What changed in this filing

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Item 1. Financial Statements

2020-11-02 compared with 2020-08-05 · 146 added, 125 removed, 433 unchanged (38% of the section changed)

2 unchanged sentences

BALANCE SHEETS

September 30,

(in thousands, except share

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100 million shares authorized

at June 30, 2020 and December 31, 2019;

at September 30, 2020 and December 31, 2019;

and 1,594,070 shares issued and outstanding at

June 30, 2020 and December 31, 2019, respectively

September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except share and per share amounts)

40 unchanged sentences

Balance, June 30, 2020

Issuance of common stock for cash,

net of offering costs

Share-based compensation

Balance, September 30, 2020

See accompanying Notes to Financial Statements

1 unchanged sentence

STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

27 unchanged sentences

Vendor finance agreement

Proceeds receivable from the issuance of common stock

Common stock offering costs accrued but not yet paid

9 unchanged sentences

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.

AB201 is a protein therapeutic the Company plans to put into clinical development as a potential treatment for patients hospitalized with COVID-19.

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 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 potential 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’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.

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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 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 .

The Company believes that its current cash and cash equivalents as of September 30, 2020 will be sufficient to fund its operations through 2022, including the projected costs for the AB201 Phase 2b clinical trial.

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.

Therefore, the Company may have to raise additional capital for clinical trials of AB201 and will have to raise additional capital for clinical trials of Gencaro.

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 Company’s liquidity, and its ability to raise additional capital or complete any strategic transaction, depen ds 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 AB201, Gencaro or any other product candidate;

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

The results of operations for the three and nine months ended September 30, 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 AB201 and Gencaro, and raising capital.

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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 and six months ended June 30, 2020 and 2019.

There were no elements of comprehensive loss during the three and nine months ended September 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 June 30, 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 September 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 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.

Because the Company reported a net loss for the three and nine months ended September 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:

September 30,

Potentially dilutive securities, excluded:

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(3) Fair Value Disclosures

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

There were no marketable securities as of September 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 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.

As of September 30, 2020 and December 31, 2019, the Company had $51.0 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 six-month periods ended June 30, 2020 and year ended December 31, 2019.

There were no transfers of assets between fair value hierarchy levels during the nine-month period ended September 30, 2020.

Fair Value of Other Financial Instruments

3 unchanged sentences

Estimated Life

June 30, 2020

September 30,

Computer equipment

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Property and equipment, net

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

For the nine months ended September 30, 2020 and 2019, depreciation and amortization expense was $6,000 and $16,000, 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 six months ended June 30, 2020 and 2019 was $141,000 and $141,000 respectively.

Total expense under these arrangements for the nine months ended September 30, 2020 and 2019 was $248,000 and $210,000 respectively.

(6) Commitments and Contingencies

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Operating Lease

On August 1, 2013 the Company entered into a lease agreement for approximately 5,300 square feet of office facilities in Westminster, Colorado which has served as the Company’s primary business office since October 1, 2013.

On August 1, 2013 the Company entered into a lease agreement for approximately 5,300 square feet of office facilities in Westminster, Colorado which served as the Company’s primary business office from October 1, 2013 until September 30, 2020.

In March 2016, October 2019 and February 2020 the lease was amended to extend the lease term.

Effective February 24, 2020, the lease was renewed for an additional six month term beginning April 1, 2020 and expiring on September 30, 2020 (the February 2020 Amendment).

Under the February 2020 Amendment, the Company has no further rights to extend or renew this lease agreement.

The lease includes real estate taxes and insurance, which is not a lease component and is not included in the lease obligation.

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 June 30, 2020 (in thousands):

Effective February 24, 2020, the lease was renewed for an additional six month term beginning April 1, 2020 and expired on September 30, 2020 (the February 2020 Amendment).

Under the February 2020 Amendment, the Company had no further rights to extend or renew this lease agreement.

The lease included real estate taxes and insurance, which was not a lease component and was not included in the lease obligation.

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

As of September 30, 2020 the lease expired and there were no minimum lease payments remaining under this lease.

Rent expense, which is included in general and administrative expense, for the nine months ended September 30, 2020 and 2019 was $73,000 and $52,000, respectively.

As of September 30, 2020 and December 31, 2019, the lease liability was $0 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 nine months ended September 30, 2020 and 2019 were $76,000 and $68,000, respectively.

On August 29, 2020 the Company entered into a lease agreement for approximately 5,200 square feet of office facilities in Westminster, Colorado which serves as the Company’s primary business office effective October 1, 2020 (October 2020 Lease).

The lease term is 42 months beginning October 1, 2020 and includes an option to renew for an additional 36 month term at the then prevailing rental rate.

The exercise of the lease renewal option is at the Company’s sole discretion.

The lease term for the operating lease assumes exercise of the renewal option.

The discount rate for the operating lease is 7%.

Future minimum commitments due under the October 2020 Lease agreement as of October 1, 2020 are as follows (in thousands):

Remainder of 2020

Total future minimum lease payments

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%.

Present value adjustment

Present value of lease payments

Cardiovascular Pharmacology and Engineering Consultants, LLC

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All warrants were exercised by the closing date.

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

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

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

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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 six months ended June 30, 2020.

Under the amen ded 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 commis sions to the placement agent.

In July 2020, the Company sold an aggregate of 2,214,301 shares of Common Stock, for net proceeds of approximately $14.3 million under the Sales Agreement.

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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.

As of September 30, 2020, the Company had sold an aggregate of 4,803,753 shares of its Common Stock pursuant to the terms of the 2020 Sales Agreement for net proceeds of approximately $27.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

As of September 30, 2020, the Company has $25.3 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 June 30, 2020 , these warrants, by year of expiration, are summarized below:

As of September 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 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,

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

General and administrative

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

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

Weighted Average Exercise Price

1 unchanged sentence

Forfeited and cancelled

Options outstanding at June 30, 2020

Options exercisable at June 30, 2020

Options outstanding at September 30, 2020

Options exercisable at September 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 $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).

Income tax benefit of $9,000 for the nine months ended September 30, 2020 was related to realization of alternative minimum tax carryforwards.

Income tax benefit of $42,000 and $151,000 for the three and nine months ended September 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

MANAGEMENT’S DISCUSS ION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995.

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

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.

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 2022, 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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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.

AB201 (rNAPc2) for treatment of COVID-19

AB201, also known as Recombinant Nematode Anticoagulant Protein c2, or rNAPc2, is a protein therapeutic we plan to put into clinical development as a potential treatment for patients hospitalized with COVID-19.

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.

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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.

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

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 was originally developed for potential us e 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 demonstrated both safety and efficacy in thes e 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).

Research ha s shown that viral infections can provoke dysregulated activation of the TF pathway, resulting in abnormal systemic coagulati on 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 viruses, where it showed evidence of efficacy i n 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).

Since this outbreak was first reported in late 2019, the virus has infected over 44 million people and has caused over 1.1 million reported deaths (as of October 30, 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.

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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.

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

Taken together, this evidence suggests that AB201 may have therapeutic benefits for patients hospitalized with COVID-19, 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.

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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.

This clinical program primarily examined the safety, dosing and anticoagulation effects of AB201 in patients with acute coronary syndromes, in patients undergoing knee replacement surgery and in patients 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 safety profile comparable to commercially available anticoagulants.

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.

In October 2020, FDA approved the IND application for AB201 as a potential treatment for patients hospitalized with COVID-19.

We anticipate initiating the Phase 2b clinical trial of AB201, ASPEN-COVID-19, in approximately 100 patients hospitalized with COVID-19 in the fourth quarter of this year.

We anticipate topline data from this Phase 2b trial in the second quarter of 2021.

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.

The Phase 2b trial is designed to be a randomized comparison of two dose regimens of AB201 versus heparin prescribed per local standard of care.

The primary endpoint of the trial will be change in D-dimer level from baseline to Day 8.

The Phase 2b is expected to be sequentially followed by a Phase 3 study, as described in a common protocol for both trials.

If Phase 2b indicates a favorable effect on D-dimer levels, following FDA review of the data and identification of the proposed Phase 3 AB201 dose, the Company anticipates that clinical investigative sites will begin enrolling patients in the planned Phase 3 clinical trial.

The primary endpoint of Phase 3 is planned to be clinical recovery as measured by the Adaptive COVID-19 Treatment Trial ordinal scale, with secondary endpoints that include D-dimer levels and the number of thrombotic events.

Phase 3 will be event driven, with an estimated requirement of 450 patients.

We believe that favorable results from this Phase 2b/3 program could support use of AB201 in hospitalized COVID-19 patients, given its potential efficacy both as an anticoagulant and an anti-viral agent that counters the dysregulatory immune response and improves clinical recovery.

The trial is being managed in collaboration with the Colorado Prevention Center , or CPC , the University of Colorado's Academic Research Organization with extensive experience in managing vascular and anticoagulation clinical trials .

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

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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).

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, or EU.

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

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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 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.

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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Beta-blockers approved for HF are commonly used off-label to treat AF and HF in these patients, but they are only moderately effective in preventing AF and none are approved for patients with LVEF ≥ 40%.

Other anti-arrhythmic drugs approved for the treatment of AF have adverse side effects and in HF patients are either contraindicated or have label warnings for use due to an increased risk of mortality.

Other anti-arrhythmic drugs approved for the treatment of AF have adverse side effects and

in HF patients are either contraindicated or have label warnings for use due to an increased risk of mortality.

Interventional procedures for AF, such as catheter ablation and electrical cardioversion, are invasive, expensive, and often temporary;

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 mor e effective therapy for the treatment of HF patients with AF.

We believe that Gencaro, if approved, may be a safe and more 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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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 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.

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

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.

We believe our cash and cash equivalents balance as of September 30, 2020 will be sufficient to fund our operations through 2022, including the projected costs for the AB201 Phase 2b clinical trial.

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.

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 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.

therefore, we may have to raise additional capital for clinical trials of AB201.

Future development of Gencaro, including initiating any Phase 3 clinical trial, is dependent on our obtaining additional financing.

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.

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Net proceeds received in this offering were approximately $30.7 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.

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 October 31, 2020, we had sold an aggregate of 4,839,599 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $28.9 million.

Net proceeds received in this offering were approximately $28.0 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.

As of October 31, 2020, we have $25.1 million available for this offering under its prospectus to our registration statement on Form S‑3 (No.

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 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.

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.

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.

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

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

AB171 is a thiol-containing derivative of isosorbide mononitrate.

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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 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.

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.

R&D expense for the three months ended September 30, 2020 was $1.1 million compared to $0.3 million for the corresponding period of 2019, an increase of $0.7 million.

R&D expense for the nine months ended September 30, 2020 was $1.8 million compared to $1.4 million for the corresponding period of 2019, an increase of approximately $0.3 million

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

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

Clinical expense increased approximately $0.3 million for the three and nine months ended September 30, 2020, as compared to the corresponding periods of 2019.

Manufacturing process development costs increased approximately $0.2 million for the three and nine months ended September 30, 2020, as compared to the corresponding periods of 2019.

The increase in costs were related to initial costs for the AB201 Phase 2b clinical trial, which we plan to initiate in the fourth quarter of 2020.

The remaining increase is primarily a result of higher outside services and consulting costs.

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

R&D expense in 2020 is expected to be higher than 2019, if we initiate our AB201 Phase 2b clinical trial.

If we are unable to initiate our AB201 Phase 2b 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 $ 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.

G&A expenses were $0.9 million for both the three months ended September 30, 2020 and 2019.

G&A expenses were $2.9 million and $3.1 million for the nine months ended September 30, 2020 and 2019, respectively.

The $0.2 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 $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 and other income was $1,000 and $50,000 in the three months ended September 30, 2020 and 2019, respectively.

Interest and other income was $27,000 and $136,000 in the nine months ended September 30, 2020 and 2019, respectively.

Interest Expense

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.

Interest expense was $2,000 and $1,000 for the three months ended September 30, 2020 and 2019, respectively.

Interest expense was $9,000 and $7,000 for the nine months ended September 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

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.

Income tax benefit for the nine months ended September 30, 2020 was $9,000.

Income tax benefit was $42,000 and $151,000 for the three and nine months ended September 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.

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Cash and Cash Equivalents

September 30,

(in thousands)

Cash and cash equivalents

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.

As of September 30, 2020, we had total cash and cash equivalents of $51.1 million, as compared to $8.4 million as of December 31, 2019.

The net increase of $42.7 million primarily reflects the net proceeds of $47.7 million from the issuance of common stock, offset by $4.7 million of cash used in operating activities during the nine months ended September 30, 2020.

Cash Flows from Operating, Investing and Financing Activities

Six Months Ended June 30,

Nine Months Ended

September 30,

(in thousands)

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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.

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.

Net cash used in operating activities for the nine months ended September 30 , 2020 in creased $ 1.1 million compared with the same period in 201 9 .

This wa s primarily due to higher outflows related to changes in operating assets and liabilities and a higher net loss in 20 20 , as discussed in Results of Operations above.

Net cash used in investing activities for the nine months ended September 30, 2020 was $6,000 for the purchase of property and equipment.

Net cash used in investing activities for the nine months ended September 30, 2020 was $2,000 for the purchase of property and equipment.

Net cash provided by financing activities was $47.5 million for the nine months ended September 30, 2020 representing $47.7 million in net proceeds from sales of our common stock in our registered direct equity offering and our “at the market” equity offering in the period, less $0.3 million of payments on a vendor finance arrangement.

Net cash provided by financing activities was $6.7 million for the nine months ended September 30, 2019 representing $6.9 million in net proceeds from sales of our common stock in our “at the market” equity offering in the period, less $0.2 million of payments on a vendor finance arrangement.

Sources and Uses of Capital

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Net proceeds received in this offering were approximately $30.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.

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.

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 October 31, 2020, we had sold an aggregate of 4,839,599 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $28.9 million.

Net proceeds received in this offering were approximately $28.0 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;

As of October 31, 2020, we have $25.1 million available for this offering under its prospectus to our registration statement on Form S‑3 (No.

Our ability to execute our development programs 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 in order to gain possible regulatory approval for AB201, Gencaro or any other product candidate;

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

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

We believe our cash and cash equivalents balance as of September 30, 2020 will be sufficient to fund our operations through 2022, including the projected costs for the AB201 Phase 2b clinical trial.

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 .

therefore, we may have to raise additional

capital for clinical trials of AB201.

Future development of Gencaro, including initiating any Phase 3 clinical trial, is dependent on our obtaining additional financing .

We may not be able to raise sufficient capital on acceptable terms, or at all, to continue development and potential commercialization 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