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 in conjunction with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those under “Risk Factors” included in Part I, Item 1A and under “Special Note Regarding Forward-Looking Statements” or in other parts of this Annual Report on Form 10-K.
General
As of January 1, 2024, we no longer qualified as a foreign private issuer under the rules and regulations of the SEC and as a result, are no longer entitled to rely on the foreign private issuer exemptions. We are required to report as a domestic U.S. filer, including filing Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements under Section 14 of the Exchange Act. In addition, since January 1, 2024, our “insiders” have been subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. We are no longer exempt from the requirements of Regulation FD promulgated by the SEC under the Exchange Act. Moreover, as a domestic filer, we are no longer permitted to follow our home country rules in lieu of the corporate governance obligations imposed by Nasdaq and are required to comply with the governance practices required of U.S. domestic issuers.
In prior periods, we prepared our financial information in accordance with the International Financial Reporting Standards as issued by the International Accounting Standard Board ("IFRS") and presented our financial results in Euros. As a consequence of becoming a domestic issuer as of January 1, 2024, we are required to present our financial information in accordance with U.S. GAAP. The below financial information has been prepared in accordance with U.S. GAAP and expressed in U.S. dollars for all periods presented. The financial information should not be expected to correspond to figures we have previously presented under IFRS.
The functional currency of the Company and its subsidiaries has historically been EUR. The Company reassessed its functional currency and determined the U.S. Dollar to be the functional currency of the Company and its subsidiaries beginning January 1, 2023. Significant elements involved in the determination of the functional currency change include a shift in the Company’s sources of financing from EUR to USD given its access to the U.S. public market and an increase of operating costs incurred in USD due to Phase III trials taking place predominantly in the United States, among other factors.
In the Company’s previously reported financial statements as at December 2022 and 2021 and for each of the three years in the period ended December 31, 2022, prepared in accordance with IFRS, the weighted average ordinary shares outstanding used to calculate net loss per ordinary share, basic and diluted, contained an error. The reported amounts in the IFRS financial statements for the weighted average ordinary share outstanding, basic and diluted, were 81,559,780, 24,131,427 and 10,653,636 for the years ended December 31, 2022, 2021 and 2020 respectively. If corrected, those amounts would have been 39,628,088 , 23,636,341 and 9,238,016 for the years ending December 31, 2022, 2021 and 2020 respectively. As a result, the reported amounts in IFRS financial statements for net loss per ordinary share, basic and diluted, were (€.96), (€1.19) and (€.54) for the years ending December 31, 2022, 2021 and 2020 respectively. If corrected those amounts would have been (€.1.97), (€1.21) and (€.62) for the years ending December 31 2022, 2021 and 2020 respectively. The U.S. GAAP financial statements correctly reflect the weighted average ordinary share outstanding, basic and diluted, and net loss per ordinary share, basic and diluted. The U.S. GAAP financial statements are not restated as this is their first time being presented.
Overview
We are a late-stage biopharmaceutical company whose mission is to improve patient care in populations with metabolic diseases where currently approved therapies have not been adequate or well tolerated. We seek to fill a significant unmet need for a safe, well tolerated and convenient LDL-lowering therapy. In multiple phase 3 studies, we are investigating obicetrapib, an oral, low-dose and once-daily CETP inhibitor, alone or as a fixed-dose combination with ezetimibe, as preferred LDL-C lowering therapies to be used as an adjunct to statin therapy for patients at risk of CVD with elevated LDL-C, for whom existing therapies are not sufficiently effective or well tolerated. We believe that CETP inhibition may also play a role in other indications by potentially mitigating the risk of developing diseases such as Alzheimer’s disease or Type 2 diabetes.
Our product candidate, obicetrapib, is a next-generation, oral, low-dose CETP inhibitor that we are developing to potentially overcome the limitations of current LDL-C lowering treatments. We believe that obicetrapib has the potential to be a once-daily oral CETP inhibitor for lowering LDL-C, if approved. In our Phase 2 ROSE2 clinical trial evaluating obicetrapib in combination with ezetimibe as an adjunct to high-intensity statin therapy, obicetrapib met its primary and secondary endpoints, with statistically significant reductions in LDL-C and ApoB observed. In five of our Phase 2 trials, TULIP, ROSE, OCEAN, ROSE2 and our Japan Phase 2b trial, evaluating obicetrapib as a monotherapy or a combination therapy with ezetimibe 10 mg, we observed statistically significant LDL-C lowering with side effects similar in frequency and severity to placebo including muscle related side effects and drug-related TESAEs. We have observed a favorable tolerability profile for obicetrapib in an aggregate of over 800 patients with dyslipidemia in our clinical trials to date. Furthermore, we believe that obicetrapib’s oral delivery, demonstrated activity at low doses, chemical properties and tolerability make it well-suited for combination approaches. We are
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developing a fixed dose combination of obicetrapib 10 mg and ezetimibe 10 mg, which has been observed to demonstrate even greater LDL-C reduction in our Phase 2b ROSE2 clinical trial.
Lowering of LDL-C, has been associated with MACE benefit in trials of LDL-C lowering drugs, including the REVEAL trial with the CETP inhibitor, anacetrapib. We are performing a cardiovascular outcomes trial (“CVOT”) to reconfirm this relationship.
Our goal is to develop and commercialize an LDL-C lowering monotherapy and a fixed-dose combination therapy, which offers the advantage of a single, low dose, once-daily oral pill, and fulfills the significant unmet need for an effective and convenient LDL-C lowering therapy. If we obtain marketing approval, we intend to commercialize obicetrapib for patients with ASCVD and/or HeFH and elevated levels of LDL-C despite being treated with currently available optimal lipid lowering therapy.
We have partnered with A. Menarini International Licensing S.A., part of Menarini Group (“Menarini”), providing them with the exclusive rights to commercialize obicetrapib 10 mg either as a sole active ingredient product or in a fixed dose combination with ezetimibe in the majority of European countries, if approved. Subject to receipt of marketing approval, our current plan is to pursue development and commercialization of obicetrapib in the United States ourselves, and to consider additional partners for jurisdictions outside of the United States and the European Union (the “EU”), including in Japan and China. In addition to our partnership with Menarini, we may in the future utilize a variety of types of collaboration, license, monetization, distribution and other arrangements with other third parties relating to the development or commercialization, once approved, of obicetrapib or future product candidates or indications. We are also continually evaluating the potential acquisition or license of new product candidates.
As of December 31, 2023 we had cash of $340.5 million as compared to $467.7 million as of December 31, 2022. The reduction in cash is primarily driven by research and development costs as we continue development of obicetrapib and increased spending on selling, general and administrative expenses to support our growing organization, partially offset by cash receipts related to the achievement of a clinical development milestone under the Menarini License and the exercise of Warrants. Based on our current operating plan, we believe that our existing cash will be sufficient to fund our anticipated level of operations through the anticipated readouts from our BROADWAY, BROOKLYN, TANDEM and PREVAIL trials.
Recent Developments
On February 16, 2024, we completed an underwritten public offering (the “Offering”) of 5,871,909 Ordinary Shares at a public offering price of $19.00 per Ordinary Share and, in lieu of Ordinary Shares to certain investors, pre-funded warrants (“Pre-Funded Warrants”) to purchase 4,736,841 Ordinary Shares at a public offering price of $18.9999 per Pre-Funded Warrant, which represents the per share public offering price for the Ordinary Shares less the $0.0001 per share exercise price for each such Pre-Funded Warrant. Of the 5,871,909 Ordinary Shares issued and sold in the Offering, 1,383,750 Ordinary Shares were issued and sold pursuant to the exercise of the underwriters’ option to purchase additional Ordinary Shares at the public offering price per share. The Ordinary Shares and Pre-Funded Warrants were issued and sold pursuant to an underwriting agreement among the Company and Jefferies LLC, Leerink Partners LLC, Piper Sandler & Co. and RBC Capital Markets, LLC, as representatives of the several underwriters listed on Schedule A thereto. The net proceeds to the Company from the Offering were $189.8 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
Components of our Results of Operations
Revenue
To date, we have not generated any revenue from the sale of pharmaceutical products. Our revenue has been solely derived from our license agreement with Menarini. Pursuant to the Menarini License, we received a non-refundable, non-creditable upfront amount of $120.9 million (€115.0 million) from Menarini on July 7, 2022, of which $98.6 million (€93.5 million) was recognized as revenue upon the execution of the Menarini License on June 23, 2022 and $4.1 million (€4.0 million) was subsequently recognized as revenue in 2022. In the year ended December 31, 2023, $14.1 million of revenue was recognized, partially related to the achievement of a clinical milestone and partially related to the recognition of additional amounts of the deferred portion of the upfront payment received from Menarini. Additionally, in partial contribution to our costs of development of the licensed products, Menarini may pay us €27.5 million, payable in two equal annual installments. Due to the scientific uncertainties around the commercialization of the licensed products based on the success of clinical trials, out of our control, the fixed €27.5 million is considered constrained at contract execution and is not initially recognized within the transaction price until it becomes highly probable of no significant revenue reversal. At the end of each reporting period, we assess the probability of significant reversals for any amounts that become likely to be realized prior to recognizing the fixed consideration associated with these payments within the transaction price.
Under the Menarini License, we are also entitled to receive fixed reimbursement payments for our continued development costs, certain cost sharing payments, sales-based royalties, as well as payments based upon the achievement of defined development, regulatory and commercial milestones. These milestones are contingent payments and represent variable considerations that are not initially recognized within the transaction price. Our ability to receive and generate revenue from these payments is dependent upon a number of factors, including our ability to successfully complete the development of and obtain regulatory approval for obicetrapib within the Menarini Territory. The uncertainty of achieving these milestones significantly impacts our ability to generate revenue. We achieved a milestone pursuant to the Menarini License in January 2023 in connection with the announcement of topline data from our ROSE2 trial. At the end of each reporting
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period, we assess the probability of significant reversals for any amounts that become likely to be realized prior to recognizing the variable consideration associated with these payments within the transaction price.
We do not expect to generate any revenue from product sales for the foreseeable future. Any revenue generated from potential future collaborations may vary due to the many uncertainties in the development of obicetrapib and other factors.
Research and Development Expenses
Research and development expenses are recognized as an expense when incurred and are typically made up of costs from our clinical and preclinical activities, drug development and manufacturing costs, and costs for CROs and investigative sites. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data provided by vendors of their actual costs incurred. At each balance sheet date, we estimate the level of services provided by vendors and the associated expenditure incurred for the services performed.
All such costs are for the purpose of advancing our product candidate to successfully complete clinical development, attain regulatory approval and, if approved, commercialize our product candidate. We commenced a Phase 3 CVOT and two other Phase 3 trials in 2022. Much of our current focus in the Phase 3 trials is on patient recruitment and retention and data cleaning. Research and development expenses consist of the following:
• clinical expenses primarily incurred by CROs assisting with our sponsored clinical trials and including clinical investigator costs, patient enrollments and costs of clinical sites;
• manufacturing expenses arising from API and drug product development as performed by our CMOs, which are used in our clinical trials and research and development activities;
• costs associated with obtaining potential regulatory approval of our product candidate, including preparation and submission of filings, ongoing monitoring and compliance with comments and recommendations provided by regulatory authorities, and regulatory-related advisory fees;
• contracted personnel and employment costs attributed to research and development efforts, which includes management fees, salaries, share-based compensation expenses, bonus plans and payments to contractors who work for us for a fixed number of hours per week or per month;
• preclinical and nonclinical research and development expenses of the product candidate, primarily for costs incurred by CROs assisting with an ongoing two-year rat and hamster carcinogenicity study; and
• other clinical costs such as clinical trial insurance and other consultancy fees.
We expect our research and development expenses to be significant as we advance obicetrapib through clinical trials and pursue regulatory approval. The process of conducting the necessary clinical trials to obtain regulatory approval is costly and time-consuming. Clinical trials generally become larger and more costly to conduct as they advance into later stages and, in the future, we will be required to make estimates for expense accruals related to clinical trial expenses. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of obicetrapib. See the section entitled “ Risk Factors—Risks Related to Our Product Development, Regulatory Approval and Commercialization ” for more information regarding the risks associated with clinical development.
Selling, General and Administrative Expenses
We recognize selling, general and administrative expenses on the accrual basis when incurred. These expenses mainly relate to consultant fees, employee costs, legal costs, marketing and communication, intellectual property costs due to increased efforts to drug patent development and protection globally, and general overhead costs.
Due to the general growth of the organization associated with administering ongoing and planned clinical trials and our focus on commercial preparedness, we expect that our selling, general and administrative expenses may increase. We will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company. Additionally, if and when a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expenses as a result of our preparation for commercial operations.
Interest Income
Interest income is recognized using the effective interest rate method. Finance income for the year ended December 31, 2023 is related to interest earned on cash balances.
Net Foreign Exchange Gain/Loss
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Our exchange gain relates mainly to cash balances denominated in foreign currencies, but also to transactions denominated in foreign currencies. We determined the United States Dollar to be the functional currency of the Company and its subsidiaries beginning January 1, 2023. Prior to January 1, 2023, the functional currency of the Company and its subsidiaries was the Euro. As such, the Company's foreign currency exposure at December 31, 2023 is mainly related to the Euro while the Company’s foreign currency exposure at December 31, 2022 is mainly related to the U.S. Dollar. As of December 31, 2023, our net exposure to foreign currency risk was $114.3 million, mainly related to the Euro, as compared to €268.2 million ($286.1 million) as of December 31, 2022, mainly related to the U.S. Dollar.
Income Tax
We have a history of losses and therefore have de minimis amounts of corporate tax. We expect to continue incurring losses as we continue to invest in our clinical and preclinical development programs. Consequently, any deferred tax assets are fully offset by a valuation allowance on our balance sheet.
Results of Operations
Comparison of the Years Ended December 31, 2023 and December 31, 2022
The following table summarizes our consolidated statements of operations for the periods indicated:
For the year ended December 31,
(In thousands of USD)
2023
2022
Change
Revenue
14,090
102,694
(88,604
)
Operating Expenses:
Research and development expenses
159,424
86,744
72,680
Selling, general and administrative expenses
37,633
19,507
18,126
Total operating expenses
197,057
106,251
90,806
Operating Loss
(182,967
)
(3,557
)
(179,410
)
Other income (expense):
Interest Income
11,283
—
11,283
Interest Expense
—
(287
)
287
Fair value change - earnout and warrants
(10,284
)
(1,041
)
(9,243
)
Fair value change - profit rights
—
(12,390
)
12,390
Fair value change - tranche rights
—
4,388
(4,388
)
Foreign exchange gains/(losses)
5,058
(9,747
)
14,805
Loss before tax
(176,910
)
(22,634
)
(154,276
)
Income tax expense
27
—
27
Loss for the year
(176,937
)
(22,634
)
(154,303
)
Revenue
Revenue decreased by $88.6 million, or 86%, from $102.7 million for the year ended December 31, 2022 to $14.1 million for the year ended December 31, 2023. This decrease is largely due to the one-time recognition in 2022 of $98.6 million of revenue allocated to the license performance obligation out of the $120.9 million upfront payment received pursuant to the Menarini License on June 23, 2022. This was partially offset by $5.4 million of revenue related to a clinical development milestone achieved in 2023 and the recognition of $8.7 million of deferred revenue related to the research and development performance obligation in 2023 as compared to $4.1 million recognized in 2022.
Research and Development Expenses
Research and development expenses increased by $72.7 million, or 84%, from $86.7 million for the year ended December 31, 2022 to $159.4 million for the year ended December 31, 2023. This was primarily driven by a:
• $45.4 million increase in clinical expenses which related to our ongoing clinical trials. Costs related to our Phase 3 clinical trials increased by $47.9 million in 2023 as compared to 2022, The increase related to Phase 3 clinical trials is slightly offset by a reduction of $2.5 million in costs related to Phase 1 and 2 clinical trials and other clinical expenses;
• $15.3 million increase in personnel expenses related to research and development expenses, primarily driven by our share-based compensation arrangements which account for $12.1 million of the increase. In addition to expenses related to new awards granted in 2023, our financial results for the year ended December 31, 2022 only reflected less than two months of expense related to the 2022 awards as compared to 12 months of such expense recognized in 2023. The remaining increase is largely due to the growth of the organization to support clinical trial management and regulatory affairs; and
• $11.6 million increase in manufacturing costs related to the ongoing operation of larger Phase 3 clinical trials
The following table summarizes our selling, general and administrative expenses for the periods indicated:
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For the year ended December 31,
(In thousands of USD)
2023
2022
Change
Clinical expenses
106,770
61,411
45,359
Non-clinical expenses
2,917
2,919
(2
)
Personnel expenses
20,877
5,539
15,338
Manufacturing costs
27,430
15,852
11,578
Regulatory expenses
1,297
878
419
Other research and development costs
133
145
(12
)
Total research and development expenses
159,424
86,744
72,680
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $18.1 million, or 93%, from $19.5 million for the year ended December 31, 2022 to $37.6 million for the year ended December 31, 2023. This was primarily driven by a:
• $11.9 million increase in personnel expenses related to selling, general and administrative expenses primarily driven by our share-based compensation arrangements which account for $8.3 million of the increase. In addition to expenses related to new awards granted in 2023, our financial results for the year ended December 31, 2022 only reflected less than two months of expense related to the 2022 awards as compared to 12 months of such expense recognized in 2023. The remainder is largely due to increased fees and hiring of individuals involved with administrative activities to support the growth of the organization and operation as a public company;
• $2.4 million increase in finance and administration expenses largely due to costs incurred in relation to the secondary offering and increased costs associated with operating as a public company for the entirety of 2023;
• $2.3 million increase in marketing and communication expenses related to startup costs as we begin to build capabilities to support our planned commercial launch of obicetrapib, if approved;
• $3.0 million increase in facility related and other costs primarily due to increased insurance costs incurred as a public company as well as increased travel expenses in support of the overall growth of the organization;
• $2.0 million decrease in commission expense due to the largest portion of the commission expense being recognized in 2022 related to the upfront payment received pursuant to the Menarini License.
The following table summarizes our research and development expenses for the periods indicated:
For the year
ended December 31,
(In thousands of USD)
2023
2022
Change
Personnel expense
17,136
5,258
11,878
Intellectual property
1,917
1,398
519
Legal costs
2,168
2,241
(73
)
Finance and administration
7,862
5,492
2,370
Marketing and communication
4,056
1,709
2,347
Commission expense
281
2,241
(1,960
)
Facility-related and other costs
4,213
1,168
3,045
Total selling, general and administrative expenses
37,633
19,507
18,126
Interest Income
Interest income increased by $11.3 million, from nil for the year ended December 31, 2022 to $11.3 million for the year ended December 31, 2023. This increase was driven by interest earned on cash balances.
Fair Value Change - Earnout and Warrants
Fair value change - earnout and warrants was a loss of $10.3 million for the year ended December 31, 2023 compared to a loss of $1.0 million for the year ended December 31, 2022. The change is driven by changes in the market price during the period for Ordinary Shares and Warrants which trade under the symbols "NAMS" and "NAMSW," respectively.
Foreign Exchange Gains/(Losses)
Net foreign exchange gains/(losses) were a loss of $9.7 million for the year ended December 31, 2022 compared to a gain of $5.1 million for the year ended December 31, 2023. This change was largely driven by a strengthening of the Euro against the U.S. Dollar, which was determined to be our functional currency as of January 1, 2023.
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Loss for the Year
Loss for the year increased by $154.3 million, from $22.6 million for the year ended December 31, 2022 to $176.9 million for the year ended December 31, 2023. This increase was largely driven by a decrease in revenue recognized in 2023 as compared to 2022 in conjunction with an increase in both research and development expenses and selling, general and administrative expenses.
Comparison of the Years Ended December 31, 2022 and December 31, 2021
The following table summarizes our consolidated statements of operations for the periods indicated:
For the year ended December 31,
(In thousands of USD)
2022
2021
Change
Revenue
102,694
—
102,694
Operating Expenses:
Research and development expenses
86,744
28,974
57,770
Selling, general and administrative expenses
19,507
6,003
13,504
Total operating expenses
106,251
34,977
71,274
Operating Loss
(3,557
)
(34,977
)
31,420
Other income (expense):
Interest Expense
(287
)
(411
)
124
Loss on debt extinguishment
—
(883
)
883
Fair value change - earnout and warrants
(1,041
)
—
(1,041
)
Fair value change - profit rights
(12,390
)
(20,613
)
8,223
Fair value change - tranche rights
4,388
13,393
(9,005
)
Foreign exchange gains/(losses)
(9,747
)
1,706
(11,453
)
Loss before tax
(22,634
)
(41,785
)
19,151
Income tax expense
—
—
—
Loss for the year
(22,634
)
(41,785
)
19,151
Revenue
Revenue increased by $102.7 million from nil for the year ended December 31, 2021 to $102.7 million for the year ended December 31, 2022. This was driven by the revenue allocated to the license performance obligation out of the $120.9 million upfront payment received pursuant to the Menarini License on June 23, 2022. $22.3 million was allocated to the research and development performance obligation and recorded as deferred revenue. Of this amount, $4.1 million was recognized in respect of the research and development performance obligation for the period ended December 31, 2022.
Research and Development Expenses
Research and development expenses increased by $57.8 million, or 199%, from $29.0 million for the year ended December 31, 2021 to $86.7 million for the year ended December 31, 2022. This was primarily driven by a:
• $48.7 million increase in clinical research and development cost which related to costs incurred in connection with our larger Phase 3 clinical trials in 2022 compared to our smaller Phase 2 clinical trials which were mostly conducted in 2021;
• $1.7 million increase in non-clinical expenses primarily as a result of costs incurred by the rat and hamster carcinogenicity study which is being conducted over two years and commenced at the end of 2021;
• $2.1 million increase in personnel expenses related to research and development expenses, primarily driven by our share-based compensation arrangements due to new grants awarded in 2022 as well as growth of the organization related to clinical trial management; and
• $6.1 million increase in manufacturing costs as a result of our Phase 2 clinical trials that continued in 2022 in addition to startup API campaign, process optimization and kit, labeling and distribution costs for our Phase 3 clinical trials.
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The following table summarizes our research and development expenses for the periods indicated:
For the year ended December 31,
(In thousands of USD)
2022
2021
Change
Clinical expenses
61,411
12,713
48,698
Non-clinical expenses
2,919
1,183
1,736
Personnel expenses
5,539
3,464
2,075
Manufacturing costs
15,852
9,783
6,069
Regulatory expenses
878
1,757
(879
)
Other research and development costs
145
74
71
Total research and development expenses
86,744
28,974
57,770
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $13.5 million, or 225%, from $6.0 million for the year ended December 31, 2021 to $19.5 million for the year ended December 31, 2022. This was primarily driven by a:
• $2.8 increase in personnel expenses related to increased fees, hiring of individuals involved with administrative and quality control activities and share-based payments due to new grants awarded in 2022;
• $1.9 million increase in intellectual property and other legal costs due to increased efforts related to drug patent development and global patent protection efforts, legal services rendered with respect to due diligence and the Business Combination;
• $5.2 million increase in finance and administration costs due to increased audit fees and accounting and advisory fees in support of the Menarini License and Business Combination; and
• $2.2 million of commission expense recognized in relation to the Menarini License.
The following table summarizes our selling, general and administrative expenses for the periods indicated:
For the year
ended December 31,
(In thousands of USD)
2022
2021
Change
Personnel expense
5,258
2,438
2,820
Intellectual property
1,398
834
564
Legal costs
2,241
927
1,314
Finance and administration
5,492
326
5,166
Marketing and communication
1,709
977
732
Commission expense
2,241
—
2,241
Facility-related and other costs
1,168
501
667
Total selling, general and administrative expenses
19,507
6,003
13,504
Fair Value Change - Earnout and Warrants
Fair value change - earnout and warrants was a loss of $1.0 million for the year ended December 31, 2022. The derivative earnout and warrant liabilities were recognized as part of the accounting for the Business Combination which occurred on November 22, 2022. As such, in the year ended December 31, 2021 there is no fair value change recognized for the earnout and warrants.
Foreign Exchange Gains/(Losses)
Net foreign exchange gains/(losses) were a gain of $1.7 million for the year ended December 31, 2021 compared to a loss of $9.7 million for the year ended December 31, 2022. This change was largely driven by the effect of the appreciation of the U.S. Dollar on cash balances held in U.S. Dollars at the end of the year and the increased research and development expenditures denominated in U.S. Dollars.
Loss for the Period
Loss for the period decreased by $19.2 million, from $41.8 million for the year ended December 31, 2021 to $22.6 million for the year ended December 31, 2022. This decrease was largely driven by the increase in research and development expenses and selling, general and administrative expenses, offset by revenue that was recognized pursuant to the Menarini License.
Liquidity and Capital Resources
We are a clinical-stage biopharmaceutical company and, since inception, we have incurred significant operating losses and expect to continue to do so for the foreseeable future. Since inception, we have not generated any product revenues or net positive cash flows from operating activities. We will not receive any product revenues or net positive cash flows from operating activities until we successfully develop a product candidate, obtain regulatory approval, and successfully commercialize it.
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To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and conducting clinical trials of obicetrapib. As a result, we are not yet profitable and have incurred losses in each annual period since our inception. As of December 31, 2023, we had an accumulated loss of $317.0 million. We expect to continue to incur significant losses for the foreseeable future. We anticipate that our expenses will relate primarily to, and increase substantially as a result of:
• the progress and costs of our discovery, preclinical and non-clinical development;
• the progress and costs of our clinical trials, including costs related to clinical sites, clinical investigators and CROs that are assisting with our sponsored clinical trials, and other research and development activities;
• the costs and timing of obtaining regulatory approval, including the expenses of filing NDAs and MAAs, and the related expenses involved in validating our manufacturing processes;
• the costs associated with any future investigator-sponsored preclinical studies and clinical trials;
• the costs of filing, prosecuting, defending and enforcing any patent applications, claims, patents and other intellectual property rights;
• the costs and timing of obtaining sufficient quantities of our product candidate for clinical trials by establishing production capacities through contracts with CMOs;
• the terms and timing of any collaborative, licensing and other arrangements that we may establish;
• compensation expenses associated with increased headcount;
• the costs of preparing for launch and commercialization of our product candidate;
• losing our status as a foreign private issuer; and
• the costs of operating as a public company in the United States.
We may encounter unforeseen expenses, difficulties, complications, delays and other factors that may adversely affect our business. The magnitude of our future net losses will depend on the rate of future growth of our expenses combined with our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our shareholders’ equity and working capital unless and until eliminated by revenue generation and growth.
We have historically funded our operations primarily through private placements of shares, the sale of convertible notes, proceeds from the Menarini License and the proceeds from the Business Combination. As of December 31, 2023, we had cash of $340.5 million. Based on our current operating plan, we believe that our existing cash will be sufficient to fund our anticipated level of operations through the anticipated readouts from our BROADWAY, BROOKLYN, TANDEM and PREVAIL trials. Until we can generate substantial revenue, if ever, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, convertible loans, warrants, collaborations, or other means. We may consider raising additional capital to take advantage of favorable market conditions or for other strategic considerations even if we have sufficient funds for planned operations. In addition to our partnership with Menarini, we may in the future utilize a variety of types of collaboration, license, monetization, distribution and other arrangements with other third parties relating to the development or commercialization, once approved, of obicetrapib or future product candidates or indications. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or privately placed equity offerings of securities, the terms of these securities or offerings may include liquidation or other preferences that adversely affect our other shareholders’ rights. To the extent that we raise additional funds by issuing and selling equity or equity-linked securities, shareholders will experience dilution. If we raise additional capital through debt financing, we would likely be subject to fixed payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, licensing or selling assets, making capital expenditures or declaring dividends. Capital may become difficult or impossible to obtain due to poor market or other conditions outside of our control. If we are unable to raise sufficient additional funds on favorable terms as and when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others any of our potential future product candidates that we would prefer to develop and commercialize ourselves. See the section titled “ Risk Factors ” for additional detail regarding these risks.
We plan to utilize our existing cash and other financial assets on hand primarily to fund our research and development initiatives to continue or commence clinical trials and seek regulatory approval for obicetrapib. We also expect to make capital expenditures to support our anticipated growth. Cash in excess of immediate requirements is invested in accordance with our investment policy which has the primary purpose of capital preservation and liquidity. We are also continually evaluating the potential acquisition or license of new product candidates.
Sources of Liquidity
Follow-on Offering
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On February 16, 2024, we completed the Offering of 5,871,909 Ordinary Shares at a public offering price of $19.00 per Ordinary Share and, in lieu of Ordinary Shares to certain investors, Pre-Funded Warrants to purchase 4,736,841 Ordinary Shares at a public offering price of $18.9999 per Pre-Funded Warrant, which represents the per share public offering price for the Ordinary Shares less the $0.0001 per share exercise price for each such Pre-Funded Warrant. Of the 5,871,909 Ordinary Shares issued and sold in the Offering, 1,383,750 Ordinary Shares were issued and sold pursuant to the exercise of the underwriters’ option to purchase additional Ordinary Shares at the public offering price per share. The Ordinary Shares and Pre-Funded Warrants were issued and sold pursuant to the Underwriting Agreement, among the Company and Jefferies LLC, Leerink Partners LLC, Piper Sandler & Co. and RBC Capital Markets, LLC, as representatives of the several underwriters listed on Schedule A thereto. The net proceeds to the Company from the Offering were $189.8 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
At-the-Market Offering
On December 7, 2023, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“TD Cowen”), pursuant to which we may issue and sell from time to time up to $150 million of our Ordinary Shares through or to TD Cowen as our sales agent or acting as principal in any method deemed to be an “at the market offering.” TD Cowen will receive a commission of up to 3.0% of the gross proceeds of any Ordinary Shares sold pursuant to the Sales Agreement. During the three months ended December 31, 2023, we did not sell any Ordinary Shares pursuant to the Sales Agreement.
Menarini License
On June 23, 2022, we entered into the Menarini License, pursuant to which we granted Menarini an exclusive, royalty-bearing, sublicensable license under certain of our intellectual property and our regulatory documentation to undertake post approval development activities and commercialize the Licensed Products, for any use in the Menarini Territory. Pursuant to the Menarini License, Menarini made a non-refundable, non-creditable upfront payment to us of €115 million. Menarini has also committed to providing us €27.5 million in funding for the research and development activities related to the Licensed Products over two years, together with bearing 50% of any development costs incurred in respect of the pediatric population in the Menarini Territory. We are also eligible to receive up to €863 million upon the achievement of various clinical, regulatory and commercial milestones. If obicetrapib is approved, and successfully commercialized by Menarini, we will be entitled to tiered royalties ranging from the low double-digits to the mid-twenties as a percentage of net sales in the Menarini Territory, with royalty step-downs in the event of generic entrance or in respect of required third-party IP payments. See the section titled “ Business—Commercial ” for a full description of the Menarini License.
As of December 31, 2023, we have received €5 million in milestone payments from Menarini.
Warrants
In the year ended December 31, 2023, 749,741 Warrants were exercised at an exercise price of $11.50 per Ordinary Share generating gross proceeds of $8.6 million. As of December 31, 2023, we had another 4,017,221 outstanding Warrants to purchase 4,017,221 Ordinary Shares, exercisable at an exercise price of $11.50 per share, which expire on November 23, 2027, at 5:00 p.m., Eastern Standard Time. Based on the exercise price of the Warrants, we may receive up to $46.2 million assuming the exercise of all Warrants outstanding as of December 31, 2023. From January 1, 2024 through February 16, 2024 a total of 663,011 additional Warrants were exercised generating gross proceeds of $7.6 million. The exercise of the Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Ordinary Shares and the spread between the exercise price of the Warrant and the price of an Ordinary Share at the time of exercise. For example, to the extent that the trading price of the Ordinary Shares exceeds $11.50 per share, it is more likely that holders of our Warrants will exercise their Warrants. If the trading price of the Ordinary Shares is less than $11.50 per share, it is unlikely that such holders will exercise their Warrants. The exercise price of the Warrants has at times exceeded the market price of the Ordinary Shares. To the extent that the price of our Ordinary Shares is below $11.50, we believe that the Warrant holders will be unlikely to cash exercise their warrants, resulting in little to no cash proceeds to us. There can be no assurance that our Warrants will be in the money prior to their expiration and, as such, certain unexercised Warrants may expire worthless. As such, it is possible that we may never generate any additional cash proceeds from the exercise of our Warrants. We have not included, and do not intend to include, any potential cash proceeds from the exercise of our Warrants in our short-term or long-term liquidity projections. We will continue to evaluate the probability that the Warrants are exercised over the life of our Warrants and the merit of including potential cash proceeds from the exercise thereof in our liquidity projections.
Business Combination and PIPE Financing
In July 2022, we entered into a Business Combination Agreement with FLAC, NewAmsterdam Pharma and Merger Sub, which closed on November 22, 2022.
Concurrently with the execution of the Business Combination Agreement, we and FLAC also entered into subscription agreements with certain investors (the "PIPE Investors"), pursuant to which the PIPE Investors agreed to subscribe for and purchase from us, and we agreed to issue and sell to such PIPE Investors in a private placement, an aggregate of 23,460,000 Ordinary Shares at $10.00 per share for gross proceeds of $234.6 million (the "PIPE Financing"). The PIPE Financing closed substantially concurrently with the Business Combination.
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We received an aggregate of $306.3 million from the Business Combination and associated PIPE Financing at the closing of the Business Combination, prior to deducting the $2.6 million of transaction costs directly attributable to these financing activities.
Cash Flows
The following is a summary of cash flows for the years ended December 31, 2023, 2022 and 2021:
For the year
ended December 31,
(In thousands of USD)
2023
2022
2021
Net cash (used in)/provided by operating activities
(141,218
)
10,665
(29,512
)
Net cash used in investing activities
(24
)
(221
)
(24
)
Net cash provided by financing activities
8,912
391,905
84,704
Foreign exchange differences
5,052
5,248
(4,683
)
Cash at the beginning of the year
467,728
60,131
9,646
Cash at the end of the year
340,450
467,728
60,131
Net Cash Flows Provided By/Used In Operating Activities
Net cash flows from operating activities decreased by $151.9 million from $10.7 million provided by operating activities in 2022 compared to $141.2 million used in operating activities in 2023. This change was primarily due to an increase in research and development and selling general administrative expenditures in addition to the non-recurring nature of the upfront fee received in 2022 pursuant to the Menarini License.
Net cash flows from operating activities were $29.5 million used in operating activities in 2021 as compared to $10.7 million provided by operating activities in 2022. This change was primarily due to the upfront fee received pursuant to the Menarini License, offset by an increase in research and development and selling, general and administrative expenditures.
Net Cash Flows Provided By/Used In Investing Activities
The $0.2 million decrease in net cash used in investing activities in 2023 as compared to 2022 and the $0.2 million increase in net cash used in investing activities in 2022 as compared to 2021 are primarily due to costs paid in 2022 related to capitalized software.
Net Cash Flows Provided By Financing Activities
The $383.0 million decrease in net cash provided by financing activities in 2023 as compared to 2022 was primarily due to the closing of the Business Combination and second tranche of series A financing which occurred in 2022 with no similar financing events occurring in 2023. The decrease of cash flows from these sources was partially offset by the cash proceeds received from the exercise of Warrants and options.
The $307.2 million increase in net cash provided by financing activities in 2022 as compared to 2021 was primarily due to the closing of the Business Combination.
Operating Capital and Capital Expenditure Requirements
Third-Party Service Agreements
We have entered into a variety of agreements and financial commitments in the normal course of business with CROs, CMOs, and other third parties for preclinical and clinical development and manufacturing services. The terms generally provide us with the option to cancel, reschedule and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation. However, some of our service providers also charge cancellation fees upon cancellation. The amount and timing of such payments are not known, but at December 31, 2023 they are estimated to be a maximum of $12.6 million due within one year and $3.0 million due in more than a year. As of December 31, 2023, we had cash of $340.5 million which is sufficient to fund these obligations.
Leases
We are party to two lease agreements, the Naarden Lease and the office lease agreement with Renaissance Aventura LLC, dated May 24, 2021 (the “Miami Lease”). Under the Naarden Lease, we are obligated to pay €40 thousand per year in rent. The Naarden Lease will continue until terminated by either us or the landlord. Pursuant to the Miami Lease, we are required to pay annual rent ranging from $69 thousand to $75 thousand, increasing from the low end of the range to the higher end of the range for each year of the lease. The Miami Lease will expire by its terms on October 31, 2024, unless terminated earlier by either party pursuant to the terms of the Miami Lease.
Menarini License
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We will be responsible for the development and commercialization costs related to Licensed Products other than those in the Menarini Territory. In addition, under specified conditions of the agreement, we agreed to bear 50% of certain development costs incurred by the other party in the development of the Licensed Products in the Menarini Territory. Please see “ Business—Marketing and Sales ” above for a description of the Menarini License.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. Prior to 2023, we prepared our financial statements in accordance with the IFRS as permitted in the United States based on our qualification as a foreign private issuer under the rules and regulations of the SEC. In connection with the loss of our status as a foreign private issuer effective on January 1, 2024, we, as a domestic filer, prepared our financial statements in accordance with U.S. GAAP. The transition was made retrospectively for all periods from our inception.
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. We based our estimates on historical experience, known trends and other market-specific or other relevant factors that we believe to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. If actual results differ from our estimates, or to the extent these estimates are adjusted in future periods, our results of operations could either benefit from, or be adversely affected by, any such change in estimate.
See Note 2 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our consolidated financial statements.