What changed in this filing

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Item 1. Financial Statements

2020-08-05 compared with 2020-05-06 · 195 added, 241 removed, 363 unchanged (55% of the section changed)

20 unchanged sentences

100 million shares authorized

at March 31, 2020 and December 31, 2019;

at June 30, 2020 and December 31, 2019;

and 1,594,070 shares issued and outstanding at

March 31, 2020 and December 31, 2019, respectively

June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

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Three Months Ended

(in thousands, except share

and per share amounts)

Six Months Ended

(in thousands, except share and per share amounts)

Costs and expenses:

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Balance, March 31, 2020

Issuance of common stock and exercise

of prefunded warrants for cash,

net of offering costs

Share-based compensation

Balance, June 30, 2020

See accompanying Notes to Financial Statements

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STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in thousands)

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Common stock offering costs

Repayment of principal on vendor finance agreement

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

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Common stock offering costs accrued but not yet paid

Leased assets obtained in exchange for operating lease liabilities, upon adoption and extension

Leased assets obtained in exchange for operating lease liabilities, upon extension and adoption

See accompanying Notes to Financial Statements

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The Company is a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of genetically targeted therapies for cardiovascular diseases.

The Company’s lead product candidate, Gencaro™ (bucindolol hydrochloride), is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that ARCA is developing to treat cardiovascular disease, focusing on atrial fibrillation (AF) in patients with chronic heart failure (HF).

In 2018, the Company completed its Phase 2B clinical superiority trial, known as GENETIC-AF, which evaluated Gencaro for the treatment of AF in HF patients.

In the trial, Gencaro was evaluated against an active comparator, the beta-blocker TOPROL-XL (metoprolol succinate), a drug indicated for the treatment of HF patients that is commonly prescribed for HF patients with AF.

Enrollment in GENETIC-AF was limited to patients that possess the specific genotype that the Company believes responds best to Gencaro.

The planned development program of Gencaro is, in part, based on the results of the Company’s completed GENETIC-AF Phase 2B clinical trial and a prospectively designed DNA substudy of adrenergic receptor polymorphisms in the BEST trial, a previous Phase 3 study of HF patients.

Following review of the Phase 2B GENETIC-AF clinical trial results, as well as its alignment with previous Phase 3 pharmacogenetic substudy data from the BEST trial, the U.S.

Food and Drug Administration (FDA) stated that data from a single pivotal Phase 3 clinical trial may be sufficient to support approval of Gencaro for the treatment of AF in patients with HF.

In 2019, the Company reached an agreement with the FDA known as a Special Protocol Assessment (SPA), for the requirements of the Gencaro Phase 3 clinical trial.

Based on the SPA agreement, the planned Phase 3 clinical trial, if successful, may support a New Drug Application (NDA) for the marketing approval of Gencaro.

The Company’s lead product candidates are AB201 (rNAPc2) as a potential treatment for diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on COVID-19, the disease syndrome caused by SARS-CoV-2 virus, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation (AF) in patients with chronic heart failure (HF).

AB201 is a protein therapeutic the Company plans to put into clinical development for the treatment of severe COVID-19 associated coagulopathy disease.

Based on its unique mechanism of action, its development history and the accumulating clinical evidence from the SARS‑CoV-2 pandemic, the Company believes AB201 has potential to be a beneficial therapy for patients with this viral disease.

Food and Drug Administration, or FDA, guidance, the Company plans to initiate a Phase 2 clinical trial of AB201 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020.

The Company has put initiation of the PRECISION-AF clinical trial of Gencaro on hold due to the ongoing COVID-19 pandemic and prioritizing the development of AB201.

The Company estimates that, subject to obtaining additional financing, enrollment in PRECISION-AF could start in 2021;

however, this estimate is subject to change due to the uncertainties of the ongoing COVID-19 pandemic and the availability of patients for non-COVID-19 related trials.

The Company’s other product candidate, AB171, is a thiol-substituted isosorbide mononitrate, which ARCA plans to develop as a genetically-targeted treatment for HF and peripheral arterial disease.

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads.

The Company does not expect a material financial effect as a result of the pandemic.

However, if the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

Liquidity and Going Concern

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The Company has historically funded its operations through issuances of common and preferred stock.

The Company believes that its current cash and cash equivalents will be sufficient to fund its operations, at its projected cost structure, after giving effect to potential cost reductions, through the end of the third quarter of 2020.

In light of the significant uncertainties regarding clinical development timelines and costs for developing drugs such as Gencaro, the Company will need to raise additional capital to finance the Company’s future operations and any additional development of Gencaro or any other product candidates.

If the Company is delayed in completing or is unable to complete additional financing and/or a strategic transaction, the Company may discontinue its development activities or operations.

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads.

The Company cannot predict what the long term effects of this pandemic and the resulting economic disruptions may have on the Company’s results of operations.

The extent of the effect of the COVID-19 pandemic on the Company’s results of operations will depend on a number future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict.

The COVID-19 pandemic may make it more difficult for the Company to enroll patients in any future clinical trials, including PRECISION-AF, and the economic uncertainty surrounding the COVID-19 pandemic may dramatically reduce the Company’s ability to secure equity or debt financing necessary to support the Company’s operations.

The Company is unable to currently estimate the financial effect of the pandemic.

If the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

The financial statements do not reflect any adjustments as a result of the COVID-19 pandemic.

Due to the current status of the Gencaro development program, the current amount of cash and cash equivalents held, the anticipated costs to be incurred for existing operations as well as exp loring other corporate strategic alternatives, and the uncertainty of the Company’s ability to raise a significant amount of capital and the continuing economic uncertainty resulting from the COVID-19 pandemic , management has determined there is substantia l doubt about the Company’s ability to continue as a going concern from one year after the Company’s financial statements have been issued.

The Company has implemented efforts to reduce personnel costs, including reduction of executive management salaries.

The Company could delay or cancel certain planned expenditures related to its drug development programs and/or implement additional cost reduction measures to conserve its cash balances;

however, there is no assurance that those measures would be adequate to allow the Company to continue as a going concern for a period beyond one year from the issuance of these financial statements.

The Company believes that its current cash and cash equivalents as of June 30, 2020, together with the net proceeds of $24.1 million raised from July 1, 2020 through July 31, 2020 from sales of its common stock, will be sufficient to fund its operations at the current cost structure plus projected costs for the AB201 clinical development program, through the end of the fourth quarter of 2021 .

However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated.

The Company has based these estimates on assumptions that may prove to be wrong, and the Company could exhaust its available financial resources sooner than the Company currently anticipates.

The Company will have to raise additional capital for clinical trials of our product candidates, AB201 and Gencaro.

These financial statements have been prepared with the assumption that the Company will continue as a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.

The Company may not be able to raise sufficient capital on acceptable terms, or at all, to continue development of Gencaro or to otherwise continue operations and may not be able to execute any strategic transaction .

The Company may not be able to raise sufficient capital on acceptable terms, or at all, to continue development of AB201 or Gencaro or to otherwise continue operations and may not be able to execute any strategic transaction.

The Company’s liquidity, and its ability to raise additional capital or complete any strategic transaction, depends on a number of factors, including, but not limited to, the following:

the costs and timing for the potential additional clinical trials in order to gain possible regulatory approval for Gencaro or any other product candidate;

the costs and timing for the potential additional clinical trials in order to gain possible regulatory approval for AB201, Gencaro or any other product candidate;

the market price of the Company’s stock and the availability and cost of additional equity capital from existing and potential new investors;

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In the opinion of management, these financial statements include all normal and recurring adjustments considered necessary for a fair presentation of these interim financial statements.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results expected for the full year ending December 31, 2020.

The Company has generated no revenue to date and its activities have consisted of seeking regulatory approval, research and development, exploring strategic alternatives for further developing and commercializing Gencaro, and raising capital.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of results expected for the full year ending December 31, 2020.

These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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If the Company had comprehensive gains (losses), they would be reflected in the statement of operations and comprehensive loss and as a separate component in the statement of stockholders’ equity.

There were no elements of comprehensive loss during the three months ended March 31, 2020 and 2019.

There were no elements of comprehensive loss during the three and six months ended June 30, 2020 and 2019.

The Company determines if an arrangement is a lease at inception.

Operating leases are included in right-of-use (ROU) asset – operating and lease obligations are included in accrued expenses and other liabilities on the Company’s March 31, 2020 and December 31, 2019 balance sheets.

Operating leases are included in right-of-use (ROU) asset – operating and lease obligations are included in accrued expenses and other liabilities on the Company’s June 30, 2020 and December 31, 2019 balance sheets.

ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease.

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The Company’s potentially dilutive shares include stock options and warrants for common stock .

Because the Company reported a net loss for the three months ended March 31, 2020 and 201 9 , all potentially dilutive shares of common stock have been excluded from the computation of the dilutive net loss per share for all periods presented.

Because the Company reported a net loss for the three and six months ended June 30, 2020 and 2019, all potentially dilutive shares of common stock have been excluded from the computation of the dilutive net loss per share for all periods presented.

Such potentially dilutive shares of common stock consist of the following:

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(3) Fair Value Disclosures

There were no marketable securities as of March 31, 2020 or December 31, 2019.

There were no marketable securities as of June 30, 2020 or December 31, 2019.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

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The Company does not have any Level 3 assets or liabilities.

As of March 31, 2020 and December 31, 2019, the Company had $6.7 million and $8.3 million, respectively, of cash equivalents consisting of money market funds with original maturities of 90 days or less.

As of June 30, 2020 and December 31, 2019, the Company had $11.0 million and $8.3 million, respectively, of cash equivalents consisting of money market funds.

The Company has the ability to liquidate these investments without restriction.

The Company determines fair value for these money market funds with Level 1 inputs through quoted market prices.

There were no transfers of assets between fair value hierarchy levels during the three-month periods ended March 31, 2020 and year ended December 31, 2019.

There were no transfers of assets between fair value hierarchy levels during the six-month periods ended June 30, 2020 and year ended December 31, 2019.

Fair Value of Other Financial Instruments

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Estimated Life

March 31, 2020

June 30, 2020

Computer equipment

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Property and equipment, net

For the three months ended March 31, 2020 and 2019, depreciation and amortization expense was $3,000 and $5,000, respectively.

For the six months ended June 30, 2020 and 2019, depreciation and amortization expense was $4,000 and $11,000, respectively.

(5) Related Party Arrangements

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Funding of any unrestricted research grants is contingent upon the Company’s financial condition, and can be deferred or terminated at the Company’s discretion.

Total expense under these arrangements for the three months ended March 31, 2020 and 2019 was $70,000 and $70,000 respectively.

Total expense under these arrangements for the six months ended June 30, 2020 and 2019 was $141,000 and $141,000 respectively.

(6) Commitments and Contingencies

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In addition, common area maintenance charges are based on actual costs incurred and are a non-lease component that is not included in the lease obligation.

Below is a summary of the future undiscounted minimum lease payments committed for the Company’s facility in Westminster, Colorado as of March 31, 2020 (in thousands):

Below is a summary of the future undiscounted minimum lease payments committed for the Company’s facility in Westminster, Colorado as of June 30, 2020 (in thousands):

Remainder of 2020

Total future minimum lease payments

Rent expense, which is included in general and administrative expense, for the three months ended March 31, 2020 and 2019 was $23,000 and $17,000, respectively.

As of March 31, 2020 and December 31, 2019, the lease liability was $50,000 and $25,000, respectively, and is included in accrued expenses and other liabilities.

Cash paid for amounts included in the measurement of lease liabilities and the operating cash flows from operating leases for the three months ended March 31, 2020 and 2019 were $25,000 and $23,000, respectively.

The weighted-average remaining lease term for the operating lease as of March 31, 2020 is 0.5 years.

Rent expense, which is included in general and administrative expense, for the six months ended June 30, 2020 and 2019 was $48,000 and $34,000, respectively.

As of June 30, 2020 and December 31, 2019, the lease liability was $25,000 and $25,000, respectively, and is included in accrued expenses and other liabilities.

Cash paid for amounts included in the measurement of lease liabilities and the operating cash flows from operating leases for the six months ended June 30, 2020 and 2019 were $51,000 and $45,000, respectively.

The weighted-average remaining lease term for the operating lease as of June 30, 2020 is 0.3 years.

The weighted-average discount rate for the operating lease is 7.5%.

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(7) Equity Financings and Warrants

Registered Direct Financing

On June 3, 2020, the Company closed a registered direct offering with certain institutional and accredited investors of 348,000 shares of the Company’s common stock, at a purchase price of $9.00 per share, and pre-funded warrants to purchase 325,500 shares of common stock at a purchase price of $8.999 per warrant.

All warrants were exercised by the closing date.

No pre-funded warrants are outstanding as of June 30, 2020.

The net proceeds were approximately $5.3 million, after deducting placement agent fees and other offering expenses.

The Company paid JonesTrading a placement agent fee equal to 8.0% of the aggregate gross proceeds and agreed to provide JonesTrading with customary indemnification and contribution rights.

At the Market Equity Financing

On January 11, 2017, the Company entered into a Capital on Demand TM Sales Agreement (the Sales Agreement) with JonesTrading Institutional Services LLC, as agent (JonesTrading), pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock, par value $0.001 per share (the Common Stock), having an aggregate offering price of up to $7.3 million.

On August 21, 2017, January 25, 2019, March 11, 2019, May 9, 2019, May 20, 2019 and June 28, 2019, the Company amended its Capital on Demand Sales Agreement.

On August 21, 2017, January 25, 2019, March 11, 2019, May 9, 2019, May 20, 2019, June 28, 2019, July 2, 2020 and July 14, 2020, the Company amended its Capital on Demand Sales Agreement.

The amendments, among other things, increased the maximum aggregate offering value of shares of the Company’s common stock which the Company may issue and sell from time to time under the Sales Agreement from $7.3 million to $32.4 million (the Shares).

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The Company will also reimburse JonesTrading for certain specified expenses in connection with entering into and amending the Sales Agreement.

Under the amended Sales Agreement, the Company sold an aggregate of 820 , 561 shares of Common Stock, for net proceeds of approximately $ 6 .

9 million, during the year ended December 31 , 2019, including initial expenses for executing the “at the market offering” and commissions to the placement agent .

There were no sales sold under this offering in the three months ended March 31, 2020.

As of March 31, 2020, the Company had sold all shares available for this offering under its prospectus to the Company’s registration statement on Form S-3 (No.

Under the amended Sales Agreement, the Company sold an aggregate of 820,561 shares of Common Stock, for net proceeds of approximately $6.9 million, during the year ended December 31, 2019, including initial expenses for executing the “at the market offering” and commissions to the placement agent.

There were no sales sold under this offering in the six months ended June 30, 2020.

In July 2020, the Company sold an aggregate of 2,214,301 shares of Common Stock, for net proceeds of approximately $14.4 million under the Sales Agreement.

This sales agreement terminated in July 2020.

On July 22, 2020, the Company entered into a new Capital on Demand TM Sales Agreement (the 2020 Sales Agreement) with JonesTrading, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s Common Stock, having an aggregate offering price of up to $54.0 million.

As of July 31, 2020, the Company had sold an aggregate of 1,423,413 shares of its Common Stock pursuant to the terms of the 2020 Sales Agreement for net proceeds of approximately $9.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

As of July 31, 2020, the Company has $43.9 million available for this offering under its prospectus to the Company’s registration statement on Form S-3 (No.

Warrants to purchase shares of common stock were previously granted as part of various financing and business agreements.

All outstanding warrants were recorded in additional paid-in capital at their estimated fair market value at the date of grant using a Black-Scholes option-pricing model.

As of March 31, 2020, these warrants, by year of expiration, are summarized below:

As of June 30, 2020 , these warrants, by year of expiration, are summarized below:

Year of Expiration

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(8) Share-based Compensation

For the three month periods ended March 31, 2020 and 2019, the Company recognized the following non-cash, share-based compensation expense in the statements of operations (in thousands):

Ended March 31,

For the three and six month periods ended June 30, 2020 and 2019, the Company recognized the following non-cash, share-based compensation expense in the statements of operations (in thousands):

Ended June 30,

Research and development

General and administrative

Stock option transactions for the three month period ended March 31, 2020 under the Company’s stock incentive plans were as follows:

Stock option transactions for the six month period ended June 30, 2020 under the Company’s stock incentive plans were as follows:

Weighted Average Exercise Price

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Forfeited and cancelled

Options outstanding at March 31, 2020

Options exercisable at March 31, 2020

Options outstanding at June 30, 2020

Options exercisable at June 30, 2020

Options vested and expected to vest

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The Company believes its tax filing positions and deductions related to tax periods subject to examination will be sustained upon audit and, therefore, has no reserve for uncertain tax positions.

Income tax benefit of $ 82 ,000 for the three months ended March 31, 2019 primarily was related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015 ( PATH Act ) .

As of December 31, 2019, the Company ha d realized the full amount available under the PATH Act.

Income tax benefit of $9,000 for the three and six months ended June 30, 2020 was related to realization of alternative minimum tax carryforwards.

Income tax benefit of $27,000 and $109,000 for the three and six months ended June 30, 2019 primarily was related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).

As of December 31, 2019, the Company had realized the full amount available under the PATH Act.

(10) Subsequent Event

In July 2020, the Company amended its Sales Agreement and issued additional Common Stock, as discussed in Note 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Examples of these statements include, but are not limited to, statements regarding the following:

potential future development plans for Gencaro, including our ability to secure sufficient financing to support our anticipated Phase 3 clinical trial of Gencaro, the likelihood that any Phase 3 clinical trial results for Gencaro to satisfy the requirements of our Special Protocol Assessment agreement, the expected features and characteristics of Gencaro, including the potential for genetic variations to predict individual patient response to Gencaro or AB171, Gencaro’s potential to treat atrial fibrillation, or AF, future treatment options for patients with AF, the potential for Gencaro to be the first genetically-targeted AF prevention treatment, statements regarding potential Phase 3 development plans for Gencaro, including the timing and results thereof, the expected features and characteristics of AB171 as a potential genetically-targeted treatment for peripheral arterial disease, or PAD, and for heart failure, or HF, the potential timeline for development of AB171, including any Investigational New Drug, or IND, application submission related thereto, and the ability of ARCA’s financial resources to support its operations through the end of the third quarter of 2020, the sufficiency of our current capital to reach certain of our corporate objectives, our ability to obtain additional funding when needed or enter into a strategic or other transaction, including our ability to raise sufficient capital to fund any Phase 3 clinical trials for Gencaro and our other operations, the extent to which our issued and pending patents may protect our products and technology, the potential of such product candidates to lead to the development of safe or effective therapies, our ability to enter into collaborations, our ability to maintain listing of our common stock on a national exchange, our future operating expenses, our future losses, our future expenditures, and the sufficiency of our cash resources to maintain operations.

potential future development plans for AB201 and Gencaro, including the potential for AB201 to treat COVID-19, including our ability to secure sufficient financing to support our anticipated clinical trials of AB201 and Gencaro, the likelihood that any Phase 3 clinical trial results for Gencaro to satisfy the requirements of our Special Protocol Assessment agreement, the expected features and characteristics of Gencaro, including the potential for genetic variations to predict individual patient response to Gencaro or AB171, Gencaro’s potential to treat atrial fibrillation, or AF, future vaccines and/or treatment options for patients with COVID-19, future treatment options for patients with AF, the potential for Gencaro to be the first genetically-targeted AF prevention treatment, statements regarding potential Phase 3 development plans for Gencaro, including the timing and results thereof, the expected features and characteristics of AB171 as a potential genetically-targeted treatment for peripheral arterial disease, or PAD, and for heart failure, or HF, the potential timeline for development of AB171, including any Investigational New Drug, or IND, application submission related thereto, and the ability of ARCA’s financial resources to support its operations through the end of the fourth quarter of 2021, the sufficiency of our current capital to reach certain of our corporate objectives, our ability to obtain additional funding when needed or enter into a strategic or other transaction, including our ability to raise sufficient capital to fund any clinical trials for AB201 and Gencaro and our other operations, the extent to which our issued and pending patents may protect our products and technology, the potential of such product candidates to lead to the development of safe or effective therapies, our ability to enter into collaborations, our ability to maintain listing of our common stock on a national exchange, our future operating expenses, our future losses, our future expenditures, and the sufficiency of our cash resources to maintain operations.

Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors discussed herein and elsewhere.

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We are a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of genetically targeted therapies for cardiovascular diseases.

Precision medicine refers to the tailoring of medical treatment to the individual characteristics of patients, using genomic and other information that extends beyond general diagnostic categorization.

Precision medicine refers to the tailoring of medical treatment to the individual characteristics of patients, using genomic, non-genomic biomarker and other information that extends beyond routine diagnostic categorization.

We believe that when implemented correctly precision medicine can enhance therapeutic response, improve patient outcomes, and reduce healthcare costs.

Our lead product candidate, Gencaro™ (bucindolol hydrochloride), is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that we are developing as a fourth-generation beta-blocker based on its pharmacogenetic targeting.

We believe the pharmacology of Gencaro is unique and has the potential for enhanced efficacy in patients with a specific genetic characteristic for the beta-1 adrenergic receptor, termed the beta-1 389 arginine homozygous genotype.

The beta-1 389 arginine homozygous genotype is present in approximately 50% of the North American and European general populations, and it can be detected by a genetic test currently performed in a centralized laboratory or in the future potentially at the point of care during a patient visit.

Our lead product candidates are AB201 (rNAPc2) as a potential treatment for diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on COVID-19, the disease syndrome caused by SARS-CoV-2 virus, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation, or AF, in patients with chronic heart failure, or HF.

AB201 (rNAPc2) for COVID-19 associated coagulopathy

AB201, also known as Recombinant Nematode Anticoagulant Protein c2, or rNAPc2, is a protein therapeutic we plan to put into clinical development for the treatment of severe COVID-19 disease.

Based on its unique mechanism of action, its development history and the accumulating clinical evidence from the SARS-CoV-2 pandemic, we believe AB201 has potential to be a beneficial therapy for patients with this viral disease.

Food and Drug Administration, or FDA, guidance, we plan to initiate a Phase 2 clinical trial of AB201 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020.

We believe that AB201 is the most potent and long-acting inhibitor of tissue factor, or TF.

TF is a cellular receptor widely distributed in mammalian tissues and involved in many essential biological processes.

TF is responsible for initiation of the primary coagulation pathway, the mechanism by which blood clotting occurs in the body in response to injury.

Recent research has also shown that various TF pathways are involved in the immune system inflammatory response to viral infections and in the process of viral dissemination during infection.

As the SARS-CoV-2 pandemic has progressed, serious complications relating to over-activation of the coagulation and immune systems have increasingly been observed in patients hospitalized with severe disease.

We believe this evidence implicates the various TF pathways, and provides a strong rationale to test AB201 as a potential therapeutic for COVID-19.

AB201 has not yet been tested in any pre-clinical COVID‑19 models or in any patients diagnosed with COVID-19.

AB2 01 was originally developed for potential use as an anticoagulant, due to its inhibition of the TF-initiated coagulation process.

It was evaluated for the prevention of thrombosis in a Phase 1 and Phase 2 clinical program involving over 700 subjects, and d emonstrated both safety and efficacy in these studies.

AB201 has also been investigated as a potential therapeutic for severe viral infections other than COVID-19.

Research had shown that viral infections can provoke dysregulated activation of the TF pathw ay, resulting in abnormal systemic coagulation and related inflammation, leading to organ failure and mortality.

For this reason, AB201 was tested as a therapeutic in non-human primates, or NHPs, in studies against lethal doses of the Ebola and Marburg vir uses, where it showed evidence of efficacy in the form of mortality reduction, decreases in inflammatory biomarkers and evidence of reduced disseminated intravascular coagulation (DIC).

SARS-CoV-2 is a new coronavirus identified in late 2019 and belongs to a family of enveloped RNA viruses that include Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS-CoV), both of which caused serious human infections of the respiratory system.

The disease caused by the SARS-CoV-2 virus has been designated COVID-19.

Since this outbreak was first reported in late 2019, the virus has infected over 18 million people and has caused over 0.6 million reported deaths (as of August 4, 2020).

COVID-19 is associated with a high incidence of coagulation-related adverse events, including stroke, myocardial infarction, or MI, (i.e., heart attack), pulmonary emboli, and DIC, a condition in which small blood clots develop throughout the bloodstream, blocking small vessels.

This syndrome is so frequently observed in COVID-19 that it has received the name of COVID-19 Associated Coagulopathy, or CAC.

A commonly used biomarker for assessing coagulation activation and the presence of CAC is a D-dimer test, which is elevated in approximately 50% of hospitalized COVID-19 patients and is associated with adverse clinical outcomes.

Researchers believe that this and other evidence points to dysregulation of TF pathways in COVID-19 patients and the resulting development of CAC.

AB201 has shown potential in addressing the coagulation disorder caused by severe viral infections.

In the preliminary studies in NHPs against lethal doses of the Ebola and Marburg virus, AB201 lowered D-dimer levels, reduced mortality and showed other anti-inflammatory effects.

More recent research supports our belief that AB201 has the unique ability to inhibit the activity of TF in multiple processes that contribute to severe viral disease.

Taken together, this evidence suggests that AB201 may have therapeutic benefits for patients with severe COVID-19 disease, as manifested by the presence of CAC.

As a therapeutic aimed at a host response disease syndrome, we believe AB201 potentially could be used in combination with other antiviral drugs.

We believe its potential efficacy is not linked to a specific viral genome and may not be diminished by genetic drift or the development of new strains of the SARS-CoV-2 virus.

As a therapeutic addressing a disease syndrome, AB201 may have broad spectrum potential against multiple pathogens that have disease elements in common with COVID‑19, such as other coronaviruses and other RNA viruses.

Therefore, we believe that AB201 has therapeutic potential for future viral outbreaks beyond the current pandemic, even after a safe and effective vaccine has been successfully developed for SARS-CoV-2.

AB201 is a single-chain, 85 amino acid, recombinant protein administered subcutaneously, that has previously been evaluated under three FDA Investigational New Drug, or IND, applications in nine Phase 1 and Phase 2 clinical trials in the United States and Europe.

This clinical program primarily examined the safety, dosing and anticoagulation effects of AB201 in treating thrombosis in patients with acute coronary syndromes, who had undergone surgical procedures and needed prophylactic anticoagulation, or who were undergoing percutaneous coronary interventions.

In these trials, involving more than 700 human subjects with over 600 exposed to drug, AB201 was well-tolerated with a well-demonstrated safety profile.

AB201 is manufactured in an engineered yeast strain by an established methodology following current Good Manufacturing Practices, or cGMP, and we believe this process can be readily scaled to commercial quantities.

FDA granted AB201 Orphan Drug Designation status in 2014 for the treatment of viral hemorrhagic fever post-exposure to Ebola virus, but clinical trials were not conducted.

Pending FDA guidance, we plan to initiate clinical testing of AB201 as a potential treatment for COVID-19 in the fourth quarter of 2020.

To enable this timeline, we anticipate filing an IND application with the FDA in the third quarter of this year.

We plan to initially evaluate AB201 for the treatment of patients hospitalized with COVID-19 who have evidence of CAC, as indicated by elevated D-dimer levels.

We plan to collaborate with an experienced clinical research network to conduct the initial COVID-19 trial.

We plan to finance the development of AB201 through public or private equity or debt funding and, potentially, governmental sources.

Our AB201 development plans, including the timeline, will depend on FDA guidance and our ability to finance the development, which are currently uncertain.

If we are successful in developing AB201, we will hold exclusive commercial rights to the compound.

This includes pending and existing patents, 12 years market exclusivity as a reference biological product under FDA law in the United States, and data exclusivity in the European Union (EU).

As we launch the development of AB201, we plan to pursue strategic co-development and partnering opportunities for its further development and commercialization.

Gencaro™ (bucindolol hydrochloride) for Atrial Fibrillation

Gencaro™ (bucindolol hydrochloride), is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that we are developing as a fourth-generation beta-blocker based on its pharmacogenetic targeting.

We believe the

pharmacology of Gencaro is unique and has the potential for enhanced efficacy in patient s with a specific genetic characteristic for the beta-1 adrenergic receptor, termed the beta-1 389 arginine homozygous genotype.

The beta-1 389 arginine homozygous genotype is present in approximately 50% of the North American and European general populati ons, and it can be detected by a genetic test currently performed in a centralized laboratory or in the future potentially at the point of care during a patient visit.

We are developing Gencaro to treat cardiovascular disease, focusing on atrial fibrillation, or AF, in patients with chronic heart failure, or HF.

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Current treatment options for AF in HF patients are limited, and can be invasive, costly and dangerous.

Gencaro was previously studied in the BEST trial, a Phase 3 HF mortality trial in 2,708 patients.

The BEST trial included a DNA substudy of over 1,000 patients, which was used to evaluate the effect of genetic variations in cardiac adrenergic receptors on the response to Gencaro.

Data from this substudy showed that patients with the beta-1 389 arginine homozygous genotype had substantial improvements in mortality, hospitalization and the prevention of arrhythmias.

We believe that these genetically determined receptor variations, which are detectable using standard DNA testing technology, can serve as diagnostic markers for predicting enhanced therapeutic response to Gencaro.

Gencaro was the subject of a Phase 3 HF development program that identified a key genetic biomarker that enhanced the drug’s efficacy.

Patients with a particular genotype had enhanced improvements in mortality, hospitalization and the prevention of arrhythmias.

We believe that this genotype, is detectable using standard DNA testing technology, can serve as a diagnostic marker for predicting enhanced therapeutic response to Gencaro.

Our current clinical development of Gencaro is focused on AF in HF patients who have a left ventricular ejection fraction, or LVEF, of 40% and higher and the specific genotype we believe responds best to Gencaro.

There are currently no drug therapies approved to treat AF or HF in this population, which encompasses more than half of all HF in the United States and Europe.

We believe that, if approved, there are additional indication expansion opportunities for Gencaro in other HF populations and cardiac arrhythmias , as well as the potential for new formulation develo pment s to extend marketing exclusivity.

We believe that, if approved, there are additional indication expansion opportunities for Gencaro in other HF populations and cardiac arrhythmias, as well as the potential for new formulation developments to extend marketing exclusivity.

In May 2019, we published the results of our Phase 2B clinical trial that examined Gencaro for the prevention of AF in HF patients, in the Journal of the American College of Cardiology:

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Secondary objectives will examine other important endpoints, such as AF burden and AF treatment-related interventions.

Subject to available financing, we plan to initiate enrollment of PRECISION-AF in the fourth quarter of 2020 and project that topline data will be available in approximately two and a half years from our initiation of patient enrollment.

If the trial meets the criteria specified in the SPA, we plan to file for approval of Gencaro with the FDA, European Medicines Agency, and other regulatory authorities.

We believe that patients with HF and AF represent a major unmet medical need, and that this need is most pronounced in patients with LVEF values of 40% and above.

We believe that patients with HF and AF represent a major unmet medical need, and this need is most pronounced in patients with LVEF values of 40% and above.

This LVEF range constitutes more than half of all chronic HF in the United States and Europe, and there are currently no approved or guideline recommended therapies for these patients to treat either their AF or HF.

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typically requiring the continued use of beta blockers post-intervention to manage both AF and HF.

We believe that Gencaro, if approved, may be a safe and more effective therapy for the treatment of HF patients with AF.

We believe that Gencaro, if approved, may be a safe and mor e effective therapy for the treatment of HF patients with AF.

We believe there are several potentially important attributes that would differentiate Gencaro from existing therapies, including:

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Foundational beta-blocker benefits for HF and unique evidence of efficacy in HF patients with AF;

the only drug therapy approved for AF in HF patients with LVEF ≥ 40%.

The only drug therapy approved and shown effective for AF in HF patients with LVEF ≥ 40%.

We have exclusive development and commercial rights for Gencaro in all indications.

We have an international patent portfolio for Gencaro in the United States, the European Union, or EU, and other major markets, as well as new chemical entity status, which we believe will give us a strong intellectual property position to approximately 2031 in the United States and approximately ten years from approval in the EU.

We have an international patent portfolio for Gencaro in the United States, the European Union, or EU, and other major markets, as well as new chemical entity status, which we believe will give us a strong intellectual property position to at least approximately 2031 in the United States and approximately ten years from approval in the EU.

Additional issued and pending patents have the potential for longer exclusivity in these and other markets.

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We retain all rights to this test platform which we expect to use in future clinical trials, and which we believe could be used for commercialization.

To support the continued development of Gencaro, including the planned PRECISION-AF clinical trial , we will need additional financing to fund the Phase 3 clinical trial and our general and administrative costs through its projected completion.

Considering the substantial time and costs associated with the development of Gencaro and the risk that we may be unable to raise a significant amount

of capital on acceptable terms, w e are also pursu ing co-develop ment and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions.

If we are delayed in obtaining f inancin g or are unable to comple te a strategic transaction, we may discontinue our development activities on Gencaro or discontinue our operations .

We believe our cash and cash equivalents balance as of March 31, 2020 will be sufficient to fund our operations, at our current cost structure, after giving effect to potential cost reductions, through the end of the third quarter of 2020.

However, changing circumstances may cause us to consume capital significantly faster or slower than we currently anticipate.

To support the continued development of AB201 and Gencaro, we will need additional financing to fund the planned clinical trials of AB201 and the PRECISION-AF clinical trial, and our general and administrative costs through the trials’ projected completion.

Considering the substantial time and costs associated with the development of AB201 and Gencaro and the risk that we may be unable to raise a significant amount of capital on acceptable terms, we are also pursuing co-development and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions.

If we are delayed in obtaining financing or are unable to complete a strategic transaction, we may discontinue our development activities on AB201 or Gencaro or discontinue our operations .

We believe our cash and cash equivalents balance as of June 30, 2020, together with the net proceeds of $24.1 million raised from July 1, 2020 through July 31, 2020 from sales of our common stock, will be sufficient to fund our operations at our current cost structure plus projected costs for the AB201 clinical development program, through the end of the fourth quarter of 2021.

However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated.

We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available financial resources sooner than we currently anticipate.

For instance, in March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

We will have to raise additional capital for clinical trials of our product candidates, AB201 and Gencaro.

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads.

We are unable to currently estimate the financial effect of the pandemic.

If the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on our business, results of operations, financial condition and cash flows .

In 2017, we entered into a sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2019, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement from $10.2 million to $17.5 million.

As of March 31, 2020, we had sold an aggregate of 1,087,858 shares of our common stock pursuant to the terms of such sales agreement, as amended, for aggregate gross proceeds of approximately $17.4 million.

We do not expect a material financial effect as a result of the pandemic.

However, if the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In 2017, we entered into a sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2020, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement to $32.4 million.

This sales agreement terminated in July 2020.

Under this sales agreement, we had sold an aggregate of 3,302,159 shares of our common stock pursuant to the terms of such sales agreement, as amended, for aggregate gross proceeds of approximately $32.3 million.

Net proceeds received in this offering were approximately $30.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

In July 2020, we entered into a new sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $54.0 million, in an “at the market offering.” As of July 31, 2020, we had sold an aggregate of 1,423,413 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $10.1 million.

Net proceeds received in this offering were approximately $9.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

As of July 31, 2020, we have $43.9 million available for this offering under its prospectus to our registration statement on Form S‑3 (No.

The Proposed Phase 3 AF Clinical Trial (PRECISION-AF)

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The trial will include an interim analysis after a portion of total patients have been enrolled that is designed to assess safety, validate initial study assumptions and maintain adequate statistical power for the primary endpoint.

Subject to securing additional financing, we plan to initiate enrollment of PRECISION-AF in the fourth quarter of 2020.

We have put initiation of the PRECISION-AF trial on hold due to the ongoing COVID-19 pandemic and prioritizing the development of AB201.

We estimate that enrollment in PRECISION-AF could start in 2021;

however, this estimate is subject to change due to the uncertainties of the ongoing COVID-19 pandemic and the availability of patients for non-COVID-19 related trials.

Any future development of Gencaro, including initiating any Phase 3 clinical trial, is dependent on obtaining significant additional financing.

The GENETIC-AF Phase 2B Clinical Trial

GENETIC-AF enrolled 267 patients from the United States, Canada and Europe.

The primary analysis compared the evidence of safety and efficacy of Gencaro versus an active comparator, TOPROL-XL.

The primary endpoint of the trial was time to first event of AF/AFL or ACM during a 24-week follow-up period after the establishment of sinus rhythm.

Randomized patients had a LVEF ≤ 55%, a history of AF in the past 6 months, and the beta-1 389 arginine homozygous genotype that we believe responds best to Gencaro.

Laboratory Corporation of America, or LabCorp, developed the genetic test, obtained an Investigational Device Exemption, or IDE, from the FDA and provided the companion diagnostic test and services to support our GENETIC‑AF clinical trial.

For the primary endpoint of time to AF recurrence, Gencaro demonstrated a similar treatment benefit in the overall population (p = 0.961) compared to the active comparator, TOPROL-XL.

However, based on further analysis of the trial, we believe we have identified a population that shows greater response to Gencaro compared to TOPROL-XL across multiple important clinical assessments, including the primary endpoint of time to AF recurrence, maintenance of normal sinus rhythm, cumulative AF burden, and AF-related clinical interventions and complications.

We plan to study this population in our first Phase 3 clinical trial.

We believe that the inclusion of a small number of patients in the trial (13.9% of overall population) with long-standing and heavily pretreate d HF and AF led to attenuation of the treatment effect estimates for the primary endpoint of GENETIC-AF.

Therefore, in accordance with procedures outlined in the statistical analysis plan, post-hoc analyses were performed that excluded 37 patients with ext raordinarily long durations of HF and AF , which showed a trend for benefit in favor of Gencaro compared to TOPROL-XL ( 32% reduction;

The onset of AF relative to the development of HF was also identified in our post-hoc analyses to have a relati onship to treatment effect.

In these analyses, there was an attenuation of the treatment effect estimates for the primary endpoint in patients who had long-standing AF prior to developing HF.

We believe this is due to differences in the underlying pathophy siology for AF patients who eventually develop HF compared to HF patients who subsequently develop AF.

Therefore, a post-hoc analysis was performed in the above patient population that excluded patients who had developed AF for more than 2 years prior to d eveloping HF.

In this population, termed the precision therapeutic phenotype, or PTP cohort, a significant reduction in the primary endpoint was observed ( 46% reduction ;

p = 0.011), which was retained in a subgroup of this cohort with LVEF values ≥ 40% and ≤ 55% (58% reduction ;

These data were published in May of 2019 in the Journal of the American College of Cardiology :

Heart Failure (print version July 2019).

Based upon our analysis of the GENETIC-AF data, we believe further clinical development of Gencaro can be successful using entry criteria to identify patients with the characteristics for disease duration and onset described above and outlined in the following table:

GENETIC-AF Subgroup Analysis:

Time to First AF/AFL/ACM Event

Subpopulation

Time to AF/AFL/ACM

HF and AF for less than 12 years

AF not more than 2 years prior to HF (PTP cohort)

LVEF ≥ 40% and ≤ 55%

Stratified Cox proportional hazards model with adjustment for:

1) HF etiology, 2) LVEF, 3) rhythm at randomization,

4) device type, 5) previous Class 3 antiarrhythmic drug use (subpopulations only).

Additional analyses of patients entering efficacy follow-up demonstrate additional benefits of Gencaro compared to TOPROL-XL in preventing adverse consequences of developing AF.

Maintenance of normal sinus rhythm, as assessed by routine ECG monitoring, was increased by 15% (p = 0.022) in the overall population and by increased 28% (p < 0.001) in the PTP cohort with Gencaro compared to TOPROL-XL.

A composite endpoint that includes AF interventions (i.e., electrical cardioversion, catheter ablation, and initiation of Class III antiarrhythmics), cardiovascular adverse events, and death was reduced by 30% (p = 0.008) in the overall population and by 46% (p = 0.001) in the PTP cohort with Gencaro compared to TOPROL-XL.

A composite endpoint of AF interventions and death was reduced by 33% (p = 0.009) in the overall population and by 51% (p < 0.001) in the PTP cohort with Gencaro compared to TOPROL-XL.

Similarly, the composite endpoint of sinus bradycardia or death was reduced by 55% (p < 0.001) in the overall population and by 49% (p < 0.001) in the PTP cohort with Gencaro compared to TOPROL-XL.

Furthermore, patients who experienced sinus bradycardia in GENETIC-AF had a 4‑fold higher incidence of study drug dose reductions (P < 0.001).

Improvements in all of the above endpoints were retained in a subgroup of the PTP cohort with LVEF values ≥ 40% and ≤ 55% (see table below).

Therefore, in addition to the prevention of AF recurrence, these data suggest that HF patients with AF potentially receive downstream clinical and pharmacoeconomic benefits with Gencaro compared to non-genetically targeted beta blockers such as TOPROL-XL.

Subject to available financing, we anticipate these findings will be further examined in the anticipated Phase 3 PRECISION-AF clinical trial.

Our cumulative analyses of important AF-related clinical outcomes are summarized in the following table:

GENETIC-AF Subgroup Analysis:

Cumulative Events During Efficacy Follow-up Period

Entire Cohort

LVEF ≥ 40% and ≤ 55%

Maintenance of

Normal Sinus Rhythm

AF Interventions and CV AEs

AF Interventions

Sinus Bradycardia

IRR (95% CI) for all patients entering efficacy follow-up period.

Maintenance of Normal Sinus Rhythm = cumulative number of ECGs in normal sinus rhythm

AF Interventions = electrical cardioversion, ablation, or initiation of class 3 antiarrhythmic therapy after start of follow-up.

Sinus Bradycardia = sinus bradycardia on ECG as assessed by the investigator.

Deaths included as events due to competing risk.

Incidence Rate Ratio (IRR) = Incidence Rate BUC / Incidence Rate MET

A subgroup of patients underwent continuous (24/7) heart rhythm monitoring via implanted loop recorders or other implanted therapeutic devices of Medtronic, Inc., or Medtronic, a global healthcare solutions company, to evaluate daily AF burden, or AFB.

A prespecified time-to-first event analysis was conducted using a total AFB of at least 6 hours per day to define an event of AF recurrence.

For the time-to-first event of AF or ACM endpoint, a trend for benefit in favor of Gencaro over TOPROL-XL was observed in the overall substudy cohort (69 patients;

25% reduction;

p = 0.315) and in the PTP substudy cohort (49 patients;

41% reduction;

Cumulative AFB was also evaluated in the device substudy to determine the total number of days in AF during the efficacy follow-up period.

In this cumulative analysis, a significant reduction in AFB was observed for Gencaro compared to TOPROL-XL in in the overall substudy cohort (23% reduction;

p < 0.001) and in the PTP substudy cohort (37% reduction;

Gencaro was generally safe and well-tolerated, with 84% of patients attaining their target dose compared to 72% of patients receiving TOPROL-XL.

The most frequently reported adverse events were similar in both groups and consistent with the known safety profile of the beta-blocker class of drugs.

Adverse events assessed as related to study drug by the investigator occurred in 23.8% of patients in the Gencaro group and in 30.1% of patients in the TOPROL-XL group.

Of note, adverse events of bradycardia were less frequently reported in the Gencaro group (3.7%) compared to patients receiving TOPROL-XL (12.0%).

During the 24-week efficacy follow-up period there were three deaths (ACM) in the TOPROL-XL group and none in the Gencaro group.

Three patients died in the long-term treatment extension period after receiving Gencaro for more than a year.

The BEST Phase 3 Heart Failure Trial

Gencaro was the subject of a major HF study known as the BEST trial, a double-blind, placebo-controlled, multicenter study of bucindolol on mortality and morbidity in an advanced chronic HF population with LVEF < 35%.

The primary endpoint of the BEST trial was ACM, and the pre-specified main secondary endpoint was progression of HF, defined as death from HF, cardiac transplant, HF hospitalization, or an emergency room visit for the treatment of worsening HF not requiring hospitalization.

The trial was projected to enroll 2800 patients and run four and one-half years.

The trial enrolled a total of 2,708 chronic HF patients primarily from U.S.

The trial was notable for including a major DNA bank, in which 1,040 of the BEST patients participated by providing blood for DNA analysis.

The DNA bank provided the basis for the genetic substudies that discovered Gencaro’s modulation by genetic variations of the beta-1 adrenergic receptor.

The BEST trial was terminated early because, after positive mortality results from two HF trials involving other beta-blockers had been reported, a substantial number of BEST trial investigators concluded that it was unethical to continue to give placebo to BEST trial participants.

It was initially reported the trial had failed to reach its primary endpoint of ACM, showing a 10% risk reduction in mortality with a p-value of 0.10.

Our reanalysis of the BEST results in accordance with the FDA approved, pre-specified statistical analysis plans (which had not been performed by the sponsors of BEST) demonstrated a 13% risk reduction on the primary endpoint of ACM in the BEST trial with a p-value of 0.053.

The results of the genetic substudies that were conducted using the BEST DNA bank were not available until several years after the completion of the trial.

Importantly, these substudies indicated a significant enhancement of response on the major HF clinical endpoints from the BEST trial in patients with the beta-1 389 arginine homozygous ge notype.

As shown in the table below, the risk reduction on HF clinical efficacy endpoints such as mortality and hospitalization ranged from 34% to 48% in this genotype.

BEST Trial Clinical Responses by Genotype Groups

ADRB1 Arg389Arg

ADRB1 389Gly carrier

All-cause mortality (ACM)

CV mortality (CVM)

CV Hospitalization

HF Hospitalization

ACM or HF Hospitalization

CVM or HF Hospitalization

AF Prevention

VT/VF Prevention

Endpoints presented as time to event analyses, with hazard ratios from a COX model and p-values generated using the log-rank statistic.

The BEST study data were further analyzed focusing on AF prevention, as well as rate control and clinical outcomes for patients with established AF.

Based on adverse events and surveillance ECGs, 7.9% of patients in the overall trial developed new onset AF, with a greater incidence observed in the placebo group (9.7%) compared to the Gencaro group (6.2%).

This corresponded to a 36% reduction in the incidence of new onset AF (based on crude event rates) for patients receiving bucindolol (p = 0.002).

In a time to event analysis, the risk of new onset AF was reduced in the overall population by 41% (p < 0.001) with Gencaro compared to placebo.

However, analysis from the DNA substudy showed that the Gencaro response for AF prevention was genotype specific, with a 74% reduction (p < 0.001) observed in patients with the beta-1 389 arginine homozygous genotype compared to no risk reduction (p = 0.969) in patients who did not have the beta-1 389 arginine homozygous genotype (i.e., beta-1 389 Gly carriers).

Gencaro also demonstrated the potential for efficacy against the serious arrhythmias of VT/VF, which also appears to be genetically regulated.

A 58% reduction in the incidence of VT/VF (p < 0.001) was observed in the overall population of the BEST trial, with a 74% reduction (p < 0.001) observed in patients with the beta-1 389 arginine homozygous genotype and no significant risk reduction

(p = 0.085) seen in beta-1 389 arginine Gly carrier genotype.

In patients with established AF, Gencaro may also have favorable effects on ventricular response rate control and other clinical outcomes.

Of the 303 patients in the BEST trial with AF at baseline, ventricular response rate control, defined as a resting heart rate of less than or equal to 80 beats per minute without symptomatic bradycardia, was observed in 67% of those receiving Gencaro compared to 49% in the placebo group (p < 0.005).

In patients with ventricular response rate control, Gencaro produced a 39% reduction in cardiovascular mortality/cardiovascular hospitalizations (p = 0.025).

Gencaro was also associated with a 72% decrease in cardiovascular mortality/cardiovascular hospitalizations (p = 0.039) in patients with the beta-1 389 arginine homozygous genotype who were in AF at baseline (N=52).

AB171 is a thiol-containing derivative of isosorbide mononitrate.

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We have identified what we believe to be a pharmacogenetic target for AB171 that is the basis for our patents, and which may enable genetically targeted cardiovascular development programs in two cardiovascular indications:

The European Patent Office has issued a patent to us on methods of treating cardiovascular disease and conditions with a thiol-substituted

isosorbide mononitrate based on genetic targeting.

The European Patent Office has issued a patent to us on methods of treating cardiovascular disease and conditions with a thiol-substituted isosorbide mononitrate based on genetic targeting.

The European patent has been validated in ten countries in the EMA:

We also have related patent applications pending in the United States Patent Office and Canadian Intel lectual Property Office.

Subject to availability of capital, we plan to initiate non-clinical studies to support a potential IND submission and initiation of clinical development in 2021 for AB171 as a potential genetically targeted treatment for HF and PA D .

We also have related patent applications pending in the United States Patent Office and Canadian Intellectual Property Office.

Subject to availability of capital, we may initiate non-clinical studies to support a potential IND submission and initiation of clinical development in 2021 for AB171 as a potential genetically targeted treatment for HF and PAD.

Results of Operations

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Our R&D expense continues to be almost entirely generated by our activities relating to the development of Gencaro.

R&D expense for the three months ended March 31, 2020 was $0.4 million compared to $0.7 million for the corresponding period of 2019, a decrease of approximately $0.3 million.

R&D personnel costs decreased approximately $0.2 million for the three months ended March 31, 2020, as compared to the corresponding period of 2019.

R&D expense for the three months ended June 30, 2020 was $0.4 million compared to $0.4 million for the corresponding period of 2019, a decrease of $68,000.

R&D expense for the six months ended June 30, 2020 was $0.7 million compared to $1.1 million for the corresponding period of 2019, a decrease of approximately $0.4 million

R&D personnel costs decreased approximately $0.1 million for the three months ended June 30, 2020, as compared to the corresponding period of 2019.

R&D personnel costs decreased approximately $0.3 million for the six months ended June 30, 2020, as compared to the corresponding period of 2019.

The remaining decrease is primarily a result of lower outside services and consulting costs.

Subject to securing significant additional financing, we plan to initiate enrollment of our PRECISION‑AF clinical trial in the fourth quarter of 2020.

R&D expense in 2020 is expected to be higher than 2019, if we initiate our PRECISION‑AF clinical trial.

If we are unable to initiate our PRECISION‑AF clinical trial, then R&D expense is expected to be consistent with 2019.

We plan to initiate clinical testing of AB201 as a potential treatment for COVID‑19 in the second half of 2020.

R&D expense in 2020 is expected to be higher than 2019, if we initiate our AB201 clinical trial.

If we are unable to initiate our AB201 clinical trial, then R&D expense is expected to be consistent with 2019.

General and Administrative Expenses

General and administrative, or G&A, expenses primarily consist of personnel costs, consulting and professional fees, insurance, facilities and depreciation expenses, and various other administrative costs.

G&A expenses were relatively unchanged at $1.0 million and $1.1 million for the three months ended March 31, 2020 and 2019, respectively.

G&A expenses were $ 0.9 million and $1.1 million for the thr ee months ended June 30 , 2020 and 201 9 , respectively .

The $ 0.1 million de crease was primarily a result of lower personnel costs and lower outside services and consulting costs in 20 20 .

G&A expenses were $1.9 million and $2.2 million for the six months ended June 30, 2020 and 2019, respectively.

The $0.3 million decrease was primarily a result of lower personnel costs and lower outside services and consulting costs in 2020.

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Interest and Other Income

Interest and other income was $24,000 and $38,000 in the three months ended March 31, 2020 and 2019, respectively.

We expect interest income to be consistent with 2019 as we continue to use our cash and cash equivalents to fund our operations.

Interest and other income was $2,000 and $48,000 in the three months ended June 30, 2020 and 2019, respectively.

Interest and other income was $26,000 and $86,000 in the six months ended June 30, 2020 and 2019, respectively.

Interest Expense

Interest expense was $4,000 and $3,000 for the three months ended March 31, 2020 and 2019, respectively.

Interest expense was $3,000 and $3,000 for the three months ended June 30, 2020 and 2019, respectively.

Interest expense was $7,000 and $6,000 for the six months ended June 30, 2020 and 2019, respectively.

Based on our current capital structure, interest expense for the remainder of 2020 is expected to be negligible.

Income Tax Benefit

There was no income tax benefit for the three months ended March 31, 2020.

Income tax benefit was $82,000 for the three months ended March 31, 2019.

The benefit was primarily related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015, or PATH Act.

Income tax benefit for the three and six months ended June 30, 2020 was $9,000.

Income tax benefit was $27,000 and $109,000 for the three and six months ended June 30, 2019, respectively.

The income tax benefit in 2019 was primarily related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015, or PATH Act.

In 2019, the benefit was fully monetized and we do not expect additional significant income tax benefit in 2020.

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Cash and cash equivalents

As of March 31, 2020, we had total cash and cash equivalents of $6.7 million, as compared to $8.4 million as of December 31, 2019.

The net decrease of $1.7 million primarily reflects cash used in operating activities during the three months ended March 31, 2020, as discussed below.

As of June 30, 2020, we had total cash and cash equivalents of $11.0 million, as compared to $8.4 million as of December 31, 2019.

The net increase of $2.7 million primarily reflects the net proceeds of $5.5 million from the issuance of common stock, offset by $2.7 million of cash used in operating activities during the six months ended June 30, 2020.

In July 2020, we sold 3.6 million shares of common stock for net proceeds of $24.1 million.

Cash Flows from Operating, Investing and Financing Activities

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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Financing activities

Net (decrease) increase in cash and cash equivalents

Net cash used in operating activities for the three months ended March 31, 2020 increased $0.1 million compared with the same period in 2019.

Net increase in cash and cash equivalents

Net cash used in operating activities for the six months ended June 30, 2020 decreased $28,000 compared with the same period in 2019.

This was primarily due to higher outflows related to changes in operating assets and liabilities, offset by a lower net loss in 2020, as discussed in Results of Operations above.

Net cash used in investing activities for the three months ended March 31, 2020 was $3,000 for the purchase of property and equipment.

There was no net cash (used in) provided by investing activities for the three months ended March 31, 2019.

There was no net cash (used in) provided by financing activities for the three months ended March 31, 2020.

Net cash provided by financing activities was $3.0 million for the three months ended March 31, 2019 representing $3.0 million in net proceeds from sales of our common stock in our “at the market” equity offering in the period.

N et cash used in investing activities for the six months ended June 30 , 2020 was $ 6 ,000 for the purchase of property and equipment .

There was no net cash (used in) provided by investing activities for the six months ended June 30 , 2019 .

Net cash provided by financing activities was $5.4 million for the six months ended June 30, 2020 representing $5.5 million in net proceeds from sales of our common stock in our registered direct equity offering in the period, less $0.1 million of payments on a vendor finance arrangement.

Net cash provided by financing activities was $6.1 million for the six months ended June 30, 2019 representing $6.2 million in net proceeds from sales of our common stock in our “at the market” equity offering in the period, less $0.1 million of payments on a vendor finance arrangement.

Sources and Uses of Capital

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The primary uses of our capital resources to date have been to fund operating activities, including research, clinical development and drug manufacturing expenses, license payments, and spending on capital items.

In 2017, we entered into a sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2020, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement to $32.4 million.

This sales agreement terminated in July 2020.

Net proceeds received in this offering were approximately $30.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

As of March 31, 2020, we had sold all shares available for this offering under its prospectus to our registration statement on Form S-3 (No.

Our ability to execute our Gencaro development program in accordance with our projected time line depends on a number of factors, includ ing, but not limited to, the following:

On July 22, 2020, we entered into a new sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $54.0 million, in an “at the market offering.” As of July 31, 2020, we had sold an aggregate of 1,423,413 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $10.1 million.

Net proceeds received in this offering were approximately $9.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

As of July 31, 2020, we have $43.9 million available for this offering under its prospectus to our registration statement on Form S‑3 (No.

Our ability to execute our Gencaro development program in accordance with our projected time line depends on a number of factors, including, but not limited to, the following:

the costs and timing for the potential additional clinical trials, including PRECISION‑AF, in order to gain possible regulatory approval for Gencaro or any other product candidate;

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the terms and conditions of our existing collaborative and licensing agreements.

However, our forecast of the period of time through which our financial resources will be adequate to support our current and forecasted operations could vary materially.

In May 2019, we implemented efforts to reduce personnel costs, including reduction of executive management salaries.

We may be required to take similar actions again in the future.

I n March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic.

This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads.

We cannot predict what the long term effects of this pandemic and the resulting economic disruptions may have on our results of operations.

The extent of the effect of the COVID-19 pandemic on our results of operations will depend on a number future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict.

The COVID-19 pandemic may make it more difficult for us to enroll patients in any future clinical trials, including PRECISION-AF, and the economic uncertainty surrounding the COVID-19 pandemic may dramatically reduce our ability to secure equity or debt financing necessary to support our operations.

We are unable to currently estimate the financial effect of the pandemic.

If the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We will need to raise additional capital to fund future operations, additional development of Gencaro or any other product candidates, or complete a strategic transaction.

Such financing would likely result in dilution to our existing stockholders.

If we raise additional funds through the incurrence of indebtedness, the obligations related to such indebtedness would be senior to rights of holders of our capital stock and could contain covenants that would restrict our operations.

The significant uncertainties surrounding the clinical development timelines and costs and the ability to raise a significant amount of capital and the continuing economic uncertainty resulting from the COVID-19 pandemic raises substantial doubt about our ability to continue as a going concern from one year after our financial statements have been issued.

However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated.

We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available financial resources sooner than we currently anticipate.

We will have to raise additional capital for clinical trials of our product candidates, AB201 and Gencaro.

These financial statements have been prepared with the assumption that we will continue as a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future

effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of us to continue as a going concern.

We may not be able to raise sufficient capital on acceptable terms, or at all, to continue development of AB201 or Gencaro or to otherwise continue operations and may not be able to execute any strategic transaction .

Critical Accounting Policies and Estimates

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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 1. Financial Statements