the point at which the transfer of know-how has substantially been completed and the customer has control of the asset and the ability to direct the use of and receive substantially all of the remaining
benefits.
Licensing revenues
Revenue from licensees of the Companys intellectual property reflects the transfer of a right to use the intellectual property as it
exists at the point in time in which the license is transferred to the customer. Consideration can be variable and is estimated using the most likely amount method. Subsequently, the estimate is constrained until it is highly probable that a
significant revenue reversal will not occur when the uncertainty is resolved. Revenue is recognized as or when the performance obligations are satisfied.
The Company recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these
amounts as other liabilities in the consolidated balance sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognizes either a contract asset or a receivable in its consolidated
balance sheet, depending on whether something other than the passage of time is required before the consideration is due.
Royalties
Revenue from licensees of the Companys intellectual property reflect a right to use the intellectual property as it exists at
the point in time in which the license is granted. Where consideration is based on sales of product by the licensee, revenue is recognized when the customers subsequent sales of products occur.
14
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Services revenue
Revenue is earned (constrained by variable considerations) from the provision of research and development services to customers. Services
revenue is recognized when performance obligations are either satisfied over time or at a point in time. Generally, the provision of research and development services under a contract with a customer will represent satisfaction of a performance
obligation over time where the Company retains the right to payment for services performed but not yet completed.
Government Research and
Development Grants
Government grants are recognized at fair value where there is reasonable assurance that the grant will be
received, and all grant conditions will be met. Grants relating to expense items are recognized as income over the periods necessary to match the grant costs they are compensating.
Grant income is generated through the Australian federal governments Research and Development Tax Incentive program, under which the
government provides a cash refund for 43.5% of eligible research and development expenditures. This grant is available for our research and development activities in Australia, as well as activities in the United States to the extent such U.S.-based
expenses relate to our activities in Australia, do not exceed half the expenses for the relevant activities and are approved by the Australian government. Grants are recorded when a reliable estimate can be made.
The Company will not be claiming the Australian Government research and development grants going forward.
Research and Development Expense
Research and development costs are expensed when incurred. These costs have been recognized as an expense when incurred. Research and
development expenses relate primarily to the cost of conducting clinical and pre-clinical trials. Pre-clinical and clinical development costs are a significant component
of research and development expenses. Estimates have been used in determining the expense liability under certain clinical trial contracts where services have been performed but not yet invoiced. Generally, the costs, and therefore estimates,
associated with clinical trial contracts are based on the number of patients, drug administration cycles, the type of treatment and the outcome being the length of time before actual amounts can be determined will vary depending on length of the
patient cycles and the timing of the invoices by the clinical trial partners.
Share-based Compensation Expense
The Company records share-based compensation in accordance with ASC 718, Stock Compensation . ASC 718 requires the fair value of all
share-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and non-employee share-based
compensation at fair value using the Black-Scholes Option Pricing Model.
The Company adopted FASB Accounting Standard Update
(ASU) 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair
value of such awards over the service period.
15
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Income Taxes
The Company is governed by Australia and United States income tax laws. The Company follows ASC 740 Accounting for Income Taxes , when
accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial
statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized.
For
uncertain tax positions that meet a more likely than not threshold, the Company recognizes the benefit of uncertain tax positions in the consolidated financial statements. The Companys practice is to recognize interest and
penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.
Recent Accounting
Pronouncements
In June 2016, the FASB issued ASU No. 2016-13: Financial
Instruments Credit Losses (Topic 326). This ASU represents a significant change in the accounting for credit losses model by requiring immediate recognition of managements estimates of current expected credit losses (CECL). Under
the prior model, losses were recognized only as they were incurred. The Company has determined that it has met the criteria of a smaller reporting company (SRC) as of November 15, 2019. As such, ASU
2019-10: Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases: Effective Dates amended the effective date for the Company to be for reporting periods beginning after
December 15, 2022. The Company will adopt this ASU effective July 1, 2023.
3. Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the nine
months ended March 31, 2021, and 2020, the Company incurred a net loss of $9.9 million and $5.3 million and used net cash of $7.7 million and $4.4 million in operations, respectively. The Company expects to continue to
incur additional operating losses in the foreseeable future.
As of March 31, 2021, the Company had $12 million in cash and cash
equivalents. The Company has performed a review of the cash flow forecasts and believes that the current funding will be sufficient for a period of at least twelve months from the date of this Report.
The Companys ability to continue as a going concern is dependent upon its ability to generate revenue and obtain adequate financing.
While the Company believes in its ability to generate revenue and raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern due to unsuccessful product development or commercialization, or the inability to obtain
adequate financing in the future.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
4. Revenue
Three Months Ended
Nine Months Ended
Revenues from customers (US$000)
March
31,
2021
March
31,
2020
March
31,
2021
March
31,
2020
Licensing revenue
$
1
$
$
57
$
60
Royalty revenue
28
73
Service revenue
4
Total
$
1
$
28
$
57
$
137
Three Months Ended March 31, 2021
Disaggregated revenue (US$000)
Licensing
Royalties
Development activities
Total
Services transferred at a point in time
$
$
$
$
Services transferred over time
1
1
Total
$
1
$
$
$
1
Nine Months Ended March 31, 2021
Disaggregated revenue (US$000)
Licensing
Royalties
Development activities
Total
Services transferred at a point in time
$
$
$
$
Services transferred over time
57
57
Total
$
57
$
$
$
57
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Three Months Ended March 31, 2020
Disaggregated revenue (US$000)
Licensing
Royalties
Development activities
Total
Services transferred at a point in time
$
$
$
$
Services transferred over time
28
28
Total
$
$
28
$
$
28
Nine Months Ended March 31, 2020
Disaggregated revenue (US$000)
Licensing
Royalties
Development activities
Total
Services transferred at a point in time
$
$
73
$
$
73
Services transferred over time
60
4
64
Total
$
60
$
73
$
4
$
137
5. Cash and Cash equivalents
(US$000)
March 31,
2021
June 30,
2020
Cash at Bank
$
11,988
$
5,231
Term Deposit
4,570
Total
$
11,988
$
9,801
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
6. Other current assets
(US$000)
March
31,
2021
June 30,
2020
Prepaid expenses
$
587
$
861
Security deposit
15
69
Other deposit
18
Market value of listed shares
4
1
Total other assets
606
949
Less: non-current portion
(197
)
Current portion
$
409
$
949
7. Property and equipment, net
(US$000)
March 31, 2021
June 30,
2020
Software
$
14
$
11
Lab equipment
1,471
1,109
Computer hardware
26
26
Leasehold improvements
24
24
Total property and equipment, gross
1,535
1,170
Accumulated depreciation and amortization
(972
)
(796
)
Total property and equipment, net
$
563
$
374
Depreciation expense was $67,000 and $179,000 for the three months and nine months ended March 31, 2021,
respectively, and $48,000 and $150,000, respectively, for the same periods in 2020.
8. Trade and other payables
(US$000)
March 31, 2021
June 30,
2020
Trade payable
$
1,640
$
282
Accrued license fees
142
54
Accrued professional fees
42
155
Other payables
181
250
Total
$
2,005
$
741
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
9. Leases
The Company has entered into an operating lease for office space under an agreement that expires in 2022. The lease requires the Company to pay
utilities, insurance, taxes and other operating expenses. The Companys lease does not contain any residual value guarantees or material restrictive covenants.
As of March 31, 2021, the Companys operating lease has a remaining lease term of 1.21 years and a discount rate of 4.67%. The
maturities of the operating lease liabilities are as follows:
(US$000)
March
31,
2021
2021
$
52
2022
218
Total operating lease payments
270
Less imputed interest
(8
)
Present value of operating lease liabilities
$
262
The Company recorded lease liabilities and
right-of-use lease assets for the lease based on the present value of lease payments over the expected lease term, discounted using the Companys incremental
borrowing rate. Rent expense was $52,000 and $156,000 for the three months and nine months ended March 31, 2021, respectively, and $52,000 and $156,000, respectively, for the same periods in 2020.
10. Stockholders equity
Common
Stock
On October 6, 2020, the Company announced the closing of an underwritten public offering of 2,666,644 shares of its common
stock at a price to the public of $3.10 per share. The Company also announced that the underwriter fully exercised its over-allotment option to purchase 483,870 additional shares of its common stock at the offering price of $3.10 per share.
Warrants
On
October 6, 2020, the Company announced the closing of an underwritten public offering of 559,162 shares of common stock underlying pre-funded warrants initially purchased for $3.09 per share and
immediately exercisable at $0.01 per share (Pre-Funded Warrants). All 559,162 Pre-Funded Warrants issued had been exercised as of March 31, 2021.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
The activity related to warrants during for the three and nine months ended March 31,
2021, is summarized as follows:
Common Stock
from Warrants
Weighted-
average
Exercise Price
(per share)
Outstanding at July 1, 2020
145,424
$
29.48
Granted
Exercised
Forfeited
(38,326
)
82.50
Outstanding and exercisable at September 30, 2020
107,098
$
10.50
Granted
559,162
3.09
Exercised
(281,581
)
3.10
Forfeited
Outstanding and exercisable at December 31, 2020
384,679
$
5.15
Granted
Exercised
(277,581
)
3.10
Forfeited
Outstanding and exercisable at March 31, 2021
107,098
$
10.50
Equity Incentive Plan
Employee Share Option Plan
Upon the re-domiciliation, the Company assumed BBLs obligations with respect to the settlement
of options that were issued by BBL prior to the re-domiciliation pursuant to the Benitec Officers and Employees Share Option Plan (the Share Option Plan). This includes the
Companys assumption of the Share Option Plan and all award agreements pursuant to which each of the options were granted. Each option when exercised entitles the option holder to one share in the Company. Options are exercisable on or before
an expiry date, do not carry any voting or dividend rights and are not transferable except on death of the option holder or in certain other limited circumstances. Employee options vest one third on each anniversary of the applicable grant date for
three years. If an employee dies, retires or otherwise leaves the Company and certain exercise conditions have been satisfied, generally, the employee has 12 months to exercise their options or the options are cancelled. After the re-domiciliation, no new options have been or will be issued under the Share Option Plan.
Equity and
Incentive Compensation Plan
On December 9, 2020, the Companys stockholders approved the Companys 2020 Equity and
Incentive Compensation Plan (the 2020 Plan). The 2020 Plan provides for the grant of various equity awards. Currently, only stock options are outstanding under the 2020 Plan. Each option when exercised entitles the option holder to one
share of the Companys common stock. Options are exercisable on or before an expiry date, do not carry any voting or dividend rights, and are not transferable except on death of the option holder or in certain other limited circumstances.
Employee stock options vest in increments of one-third on each anniversary of the applicable grant date for three years. Non-employee director options vest in increments
of one-third on the day prior to each of the Companys next three annual stockholder meetings following the grant date. If an option holder dies or terminates employment or service due to Disability (as
defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 12 months to exercise their options or the options are cancelled. If an option holder otherwise leaves the Company, other than for a
termination by the Company for Cause (as defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 90 days to exercise their options or the options are cancelled. Any future equity grants will be
made under the 2020 Plan.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
Equity Awards
The activity related to equity awards, which comprised of stock options during the three and nine months ended March 31,
2021, is summarized as follows:
Stock
Options
Weighted-
average
Exercise
Price
Weighted-
average
Remaining
Contractual Term
Aggregate
Intrinsic Value
Outstanding at June 30, 2020
70,154
$
60.42
2.89 years
$
Granted
Exercised
Forfeited
(444
)
69.32
Outstanding at September 30, 2020
69,710
$
60.00
2.65 years
Granted
525,547
2.98
9.95 years
Exercised
Forfeited
(7,967
)
153.78
Outstanding at December 31, 2020
587,290
7.64
9.2 years
Outstanding at March 31, 2021
587,290
7.64
8.9 years
Exercisable at March 31, 2021
41,686
$
47.34
2.3 years
$
Share-Based Compensation Expense
The classification of share-based compensation expense is summarized as follows:
Three Months Ended
March 31,
Nine Months Ended
March 31,
(US$000)
2021
2020
2021
2020
Research and development
$
18
$
18
$
33
$
53
General and administrative
217
70
322
127
Total share-based compensation expense
$
235
$
88
$
355
$
180
As of March 31, 2021, there was $1,159,000 of unrecognized share-based compensation expense related to
stock options issued under the Share Option Plan and the 2020 Plan.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
(Unaudited)
11. Income taxes
For the three and nine months ended March 31, 2021, and 2020, the Company did not recognize a provision or benefit for income taxes as it
has incurred net losses. In addition, the net deferred tax assets generated from net operating losses are fully offset by a valuation allowance as the Company believes it is more likely than not that the benefit will not be realized.
12. Commitments and contingencies
Contract commitments
The
Company enters into contracts in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for
termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
Contingencies
From time
to time, the Company may become subject to claims and litigation arising in the ordinary course of business. The Company is not a party to any material legal proceedings, nor is it aware of any material pending or threatened litigation.
13. Subsequent events
On April 30, 2021,
the Company closed an underwritten, firm commitment public offering of 3,036,366 shares of the Companys common stock at a public offering price of $4.25 per share resulting in gross proceeds to the Company of approximately $12.9 million. In
addition, the Company granted the underwriter an option for a period of 30 days to purchase up to an additional 455,454 shares of the Companys common stock at the public offering price. On May 11, 2021, the underwriter partially exercised the
overallotment option by purchasing 317,274 shares resulting in approximately $1.35 million of additional gross proceeds to the Company. The Company intends to use the net proceeds from this offering for the continued advancement of development
activities for its product pipeline, general corporate purposes, and strategic growth opportunities.
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Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of financial condition and operating results together with our consolidated
financial statements and the related notes and other financial information included elsewhere in this document.
Overview
We endeavor to become the leader in discovery, development, and commercialization of therapeutic agents capable of addressing significant unmet
medical needs via the application of the silence and replace approach to the treatment of genetic disorders.
Benitec Biopharma Inc.
(Benitec or the Company or in the third person, we or our) is a development-stage biotechnology company focused on the advancement of novel genetic medicines with headquarters in Hayward,
California. The proprietary platform, called DNA-directed RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of
disease-causing genes following a single administration. The Company is developing ddRNAi-based therapeutics for chronic and life-threatening human conditions including Oculopharyngeal Muscular Dystrophy (OPMD), and Chronic Hepatitis B.
BB-301 is the most advanced ddRNAi-based genetic medicine currently under development by Benitec. BB-301 is an internally optimized, AAV-based gene therapy agent that is designed to both silence the expression of mutated, disease-causing genes
(to slow, or halt, the underlying mechanism of disease progression) and replace the mutant genes with normal, wild type genes (to drive restoration of function in diseased cells). This fundamental approach to disease management is
called silence and replace and this biological mechanism offers the potential to restore the underlying physiology of the treated tissues and, in the process, improve treatment outcomes for patients suffering from the chronic and,
potentially, fatal effects of Oculopharyngeal Muscular Dystrophy (OPMD). BB-301 has been granted Orphan Drug Designation in the United States and the European Union.
Through the combination of the targeted gene silencing effects of RNAi and the durable transgene expression achievable via the use of modified
viral vectors, the silence and replace approach has the potential to produce long-term silencing of disease-causing genes along with simultaneous replacement of wild type gene function following a single administration of the proprietary genetic
medicine. We believe this novel attribute of the investigational agents under development by Benitec may facilitate the achievement of robust clinical activity while greatly reducing the dosing frequencies traditionally expected for medicines
employed for the management of chronic diseases. Additionally, the establishment of chronic gene silencing and gene replacement may significantly reduce the risk of patient non-compliance during
the course of medical management of potentially fatal clinical disorders.
Unless otherwise indicated, all dollar amounts in this section
are provided in thousands.
Re-domiciliation
On April 15, 2020, (the Implementation Date), the re-domiciliation of
Benitec Biopharma Limited (the Re-domiciliation), a public company incorporated under the laws of the State of Western Australia, or BBL, was completed in accordance with the Scheme Implementation
Agreement, as amended and restated as of January 30, 2020, between BBL and us. As a result of the Re-domiciliation, the jurisdiction of incorporation was changed from Australia to Delaware, and
BBL became our wholly owned subsidiary.
The Re-domiciliation was effected pursuant to a
statutory scheme of arrangement under Australian law, or the Scheme, whereby on the Implementation Date, all of the issued and outstanding ordinary shares of BBL were exchanged for newly issued shares of our common stock, on the basis of one share
of our common stock, par value $0.0001 per share, for every 300 ordinary shares of BBL issued and outstanding. Holders of BBLs American Depository Shares, or ADSs (each of which represented 200 ordinary shares), received two shares of our
common stock for every three ADSs held.
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Table of Contents
COVID-19
In December 2019, an outbreak of a novel strain of coronavirus was identified in Wuhan, China. This virus continues to spread globally, has
been declared a pandemic by the World Health Organization and has spread to nearly every country, including Australia and the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society,
which has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. The extent to which the coronavirus impacts us will depend on future developments, which are highly uncertain and
cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.
Certain of our research and development efforts are conducted globally, including the ongoing development of our silence and replace
therapeutic for the treatment of Oculopharyngeal Muscular Dystrophy (OPMD), and will be dependent upon our ability to initiate preclinical and clinical studies despite the
ongoing COVID-19 pandemic. As we continue to actively advance our preclinical programs, including our ongoing tissue transduction studies
for BB-301, we are in close contact with our principal investigators and preclinical trial sites, which are primarily located in the France, and are assessing the impact of COVID-19 on our studies and the expected development timelines and costs of all of our product candidates, on an ongoing basis. In light of recent developments relating to
the COVID-19 global pandemic, the focus of healthcare providers and hospitals on fighting the virus, and consistent with the FDAs updated industry guidance for conducting clinical trials issued
on March 18, 2020, we have experienced delays to the original timeline regarding the initiation and anticipated completion of the
ongoing BB-301 IND-enabling development work. The initiation of the BB-301 tissue transduction study,
which represents a key component of the IND-enabling work, was delayed by several months, however, the study has been recently initiated and the dosing of the initial preclinical cohorts has
proceeded without incident. We will continue to evaluate the impact of the COVID-19 pandemic on our business and expect to reevaluate the timing of our anticipated preclinical and clinical milestones
as we learn more and the impact of COVID-19 on our industry becomes more clear.
We had
also implemented work-from-home measures for some of our employees between March 2020 and March 2021, resulting in a reduction of laboratory work and a halt of non-essential business travel. As we
transition our employees back to our premises, there is a risk that COVID-19 infections occur at our offices or laboratory facilities and significantly affect our operations. Additionally, if any of
our critical vendors are impacted, our business could be affected if we become unable to timely procure essential equipment, supplies or services in adequate quantities and at acceptable prices.
Axovant Termination
Benitecs
License and Collaboration Agreement, dated July 9, 2018, with Axovant Sciences GmbH, or Axovant, was terminated as of September 3, 2019. As a result, all rights and licenses which Benitec had granted to Axovant to develop and commercialize BB-301 and related gene therapy product candidates terminated.
Prior to such
termination, the Benitec team endeavored to conduct several additional exploratory nonclinical analyses in order to potentially improve the biological efficacy of BB-301 via
further optimization of the route of administration employed to dose the target muscle tissues.
Nonclinical data derived
from in vivo evaluations of BB-301 in two distinct large animal species suggested the existence of an opportunity to further improve the biological efficacy of the compound
via additional optimization of the proprietary delivery method employed to dose key target tissues that underlie the morbidity and mortality associated with the natural history of OPMD. The initial biological efficacy profile observed for BB-301 following in vivo testing in the A17 mouse model of OPMD, including full correction of the disease phenotype, remained unchanged. However, the Benitec management
team desired to complete a series of exploratory analyses prior to the formal IND filing and the subsequent initiation of clinical testing.
Completion of the experimental work noted above would have delayed the initiation of
the BB-301 clinical study beyond the timelines that were initially outlined by Axovant following the execution of the License and Collaboration Agreement between Benitec and Axovant. As such,
Axovant elected to terminate the License and Collaboration Agreement between Benitec and Axovant, and all rights and licenses granted to Axovant terminated, including the rights to BB-301, which
was in preclinical development for the treatment of OPMD, and all other early stage research collaboration programs that were governed by the agreement.
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Table of Contents
Nonclinical Programs
Our Pipeline
The following table sets
forth our current product candidates and their development status:
Table 1. Pipeline: Oculopharyngeal Muscular Dystrophy and Chronic Hepatitis B Virus
Infection
BB-301
BB-301 is a late-stage nonclinical investigational agent currently in development for the treatment of
Oculopharyngeal Muscular Dystrophy. BB-301 is the lead pipeline program for Benitec, and IND-enabling studies are currently being conducted. A summary of the BB-301 program is provided in Figure 3.
Figure 3. Overview of the BB-301
Program
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Table of Contents
BB-301 is a first-in-class genetic medicine employing the silence and replace approach for the treatment of OPMD. OPMD is a chronic, life-threatening genetic disorder affecting approximately 15,000 patients
in the United States, Canada, Western Europe, and Israel. OPMD is caused by a mutation in the gene encoding poly(A) binding protein nuclear 1 (PABPN1). Patients with OPMD lose the ability to swallow liquids and solids, and the natural history of the
disorder is characterized by chronic malnutrition, aspiration, and fatal episodes of aspiration pneumonia.
Currently, no therapeutic
agents are approved for the treatment of OPMD. Additionally, no surgical interventions capable of altering the long-term natural history of OPMD are available. BB-301 has received Orphan Drug Designation in
the United States and the European Union which provides commercial exclusivity independent of intellectual property protection. While OPMD is a rare disorder, we believe the commercial opportunity for a safe and efficacious therapeutic agent in this
clinical indication exceeds $1 billion over the course of the commercial life of the product.
Benitec has previously outlined the
core IND-enabling studies required by global regulatory agencies to support the initiation of BB-301 clinical trials in OPMD patients, and these IND-enabling studies include a BB-301 Pilot Dosing Study (the Pilot Dosing Study) in large animals and a classical 12-week
GLP Toxicology and Biodistribution Study. BB-301 is directly injected into the pharyngeal muscles known to underlie the morbidity and mortality characterizing the natural history of OPMD. Against this
backdrop, Benitec recently conducted the BB-301 Pilot Dosing Study in Beagle dog subjects to demonstrate that direct intramuscular injection of BB-301 via the use of a
proprietary dosing device in an open surgical procedure could safely achieve the following goals:
Biologically significant, highly-consistent, dose-dependent levels of
BB-301 tissue transduction (i.e., delivery of the multi-functional BB-301 genetic construct into the target pharyngeal muscle cells);
Durable, broad-based, dose-dependent expression within the pharyngeal muscle cells of the three distinct genes
comprising the BB-301 gene construct; and
Durable and biologically significant levels of target gene knock-down (i.e., inhibition of the expression of the
gene of interest) within the pharyngeal muscle cells.
The Pilot Dosing Study evaluated the safety and biological
activity of two concentrations of BB-301 (1.0+E13 vg/mL and 3.0+E13 vg/mL) across three distinct doses (1.0+E13 vg/mL, 3.0+E13 vg/mL with a low injection volume, and 3.0+E13 vg/mL with a high injection volume)
following direct intramuscular injection into the Hypopharyngeus (HP) muscles and the Thyropharyngeus (TP) muscles of Beagle dogs via the use of a proprietary delivery device employed in an open surgical procedure. The HP muscle in Beagle dogs
corresponds to the Middle Pharyngeal Constrictor muscle in human subjects, and the TP muscle in Beagle dogs corresponds to the Inferior Pharyngeal Constrictor muscle in human subjects. BB- 301 was injected
only on Day 1 of the Pilot Dosing Study, and the corresponding canine pharyngeal muscles were harvested for analysis after 8 weeks on study. BB-301 dosing was carried out by both a veterinary surgeon and a
practicing Otolaryngologist who has extensive experience with the provision of palliative surgical care for OPMD patients.
Further data
analyses are ongoing for the canine subjects treated in the BB-301 Pilot Dosing Study, and the interim data-points highlighted here are derived from completed analyses of pharyngeal muscle tissues isolated
from the 6 Beagle dog subjects to date (of the 24-subject study population). The data-set and the initial conclusions will be updated as additional subjects are
analyzed.
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The key preliminary results are summarized here:
Figure 4. Pharyngeal Muscle Tissue Transduction Levels for BB-301
Regarding Gene Expression Levels Observed for BB-301 Within the Pharyngeal
Muscle Tissues (Figure 5, Figure 6, Figure 7):
BB-301 encodes two distinct siRNA species (i.e., siRNA13 and siRNA17)
which are each, independently, capable of inhibiting (i.e., silencing) the expression of the mutant form of the PABPN1 protein and the wildtype (i.e., endogenous) form of the PABPN1 protein (importantly, the mutant form of the PABPN1
protein underlies the development and progression of OPMD).
BB-301 also codes for a wildtype version of the PABPN1 protein whose
intracellular expression is unaffected by the inhibitory activities of siRNA13 and siRNA17, and this codon optimized PABPN1 protein (i.e., coPABPN1) serves to replenish the endogenous form of the PABPN1 protein and to replace the mutant form of
PABPN1 that underlies the development and progression of OPMD in diseased tissues.
For comparative purposes, is should be noted that the average level of expression for wild type PABPN1 within the
pharyngeal muscle cells of Beagle dogs is 4.5 copies per cell to 7.8 copies per cell.
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Figure 5. siRNA13 Expression Levels for BB-301 within Pharyngeal
Muscle Tissues
Figure 6. siRNA17 Expression Levels for BB-301 within Pharyngeal Muscle Tissues
29
Table of Contents
Figure 7. coPABPN1 Expression Levels for BB-301 within Pharyngeal
Muscle Tissues
Regarding WildType PABPN1 Silencing (i.e. target knock-down) Observed for
BB-301 Within the Pharyngeal Muscle Tissues (Figure 8):
As noted above, BB-301 encodes two distinct siRNA species (i.e. siRNA13
and siRNA17) which are each, independently, capable of inhibiting (i.e., silencing) the expression of all forms of the PABPN1 protein (siRNA13 and siRNA17 silence the expression of both wildtype PABPN1 wtPABPN1 and mutant PABPN1).
While the Beagle dog subjects treated in the current BB-301 Pilot Dosing
Study do not express mutant PABPN1, the level of BB-301-driven gene silencing for the PABPN1 target can be accurately assessed due to the equivalent inhibitory effects
of siRNA13 and siRNA17 on both wtPABPN1 and mutant PABPN1.
Thus, the wtPABPN1 silencing activity observed in the current BB-301
Pilot Dosing Study serves as a surrogate for the activity that would be anticipated in the presence of mutant PABPN1.
BB-301 has been evaluated in prior
non-clinical studies in animals that express mutant PABPN1 and manifest the key signs and symptoms of OPMD and, in these animal models of OPMD, the achievement of PABPN1 silencing levels of 31% inhibition or
higher led to complete resolution of OPMD disease symptoms and correction of the histological hallmarks of OPMD.
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Table of Contents
Figure 8. PABPN1 Silencing (i.e. target knock-down) within Pharyngeal Muscle Tissues
Finally, it is critical to highlight the key methodological distinctions between the current BB-301 Pilot Dosing Study in Beagle dogs conducted by Benitec and the prior Beagle dog dosing study carried out independently by the previous BB-301 licensee of Benitec. The BB-301 dosing study conducted by the prior BB-301 licensee employed non-ideal routes and methods of
BB-301 administration to the target pharyngeal muscle tissues and employed similarly limited analytical methods at the completion of the dosing phase of the study. The Benitec team worked to optimize the route
and method of administration of BB-301 and to refine the core analytical methods employed following the completion of dosing.
Following these methodological improvements, Benitec demonstrated a 248-fold improvement (+24,650%) in
BB-301 transduction of the HP muscle and a 111-fold improvement (+11,027%) in BB-301 transduction of the TP muscle relative to
the levels of BB-301 transduction observed by the previous BB-301 licensee (Figure 9).
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Figure 9. Impact of Benitec-Initiated Methodological Improvements to the
BB-301 Large Animal Study Design on the Relative Pharyngeal Muscle Tissue Transduction Levels Achieved
Benitec has scheduled a Scientific Advice Meeting in France in May 2021 to review the interim data and the Phase 1 clinical
trial design, and the Company continues to plan for the initiation of the first-in-human clinical study of BB-301 in OPMD
patients in 2022.
BB-103
BB-103 has demonstrated robust nonclinical activity during the evaluation of this agent for the treatment of Chronic
Hepatitis B Virus infection. Benitec is currently seeking strategic partners to advance BB-103 through IND-enabling studies.
Royalties, milestone payments and other license fees
We are required to pay royalties, milestone payments and other license fees in connection with our licensing of intellectual property from
third parties, including as discussed below.
In December 2016, we entered into an exclusive sublicense agreement with NantWorks, LLC,
pursuant to which we agreed to make certain milestone and royalty payments, as well as periodic payments for so long as the agreement remained in effect. In December of 2018, the Company accrued a milestone payment of USD 300k (AUD 425,411), which
was anticipated to be paid to NantWorks, LLC under the sublicense agreement. It was later determined that the milestone was not required to be paid and, therefore, the accrual was reversed in December of 2019. We terminated the exclusive sublicense
agreement for convenience, with the termination effective as of June 2020.
We have collaborated with Biomics Biotechnologies Co., Ltd.,
or Biomics, pursuant to several collaboration agreements in relation to single-stranded RNA and shRNA sequences for treatment of hepatitis B. In July 2015, we entered into an earn-out agreement with
Biomics which confirmed Benitecs ownership of certain patents resulting from the collaboration in exchange for an upfront payment and equity issuance to Biomics and a share of certain future licensing revenue received by Benitec.
32
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Foreign Currency Translation and Other Comprehensive Income (Loss)
The Companys functional currency and reporting currency is the United States dollar. BBLs functional currency is the Australian
dollar (AUD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are
translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders equity as Accumulated other
comprehensive income (loss). Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive income (loss) as other comprehensive income (loss).
Other comprehensive income (loss) for all periods presented includes only foreign currency translation gains (losses).
October 2020 Capital Raise
On
October 6, 2020, the Company announced the closing of an underwritten public offering of common stock and common stock equivalents (the October 2020 Capital Raise). The Company received gross proceeds of approximately
$11.5 million and net proceeds of approximately $9.9 million from the offering.
Results of Operations
Revenues
In the past BBL has
generated revenue from its operations through two activities: revenue from customers and revenue from government research and development grants. For the three-month period ended March 31, 2021 the Company received $1 in revenue relating to
licensing fees. Revenues from licensing fees are included in the revenue from customers line item on our statements of operations and comprehensive income (loss). There were no Research and Development Tax Incentive payments received during this
period.
The following table sets forth a summary of our revenues for each of the periods set forth below:
Three Months Ended
March 31,
Nine Months Ended
March 31,
2021
2020
2021
2020
(US$000)
Revenues:
Revenues from customers
$
1
$
28
$
57
$
137
Total revenues
$
1
$
28
$
57
$
137
Revenues from customers
During the three and nine months ended March 31, 2021, respectively, the Company recognized $1 and $57 in customer revenues, as compared
to $28 and $137 for the comparable periods ended March 31, 2020. The decrease in revenues from customers is due to the decrease in licensing and royalty revenues in the current period.
Royalties and License Fees
Royalties and license fees consist primarily of payments we are required to remit for royalties and other payments related to in-licensed intellectual property. Under our in-license agreements, we may pay up-front fees and
milestone payments and be subject to future royalties. We cannot precisely predict the amount, if any, of royalties we will owe in the future, and if our calculations of royalty payments are incorrect, we may owe additional royalties, which could
negatively affect our results of operations. As our product sales increase, we may, from time to time, disagree with our third-party collaborators as to the appropriate royalties owed, and the resolution of such disputes may be costly, may consume
managements time, and may damage our relationship with our collaborators. Furthermore, we may enter into additional license agreements in the future, which may also include royalty, milestone and other payments.
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Table of Contents
Research and Development Expenses
Research and development expenses relate primarily to the cost of conducting clinical and pre-clinical
trials. Pre-clinical and clinical development costs are a significant component of research and development expenses. Estimates have been used in determining the expense liability under certain clinical trial
contracts where services have been performed but not yet invoiced. Generally, the costs, and therefore estimates, associated with clinical trial contracts are based on the number of patients, drug administration cycles, the type of treatment and the
outcome being the length of time before actual amounts can be determined will vary depending on length of the patient cycles and the timing of the invoices by the clinical trial partners.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel, and equity-based compensation expense. General and
administrative expenses also include facility expenses, professional fees for legal, consulting, accounting and audit services and other related costs.
We anticipate that our general and administrative expenses may increase as the Company focuses on the continued development of the pre-clinical OPMD program. The Company also anticipates an increase in expenses relating to accounting, legal and regulatory-related services associated with maintaining compliance with exchange listing and SEC
requirements, director and officer insurance premiums and other costs associated with being a domestic public company after the Re-domiciliation.
Operating Expenses
The following tables
set forth a summary of our expenses for each of the periods set forth below:
Three Months Ended
March 31,
Nine Months Ended
March 31,
2021
2020
2021
2020
(US$000)
Operating Expenses:
Royalties and license fees
$
7
$
47
$
122
$
(233
)
Research and development
2,758
805
4,700
2,095
General and administrative
1,029
1,287
4,976
3,669
Total operating expenses
$
3,794
$
2,139
$
9,798
$
5,531
During the three and nine months ended March 31, 2021, respectively, we incurred $7 and $122 in royalties
and license fees, as compared to $47 and ($233) for the comparable periods ended March 31, 2020. The change is primarily due to a reversal of an accrual which created the negative balance in the nine months ended March 31, 2020. In the
three months ended March 31, 2020 included a payable license fee, resulting in the balance of $47 as opposed to the nine month balance which included a reversed accrual.
During the three and nine months ended March 31, 2021, we incurred $2,758 and $4,700 in research and development expenses, as compared to
$805 and $2,095 for the comparable periods ended March 31, 2020. The increase in research and development expenses are related to the pre-clinical trials associated with
BB-301.
General and administrative expense was $1,029 and $4,976 for the three and nine months
ended March 31, 2021, as compared to $1,287 and $3,669 for the comparable periods ended March 31, 2020. The increase for the nine month period was due to the increase in insurance, consultants, legal and accounting fees. The decrease in
the three month period end was due to timing differences with receipt of the invoices.
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Other Income (Expense)
The following tables set forth a summary of our other income (loss) for each of the periods set forth below:
Three Months Ended
March 31,
Nine
Months Ended
March 31,
2021
2020
2021
2020
(US$000)
Other Income (Loss):
Foreign currency transaction gain (loss)
$
(112
)
$
(7
)
$
(167
)
$
4
Interest income (expense), net
(2
)
16
(5
)
52
Other income, net
37
Unrealized loss on investment
(2
)
(3
)
(1
)
Total other income (loss), net
$
(116
)
$
9
$
(138
)
$
55
The other loss, net during the three and nine months ended March 31, 2021, respectively, totaled $(116)
and ($138), which consists of foreign currency transaction loss, interest expense, other income, and unrealized loss on investment. During the three and nine months ended March 31, 2020, respectively, other income, net totaled $9 and $55.
Foreign currency transaction gain has decreased due to a change in foreign exchange rates. Interest income (expense), net has decreased due to fewer transactions with interest. Other income, net increased due
to COVID-19 stimulus incentives from the Australian government. Unrealized loss on investment had a minor increase for the three and nine months ended March 31, 2021, compared to the three and
nine months ended March 31, 2020.
Liquidity and Capital Resources
The Company has incurred cumulative losses and negative cash flows from operations since our predecessors inception in 1995. The Company
had accumulated losses of $126.1 million as of March 31, 2021. We expect that our research and development expenses may increase due to the continued development of the OPMD program. It is also likely that there will be an increase in the
general and administrative expenses due to the obligations of being a domestic public company in the United States as a result of the Re-domiciliation.
We had no borrowings as at March 31, 2021 and do not currently have a credit facility.
As of March 31, 2021, we had cash and cash equivalents of approximately $12 million. Cash in excess of immediate requirements is
invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash and cash equivalents are held in bank accounts.
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The following table sets forth a summary of the net cash flow activity for each of the
periods set forth below:
Nine Months Ended
March 31,
2021
2020
(US$000)
Net cash provided by (used in):
Operating activities
$
(7,675
)
$
(4,390
)
Investing activities
(362
)
(81
)
Financing activities
9,854
1,770
Effects of exchange rate changes on cash and cash equivalents
370
(1,617
)
Net increase (decrease) in cash
$
2,187
$
(4,318
)
Operating activities
Net cash used in operating activities for the nine months ended March 31, 2021 and 2020 was $7,675 and $4,390, respectively. Net cash used
in operating activities was primarily the result of our net loss and change in working capital and a decrease in payables.
Investing activities
Net cash used in investing activities for the nine months ended March 31, 2021 and 2020 was $362 and $81, respectively. The
change was primarily related to an increase in purchases of equipment in 2021 compared to the same period in 2020.
Financing activities
Net cash provided by financing activities was $9,854 and $1,770 for the nine months ended March 31, 2021 and 2020, respectively. Cash from
financing activities related to the issuance of common stock, including $11,497 in gross proceeds which includes the October 2020 Capital Raise and exercise of pre-funded warrants. This was partially offset by
$1,643 in share issuance costs for the nine months ended March 31, 2021. For the same period in 2020, cash from financing activities related to the issuance of common stock of BBL, including gross proceeds of $2,250 from a public offering,
partially offset by $480 in share issuance costs.
The future of the Company as an operating business will depend on its ability to
generate revenues mostly from licensing, strategic alliances and collaboration arrangements with pharmaceutical companies. While we continue to progress discussions and advance opportunities to engage with pharmaceutical companies and continue to
seek licensing partners for ddRNAi in disease areas that are not our focus, there can be no assurance as to whether we will enter into such arrangements or what the terms of any such arrangement could be.
While we have established some licensing arrangements, we do not have any products approved for sale and have not generated any revenue from
product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or
future product candidates.
Unless and until we establish significant revenues from licensing programs, strategic alliances or
collaboration arrangements with pharmaceutical companies, or from product sales, we anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of product
candidates and begin to prepare to commercialize any product that receives regulatory approval. We are subject to the risks inherent in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties,
complications, delays and other unknown factors that may adversely affect our business. We estimate that our cash and cash equivalents will be sufficient to fund the Companys operations at least for the next twelve months.
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Table of Contents
We have based our projections of operating capital requirements on assumptions that may
prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable
to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
the timing and costs of our planned clinical trials for our ddRNAi and silence and replace product candidates;
the timing and costs of our planned preclinical studies for our ddRNAi and silence and replace product
candidates;
the number and characteristics of product candidates that we pursue;
the outcome, timing and costs of seeking regulatory approvals;
revenue received from commercial sales of any of our product candidates that may receive regulatory approval;
the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may
establish;
the amount and timing of any payments we may be required to make, or that we may receive, in connection with the
licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual
property rights and defending against intellectual property related claims; and
the extent to which we need to in-license or acquire other
products and technologies.
Contractual Obligations and Commercial Commitments
On October 1, 2016, the Company entered into an operating lease for office space in Hayward, California that originally expired in April
2018. The Company has entered into lease amendments that extend the lease commitment through June 2022.
The Company enters into contracts
in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and,
therefore, are cancellable contracts and not considered contractual obligations and commitments.
Off-Balance Sheet Arrangements
The Company had no material off-balance sheet arrangements as of March 31, 2021.
Critical Accounting Policies and Significant Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting
policies.
A critical accounting policy is defined as one that is both material to the presentation of the Companys consolidated
financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on the Companys financial condition or results of operations. Specifically, these policies have the following
attributes: (1) the Company is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates the Company could reasonably have used, or changes in the estimate that are
reasonably likely to occur, would have a material effect on the Companys financial condition or results of operations.
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Estimates and assumptions about future events and their effects cannot be determined with
certainty. The Company bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is
obtained and as the Companys operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced
with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties are discussed in the section above entitled Risk Factors. Based on a critical assessment of its
accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that the Companys consolidated financial statements are fairly stated in accordance with accounting principles
generally accepted in the United States of America,and provide a meaningful presentation of the Companys financial condition and results of operations.
Management believes that the following are critical accounting policies:
Revenue Recognition
The Company
recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a
customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company applies judgement in determining whether contracts entered into fall within the scope of ASC 606 Revenue from Contracts
with Customers (ASC 606). In doing so, management considers the commercial substance of the transaction and how risks and benefits of the contract accrue to the various parties to the contract.
Management has also made the judgement that the grant of the license and transfer of
associated know-how and materials are accounted for as one performance obligation as they are not considered to be distinct; they are highly interrelated and could not provide benefits to the
customer independently from each other. Judgements were made in relation to the transfer of the license and know-how and whether this should be recognized over time or a point in time. The point in
time has been determined with regard to the point at which the transfer of know-how has substantially been completed and the customer has control of the asset and the ability to direct the use of and
receive substantially all of the remaining benefits.
Licensing revenues
Revenue from licensees of the Companys intellectual property reflects the transfer of a right to use the intellectual property as it
exists at the point in time in which the license is transferred to the customer. Consideration can be variable and is estimated using the most likely amount method. Subsequently, the estimate is constrained until it is highly probable that a
significant revenue reversal will not occur when the uncertainty is resolved. Revenue is recognized as or when the performance obligations are satisfied.
The Company recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these
amounts as other liabilities in the consolidated balance sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognizes either a contract asset or a receivable in its consolidated
balance sheet, depending on whether something other than the passage of time is required before the consideration is due.
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Table of Contents
Royalties
Revenue from licensees of the Companys intellectual property reflect a right to use the intellectual property as it exists at the point
in time in which the license is granted. Where consideration is based on sales of product by the licensee, revenue is recognized when the customers subsequent sales of product occurs.
Services revenue
Revenue is earned
(constrained by variable considerations) from the provision of research and development services to customers. Services revenue is recognized when performance obligations are either satisfied over time or at a point in time. Generally, the provision
of research and development services under a contract with a customer will represent satisfaction of a performance obligation over time where the Company retains the right to payment for services performed but not yet completed.
Share-Based Compensation
The
Company records share-based compensation in accordance with ASC 718, Stock Compensation . ASC 718 requires the fair value of all share-based employee compensation awarded to employees to be recorded as an expense over the
shorter of the service period or the vesting period. The Company values employee and non-employee share-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company adopted ASU 2018-07 and accounts
for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period.
Recent Accounting Pronouncements
Accounting
Standards recently adopted
None.
New
Accounting Standards and Interpretations not yet mandatory or early adopted
ASU 2016-13 In June 2016, the FASB issued
ASU No. 2016-13: Financial InstrumentsCredit Losses (Topic 326). This ASU represents a significant change in the accounting for credit losses model by requiring
immediate recognition of managements estimates of current expected credit losses (CECL). Under the prior model, losses were recognized only as they were incurred. The Company has determined that it has met the criteria of a smaller reporting
company (SRC) as of November 15, 2019. As such, ASU 2019-10: Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases: Effective Dates amended
the effective date for the Company to be for reporting periods beginning after December 15, 2022. The Company will adopt this ASU effective July 1, 2023.
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Table of Contents
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information pursuant to this Item.
Item 4.
Controls and Procedures
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). As of the end of the period covered by this Report we carried out an evaluation under the supervision and with the participation of our management,
including our principal executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15
of the Securities and Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures are effective.
There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2021 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We do not expect that our
disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
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Table of Contents
PART II
OTHER INFORMATION
Item 1.
Legal Proceedings
We are currently not a party to any legal proceedings.
Item 1A.
Risk Factors
There have been no material changes to the risk factors disclosed in Item 1A of the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
None.
Item 5.
Other Information
None.
41
Table of Contents
Item 6.
Exhibits.
Number
Description of Document
31.1
Statement of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Statement of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
Statement of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2
Statement of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS
XBRL Instance Document*
101.SCH
XBRL Taxonomy Extension Schema Document*
101.CAL
XBRL Calculation Linkbase Document*
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
XBRL Label Linkbase Document*
101.PRE
XBRL Taxonomy Presentation Linkbase Document*
*
Filed herewith.
**
Furnished, not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by
the undersigned thereunto duly authorized.
Benitec Biopharma Inc.
Dated: May 12, 2021
/s/ Megan Boston
Megan Boston
Executive Director (principal financial and accounting officer)
/s/ Jerel Banks
Jerel Banks
President and Chief Executive Officer
(principal executive officer)
43
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.