What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-07 · 48 added, 45 removed, 189 unchanged (33% of the section changed)

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In April 2023, we initiated our first pivotal trial, Advance-HTN, a randomized, double-blind, placebo-controlled Phase 2 clinical trial to evaluate the safety and efficacy of lorundrostat for the treatment of uHTN or rHTN, when used as an add-on therapy to standardized background treatment of two or three antihypertensive medications in up to approximately 300 adult subjects.

The topline data from this trial is expected in the first half of 2024.

We also plan to initiate our second pivotal trial, Launch-HTN, a randomized, double-blind, placebo-controlled Phase 3 clinical trial in the second half of 2023 to evaluate the safety and efficacy of lorundrostat for the treatment of uHTN or rHTN, when used as an add-on therapy to prescribed treatment of two to five antihypertensive medications in up to approximately 1,000 adult subjects.

The trial is expected to have a similar design as Advance-HTN.

The topline data from this trial is expected in mid-2025.

In mid-2023, we initiated an open-label extension trial to obtain additional safety data.

All subjects in the pivotal hypertension program, including the Advance-HTN and Launch-HTN trials, will be given the opportunity to participate in the extension trial.

Topline data from this trial is anticipated in the second half of 2024.

We also plan to initiate our second pivotal trial, Launch-HTN, a randomized, double-blind, placebo-controlled Phase 3 clinical trial in the second half of 2023 to evaluate the safety and efficacy of lorundrostat for the treatment of uHTN or rHTN, when used as an add-on therapy to prescribed background treatment of two to five antihypertensive medications in up to approximately 1,000 adult subjects.

The trial is expected to have a similar design to the Target-HTN trial.

Topline data from this trial is expected in the second half of 2025.

In mid-2023, we initiated an open-label extension trial to allow subjects to continue to receive lorundrostat and obtain long-term safety and efficacy data.

All subjects in the pivotal hypertension program, including the Advance-HTN and Launch-HTN trials, as well as the Explore-CKD trial, will be given the opportunity to participate in the extension trial.

Other Indications

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When CKD progresses, it may eventually lead to kidney failure, which requires dialysis or a kidney transplant to maintain life.

We plan to initiate a Phase 2 trial in the second half of 2023 for lorundrostat as a potential therapy to treat patients with Stage 2 to 4 CKD.

We plan to initiate a two-part Phase 2 trial, Explore-CKD, in the second half of 2023 for lorundrostat in hypertensive patients with Stage 2 to 3b CKD.

The planned Phase 2 clinical trial includes an initial proof-of-concept portion (Part A) and a profiling portion (Part B).

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We commenced our operations in May 2019 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, in-licensing our product candidate, lorundrostat, establishing our intellectual property portfolio, conducting research, preclinical studies, and clinical trials, and providing other general and administrative support for our operations.

As of June 30, 2023, we had cash, cash equivalents, and investments of $282.8 million.

From inception to June 30, 2023, we raised aggregate gross proceeds of approximately $378.8 million from the sale of common stock, convertible preferred stock, and convertible notes.

As of September 30, 2023, we had cash, cash equivalents, and investments of $265.9 million.

From inception to September 30, 2023, we raised aggregate gross proceeds of approximately $378.8 million from the sale of common stock, convertible preferred stock, and convertible notes.

In February 2023, we completed our initial public offering (IPO) of 13,800,000 shares of our common stock at a price to the public of $16.00 per share, including the exercise in full by the underwriters of their option to purchase 1,800,000 additional shares of our common stock.

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Our operations to date have been limited to business planning, raising capital, in-licensing and developing lorundrostat, conducting clinical trials, and other research and development activities.

Our net losses for the six months ended June 30, 2023 and 2022 were $24.7 million and $14.0 million, respectively.

As of June 30, 2023 and December 31, 2022, we had an accumulated deficit of $77.6 million and $52.8 million, respectively.

Our net losses for the nine months ended September 30, 2023 and 2022 were $47.5 million and $20.7 million, respectively.

As of September 30, 2023 and December 31, 2022, we had an accumulated deficit of $100.3 million and $52.8 million, respectively.

Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical development activities and other research and development activities.

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In July 2020, we entered into a license agreement (the Mitsubishi License) with Mitsubishi Tanabe Pharmaceutical Company (Mitsubishi Tanabe), pursuant to which Mitsubishi Tanabe granted us an exclusive, worldwide, royalty-bearing, sublicensable license under Mitsubishi Tanabe’s patent and other intellectual property rights to exploit products incorporating lorundrostat (formerly MT-4129) (Lorundrostat Products) for the prevention, treatment, diagnosis, detection, monitoring, or predisposition testing with respect to indications, diseases, and conditions in humans.

Pursuant to the Mitsubishi License, we paid Mitsubishi Tanabe a $1.0 million upfront fee, and we are obligated to pay Mitsubishi Tanabe development milestone payments of up to $9.0 million in the aggregate and commercial milestone payments of up to $155.0 million in the aggregate upon first commercial sale and upon meeting certain annual sales targets, as well as additional commercial milestone payments of up to $10.0 million for a second indication.

Additionally, we are obligated to pay

Mitsubishi Tanabe tiered royalties at percentages ranging from the mid-single digits to ten percent ( 10% ) of aggregate net sales of each Lorundrostat Product on a Lorundrostat Product-by-Lorundrostat Product and country-by-country basis, until the later of (i) the expiration of the last-to-expire valid Mitsubishi Tanabe patent claim covering a Lorundrostat Product, (ii) ten years from the first commercial sale of a Lorundrostat Product, or (iii) the expiration of regulatory exclusivity in such country.

Pursuant to the Mitsubishi License, we paid Mitsubishi Tanabe a $1.0 million upfront fee, and we were initially obligated to pay Mitsubishi Tanabe development milestone payments of up to $9.0 million in the aggregate and commercial milestone payments of up to $155.0 million in the aggregate upon first commercial sale and upon meeting certain annual sales targets, as well as additional commercial milestone payments of up to $10.0 million for a second indication.

Additionally, we are obligated to

pay Mitsubishi Tanabe tiered royalties at percentages ranging from the mid-single digits to ten percent ( 10% ) of aggregate net sales of each Lorundrostat Product on a Lorundrostat Product-by-Lorundrostat Product and country-by-country basis, until the later of (i) the expiration of the last-to-expire valid Mitsubishi Tanabe patent claim covering a Lorundrostat Product, (ii) ten years from the first commercial sale of a Lorundrostat Product, or (iii) the expiration of regulatory exclusivity in such country.

Such royalties are subject to reduction under specified conditions, including lack of patent coverage and generic competition.

We incurred $4.0 million of research and development expenses during the six months ended June 30, 2023 associated with an achieved development milestone in March 2023 related to the planned initiation of our pivotal clinical program of lorundrostat.

We incurred $4.0 million of research and development expenses during the nine months ended September 30, 2023 associated with an achieved development milestone in March 2023 related to the planned initiation of our pivotal clinical program of lorundrostat.

We are obligated to use commercially reasonable efforts to conduct and complete the development activities and to file for regulatory approval for at least one Lorundrostat Product in a major market country and consider in good faith developing at least one Lorundrostat Product in a non-major market country.

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Results of Operations

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

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

Three Months Ended,

September 30,

2023 2022 Change

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Research and Development Expenses

Research and development expenses increased by $6.3 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, which was primarily due to increases of $4.0 million in preclinical and clinical costs, driven by the initiation of the lorundrostat pivotal program in the second quarter of 2023, $1.3 million in higher compensation expense as a result of additions to headcount, and $1.0 million in clinical supply, manufacturing, and regulatory costs.

Research and development expenses increased by $16.4 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, which was primarily due to increases of $12.4 million in preclinical and clinical costs, driven by the initiation of the lorundrostat pivotal program in the second quarter of 2023, $2.3 million in clinical supply, manufacturing, and regulatory costs, and $1.7 million in higher compensation expense resulting from additions to headcount.

General and Administrative Expenses

General and administrative expenses increased by $3.0 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

The increase was primarily due to $1.4 million in higher compensation expense as a result of additions to headcount, $1.1 million in higher professional fees associated with operating as a public company, $0.3 million of higher insurance expense associated with new director and officer insurance policies, and $0.2 million in higher other administrative expenses.

General and administrative expenses increased by $2.4 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

The increase was primarily due to $1.2 million in higher professional fees associated with operating as a public company, $0.8 million in higher compensation expense resulting from additions to headcount, $0.3 million of higher insurance expense associated with new director and officer insurance policies, and $0.1 million in higher other administrative expenses.

Total Other Income, Net

Total other income, net increased by $3.6 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, which was primarily attributable to interest earned during the three months ended June 30, 2023 on our investments in money market funds and U.S.

treasuries that began earning interest in the third quarter of 2022.

Total other income, net increased by $2.8 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, which was primarily attributable to increased interest earned on our investments in money market funds and U.S.

Results of Operations

Comparison of the Six Months Ended June 30, 2023 and 2022

Six Months Ended,

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

Nine Months Ended,

September 30,

2023 2022 Change

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Research and Development Expenses

Research and development expenses increased by $11.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, which was primarily due to increases of $4.0 million in license fees under the Mitsubishi License upon achieving a development milestone of lorundrostat in March 2023, $3.8 million in preclinical and clinical costs, driven by the initiation of the lorundrostat pivotal program in

the second quarter of 2023, $2.2 million in higher compensation expense as a result of additions to headcount, $1.7 million in clinical supply, manufacturing, and regulatory costs, and $0.1 million in other research and development expenses.

Research and development expenses increased by $28.2 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, which was primarily due to increases of $15.3 million in preclinical and clinical costs, driven by the initiation of the lorundrostat pivotal program in the second quarter of 2023, $4.9 million in clinical supply, manufacturing, and regulatory costs,

$4.0 million in license fees under the Mitsubishi License upon achieving a development milestone of lorundrostat in March 2023, $3.9 million in higher compensation expense resulting from additions to headcount, and $0.1 million in other research and development expenses.

General and Administrative Expenses

General and administrative expenses increased by $4.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

The increase was primarily due to $2.1 million in higher compensation expense as a result of additions to headcount, $1.9 million in higher professional fees associated with operating as a public company, $0.5 million of higher insurance expense associated with new director and officer insurance policies, and $0.3 million in higher other administrative expenses.

General and administrative expenses increased by $7.2 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

The increase was primarily due to $3.7 million in higher professional fees associated with operating as a public company, $2.5 million in higher compensation expense resulting from additions to headcount, $0.8 million of higher insurance expense associated with new director and officer insurance policies, and $0.2 million in higher other administrative expenses.

Total Other Income, Net

Total other income, net increased by $5.9 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, which was primarily attributable to interest earned during the six months ended June 30, 2023 on our investments in money market funds and U.S.

treasuries that began earning interest in the third quarter of 2022.

Total other income, net increased by $8.7 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, which was primarily attributable to increased interest earned on our investments in money market funds and U.S.

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses and have negative cash flows from operations for the foreseeable future as we continue the development of, seek regulatory approval for, and potentially commercialize lorundrostat, seek to identify, assess, acquire, and in-license intellectual property related to or develop additional product candidates and operate as a public company.

From inception to June 30, 2023, we raised aggregate gross proceeds of approximately $378.8 million from the sale of common stock, convertible preferred stock, and convertible notes.

As of June 30, 2023, we had cash, cash equivalents, and investments of $282.8 million.

From inception to September 30, 2023, we raised aggregate gross proceeds of approximately $378.8 million from the sale of common stock, convertible preferred stock, and convertible notes.

As of September 30, 2023, we had cash, cash equivalents, and investments of $265.9 million.

In February 2023, we completed our IPO of 13,800,000 shares of our common stock sold at a price to the public of $16.00 per share, including the exercise in full by the underwriters of their option to purchase 1,800,000 additional shares of our common stock, for net proceeds of approximately $201.4 million, net of underwriting discounts, commissions, and offering costs.

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Funding Requirements

Based on our current operating plan, we believe that our cash, cash equivalents, and investments as of June 30, 2023 will be sufficient to allow us to fund our operations for at least twelve months.

Based on our current operating plan, we believe that our cash, cash equivalents, and investments as of September 30, 2023 will be sufficient to allow us to fund our operations for at least twelve months.

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

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may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from factors that include but are not limited to, inflation, the conflict between Russia and Ukraine, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from factors that include but are not limited to, inflation, elevated interest rates, geopolitical conflict in and around Ukraine, Israel, and other areas of the world, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive.

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If we are unable to raise additional funds through equity or debt financings or other arrangements when needed or on terms acceptable to us, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves, or on less favorable terms than we would otherwise choose.

Comparison of the Six Months Ended June 30, 2023 and 2022

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

Since our inception, we have primarily used our available cash to fund expenditures related to the in-license and development of lorundrostat.

The following table sets forth a summary of cash flows for the periods presented:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Operating Activities

Net cash used in operating activities of $33.2 million during the six months ended June 30, 2023 increased, compared to $12.0 million during the six months ended June 30, 2022, which was primarily attributable to an increase in cash used to support our operating activities, including but not limited to, the development of lorundrostat and related clinical trial expenses, personnel and compensation expense, legal and professional fees to support our operations, and general working capital requirements.

Net cash used in operating activities of $52.2 million during the nine months ended September 30, 2023 increased, compared to $19.0 million during the nine months ended September 30, 2022, which was primarily attributable to an increase in cash used to support our operating activities, including but not limited to, the development of lorundrostat and related clinical trial expenses, personnel and compensation expense, legal and professional fees to support our operations, and general working capital requirements.

The $33.2 million increase in cash used consisted of an increase in net loss, adjusted for non-cash expenses of approximately $27.9 million and the net effect of changes in working capital of $5.3 million.

Investing Activities

Net cash used in investing activities of $156.4 million during the six months ended June 30, 2023 increased, compared to zero during the six months ended June 30, 2022, which was attributable to purchases of marketable securities of $218.9 million during the six months ended June 30, 2023 subsequent to receiving cash proceeds from our IPO in February 2023, partially offset by maturities of the marketable securities of $62.5 million during the six months ended June 30, 2023.

Net cash used in investing activities of $152.4 million during the nine months ended September 30, 2023 increased, compared to $71.8 million during the nine months ended September 30, 2022, which was attributable to increased purchases of marketable securities of $203.1 million during the nine months ended September 30, 2023 subsequent to receiving cash proceeds from our IPO in February 2023, partially offset by

increased maturities of the marketable securities of $122.5 million during the nine months ended September 30, 2023.

Financing Activities

Net cash provided by financing activities of $203.0 million during the six months ended June 30, 2023 increased, compared to $129.6 million during the six months ended June 30, 2022.

During the six months ended June 30, 2023, we received aggregate gross proceeds of $220.8 million from the sale of our common stock in our IPO in February 2023 and paid $17.8 million of underwriting discounts, commissions, and offering costs in the same period.

During the six months ended June 30, 2022, we received $129.6 million in net proceeds from the issuance and sale of our Series A and Series B convertible preferred stock.

Net cash provided by financing activities of $203.2 million during the nine months ended September 30, 2023 increased, compared to $129.1 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, we received aggregate gross proceeds of $220.8 million from the sale of our common stock in our IPO in February 2023 and paid $17.8 million of underwriting discounts, commissions, and offering costs in the same period.

During the nine months ended September 30, 2022, we received $129.6 million in net proceeds from the issuance and sale of our Series A and Series B convertible preferred stock.

Contractual Obligations and Commitments

Under the Mitsubishi License, we have milestone payment obligations that are contingent upon the achievement of certain development milestones and specified levels of product sales and are required to make certain royalty payments in connection with the sale of products developed under the agreement.

We are currently unable to estimate the timing or likelihood of achieving future milestones or making future product sales.

Our next anticipated development milestone of $5.0 million will become due by us upon initiation of the Launch-HTN trial.

We are currently unable to estimate the timing or likelihood of achieving other future milestones or making future product sales.

See above and Note 4.

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however, actual results may differ materially from these estimates under different assumptions or conditions.

There were no changes during the six months ended June 30, 2023 to our critical accounting estimates as disclosed in our 2022 Annual Report on Form 10-K.

There were no changes during the nine months ended September 30, 2023 to our critical accounting estimates as disclosed in our 2022 Annual Report on Form 10-K.

For information on our significant accounting policies, please refer to Note 2.

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We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

if, among other factors, the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year (subject to certain conditions), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We intend to rely on other exemptions provided by the JOBS Act, including without limitation,

not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if, among other factors, the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year (subject to certain conditions), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We are also a smaller reporting company as defined in the Exchange Act.

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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