QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number ) | |
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(Address of principal executive offices) |
(Zip Code) |
Title of each class: |
Trading Symbol(s) |
Name of each exchange on which registered: | ||
The | ||||
The |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
Emerging growth company |
Page No. |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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7 |
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8 |
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Item 2. |
22 |
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Item 3. |
36 |
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Item 4. |
36 |
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Item 1. |
37 |
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Item 1A. |
37 |
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Item 2. |
37 |
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Item 3. |
37 |
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Item 4. |
37 |
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Item 5. |
37 |
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Item 6. |
38 |
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40 |
• |
our ability to realize the benefits from the business combination between Blue Water Acquisition Corp. and Clarus Therapeutics, Inc. (the “Business Combination”); |
• |
the ability to maintain the listing of our Common Stock on the Nasdaq Global Market; |
• |
our future financial performance; |
• |
the potential liquidity and trading of our securities; |
• |
the impact from the outcome of any known and unknown litigation; |
• |
our ability to forecast and maintain an adequate rate of revenue growth and appropriately plan expenses; |
• |
expectations regarding future expenditures; |
• |
the future mix of revenue and effect on gross margins; |
• |
the attraction and retention of qualified directors, officers, employees and key personnel; |
• |
our ability to compete effectively in a competitive industry; |
• |
our ability to protect and enhance our corporate reputation and brand; |
• |
expectations concerning our relationships and actions with third parties; |
• |
the impact from future regulatory, judicial, and legislative changes in our industry; |
• |
the ability to locate and acquire complementary products or product candidates and integrate those into our business; |
• |
future arrangements with, or investments in, other entities or associations; |
• |
intense competition and competitive pressures from other companies in the industries in which we operate; and |
• |
other economic, business and/or competitive factors, risks and uncertainties, |
• |
there is substantial doubt about our ability to continue as a going concern. |
• |
we have incurred significant indebtedness in connection with our business and servicing our debt requires a significant amount of cash. We may not have sufficient cash flow from our operations to satisfy the financial covenants in our debt agreements. We may not receive a waiver of default for outstanding indebtedness for which we may be in default in the future. |
• |
we have identified material weaknesses in our internal control over financial reporting, and we may identify future material weaknesses in our internal control over financial reporting. |
• |
JATENZO is the only product we are commercializing, and we depend almost entirely on its success. |
• |
we have limited experience as a commercial company and the marketing and sale of JATENZO or any future approved drugs may be unsuccessful or less successful than anticipated. |
• |
our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited. |
• |
our reliance on third-party suppliers and distributors could harm our ability to commercialize JATENZO. |
• |
the ongoing COVID-19 pandemic is having, and is expected to have, an adverse impact on our business. |
• |
the U.S. Food and Drug Administration (“FDA”) and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability. |
• |
even though we have received marketing approval for JATENZO in the United States, we may never receive marketing approval outside of the United States, or receive pricing and reimbursement outside the United States at acceptable levels. |
• |
recent federal legislation may increase pressure to reduce prices of certain pharmaceutical products paid for by Medicare. |
• |
testosterone (T) is a Schedule III (non-narcotic) substance under the Controlled Substances Act and any failure to comply with this act or its state equivalents would have a negative impact on our business. |
• |
if coverage and reimbursement for JATENZO are limited, it may be difficult to profitably sell JATENZO. |
• |
our market is subject to intense competition. |
• |
if we are unable to obtain or protect intellectual property rights related to JATENZO, we may not be able to compete effectively in our market. |
• |
we may be involved in lawsuits and proceedings to protect or enforce our patents, which could be expensive, time consuming and unsuccessful. |
• |
we will need to grow our company, and may encounter difficulties in managing this growth. |
• |
our future success depends on our ability to retain our chief executive officer, chief financial officer and chief commercial officer and to attract, retain and motivate qualified personnel. |
• |
our debt agreements contain restrictions that limit our flexibility in operating our business. |
September 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Assets |
||||||||
Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
||||||||
Inventory, net |
||||||||
Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Total assets |
$ | $ | ||||||
|
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|
|||||
Liabilities, redeemable convertible preferred stock, and stockholders’ deficit |
||||||||
Current liabilities: |
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Senior notes payable |
$ | $ | ||||||
Accounts payable |
||||||||
Accrued expenses |
||||||||
Deferred revenue |
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|
|
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Total current liabilities |
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Convertible notes payable to related parties |
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Royalty obligation |
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Derivative warrant liability |
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|
|||||
Total liabilities |
||||||||
Commitments and contingencies (See Note 12) |
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Redeemable convertible preferred stock, $ |
||||||||
Stockholders’ deficit: |
||||||||
Preferred stock, $ |
||||||||
Common stock $ |
||||||||
Additional paid-in capital |
— | |||||||
Accumulated deficit |
( |
) | ( |
) | ||||
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|
|||||
Total stockholders’ deficit |
( |
) | ( |
) | ||||
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Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit |
$ | $ | ||||||
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|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Net product revenue |
$ | $ | $ | $ | ||||||||||||
Cost of product sales |
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Gross profit (loss) |
( |
) | ||||||||||||||
Operating expenses: |
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Sales and marketing |
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General and administrative |
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Research and development |
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Total operating expenses |
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|||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other (expense) income, net: |
||||||||||||||||
Change in fair value of warrant liability and derivative, net |
||||||||||||||||
Interest income |
||||||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Litigation settlement |
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Total other (expense) income, net |
( |
) | ||||||||||||||
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|
|||||||||
Net (loss) income before income taxes |
( |
) | ( |
) | ||||||||||||
Provision for income taxes |
||||||||||||||||
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|||||||||
Net (loss) income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
|
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|||||||||
Net (loss) income attributable to common stockholders, basic (Note 13) |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
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|
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|||||||||
Net loss attributable to common stockholders, diluted (Note 13) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
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|
|
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|||||||||
Net (loss) income per common share attributable to common stockholders, basic (Note |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
|
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|
|
|
|
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|||||||||
Net loss per common share attributable to common stockholders, diluted (Note 13) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Weighted-average to |
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Weighted-average common shares used in net loss per share attributable to common stockholders, diluted (Note 13) |
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|
Redeemable Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance at December 31, 2020 (as previously reported) |
$ |
$ |
$ |
— |
$ |
( |
) |
$ |
( |
) | ||||||||||||||||||
Retroactive application of the recapitalization due to the Business Combination (Note 3) |
( |
) |
( |
) |
— |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
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|
|
|
|
|
|||||||||||||||
Adjusted balance at December 31, 2020 |
( |
) |
( |
) | ||||||||||||||||||||||||
Retroactive application of recapitalization related to 2021 activity (1) |
— |
— |
— |
— |
( |
) |
— |
|||||||||||||||||||||
Conversion of Series D redeemable convertible preferred stock into common stock, adjusted for retroactive application of the recapitalization |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
( |
) |
( |
) | |||||||||||||||||||
|
|
|
|
|
|
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|
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|
|||||||||||||||
Balance at March 31, 2021 |
( |
) |
( |
) | ||||||||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
( |
) |
( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
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|
|
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|
|||||||||||||||
Balance at June 30, 2021 |
( |
) |
( |
) | ||||||||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Recapitalization on September 9, 2021 |
— |
— |
— |
|||||||||||||||||||||||||
Proceeds from Blue Water Acquisition Corp. in Business Combination |
— |
— |
— |
— |
||||||||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
( |
) |
( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at September 30, 2021 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||||||||||
|
|
|
|
|
|
|
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(1) |
Relates to reversal of 2021 accretion recorded on the redeemable convertible preferred stock prior to the merger, as the redeemable convertible preferred stock has been retroactively restated to give effect to the reverse recapitalization. |
Redeemable Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance at December 31, 2019 (as previously reported) |
$ |
$ |
$ |
— |
$ |
( |
) |
$ |
( |
) | ||||||||||||||||||
Retroactive application of the recapitalization due to the Business Combination (Note 3) |
( |
) |
( |
) |
— |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Adjusted balance at December 31, 2019 |
( |
) |
( |
) | ||||||||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Net income (loss) |
— |
— |
— |
— |
— |
( |
) |
( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at March 31, 2020 |
( |
) |
( |
) | ||||||||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Net income |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at June 30, 2020 |
( |
) |
( |
) | ||||||||||||||||||||||||
Stock-based compensation |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
Net income |
— |
— |
— |
— |
— |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at September 30, 2020 |
$ |
$ |
$ |
( |
) |
$ |
( |
) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
||||||||
2021 |
2020 |
|||||||
Operating activities |
||||||||
Net income (loss) |
$ | ( |
) | $ | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
Non-cash interest expense related to debt financing and royalty obligation |
||||||||
Settlement of interest with payment-in-kind |
||||||||
Non-cash gain on partial extinguishment of senior notes |
( |
) | ||||||
Change in fair value of warrant liability |
( |
) | ( |
) | ||||
Change in fair value of derivative liability |
— | ( |
) | |||||
Stock-based compensation expense |
||||||||
Depreciation |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ( |
) | ||||
Inventory |
( |
) | ||||||
Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
Accounts payable |
||||||||
Accrued expenses |
||||||||
Deferred revenue |
( |
) | ||||||
|
|
|
|
|||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
Investing activities |
||||||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Financing activities |
||||||||
Proceeds from business combination, net |
||||||||
Proceeds from issuance of convertible notes payable |
||||||||
Proceeds from issuance of senior notes payable |
||||||||
Proceeds from PPP loan |
— | |||||||
Repayment of PPP loan |
— | ( |
) | |||||
Debt issuance costs |
— | ( |
) | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
||||||||
Net increase in cash and cash equivalents |
||||||||
Cash and cash equivalents—beginning of period |
||||||||
|
|
|
|
|||||
Cash and cash equivalents—end of period |
$ | $ | ||||||
|
|
|
|
|||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||
Conversion of convertible notes payable into Series D redeemable convertible preferred stock |
$ | $ | — | |||||
|
|
|
|
|||||
Conversion of Series D redeemable convertible preferred stock into Old Clarus common stock prior to the recapitalization |
$ | $ | ||||||
|
|
|
|
|||||
Senior secured note principal and royalty obligation balance conversion to shares of common stock upon merger (Note 3) |
$ | |||||||
|
|
|
|
|||||
Convertible notes principal and accrued interest balance conversion to shares of common stock upon merger (Note 3) |
$ | |||||||
|
|
|
|
|||||
Conversion of Series D redeemable convertible preferred stock into share of common stock |
$ | |||||||
|
|
|
|
|
||||
Value of warrants assumed upon merger (Note 3) |
— | |||||||
|
|
|
|
Cash – Blue Water Trust Account and cash (net of redemptions) |
$ | |||
Less: Equity issuance costs and other costs paid prior to September 30, 2021 |
( |
) | ||
|
|
|||
Net Proceeds from the Business Combination |
$ | |||
|
|
Blue Water shares outstanding prior to the Business Combination |
||||
Conversion of Old Clarus Series D Preferred Stock |
|
|
|
|
Conversion of Old Clarus |
||||
Conversion of additional capital provided by Old Clarus convertible note and senior note holders |
||||
Conversion of Senior Secured Note principal and royalty rights |
||||
|
|
|||
Total shares of the Company’s common stock outstanding immediately following the Business Combination |
||||
|
|
Additional Paid in Capital |
||||
Conversion of senior notes and royalty obligation carrying value |
$ |
|||
Conversion of Old Clarus convertible notes carrying value |
||||
Assumption of private placement warrant liabilities |
( |
) | ||
|
|
|||
Total reverse recapitalization impact on statement of equity |
$ |
|||
|
|
September 30, 2021 |
||||||||||||||||
(in thousands) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Assets |
||||||||||||||||
Cash equivalents: |
||||||||||||||||
Money market funds |
$ |
$ |
$ |
— |
$ |
— |
||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ |
$ |
$ |
— |
$ |
— |
||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Private placement warrant liability |
$ |
$ |
— |
$ |
— |
$ |
||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Liabilities |
$ |
$ |
— |
$ |
— |
$ |
||||||||||
|
|
|
|
|
|
|
|
December 31, 2020 |
||||||||||||||||
(in thousands) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Assets |
||||||||||||||||
Cash equivalents: |
||||||||||||||||
Money market funds |
$ | $ | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | $ | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
Beginning warrant liability balance |
$ |
|||
Private placement warrant liability assumed |
||||
Change in fair value of warrant liability |
( |
) | ||
|
|
|||
Balance at September 30, 202 1 |
$ |
|||
|
|
September 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Raw material |
$ | $ | ||||||
Work-in-process |
— | |||||||
Finished goods |
||||||||
|
|
|
|
|||||
Total inventory |
||||||||
Inventory reserve |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total inventory, net of reserve |
$ | $ | ||||||
|
|
|
|
September 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Selling and marketing costs |
$ | $ | ||||||
Employee compensation and related benefits |
||||||||
Professional f ees |
||||||||
Other |
— | |||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
December 31, |
||||
2020 |
||||
Principal amount |
$ | |||
Accrued and unpaid interest |
||||
Unamortized debt discount |
( |
) | ||
|
|
|||
Total |
$ | |||
|
|
September 30, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Principal amount |
$ | $ | ||||||
Accrued and unpaid interest |
||||||||
Unamortized debt discount |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
Years ended December 31, |
Amount |
|||
2021 (remaining 3 months) |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
|
|
|||
Total |
$ | |||
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Selling and marketing |
$ | $ | $ | $ | ||||||||||||
Research and development |
||||||||||||||||
General and administrative |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stock-based compensation expense |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
Years ended December 31, |
Amount |
|||
2021 (remaining 3 months) |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
|
|
|||
Total |
$ | |||
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
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Numerator: |
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Net loss (income) |
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$ |
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Earnings attributable to Old Clarus participating warrants (1) |
— |
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Gain on extinguishment of convertible notes (2) |
— |
— |
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Net (loss) income attributable to common stockholders, basic |
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Effect of convertible notes (3) |
— |
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Net loss attributable to common stockholders, diluted |
$ |
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Denominator: |
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Weighted-average common shares attributable to common stockholders, basic |
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Effect of convertible notes (4) |
— |
— |
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Weighted average number of common shares - diluted |
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Net loss per common share attributable to common stockholders, basic |
$ |
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$ |
$ |
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$ |
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Effect of convertible notes |
— |
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Net loss per common share attributable to common stockholders, diluted |
$ |
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$ |
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$ |
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$ |
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(1) |
The loss attributable to Old Clarus participating warrants relates to the total earnings attributable to the two-class |
(2) |
The gain on extinguishment of convertible notes relates to the difference between the carrying value of the convertible notes upon conversion to shares and the fair value of the shares exchanged which requires adjustment to the numerator when calculating basic EPS. |
(3) |
The effect of the convertible notes on the numerator for the three and nine months ended September 30, 2020 relates to the impact that the convertible notes had on net income during the period, and are removed from net income when calculating net income (loss) attributable to common stockholders diluted using the if-converted |
(4) |
The effect of convertible notes on the denominator for the three and nine months ended September 30, 2020 was calculated based on the carrying value of the convertible notes balance at September 30, 2020, converted at the series D price of $ if-converted |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Convertible notes |
— |
— |
— |
— |
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Old Clarus Warrants |
— |
— |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Easy-to-swallow |
• | Dose adjustable |
• | 87% of men achieved T levels in normal range |
• | Restored T levels to mid-normal range |
• | Safety profile consistent with TRT class |
• | No liver toxicity — JATENZO bypasses first-pass hepatic metabolism; liver toxicity not observed in clinical studies of up to 2 years duration. |
• | continue to commercialize JATENZO in the United States for the treatment of adult males with a deficiency or absence of endogenous T; |
• | incur sales and marketing costs to support the commercialization of JATENZO; |
• | incur contractual manufacturing costs for JATENZO; |
• | implement post-approval requirements related to JATENZO; |
• | actively pursue additional indications and line extensions for JATENZO for the treatment of adult males with a deficiency or absence of endogenous T; |
• | seek to attract and retain new and existing skilled personnel; |
• | invest in measures to protect and expand our intellectual property; |
• | seek to discover and develop additional product candidates; |
• | seek to in-license or acquire additional product candidates for other medical conditions; |
• | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products; |
• | maintain, expand and protect our intellectual property portfolio; |
• | hire additional clinical, manufacturing and scientific personnel; |
• | add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; |
• | create additional infrastructure to support operations as a public company and incur increased legal, accounting, investor relations and other expenses; and |
• | experience delays or encounters issues with additional outbreaks of the pandemic in addition to any of the above. |
• | salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; |
• | post-marketing requirements of the FDA for JATENZO and pharmaceutical development expense related to our recently in-licensed products; and |
• | costs of outside consultants, including their fees and related travel expenses engaged in research and development functions. |
Three Months Ended September 30, |
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2021 |
2020 |
Change |
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Net product revenue |
$ | 4,286 | $ | 2,224 | $ | 2,062 | ||||||
Cost of product sales |
510 | 257 | 253 | |||||||||
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Gross profit |
3,776 | 1,967 | 1,809 | |||||||||
Operating expenses: |
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Sales and marketing |
7,550 | 8,733 | (1,183 | ) | ||||||||
General and administrative |
3,384 | 3,040 | 344 | |||||||||
Research and development |
1,275 | 1,437 | (161 | ) | ||||||||
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Total operating expenses |
12,209 | 13,210 | (1,000 | ) | ||||||||
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Loss from operations |
(8,433 | ) | (11,243 | ) | 2,810 | |||||||
Other (expense) income, net: |
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Change in fair value of warrant liability and derivative, net |
7,610 | 20,939 | (13,329 | ) | ||||||||
Interest income |
1 | 1 | — | |||||||||
Interest expense |
(4,447 | ) | (4,291 | ) | (156 | ) | ||||||
Litigation settlement |
2,500 | — | 2,500 | |||||||||
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Total other (expense) income, net |
5,664 | 16,649 | (10,985 | ) | ||||||||
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Net (loss) income |
$ | (2,769 | ) | $ | 5,406 | $ | (8,175 | ) | ||||
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• | A $1.7 million decrease in outsourced advertising and promotion costs due to timing of media buys and agency activities; |
• | a $0.4 million increase in commercial analytic and market research costs, primarily related to prescription and payor data; and |
• | a $0.1 million decrease in other sales and marketing related costs. |
• | A $1.0 million increase in personnel costs, including stock-based compensation expense, primarily due to an increase in headcount and external consultants; |
• | a $0.6 million decrease in consulting and professional fees, primarily due to a decrease in legal fees related to patents; and |
• | a $0.1 million decrease in other general and administrative costs |
• | A $1.0 million decrease in costs related to research and development consulting services; offset by |
• | A $0.9 million increase in license fees related to the License Agreements with HavaH and McGill. |
Nine Months Ended September 30, |
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2021 |
2020 |
Change |
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Net product revenue |
$ | 9,395 | $ | 3,943 | $ | 5,452 | ||||||
Cost of product sales |
1,431 | 8,328 | (6,897 | ) | ||||||||
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Gross profit (loss) |
7,964 | (4,385 | ) | 12,349 | ||||||||
Operating expenses: |
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Sales and marketing |
25,017 | 23,557 | 1,460 | |||||||||
General and administrative |
12,316 | 8,261 | 4,055 | |||||||||
Research and development |
3,093 | 2,818 | 276 | |||||||||
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Total operating expenses |
40,426 | 34,636 | 5,790 | |||||||||
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Loss from operations |
(32,462 | ) | (39,021 | ) | 6,559 | |||||||
Other (expense) income, net: |
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Change in fair value of warrant liability and derivative, net |
7,610 | 53,854 | (46,244 | ) | ||||||||
Interest income |
1 | 24 | (23 | ) | ||||||||
Interest expense |
(13,964 | ) | (10,790 | ) | (3,174 | ) | ||||||
Litigation settlement |
2,500 | — | 2,500 | |||||||||
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Total other (expense) income, net |
(3,853 | ) | 43,088 | (46,941 | ) | |||||||
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Net (loss) income |
$ | (36,315 | ) | $ | 4,067 | $ | (40,382 | ) | ||||
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• | A $2.6 million increase in marketing costs, primarily related to the timing of agency activities; and |
• | a $0.2 million increase in patient assistance costs and other sales and marketing costs; offset by |
• | a $1.3 million decrease in commercial analytics and market research costs. |
• | A $2.6 million increase in personnel costs, including stock-based compensation expense, primarily due to an increase headcount and external consultants; |
• | a $0.8 million increase in consulting and professional fees, primarily due to an increase in fees paid to outside accounting and finance consultants and audit fees incurred as a result of becoming a public company; |
• | a $0.5 million increase in insurance fees, related to directors’ and officers’ insurance; and |
• | a $0.2 million increase in other general and administrative expenses. |
• | A $0.9 million increase in license fees related to the HavaH Agreement and McGill Agreement; and |
• | a $1.0 million increase in clinical costs related to Phase 4 studies related to the development of JATENZO, our lead commercial product; offset by |
• | a $1.6 million decrease in costs related to research and development consulting services. |
Nine Months Ended September 30, |
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2021 |
2020 |
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Net cash used in operating activities |
(34,452 | ) | (35,661 | ) | ||||
Net cash used in investing activities |
(20 | ) | (62 | ) | ||||
Net cash provided by financing activities |
49,192 | 47,220 | ||||||
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Net increase in cash and cash equivalents |
$ | 14,720 | $ | 11,497 | ||||
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• | The costs, timing and ability to manufacture JATENZO; |
• | the costs of future activities, including product sales, marketing, manufacturing and distribution of JATENZO; |
• | the costs of manufacturing commercial-grade product and necessary inventory to support continued commercial launch; |
• | the costs of potential milestones related to license agreements; |
• | the ability to receive additional non-dilutive funding, including grants from organizations and foundations; |
• | the revenue from commercial sale of its products; |
• | the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing its intellectual property rights and defending intellectual property-related claims; and |
• | our ability to establish and maintain collaborations on favorable terms, if at all. |
Contractual obligation |
Total |
Less than 1 year |
More than 1 year and less than 3 |
More than 3 years and less than 5 |
More than 5 years |
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Senior secured notes |
43,125 | 6,000 | 29,125 | 8,000 | — | |||||||||||||||
Interest on senior secured notes (1) |
18,226 | 10,207 | 7,439 | 580 | — | |||||||||||||||
Operating lease obligations (2) |
40 | 40 | — | — | — | |||||||||||||||
Catalent Agreement purchase obligation |
12,737 | 3,639 | 7,278 | 1,820 | — | |||||||||||||||
Pfizer Agreement purchase obligation |
4,719 | 1,849 | 2,870 | — | — | |||||||||||||||
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Total |
$ | 78,846 | $ | 21,734 | $ | 46,712 | $ | 10,400 | $ | 0 | ||||||||||
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(1) | We have $43.1 million outstanding aggregate principal on our senior secured notes that bear interest at 12.5% and mature on March 1, 2025. |
(2) | We have an operating lease agreement for our office space. |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 4. |
Controls and Procedures |
Item 1. |
Legal Proceedings |
Item 1A. |
Risk Factors |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 3. |
Defaults upon Senior Securities |
Item 4. |
Mine Safety Disclosures. |
Item 5. |
Other Information. |
Item 16. |
Exhibits. |
10.22¥ | ||
10.23¥ | ||
10.24¥ | ||
31.1** | ||
31.2** | ||
32.1* | ||
32.2* | ||
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema Document | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
+ | The schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
# | Indicates management contract or compensatory plan or arrangement. |
¥ | Portions of this exhibit (indicated by brackets and asterisks) have been omitted because the Registrant has determined that the information is both not material and is the type that the Registrant treats as private or confidential. |
* | The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Quarterly Report on Form 10-Q and will not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. |
** | Filed herewith. |
Date: November 19, 2021 | By: | /s/ Robert E. Dudley | ||||
Name: | Robert E. Dudley | |||||
Title: | Chief Executive Officer | |||||
(Principal Executive Officer) | ||||||
By: | /s/ Richard Peterson | |||||
Name: | Richard Peterson | |||||
Title: | Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |