What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-12 compared with 2020-08-14 · 50 added, 41 removed, 170 unchanged (35% of the section changed)

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We plan to conduct the interim analysis by the end of 2020 after approximately 100 patients in each of the GAIN trial’s three arms complete 24 weeks of treatment and expect top-line results by the end of 2021.

In November 2020, final enrollment in the GAIN Trial was 643 participants.

The GAIN Trial also includes an open-label extension (OLE) in the United States that began dosing patients in April 2020.

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The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, our employees, vendors and clinical trial sites have been able to advance our GAIN clinical trial, continue randomizations and screenings and begin our Open Label Extension for those patients completing the GAIN trial.

To date, our employees, vendors and clinical trial sites have been able to advance our GAIN clinical trial, complete enrollment and continue the Open Label Extension for eligible patients completing the GAIN trial.

At this time the impact of the COVID-19 pandemic has not resulted in changes to our previously stated analysis timelines for the GAIN trial.

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Our office-based employees have been working primarily from home since mid-March 2020, while ensuring essential staffing levels in our operations remain in place, including maintaining key personnel in our lab facility.

We ar e not currently experiencing any significant supply chain disruptions and have drug supply for the full GAIN Trial on hand.

We have developed plans to enable all employees to voluntarily return to work in our offices and lab facility which include safety protocols, such as face coverings, social distancing, frequent cleaning, and COVID-19 testing.

We continue to assess the risks which take into account applicable public health authority and local government guidelines and are designed to ensure community and employee safety.

However, the effects of the COVID-19 pandemic continue to rapidly evolve and even if our employees more broadly return to work in our offices and lab facility, we may have to resume a more restrictive remote work model, whether as a result of spikes or surges in COVID-19 infection or hospitalization rates or public authority mandates.

We are not currently experiencing any significant supply chain disruptions and have drug supply for the full GAIN Trial on hand.

We have diversified our vendor relationships geographically for both starting materials and manufacturing.

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The Company has taken and continues to take proactive measures to maintain the integrity of its ongoing clinical trial.

Despite these efforts, the COVID-19 pandemic could impact clinical trial enrollment and its completion.

To potentially mitigate some of the risks of COVID-19 and based on interest and the ability to maintain milestone timelines, we enrolled approximately an additional 70 subjects in the GAIN trial.

Despite these efforts, the COVID-19 pandemic could impact timelines, subject follow up visits and study completion.

The Company will continue to monitor the COVID-19 situation and its impact on the ability to continue the development of, and seek regulatory approvals for, the Company’s product candidates.

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We initiated a global Phase 2/3 clinical trial of atuzaginstat, called the GAIN trial, in mild to moderate Alzheimer’s patients in April 2019 in the United States and in September 2019 in Europe.

Patients successfully completing the 48-week placebo-controlled period of the GAIN trial are eligible to participate in the open-label extension (OLE) in the United States.

We plan to conduct the interim analysis by the end of 2020 after approximately 100 patients in each of the GAIN trial’s three arms complete 24 weeks of treatment and expect top-line results by the

In November 2020, final enrollment in the GAIN Trial was 64 3 participants.

Patients successfully completing the 48-week placebo-controlled period of the GAIN tri al are eligible to participate in the open-label extension (OLE) in the United States.

We started dosing patients in the OLE starting in April 2020 where they receive 40 mg or 80 mg of atuzaginstat twice daily for an additional 48 weeks.

The OLE is intended to evaluate the long-term safety and efficacy measures of participants in the GAIN trial.

The duration, costs and timing of our clinical trial and development of our product c andidates will depend on a variety of factors that include, but are not limited to, the following:

The duration, costs and timing of our clinical trial and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

per patient trial costs;

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Results of Operations

Three Months Ended June 30, 2020 and 2019

The following sets forth our results of operations for the three months ended June 30, 2020 (in thousands):

Three Months Ended June 30,

Three Months Ended September 30, 2020 and 2019

The following sets forth our results of operations for the three months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Operating expenses:

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Research and Development Expenses (in thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Direct research and development expenses:

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Total research and development expenses

Research and development expenses were $14.1 million for the three months ended June 30, 2020, compared to $7.1 million for the three months ended June 30, 2019.

The increase of $7.0 million was driven mostly by increasing patient enrollments in the GAIN trial resulting in increases of $2.7 million in clinical trial expenses for our lead product candidate, atuzaginstat which entered into Phase 2/3 clinical trials in 2019, $1.5 million in drug manufacturing costs to support the clinical trial and $0.5 million in non-clinical related costs.

Additionally, we experienced a net increase of $2.2 million in personnel related expenses primarily due to an increase in our employee headcount which was comprised of an increase in compensation and benefit costs of $0.5 million and $1.7 million in allocated stock-based compensation costs.

Research and development expenses were $17.0 million for the three months ended September 30, 2020, compared to $8.3 million for the three months ended September 30, 2019.

The increase of $8.7 million was driven primarily by increasing patient enrollments in the GAIN trial resulting in increases of $3.4 million in clinical trial expenses for our lead product candidate, atuzaginstat which entered into Phase 2/3 clinical trials in 2019, $2.9 million in drug manufacturing costs to support the clinical trial and $0.4 million in non-clinical related costs.

We experienced a net increase of $1.8 million in personnel related expenses primarily due to an increase in our employee headcount which was comprised of an increase in compensation and benefit costs of $0.5 million and $1.3 million in stock-based compensation costs.

Allocated facilities and other non-clinical research not related to atuzaginstat increased $0.2 million for the period.

General and Administrative Expenses

General and administrative expenses increased $1.7 million to $4.2 million for the three months ended June 30, 2020 from $2.5 million for three months ended June 30, 2019 primarily due to an increase in personnel costs due to an increase in our employee headcount which was comprised of an increase in compensation and benefits costs of $0.4 million and $1.3 million in allocated stock-based compensation expense.

General and administrative expenses increased $2.6 million to $4.9 million for the three months ended September 30, 2020 from $2.3 million for three months ended September 30, 2019 primarily due to an increase in personnel costs due to an increase in our employee headcount which was comprised of an increase in compensation and benefits costs of $0.5 million and $2.0 million in stock-based compensation expense and $0.1 million increase in costs associated with being a public company.

Interest Income

Interest income was $0.7 million for the three months ended June 30, 2020 compared to $0.5 million for the three months ended June 30, 2019.

The increase was a result of increased average cash and investment balances from the proceeds of private placement which closed in February 2020 and our initial public offering which closed in May 2019.

Interest income was $0.4 million for the three months ended September 30, 2020 compared to $0.7 million for the three months ended September 30, 2019.

The decrease was a result of lower yields on our available for sale portfolio from the prior year.

We anticipate overall yields from our investment portfolio will remain at historic lows in future quarters due to the impact of the COVID-19 pandemic on the financial markets, specifically the credit securities markets.

Six Months Ended June 30, 2020 and 2019

The following sets forth our results of operations for the six months ended June 30, 2020 (in thousands):

For the Six Months Ended June 30,

Nine Months Ended September 30, 2020 and 2019

The following sets forth our results of operations for the nine months ende d September 30, 2020 and 2019 (in thousands):

Nine Months Ended September 30,

Operating expenses:

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Research and Development Expenses (in thousands)

Six months ended June 30,

Nine Months Ended September 30,

Direct research and development expenses:

5 unchanged sentences

Total research and development expenses

Research and development expenses were $28.5 million for the six months ended June 30, 2020, compared to $11.9 million for the six months ended June 30, 2019.

Research and development expenses were $45.4 million for the nine months ended September 30, 2020, compared to $20.2 million for the nine months ended September 30, 2019.

The increase of $25.3 million was driven mostly by increasing patient enrollments in the GAIN trial resulting in $11.3 million in clinical trial expenses for our lead product candidate, atuzaginstat which entered into Phase 2/3 clinical trials in 2019, $6.0 million in drug manufacturing costs to support the clinical trial and $1.6 million in non-clinical related costs.

We also experienced a net increase of $4.1 million in personnel related expenses due to an increase in our employee headcount which was comprised of an increase in compensation and benefit costs of $1.6 million and $2.5 million in allocated stock-based compensation costs.

Additionally, facility and other non-clinical costs increased $0.3 million due primarily to pipeline research.

We also experienced a net increase of $5.9 million in personnel related expenses due to an increase in our employee headcount which was comprised of an increase in compensation and benefit costs of $2.1 million and $3.8 million in stock-based compensation costs.

Additionally, allocated facility costs and other non-clinical costs increased $0.4 million due primarily to pipeline research.

General and Administrative Expenses

General and administrative expenses increased approximately $4.0 million to $7.7 million for the six months ended June 30, 2020 from $3.7 million for the six months ended June 30, 2019.

The increase in general and administrative expenses was primarily due to an increase of $3.2 million in personnel costs due to an increase in our employee headcount which was comprised of an increase in compensation and benefits costs of $0.9 million and $2.3 million in allocated stock-based compensation expense and increases in $0.8 million in insurance expense associated with becoming a public company.

General and administrative expenses increased approximately $6.6 million to $12.6 million for the nine months ended September 30, 2020 from $6.0 million for the nine months ended September 30, 2019.

The increase in general and administrative expenses was primarily due to an increase of $5.6 million in personnel costs due to an increase in our employee headcount which was comprised of an increase in compensation and benefits costs of $1.4 million and $4.2 million in stock-based compensation expense and increases in $1.0 million in insurance expense associated with becoming a public company.

Interest Income

Interest income was $1.3 million for the six months ended June 30, 2020 compared to $0.9 million for the six months ended June 30, 2019.

Interest income was $1.7 million for the nine months ended September 30, 2020 compared to $1.6 million for the nine months ended September 30, 2019.

The increase was a result of increased average cash and investment balances of approximately $70.0 million from the proceeds of private placement which closed in February 2020.

This was offset by significantly lower yields on the portfolio from the previous year.

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We have incurred cumulative net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future.

As of June 30, 2020, we had an accumulated deficit of $104.6 million and had cash, cash equivalents and short-term investments of $144.5 million.

Although our investment portfolio contains some debt securities that have experienced negative credit downgrades, based on our current cash requirements, we believe that we will continue to be able to hold all securities to their final maturity and not realize material gains or losses in the available for sale portfolios.

As of September 30, 2020, we had an accumulated deficit of $126.1 million and had cash, cash equivalents and short-term investments of $137.8 million.

Based on our current cash requirements, we believe that we will continue to be able to hold all securities to their final maturity and not realize material gains or losses in the available for sale portfolios.

Based on our existing business plan, we believe that our existing cash, cash equivalents, and short-term investments will be sufficient to fund our anticipated level of operations for a period of at least one year from the date this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission.

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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stoc kholders’ rights.

If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

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The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash (used in) provided by:

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Operating Activities

Net cash used in operating activities was $25.2 million for the six months ended June 30, 2020.

Cash used in operating activities was primarily due to our net loss of $34.8 million for the period, adjusted for $5.9 million of non-cash items, including $5.4 million in stock-based compensation and a net increase in accounts payable, accrued expenses and other current liabilities of $4.6 million offset by increases in our current assets of $0.9 million.

Net cash used in operating activities was $13.5 million for the six months ended June 30, 2019 and was primarily due to our net loss for the period of $14.7 million, adjusted for $0.4 million of non-cash items and a net increase in accounts payable, accrued expenses and other current liabilities of $5.6 million offset by an increase in operating assets of 4.8 million related to activities surrounding our GAIN clinical trial.

Net cash used in operating activities was $37.5 million for the nine months ended September 30, 2020.

Cash used in operating activities was primarily due to our net loss of $56.3 million for the period, adjusted for $10.5 million of non-cash items, including $9.5 million in stock-based compensation and a net increase in accounts payable, accrued expenses and other current liabilities of $7.3 million and decreases in our current assets of $1.0 million.

Net cash used in operating activities was $22.3 million for the nine months ended September 30, 2019 and was primarily due to our net loss for the period of $24.6 million, and also due to use of cash in for prepaid expenses and other assets of $3.5 million offset by cash provided by increases in our accounts payable and accrued expenses of $4.7 million related to the activities surrounding our Phase 2/3 clinical trial.

Non-cash operating income and expenses (net) accounted for $1.1 million of the net loss.

Investing Activities

Cash used by investing activities was $78.6 million for the six months ended June 30, 2020, primarily related to the purchase of available for sale investment securities with the proceeds from the private placement transaction which closed in February 2020.

Cash used by investing activities was $44.7 million in the six months ended June 30, 2019, primarily related to investment of the IPO proceeds received in May 2019

Cash used in investing activities was $68.3 million for the nine months ended September 30, 2020, primarily related to the purchase of available for sale investment securities of $183.4 million and maturities of $115.1 million.

Cash used in investing activities was $35.5 million in the nine months ended September 30, 2019, primarily related to the purchase of available for sale investment securities of $98.5 million and maturities of $63.0 million.

Financing Activities

Cash provided by financing activities was $118.7 million for the six months ended June 30, 2020, which consisted primarily of net proceeds from the private placement transaction and the proceeds from the exercise of stock options.

Cash provided by financing activities was $77.9 million in the six months ended June 30, 2019, primarily related to the IPO proceeds received in May 2019.

Cash provided by financing activities was $118.8 million for the nine months ended September 30, 2020, which consisted primarily of net proceeds from the private placement transaction and the proceeds from the exercise of stock options.

Cash provided by financing activities was $77.9 million in the nine months ended September 30, 2019, which consisted primarily of net proceeds from the initial public offering in the period.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and other commitments as of June 30, 2020, as compared to those disclosed in our Annual Report on Form 10-K.

There have been no material changes to our contractual obligations and other commitments as of September 30, 2020, as compared to those disclosed in our Annual Report on Form 10-K.

We enter into contracts in the normal course of business with third party contract organizations for clinical trials, non-clinical studies and testing, manufacturing, and other services and products for operating purposes.

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Therefore, we consider these to be our critical accounting policies and estimates.

The following critical accounting policies are described under the heading “Management’s Discussi on and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgements and Use Estimates” in our 2019 Annual Report on Form 10-K and the notes to the unaudited condensed financial statements included in Item 1 , “Unaudited Financial Statements,” of this Quarterly Report on Form 10-Q.

We believe that of our critical accounting policies, the following accounting policies are the most critical to fully understanding and evaluating our financial condition and result s of operations:

The following critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgements and Use Estimates” in our 2019 Annual Report on Form 10-K and the notes to the unaudited condensed financial statements included in Item 1, “Unaudited Financial Statements,” of this Quarterly Report on Form 10-Q.

We believe that of our critical accounting policies, the following accounting policies are the most critical to fully understanding and evaluating our financial condition and results of operations:

Research and Development Expenses;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis