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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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For the Quarterly Period Ended
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Acurx Pharmaceuticals, Inc.
Table of Contents
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In this Quarterly Report, we refer to Acurx Pharmaceuticals, Inc., together with its subsidiary, as the “Company,” “we,” “our” or “us.” All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” or the negative version of these words and similar expressions are intended to identify forward-looking statements.
We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances included herein may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| ● | our ability to obtain and maintain regulatory approval of ibezapolstat and/or our other product candidates; |
| ● | our ability to successfully commercialize and market ibezapolstat and/or our other product candidates, if approved; |
| ● | our ability to contract with third-party suppliers, manufacturers and other service providers and their ability to perform adequately; |
| ● | the potential market size, opportunity and growth potential for ibezapolstat and/or our other product candidates, if approved; |
| ● | our ability to build our own sales and marketing capabilities, or seek collaborative partners, to commercialize ibezapolstat and/or our other product candidates, if approved; |
| ● | our ability to obtain funding for our operations; |
| ● | the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs; |
| ● | the timing of anticipated regulatory filings; |
| ● | the timing of availability of data from our clinical trials; |
| ● | the impact of the ongoing COVID-19 pandemic and our response to it; |
| ● | the accuracy of our estimates regarding expenses, capital requirements and needs for additional financing; |
| ● | our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; |
| ● | our ability to advance product candidates into, and successfully complete, clinical trials; |
| ● | our ability to recruit and enroll suitable patients in our clinical trials and the timing of enrollment; |
| ● | the timing or likelihood of the accomplishment of various scientific, clinical, regulatory and other product development objectives; |
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| ● | the pricing and reimbursement of our product candidates, if approved; |
| ● | the rate and degree of market acceptance of our product candidates, if approved; |
| ● | the implementation of our business model and strategic plans for our business, product candidates and technology; |
| ● | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology; |
| ● | developments relating to our competitors and our industry; |
| ● | the development of major public health concerns, including the novel coronavirus outbreak or other pandemics arising globally, and the future impact of it and COVID-19 on our clinical trials, business operations and funding requirements; |
| ● | the effects of the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide from the conflict between Russia and Ukraine as well as the conflict in the Middle East between Israel and Hamas; |
| ● | the volatility of the price of our common stock; |
| ● | our financial performance; and |
| ● | other risks and uncertainties, including those listed in “Risk Factors.” |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date on which it is made. We disclaim any duty to update any of these forward-looking statements after the date of this Quarterly Report to conform these statements to actual results or revised expectations.
Other risks may be described from time to time in our filings made under applicable securities laws. New risks emerge from time to time. It is not possible for our management to predict all risks. All forward-looking statements in this Quarterly Report speak only as of the date made and are based on our current beliefs and expectations. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED INTERIM FINANCIAL STATEMENTS.
ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM BALANCE SHEETS
September 30, |
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(unaudited) | (Note 2) | |||||
ASSETS |
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Cash | $ | | $ | | ||
Other Receivable | | | ||||
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts Payable and Accrued Expenses | $ | | $ | | ||
TOTAL CURRENT LIABILITIES |
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TOTAL LIABILITIES |
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COMMITMENTS AND CONTINGENCIES |
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SHAREHOLDERS' EQUITY | ||||||
Common Stock; $ |
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Additional Paid-In Capital |
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Accumulated Deficit |
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TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | | $ | | ||
See accompanying notes to condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM STATEMENTS OF OPERATIONS
| Three Months Ended |
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| 2023 |
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(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||
OPERATING EXPENSES |
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Research and Development | $ | | $ | | $ | | $ | | |||||
General and Administrative |
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TOTAL OPERATING EXPENSES |
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NET LOSS | $ | ( | $ | ( | $ | ( | $ | ( | |||||
LOSS PER SHARE |
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Basic and diluted net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Weighted average common shares outstanding, basic and diluted |
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See accompanying notes to condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)
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Shares | Amount | Capital | Deficit | Equity | ||||||||||
Balance at January 1, 2023 |
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Share-Based Compensation |
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Share-Based Payments to Vendors |
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Net Loss |
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Balance at March 31, 2023 |
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Share-Based Compensation |
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Issuance of shares of common stock and pre-funded warrants in registered direct offering, net of $ | | | | — | | |||||||||
Pre-funded Warrant Exercise | | | ( | — | | |||||||||
Net Loss |
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Balance at June 30, 2023 |
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Share-Based Compensation | — | — | | — | | |||||||||
Net Loss | — | — | — | ( | ( | |||||||||
Balance at September 30, 2023 | | $ | | $ | | $ | ( | $ | | |||||
Balance at January 1, 2024 | | $ | | $ | | $ | ( | $ | | |||||
Share-Based Compensation | — | — | | — | | |||||||||
Share-Based Payments to Vendors | | | | — | | |||||||||
Issuance of shares of common stock in At-the-Market sales agreement, net of $ | | | | — | | |||||||||
Warrant Exercise | | | | — | | |||||||||
Net Loss | — | — | — | ( | ( | |||||||||
Balance at March 31, 2024 | | | | ( | | |||||||||
Share-Based Compensation | — | — | | — | | |||||||||
Share-Based Payments to Vendors | | | | — | | |||||||||
Issuance of shares of common stock in At-the-Market sales agreement, net of $ | | | | — | | |||||||||
Net Loss | — | — | — | ( | ( | |||||||||
Balance at June 30, 2024 | | | | ( | | |||||||||
Share-Based Compensation | — | — | | — | | |||||||||
Share-Based Payments to Vendors | | | | — | | |||||||||
Issuance of shares of common stock in At-the-Market sales agreement, net of $ | | | | — | | |||||||||
Net Loss | — | — | — | ( | ( | |||||||||
Balance at September 30, 2024 | | $ | | $ | | $ | ( | $ | | |||||
See accompanying notes to condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
Nine Months Ended | |||||||
September 30, | |||||||
2024 | 2023 | ||||||
(unaudited) | (unaudited) | ||||||
Cash Flow from Operating Activities: |
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Net Loss | $ | ( | $ | ( | |||
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: |
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Share-Based Compensation |
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Share-Based Payments to Vendors |
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Changes in Assets and Liabilities: |
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Other Receivable | | — | |||||
Prepaid Expenses |
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Accounts Payable and Accrued Expenses | | | |||||
Net Cash Used in Operating Activities | ( | ( | |||||
Cash Flow from Financing Activities: |
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Warrant Exercise | | — | |||||
Proceeds from At-the-Market Offering, net of issuance costs | | — | |||||
Proceeds from Registered Direct Offering, net of issuance costs | — | | |||||
Pre-funded Warrant Exercise | — | | |||||
Net Cash Provided by Financing Activities | | | |||||
Net Decrease in Cash |
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Cash at Beginning of Period | | | |||||
Cash at End of Period | $ | | $ | | |||
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SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES | |||||||
2023 Registered Direct offering costs (Note 4) | $ | — | $ | | |||
See accompanying notes to condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – NATURE OF OPERATIONS
Business
Acurx Pharmaceuticals, Inc., a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a clinical stage biopharmaceutical company formed in July 2017, with operations commencing in February 2018. The Company is focused on developing a novel class of antibiotics that address serious or life-threatening bacterial infections.
In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of coronavirus, a global pandemic. This outbreak caused major disruptions to businesses and markets worldwide as the virus continued to spread. Previously, the Company’s clinical trial operations were directly and indirectly adversely impacted, and could continue to be directly and indirectly adversely impacted, by the COVID-19 pandemic. The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages all of which are uncertain and difficult to predict. Although the Company is unable to estimate the financial effect of the pandemic, at this time, if the pandemic continues over a long period of time, it could have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows. The financial statements do not reflect any adjustments as a result of the pandemic.
In February 2018, the Company purchased the active pharmaceutical ingredient, the intellectual property and other rights to an antibiotic product candidate known as GLS362E (renamed ACX-362E and now approved for non-proprietary name, ibezapolstat) (the “Asset”) from GLSynthesis, Inc. The Company paid $
The Company’s primary activities since inception aside from organizational activities have included performing research and development activities relating to the development of its two antibiotic candidates and raising funds through equity offerings including its initial public offering (“IPO”) consummated in June 2021. The Company has not generated any revenues since inception.
The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company has needed to raise capital from sales of its securities to sustain operations. On June 29, 2021, the Company completed the IPO, issuing
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candidate will be approved by the Food and Drug Administration (“FDA”) or any other worldwide regulatory authority or become commercially viable. The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission for interim reporting. In the opinion of management, these unaudited interim financial statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations, and cash flows. The unaudited interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The year-end condensed interim balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Management believes that the disclosures provided herein are adequate when these unaudited condensed interim financial statements are read in conjunction with the audited financial statements and notes thereto as of December 31, 2023 filed in Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company estimates an annual effective tax rate of
Based on the Company’s history of generating operating losses and its anticipation of operating losses for the foreseeable future, the Company has determined that it is more likely than not that the tax benefits from those net operating losses would not be realized and a full valuation allowance against all deferred tax assets has been recorded. Should the Company’s assessment change, tax benefits associated with the historic net operating loss carryforwards could be limited due to future ownership changes.
During the second quarter of 2024, the Company applied for a qualified small business payroll tax credit for increasing research activities in the amount of $
Concentration of Credit Risk
The Company maintains the majority of its cash balance in one financial institution. The balance is insured up to the maximum allowable by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant risk of loss on cash. At times, the cash balance may exceed the maximum insured limit of the FDIC. As of September 30, 2024, the Company had cash of approximately $
Research and Development
The Company expenses research and development costs when incurred. At times, the Company may make cash advances for future research and development services. These amounts are deferred and expensed in the period the service is provided. The Company incurred research and development expenses in the amount of $
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Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to the Company by its vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as applicable. The estimates are adjusted to reflect the best information available at the time of the financial statement issuance. The Company’s estimate of the status and timing of services performed could differ from the actual status and timing of services performed.
Share-Based Compensation
The Company accounts for the cost of services performed by employees, directors and consultants received in exchange for an award of the Company’s common stock or stock options, based on the grant-date fair value of the award. The Company recognizes compensation expense based on the requisite service period.
Compensation expense associated with stock option awards is recognized over the requisite service period based on the fair value of the option at the grant date determined based on the Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for the Company’s stock options and very little historical experience with the Company’s stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities.
Share-Based Payments to Vendors
The Company accounts for the cost of services performed by vendors in exchange for an award of common stock, stock options, or warrants based on the grant-date fair value of the award or the fair value of the services rendered, whichever is more readily determinable. The Company recognizes the expense in the same period and in the same manner as if the Company had paid cash for the services.
Major Vendor
The Company had three major vendors that accounted for approximately
As of September 30, 2024, there were three vendors who accounted for approximately
NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of September 30, 2024 and December 31, 2023 were as follows:
| September 30, 2024 |
| December 31, 2023 | |||
Accrued research and development | $ | | $ | | ||
Accrued compensation expenses |
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Accrued professional fees |
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Other accounts payable and accrued expenses |
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Total | $ | | $ | | ||
NOTE 4 – ISSUANCE OF EQUITY INTERESTS
On June 23, 2021, Acurx Pharmaceuticals, LLC was converted into a corporation and renamed Acurx Pharmaceuticals, Inc. The Company’s certificate of incorporation authorizes
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On May 16, 2023, the Company entered into a securities purchase agreement with a single healthcare-focused U.S. institutional investor named therein (the “2023 Investor”), pursuant to which the Company issued and sold, in a registered direct offering by the Company directly to the 2023 Investor (the “2023 Registered Offering”), an aggregate of
The gross proceeds to the Company from the 2023 Registered Offering were approximately $
In a concurrent private placement (the “2023 Private Placement” and together with the 2023 Registered Offering, the “2023 Offerings”), the Company issued to the Investor Series C warrants exercisable for an aggregate of
In connection with the 2023 Offerings, the Company also entered into a Warrant Amendment Agreement with the 2023 Investor. Under the Warrant Amendment Agreement, the Company amended its existing Series A warrants to purchase up to an aggregate of
In January 2024, the Affiliate Investors exercised
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company as of September 30, 2024:
Weighted Average | ||||||
| Number of Warrants |
| Exercise Price | |||
Balance at December 31, 2023 | | $ | | |||
Issued |
| — | — | |||
Exercised |
| ( | | |||
Balance at September 30, 2024 |
| | $ | | ||
The weighted average contractual life of the outstanding warrants is
On November 15, 2023, the Company entered into a Sales Agreement and established the ATM Program, pursuant to which the Company may offer and sell, from time to time through A.G.P./Alliance Global Partners, as sales agent, shares of its common stock having an aggregate offering price of up to $
The Company sold
As of September 30, 2024, the Company sold a total of
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unsettled shares as of September 30, 2024 is included within the “Other Receivable” balance in the accompanying condensed interim balance sheets. The receivables for unsettled shares were collected on October 1, 2024 and
As of September 30, 2024, the Company has $
NOTE 5 – SHARE-BASED COMPENSATION
In April 2021, the board of directors approved the creation of the 2021 Equity Incentive Plan (the “Plan”). The Plan became effective as of the completion of the corporate conversion, with an annual evergreen provision pursuant to the Plan. The Plan currently reserves an aggregate of
In June 2021, the Company granted stock options to purchase a total of
In July 2021, the Company granted stock options to purchase a total of
In January 2022, the Company granted stock options to purchase a total of
In April 2022, the Company granted stock options to purchase a total of
In February 2023, the Company granted stock options to purchase a total of
In June 2023, the Company granted stock options to purchase a total of
In February 2024, the Company granted stock options to purchase a total of
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the options vesting monthly over
In June 2024, the Company granted stock options to purchase a total of
Compensation expense associated with these awards is recognized over the vesting period based on the fair value of the option at the grant date determined based on the Black-Scholes model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for the Company’s stock options and very little historical experience with the Company’s stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities.
The Company determined the fair value of the option awards using the Black-Scholes option pricing model using the following weighted average assumptions:
Nine Months Ended | |||||||
Sep 30, | |||||||
2024 | 2023 | ||||||
Expected term | years | years | |||||
Volatility | | % | | % | |||
Dividend yield | — | % | — | % | |||
Risk-free interest rate | | % | | % | |||
Weighted average grant date fair value | $ | | $ | | |||
A summary of the Company’s stock option activity is as follows:
Weighted | |||||||||
Average | |||||||||
Weighted | Remaining | Aggregate | |||||||
Number of |
| Average | Contractual Term | Intrinsic | |||||
Options |
| Exercise Price | (in years) | Value | |||||
Outstanding, vested and expected to vest at December 31, 2023 | | $ | | $ | | ||||
Granted | | | — | ||||||
Exercised | — | — | — | — | |||||
Forfeited | — | — | — | — | |||||
Outstanding, vested and expected to vest at September 30, 2024 | | $ | | $ | — | ||||
Exercisable | | $ | | $ | — | ||||
The total non-cash compensation expense for these options not yet recognized as of September 30, 2024 was $
NOTE 6 – SHARE-BASED PAYMENTS TO VENDORS
In the fourth quarter of 2022, the Company entered into a number of agreements with vendors pursuant to which the Company made grants of a total of
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In the first quarter of 2023, the Company entered into an agreement with a consultant to provide investor relation services for a
In the fourth quarter of 2023, the Company entered into a number of agreements with vendors pursuant to which the Company made grants of a total of
In the first quarter of 2024, the Company entered into two respective agreements with consultants to provide investor relation services for
In the second quarter of 2024, the Company entered into two separate agreements with consultants to provide investor relation services for
NOTE 7 – NET LOSS PER SHARE
Basic and diluted net loss per shares of common stock for the nine months ended September 30, 2024 and 2023 was determined by dividing net loss by the weighted average shares of common stock outstanding during the period. The Company’s potentially dilutive shares, consisting of
NOTE 8 – COMMITMENTS AND CONTINGENCIES
In conjunction with the Asset purchase in February 2018, the Company is required to make certain milestone payments related to the ongoing development of ACX-362E totaling $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2023 included in the Annual Report on Form 10-K (the “2023 Annual Report”) and filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2024. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a late-stage biopharmaceutical company focused on developing a new class of small molecule antibiotics for difficult-to-treat bacterial infections. Our approach is to develop antibiotic candidates with a Gram-positive selective spectrum (“GPSS®”) that block the active site of the Gram positive specific bacterial enzyme deoxyribonucleic acid (“DNA”) polymerase IIIC ("pol IIIC”), inhibiting DNA replication and leading to Gram-positive bacterial cell death. Our research and development (“R&D”) pipeline includes antibiotic product candidates that target Gram-positive bacteria, including Clostridioides difficile, methicillin-resistant Staphylococcus aureus (“MRSA”), vancomycin resistant Enterococcus (“VRE”) and drug-resistant Streptococcus pneumoniae (“DRSP”).
These bacterial targets are listed as priority pathogens by the World Health Organization (“WHO”), the United States (“U.S.”) Centers for Disease Control and Prevention (“CDC”) and the U.S. Food and Drug Administration (“FDA”). Priority pathogens are those which require new antibiotics to address the worldwide crisis of antimicrobial resistance (“AMR”) as identified by the WHO, CDC and FDA.
Our Market Opportunity
The CDC estimates that, in the U.S., antibiotic-resistant pathogens infect one individual every 11 seconds and result in one death every 15 minutes. The WHO recently stated that growing antimicrobial resistance is equally as dangerous as the recent COVID-19 pandemic, threatens to unwind a century of medical progress and may leave us defenseless against infections that today can be treated easily. According to the WHO, the current clinical development pipeline remains insufficient to tackle the challenge of the increasing emergence and spread of antimicrobial resistance.
We believe we are developing the first DNA pol IIIC inhibitor to enter Phase 3 clinical trials and our Phase 2 clinical trial has provided positive clinical trial results for our lead pol IIIC antibiotic candidate.
Pol IIIC is the primary catalyst for DNA replication of several Gram-positive bacterial cells. Our research and development pipeline includes clinical stage and early-stage antibiotic candidates that target Gram-positive bacteria for oral and/or parenteral treatment of infections caused by Clostridioides difficile (“C. difficile”), Enterococcus (including VRE), Staphylococcus (including MRSA), and Streptococcus (including antibiotic resistant strains).
Pol IIIC is required for the replication of DNA in certain Gram-positive bacterial species. By blocking this enzyme, our antibiotic candidates are believed to be bactericidal and inhibit proliferation of several common Gram-positive bacterial pathogens, including both sensitive and resistant C. difficile, MRSA, vancomycin-resistant Enterococcus, penicillin-resistant Streptococcus pneumonia (“PRSP”) and other resistant bacteria.
We expect to partner with a fully-integrated pharmaceutical company for late-stage clinical trials and commercialization or conduct Phase 3 clinical trials prior to such partnership and continue to review partnership opportunities on an ongoing basis up to FDA approval.
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Our lead antibiotic candidate, ibezapolstat (formerly named ACX-362E), has a novel mechanism of action that targets the pol IIIC enzyme, a previously unexploited scientific target. A Phase 2 clinical trial, comprised of a Phase 2a segment and a Phase 2b segment, provided data that demonstrates positive clinical trial results for our lead antibiotic candidate and demonstrates pol IIIC as an appropriate bacterial target.
Our Lead Product Candidate
Currently available antibiotics used to treat C. difficile infections (“CDI”) utilize other mechanisms of action. We believe ibezapolstat is the first antibiotic candidate in late-stage clinical trials to work by blocking the DNA pol IIIC enzyme in C. difficile. This enzyme is necessary for replication of the DNA of certain Gram-positive bacteria, like C. difficile.
Our Other Candidates
We also have an early-stage pipeline of antibiotic product candidates with the same previously unexploited mechanism of action, which has established proof of concept in animal studies. This pipeline includes ACX-375C, a potential oral and parenteral treatment targeting Gram-positive bacteria, including MRSA, VRE and PRSP.
We continue to evaluate strategic transactions for the Company, including a partner for the further development and potential commercialization of our lead antibiotic candidate, ibezapolstat, as well as a potential sale, merger, third-party licensing arrangement or other strategic transaction. At this time, we have no commitments from potential partners or others to provide the Company with capital.
Recent Developments
On September 26, 2024, we announced results from new analyses that extend data on the beneficial effects of ibezapolstat on the gut microbiome. The data show an increased proportion of actinobacteriota and increased quantity of beneficial bacillota (firmicutes) leading to reversal of dysbiosis and contributing to the CDI anti-recurrence effect of ibezapolstat. Microbiological testing of certain ACX-375 DNA pol IIIC analogues in independent qualified laboratories, including the University of Florida, demonstrated in vitro activity with minimal inhibitory concentrations of 0.5-2mcg/mL against B.anthracis, a Bioterrorism Category A pathogen including activity against ciprofloxacin resistant B. anthracis. These results were presented at the premier International C.difficile Symposium (“ICDS”) held in Bled, Slovenia in September 2024.
On September 24, 2024, we announced results from our pioneering research with ibezapolstat in collaboration with Leiden University Medical Center. This detailed demonstration of the mode of action of DNA pol IIIC inhibitors in general, and for ibezapolstat specifically, is critically important to support our scientific foundation and our regulatory filings as we advance into this late-stage of ibezapolstat's development. These results were similarly presented at the ICDS held in September 2024.
Ibezapolstat Phase 2 Clinical Results
On November 2, 2023, we announced top-line results from the Phase 2b segment of our Phase 2 clinical trial of ibezapolstat in patients with CDI. In the Phase 2b segment of the clinical trial, the observed Clinical Cure rate in the per protocol population was 15 of 16 patients (94%) in the ibezapolstat arm and 14 out of 14 patients (100%) in the vancomycin arm, respectively. In the Phase 2a segment of the clinical trial that evaluated ibezapolstat in patients with CDI, the observed Clinical Cure rate in the per protocol population was 10 out of 10 patients (100%). In a post hoc analysis conducted with the data available at the time of discontinuation of the trial, the overall observed Clinical Cure rate for ibezapolstat in the combined Phase 2a and Phase 2b segments of the clinical trial in patients with CDI was 96% (25 out of 26 patients), based on 10 out of 10 patients (100%) in the Phase 2a segment in the per protocol population, plus 15 out of 16 (94%) patients in the Phase 2b segment We believe that, based on the post hoc pooled Phase 2 ibezapolstat Clinical Cure rate of 96% and the historical vancomycin cure rate of approximately 81% (Vancocin® Prescribing Information, January 2021), Phase 3 trials conducted in accordance with the applicable FDA Guidance for Industry (October 2022) would be able to demonstrate the non-inferiority of ibezapolstat to vancomycin, though there can be no assurance that these early-stage, Phase 2 data will predict results in Phase 3 clinical trials.
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Further analysis of the secondary and exploratory endpoints from the Phase 2b segment showed the following:
| ● | 15 of 15 (100%) of the ibezapolstat-treated patients who achieved Clinical Cure (“CC”) at end of treatment (“EOT”) remained free of C. difficile Infection (“CDI”) recurrence through one month after EOT, for a Sustained Clinical Cure (“SCC”) rate of 100%. In the Phase 2a segment, 10 of 10 (100%) of the ibezapolstat-treated patients who had achieved CC at EOT remained free of CDI recurrence through one month after EOT, for an SCC rate of 100%; |
| ● | 2 of 14 patients treated with standard of care, vancomycin, experienced recurrent infection within one month after EOT for a SCC of 86%; |
For extended clinical cure, data also showed that 100% (5 of 5) of ibezapolstat-treated patients who agreed to observation for up to three months following CC at EOT experienced no recurrence of infection;
| ● | Additional microbiology and microbiome analysis of patients in the Phase 2b segment data showed that ibezapolstat outperformed vancomycin showing eradication of fecal C. difficile at Day 3 of treatment in 15 of 16 treated patients (94%), versus vancomycin which had eradication of C. difficile in 10 of 14 treated patients (71%); and |
| ● | Ibezapolstat, but not vancomycin, consistently preserved and allowed regrowth of key gut bacterial species believed to confer health benefits including to prevent recurrence of CDI. |
Ibezapolstat was well-tolerated in the Phase 2 clinical trial. In the Phase 2b segment, there were three patients each experiencing one mild adverse event assessed by the blinded investigator to be drug-related. All three events were gastrointestinal in nature and resolved without treatment. In the Phase 2a segment, there were seven adverse events reported in four patients, with only one (nausea) likely related to ibezapolstat. One severe adverse event occurred (an exacerbation of a migraine headache) but was considered to be unrelated to ibezapolstat. There were no drug-related treatment withdrawals or no drug-related serious adverse events, or other safety findings of concern in either segment of the Phase 2 clinical trial.
Further analyses will be forthcoming regarding other exploratory endpoints from the Phase 2b segment of the Phase 2 clinical trial later this year. The Company anticipates presenting data from the Phase 2 clinical trial at one or more scientific conferences throughout 2024.
We convened an End-of-Phase 2 Meeting with the FDA on April 17, 2024 and announced on May 15, 2024 that we had a successful meeting, including confirmation of Phase 3 readiness for ibezapolstat for the treatment of C. difficile infection. Agreement with the FDA was reached on key elements to move forward with our international Phase 3 clinical trial program. Agreement was also reached with the FDA on the complete non-clinical and clinical development plan for filing of a New Drug Application (“NDA”) for marketing approval. Planning continues to advance ibezapolstat into international Phase 3 clinical trials for treatment of C. difficile infection (“CDI”). We are also now preparing to submit requests for guidance to initiate clinical trials in the European Union, the United Kingdom, Japan and Canada, as well as preparing for a manufacturing meeting with the FDA to be scheduled prior to Phase 3 enrollment.
In July 2024, we announced that a new patent has been granted by the United States Patent and Trademark Office (“USPTO”). This patent relates to ibezapolstat and its use to treat C. difficile infection while reducing the recurrence of the infection, as well as improving the health of the gut microbiome. This is the latest in the series of granted patents and pending patent applications that we have filed to protect our proprietary technologies in the field of antimicrobials.
Following our successful End-of-Phase 2 Meeting with the FDA, which confirmed our Phase 3 clinical trial readiness, and per the FDA regulatory requirements, in August 2024, we submitted our request to the FDA for a meeting to review our manufacturing processes and specifications for drug substance and final project and packaging (typically referred to as Chemistry, Manufacturing and Controls (“CMC”)) for our Phase 3 clinical trials. We anticipate the FDA to grant a meeting in the fourth quarter.
2023 At-the-Market Offering
On November 15, 2023, we entered into a Sales Agreement and established an “ATM Program”, pursuant to which we may offer and sell, from time to time through A.G.P/Alliance Global Partners, as sales agent, shares of our common stock having an
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aggregate offering price of up to $17.0 million. Under the Sales Agreement, the sales agent is entitled to compensation of 3.0% of the gross offering proceeds of all shares of common stock sold through it pursuant to the Sales Agreement.
As of the period ended September 30, 2024, we sold a total of 2,692,190 shares of our common stock under the ATM Program at a weighted-average price of $3.35 per share, raising $9.0 million of gross proceeds and net proceeds of $8.6 million, after deducting commissions to the sales agent and other ATM Program related expenses. As of November 11, 2024, total sales under the ATM Program since it was implemented in November 2023 are approximately $9.0 million out of the total $17 million ATM facility.
There remains approximately $8.0 million available for future sales of shares of common stock under the ATM Program.
Effects of Coronavirus (COVID-19) on Our Business
Public health crises such as pandemics or similar outbreaks could adversely impact our business. Notably, the COVID-19 pandemic continues to evolve. The extent to which COVID-19 impacts our operations or those of our collaborators, vendors, contractors, suppliers, clinical trial sites and other material business relations and governmental agencies will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the ultimate duration of the outbreak, new information that will emerge concerning the severity of the virus and the actions to contain it or treat its impact, among others. While the potential economic impact brought by, and the ultimate duration of, the COVID-19 pandemic, have been, and continue to be, difficult to assess or predict, the spread of COVID-19 has caused a broad impact globally. The extent to which the COVID-19 pandemic may impact our business continues to be highly uncertain and cannot be predicted with confidence.
Components of our Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all.
Research and Development Expenses
To date, our research and development expenses have related primarily to development of ibezapolstat, preclinical studies and other preclinical activities related to our portfolio. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include:
| ● | external research and development expenses incurred under agreements with contract research organizations (“CROs”) and consultants to conduct our preclinical, toxicology and other preclinical studies; |
| ● | laboratory supplies; |
| ● | costs related to manufacturing product candidates, including fees paid to third-party manufacturers and raw material suppliers; |
| ● | license fees and research funding; and |
| ● | facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance, equipment and other supplies. |
Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. We outsource a substantial portion of our clinical trial activities, utilizing external entities such as CROs, independent clinical investigators and other third-party service providers to assist us with the execution of our clinical trials.
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We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and seek to discover and develop new product candidates. Due to the inherently unpredictable nature of preclinical and clinical development, we cannot determine with certainty the timing of the initiation, duration or costs of future clinical trials and preclinical studies of product candidates. Clinical and preclinical development timelines, the probability of success and the amount of development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly based on factors such as:
| ● | per-patient trial costs; |
| ● | the number of trials required for regulatory approval; |
| ● | the number of sites included in the trials; |
| ● | the countries in which the trials are conducted; |
| ● | the length of time required to enroll eligible patients; |
| ● | the number of patients that participate in the trials; |
| ● | the number of doses that patients receive; |
| ● | the drop-out or discontinuation rates of patients; |
| ● | potential additional safety monitoring requested by regulatory agencies; |
| ● | the duration of patient participation in the trials and follow-up; |
| ● | the phase of development of the product candidate; and |
| ● | the efficacy and safety profile of the product candidate. |
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and employee-related costs, including share-based compensation, for personnel in our executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities, pre-commercialization and, if any product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.
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Results of Operations
Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
The following table presents a summary of the changes in our results of operations for the three months ended September 30, 2024 compared with the three months ended September 30, 2023:
Three Months Ended |
| ||||||||
September 30, | Percentage | ||||||||
| 2024 |
| 2023 |
| Change |
| |||
(in thousands) |
| ||||||||
OPERATING EXPENSES: |
|
|
|
|
|
| |||
Research and Development | $ | 1,198 | $ | 1,349 |
| (11) | % | ||
General and Administrative |
| 1,623 |
| 1,766 |
| (8) | % | ||
TOTAL OPERATING EXPENSES |
| 2,821 |
| 3,115 |
| (9) | % | ||
Net Loss | $ | (2,821) | $ | (3,115) |
| (9) | % | ||
Research and Development Expenses
Research and development expenses were $1.2 million for the three months ended September 30, 2024 and $1.3 million for the three months ended September 30, 2023, a decrease of $0.1 million primarily due to $0.1 million increase in manufacturing related costs offset by $0.2 million decrease in consulting fees.
General and Administrative Expenses
General and administrative expenses were $1.6 million for the three months ended September 30, 2024 and $1.8 million for the three months ended September 30, 2023, a decrease of $0.2 million. The decrease was primarily due to $0.2 million increase in professional fees and $0.1 million increase in compensation related costs offset by $0.5 million decrease in share-based compensation related costs.
Net Loss
Net loss was $2.8 million for the three months ended September 30, 2024, and $3.1 million for the three months ended September 30, 2023, a decrease of $0.3 million, due to the reasons stated above.
Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
The following table presents a summary of the changes in our results of operations for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023:
| Nine Months Ended |
|
|
| |||||
September 30, | Percentage | ||||||||
| 2024 |
| 2023 |
| Change |
| |||
(in thousands) |
| ||||||||
OPERATING EXPENSES: |
|
|
|
|
|
| |||
Research and Development | $ | 4,579 | $ | 4,101 |
| 12 | % | ||
General and Administrative |
| 6,743 |
| 5,362 |
| 26 | % | ||
TOTAL OPERATING EXPENSES |
| 11,322 |
| 9,463 |
| 20 | % | ||
Net Loss | $ | (11,322) | $ | (9,463) |
| 20 | % | ||
Research and Development Expenses
Research and development expenses were $4.6 million for the nine months ended September 30, 2024 and $4.1 million for the nine months ended September 30, 2023, an increase of $0.5 million primarily due to $0.9 million increase in manufacturing related costs offset by $0.4 million decrease in consulting fees.
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General and Administrative Expenses
General and administrative expenses were $6.7 million for the nine months ended September 30, 2024 and $5.4 million for the nine months ended September 30, 2023, an increase of $1.3 million. The increase was primarily due to $1.1 million increase in professional fees and $0.2 million increase in legal costs.
Net Loss
Net loss was $11.3 million for the nine months ended September 30, 2024, and $9.5 million for the nine months ended September 30, 2023, an increase of $1.8 million, due to the reasons stated above.
Liquidity and Capital Resources
Overview
Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $64.5 million as of September 30, 2024. We have funded our operations primarily from equity issuances. We received net cash proceeds of approximately $12.9 million from equity financings closed between March 2018 and October 2020. On June 29, 2021, we completed our IPO resulting in net proceeds of approximately $14.8 million after deducting underwriter discounts of $1.4 million and offering costs of approximately $1.1 million. On July 27, 2022, we completed a registered direct offering and concurrent private placement resulting in net proceeds of approximately $3.7 million after deducting placement agents fees of $0.3 million and offering costs of $0.2 million. On May 18, 2023, we completed a registered direct offering and a concurrent private placement resulting in net proceeds of approximately $3.5 million after deducting placement agents fee of $0.2 million and offering costs of $0.2 million. On November 15, 2023, we entered into a Sales Agreement and established the ATM Program, pursuant to which we may offer and sell, from time to time, through A.G.P./Alliance Global Partners, as sales agent, shares of our common stock having an aggregate offering price of up to $17.0 million. Under the ATM Program, we raised net proceeds of approximately $8.6 million after deducting sales agent commissions and other related expenses of $0.4 million.
Based upon our lack of revenue expected for the foreseeable future, and because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities.
As of September 30, 2024, we had working capital of $2.7 million, consisting primarily of $5.8 million of cash, $0.2 million of other receivable and prepaid expenses, offset by approximately $3.3 million of accounts payable and accrued expenses.
The following table sets forth selected cash flow information for the periods indicated:
| Nine Months Ended | |||||
| September 30, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Net cash (used in)/provided by: |
|
|
|
| ||
Operating activities | $ | (8,133) | $ | (5,603) | ||
Financing activities |
| 6,421 |
| 3,544 | ||
Net increase/(decrease) in cash | $ | (1,712) | $ | (2,059) | ||
Net Cash Used in Operating Activities
Net cash used in operating activities was $8.1 million for the nine months ended September 30, 2024. The net loss was greater than the net cash used in operating activities by $3.2 million, primarily attributable to share-based compensation and share-based vendor payments of $2.9 million and increase in accounts payable and accrued expenses of $0.3 million.
Net cash used in operating activities was $5.6 million for the nine months ended September 30, 2023. The net loss was greater than the net cash used in operating activities by $3.8 million, primarily attributable to share-based compensation and share-
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based vendor payments of $2.5 million and an increase in accounts payable and accrued expenses of $1.2 million and decrease in prepaid expenses of $0.1 million.
Net Cash Provided by Financing Activities
Net cash provided from financing activities was $6.4 million for the nine months ended September 30, 2024, which was primarily attributable to the ATM Program.
Net cash provided from financing activities was $3.5 million for the nine months ended September 30, 2023, which was attributable to the net proceeds from the registered direct offering.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2, “Summary of Significant Accounting Policies,” we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.
Research and Development
We expense research and development costs when incurred. At times, we may make cash advances for future research and development services. These amounts are deferred and expensed in the period the services are provided.
Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to us by our vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as applicable. The estimates are adjusted to reflect the best information available at the time of the financial statement issuance. Although we do not expect our estimates to be materially different from amounts actually incurred, our estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.
Share-Based Compensation
We account for the cost of services performed by employees, directors and consultants received in exchange for an award of the Company’s common stock or stock options, based on the grant-date fair value of the award. We recognize compensation expense based on the requisite service period.
Compensation expense associated with stock option awards is recognized over the requisite service period based on the fair value of the option at the grant date determined based on the Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. Our employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for our stock options and very little historical experience with our stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities. We will continue to analyze the expected stock price volatility and will adjust our Black-Scholes option pricing assumptions as appropriate. Any changes in the foregoing Black-Scholes assumptions, or if we were to elect to utilize an alternative method for valuing stock options granted to employees, officers and directors, could potentially impact our stock-based compensation expense and our results of operations.
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Share-Based Payments to Vendors
We account for the cost of services performed by vendors in exchange for an award of our common stock or stock options, based on the grant-date fair value of the award or the fair value of the services rendered, whichever is more readily determinable. We also use Black-Scholes option pricing model for the purpose of estimating the fair value of options and warrants. Changes in our Black-Scholes assumptions, or if we were to utilize an alternative method for valuing options or warrants issued to our vendors, could impact our expense and our results of operations.
Other Company Information
Emerging Growth Company Status
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. We have elected this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, we are entitled to rely on certain exemptions as an emerging growth company; we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items. These exemptions will apply for a period of five years following the completion of our IPO or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.
Recent Accounting Pronouncements not yet adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
We can give no assurance that weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations over Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 3 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.
Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks include the following:
| ● | We are a clinical-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance. |
| ● | We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur net losses for the foreseeable future and may never achieve or maintain profitability. |
| ● | Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. |
| ● | We may need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. |
| ● | Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates. |
| ● | We are reliant on the success of our lead product candidate, ibezapolstat, which we are developing for the treatment of CDI. If we are unable to commercialize ibezapolstat, or experience significant delays in doing so, our business will be materially harmed. |
| ● | If serious adverse or inappropriate side effects are identified during the development of ibezapolstat or any other product candidate, we may need to abandon or limit our development of that product candidate. |
| ● | Ibezapolstat or our other product candidates may never achieve sufficient market acceptance even if we obtain regulatory approval. |
| ● | We are exposed to product liability, and non-clinical and clinical liability risks which could place a substantial financial burden upon us, should lawsuits be filed against us. |
| ● | Our current and future operations substantially depend on our management team and our ability to hire other key personnel, the loss of any of whom could disrupt our business operations. |
| ● | Our failure to complete or meet key milestones relating to the development of our technologies and proposed products and formulations would significantly impair our financial condition. |
| ● | We will compete with larger and better capitalized companies, and competitors in the drug development or pharmaceutical industries may develop competing products which outperform or supplant our proposed products. |
| ● | A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, could materially and adversely affect our business. |
| ● | Global market and economic conditions may negatively impact our business, financial condition and share price. |
| ● | Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may not have favorable results in later clinical trials or receive regulatory approval. Moreover, interim, “top-line,” and preliminary data from our clinical trials that we announce or publish may change, or the perceived product profile may be negatively impacted, as more patient data or additional endpoints (including efficacy and safety) are analyzed. |
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| ● | If clinical trials of our lead product candidate fail to demonstrate safety and efficacy to the satisfaction of the FDA, or the European Medicines Agency (“EMA”), or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of ibezapolstat or any other product candidate. |
| ● | If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented. |
| ● | We may be unable to obtain regulatory approval in the United States or foreign jurisdictions and, as a result, be unable to commercialize our product candidates and our ability to generate revenue will be materially impaired. |
| ● | Risks associated with operating in foreign countries could materially adversely affect our product development should we elect to extend development outside the U.S. |
| ● | Our results of operations may be adversely affected by current and potential future healthcare legislative and regulatory actions. |
| ● | If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing ibezapolstat or any other product candidate if and when such product candidates are approved. |
| ● | We contract with third parties for the manufacture of our product candidates for preclinical studies and our ongoing clinical trials, and expect to continue to do so for additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. |
| ● | If ultimate users of our product candidates are unable to obtain adequate reimbursement from third- party payers, or if new restrictive legislation is adopted, market acceptance of our proposed products may be limited and we may not achieve material revenues. |
| ● | We may be involved in lawsuits to protect or enforce our patents. |
| ● | Intellectual property litigation could cause us to spend substantial |