Item 7. Management’s Discussion and Analysis
Item
7.
Management’s
Discussion And Analysis Of Financial Condition And Results Of Operations
The
following discussion and analysis of our financial condition and results of operations should be read together with our financial statements
and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis
or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business
and financing needs, includes forward-looking statements that involve risks and uncertainties and should be read together with the “Risk
Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ
materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those discussed below and elsewhere in this Annual Report and in other reports we file with the Securities and Exchange Commission,
particularly those under “Risk Factors.” All dollars amounts stated in the tabular and paragraph formats are presented in
thousands, except per share data, or otherwise indicated.
Overview
We
are a clinical-stage biopharmaceutical company focused on delivering groundbreaking therapies using our lipid nanocrystal (LNC) platform
delivery technology (LNC Platform). We are seeking to develop an internal pipeline of products utilizing the LNC Platform to successfully
encapsulate small molecules and small oligonucleotides and facilitate targeted and extrahepatic delivery to desired cells tissues without
toxicity.
Key
elements of our strategy include:
●
Advancing
MAT2203 into the ORALTO trial for the treatment of invasive aspergillosis in patients with limited treatment options by securing
a development and/or commercial partner. This initial indication is designed to be a gateway indication to establish the pharmacodynamic
bridge necessary to expand the use of MAT2203 into other indications to treat deadly invasive fungal infections (e.g., mucormycosis,
candidiasis and the endemic mycoses) through limited additional clinical work under a 505(b)(2) pathway, thereby making MAT2203 a
pipeline in a product.
●
Expanding
the utilization of our LNC Platform with other small molecules and small oligonucleotides into inflammation and oncology in order
to develop an internal pipeline of differentiated drug candidates. Oral, extrahepatic and non-toxic intracellular delivery of these
molecules would represent a significant advancement.
●
Building
an external pipeline of collaborations focused on our LNC Platform with leading pharmaceutical companies to provide delivery solutions
for their complex small molecules and small oligonucleotides, including ASOs and siRNAs.
For
the years ended December 31, 2023 and 2022, our net loss was $22,942 and $20,997, respectively. We have incurred losses for each
period from our inception and expect to incur additional losses for the foreseeable future. We do not believe that the cash, cash
equivalents and marketable debt securities on hand are sufficient to fund planned operations beyond the next twelve months from the filing date of this Annual Report. We will seek to fund our operations through public or private equity offerings, debt financings, government or other
third-party funding, collaborations, and licensing arrangements. These financing alternatives may not be available to us on
acceptable terms, or at all. As a result, substantial doubt exists about our ability to continue as a going concern.
Financial
Operations Overview
Revenue
During
the year ended December 31, 2023, we generated $1,096 in contract research revenue resulting from the research collaboration with BioNTech
SE and Genentech Inc. During the year ended December 31, 2022, we generated $3,188 in contract revenue resulting from the research collaboration
with BioNTech SE. Our ability to generate product revenue, which we do not expect to occur for many years, if ever, will depend heavily
on the successful development and eventual commercialization of our early-stage product candidates.
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Research
and Development Expenses
Research
and development expenses consist of costs incurred for the development of product candidate MAT2203, and advancement of our LNC Platform,
which include:
●
the
cost of acquiring, developing, and manufacturing pre-clinical and human clinical trial materials;
●
costs
for consultants and contractors associated with Chemistry and Manufacturing Controls (CMC), pre-clinical and clinical activities
and regulatory operations;
●
expenses
incurred under agreements with contract research organizations, or CROs, including the NIH, that conduct our pre-clinical or clinical
trials;
●
employee-related
expenses, including salaries and stock-based compensation expense for those employees involved in the research and development process;
and
●
the
reimbursement of certain expenses related to the CFF award agreement.
The
table below summarizes our direct research and development expenses for our product candidates and development platform for the years
ended December 31, 2023 and 2022. Our direct research and development expenses consist principally of external costs, such as fees paid
to contractors, consultants, analytical laboratories and CROs and/or the NIH, in connection with our development work. We typically use
our employee and infrastructure resources for manufacturing clinical trial materials, conducting product analysis, study protocol development
and overseeing outside vendors. Included in “Internal Staffing, Overhead and Other” below is the cost of laboratory space,
supplies, research and development (R&D) employee costs (including stock option expenses), travel and medical education.
Years Ended December 31,
2023
2022
Direct research and development expenses:
Manufacturing process development
$ 1,182
$ 2,523
Preclinical trials
852
720
Clinical development
1,696
2,175
Regulatory
581
737
Internal staffing, overhead and other
10,178
10,523
Total research & development
$ 14,489
$ 16,678
Research
and development activities are central to our business model. We expect our research and development expenses to increase over time because
product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical
development, primarily due to the increased size and duration of later-stage human trials. However, we anticipate that our research and
development expenses during 2024 will be lower compared with expenses incurred during 2023 until such time as we are able to secure additional
funding to support initiation of our Phase 3 registration trial for MAT2203 and advancement of our LNC platform delivery technology.
General
and Administrative Expenses
General
and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions. Other
general and administrative expenses include facility costs, insurance, investor relations expenses, professional fees for legal, patent
review, consulting, and accounting/audit services. We anticipate that our general and administrative expenses during 2024 will decrease
slightly compared to expenses incurred during 2023.
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Sale
of Net Operating Losses (NOLs) & Tax Credits
Income
obtained from selling unused net operating losses (NOLs) and research and development tax credits under the New Jersey Technology Business
Tax Certificate Program was $484 and $3,491 for the years ended December 31, 2023 and 2022, respectively. The income recorded in 2023
included sales related to tax year 2022, while income recorded in 2022 included sales related to tax years 2021 and 2020.
Other
Income, net
Other
income, net is largely comprised of interest income (expense) and dividends.
Application
of Critical Accounting Policies and Accounting Estimates
A
critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires
management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect
of matters that are inherently uncertain.
For
a description of our significant accounting policies, refer to “Note 3 – Summary of Significant Accounting Policies .”
Of these policies, the following are considered critical to an understanding of our Consolidated Financial Statements as they require
the application of the most difficult, subjective and complex judgments; (i) Research and development costs, and (ii) Goodwill and other
intangible assets.
Current
Operating Trends
Our
current R&D efforts are focused on advancing our lead LNC product candidate, MAT2203, through clinical development and expanding
application of our LNC Platform through both internal efforts and collaborations with third parties. Our R&D expenses consist of
manufacturing work and the cost of active pharmaceutical ingredients and excipients used in such work, fees paid to consultants for work
related to clinical trial design and regulatory activities, fees paid to providers for conducting various clinical studies as well as
for the analysis of the results of such studies, and for other medical research addressing the potential efficacy and safety of our drugs.
We believe that significant investment in product development is a competitive necessity, and we plan to continue these investments to
be in a position to realize the potential of our product candidates and proprietary technologies.
We
expect that most of our R&D expenses in the near-term future will be incurred in support of our current and future preclinical and
clinical development programs. These expenditures are subject to numerous uncertainties relating to timing and cost to completion. We
test compounds in numerous preclinical studies for safety, toxicology, and efficacy. At the appropriate time, subject to the approval
of regulatory authorities, we expect to conduct early-stage clinical trials. We anticipate funding these trials ourselves, and possibly
with the assistance of federal grants, contracts, or other agreements. As we obtain results from trials, we may elect to discontinue
or delay clinical trials for certain products to focus our resources on more promising products. Completion of clinical trials may take
several years, and the length of time varies substantially according to the type, complexity, novelty and intended use of a product candidate.
The
commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical
trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays. In addition, we
may encounter regulatory delays or rejections as a result of many factors, including results that do not support the intended safety
or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the
period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing
and costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business,
financial condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical
trials or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows
from the relevant drug or program would be delayed or would not occur.
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Results
of Operations
Years
Ended December 31, 2023 and 2022
The
following table summarizes our operating expenses for the years ended December 31, 2023 and 2022:
Years Ended December 31,
2023
2022
Revenues
$ 1,096
$ 3,188
Expenses:
Research and development
$ 14,489
$ 16,678
General and administrative
10,373
11,100
Operating Expenses
$ 24,862
$ 27,778
Sale of net operating losses (NOLs)
$ 484
$ 3,491
Revenues.
We generated $1,096 and $3,188 for the years ended December 31, 2023 and 2022, respectively. The amount earned during 2023 consists
of contract research revenue resulting from the research collaboration with BioNTech SE and the feasibility study agreement with Genentech
Inc., while the amount earned during 2022 resulted exclusively from the research collaboration with BioNTech SE.
Research
and Development expenses. R&D expense for the years ended December 31, 2023 and 2022 was $14,489 and $16,678, respectively.
The decrease of $2,189 was due to a decrease of $1,302 of clinical trial expenses and $541 decrease in professional & consulting
fees, primarily related to the pause of our MAT2203 development program, and a $291 decrease due to the license agreement amendment expense
recorded in 2022.
General
and Administrative expenses. G&A expense for the years ended December 31, 2023 and 2022 was $10,373 and $11,100, respectively.
The decrease of $727 over the prior year was primarily due to a decrease in certain insurance premiums, and lower consulting fees and
facility expenses related to certain projects that began in the prior year.
Sale
of net operating losses (NOLs) & tax credits. The Company recognized $484 and $3,491 for the years ended December 31, 2023
and 2022, respectively, in connection with the sale of state net operating losses and state research and development credits to a third
party under the New Jersey Technology Business Tax Certificate Program. The income recorded in 2023 included sales related to tax year
2022, while income recorded in 2022 included sales related to tax years 2021 and 2020.
Liquidity
and capital resources
Sources
of Liquidity
We
have funded our operations since inception primarily through private placements of our preferred stock and our common stock and common
stock warrants. As of December 31, 2023, we have raised a total of $156,851 in gross proceeds and $144,141, net proceeds, from sales
of our equity securities since inception in 2013.
As
of December 31, 2023, we had cash, cash equivalents and marketable debt securities, excluding restricted cash, totaling $13,756.
2020
At-The-Market Sales Agreement
On
July 2, 2020, we entered into an At-The-Market Sales Agreement (the “Sales Agreement”) with BTIG, LLC (“BTIG”),
pursuant to which we may offer and sell, from time to time, through BTIG, as sales agent and/or principal, shares of our common stock
having an aggregate offering price of up to $50 million, subject to certain limitations on the amount of common stock that may be offered
and sold by us set forth in the Sales Agreement. BTIG will be paid a 3% commission on the gross proceeds from each sale. We may terminate
the Sales Agreement at any time; BTIG may terminate the Sales Agreement in certain limited circumstances. We did not sell any shares
of our common stock under the Sales Agreement during either 2023 or 2022. At December 31, 2023, the Sales Agreement’s available
capacity was $44,247.
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Cash
Flows
The
following table sets forth the primary sources and uses of cash for each of the periods set forth below:
Years Ended December 31
2023
2022
Cash used in operating activities
$ (15,278 )
$ (19,156 )
Cash provided by investing activities
13,242
4,877
Cash (used in) provided by financing activities
(7 )
79
Net decrease in cash and cash equivalents and restricted cash
$ (2,043 )
$ (14,200 )
Operating
Activities
Net
cash used in operating activities for the year ended December 31, 2023 was $15,278, compared to $19,156 in the prior year. The decrease
of $3,878 for the period was primarily due to a decrease of $6,456 of working capital adjustments due to the timing of receipts and payments
in the ordinary course of business, partially offset by a $1,945 increase in net loss in the current period, $280 decrease in stock based
compensation expense, and a decrease associated with the license agreement charge of $291 in 2022. We expect the amount of cash used
in operations during 2024 to be slightly higher as we continue to move our product candidates and LNC Platform forward in their development
cycles.
Investing
Activities
Net
cash provided by investing activities for the year ended December 31, 2023 was $13,242, compared to $4,877 of net cash provided by investing
activities for the year ended December 31, 2022. The increase of $8,365 provided by investing activities was primarily due to a $7,691
net decrease in the purchases and maturities of marketable debt securities and $674 decrease in purchases of equipment and leasehold
improvements as compared to the prior year.
Financing
Activities
Net
cash (used in) and provided by financing activities was ($7) and $79 for the years ended December 31, 2023 and 2022, respectively. The
decrease of $86 in cash provided by financing activities is primarily due to the decrease in the receipt of proceeds of $99 from the
exercise of stock options in 2022.
Funding
Requirements and Other Liquidity Matters
We
expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses
will increase substantially if and as we:
●
conduct
further clinical studies of MAT2203, our lead product candidate, even is such studies are primarily financed with non-dilutive funding
from NIH;
●
seek
to discover and develop additional product candidates;
●
seek
regulatory approvals for any product candidates that successfully complete clinical trials;
●
require
the manufacture of larger quantities of product candidates for clinical development and potentially commercialization;
●
maintain,
expand, and protect our intellectual property portfolio;
●
hire
additional clinical, quality control and scientific personnel; and
74
●
add
operational, financial and management information systems and personnel, including personnel to support our product development and
planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public
company.
We
do not believe that our existing cash, cash equivalents and marketable debt securities will be sufficient to fund our operating expenses and
capital expenditures requirements beyond the next twelve months from the filing date of this Annual Report. As a result, substantial doubt exists about the Company’s
ability to continue as a going concern.
Until
such time, if ever, that we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through
a combination of private and public equity offerings, debt financings, government or other third-party funding, collaborations, and licensing
arrangements. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity
securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation
or other preferences that adversely affect your rights of our common stockholders. Debt financing and preferred equity financing, if
available, would result in increased fixed payment obligations and 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, that could
adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention
from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely
affect our management’s ability to oversee the development of our product candidates.
If
we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates
or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings
when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant
rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our
financial condition and results of operations may also be impacted by other factors we may not be able to control, such as global supply
chain disruptions, global trade disputes and/or political instability. Increases in interest rates, especially if coupled with reduced
government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening
these risks. Additionally, rising inflation rates may affect us by increasing operating expenses, such as employee-related costs and
clinical trial expenses, negatively impacting our results of operations.
Contractual
Obligations and Commitments
Refer
to Note 10 – “Commitments” in the accompanying notes to the consolidated financial statements for a discussion
of the Company’s contractual obligations and commitments.
Off-Balance
Sheet Arrangements
We
did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules,
such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special
purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance
sheets.
RECENT
ACCOUNTING PRONOUNCEMENTS
Refer
to Note 3 - “ Summary of Significant Accounting Policies ,” in the accompanying notes to the consolidated financial
statements for a discussion of recent accounting pronouncements.
Item
7A.
Quantitative
And Qualitative Disclosures About Market Risk
Not
applicable.
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