What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-02 · 58 added, 102 removed, 169 unchanged (49% of the section changed)

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We believe that targeting the S2R complex represents a mechanism that is functionally distinct from other current approaches in clinical development for the treatment of degenerative diseases.

Recent clinical results supports this hypothesis.

Recent clinical results support this hypothesis.

In the SNAP study, results of which were published in May 2023 in the journal, Translational Neurodegeneration and showed that a single oral dose of CT1812 rapidly displaces Aβ oligomers from synapses of individuals with AD.

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Since our inception in 2007, we have incurred significant operating losses and devoted substantially all of our time and resources to developing our lead product candidate, CT1812, building our intellectual property portfolio, raising capital and recruiting management and technical staff to support these operations.

As of September 30, 2023, we had an accumulated deficit of $133.0 million.

We incurred a net loss of $6.7 million and $17.6 million for the three and nine months ended September 30, 2023, respectively, and net loss of $6.6 million and $16.2 million for the three and nine months ended September 30, 2022, respectively.

To date, we have funded our operations primarily with proceeds from grants awarded by the National Institute of Aging (the “NIA”), a division of the National Institutes of Health (the “NIH”), and proceeds from our initial public offering (the “IPO”), completed in October 2021, proceeds from our follow-on public offering in November 2022, sales of our common stock through our ATM (as defined below), sales of our convertible promissory notes, convertible preferred stock, simple agreements for future equity (“SAFE”) and stock option exercises.

Since our inception, we have received approximately $171.0 million in cumulative grant awards to fund our clinical trials, primarily from the NIA, and we have raised approximately $111.4 million in net proceeds from sales of our equity securities, convertible notes, SAFE, stock option exercises, IPO and follow-on public offering, ATM, and equity line financing with Lincoln Park.

As of September 30, 2023, we had cash and cash equivalents of $33.0 million.

On November 15, 2022, we completed our follow-on public offering, pursuant to which we issued and sold 5,000,000 shares of our common stock at a public offering price of $1.20 per share.

In connection with the follow-on public offering, we received net proceeds of approximately $5.2 million, after deducting underwriting discounts and commissions and other offering related expenses.

As of March 31, 2024, we had an accumulated deficit of $150.3 million.

We incurred a net loss of $9.2 million and $6.2 million for the three months ended March 31, 2024 and 2023, respectively.

To date, we have funded our operations primarily with proceeds from grants awarded by the National Institute of Aging (the “NIA”), a division of the National Institutes of Health (the “NIH”), and proceeds from our initial public offering (the “IPO”), completed in October 2021, proceeds from our follow-on public offering in November 2022 and March 2024, sales of our common stock through our ATM (as defined below), sales of our convertible promissory notes, convertible preferred stock, simple agreements for future equity (“SAFE”) and stock option exercises.

Since our inception, we have received approximately $171.0 million in cumulative grant awards to fund our clinical trials, primarily from the NIA, and we have raised approximately $125.9 million in net proceeds from sales of our equity securities, convertible notes, SAFE, stock option exercises, IPO and follow-on public offerings, ATM, and equity line financing with Lincoln Park.

As of March 31, 2024, we had cash and cash equivalents of $34.7 million.

On December 23, 2022, we entered into a sales agreement with Cantor Fitzgerald & Co.

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(the “Sales Agents”), providing for the offering, issuance and sale by us of up to $40.0 million of our common stock from time to time in “at-the-market” offerings (the “ATM”).

We sold 1,110,678 shares of common stock under the ATM during the nine months ended September 30, 2023 for gross proceeds of approximately $2.5 million.

As of September 30, 2023, there was approximately $37.5 million of common stock remaining available for sale under the ATM.

We sold 191,273 shares of common stock under the ATM during the three months ended March 31, 2024 for gross proceeds of approximately $0.4 million.

As of March 31, 2024, there

was approximately $34.3 million of common stock remaining available for sale under the ATM subject to the limitations of General Instruction I.B.6 of Form S-3.

On March 10, 2023, we entered into a purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) for an equity line financing (the “Lincoln Park Purchase Agreement”).

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333-268992) covering the resale of shares of common stock that are issued under the Lincoln Park Purchase Agreement.

During the nine months ended September 30, 2023, we sold 125,000 shares of common stock to Lincoln Park for proceeds of $0.2 million, as part of the equity line financing arrangement.

As of September 30, 2023, $34.8 million was available to draw pursuant to the Lincoln Park Purchase Agreement.

During the three months ended March 31, 2024, we did not sell any shares of common stock to Lincoln Park.

As of March 31, 2024, $34.8 million was available to draw pursuant to the Lincoln Park Purchase Agreement.

On March 14, 2024, we completed our follow-on public offering, pursuant to which we issued and sold 6,571,428 shares of our common stock at a public offering price of $1.75 per share.

On March 28, 2024, the underwriters exercised their option to purchase 985,714 shares of our common stock at a public offering price of $1.75 per share.

In connection with the follow-on public offering, we received net proceeds of approximately $11.9 million, after deducting underwriting discounts and commissions and other offering related expenses.

We expect to continue to incur significant and increasing expenses and net losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company.

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Our business has been and could be adversely affected by the effects of the COVID-19 pandemic or other national health issues.

For example, our ongoing and/or planned clinical trials may be impacted by interruptions or delays in the

operations of the FDA and comparable foreign regulatory authorities.

For example, our ongoing and/or planned clinical trials may be impacted by interruptions or delays at clinical trial sites or operations of the FDA and comparable foreign regulatory authorities.

Additionally, we have made certain adjustments to the operation of our trials in an effort to ensure the monitoring and safety of patients and minimize risks to trial integrity during the pandemic in accordance with the guidance issued by the FDA and may need to make further adjustments in the future.

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Only costs that are allowable under the grant award, certain government regulations and the NIH’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine audits from governmental agencies from time to time.

As of September 30, 2023, the Company has been awarded grants with project periods that extend through May 31, 2026, subject to extension.

As of March 31, 2024, the Company has been awarded grants with project periods that extend through May 31, 2027, subject to extension.

Our clinical trials have been funded by approximately $171.0 million in cumulative grants awarded primarily by the NIA, which includes an approximately $81.0 million grant from the NIA to fund our Phase 2 (COG0203) study of CT1812 in patients with early-stage AD, an approximately $30.5 million grant from the NIA to fund our Phase 2 (COG0201) study of CT1812 in patients with mild-to-moderate AD, and an approximately $29.5 million grant from the NIA to fund our Phase 2 (COG1201) study of CT1812 in patients with dementia with Lewy bodies.

Interest Expense

Interest expense consisted of interest expense related to the insurance premium financing arrangement with a lender.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income from money market funds, other fees such as offering costs incurred to establish our equity line financing, as well as foreign currency transaction gains or losses.

Interest Expense

Interest expense consisted of interest expense related to the insurance premium financing arrangement with a lender.

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations (in thousands):

Three Months Ended September 30,

Three Months Ended March 31,

Operating Expenses:

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Other income (expense):

Other income, net

Other income (expense), net

Interest expense

Loss on currency translation from liquidation of subsidiary

Total other income, net

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The following table summarizes our research and development expenses (in thousands):

Three Months Ended September 30,

Three Months Ended March 31,

Clinical programs

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Preclinical programs

Facilities and other costs

Research and development expenses were $11.7 million for the three months ended September 30, 2023, compared to $8.3 million for the three months ended September 30, 2022.

Research and development expenses were $10.6 million for the three months ended March 31, 2024, compared to $5.4 million for the three months ended March 31, 2023.

The increase of $5.1 million was primarily due to the following:

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● an increase of $0.9 million in manufacturing related to higher costs with contract manufacturing organizations for the replenishment of clinical trial supply;

● an increase of $0.8 million in preclinical programs, facilities and other costs primarily due to increased research spend.

● a decrease of $0.6 million in preclinical programs and other costs primarily due to decreased research activities.

General and Administrative Expenses

General and administrative expenses were $3.1 million for the three months ended September 30, 2023, compared to $4.4 million for the three months ended September 30, 2022.

The decrease of $1.3 million was primarily due to:

● decrease of $0.4 million in Director & Officer liability insurance and other expenses;

● a decrease of $1.1 million in professional fees primarily driven by lower consulting and legal expenses;

● an increase of $0.2 million in equity-based compensation from stock option and restricted stock unit (“RSU”) grants.

General and administrative expenses were $3.5 million for the three months ended March 31, 2024, compared to $3.5 million for the three months ended March 31, 2023.

The fluctuation of general and administrative expenses were insignificant period over period.

Other Income (Expense)

Grant income was $7.7 million for the three months ended September 30, 2023, compared to $5.9 million for the three months ended September 30, 2022.

Grant income was $4.9 million for the three months ended March 31, 2024, compared to $3.4 million for the three months ended March 31, 2023.

The change in grant income is correlated with the increase in eligible reimbursable costs related to clinical trials incurred during 2024 as compared to 2023.

Other Income, Net

Other income, net was $0.3 million for the three months ended September 30, 2023, compared to other income, net of less than $0.1 million for the three months ended September 30, 2022.

The change in other income, net was driven primarily by interest earned on money market funds.

Interest Expense

Interest expense was less than $0.1 million for the three months ended September 30, 2023, compared to interest expense of less than $0.1 million for the three months ended September 30, 2022.

Interest expense was not significant in either period.

Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations (in thousands):

Nine Months Ended September 30,

Operating Expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Other expense, net

Interest expense

Total other income, net

Research and Development Expenses

The following table summarizes our research and development expenses (in thousands):

Nine Months Ended September 30,

Clinical programs

Manufacturing

Preclinical programs

Facilities and other costs

Research and development expenses were $25.6 million for the nine months ended September 30, 2023, compared to $23.9 million for the nine months ended September 30, 2022.

The increase of $1.7 million was primarily due to the following:

● a decrease of $0.7 million in clinical programs primarily related to lower Phase II trial spend due to non-recurring start up activities with contract research organizations;

● an increase of $1.4 million in personnel costs associated with expanded research and development activities, and equity-based compensation expense;

● a decrease of $0.5 million in manufacturing related to lower costs with contract manufacturing organizations for the production of pre-clinical and future clinical trial supply;

● an increase of $1.5 million in preclinical programs, facilities and other costs primarily due to increased research spend.

General and Administrative Expenses

General and administrative expenses were $9.9 million for the nine months ended September 30, 2023, compared to $10.4 million for the nine months ended September 30, 2022.

The decrease of $0.5 million was primarily due to:

● a decrease of $0.8 million in Director & Officer liability insurance and other expenses;

● a decrease of $0.2 million in professional fees driven by lower consulting and legal services;

● an increase of $0.5 million in equity-based compensation from stock option and RSU grants.

Other Income (Expense)

Grant income was $18.0 million for the nine months ended September 30, 2023, compared to $18.2 million for the nine months ended September 30, 2022.

The change in grant income is correlated with the decrease in eligible reimbursable costs incurred during 2023 as compared to 2022.

Other Expense, Net

Other expense, net was $0.1 million for the nine months ended September 30, 2023, compared to other expense, net of $0.2 million for the nine months ended September 30, 2022.

The decrease in other expense, net was driven primarily by expenses related to the Lincoln Park Purchase Agreement incurred in the first quarter of 2023 offset by interest earned on money market funds.

Other Income (Expense), Net

Other income, net was $0.2 million for the three months ended March 31, 2024, compared to other expense, net of $0.6 million for the three months ended March 31, 2023.

The change in other income (expense), net was driven primarily by interest earned on money market funds.

Interest Expense

Interest expense was less than $0.1 million for the nine months ended September 30, 2023, compared to interest expense of less than $0.1 million for the nine months ended September 30, 2022.

Interest expense was less than $0.1 million for the three months ended March 31, 2024, compared to interest expense of less than $0.1 million for the three months ended March 31, 2023.

Interest expense was not significant in either period.

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The net proceeds from our IPO, which closed on October 13, 2021, were approximately $44.2 million, after deducting underwriting discounts and commissions and other offering related expenses payable by us.

On November 15, 2022, we closed our follow-on public

offering, selling 5,000,000 shares of our common stock at a public offering price of $1.20 per share.

On November 15, 2022, we closed our follow-on public offering, selling 5,000,000 shares of our common stock at a public offering price of $1.20 per share.

The net proceeds were approximately $5.2 million, after deducting underwriting discounts and commissions and other offering related expenses payable by us.

On December 23, 2022, we entered into a sales agreement with the Sales Agents, providing for the offering, issuance and sale by us of up to $40.0 million of our common stock from time to time in ATM offerings.

As of September 30, 2023, we sold 1,105,178 shares of common stock under the ATM during the nine months ended September 30, 2023, for gross proceeds of approximately $2.5 million.

As of September 30, 2023, there was $37.5 million of common stock remaining available for sale under the ATM.

As of March 31, 2024, we sold 3,050,347 shares of common stock under the ATM for gross proceeds of approximately $5.7 million.

As of March 31, 2024, there was $34.3 million of common stock remaining available for sale under the ATM.

In addition, in March 2023, we entered into the Lincoln Park Purchase Agreement with Lincoln Park Capital Fund, LLC , or Lincoln Park, giving the Company the right, but not the obligation to sell to Lincoln Park up to $35.0 million worth of shares of our common stock .

During the nine months ended September 30, 2023, we sold 125,000 shares of common stock to Lincoln Park for proceeds of $0.2 million, as part of the equity line financing arrangement.

As of September 30, 2023, $34.8 million was available to draw pursuant to the Lincoln Park Purchase Agreement.

As of September 30, 2023, we had $33.0 million in cash and cash equivalents and have not generated positive cash flows from operations.

Based on our current business plans, we believe that our existing cash and cash equivalents, and income from non-dilutive grants, will be sufficient for us to fund our operating expenses and capital expenditures requirements through November of 2024, which assumes no usage from the remaining ATM nor the Lincoln Park Purchase Agreement.

As of March 31, 2024, we have sold 125,000 shares of common stock to Lincoln Park for proceeds of $0.2 million, as part of the equity line financing arrangement.

As of March 31, 2024, $34.8 million was available to draw pursuant to the Lincoln Park Purchase Agreement.

On March 14, 2024, we closed a follow-on public offering of 6,571,428 shares of our common stock at a public offering price of $1.75 per share.

As part of the follow-on offering, the underwriters exercised their option to purchase 985,714 shares of our common stock on March 28, 2024, at a public offering price of $1.75 per share.

The net proceeds were approximately $11.9 million, after deducting underwriting discounts and commissions and other offering related expenses payable by us.

As of March 31, 2024, we had $34.7 million in cash and cash equivalents and have not generated positive cash flows from operations.

Based on our current business plans, we believe that our existing cash and cash equivalents, and income from non-dilutive grants, will be sufficient for us to fund our operating expenses and capital expenditures requirements through the second quarter of 2025, which assumes no usage from the remaining ATM nor the Lincoln Park Purchase Agreement.

We have based these estimates on assumptions that may prove to be incorrect or require adjustment as a result of business decisions, and we could utilize our available capital resources sooner than we currently expect.

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Our future funding requirements will depend on many factors, including, but not limited to:

● the scope, progress, costs and results of our ongoing and planned clinical trials of CT1812, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to the COVID-19 pandemic or other diseases, macroeconomic conditions, global or political instability, such as the ongoing global and regional conflicts, inflation, or other delays ;

● the scope, progress, costs and results of our ongoing and planned clinical trials of CT1812, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due a pandemic, such as the COVID-19 pandemic or other diseases, macroeconomic conditions, global or political instability, such as the ongoing global and regional conflicts, inflation, or other delays ;

● the scope, progress, costs and results of preclinical development, laboratory testing and clinical trials for any future product candidates we may decide to pursue ;

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The following table summarizes our cash flows for the periods indicated (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows used in operating activities

Cash flows used in investing activities

Cash flows provided by financing activities

Cash flows provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 was $10.6 million, which consisted primarily of a net loss of $17.6 million, offset primarily by the impact of equity-based compensation of $3.3 million and a net change of $3.3 million in operating assets and liabilities.

The net change in operating assets and liabilities was primarily due to an increase in grant receivables of $2.0 million, an increase in prepaid expenses and other assets of $1.0 million, an increase in accounts payable and accrued expenses of $1.8 million, and a decrease in deferred grant income and other liabilities of $1.4 million.

Net cash used in operating activities for the nine months ended September 30, 2022 was $8.4 million, which consisted primarily of our net loss of $16.2 million, offset by the impact of equity-based compensation of $2.7 million and a net change of $5.0 million in our operating assets and liabilities.

The net change in our operating assets and liabilities was primarily due to a decrease in grant receivables of $0.7 million, a decrease in prepaids and other assets of $1.5 million, offset by an increase in accounts payable and accrued expenses of $4.4 million, and an increase in deferred grant income, current and other liabilities of $2.4 million.

Net cash used in operating activities for the three months ended March 31, 2024 was $7.2 million, which consisted primarily of a net loss of $9.2 million, offset primarily by the impact of equity-based compensation of $1.2 million and a net change of $0.5 million in operating assets and liabilities.

The net change in operating assets and liabilities was primarily due to an increase in grant receivables of $0.4 million, an increase in prepaid expenses and other assets of $0.6 million, a decrease in accounts payable and accrued expenses of $0.4 million, and a decrease in deferred grant income and other liabilities of $0.1 million.

Net cash used in operating activities for the three months ended March 31, 2023 was $2.7 million, which consisted primarily of our net loss of $6.2 million, offset primarily by the impact of equity-based compensation of $1.2 million and a net change of $1.9 million in our operating assets and liabilities.

The net change in our operating assets and liabilities was primarily due to a decrease in grant receivables of $2.1 million, an increase in prepaid expenses and other assets of $0.1 million, and a decrease in accounts payable and accrued expenses of less than $0.1 million.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 was $0.1 million, and net cash used in investing activities was $0.2 million for the nine months ended September 30, 2022.

Net cash used in investing activities for the three months ended March 31, 2024 and 2023 was $0 and less than $0.1 million, respectively.

Overall, the change in net cash used in investing activities was insignificant.

Financing Activities

Net cash provided by financing activities was $2.1 million for the nine months ended September 30, 2023, and net cash provided by financing activities was $0.4 million for the nine months ended September 30, 2022.

The change in net cash provided by financing activities is primarily related to net proceeds from the issuance of common stock under the ATM program and sale of common stock pursuant to the Lincoln Park Purchase Agreement.

Net cash provided by financing activities was $12.0 million for the three months ended March 31, 2024, and net cash used by financing activities was less than $0.1 million for the three months ended March 31, 2023.

The change in net cash provided by financing activities is primarily related to net proceeds from the issuance of common stock in our follow-on offering in March 2024 and under the ATM program.

Contractual Obligations

The following table summarizes our contractual obligations as of September 30, 2023 (in thousands):

The following table summarizes our contractual obligations as of March 31, 2024 (in thousands):

Operating lease obligations:

In October 2022, we entered into an insurance premium financing arrangement with a lender.

Under the agreement, we financed $0.8 million of certain premiums at a 6.85% annual interest rate.

Total payments of less than $0.1 million, including interest and principal, are due monthly from November 2022 through October 2023.

As of September 30, 2023, there was no remaining outstanding principal on the loan.

In October 2023, we entered into an insurance premium financing arrangement with the same lender whereby we financed $0.7 million of certain premiums at a 8.65% annual interest rate.

Other obligations:

In October 2023, we entered into an insurance premium financing arrangement with a lender whereby we financed $0.7 million of certain premiums at a 8.65% annual interest rate.

Payments of less than $0.1 million are due monthly from October 2023 through September 2024.

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Total payments due over the term of the lease are $0.2 million.

Additionally, on August 31, 2022, we modified one of our existing lease agreements with the landlord for approximately

3,706 square feet of lab space at the same location to extend the lease term termination date from June 30, 2023 until June 30, 2026.

Additionally, on August 31, 2022, we modified one of our existing lease agreements with the landlord for approximately 3,706 square feet of lab space at the same location to extend the lease term termination date from June 30, 2023 until June 30, 2026.

On July 1, 2021, we entered into an agreement to lease 2,864 square feet of office space in Purchase, New York.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis